[Special Note Regarding Forward-Looking Statements](index=4&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) [Forward-Looking Statements Disclaimer](index=4&type=section&id=Forward-Looking%20Statements%20Disclaimer) The report contains forward-looking statements with inherent risks and uncertainties that may cause actual results to differ - Forward-looking statements involve substantial risks and uncertainties, and **actual results may differ materially** from expectations[6](index=6&type=chunk)[7](index=7&type=chunk)[9](index=9&type=chunk) - The company **does not undertake to update** forward-looking statements unless required by law[10](index=10&type=chunk) - Data, estimates, and forecasts from independent industry publications are used but **not independently verified** by the company[11](index=11&type=chunk) [PART I — FINANCIAL INFORMATION](index=7&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements and accompanying notes for Capricor Therapeutics, Inc [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (September 30, 2021 vs. December 31, 2020) | Metric | Sep 30, 2021 (Unaudited) | Dec 31, 2020 | | :---------------------------------- | :----------------------- | :----------- | | Cash and cash equivalents | $40,839,158 | $32,665,874 | | Total Current Assets | $41,298,245 | $33,677,083 | | Total Assets | $43,100,521 | $34,618,796 | | Total Current Liabilities | $2,988,292 | $2,971,282 | | Total Liabilities | $6,364,551 | $6,419,012 | | Total Stockholders' Equity | $36,735,970 | $28,199,784 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) | Metric | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $0 | $16,863 | $244,898 | $252,420 | | Research and development | $2,513,915 | $2,629,267 | $9,307,512 | $5,711,896 | | General and administrative | $1,800,630 | $1,301,673 | $5,496,186 | $4,049,955 | | Total Operating Expenses | $4,314,545 | $3,930,940 | $14,803,698 | $9,761,851 | | Loss from Operations | $(4,314,545) | $(3,914,077) | $(14,558,800) | $(9,509,431) | | Total Other Income (Expense) | $382,738 | $3,953 | $726,804 | $30,335 | | Net Loss | $(3,931,807) | $(3,910,124) | $(13,831,996) | $(9,479,096) | | Comprehensive Loss | $(3,931,807) | $(3,910,124) | $(13,831,996) | $(9,478,339) | | Net loss per share, basic and diluted | $(0.17) | $(0.20) | $(0.61) | $(0.68) | | Weighted average shares, basic and diluted | 23,095,375 | 19,801,841 | 22,731,638 | 13,958,507 | [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - Nine Months Ended September 30, 2021 | Metric | Common Shares | Stock Amount | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders' Equity | | :---------------------------------- | :------------ | :----------- | :------------------------- | :------------------ | :------------------------- | | Balance at December 31, 2020 | 20,577,123 | $20,577 | $116,216,966 | $(88,037,759) | $28,199,784 | | Issuance of common stock, net of fees | 3,365,349 | $3,368 | $19,972,425 | — | $19,975,891 | | Stock-based compensation | — | — | $2,185,542 | — | $2,185,542 | | Stock options exercised | 5,683 | $6 | $6,643 | — | $6,649 | | Net loss | — | — | — | $(13,831,996) | $(13,831,996) | | Balance at September 30, 2021 | 24,149,155 | $24,149 | $138,581,576 | $(101,869,755) | $36,735,970 | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (Unaudited) - Nine Months Ended September 30 | Metric | 2021 | 2020 | Change (2021 vs 2020) | | :------------------------------------------ | :----------- | :----------- | :-------------------- | | Net cash used in operating activities | $(11,181,741) | $(6,212,413) | $(4,969,328) | | Net cash provided by (used in) investing activities | $(827,615) | $5,727,327 | $(6,554,942) | | Net cash provided by financing activities | $20,182,640 | $31,886,098 | $(11,703,458) | | Net increase in cash and cash equivalents | $8,173,284 | $31,401,012 | $(23,227,728) | | Cash and cash equivalents at end of period | $40,839,158 | $35,300,340 | +$5,538,818 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures for the financial statements, covering accounting policies, equity, and commitments [Note 1. Organization and Summary of Significant Accounting Policies](index=12&type=section&id=Note%201.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines Capricor's business, basis of presentation, and significant accounting policies including liquidity and COVID-19 impacts [Description of Business](index=12&type=section&id=Description%20of%20Business) - Capricor Therapeutics, Inc is a biotechnology company developing transformative **cell and exosome-based therapeutics** for a broad spectrum of diseases[30](index=30&type=chunk) - The company has **multiple active drug and vaccine candidates** in various stages of development[30](index=30&type=chunk) [Basis of Presentation](index=12&type=section&id=Basis%20of%20Presentation) - Unaudited interim condensed consolidated financial statements are prepared in accordance with **U.S. GAAP** and Form 10-Q instructions[31](index=31&type=chunk) - Interim results are **not necessarily indicative** of the results expected for the full year[31](index=31&type=chunk) [Basis of