What changed in this filing

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Item 1A. Risk Factors

2024-03-11 compared with 2023-03-17 · 221 added, 241 removed, 977 unchanged (32% of the section changed)

12 unchanged sentences

● we may not have adequate personnel and may not be able to attract or retain personnel needed to develop our products.

● the COVID-19 pandemic, including its impact on our business and operations;

Risks Related to Clinical and Commercialization Activities

3 unchanged sentences

● product candidates can fail to meet their efficacy endpoints at any time during the clinical development process, which would likely make them ineligible for becoming commercial products;

● we may not be able to use our facilities to manufacture product for use in our Phase III trial of CAP-1002 for DMD;

● we may not be able to use our facilities to manufacture CAP-1002 product for commercial purposes;

● we may be required to obtain consent from CSMC in order to sell commercial product from our Los Angeles facility;

● we may not be able to satisfy clinical and/or regulatory requirements necessary for the approval of our product in the U.S.

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● the FDA may not accept the viability or comparability of our manufacturing processes;

● the FDA may not approve our manufacturing facilities for the manufacture of commercial products .

Risks Related to Our Intellectual Property

● our ability to obtain, maintain, protect, and enforce our intellectual property rights;

● potential challenges to the validity, enforceability, or scope of our intellectual property;

● potential claims from third parties that we are infringing their patents or other intellectual property rights;

● our ability to satisfy our obligations under our licensing agreements;

● we may not be able to obtain, maintain, protect, and enforce our intellectual property rights;

● we may face potential challenges to the validity, enforceability, or scope of our intellectual property;

● we may experience claims from third parties that we are infringing their patents or other intellectual property rights;

● we may not be able to satisfy our obligations under our licensing agreements.

Risks Related to Our Relationships with Third Parties

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As of December 31, 2023, we had cash, cash equivalents, and marketable securities totaling approximately $39.5 million.

Additionally, under the terms of our Japan Distribution Agreement with Nippon Shinyaku, we expect to receive an upfront payment of $12.0 million in the first quarter of 2023 and may potentially receive other additional development and sales-based milestones.

Additionally, we received a milestone payment of $10.0 million in the first quarter of 2024 under the terms of our U.S.

Distribution Agreement with Nippon Shinyaku and we may potentially receive other additional development and sales-based milestones.

We have not generated any revenues from the commercial sale of products.

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

We can give no assurances that we will be able to secure such additional sources of funds to support our operations or, if such funds are available to us, that such additional financing

will be sufficient to meet our needs.

We can give no assurances that we will be able to secure such additional sources of funds to support our operations or, if such funds are available to us, that such additional financing will be sufficient to meet our needs.

Moreover, to the extent that we raise additional funds by issuing equity securities, our stockholders may experience additional significant dilution, and debt financing, if available, may involve restrictive covenants.

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● the costs of establishing sales, marketing and distribution capabilities, as applicable, for any product candidates for which we may receive regulatory approval.

If our business plans are not successful, we may not be able to continue operations as a going concern and our stockholders may lose their entire investment in us.

Our audited financial statements include a statement that there is substantial doubt about our ability to continue as a going concern.

We have historically incurred substantial losses to fund our business operations including our research and development activities and more recently manufacturing scale-up activities.

We will, in all likelihood, sustain operating expenses without corresponding revenues for the foreseeable future.

This may result in our incurring net operating losses that will increase continuously until we are able to obtain regulatory approval for, and commercialize, our product candidates, the occurrence of which cannot be assured.

While we have historically been able to adjust the timing associated with our R&D efforts, as well as reducing headcount and implementing certain budget restrictions, to alleviate

uncertainties surrounding our ability to continue as a going concern, if ultimately we cannot continue as a going concern, our stockholders may lose their entire investment in us.

We have a history of net losses, and we expect losses to continue for the foreseeable future.

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● our ability to receive regulatory approval or commercialize our product candidates, within and outside the United States;

● potential side effects of our current or future products and product candidates that could delay or prevent commercialization or cause an approved treatment drug to be taken off the market;

● potential side effects of our current or future products and product candidates that could delay or prevent commercialization or cause an approved treatment to be taken off the market;

● market acceptance of our product candidates;

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● our ability to maintain and staff our current manufacturing facilities;

● our ability to build or secure new manufacturing facilities, if necessary, and achieve and maintain cGMP and obtain required certifications as necessary;

● our ability to build or secure new manufacturing facilities, if necessary, and achieve and maintain cGMP and obtain required certifications as required;

● costs related to and outcomes of potential intellectual property litigation;

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● our ability to adequately support future growth;

● if our products are approved for commercial sale, the ability to secure reimbursement for our products;

● if our products are approved for commercial sale, the ability to secure adequate reimbursement levels for our products;

● our ability to attract and retain key personnel to manage our business effectively;

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The Company’s failure to establish the efficacy of its technologies would have a material adverse effect on the Company.

We cannot predict with any certainty the results of such clinical testing, including the results of our ongoing Phase III trial of our CAP-1002 product candidate for DMD.

Additionally, we cannot predict with any certainty if, or when, we might commence any additional clinical trials of our product candidates, whether we will be able to secure additional partners, or whether our current trials will yield sufficient data to permit us to proceed with additional clinical development and ultimately submit an application for regulatory approval of our product candidates in the United States or abroad, or whether such applications will be accepted by the appropriate regulatory agencies.

We cannot predict with any certainty the results of such clinical testing, including the results of our ongoing Phase 3 trial of our CAP-1002 product candidate for DMD.

Additionally, we cannot predict with any certainty if, or when, we might commence any additional clinical trials of our product candidates, whether we will be able to secure additional strategic partners, or whether our current trials will yield sufficient data to permit us to proceed with additional clinical development and ultimately submit an application for regulatory approval of our product candidates in the United States or abroad, or whether such applications will be accepted by the appropriate regulatory agencies.

We are also unable to predict whether our preclinical studies of our exosomes products will result in a viable clinical development program.

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● initiation and successful patient enrollment and completion of additional clinical trials on a timely basis;

● the impact of COVID-19 on our operations, ability to conduct clinical trials and on the ability of our regulators to review and approve or authorize our products;

● the impact of COVID-19 or some other infectious disease outbreak on our operations, ability to conduct clinical trials and on the ability of our regulators to review and approve or authorize our products;

● our ability to demonstrate our products’ safety, tolerability and efficacy to the FDA or any comparable foreign regulatory authority for marketing approval;

1 unchanged sentence

● obtaining and maintaining patent protection, trade secret protection and regulatory exclusivity, both in the United States and internationally;

● successfully defending and enforcing our rights in our intellectual property portfolio;

● avoiding and successfully defending against any claims that we have infringed, misappropriated or otherwise violated any intellectual property of any third-party;

● the performance of our current and future collaborators, if any;

● the performance of our current and future distributors or collaborators, if any;

● the extent of, and our ability to timely complete, any required post-marketing approval commitments imposed by FDA or other applicable regulatory authorities;

● successfully developing a companion diagnostic test on a timely and cost effective basis, if required;

● establishment of supply arrangements with third-parties for raw materials and drug product supplies and potential manufacturers who are able to manufacture clinical trial and commercial quantities of drug substance and drug products and to develop, validate and maintain a commercially viable manufacturing process that is compliant with cGMP at a scale sufficient to meet anticipated demand and over time enable us to reduce our cost of manufacturing, if necessary;

● establishment of supply arrangements with third-parties for raw materials and product supplies and potential manufacturers who are able to manufacture clinical trial and commercial quantities of drug substance and drug products;

● our ability to develop, validate and maintain a commercially viable manufacturing process that is compliant with cGMP at a scale sufficient to meet anticipated demand;

● establishment of arrangements with potential manufacturers who are able to develop, validate and maintain a commercially viable manufacturing process that is compliant with cGMP at a scale sufficient to meet anticipated demand and over time enable us to reduce our cost of manufacturing, if necessary;

● establishment of scaled production arrangements with third-party manufacturers to obtain finished products that are compliant with cGMP and appropriately packaged for sale;

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● our ability to compete with other therapies;

● our ability to conduct post-marketing surveillance and comply with requirements of FDA and other comparable regulatory authorities after product approval.

We do not have complete control over many of these factors, including certain aspects of clinical development and the regulatory submission process, potential threats to our intellectual property rights and the manufacturing, marketing, distribution and sales efforts of any future collaborator.

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If we are not successful in marketing or commercializing our products, or are significantly delayed in doing so, our business will be materially harmed.

Business disruptions such as natural disasters, widespread infectious diseases or pandemics could seriously harm our future revenues and financial condition and increase our costs and expenses.

Business disruptions such as natural disasters, widespread infectious diseases, or pandemics or geopolitical conflicts could seriously harm our future revenues and financial condition and increase our costs and expenses.

Our corporate headquarters and our manufacturing and research facilities are located in San Diego and in the greater Los Angeles, California area, a region known for seismic activity, as well as being susceptible to drought and fires.

A significant natural disaster, such as an earthquake, flood or fire, occurring at our headquarters or manufacturing facilities, or at the facilities of any third-party manufacturer or vendor, could have a material adverse effect on our business, financial condition and results of operations.

In addition, outbreaks of viruses, infectious diseases or pandemics (including, for example, the outbreak of the novel coronavirus (COVID-19), terrorist acts or acts of war targeted at the United States, and specifically in the California region, could cause damage or disruption to us, our employees, facilities, contractors and collaborators, which could have a material adverse effect on our business, financial condition and results of operations.

