What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-26 compared with 2024-03-11 · 180 added, 274 removed, 553 unchanged (45% of the section changed)

16 unchanged sentences

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2024 and 2023, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has continued to incur significant operating losses and negative cash flows from operations, during the year ended December 31, 2023.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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Accounts payable and accrued expenses

Accounts payable and accrued expenses, related party

Lease liabilities, current

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Lease liabilities, net of current

Deferred revenue, net of current

TOTAL LONG-TERM LIABILITIES

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Preferred stock, $ 0.001 par value, 5,000,000 shares authorized, none issued and outstanding

Common stock, $ 0.001 par value, 50,000,000 shares authorized, 31,148,320 and 25,241,402 shares issued and outstanding , respectively

Common stock, $ 0.001 par value, 100,000,000 and 50,000,000 shares authorized, 45,582,288 and 31,148,320 shares issued and outstanding , respectively

Additional paid-in capital

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Issuance of common stock, net of fees

Exercise of common warrants

Stock-based compensation

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( 22,287,542 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Loss on disposal of fixed assets

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( 9,824,413 )

Prepaid expenses and other current assets

Prepaid expenses and other assets

Accounts payable and accrued expenses

Accounts payable and accrued expenses, related party

Deferred revenue

( 12,270,465 )

Net cash provided by (used in) operating activities

( 3,178,066 )

Net cash used in operating activities

( 39,995,742 )

( 25,596,545 )

Cash flows from investing activities:

7 unchanged sentences

Payments for leasehold improvements

( 1,359,488 )

Net cash provided by (used in) investing activities

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Net proceeds from sale of common stock

Proceeds from exercise of stock awards

Proceeds from exercise of stock awards and warrants

Net cash provided by financing activities

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See accompanying notes to the audited consolidated financial statements.

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Capricor Therapeutics, Inc., a Delaware corporation (referred to herein as “Capricor Therapeutics” or the “Company,” “we,” “us” or “our”), is a clinical-stage biotechnology company focused on the development of transformative cell and exosome-based therapeutics for treating Duchenne muscular dystrophy (“DMD”), a rare form of muscular dystrophy which results in muscle degeneration and premature death, and other diseases with high unmet medical needs.

Capricor Therapeutics, Inc., a Delaware corporation (together with its wholly-owned subsidiary, referred to herein as “Capricor Therapeutics,” the “Company,” “we,” “us” or “our”), is a clinical-stage biotechnology company focused on the development of transformative cell and exosome-based therapeutics for treating Duchenne muscular dystrophy (“DMD”), a rare form of muscular dystrophy which results in muscle degeneration and premature death, and other diseases with high unmet medical needs.

Capricor, Inc.

(“Capricor”), a wholly-owned subsidiary of Capricor Therapeutics, was founded in 2005 as a Delaware corporation based on the innovative work of its founder, Eduardo Marbán, M.D., Ph.D.

After completion of a merger between Capricor and a subsidiary of Nile Therapeutics, Inc., a Delaware corporation (“Nile”), on November 20, 2013, Capricor became a wholly-owned subsidiary of Nile and Nile formally changed its name to Capricor Therapeutics, Inc.

(“Capricor”), a wholly-owned subsidiary of Capricor Therapeutics, was founded in 2005 as a Delaware corporation.

Capricor became public after the completion of a merger between Capricor and a subsidiary of Nile Therapeutics, Inc., a Delaware corporation (“Nile”), in 2013, where Capricor became a wholly-owned subsidiary of Nile and Nile formally changed its name to Capricor Therapeutics, Inc.

Capricor Therapeutics was listed on the Nasdaq Capital Market shortly thereafter.

Capricor Therapeutics, together with its subsidiary, Capricor, has multiple therapeutic drug candidates in various stages of development.

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Certain reclassification of prior period amounts has been made to conform to the current year presentation.

Liquidity and Going Concern

The Company has historically financed its research and development activities as well as operational expenses primarily from equity financings, government grants, and payments from distribution agreements and collaboration partners.

Cash, cash equivalents, and marketable securities as of December 31, 2023 were approximately $ 39.5 million, compared to approximately $ 41.4 million as of December 31, 2022.

In the first quarter of 2023, the Company received an upfront payment of $ 12.0 million from Nippon Shinyaku Co., Ltd., a Japanese corporation, (“Nippon Shinyaku”), in accordance with its Japan Exclusive Commercialization and Distribution Agreement (see Note 7 – “License and Distribution Agreements”).

In October 2023, the Company completed a registered direct offering for gross proceeds of approximately $ 23.0 million (see Note 2 – “Stockholder’s Equity”).

We received our first milestone payment of $ 10.0 million in the first quarter of 2024, which was triggered upon completion of the interim futility analysis of the HOPE-3 trial whereby the outcome was determined to be not futile.

Additionally, the Company has a Common Stock Sales Agreement in place with H.C.

Wainwright & Co.

LLC ("Wainwright") to create at-the-market equity programs under which the Company, from time to time, sells shares of its common stock (see Note 2 - "Stockholders' Equity").

The Company’s principal uses of cash are for research and development expenses, general and administrative expenses, capital expenditures and other working capital requirements.

Liquidity and Capital Resources

As of December 31, 2024, the Company’s cash, cash equivalents and marketable securities totaled approximately $ 151.5 million with an accumulated deficit of approximately $ 199.8 million.

The Company’s principal uses of cash are for research and development expenses, expenses in development of manufacturing capabilities, general and administrative expenses, capital expenditures and other working capital requirements.

The Company’s future expenditures and capital requirements may be substantial and will depend on many factors, including, but not limited to, the following:

● the timing and costs associated with our research and development activities, clinical trials and preclinical studies, including the enrollment and progress of our ongoing HOPE-3 Phase 3 clinical trial of CAP-1002 in DMD;

● the timing and costs associated with the manufacturing of our product candidates, including the expansion of our manufacturing capacity to support the potential commercialization of CAP-1002 for DMD;

● the timing and costs associated with our research and development activities, commercial launch activities, clinical trials and preclinical studies;

● the timing and costs associated with potential commercialization of our product candidates;

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● the costs involved in prosecuting and enforcing patent claims and other intellectual property rights;

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

● the costs associated with pursuing marketing approval and potential commercialization of deramiocel in countries outside the United States.

The Company’s options for raising additional capital include potentially seeking additional financing primarily from, but not limited to, the sale and issuance of equity or debt securities, the licensing or sale of its technology and other assets, potential distribution and other partnering opportunities, and from government grants.

The Company has incurred significant operating losses and negative cash flows from operations.

Based on the Company’s available cash resources and based upon the Company’s projections for its operations, the Company does not have sufficient cash on hand to support current operations for at least the next twelve months from the date of filing this Annual Report on Form 10-K.