Consolidation](index=12&type=section&id=Basis%20of%20Consolidation) - Consolidated financial statements include the Company and its **wholly-owned subsidiary**, with all intercompany transactions eliminated[33](index=33&type=chunk) [Liquidity](index=12&type=section&id=Liquidity) - The Company's cash and cash equivalents increased to approximately **$40.8 million** as of September 30, 2021, from $32.7 million at December 31, 2020[35](index=35&type=chunk) - Future expenditures and capital requirements are **substantial** and depend on R&D, manufacturing, and commercialization costs[38](index=38&type=chunk) - The Company will require **substantial additional capital** and cannot assure availability on favorable terms[39](index=39&type=chunk)[40](index=40&type=chunk) [Business Uncertainty Related to the Coronavirus](index=13&type=section&id=Business%20Uncertainty%20Related%20to%20the%20Coronavirus) - **COVID-19 has impacted** clinical trial enrollment, contract performance, workforce stability, and supply chain[41](index=41&type=chunk) - The Company received a **$318,160 PPP loan** in April 2020, which was forgiven in April 2021[42](index=42&type=chunk)[81](index=81&type=chunk) - The Company recorded **$367,168 in Employee Retention Credit (ERC)** as other income for the nine months ended September 30, 2021[43](index=43&type=chunk) [Use of Estimates](index=13&type=section&id=Use%20of%20Estimates) - Financial statements require management to make estimates and assumptions, particularly for **stock-based compensation expense**[44](index=44&type=chunk)[45](index=45&type=chunk) [Cash and Cash Equivalents](index=15&type=section&id=Cash%20and%20Cash%20Equivalents) - Highly liquid investments with a maturity of **less than 30 days** at purchase are considered cash equivalents[47](index=47&type=chunk) [Marketable Securities](index=15&type=section&id=Marketable%20Securities) - All marketable securities are classified as **available-for-sale**, carried at estimated fair values[48](index=48&type=chunk) [Property and Equipment](index=15&type=section&id=Property%20and%20Equipment) - Property and equipment are stated at cost and depreciated using the **straight-line method** over 5 to 7 years[49](index=49&type=chunk) - Depreciation expense was **$164,887** for the nine months ended September 30, 2021, compared to $98,567 for the same period in 2020[49](index=49&type=chunk) Property and Equipment, Net | Category | September 30, 2021 | December 31, 2020 | | :------------------------ | :----------------- | :---------------- | | Furniture and fixtures | $55,440 | $48,676 | | Laboratory equipment | $2,294,559 | $1,473,708 | | Leasehold improvements | $47,043 | $47,043 | | Less accumulated depreciation | $(883,467) | $(718,580) | | **Property and equipment, net** | **$1,513,575** | **$850,847** | [Intangible Assets](index=15&type=section&id=Intangible%20Assets) - Intangible assets are amortized over 5 to 15 years; all capitalized intellectual property was **fully amortized** as of September 30, 2021[50](index=50&type=chunk) - Amortization expense was **$2,165** for the nine months ended September 30, 2021, compared to $3,247 for the same period in 2020[50](index=50&type=chunk) - **No impairment** was recorded for goodwill and intangible assets for the nine months ended September 30, 2021 and 2020[51](index=51&type=chunk) [Leases](index=15&type=section&id=Leases) - The Company adopted ASC Topic 842, requiring recognition of most leases on the balance sheet with a **right-to-use (ROU) asset** and lease liabilities[52](index=52&type=chunk)[55](index=55&type=chunk) - All current leases for office and laboratory space are classified as **operating leases**[56](index=56&type=chunk)[57](index=57&type=chunk) [Revenue Recognition](index=17&type=section&id=Revenue%20Recognition_Note1) - The Company applies **ASU 606**, Revenue from Contracts with Customers, for all contracts[59](index=59&type=chunk) [Government Research Grants](index=17&type=section&id=Government%20Research%20Grants_Note1) - Government research grants are recognized as income when related expenses are incurred, but the **CIRM Award is classified as a liability**[60](index=60&type=chunk) [Miscellaneous Income](index=17&type=section&id=Miscellaneous%20Income_Note1) - Revenue from miscellaneous income is recognized **upon delivery of doses** developed from past R&D efforts[61](index=61&type=chunk) [Research and Development](index=17&type=section&id=Research%20and%20Development_Note1) - R&D costs are expensed as incurred, amounting to approximately **$2.5 million for Q3 2021** and **$9.3 million for the nine months** ended September 30, 2021[62](index=62&type=chunk) [Comprehensive Income (Loss)](index=17&type=section&id=Comprehensive%20Income%20(Loss)_Note1) - Comprehensive loss was approximately **$3.9 million for Q3 2021** and **$13.8 million for the nine months** ended September 30, 2021[64](index=64&type=chunk)[65](index=65&type=chunk) - Other comprehensive income (loss) is related to **net unrealized gain (loss)** on marketable securities[65](index=65&type=chunk) [Clinical Trial Expense](index=19&type=section&id=Clinical%20Trial%20Expense_Note1) - Clinical