The coronavirus outbreak could adversely impact our business.

An epidemic or pandemic disease outbreak, including COVID-19, could severely disrupt our operations or the operations of third parties that we depend on, including any third-party contract manufacturer, our CROs, clinical data

management organizations, medical institutions and clinical investigators, and have a material adverse effect on our business, results of operations, financial condition and prospects.

In December 2019, it was first reported that there had been an outbreak of COVID-19, in China.

COVID-19 has since spread globally and while cases and hospitalizations are currently on the decline in the US, there can be no assurances they will not continue at the current rate or increase in the future especially in light of the number of variants that are emerging across the world.

Governments in the United States and elsewhere have taken and are continuing to take measures to slow the spread of COVID-19.

If COVID-19 continues to spread and further variants emerge, we may experience disruptions that could severely impact our business, including:

● delays or difficulties in enrolling patients in our clinical trials and having patients complete their assessments in accordance with the clinical protocol;

● restrictions preventing trial investigators, patients or other critical staff from traveling to our trial sites;

● diversion of healthcare resources to address COVID-19, which could limit the availability of medical facilities for our clinical trials;

● forced closures or reductions in operations at our facilities or the facilities of third parties with whom we do business;

● supply chain disruptions which could have a material adverse effect on the availability or cost of materials for our product candidates;

● disruptions to our workforce, or the workforces of third parties with whom we do business, caused by sickness, travel restrictions or quarantines.

Additionally, disruptions at the at FDA, the EMA and other regulatory agencies, caused by global health concerns, including the COVID-19 pandemic, including delays in inspections of clinical trial or manufacturing sites required as part of the application review process, could result in delays of reviews and approvals of our product candidate or our proposed clinical trials.

Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic.

It is unclear how FDA’s and other health agencies’ policies and guidance will impact any inspections of our facilities, including our clinical trial sites.

It is also unclear whether, when, and how FDA and other health agencies will change their policies for facility inspections.

The global outbreak of COVID-19 continues to evolve and its ultimate impact on our business will depend on future developments, which are highly uncertain and cannot be predicted.

Any of the disruptions listed above, or other disruptions caused by new developments associated with the COVID-19 outbreak or other outbreak could severely impact our business.

A breakdown or breach of our information technology systems could subject us to liability or interrupt the operation of our business.

We are increasingly dependent upon information technology systems and data, as well as the information technology systems and data of our third-party vendors, especially if we expand our clinical trials and therefore our databases of patient information.

Our or our third-party vendors’ computer systems are potentially vulnerable to breakdown, malicious intrusion and random attack.

In addition, outbreaks of viruses, infectious diseases or pandemics (including, for example, the outbreak of the novel coronavirus (COVID-19), terrorist acts or acts of war targeted at the United States, and specifically in the California region, or geopolitical conflicts, such as the Russia-Ukraine conflict and the conflicts in the Middle East, could cause damage or disruption to us, our employees, facilities, contractors and collaborators, which could have a material adverse effect on our business, financial condition and results of operations.

A breakdown, corruption or breach of our information technology systems or computer systems, or those used or hosted by our CROs, contractors, consultants or third-party vendors could subject us to liability or interrupt the operation of our business.

We are increasingly dependent upon information technology systems, computer systems and data, as well as the information technology systems, computer systems and data of our current and future clinical research organizations (“CROs”), contractors, consultants and third-party vendors, especially if we expand our clinical trials and therefore our databases of patient information.

Our information technology systems, computer systems and data (and those of our current and future CROs, contractors, consultants and third-party vendors) are potentially vulnerable to breakdown, corruption, deliberate attacks, malicious intrusion or software, as well as unintentional cybersecurity incidents, such as system misconfigurations, misuses or human error.

Likewise, data privacy or security breaches by individuals authorized to access our information technology systems or others may pose a risk that sensitive data, including intellectual property, trade secrets or personal information belonging to us, our patients, customers or other business partners, may be exposed to unauthorized persons or to the public.

Cyber-attacks are increasing in their frequency, sophistication and intensity.

While we continue to build and improve our information systems and infrastructure and believe we have taken appropriate security measures to minimize these risks to our data and information technology systems, we intend to defend against and respond to data security incidents, and there can be no assurance that our efforts will prevent breakdowns or breaches in our systems, or adequately contain and mitigate risks from a data security incident, that could adversely affect our business.

Our internal computer systems, or those used by our CROs or other contractors or consultants, may fail or suffer security breaches .

We utilize and rely on services of third parties to perform services in connection with our clinical trials, which services involve the collection, use, storage and analysis of personal health information.

While we receive assurances from these vendors that their services are compliant with HIPAA and other applicable privacy and cybersecurity laws, there can

be no assurance that such third parties will comply with applicable laws or regulations.

Non-compliance by such vendors or weaknesses in their information security programs may result in liability for us which would have a material adverse effect on our business, financial condition and results of operations.

Despite the implementation of security measures, our internal computer systems and those of our current and future clinical research organizations (CROs”) and other contractors and consultants are vulnerable to damage from computer viruses and unauthorized access.

We utilize and rely on services of third parties in connection with our clinical trials, which services involve the collection, use, storage and analysis of personal health information.

While we receive assurances from these third parties that their systems and services are compliant with HIPAA and other applicable privacy and cybersecurity laws, there can be no assurance that such third parties will comply with applicable laws or regulations.

Non-compliance by such third parties or weaknesses in their cybersecurity programs may result in liability for us which would have a material adverse effect on our business, financial condition and results of operations.

Despite the implementation of security measures, our information technology systems and computer systems, and those of our current and future CROs, contractors, consultants and other third parties are potentially vulnerable to breakdown, corruption, disruption or cybersecurity incidents.

Cyber-attacks are increasing in their frequency, sophistication and intensity and are becoming increasingly difficult to detect.

While we have not experienced any such material system failure or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations.

For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of our product candidates could be delayed.

For example, the loss of

clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

We continue to build and improve our information systems and infrastructure and believe we have taken appropriate security measures to minimize these risks to our data, information technology systems and computer systems, and we intend to defend against and respond to data security incidents.

There can be no assurance that our efforts will prevent breakdowns or breaches in our systems, or adequately contain and mitigate risks from a data security incident, which could result in a material disruption of our development programs and business operations, and our business, financial condition, results of operations and prospects could be adversely impacted.

If we achieve our near-term product development milestones, we may not be able to manage any subsequent growth.

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We cannot predict whether our research and clinical approaches will result in drugs that the FDA considers safe for humans and effective for indicated uses.

The FDA and other foreign regulatory agencies have substantial discretion in the drug approval process and may require us to conduct additional preclinical and clinical testing or to perform post-marketing studies.

The FDA and other foreign regulatory agencies have substantial discretion in the approval process and may require us to conduct additional preclinical and clinical testing or to perform post-marketing studies.

The approval process may also be delayed by changes in government regulation, future legislation, administrative action or changes in FDA policy that occur prior to or during our regulatory review.

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Failure to obtain FDA approval of any of our product candidates will reduce our number of potentially salable products, if any, and, therefore, corresponding product revenues, and will have a material and adverse impact on our business.

We have limited experience in conducting late-stage clinical trials, which are complex and subject to strict regulatory oversight.

We have limited late-stage clinical trial experience with respect to its product candidates.

The clinical testing process is governed by stringent regulations and is highly complex, costly, time-consuming, and uncertain as to outcome, and pharmaceutical products and products used in the regeneration of tissue may invite particularly close scrutiny and requirements from the FDA and other regulatory bodies.

Our failure or the failure of our collaborators to conduct clinical trials successfully or our failure to capitalize on the results of clinical trials for our product candidates would have a material adverse effect on the Company.

If our clinical trials of our product candidates or future product candidates do not sufficiently enroll or produce results necessary to support regulatory approval in the United States or elsewhere, or if they show undesirable side effects, we will be unable to commercialize these product candidates.

To receive regulatory approval for the commercial sale of our product candidates, we must conduct adequate and well-controlled clinical trials to demonstrate efficacy and safety in humans.

Clinical failure can occur at any stage of testing.

Our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical and/or non-clinical testing.

In addition, the results of our clinical trials may show that our product candidates are ineffective or may cause undesirable side effects, which could interrupt, delay or halt clinical trials, resulting in the denial of regulatory approval by the FDA and other regulatory authorities.

Furthermore, negative, delayed or inconclusive results may result in:

● the withdrawal of clinical trial participants;

● the termination of clinical trial sites or entire trial programs;

● costly litigation arising out of the trials;

● substantial monetary awards to patients or other claimants;

● the requirement that additional trials be conducted;

● impairment of our business reputation;

● loss of revenues;

● the inability to commercialize our product candidates.

As the results of earlier preclinical studies or clinical trials are not necessarily predictive of future results, any product candidate we advance into clinical trials may not have favorable results in later clinical trials or receive regulatory approval.

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Because of the small sample size, the results of these clinical trials may not be indicative of future results.

Despite the results reported in earlier clinical trials for our product candidates, we do not know whether any Phase II, Phase III or other clinical trial which we may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market our product candidates.

A number of companies in the pharmaceutical industry, including those with greater resources and experience, have suffered significant setbacks in Phase II or Phase III clinical trials, even after seeing promising results in earlier clinical trials.