Therefore, there is a substantial doubt about the Company’s ability to continue as a going concern.

The Company’s plan to address its financial position may include potentially seeking additional financing primarily from, but not limited to, the sale and issuance of equity or debt securities, the licensing or sale of its technology and from government grants.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

The Company will require substantial additional capital to fund its operations.

The Company cannot provide assurances that financing will be available when and as needed or that, if available, financing will be available on favorable or acceptable terms.

If the Company is unable to obtain additional financing when and if required, it would have a material adverse effect on the Company’s business and results of operations.

The Company would likely need to delay, curtail or terminate portions of its clinical trial and research and development programs.

If the Company is unable to obtain additional financing when and if required, it would have a material

adverse effect on the Company’s business and results of operations.

The Company would likely need to delay, curtail or terminate portions of its clinical trials and research and development programs.

To the extent the Company issues additional equity securities, its existing stockholders would experience substantial dilution.

Business Uncertainty Related to the Coronavirus

The COVID-19 pandemic presented substantial public health and economic challenges around the world.

Our business operations and financial condition and results have been impacted to varying degrees.

In light of past uncertainties due to COVID-19 and its economic and other impacts and to uncertainties around the timing and availability of grant disbursements, the loss of revenue from the REGRESS and ALPHA trials as well as any potential equity and debt financings, the Company submitted for the Employee Retention Credit (“ERC”), a credit against certain payroll taxes allowed to an eligible employer for qualifying wages, which was established by the CARES Act.

The Company has submitted $ 738,778 in ERC for applicable 2020 and 2021 periods, receiving $ 191,199 in 2021, and $ 191,463 in 2023.

As of December 31, 2023, the Company has recorded a receivable for $ 366,551 for the remainder of funds expected to be received.

As of December 31, 2024, the Company has recorded a receivable for $ 366,551 for the remainder of funds expected to be received, of which $ 190,582 was received subsequent to year end in January 2025.

Use of Estimates

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Realized gains and losses on the sale of debt and equity securities are determined using the specific identification method.

Unrealized gains and losses on available-for-sale securities are

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

presented as accumulated other comprehensive income (loss) as a separate component of stockholders’ equity.

Unrealized gains and losses on available-for-sale securities are presented as accumulated other comprehensive income (loss) as a separate component of stockholders’ equity.

As of December 31, 2024, marketable securities consist primarily of short-term United States treasuries.

22 unchanged sentences

Leases will be classified as financing or operating, which will drive the expense recognition pattern.

The Company elects to exclude short-term leases if and when the Company has them.

The Company elects to exclude short-term leases from ASC 842 analysis if and when the Company has them.

The Company leases office and laboratory space, all of which are operating leases (see Note 6 - “Commitments and Contingencies”).

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

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Revenue Recognition

The Company adopted ASU 606, Revenue for Contracts from Customers (“ASU 606”), which amended revenue recognition principles and provides a single, comprehensive set of criteria for revenue recognition within and across all industries (see Note 7 – “License and Distribution Agreements”).

The revenue standard provides a five-step framework for recognizing revenue as control of promised goods or services is transferred to a customer at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

To determine revenue recognition for arrangements that it determines are within the scope of the revenue standard, the Company performs the following five steps:

(i) identify the contract;

(ii) identify the performance obligations;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

The Company recognizes revenue following a five-step framework as control of promised goods or services is transferred to a customer at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services by:

(i) identifying the contract;

(ii) identifying the performance obligations;

(iii) determining the transaction price;

(iv) allocating the transaction price to the performance obligations in the contract;

and (v) recognizing revenue when (or as) the Company satisfies a performance obligation.

At contract inception, the Company assesses whether the goods or services promised within each contract are distinct and, therefore, represent a separate performance obligation, or whether they are not distinct and are combined with other goods and services until a distinct bundle is identified.

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The Company’s distribution agreements may entitle it to additional payments upon the achievement of milestones or shares of product revenue on sales.

The milestones are generally categorized into three types:

development milestones, regulatory milestones and sales-based milestones.

The milestones are generally categorized into two types:

development milestones and sales-based milestones.

The Company evaluates whether it is probable that the consideration associated with each milestone or shared revenue payments will not be subject to a significant reversal in the cumulative amount of revenue recognized.

Amounts that meet this threshold are included in the transaction price using the most likely amount method, whereas amounts that do not meet this threshold are excluded from the transaction price until they meet this threshold.

At the end of each subsequent reporting period, the Company re-evaluates the probability of a significant reversal of the cumulative revenue recognized for its milestones and royalties, and, if necessary, adjusts its estimate of the overall transaction price.

transaction price.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and net income (loss) in the Company’s consolidated statements of operation and comprehensive loss.

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The Company feels this method of measurement to be the best depiction of the transfer of services and recognition of revenue.

Significant management judgment is required in determining the level of effort required under an arrangement and the period over which the Company is expected to

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

complete its performance obligations.

Significant management judgment is required in determining the level of effort required under an arrangement and the period over which the Company is expected to complete its performance obligations.

If the Company determines that the performance obligation is satisfied over time, any upfront payment received is initially recorded as deferred revenue on its consolidated balance sheets.

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Under the U.S.

Commercialization and Distribution Agreement (the “US Distribution Agreement”) with Nippon Shinyaku, the transaction price consists of variable shared revenue payments and fixed components in the form of an upfront payment and milestones.

The timing of the fixed component of the transaction price is upfront, however, the performance obligation is satisfied over a period of time, which is the estimated duration of the HOPE-3 clinical trial, Cohort A arm.

Therefore, upon receipt of the upfront payment and achievement of milestones, a contract liability is recorded which represents deferred revenue.

Commercialization and Distribution Agreement (the “U.S.

Distribution Agreement”) with Nippon Shinyaku, the transaction price consists of variable shared revenue payments and fixed components in the form of an upfront payment and milestones.

For the first performance obligation identified, which is the conduct of the HOPE-3, Phase 3 clinical study, the timing of the fixed component of the transaction price is upfront, however, the performance obligation is satisfied over a period of time, which is the estimated duration of the HOPE-3 clinical trial, Cohort A arm.

Therefore, upon receipt of the upfront payment and achievement of the first milestone, a contract liability was recorded which represents deferred revenue.

The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the related revenue recognition.

For the second performance obligation identified, which is the submission of our BLA to the FDA, the payment was due at the point in time when the application was submitted, as such, revenue was recognized at the point in time, and a contract asset was recorded which represents accounts receivable.

Generally, government research grants that provide funding for research and development activities are recognized as income when the related expenses are incurred, as applicable.

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No grant income was recognized during the years ended December 31, 2024 and 2023.

As of December 31, 2024, and 2023, accounts receivable primarily consisted of $ 10 million due from Nippon Shinyaku, related to the second and first milestone payments, respectively, as well as $ 366,551 related to funds due from the Employee Retention Credit.

Income taxes are recognized for the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets are recognized for the future tax consequences of transactions that have been recognized in the Company’s financial statements or tax returns.

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Utilization of these credits could be limited under Section 383 of the Code and similar state laws based on ownership changes and the value of the Company’s stock.

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Under Section 382 of the Code, the Company’s ability to utilize NOL carryforwards or other tax attributes, such as federal tax credits, in any taxable year may be limited if the Company has experienced an “ownership change.” Generally, a Section 382 ownership change occurs if one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period.

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The Company’s policy is to include interest and penalties related to unrecognized tax benefits in income tax expense.

The Company incurred no interest or penalties for the years ended December 31, 2023 and 2022.

The Company files income tax returns with the IRS and the California Franchise Tax Board.

Interest and penalties were insignificant for the years ended December 31, 2024 and 2023.

The Company files income tax returns with the IRS, the California Franchise Tax Board, and the Florida Department of Revenue.

Research and Development

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The Company’s other comprehensive income (loss) is related to a net unrealized gain (loss) on marketable securities.

For the years ended December 31, 2023 and 2022, the Company’s other comprehensive income was $ 130,569 and $ 105,244 , respectively.

the years ended December 31, 2024 and 2023, the Company’s other comprehensive income was $ 791,142 and $ 130,569 , respectively.

Clinical Trial Expense

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Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low for any particular period.

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Stock-Based Compensation

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Marketable Securities

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

December 31, 2023

Marketable Securities

Carrying amounts reported in the balance sheet of cash and cash equivalents, receivables, accounts payable and accrued expenses approximate fair value due to their relatively short maturity.

Carrying amounts reported in the balance sheet of cash and cash equivalents, receivables, prepaid expenses and other current assets, accounts payable and accrued expenses, and deferred revenue approximate fair value due to their relatively short maturity.

The carrying amounts of the Company’s marketable securities are based on market quotations from national exchanges at the balance sheet date.

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Recent Accounting Pronouncements

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative .

This standard was issued in response to the SEC’s disclosure update and simplification initiative, which affects a variety of topics within the Accounting Standards Codification.

The amendments apply to all reporting entities within the scope of the affected topics unless otherwise indicated.

The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.

In November 2024, the FASB issued ASU No.

2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40) .

The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions.

This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses.

The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements.

Early adoption is also permitted.

This ASU will likely result in the required additional disclosures being included in our consolidated financial statements, once adopted.

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

1 unchanged sentence

STOCKHOLDERS’ EQUITY

The Company established an “at-the-market” program (the “ATM Program”) on June 21, 2021, with an aggregate offering price of up to $ 75.0 million, pursuant to a Common Stock Sales Agreement with Wainwright by which Wainwright has sold and may continue to sell our common stock at the market prices prevailing at the time of sale.

October 2024 Underwritten Public Offering

On October 16, 2024, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Piper Sandler and Oppenheimer as representatives of the underwriters (the “Underwriters”), pursuant to which the Company agreed to sell and issue, in a public offering an aggregate of 5,073,800 shares of common stock, including the

exercise in full of the underwriters’ option to purchase additional shares to cover over allotments, at a public offering price of $ 17.00 per share for total gross proceeds of approximately $ 86.3 million, before deducting underwriting commissions and other offering expenses payable by the Company.

The Company paid cash commissions on the gross proceeds, plus reimbursement of expenses to the Underwriters, as well as legal and accounting fees in the aggregate amount of approximately $ 5.4 million.

September 2024 Private Placement

On September 16, 2024, the Company entered into a Subscription Agreement with Nippon Shinyaku pursuant to which the Company agreed to issue and sell to Nippon Shinyaku in a private placement (the “Private Placement”), an aggregate of 2,798,507 shares of the common stock of the Company at a price per Share of $ 5.36 , which was issued at a 20 % premium to the 60-day volume-weighted average price, for an aggregate purchase price of approximately $ 15.0 million.

The Subscription Agreement also included lock-up provisions restricting Nippon Shinyaku from selling or otherwise disposing of shares of Common Stock until the six-month anniversary of the Closing Date which occurred on March 15, 2025.

In connection with the Private Placement, the Company also entered into a Registration Rights Agreement with Nippon Shinyaku on September 16, 2024 (the “Registration Rights Agreement”).

Pursuant to the terms of the Registration Rights Agreement, the Company has filed with the SEC a registration statement to register for resale the shares sold in the Private Placement, which registration statement was declared effective on November 8, 2024.

The Company established the ATM Program on June 21, 2021, with an aggregate offering price of up to $ 75.0 million, pursuant to a Common Stock Sales Agreement with Wainwright by which Wainwright sold our common stock at the market prices prevailing at the time of sale.

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

From June 21, 2021 through December 31, 2023, the Company sold an aggregate of 2,976,154 shares of common stock under the ATM Program at an average price of approximately $ 5.59 per share for gross proceeds of approximately $ 16.6 million.

From June 21, 2021 through October 1, 2024, the Company sold an aggregate of 9,228,383 shares of common stock under the ATM Program at an average price of approximately $ 8.13 per share for gross proceeds of approximately $ 75.0 million, which represents all amounts that were available to be sold under the ATM program.

Effective October 1, 2024, the ATM Program was closed and terminated.

The Company paid cash commissions on the gross proceeds, plus reimbursement of expenses to Wainwright, as well as legal and accounting fees in the aggregate amount of approximately $ 2.4 million.

As of the date of this filing, approximately $ 57.2 million of common stock may still be sold pursuant to the ATM Program.

Additionally, subsequent to December 31, 2023, the Company sold shares under the ATM Program (see Note 9 – “Subsequent Events”).

October 2023 Financing

On October 3, 2023, the Company entered into Securities Purchase Agreements with its commercial partner, Nippon Shinyaku and funds associated with Highbridge Capital Management, LLC (the “Investors”), pursuant to which the Company agreed to issue and sell to the Investors, in a registered direct offering (the “Registered Direct Offering”), an aggregate of 4,935,621 shares of its common stock, par value $ 0.001 per share, at a price per share of $ 4.66 for an aggregate purchase price of approximately $ 23.0 million.

September 2023 Financing

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

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

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

As part of the Registered Direct Offering, the Company agreed not to issue or sell shares (subject to customary exceptions for employee stock option issuances and other customary exceptions) for a period of 30 days following the date of the prospectus supplement that was used in the Registered Direct Offering.

That prospectus was dated September 29, 2023, and the Company “lock-up” expired on October 29, 2023.