Our exosome technologies are based on a novel therapeutic approach which makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval, if at all.

Despite the results reported in earlier clinical trials for our product candidates, we do not know whether any Phase 2, Phase 3 or other clinical trial which we may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market our product candidates.

A number of companies in the pharmaceutical industry, including those with greater resources and experience, have suffered significant setbacks in Phase 2 or Phase 3 clinical trials, even after seeing promising results in earlier clinical trials.

Our exosome technologies are based on a novel therapeutic approach which makes it difficult to predict the time and cost of development and the probability of subsequently obtaining regulatory approval, if at all.

Our exosome technologies involve a relatively new therapeutic approach which will face both clinical and regulatory challenges.

To date , and to the best of our knowledge, no products based on exosomes have been approved in the United States or the European Union.

To date , and to the best of our knowledge, no products based on exosomes have been approved in the United States for therapeutic use.

It is therefore difficult to accurately predict the developmental challenges we may face for our exosome technologies as they proceed through preclinical studies and clinical trials.

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Additionally, our success will depend upon physicians who specialize in the treatment of diseases targeted by our exosomes prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments with which they are more familiar and for which greater clinical data may be available.

Adverse events in clinical trials of our exosomes or in clinical trials of others developing similar products and the resulting publicity, as well as any other adverse events in the field of exosome therapeutics, could result in a decrease in demand for any products that

we may develop.

These events could also result in the suspension, discontinuation, or clinical hold of, or modification to, our clinical trials.

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Unfavorable future trial results or other factors, such as insufficient capital to continue development of a product candidate or program, could also cause us to voluntarily withdraw an effective IND.

The Company has limited experience in conducting late-stage clinical trials, which are complex and subject to strict regulatory oversight.

The Company has limited late-stage clinical trial experience with respect to its product candidates.

To receive regulatory approval for the commercial sale of our product candidates, we must conduct adequate and well-controlled clinical trials to demonstrate efficacy and safety in humans.

Clinical failure can occur at any stage of testing.

Our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical and/or non-clinical testing.

Furthermore, negative, delayed or inconclusive results may result in:

● the withdrawal of clinical trial participants;

● the termination of clinical trial sites or entire trial programs;

● costly litigation arising out of the trials;

● substantial monetary awards to patients or other claimants;

● the requirement that additional trials be conducted;

● impairment of our business reputation;

● loss of revenues;

● the inability to commercialize our product candidates.

Delays in the commencement, enrollment, and completion of clinical testing could result in increased costs to us and delay or limit our ability to obtain regulatory approval for our product candidates.

Delays in the commencement, enrollment or completion of clinical testing could significantly affect our product development costs.

The current pandemic has had an impact on the ability to conduct clinical trials due to inabilities to enroll or even get subjects to complete the trials due to lockdowns, reluctance to travel, limitations set by trial sites and other reasons.

We cannot predict how long this will exist and, there is no assurance that it will not revert to prior critical levels.

A clinical trial may be suspended or terminated by the Company, the FDA, or other regulatory authorities due to a number of factors.

Additionally, a clinical trial may be suspended or terminated by the Company, the FDA, or other regulatory authorities due to a number of factors.

The commencement and completion of clinical trials require us to identify and maintain a sufficient number of trial sites, many of which may already be engaged in other clinical trial programs for the same indication as our product candidates or may otherwise be resource constrained.

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● the impact of COVID-19 on site personnel availability, patient screening and patient enrollment;

● competition from other companies in the same disease setting;

● competition from other companies operating in the same disease setting;

● developing and validating any companion diagnostic to be used in the trial, to the extent we are required to do so;

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● the need to add new clinical trial sites;

● retaining patients who have initiated their participation in a clinical trial but may be prone to withdraw due to the treatment protocol, lack of efficacy, personal issues, or side effects from the therapy, or who are lost to further follow-up;

● retaining patients who have initiated their participation in a clinical trial but may withdraw due to the treatment protocol, lack of efficacy, personal issues, or side effects from the therapy, or who are lost to further follow-up;

● manufacturing sufficient quantities of a product candidate for use in clinical trials on a timely basis;

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If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, we or our development partners, if any, may be delayed in obtaining, or may not be able to obtain or maintain, clinical or marketing approval for these product candidates.

We may not be able to obtain approval for indications that are as broad as intended, or we may be able to obtain approval only for indications that are entirely different from those indications for which we sought approval.

We may not be able to obtain approval for

indications that are as broad as intended, or we may be able to obtain approval only for indications that are entirely different from those indications for which we sought approval.

Changes in regulatory requirements and guidance may occur, and we may need to amend clinical trial protocols to reflect these changes with appropriate regulatory authorities.

In August 2023, the FDA published a guidance document, Informed Consent, Guidance for IRBs, Clinical Investigators, and Sponsors, which supersedes past guidance and finalizes draft guidance on informed consent.

The FDA’s new guidance presents evolving requirements for informed consent which may affect recruitment and retention of patients in clinical trials.

Further, in December 2023, the FDA published a final rule, Institutional Review Board Waiver or Alteration of Informed Consent for Minimal Risk Clinical Investigations, which allows exceptions from informed consent requirements when a clinical investigation poses no more than minimal risk to the human subject and includes appropriate safeguards to protect the rights, safety, and welfare of human subjects.

Modifications to informed consent or other clinical trial requirements may affect enrollment or retention of patients, require modifications to trial documents and may cause delays to the trial.

Amendments may require us to resubmit our clinical trial protocols to IRBs for re-examination which may impact the costs, timing, or successful completion of a clinical trial.

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Moreover, there is a relatively limited safety data set for product candidates using an exosome platform.

An adverse safety issue or

other adverse finding in a clinical trial conducted by a third party with a product candidate similar to ours could adversely affect our clinical trials.

Further, our product candidates may not be approved even if they achieve their primary endpoints in Phase III clinical trials or registration trials.

An adverse safety issue or other adverse finding in a clinical trial conducted by a third-party with a product candidate similar to ours could adversely affect our clinical trials.

Further, our product candidates may not be approved even if they achieve their primary endpoints in Phase 3 clinical trials or registration trials.

The FDA or comparable foreign regulatory authorities may disagree with our trial design and our interpretation of data from preclinical studies and clinical trials.

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The FDA and other comparable foreign regulatory authorities retain broad discretion in evaluating the results of our clinical trials and in determining whether the results demonstrate that a product candidate is safe and effective.

If we are required to conduct additional clinical trials of a product candidate than we expect prior to its approval, we will need substantial additional funds and there is no assurance that the results of any such additional clinical trials will be sufficient for approval.

The regulatory pathway for COVID-19 or other infectious disease vaccines is continually evolving and may result in unexpected or unforeseen challenges.

The speed at which select parties are acting to create and test many therapeutics and vaccines for COVID-19 or other infection diseases is atypical.

The speed at which select parties have acted to create and test many therapeutics and vaccines for COVID-19 or other infection diseases is atypical.

Further, changing plans or priorities within the FDA or the regulatory authorities in other jurisdictions, including changes based on new knowledge of COVID-19 or other infectious diseases, and new variants of the virus, may significantly affect the regulatory timeline for further authorizations or approvals.

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● potential product candidates may not be safe or effective in treating their targeted diseases.

For example, we previously initiated the INSPIRE trial of our lead product candidate, CAP-1002, in patients with severe COVID-19, but we ultimately decided not to pursue further clinical evaluation in that indication.

Research programs to identify new product candidates require substantial technical, financial and human resources.

If we are unable to identify suitable compounds for preclinical and clinical development, our business would be harmed.

If any of our product candidates receives marketing approval and we, or others, later discover that the drug is less effective than previously believed or causes undesirable side effects that were not previously identified, our ability, or that of any future collaborators, to market the drug could be compromised.

If any of our product candidates receives marketing approval and we, or others, later discover that the drug is less effective than previously believed or causes undesirable side effects that were not previously identified, our ability, or that of any future distributors or collaborators, to market the drug could be compromised.

Clinical trials of our product candidates must be conducted in carefully defined subsets of patients who have agreed to enter into clinical trials.

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These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or that may be necessary for, our programs.

There are many pharmaceutical companies, biotechnology companies, public and private universities, government agencies and research organizations that compete with us in developing various approaches to the treatment of DMD which includes competitors both in the United States and internationally.

We have competitors both in the United States and internationally.

With CAP-1002, we expect to face competition from existing products and products in development.

In addition, at this time, there are four FDA conditionally approved exon skipping drugs:

EXONDYS 51 (eteplirsen), AMONDYS 45 (casimersen) and VYONDYS 53 (golodirsen), which are PMOs approved for the treatment of DMD patients amenable to Exon 51, Exon 45 and Exon 53 skipping, respectively, and are marketed by Sarepta Therapeutics, Inc., and VILTEPSO (vitolarsen), a PMO approved for the treatment of DMD patients amenable to Exon 53 skipping, which is marketed by Nippon Shinyaku (U.S.

NS Pharma, Inc.).

In June 2023, the FDA approved Sarepta’s BLA application seeking accelerated approval of Elevidys (delandistrogene moxeparvovec), its microdystrophin gene therapy, for the treatment of ambulant individuals with Duchenne.