The Company’s directors and executive officers also entered into “lock-up” agreements with the

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

placement agent in the Registered Direct Offering, which agreements expired on the 60 th day following the date of the Securities Purchase Agreements, or December 2, 2023.

Outstanding Shares

At December 31, 2023, the Company had 31,148,320 shares of common stock issued and outstanding .

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

STOCK AWARDS, WARRANTS AND OPTIONS

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Outstanding at December 31, 2024

The following table summarizes all outstanding warrants to purchase shares of the Company’s common stock:

The following table summarizes all outstanding warrants to purchase shares of the Company’s common stock at December 31, 2024 and 2023:

Warrants Outstanding

3 unchanged sentences

Common Warrants

Stock Options

The Company’s Board of Directors (the “Board”) has approved five stock option plans:

(i) the 2006 Stock Option Plan, (ii) the 2012 Restated Equity Incentive Plan (which superseded the 2006 Stock Option Plan) (the “2012 Plan”), (iii) the 2012 Non-Employee Director Stock Option Plan (the “2012 Non-Employee Director Plan”), (iv) the 2020 Equity Incentive Plan (the “2020 Plan”), and (v) the 2021 Equity Incentive Plan (the “2021 Plan”).

At this time, the Company only issues options under the 2020 Plan and the 2021 Plan and no longer issues options under the 2006 Stock Option Plan, the 2012 Plan, or the 2012 Non-Employee Director Plan.

In June 2020, the Company’s stockholders approved the 2020 Equity Incentive Plan (the “2020 Plan”), which authorized 2,500,000 shares of common stock to be issued and allows for the grant of stock options as well as other forms of equity-based compensation.

Pursuant to the “evergreen” provision, on January 1, 2021, 823,084 shares were added under the 2020 Plan.

Once the 2021 Plan was approved on June 11, 2021, no new shares were added to the share reserve under the 2020 Plan pursuant to its “evergreen” provisions.

At this time, the Company only issues stock options and restricted stock awards under the 2020 Plan and the 2021 Plan and no longer issues stock awards under the 2006 Stock Option Plan, the 2012 Plan, or the 2012 Non-Employee Director Plan.

In June 2021, the Company’s stockholders approved the 2021 Plan, which authorized 3,500,000 shares of common stock reserved under the 2021 Plan for the issuance of stock awards.

The number of shares available for issuance under the 2021 Plan shall be automatically increased on January 1 of each year, commencing with January 1, 2022, by an amount equal to the lesser of 5% of the outstanding shares of Common Stock as of the last day of the immediately preceding

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

fiscal year or such number of shares determined by the compensation committee of the Board.

The number of shares available for issuance under the 2021 Plan shall be automatically increased on January 1 of each year, commencing with January 1, 2022, by an amount equal to the lesser of 5 % of the outstanding shares of Common Stock as of the last day of the immediately preceding fiscal year or such number of shares determined by the compensation committee of the Board.

On January 1, 2025 and 2024, 2,279,114 and 1,557,416 shares were added under the 2021 Plan, respectively.

As of December 31, 2023, 1,232,318 options remain available for issuance under the respective stock option plans.

As of December 31, 2024, 59,850 stock awards remain available for issuance under the respective stock option plans.

The Company’s stock option plans are administered by the Board, in conjunction with the compensation committee of the Board, which determines the recipients and types of awards to be granted, as well as the number of shares subject to the awards, the exercise price and the vesting schedule.

Each stock option granted will be designated in the award agreement as either an incentive stock option or a nonstatutory stock option.

Each stock award granted will be designated in the award agreement as either an incentive stock option, a nonstatutory stock option, or a restricted stock award.

Notwithstanding such designation, however, to the extent that the aggregate fair market value of the shares with respect to which incentive stock options are exercisable for the first time by the participant during any calendar year (under all plans of the Company and any parent or subsidiary) exceeds $ 100,000 , such options will be treated as nonstatutory stock options.

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The Company estimates the fair value of each option award using the Black-Scholes option-pricing model.

The Company estimates the fair value of each restricted stock awards using the Company’s stock price on the grant date.

There were no restricted stock awards issued during the year ended December 31, 2024 or 2023.

The company used the following assumptions to estimate the fair value of stock options issued during the year ended December 31, 2024 and 2023:

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For non-qualified stock options, the loss creates a timing difference, resulting in a deferred tax asset, which is fully reserved by a valuation allowance.

Common stock, stock options or other equity instruments issued to non-employees (including consultants) as consideration for goods or services received by the Company are accounted for based on the fair value of the equity instruments issued.

The fair value of stock options is determined using the Black-Scholes option-pricing model.

The Company calculates the fair value for non-qualified options as of the date of grant and expenses over the applicable vesting periods.

The Company accounts for forfeitures upon occurrence.

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

The following table summarizes information about stock options outstanding and exercisable at December 31, 2023:

Options Outstanding

Weighted Average

Options Outstanding

Exercise Price

$ 2.54 - $ 3.41

$ 3.61 - $ 3.85

$ 4.11 - $ 7.14

Options Exercisable

Weighted Average

Options Exercisable

Exercise Price

$ 2.54 - $ 3.41

$ 3.61 - $ 3.85

$ 4.11 - $ 7.14

As of December 31, 2024, the total unrecognized fair value compensation cost related to non-vested stock options was approximately $ 20.4 million, which is expected to be recognized over a weighted average period of approximately 1.5 years.

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These accounts are insured by the Federal Deposit Insurance Corporation (the “FDIC”) for up to $ 250,000 and/or the Securities Investor Protection Corporation, as applicable.

The Company’s cash, cash equivalents, and marketable securities in excess of the FDIC insured limits as of December 31, 2023, were approximately $ 39.2 million.

The Company monitors the financial stability of the financial institutions with which it maintains accounts and believes it is not exposed to any significant credit risk in cash and cash equivalents.

Historically, the Company has not experienced any significant losses

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

in such accounts and does not believe it is exposed to any significant credit risk due to the quality nature of the financial instruments in which the money is held.

The Company monitors the financial stability of the financial institutions

with which it maintains accounts and believes it is not exposed to any significant credit risk in cash and cash equivalents.

Historically, the Company has not experienced any significant losses in such accounts and does not believe it is exposed to any significant credit risk due to the quality nature of the financial instruments in which the money is held.

GOVERNMENT GRANT AWARDS

CIRM Grant Award (HOPE)

On June 16, 2016, Capricor entered into the CIRM Award with CIRM in the amount of approximately $ 3.4 million to fund, in part, Capricor’s Phase 1/2 HOPE-Duchenne clinical trial investigating CAP-1002 for the treatment of DMD-associated cardiomyopathy.

On June 16, 2016, Capricor entered into the CIRM Award with CIRM in the amount of approximately $ 3.4 million to fund, in part, Capricor’s Phase I/II HOPE-Duchenne clinical trial investigating deramiocel for the treatment of DMD-associated cardiomyopathy.

Pursuant to terms of the CIRM Award, the disbursements were tied to the achievement of specified operational milestones.

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The CIRM Award is further subject to the conditions and requirements set forth in the CIRM Grants Administration Policy for Clinical Stage Projects.

Such requirements include, without limitation, the filing of quarterly and annual reports with CIRM, the sharing of intellectual property pursuant to Title 17, California Code of Regulations (CCR) Sections 100600-100612, and the sharing with the State of California of a fraction of licensing revenue received from a CIRM funded research project and net commercial revenue from a commercialized product which resulted from the CIRM funded research as set forth in Title 17, CCR Section 100608.

Such requirements include, without limitation, the filing of quarterly and annual reports with CIRM, the sharing of intellectual property pursuant to Title 17, California Code of Regulations (CCR) Sections 100600-100612, and potentially the sharing with the State of California of a fraction of licensing revenue received from a CIRM funded research project and net commercial revenue from a commercialized product which resulted from the CIRM funded research as set forth in Title 17, CCR Section 100608.

The maximum royalty on net commercial revenue that Capricor may be required to pay to CIRM is equal to nine times the total amount awarded and paid to Capricor.

After completing the CIRM funded research project and at any time after the award period end date (but no later than the ten-year anniversary of the date of the award), Capricor has the right to convert the CIRM Award into a loan, the terms of which will be determined based on various factors, including the stage of the research and development of the program at the time the election is made.

After completing the CIRM funded research project and at any time after the award period end date (but no later than the ten-year anniversary of the date of the award), Capricor had the right to convert the CIRM Award into a loan, the terms of which will be determined based on various factors, including the stage of the research and development of the program at the time the election is made.

On June 20, 2016, Capricor entered into a Loan Election Agreement with CIRM whereby, among other things, CIRM and Capricor agreed that if Capricor elects to convert the grant into a loan, the term of the loan could be up to five years from the date of execution of the applicable loan agreement;

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Interest shall be compounded annually on the outstanding New Loan Balance commencing with the loan date and the interest shall be payable, together with the New Loan Balance, upon the due date of the loan.

If Capricor elects to convert the CIRM Award into a loan, certain requirements of the CIRM Award will no longer be applicable, including the revenue sharing requirements.

Capricor has not yet made its decision as to whether it will elect to convert the CIRM Award into a loan.

Depending on the timing of our election, additional funds may be owed.

If we elect to do so, Capricor would be required to repay the amounts awarded by CIRM;

therefore, the Company accounts for this award as a liability rather than income.

In 2019, Capricor completed all milestones and close-out activities associated with the CIRM Award and expended all funds received.

As of December 31, 2023, Capricor’s liability balance for the CIRM Award was approximately $ 3.4 million.

The Company accounts for this award as a liability rather than income.

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

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

As a result, certain requirements of the CIRM Award will no longer be applicable, including the revenue sharing requirements.

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

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

COMMITMENTS AND CONTINGENCIES

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Effective January 1, 2021, we entered into a month-to-month lease amendment with Bubble Real Estate, which is terminable by either party upon 90 days ’ written notice to the other party.

Commencing in July 2022, the monthly lease payment was $ 7,869 per month.

Effective July 1, 2023, the monthly lease payment was reduced to $ 7,619 per month.

Effective July 1, 2023, the monthly lease payment was $ 7,619 per month.

Commencing March 13, 2024, we entered into a License and Services Agreement with Azzur Cleanrooms-on-Demand – San Diego, LLC (the “Azzur License Agreement”) pursuant to which we were granted an exclusive license to use certain space and the non-exclusive right to use certain equipment and property for our early phase clinical manufacturing purposes.

Our license fee was approximately $ 110,615 per month.

The initial license agreement term expired on September 26, 2024, which the Company extended through November 8, 2024.

Commencing on November 20, 2024, the Company entered into a lease with Shiraz Partners LP for manufacturing facilities located in Vista, California, with a term of 6 month s with an option to extend for another 6 months .

The monthly base rent is $ 31,247 .

In March 2025, the Company extended the term of the lease until November 19, 2025.

In December 2024, the Company entered into a sublease agreement with Entos Pharmaceuticals US, Inc.

for office and research space located in San Diego, California, with a monthly base rent of $ 63,127 .

The lease has a term of 12 months and has an option to continue on a month-to month basis after the expiration date.

Expenses incurred under short-term operating leases for the years ended December 31, 2024 and 2023 were $ 1,073,870 and $ 92,928 , respectively.

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Long-Term Operating Leases

Capricor leases facilities in Los Angeles, California from Cedars-Sinai Medical Center (“CSMC”), a related party (see Note 8 – “Related Party Transactions”), pursuant to a lease (the “Facilities Lease”) entered into in 2014.

Capricor leases facilities in Los Angeles, California from CSMC, pursuant to a lease (the “Facilities Lease”) entered into in 2014.

Capricor has subsequently entered into several amendments modifying certain terms of the lease.

In July 2022, we entered into an amendment for an additional 24-month period extending the term through July 31, 2024 with a monthly lease payment of $ 10,707 .

Additionally, in September 2023, we entered into an amendment pursuant to which Capricor was granted an option to extend the lease for an additional 24-month period extending the term through July 31, 2026 with a monthly lease payment of $ 11,028 commencing on August 1, 2024.

The Company entered into a lease agreement commencing October 1, 2021 with Altman Investment Co, LLC (“Altman”) for 9,396 square feet of office and laboratory space located at 10865 Road to the Cure, Suite 150, in San Diego, California (the “San Diego Lease”).

We entered into an amendment effective August 1, 2024 for an additional 24-month period extending the term through July 31, 2026 with a monthly lease payment of $ 11,028 .

Capricor leases facilities in San Diego, California from Altman Investment Co., LLC (“Altman”).

The Company entered into a lease agreement commencing October 1, 2021 with Altman for 9,396 square feet of office and laboratory space (the “San Diego Lease”).

The rent is subject to a 3.0 % annual rent increase during the initial lease term of five years , plus certain operating expenses and taxes.

The San Diego Lease contains an option for Capricor to renew it for an additional term of five years .

The Company has subsequently entered into several amendments to the San Diego Lease increasing the square footage of the premises and effective July 1, 2022, the monthly lease payment was increased to $ 49,322 per month.

Effective December 1, 2022, the monthly lease payment was increased to $ 51,444 per month.

The San Diego Lease contains an option for Capricor to renew for an additional term of five years .

The Company has subsequently entered into several amendments to the San Diego Lease increasing the square footage of the premises.

Effective October 1, 2023, the monthly lease payment was increased to $ 58,409 per month.

Effective October 1, 2024, the monthly lease payment was increased to $ 60,161 per month.