There are multiple other companies focused on developing genetic based therapies that target dystrophin mechanisms and non-dystrophin mechanisms for the treatment of DMD.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize drugs that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any drugs that we may develop.

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In addition, Congress is considering updates to the orphan drug provisions of the FDCA in response to a recent 11 th Circuit decision.

Any changes to the orphan drug provisions could change our opportunities for, or likelihood of

success in obtaining, orphan drug exclusivity and would materially adversely affect our business, financial condition, results of operations, cash flows and prospects.

Any changes to the orphan drug provisions could change our opportunities for, or likelihood of success in obtaining, orphan drug exclusivity and would materially adversely affect our business, financial condition, results of operations, cash flows and prospects.

We have also obtained an RMAT designation for CAP-1002 for the treatment of DMD.

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CAP-1002 has received rare pediatric disease designation from the FDA for the treatment of DMD.

The FDA generally define a "rare pediatric disease"

as a serious or life-threatening disease that affects fewer than 200,000 individuals in the U.S.

The FDA generally define a "rare pediatric disease" as a serious or life-threatening disease that affects fewer than 200,000 individuals in the U.S.

primarily under the age of 18 years old.

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In addition to manufacturing CAP-1002 for its own clinical trials, Capricor provided CAP-1002 for investigational purposes in two clinical trials sponsored by CSMC.

The first trial is known as “Regression of Fibrosis and Reversal of Diastolic Dysfunction in HFpEF Patients Treated with Allogeneic CDCs.” The second trial is known as “Pulmonary Arterial Hypertension treated with Cardiosphere-derived Allogeneic Stem Cells.” In both studies, Capricor provided doses of CAP-1002 and received a negotiated amount of monetary compensation in exchange for doing so.

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

Department of Health and Human Services to advance a pipeline of new, innovative vaccines for COVID-19.

As part of Project NextGen, the National Institute of Allergy and Infectious Diseases, part of the National Institutes of Health, will conduct a Phase 1 clinical study with our StealthX™ vaccine, subject to regulatory approval.

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

Providing product for clinical trials sponsored by third parties poses significant risks for the Company as we will not have control over the conduct of the trial even though we have used our commercially reasonable efforts to ensure that the investigative sites are contractually bound to follow the protocol and other procedures established by Capricor.

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There is no assurance that if research injuries are sustained, any insurance carrier will compensate Capricor for any liabilities or other losses sustained by Capricor arising out of these injuries.

been informed by CSMC that both of these trials have ceased enrollment and that the trials have been concluded.

We have been informed by CSMC that both of the CAP-1002 (REGRESS and ALPHA) trials have ceased enrollment and that the trials have been concluded.

Notwithstanding their cessation, there is a risk that injuries could result from the use of the product or other claims may arise.

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To reduce the risk of future events, we initiated a pre-medication strategy commonly used by physicians to prevent and treat allergic reactions.

We cannot provide any assurances that this will not happen again in any future studies.

We cannot provide any assurances that this will not happen again in our current trials or in any future studies.

If these or other reactions continue to occur, it could have a material adverse impact on the effectiveness of the product, our ability to receive approval of our product candidates, and could result in substantial delays, increased costs and potentially termination of the trial.

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The same possibilities exist for trials to be conducted outside of the United States that are subject to regulations established by local authorities and local law.

Any such determinations would delay or deny the introduction of our product candidates to the market and have a material adverse effect on our business, financial condition, and results of operations.

Any such determinations

would delay or deny the introduction of our product candidates to the market and have a material adverse effect on our business, financial condition, and results of operations.

Drug manufacturers are subject to ongoing periodic unannounced inspection by the FDA, the Drug Enforcement Agency, other federal agencies and corresponding state agencies to ensure strict compliance with good manufacturing practices, and other government regulations and corresponding foreign standards.

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● we may be subject to litigation or product liability claims;

● the products we manufacture may experience failures in the manufacturing process.

There are additional risks involved in conducting clinical trials internationally.

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Any of those options would involve a significant monetary investment, time delays, and increased risk and may impact the progress of our clinical trials and regulatory approvals.

Further, we have entered into the Japanese Distribution Agreement with Nippon Shinyaku for the distribution of CAP-1002 in Japan.

In order for us to be able to sell CAP-1002 in Japan, we will be required to satisfy the requirements of and get approval from the PMDA.

At this time, we are uncertain as to the type or types of trials that may be required, whether the PMDA in Japan will accept product manufactured at our facilities, if approved, the price at which our product may be sold and market acceptance.

To the extent we conduct business in the European Union (“EU”), or receive information about EU residents, we will also have to comply with the EU General Data Protection Regulation (the “GDPR”), which was officially adopted in April 2016 and went into effect in May 2018.

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Failure to obtain regulatory approval in other countries, or any delay or setback in obtaining such approval, could have the same adverse effects detailed above regarding FDA approval in the United States.

Such effects include the risks that our product candidates may not be approved for all indications requested, which could limit the uses of our product candidates and have an adverse effect on product sales and potential royalties, and that such approval may be subject to limitations on the indicated uses for which the product may be marketed or require costly, post-marketing follow-up studies.

and that such approval may be subject to limitations on the indicated uses for which the product may be marketed or require costly, post-marketing follow-up studies.

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

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Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse, transparency, and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our therapeutic candidates for which we obtain marketing approval.

Restrictions under applicable federal and state healthcare laws and regulations include, but are not limited to, the following:

federal Anti-Kickback Statute, which prohibits, among other things, persons from soliciting, receiving, offering or providing remuneration, directly or indirectly, to induce either the referral of an individual for a healthcare item or service, or the purchasing or ordering of an item or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare or Medicaid.

The term remuneration has been broadly interpreted to include anything of value.

The ACA among other things, amended the intent requirement of the federal Anti-Kickback Statute to clarify that a person or entity need not have actual knowledge of this statute or specific intent to violate it.

The Anti-Kickback Statute applies to arrangements between pharmaceutical manufacturers on the one hand and individuals, such as healthcare providers and prescribers, patients, purchasers, pharmacy benefit managers, group purchasing

organizations, third-party payors, wholesalers and distributors on the other hand, including, for example, consulting/speaking arrangements, discount and rebate offers, certain pricing arrangements, grants, charitable contributions, and patient support offerings, among others.

Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly.

Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor.

Violations of the federal Anti-Kickback Statute may result in significant civil monetary penalties for each violation, plus up to three times the remuneration involved.

Civil penalties for such conduct can further be assessed under the federal False Claims Act.

Violations can also result in criminal penalties, including criminal fines and imprisonment.

Similarly, violations can result in exclusion from participation in government healthcare programs, including Medicare and Medicaid;

● the federal False Claims Act imposes civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or knowingly making or causing to be made, a false statement to avoid, decrease or conceal an obligation to pay money to the federal government.

In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.

When an entity is determined to have violated the federal civil False Claims Act, the government may impose significant civil fines and penalties for each false claim, plus treble damages, and exclude the entity from participation in Medicare, Medicaid and other federal healthcare programs.

As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the U.S.

In addition, manufacturers can be held liable under the federal False Claims Act even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims;

● the Federal Criminal Statute on False Statements Relating to Health Care Matters makes it a crime to knowingly and willfully falsify, conceal, or cover up a material fact, make any materially false, fictitious, or fraudulent statements or representations, or make or use any materially false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items, or services;

● the Federal Civil Monetary Penalties Law authorizes the imposition of substantial civil monetary penalties against an entity, such as a pharmaceutical manufacturer, that engages in activities including, among others (1) knowingly presenting, or causing to be presented, a claim for services not provided as claimed or that is otherwise false or fraudulent in any way;

(2) arranging for or contracting with an individual or entity that is excluded from participation in federal health care programs to provide items or services reimbursable by a federal health care program;

(3) violations of the federal Anti-Kickback Statute;

or (4) failing to report and return a known overpayment;

● HIPAA includes a fraud and abuse provision referred to as the HIPAA All-Payor Fraud Law, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services.

Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

● HIPAA, as amended by HITECH, and its implementing regulations, which impose obligations on certain covered entity healthcare providers, health plans, and healthcare clearinghouses as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect to safeguarding, the privacy, security, and transmission of individually identifiable health information, and require notification to affected individuals and regulatory authorities of certain breaches of security of individually identifiable health information;

● the FDCA, which prohibits the adulteration and misbranding of drugs, including therapeutic biological products;

● federal and state consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;

● the federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the government information related to payments or other “transfers of value” made to, at the request of, or on behalf of “covered recipients,”

which include physicians, certain other healthcare providers, and teaching hospitals, and requires applicable manufacturers and group purchasing organizations to report annually to the government ownership and investment interests held by physicians and their immediate family members;

● analogous state laws and regulations, such as, state anti-kickback and false claims laws potentially applicable to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third party payors, including private insurers;

and some state laws requiring pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations.

Some of our pre-commercial activities also may be subject to some of these laws.

For more information on potentially applicable healthcare laws and regulations, See Part I, Item 1 – Other Healthcare Fraud and Abuse Laws.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform.

Federal and state enforcement bodies have increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry.

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Efforts to ensure that our current and future business arrangements with third parties comply with applicable healthcare laws and regulations could involve substantial costs.