On February 26, 2025, the Company entered into a lease amendment modifying certain terms of the San Diego Lease (see Note 9 – “Subsequent Events”).

Effective November 1, 2021, the Company entered into a vivarium agreement with Explora BioLabs, Inc.

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Under the terms of the agreement, the Company is obligated to pay a base rent of $ 4,021 per month for an exclusive large vivarium room located in San Diego, California.

The lease term is for one-year and will automatically renew for additional successive one-year renewal terms unless either party provides the other party with 60-day written notice of its election not to renew prior to the end of the then-current term.

In December 2022, we were notified by Explora of a monthly rent escalation of 4.5 % bringing the base rent to approximately $ 4,202 per month effective January 1, 2023.

For ASC 842 purposes, we applied a lease term of five years .

Additionally, effective January 1, 2024, we entered into an amendment for an additional 24-month period extending the term through December 31, 2025 with a monthly lease payment of $ 4,370 commencing on January 1, 2024 subject to a 4.0 % annual rent increase.

The long-term real estate operating leases are included in “lease right-of-use assets, net” on the Company’s Consolidated Balance Sheet and represent the Company’s right-to-use the underlying assets for the lease term.

The Company’s obligation to make lease payments are included in “lease liabilities, current” and “lease liabilities, net of current” on the Company’s Consolidated Balance Sheet.

The Company’s obligation to make lease payments are included in “lease liabilities, current” and “lease liabilities, net of current” on the Company’s Consolidated Balance Sheets.

The table below excludes short-term operating leases.

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Weighted average discount rate

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

As of December 31, 2023, ROU assets for operating leases were approximately $ 2.1 million and operating lease liabilities were approximately $ 2.2 million.

The following table contains a summary of the lease costs recognized and lease payments pertaining to the Company’s operating leases under ASC 842 for the period indicated:

Year ended December 31,

Lease costs, unrelated parties

Lease costs, related parties

Lease payments, unrelated parties

Lease payments, related parties

Lease payments

Legal Contingencies

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The Company has not recorded any material accruals for loss contingencies as of December 31, 2024.

The Company has received a letter from CSMC alleging certain overdue payment obligations and alleged breaches (see Note 7 – “License and Distribution Agreements”).

Accounts Payable

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The Company is a party to various agreements, principally relating to licensed technology, that require future payments relating to milestones that may be met in subsequent periods or royalties on future sales of specific products (see Note 7 - "License and Distribution Agreements").

Additionally, the Company is a party to various agreements with contract research, manufacturing and other organizations that generally provide for termination upon notice, with the exact amounts owed in the event of termination to be based on the timing of termination and the terms of the agreement.

Additionally, the Company is a party to various agreements with contract research, manufacturing and other organizations that generally provide for termination upon notice, subject to certain time periods, with the exact amounts owed in the event of termination to be based on the timing of termination and the terms of the agreement.

Employee Severances

The Board of Directors approves severance packages for specific full-time employees based on their length of service and position ranging up to six months of their base salaries, in the event of termination of their employment, subject to certain conditions.

The Board from time to time may approve severance packages up to twelve months of their base salaries for specific full-time employees based on their length of service and position in the event of termination of their employment, subject to certain conditions.

No liability under these severance packages has been recorded as of December 31, 2024.

LICENSE AND DISTRIBUTION AGREEMENTS

Intellectual Property Rights for Capricor’s Technology - CAP-1002 and Exosomes

Intellectual Property Rights for Capricor’s Technology - Deramiocel and Exosomes

Capricor has entered into exclusive license agreements for intellectual property rights related to certain cardiac-derived cells with Università Degli Studi Di Roma La Sapienza (the “University of Rome”), JHU, and CSMC.

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University of Rome License Agreement

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

to Capricor (with the right to sublicense) to develop and commercialize licensed products under the licensed patent rights in all fields.

Capricor and the University of Rome entered into a License Agreement, dated June 21, 2006 (the “Rome License Agreement”), which provides for the grant of an exclusive, world-wide, royalty-bearing license by the University of Rome to Capricor (with the right to sublicense) to develop and commercialize licensed products under the licensed patent rights in all fields.

Pursuant to the Rome License Agreement, Capricor paid the University of Rome a license issue fee, is currently paying minimum annual royalties in the amount of 20,000 Euros per year, and is obligated to pay a lower-end of a mid-range double-digit percentage on all royalties received as a result of sublicenses granted, which are net of any royalties paid to third parties under a license agreement from such third-party to Capricor.

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Either party may terminate the agreement upon the other party’s material breach, provided that the breaching party will have up to 90 days to cure its material breach.

Capricor may also terminate for any reason upon 90 days ’ written notice to the University of Rome.

Capricor may also terminate the Rome License Agreement for any reason upon 90 days ’ written notice to the University of Rome.

The Johns Hopkins University License Agreements

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In March 2022, Capricor paid the $ 250,000 development milestone related to the Phase 2 study pursuant to the terms of the JHU License Agreement.

The next milestone is triggered upon successful completion of a full Phase 3 study for which a payment of $ 500,000 will be due.

The JHU License Agreement will, unless sooner terminated, continue in effect in each applicable country until the date of expiration of the last to expire patent within the patent rights, or, if no patents are issued, then for twenty years from the effective date.

Capricor’s next milestone payments will be triggered, if at all, upon a successful completion of a full Phase 3 study, for which a payment of $ 500,000 will be due, and upon receipt of a full FDA market approval, for which a payment of $ 1,000,000 will be due.

from the effective date.

Under the terms of the JHU License Agreement, either party may terminate the agreement should the other party become insolvent or file a petition in bankruptcy or fail to cure a material breach within 30 days after notice.

In addition, Capricor may terminate for any reason upon 60 days ’ written notice.

License Agreement for Exosome-based Vaccines and Therapeutics

Capricor and JHU entered into an Exclusive License Agreement (the “JHU Exosome License Agreement”), effective April 28, 2021 for its co-owned interest in certain intellectual property rights related to exosome-mRNA vaccines and therapeutics.

The JHU Exosome License Agreement provided for the grant of an exclusive, world-wide, royalty-bearing license of JHU’s co-owned rights by JHU to Capricor, with the right to sublicense, in order to conduct research using the patent rights and know-how and to develop and commercialize products in the field using the patent rights and know-how.

The JHU Exosome License Agreement was terminated by Capricor on December 15, 2023.

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Cedars-Sinai Medical Center License Agreements

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Capricor reimbursed CSMC for certain attorneys’ fees and filing fees incurred in connection with the additional patent applications.

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.

Capricor has received a milestone payment of $ 10.0 million under its U.S.

Distribution Agreement with Nippon Shinyaku, which CSMC is claiming 10 % of this milestone payment is owed to them.