If our operations are found to be in violation of any such requirements, we may be subject to significant penalties, including the imposition of civil, criminal or administrative penalties, monetary fines, damages, disgorgement, individual imprisonment, the curtailment or restructuring of our operations, or exclusion from participation in government contracting, healthcare reimbursement or other government programs, including Medicare and Medicaid, any of which could adversely affect our financial results.

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

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In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted.

Although we intend to monitor these regulations, our programs are currently in earlier stages of development and we will not be able to assess the impact of price regulations for a number of years.

As a result, we might obtain regulatory approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product and negatively impact the revenues we are able to generate from the sale of the product in that country.

Our ability to commercialize any products successfully also will depend in part on the extent to which coverage and reimbursement for these products and related treatments will be available from government health administration

authorities, private health insurers and other organizations.

However, there may be significant delays in obtaining coverage for newly-approved drugs.

However, there may be significant delays in obtaining coverage

for newly-approved drugs.

Moreover, eligibility for coverage does not necessarily signify that a drug will be reimbursed in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution costs.

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Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.

If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize any product candidate that we successfully develop.

If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize any product candidate that we develop.

Increasingly, the third-party payors who reimburse patients or healthcare providers, such as government and private insurance plans, are seeking greater upfront discounts, additional rebates and other concessions to reduce the prices for pharmaceutical products.

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There have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post approval activities and affect our ability to profitably sell any product candidates for which we obtain marketing approval.

Among policy makers and payors in the United States there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality of care and/or expanding access to care and the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

We expect that these and other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and lower reimbursement, and in additional downward pressure on the price that we receive for any approved product.

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Our risk mitigation measures cannot guarantee that we effectively manage all operational risks and that we are in compliance with all potentially applicable U.S.

federal and state regulations and all potentially applicable foreign regulations and/or other requirements.

federal and state regulations and all potentially applicable foreign regulations and other requirements.

The development, manufacturing, distribution, pricing, sale, marketing and reimbursement of our product candidates, together with our general operations, are subject to extensive federal and state regulation in the United States and may be subject to extensive regulation in foreign countries.

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federal government agencies currently face potentially significant spending reductions.

For example, as a result of the Budge Control Act of 2011, the Bipartisan Budget Act (“BBA”), and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), an annual 2% reduction to Medicare payments took effect on April 1, 2013, and has been extended into 2031 (with the exception of a temporary suspension from May 1, 2020 through March 31, 2022 and a subsequent reduction to 1% from April 1, 2022 until June 30, 2022).

To offset the temporary suspension during the COVID-19 pandemic, in 2030, reductions in Medicare payments will be 2.25% for the first half of the year, and 3% in the second half of the year.

For example, as a result of the Budge Control Act of 2011, the Bipartisan Budget Act (“BBA”), and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), an annual 2% reduction to Medicare payments took effect on April 1, 2013, and has been extended into through the first six months of the fiscal year 2032 sequestration order (with the exception of a temporary suspension from May 1, 2020 through March 31, 2022 and a subsequent reduction to 1% from April 1, 2022 until June 30, 2022).

federal budget remains in flux, which could, among other things, result in additional cuts to Medicare payments to providers and otherwise affect federal spending on clinical and preclinical research and development.

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The full impact on our business of any future cuts in Medicare or other programs is uncertain.

In addition, we cannot predict any impact which the actions

of President Biden’s administration and the U.S.

In addition, we cannot predict any impact which the actions of President Biden’s administration and the U.S.

Congress may have on the federal budget.

If federal spending is reduced, anticipated budgetary shortfalls may also impact the ability of relevant agencies, such as the FDA or the National Institutes of Health, to continue to function at current levels.

Amounts allocated to federal grants and contracts may be reduced or eliminated.

Amounts allocated to federal grants and contracts may be reduced or

These reductions may also impact the ability of relevant agencies to timely review and approve drug research and development, manufacturing, and marketing activities, which may delay our ability to develop, market and sell any products we may develop.

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● There may be limited access to, and supply of, normal and diseased tissue samples, cell lines, media pathogens, bacteria, viral strains, synthesized nucleic acids, including mRNA and other biological materials.

In addition, government regulations in multiple jurisdictions, such as the United States and the EU, could result in restricted access to, or the transport or use of, such materials.

In addition, government regulations in multiple jurisdictions, such as the United States, Japan and the EU, could result in restricted access to, or the transport or use of, such materials.

If the Company in unable to access sufficient sources of such materials, or if tighter restrictions are imposed on the use of such materials, the Company may not be able to conduct research or product development activities as planned and may incur additional costs.

● The development, manufacturing and marketing of vaccines are subject to regulation by the FDA, the EMA and other regulatory bodies that are often more complex and extensive than the regulations applicable to other pharmaceutical products.

● The development, manufacturing and marketing of vaccines are subject to regulation by the FDA, the EMA, PMDA and other regulatory bodies that are often more complex and extensive than the regulations applicable to other pharmaceutical products.

For example, in the United States, a BLA, including both preclinical and clinical trial data and extensive data regarding the manufacturing procedures, is required for human vaccine candidates, and FDA approval is generally required for the release of each manufactured commercial lot.

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We have limited manufacturing capability and may not be able to maintain our manufacturing licenses.

Our primary research and new manufacturing facility is located in San Diego, California.

We recently completed construction in our San Diego Research and Development Facility of a new GMP pilot manufacturing facility as we prepare for potential commercial launch.

This facility is designed to produce commercial-scale GMP CAP-1002 product for further clinical and potential commercial use.

In 2022, we completed construction of our new primary manufacturing facility located within our Research and Development Facility in San Diego, California as we prepare for potential commercial launch.

This facility is designed to produce commercial-scale GMP CAP-1002 product for clinical and potential commercial use, subject to FDA approval.

Additionally, we also maintain a portion of our laboratories, research and manufacturing facilities in leased premises at CSMC in Los Angeles, California.

Currently, in the area of our leased premises at CSMC where we manufacture CAP-1002 and may potentially manufacture our exosome technologies, we believe that we follow good manufacturing practices sufficient for an investigational stage product.

Capricor has been manufacturing CAP-1002 in this facility for our current and previous studies including the HOPE-3 trial, although we are planning to potentially use (and, as discussed further below, we may be required by the FDA to use) product manufactured from our San Diego facility to support the ongoing HOPE-3 trial.

Capricor has been manufacturing CAP-1002 in this facility for our current and previous studies including Cohort A of the HOPE-3 trial.

We are using product manufactured from our San Diego facility to support Cohort B of the ongoing HOPE-3 trial and supporting our OLE trials.

Furthermore, it is to be determined whether the FDA will ultimately approve commercial manufacturing at this facility.

Our plans to use the CSMC facility for future trials could change if we fail to meet the specifications necessary to produce our product in a qualified manner.

Currently, we also intend to utilize our premises at CSMC to develop and manufacture our exosomes technologies, if necessary.

Currently, our CSMC Facilities Lease is scheduled to expire on July 31, 2026.

There can be no assurance that the Facilities Lease for the manufacturing space will be continued beyond July 31, 2024.

At this time, we are considering the possible extension of our current Facilities Lease.

The FDA has informed us that we will need to use cGMP CAP-1002 product in connection with the ongoing HOPE-3 trial to support a potential BLA filing.

Such change may result in delays and significant expenses which would have a negative impact on our business and product development.

In addition, FDA may disagree with our position that the drug used in our prior clinical studies is sufficiently comparable to the drug to be used in our HOPE-3 study.

This could result in us being required to conduct further comparability testing and may result in us being required to conduct additional clinical and/or nonclinical studies before we are able to submit a BLA for approval.

Additional testing or clinical

trial requirements could lead us not to pursue an application for approval.

There can be no assurance that the Facilities Lease for the manufacturing space will be continued beyond July 31, 2026 or whether the facility will be approved by the FDA for commercial manufacturing following approval of the BLA.

In the third quarter of 2023, we met with the FDA, where we affirmed alignment with respect to our Phase 3, HOPE-3 program where the FDA agreed to allow us to submit a BLA supported by results using product manufactured at our Los Angeles manufacturing site.

At this time, we can provide no assurance that the FDA will ultimately approve this facility for commercial use, or that CMSC will allow us to market commercial product from this facility.

Should this facility ultimately not be approved to manufacture commercial product, this may result in delays and significant expenses which would materially impact our business and product development.

In addition, FDA may consider the data we provide are insufficient to prove that the drug used in Cohort B of our HOPE-3 study is comparable to the drug produced in our Los Angeles facility and used in our prior clinical studies.

This could result in us being required to conduct further comparability testing and may result in us being required to conduct

additional clinical and/or nonclinical studies before we are able to submit a BLA for approval.

Additional testing or clinical trial requirements could lead us not to pursue an application for approval.

Conducting a clinical trial may prove too difficult or too expensive, and the process of designing a clinical trial, enrolling enough patients, and completing treatment and data collection under the protocol could take a significant amount of time, effort, and resources.

Even if we do complete the clinical trial, the study may not meet its prespecified endpoints, and even if it does, FDA may still disagree with our determination that the trial is sufficient to support submission and approval of a marketing application.

Additionally, we initiated a technology transfer with Lonza Houston, Inc., a leading global contract manufacturing organization to prepare for the possibility of commercial launch to support product demand, as needed, for manufacturing of CAP-1002.

Process development and cGMP readiness have been the focus of the work done by Lonza to date.

We are evaluating whether it would be in our best interests to have Lonza move forward to complete the technology transfer process.

The next steps will be based on many factors, including our ability to produce GMP CAP-1002 product from our facility in San Diego as well as our discussions with regulatory agencies.

We may be required to obtain and maintain certain licenses in connection with our manufacturing facilities and activities.

Even if we do complete the clinical trial, the study may not meet its prespecified endpoints, and even if it does, the FDA may still disagree with our determination that the trial is sufficient to support the submission and approval of a BLA application.

We obtain the donor hearts from which our CDCs are manufactured from organ procurement organizations (“OPOs”).

There is no guarantee that the OPOs which currently provide donor hearts to us will be able to continue to supply us with donor hearts in the future or, in that case, that an alternative OPO will be available to us.

If those OPOs or an alternative OPO is not able or willing to supply us with donor hearts, we would be unable to produce our CDCs or CDC-exosomes and the development of our lead product candidate would be significantly impaired and possibly terminated.

Additionally, OPOs are subject to regulations of various government agencies.

There is no guarantee that laws and regulations pursuant to which our OPOs provide donor hearts will not change, making it more difficult or even impossible for the OPOs to continue to supply us with the hearts we need to produce our product candidates.

We are required to obtain and maintain certain licenses in connection with our manufacturing facilities and activities.

For example, we have recently entered into Azzur License Agreement with Azzur Cleanrooms-on-Demand – San Diego, LLC pursuant to which we have been granted an exclusive license to use certain space and the non-exclusive right to use certain equipment and property for our early phase clinical and/or pre-clinical manufacturing purposes.

We are planning to use this facility to manufacture our exosome-based vaccine for potential clinical use.

There is no guarantee that any licenses issued to us will not expire, be revoked, forfeited by operation of law or otherwise.

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Other states may impose additional licensing requirements upon us which, until obtained, would limit our ability to conduct our trials in such states.

We obtain the donor hearts from which our CDCs are manufactured from OPOs.

If those OPOs or an alternative OPO is not able or willing to supply us with donor hearts, we would be unable to produce our CDCs or exosomes and the development of our lead product candidates would be significantly impaired and possibly terminated.

Additionally, OPOs are subject to regulations of various government agencies.

We have no prior experience in manufacturing products for large, late-stage clinical trials or commercial use.

To date, our manufacturing experience has been limited to manufacturing CAP-1002 for clinical use in multiple clinical trials.

Our experience in the manufacturing of exosomes is limited to producing product for preclinical use.

We have no prior history or experience in manufacturing our allogeneic product for large scale, late-stage (Phase III) clinical trials or for commercial use.

Our product candidates have not previously been tested in any large trials to show safety or efficacy, nor are they available for commercial use.

We face risks of manufacturing failures and risks of making products that are not proven to be safe or effective.

The process of manufacturing our products is complex and we may encounter difficulties in production, particularly with respect to process development or scaling-up of our manufacturing capabilities.

We are currently producing doses of CAP-1002 in order to conduct our ongoing clinical trials at both of our facilities.

The process of manufacturing our products is complex, highly regulated and subject to multiple risks.

The complex processes associated with the manufacture of our product candidates expose us to various manufacturing challenges and risks, which may include delays in manufacturing adequate supply of our product candidates, limits on our ability to increase manufacturing capacity, and the potential for product failure and product variation that may interfere with preclinical and clinical trials, along with additional costs.

We also may make changes to our manufacturing process at various points during development, and even after commercialization, for various reasons, such as controlling costs, achieving scale, decreasing processing time, increasing manufacturing success rate, or other reasons.

Such changes carry the risk that they will not achieve their intended objectives, and any of these changes could cause our product candidates to perform differently and affect the results of current or future clinical trials, or the performance of the product, once commercialized.

In some circumstances, changes in the manufacturing process may require us to perform ex vivo comparability studies and to collect additional data from patients prior to undertaking more advanced clinical trials.

For instance, changes in our process during the course of clinical development may require us to show the comparability of the product used in earlier clinical trials or at earlier portions of a trial to the product used in later clinical trials or later portions of the trial.

We may also make further changes to our manufacturing process before or after commercialization, and such changes may require us to show the comparability of the resulting product to the product used in the clinical trials using earlier processes.

We may be required to collect additional clinical data from any modified process prior to obtaining marketing approval for the product candidate produced with such modified process.

If clinical data are not ultimately comparable to that seen in the earlier trials in terms of safety or efficacy, we may be required to make further changes to our process and/or undertake additional clinical and/or nonclinical testing, which could significantly delay the clinical development or commercialization of the associated product candidate.

Although we continue to build on our experience in manufacturing our product candidates, we have no experience, as a company, manufacturing product candidates for commercial supply.

We may never be successful in manufacturing product candidates in sufficient quantities or with sufficient quality for commercial use.

Our manufacturing capabilities could be affected by cost-overruns, unexpected delays, equipment failures, labor shortages, operator error,

natural disasters, unavailability of qualified personnel, difficulties with logistics and shipping, problems regarding yields or stability of product, contamination or other quality control issues, power failures, and numerous other factors that could prevent us from realizing the intended benefits of our manufacturing strategy and have a material adverse effect on our business.

Furthermore, compliance with cGMP requirements and other quality issues may arise during our internal efforts to scale-up manufacturing, and with our current suppliers, or any future CMOs.

If contaminants are discovered in our supply of our product candidates or in our manufacturing facilities or those of our CMOs, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination.

We cannot assure that any stability failures or other issues relating to the manufacture of our product candidates will not occur in the future.

Additionally, we may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments.

If we were to encounter any of these difficulties, our ability to provide our product candidate to patients in clinical trials, or to provide product for treatment of patients once approved, would be jeopardized.

We are subject to a number of manufacturing risks, any of which could substantially increase our costs and limit supply of our product candidates.

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Our resources and expertise to formulate or manufacture our product candidates on a large or commercial scale basis are still very limited.

If we need to secure an additional manufacturer of our product candidates, demand for third-

party manufacturing or testing facilities may grow at a faster rate than their existing capacity, which could disrupt our ability to find and retain third-party manufacturers capable of producing sufficient quantities of such raw materials, components, parts, and consumables required to manufacture our products.

If CAP-1002 or any of our exosome technologies receives FDA approval, we may need to ultimately rely on one or more third-party contractors to manufacture supplies of these drug products which may cause delays in our ability to sell commercially.

If we need to secure an additional manufacturer of our product candidates, demand for third-party manufacturing or testing facilities may grow at a faster rate than their existing capacity, which could disrupt our ability to find and retain third-party manufacturers capable of producing sufficient quantities of such raw materials, components, parts, and consumables required to manufacture our products.

If CAP-1002 or any of our exosome technologies receives FDA approval, we may need to ultimately rely on one or more third-party contractors to manufacture supplies of these products which may cause delays in our ability to sell commercially.

Our current and anticipated future reliance on a limited number of third-party manufacturers exposes us to the following risks:

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Each of these risks could delay our clinical trials, the approval, if any, of our product candidates by the FDA, or the commercialization of our product candidates, or result in higher costs or deprive us of potential product revenues.

Even if our product candidates receive regulatory approval, they may still face future development and regulatory difficulties.

Our product candidates, if approved, will also be subject to ongoing FDA requirements for the labeling, packaging, storage, advertising, promotion, record-keeping and submission of safety and other post-market information on the drug.

In addition, approved products, manufacturers and manufacturers’ facilities are subject to continual review and periodic inspections.

If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product or us, including requiring withdrawal of the product from the market.

If our product candidates fail to comply with applicable regulatory requirements, such as cGMPs, a regulatory agency may:

● issue warning letters or untitled letters;

● require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due dates for specific actions and penalties for non-compliance;

● impose other civil or criminal penalties;

● suspend regulatory approval;

● suspend any ongoing clinical trials;

● refuse to approve pending applications or supplements to approved applications filed by us;

● impose restrictions on operations, including costly new manufacturing requirements;

● seize or detain products or require a product recall.

The third parties we use in the manufacturing process for our product candidates may fail to comply with cGMP regulations.

If we decide to transfer the manufacturing of our product candidates for future clinical trials or for commercial supply, our contract manufacturers will be required to produce our drug products in compliance with cGMP.

These contract manufacturers are subject to periodic unannounced inspections by the FDA and corresponding state and foreign authorities to ensure strict compliance with cGMP and other applicable government regulations and corresponding foreign requirements.

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Any difficulties or delays in our contractors’ manufacturing and supply of product candidates, or any failure of our contractors to maintain compliance with the applicable regulations and requirements could increase our costs, make us postpone or cancel clinical trials, prevent or delay regulatory approvals by the FDA and corresponding state and foreign authorities, prevent the import and/or export of our products, cause us to lose revenue, result in the termination of the development of a product candidate, or have our product candidates recalled or withdrawn from use.

The process of manufacturing our products is complex and we may encounter difficulties in production, particularly with respect to process development or scaling-up of our manufacturing capabilities.

We are currently producing doses of CAP-1002 in order to conduct our ongoing HOPE-3 Phase III clinical trial.

The process of manufacturing our products is complex, highly regulated and subject to multiple risks.

We also may make changes to our manufacturing process at various points during development, and even after commercialization, for various reasons, such as controlling costs,

achieving scale, decreasing processing time, increasing manufacturing success rate, or other reasons.