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

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

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.

License Agreement for Exosomes

On May 5, 2014, Capricor entered into an Exclusive License Agreement with CSMC (the “Exosomes License Agreement”), for certain intellectual property rights related to CDC-derived exosomes technology.

The Exosomes License Agreement provides for the grant of an exclusive, world-wide, royalty-bearing license by CSMC to Capricor (with the right to sublicense) in order to conduct research using the patent rights and know-how and to develop and commercialize products in the field using the patent rights and know-how.

products in the field using the patent rights and know-how.

In addition, Capricor has the exclusive right to negotiate for an exclusive license to any future rights arising from related work conducted by or under the direction of Dr.

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These amendments also obligated Capricor to reimburse CSMC for certain attorneys’ fees and filing fees in connection with the additional patent applications and patent families.

Cell Line License Agreement with Life Technologies

On March 7, 2022, Capricor entered into a non-exclusive cell line license agreement with Life Technologies Corporation, a subsidiary of Thermo Fisher Scientific, Inc., for the supply of certain cells which we will use in connection with the development of our exosomes platform.

An initial license fee payment was made in 2022 and additional milestone fees may become due based on the progress of our development program.

Commercialization and Distribution Agreement with Nippon Shinyaku (Territory:

United States)

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

Distribution Agreement”) with Nippon Shinyaku, a Japanese corporation.

Under the terms of the U.S.

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Agreement, Capricor appointed Nippon Shinyaku as its exclusive distributor in the United States of CAP-1002 for the treatment of DMD.

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

Distribution Agreement with Nippon Shinyaku, a Japanese corporation and related party (see Note 8 – “Related Party Transactions”).

Under the terms of the U.S.

Distribution Agreement, Capricor will be responsible for the conduct of the HOPE-3 trial as well as the manufacturing of CAP-1002.

Nippon Shinyaku will be responsible for the distribution of CAP-1002 in the United States.

Pursuant to the U.S Distribution Agreement, Capricor received an upfront payment of $ 30.0 million in the first quarter of 2022.

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

Additionally, there are potential milestones totaling up to $ 90.0 million leading up to and including the BLA approval.

Further, there are various potential sales-based milestones, if commercialized, tied to the achievement of certain sales thresholds for annual net sales of CAP-1002 of up to $ 605.0 million.

Further, pursuant to the U.S.

Distribution Agreement, Capricor has the obligation to sell commercial product to Nippon Shinyaku, subject to regulatory approval, and Capricor will have the right to receive a meaningful mid-range double-digit share of product revenue.

Distribution Agreement, Capricor appointed Nippon Shinyaku as its exclusive distributor in the United States of deramiocel for the treatment of DMD.

Nippon Shinyaku and NS Pharma, Inc.

(its wholly-owned U.S.

subsidiary) will be responsible for the distribution of deramiocel in the United States.

Pursuant to the U.S.

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

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

The second milestone payment of $ 10.0 million was triggered in December 2024 upon submission of the BLA to the FDA seeking marketing approval of deramiocel in the United States.

Additionally, there is another potential milestone of $ 80.0 million due to Capricor upon receipt of marketing approval.

The foregoing milestones are considered development milestones under the terms of the U.S.

Distribution Agreement.

Further, there are various potential sales-based milestones, if commercialized, tied to the achievement of certain sales thresholds for annual net sales of deramiocel of up to $ 605.0 million.

Subject to regulatory approval, Capricor will have the right to receive a share of product revenue which falls between 30 and 50 percent.

The Company has evaluated the U.S.

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The Company determined that the performance obligation is the conduct of the HOPE-3, Phase 3 clinical study.

The Company determined the transaction price totaled $ 40.0 million, which was the upfront payment of $ 30.0 million and $ 10.0 million milestone payment.

The Company has excluded any future milestone or shared revenue payments from this transaction price to date based on probability.

The Company has allocated the $ 40.0 million transaction price to its one distinct performance obligation.

Revenue will be recognized using a proportional performance method in relation to the completion of the HOPE-3 clinical study, Cohort A arm, to determine the extent of progress towards completion.

The Company determined the transaction price totaled $ 40.0 million, which was the upfront payment of $ 30.0 million and first milestone payment of $ 10.0 million.

The Company has excluded any future milestone or shared revenue

payments from this transaction price to date based on probability.

Revenue related to this performance obligation has been recognized using a proportional performance method in relation to the completion of the HOPE-3 clinical study, Cohort A arm, to determine the extent of progress towards completion.

Under this method, the transaction price is recognized over the contract’s entire performance period using a cost percentage per patient visit relative to the total estimated cost of patient visits.

As of December 31, 2024, all of the $ 40.0 million has been recognized as revenue.

In December 2024, the Company triggered its second milestone with Nippon Shinyaku under the U.S.

Distribution Agreement, which related to a separate distinct performance obligation.

The performance obligation was tied to the submission of our BLA to the FDA.

As a result, the $ 10.0 million milestone payment is recognized as revenue within the Company’s consolidated statement of operations and comprehensive loss as of December 31, 2024.

For the year ended December 31, 2024, the Company recognized approximately $ 22.3 million as revenue compared to approximately $ 25.2 million for the year ended December 31, 2023.

In relation to the U.S.

Distribution Agreement, as of December 31, 2023, the Company recorded approximately $ 12.3 million as current deferred revenue on the Company’s consolidated balance sheets.

As of December 31, 2023, the Company recorded a receivable of $ 10.0 million in connection with the interim futility milestone, which payment was received in January 2024.

The Company had no opening or closing contract asset balances recognized.

Distribution Agreement, there was no deferred revenue recorded as of December 31, 2024, as the total $ 50.0 million payment received (including $ 30.0 million upfront payment and two $ 10.0 development milestone payments) has been fully recognized as revenue, compared to approximately $ 12.3 million as of December 31, 2023.

As of December 31, 2024 and 2023, the Company recognized a receivable of $ 10.0 million for each year related to the first and second milestones, which payments were received in January 2025 and 2024, respectively.

The Company had no opening or closing contract asset balances recognized other than the accounts receivable mentioned above.

The difference between the opening and closing balances of the Company’s contract liability results from the Company performance of services in connection to its performance obligation.

The transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized.

As of December 31, 2023, remaining performance obligations related to the U.S.

Distribution Agreement were approximately $ 12.3 million.

At this time, we estimate 100 % of the remaining performance obligations are expected to be recognized over the next 12 months .

Remaining performance obligations estimates are subject to change.

Commercialization and Distribution Agreement with Nippon Shinyaku (Territory:

On February 10, 2023, Capricor entered into a Commercialization and Distribution Agreement (the “Japan Distribution Agreement”) with Nippon Shinyaku.