We may be required to collect additional clinical data from any modified process prior to obtaining marketing approval for the product candidate produced with such modified process.

Although we continue to build on our experience in manufacturing our products, we have no experience, as a company, manufacturing product candidates for commercial supply.

We may never be successful in manufacturing product candidates in sufficient quantities or with sufficient quality for commercial use.

Our manufacturing capabilities could be affected by cost-overruns, unexpected delays, equipment failures, labor shortages, operator error, natural disasters, unavailability of qualified personnel, difficulties with logistics and shipping, problems regarding yields or stability of product, contamination or other quality control issues, power failures, and numerous other factors that could prevent us from realizing the intended benefits of our manufacturing strategy and have a material adverse effect on our business.

Furthermore, compliance with cGMP requirements and other quality issues may arise during our internal efforts to scale-up manufacturing, and with our current or any future CMOs.

We cannot assure that any stability failures or other issues relating to the manufacture of our product candidates will not occur in the future.

Additionally, we and our CMOs may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments.

If we or our CMOs were to encounter any of these difficulties, our ability to provide our product candidate to patients in clinical trials, or to provide product for treatment of patients once approved, would be jeopardized.

Risks Related to Our Intellectual Property

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Furthermore, there can be no assurance that others will not independently develop substantially equivalent technologies not covered by patents to which we have rights or obtain access to our know-how.

In addition, the laws of certain countries may not adequately protect our intellectual property.

In addition, the laws of certain countries

may not adequately protect our intellectual property.

Our competitors may possess or obtain patents on products or processes that are necessary or useful to the development, use, or manufacture of our product candidates.

There can also be no assurance that our proposed technology will not infringe upon valid and enforeceable patents or proprietary rights owned by others, with the result that others may bring infringement claims against us and require us to license such proprietary rights, which may not be available on commercially reasonable terms, if at all.

There can also be no assurance that our proposed technology will not infringe upon valid and enforceable patents or proprietary rights owned by others, with the result that others may bring infringement claims against us and require us to license such proprietary rights, which may not be available on commercially reasonable terms, if at all.

Any such litigation, if instituted, could have a material adverse effect, potentially including monetary penalties, diversion of management resources, and injunction against continued manufacture, use, or sale of certain products or processes.

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We have licensed certain patent and other intellectual property rights that cover cardiospheres (CSps), and cardiosphere-derived cells (CDCs), (including our CAP-1002 product candidate) from the University of Rome, JHU, and CSMC.

We have also licensed certain patent and other intellectual property rights from CSMC and JHU that cover extracellular vesicles, such as exosomes and microvesicles.

We have also licensed certain patent and other intellectual property rights from CSMC that cover extracellular vesicles, such as exosomes and microvesicles.

Under the license agreements with the University of Rome and JHU, those institutions prosecute and maintain their patents and patent applications in collaboration with us.

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We cannot be certain that such activities by these institutions have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights.

Under our Amended and Restated Exclusive License Agreement with CSMC and our Exclusive License Agreement with CSMC, as the same have been amended, we have assumed, in coordination with CSMC, financial responsibility for the prosecution and maintenance of certain patents and patent applications thereunder.

Our enforcement of certain of these licensed patents or defense of any claims asserting the invalidity and/or unenforceability of these patents would also be subject to the cooperation of the University of Rome, JHU, and/or CSMC.

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If we choose to go to court to stop a third-party from using the inventions covered by our patents, that individual or company has the right to ask the court to rule that such patents are invalid and/or should not be enforced against that third-party.

These lawsuits are expensive and would consume time and other resources, even if we were successful in discontinuing the infringement of our patents.

These lawsuits are expensive and would consume time and other resources, even if we were successful in

discontinuing the infringement of our patents.

In addition, there is a risk that the court will determine that these patents are not valid and that we do not have the right to stop the other party from using the inventions.

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As a consequence, issued patents may be found to contain invalid claims according to the revised legal standards.

Some of our own or in-licensed patents may be subject to challenge and subsequent invalidation in a variety of post-grant

proceedings, before the Patent Trial and Appeal Board (the PTAB) of the USPTO or in litigation under the revised legal standards, which make it more difficult to defend the validity of claims in already issued patents.

Some of our own or in-licensed patents may be subject to challenge and subsequent invalidation in a variety of post-grant proceedings, before the Patent Trial and Appeal Board (the PTAB) of the USPTO or in litigation under the revised legal standards, which make it more difficult to defend the validity of claims in already issued patents.

Furthermore, a third-party may claim that we or our manufacturing or commercialization partners are using inventions covered by the third-party’s patent rights and may go to court to stop us from engaging in our normal operations and activities, including making or selling our product candidates.

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We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise improperly used, misappropriated or disclosed confidential information of these third parties or our employees’ former employers.

Litigation may be necessary to defend against these claims.

may be necessary to defend against these claims.

Even if we are successful in defending against these claims, litigation could result in substantial cost and be a distraction to our management and employees.

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Nippon Shinyaku has exclusive distribution rights for CAP-1002 in the United States and Japan for a significant period of time, with only limited rights of either party to terminate these agreements.

We are largely dependent on our relationships with our licensors and collaborators and there is no guarantee that such relationships will be maintained or continued.

We are dependent on our relationships with our licensors and collaborators and there is no guarantee that such relationships will be maintained or continued.

We have entered into certain license agreements for certain intellectual property rights which are essential to enable us to develop and commercialize our products.

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There is no guarantee that we will be able to satisfy all of our obligations under our license agreements to each of the institutions and that such license agreements will not be terminated.

By way of example, we recently received a letter from CSMC alleging that pursuant to the Amended CSMC License Agreement between CSMC and Capricor, Capricor has certain overdue payment obligations to CSMC arising out of a milestone payment received by Capricor pursuant to the U.S.

Distribution Agreement entered into between Capricor and Nippon Shinyaku.

The notice letter requests that Capricor cure the alleged breaches of the Amended CSMC License Agreement, and reserves CMSC’s purported right to terminate the Amended CSMC License Agreement if such alleged breaches are not cured.

We dispute the allegations in the letter from CSMC and intend to vigorously defend our position and pursue all available remedies, but there is no guarantee that any disputes that we have with CSMC will be resolved or if resolved, will not result in our incurring certain payment and other obligations.

Each of the institutions receives funding from independent sources such as the NIH and other private or not-for-profit sources and are investigating scientific and clinical questions of interest to their own principal investigators as well as the scientific and clinical communities at large.

These investigators (including Capricor, Inc.’s founder, Dr.

Eduardo Marbán, who is the Director of the Smidt Heart Institute at CSMC) are under no obligation to conduct, continue, or conclude either current or future studies utilizing our cell therapy or exosomes technology, and they are not compelled to license any further technologies or intellectual property rights to us except as may be stated in the applicable licensing agreements or research agreements between those institutions and us.

Changes in these collaborators’ research interests or their funding sources away from our technology would have a material adverse effect on us.

Marbán, who is the Director of the Smidt Heart Institute at CSMC) are under no obligation to conduct, continue, or conclude either current or future studies utilizing our cell therapy or exosomes technology, and they are not compelled to license any further technologies or intellectual property rights to us except as may be stated in the applicable licensing agreements or research agreements between those institutions and us.

Further, the failure of any third-party licensor to comply with its licensing obligations under its respective agreement with us would have a material adverse effect on us.

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We cannot assure that, upon inspection, such regulatory authorities will determine that any of our clinical trials comply with the cGCP regulations.

Further, GCP requirements may evolve.

In June 2023, the FDA published a draft guidance, E6(R3) Good Clinical Practice (GCP), which seeks to unify standards for clinical trial data for ICH member countries and regions.

Changes to data requirements may cause the FDA or comparable foreign regulatory authorities to disagree with data from preclinical studies or clinical trials, and may require further studies.

Biologic products for commercial purposes must also be produced under cGMP.

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One or more of our competitors may develop products based upon the principles underlying our proprietary technologies earlier than we do, obtain approvals for such products from the FDA more rapidly than we do, or develop alternative products or therapies that are safer, more effective and/or more cost effective than any product developed by us.

Our competitors may obtain regulatory approval of their

products more rapidly than we are able to or may obtain patent protection or other intellectual property rights that limit our ability to develop or commercialize our product candidates.

Our competitors may obtain regulatory approval of their products more rapidly than we are able to or may obtain patent protection or other intellectual property rights that limit our ability to develop or commercialize our product candidates.

Our competitors may also develop drugs that are more effective, useful, and less costly than ours, and may also be more successful than us in manufacturing and marketing their products.

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The market for employees with experience in the cell therapy and exosome industries is especially competitive, and we may not be able to recruit employees needed to develop and manufacture our products or be able to retain the employees whom we do recruit.

There has been a close working relationship between the academic lab at CSMC and our research and development team where employees and consultants of both entities contribute time and services to the research being performed by the other.

There has been a close working relationship between the academic lab at CSMC and our research and development team where employees and consultants of both entities from time to time have contributed time and services to the research being performed by the other.

As a result, it can sometimes be unclear whether intellectual property developed out of these services for CSMC would be owned by CSMC or by the Company, although if owned by CSMC, the Company may have rights to that intellectual property under the terms of its license agreements with CSMC.

We also developed a working relationship between the academic lab of Dr.

Stephen Gould at JHU and our research and development team where employees and consultants of both entities contributed time and services to the research being performed by the other.

As a result, it can sometimes be unclear whether intellectual property developed out of these services would be owned by JHU or by the Company, although if owned by JHU, the Company may have rights to that intellectual property under the terms of its license and research agreements with JHU.

This SRA expired in accordance with its terms on March 31, 2022.

The Company may be unable to attract and retain personnel on acceptable terms given the competition among biotechnology, biopharmaceutical, and health care companies, universities, and non-profit research institutions for experienced scientists.

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All of the Company’s employees will be employed “at will” and, therefore, each employee may leave the employment of the Company at any time.

If we are unable to retain our existing employees, including qualified scientific personnel, and attract additional qualified candidates, the Company’s business and results of operations could be adversely affected.

If we are unable to retain our existing employees, including qualified scientific and manufacturing personnel, and attract additional qualified candidates, the Company’s business and results of operations could be adversely affected.

If we do not establish strategic partnerships, we will have to undertake development and commercialization efforts on our own, which would be costly and delay our ability to commercialize any future products or product candidates.

An element of our business strategy includes potentially partnering with pharmaceutical, biotechnology and other companies to obtain assistance for the development and potential commercialization of our product candidates, including the cash and other resources we need for such development and potential commercialization.

An element of our business strategy includes potentially partnering with pharmaceutical, biotechnology and other companies to obtain assistance for the development and potential commercialization of our product candidates, including having access to the cash and other resources we need for such development and potential commercialization.

We may not be able to negotiate strategic partnerships on acceptable terms, or at all.

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Our business could be negatively impacted by our allocation of significant resources to a global health threat that is unpredictable and could rapidly dissipate or against which our vaccine, if developed, may not be partially or fully effective, or for which better vaccine options may be available.

Even if our product candidates are approved, our ability to generate product revenues will be diminished if our drugs sell for inadequate prices or patients are unable to obtain adequate levels of reimbursement.

Even if our product candidates are approved, our ability to generate product revenues will be diminished if our products sell for inadequate prices or patients are unable to obtain adequate levels of reimbursement.

Our or our collaborators’ ability to generate significant sales of our products, if approved, depends on the availability of adequate coverage and reimbursement from third-party payors.

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In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors.

Many third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies, but also have their own methods and approval processes to decide which drugs they will pay for and establish reimbursement levels.

will pay for and establish reimbursement levels.

Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available.

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Such decisions can strongly influence the adoption of a drug by patients and physicians.

Patients who are prescribed treatments

for their conditions and treating healthcare providers generally rely on third-party payors to reimburse all or part of the associated healthcare costs.

Patients who are prescribed treatments for their conditions and treating healthcare providers generally rely on third-party payors to reimburse all or part of the associated healthcare costs.

Patients may be unlikely to use and prescribers unlikely to prescribe our products unless adequate coverage is provided and reimbursement is available.

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Our products may expose us to potential product liability, and there is no guarantee that we will be able to obtain and maintain adequate insurance to cover these liabilities.

The testing, marketing, and sale of human cell therapeutics, pharmaceuticals, and services entail an inherent risk of adverse effects or medical complications to patients and, as a result, product liability claims may be asserted against us.

The testing, marketing, and sale of human cell therapeutics, pharmaceuticals, biologics, and services entail an inherent risk of adverse effects or medical complications to patients and, as a result, product liability claims may be asserted against us.

A future product liability claim or product recall could have a material adverse effect on the Company.

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The use of our product candidates in clinical trials and the sale of any products for which we obtain marketing approval, if at all, expose the Company to the risk of product liability claims.

Product liability claims might be brought against the Company by consumers, health care providers or others using, administering or selling our products.

Product liability claims might be brought against the Company by consumers, health care providers or others using,

administering or selling our products.

If we cannot successfully defend ourselves against these claims, we will incur substantial liabilities.

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A successful product liability claim or series of claims brought against the Company could have a material adverse effect on us and, if judgments exceed our insurance coverage, could significantly decrease our cash position and adversely affect our business.

In addition, our clinical trial agreements and most agreements with third-party vendors contain indemnification obligations requiring us to indemnify them from any losses and claims that may be brought in connection with their provision of services, testing, manufacture or other activities in connection with the use of our products.

In addition, our clinical trial agreements and most agreements with third-party vendors contain provisions requiring us to maintain certain levels of insurance extending for multiple years beyond the termination or expiration of the agreement as well as indemnification obligations requiring us to indemnify them from any losses and claims that may be brought in connection with their provision of services, testing, manufacture or other activities in connection with the use of our products.

Our business involves risk associated with handling hazardous and other dangerous materials.

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● authorizing the issuance of “blank check” preferred stock without any need for action by stockholders;

● eliminating the ability of stockholders to call special meetings of stockholders;

● establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.

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As of December 31, 2023, there were approximately 31.1 million shares of common stock outstanding and approximately 5.0 million common warrants outstanding, as well as outstanding awards to purchase approximately 8.2 million shares of common stock under various incentive stock plans of the Company.

Additionally, as of December 31, 2022, there were approximately 2.6 million shares of common stock available for future issuance under various incentive plans.

Additionally, as of December 31, 2023, there were approximately 1.2 million shares of common stock available for future issuance under our incentive plans.

This number of shares available for future issuance under those plans was subsequently increased by 1,557,416 shares in accordance with the terms of our 2021 equity incentive plan which include an automatic increase previously approved by our Board and stockholders.

We may issue additional common stock, warrants and other convertible securities from time to time to finance our operations.

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The annual limitation is calculated by multiplying the loss corporation’s value immediately before the ownership change by the greater of the long-term tax-exempt rate determined by the U.S.

Internal Revenue Service (“IRS”)

in the month of the ownership change or the two preceding months.

Internal Revenue Service (“IRS”) in the month of the ownership change or the two preceding months.

This annual limitation may be adjusted to reflect any unused annual limitation for prior years and certain recognized built-in gains and losses for the year.

Section 383 of the Code also imposes a limitation on the amount of tax liability in any post-ownership change year that can be reduced by the loss corporation’s pre-ownership change tax credit carryforwards.

The merger between Nile Therapeutics, Inc.

(“Nile”) and Capricor resulted in an “ownership change” of Nile.

In addition, previous or current changes in the Company’s stock ownership may have triggered or, in the future, may trigger an “ownership change,” some of which may be outside our control.

The merger between Nile and Capricor resulted in an “ownership change” of Nile.

In addition, previous or current changes in the Company’s stock ownership may have triggered or, in the future, may trigger an “ownership change,” some of which may be outside of our control.

Accordingly, the Company’s ability to utilize Nile’s NOL and tax credit carryforwards may be substantially limited.

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Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business and stock price.

The Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”), as well as rules implemented by the Securities and Exchange Commission (“SEC”), Nasdaq and any market on which the Company’s shares may be listed in the future, impose various requirements on public companies, including those related to corporate governance practices.

The Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”), as well as rules implemented by the SEC, Nasdaq and any market on which the Company’s shares may be listed in the future, impose various requirements on public companies, including those related to corporate governance practices.

The Company’s management and other personnel will need to devote a substantial amount of time to these requirements.

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Therefore, we cannot be certain that in the future material weaknesses or significant deficiencies will not exist or otherwise be discovered.

If material weaknesses or other significant deficiencies occur, these weaknesses or deficiencies could result in misstatements of our results of operations, restatements of our consolidated financial statements, a decline in our stock price, or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity.

If material weaknesses or other

significant deficiencies occur, these weaknesses or deficiencies could result in misstatements of our results of operations, restatements of our consolidated financial statements, a decline in our stock price, or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity.

You may experience future dilution as a result of future equity offerings.

In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock at prices that may not be the same as the price per share paid by any investor.

We may sell shares or other securities in any other offering at a price per share that is less than the price per share paid by any investor, and investors purchasing shares or other securities in the future could have rights

superior to you.

The price per share at which we sell additional shares of our common stock, or securities convertible or exchangeable into common stock, in future transactions may be higher or lower than the price per share paid by any investor.

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We may be at risk of securities class action litigation or litigation initiated by individual stockholders.

We may subject to securities class action litigation or litigation initiated by individual stockholders.

This risk is especially relevant due to our dependence on positive clinical trial outcomes and regulatory approvals.

In the past, biotechnology and pharmaceutical companies have experienced significant stock price volatility, particularly when associated with binary events such as clinical trials and product approvals.

If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business and result in a decline in the market price of our common stock.

Additionally, we may be subject to litigation and business challenges in the operation of our company due to actions instituted by activist stockholders.

Perceived uncertainties as to our future direction as a result of stockholder activism may lead to the perception of a change in the direction of the business or other instability and may affect our relationships with vendors, distributors, collaborators, prospective and current employees and others.

Responding to legal and/or business challenges related to securities class action litigation, or litigation initiated by individual stockholders, including activist stockholders, could be costly and time-consuming, may not align with our business strategies, and could divert management’s attention and resources from the pursuit of our business strategies, any of which could harm our business and result in a decline in the market price of our common stock.

In the event we fail to satisfy any of the listing requirements of The Nasdaq Capital Market, our common stock may be delisted, which could affect our market price and liquidity.

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● a decreased ability to issue additional securities (including pursuant to short-form registration statements on Form S-3) or obtain additional financing in the future.

UNRESOLVED STAFF COMMENTS

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 1A. Risk Factors