Under the terms of the Japan Distribution Agreement, Capricor appointed Nippon Shinyaku as its exclusive distributor in Japan of CAP-1002 for the treatment of DMD.

Under the terms of the Japan Distribution Agreement, Capricor appointed Nippon Shinyaku as its exclusive distributor in Japan of deramiocel for the treatment of DMD.

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

Nippon Shinyaku will be responsible for the distribution of CAP-1002 in Japan.

Capricor will be responsible for the conduct of clinical development in Japan, as may be required, as well as the manufacturing of CAP-1002.

Subject to regulatory approval, Capricor will sell commercial product to Nippon Shinyaku in Japan.

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

Capricor will be responsible for the conduct of clinical development and regulatory approval in Japan, as may be required, as well as the manufacturing of deramiocel.

In addition, Capricor or its designee will hold the Marketing Authorization in Japan if the product is approved in that territory.

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

The Company has evaluated the Japan Distribution Agreement in accordance with ASU 606, Revenue for Contracts from Customers .

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As such, the Company has recorded the entire upfront payment fee of $ 12.0 million as current deferred revenue on the Company’s consolidated balance sheets as of December 31, 2024.

Binding Term Sheet with Nippon Shinyaku (Territory:

European Region)

On September 16, 2024, Capricor entered into a Binding Term Sheet (the “Term Sheet”) with Nippon Shinyaku for the commercialization and distribution of deramiocel for the treatment of DMD in the European region, as defined in the Term Sheet.

Subject to finalization of a definitive agreement, under the terms of the Term Sheet, Capricor would be responsible for the development and manufacturing of deramiocel for potential approval in the European region.

Nippon Shinyaku would be responsible for the sales and distribution of deramiocel in the European region.

Subject to regulatory approval, Capricor would receive a double-digit share of product revenue and additional development and sales-based milestone payments.

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

Upon execution of the definitive agreement, the

Company will evaluate the terms in accordance with ASU 606, Revenue for Contracts from Customers .

As of December 31, 2024, nothing has been recorded or received.

Capricor and Nippon Shinyaku have entered into various amendments to the Term Sheet, pursuant to which the parties agreed to extend the date during which the parties shall negotiate the definitive agreement to April 30, 2025.

RELATED PARTY TRANSACTIONS

Lease and Sub-Lease Agreement

As noted above, Capricor is a party to lease agreements with CSMC (see Note 6 – “Commitments and Contingencies”), and CSMC has served as an investigative site in Capricor’s clinical trials.

Additionally, Dr.

Eduardo Marbán, who is a stockholder of Capricor Therapeutics and has participated from time to time as an observer at the Company’s meetings of the Board of Directors, is the Director of the Cedars-Sinai Smidt Heart Institute, and co-founder of Capricor.

Consulting Agreements

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The agreement is terminable upon 30 days ’ notice.

In July 2020, Capricor entered into an Advisory Services Agreement with Dr.

Eduardo Marbán whereby he was granted an option to purchase 50,000 shares of the Company's common stock.

Additionally, in January 2022, Dr.

Eduardo Marbán was granted an additional option grant to purchase 50,000 shares of the Company’s common stock.

As of December 31, 2024 and 2023, $ 10,000 was recorded in accounts payable and accrued expenses related to this Consulting Agreement.

In January 2024, Capricor entered into a Consulting Agreement with Michael Kelliher, a member of its Board of Directors, related to business development services whereby he was granted an option to purchase 30,000 shares of the Company's common stock.

Payables to Related Party

As of December 31, 2023 and 2022, the Company had accounts payable and accrued expenses to related parties totaling $ 27,479 and $ 89,234 , respectively.

CSMC accounts for $ 17,479 and $ 79,234 of the total accounts payable and accrued expenses to related parties as of December 31, 2023 and December 31, 2022, respectively.

CSMC expenses relate to research and development costs, clinical trial costs, license and patent fees, and facilities rent.

During the years ended December 31, 2023 and 2022, the Company paid CSMC approximately $ 226,400 and approximately $ 794,000 , respectively, for such costs.

Commercialization and Distribution Agreements

As noted above, Capricor is party to two commercialization and distribution agreements with Nippon Shinyaku, which holds more than 10 % of the outstanding capital stock of Capricor Therapeutics (see Note 7 – “License and Distribution Agreements”).

The amount receivable from Nippon Shinyaku as of December 31, 2024 and 2023 was $ 10.0 million.

There were no outstanding payables as of December 31, 2024 or 2023.

Binding Term Sheet

As noted above, on September 16, 2024, Capricor entered into a Binding Term Sheet (the “Term Sheet”) with Nippon Shinyaku for the commercialization and distribution of deramiocel for the treatment of DMD in the European region, as defined in the Term Sheet (see Note 7 – “License and Distribution Agreements”).

At this time, Capricor and Nippon Shinyaku have entered into various amendments to the Term Sheet, pursuant to which the parties agreed to extend the date during which the parties shall negotiate the definitive agreement to April 30, 2025.

Private Placement

In connection with the Private Placement, the Company also entered into a Registration Rights Agreement with Nippon Shinyaku on September 16, 2024 (the “Registration Rights Agreement”).

SUBSEQUENT EVENTS

Additional Sales under ATM Program

Subsequent to December 31, 2023 and through March 7, 2024, the Company sold an aggregate of 251,347 shares of common stock under the ATM Program at an average price of approximate $ 4.50 per share for gross proceeds of approximately $ 1.1 million.

The Company paid cash commissions on the gross proceeds, plus reimbursement of expenses to the placement agent in the aggregate amount of approximately $ 35,900 .

Stock Option Grants

In January 2024, the Company granted a total of 2,203,726 stock options to its employees, certain non-employee consultants, and directors.

CAPRICOR THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

License and Service Agreement

In February 2024, we entered into a License and Services Agreement with Azzur Cleanrooms-on-Demand – San Diego, LLC (the “Azzur License Agreement”) 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.

Our estimated license fee is approximately $ 120,500 per month for a term of approximately 6 months .

Stock Award Grants

In January 2025, the Company granted a total of 1,831,237 stock options and restricted stock awards to its employees, certain non-employee consultants, and directors.

San Diego Lease Amendment

On February 26, 2025, the Company entered into an amendment to the San Diego Lease (the “Fourth Amendment”) with Altman.

Pursuant to the terms of the Fourth Amendment, the Company increased the rentable square footage to 34,348 square feet commencing on or before July 1, 2025 and extended the lease term to September 30, 2033.

Commencing January 1, 2026, our base rent will increase to $ 188,914 per month.

The rent is subject to a 3.0 % annual rent increase commencing October 1, 2026 plus certain operating expenses and taxes.

The Fourth Amendment contains an option for Capricor to renew for an additional term of five years .

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data