trial expenses are accrued based on the **progress of the trial**, patient progression, and timing of services[66](index=66&type=chunk) - Accrual estimates depend on **timely and accurate reporting** from CROs and other third-party vendors[66](index=66&type=chunk) [Stock-Based Compensation](index=19&type=section&id=Stock-Based%20Compensation_Note1) - Stock-based compensation expense is recognized based on estimated fair values using the **Black-Scholes model**[67](index=67&type=chunk)[68](index=68&type=chunk) - Key assumptions for the Black-Scholes model include **expected volatility, expected term, and dividend yield**[68](index=68&type=chunk) [Basic and Diluted Loss per Share](index=19&type=section&id=Basic%20and%20Diluted%20Loss%20per%20Share) - Basic and diluted loss per share are computed by dividing net loss by the **weighted-average number of common shares** outstanding[69](index=69&type=chunk)[70](index=70&type=chunk) - Warrants and options to purchase **3,968,546 shares (2021)** were excluded from diluted EPS calculation due to their anti-dilutive effect[70](index=70&type=chunk) [Fair Value Measurements](index=21&type=section&id=Fair%20Value%20Measurements) - Carrying amounts of cash, accounts payable, and accrued expenses **approximate fair value** due to short maturity[73](index=73&type=chunk) [Recent Accounting Pronouncements](index=21&type=section&id=Recent%20Accounting%20Pronouncements_Note1) - The Company adopted ASU 2019-12 (Income Taxes) in Q1 2021, which **did not have a material impact** on financial statements[74](index=74&type=chunk) - Other recent pronouncements are **not believed to have a material impact**[75](index=75&type=chunk) [Note 2. Note Payable](index=21&type=section&id=Note%202.%20Note%20Payable) This note details the Paycheck Protection Program (PPP) loan received by Capricor and its subsequent forgiveness - Capricor received a **$318,160 PPP loan** in Q2 2020, which was used for covered payroll costs[76](index=76&type=chunk) - The loan was **forgiven by the SBA** in April 2021, and the Company recognized a gain on forgiveness in Q2 2021[81](index=81&type=chunk) [Note 3. Stockholder's Equity](index=23&type=section&id=Note%203.%20Stockholder's%20Equity) This note describes the Company's various equity programs, public offerings, and warrant inducements as key sources of capital [ATM Programs and Other Offerings](index=23&type=section&id=ATM%20Programs%20and%20Other%20Offerings) - The Company uses **"at-the-market" (ATM) programs** to sell common stock and has completed public offerings to raise capital[82](index=82&type=chunk) [August 2019 ATM Program](index=23&type=section&id=August%202019%20ATM%20Program) - This program **expired on May 4, 2020**, and was replaced by the May 2020 ATM Program[83](index=83&type=chunk) August 2019 ATM Program Summary | Metric | Value | | :-------------------- | :---------------- | | Shares sold | 360,316 | | Average price per share | ~$3.07 | | Gross proceeds | ~$1.1 million | | Commissions & fees | ~$0.1 million | [May 2020 ATM Program](index=23&type=section&id=May%202020%20ATM%20Program) - This program **expired on June 21, 2021**, and was replaced by the June 2021 ATM Program[84](index=84&type=chunk) May 2020 ATM Program Summary | Metric | Value | | :-------------------- | :---------------- | | Aggregate offering price | Up to $40.0 million | | Shares sold | 6,027,852 | | Average price per share | ~$6.15 | | Gross proceeds | ~$37.1 million | | Commissions & fees | ~$1.2 million | [June 2021 ATM Program](index=23&type=section&id=June%202021%20ATM%20Program_Note3) June 2021 ATM Program Summary (as of Sep 30, 2021) | Metric | Value | | :-------------------- | :---------------- | | Aggregate offering price | Up to $75.0 million | | Shares sold | 1,267,475 | | Average price per share | ~$5.89 | | Gross proceeds | ~$7.5 million | | Commissions & fees | ~$0.3 million | | Remaining to be sold | ~$67.5 million | [December 2019 Financing](index=23&type=section&id=December%202019%20Financing) December 2019 Public Offering Summary | Metric | Value | | :-------------------------------- | :---------------- | | Common stock issued | 531,173 shares | | Warrants to purchase common stock | 4,139,477 shares | | Pre-funded warrants | 3,608,304 shares | | Combined purchase price | $1.226 per share/warrant | | Aggregate purchase price | ~$5.1 million | | Net proceeds (after fees) | ~$4.4 million | | December 2019 Common Warrants outstanding (Sep 30, 2021) | 61,173 | [March 2020 Warrant Inducement](index=25&type=section&id=March%202020%20Warrant%20Inducement) - The Company issued **4,000,000 new warrants** in connection with the exercise of 4,000,000 December 2019 Common Warrants, generating gross proceeds of approximately **$4.9 million**[89](index=89&type=chunk)[91](index=91&type=chunk) - New Warrants have an exercise price of **$1.27 per share** and a term of 5.5 years[89](index=89&type=chunk)[90](index=90&type=chunk) - As of September 30, 2021, **65,000 March 2020 Placement Agent Warrants** remained outstanding[91](index=91&type=chunk) [Outstanding Shares](index=25&type=section&id=Outstanding%20Shares) - As of September 30, 2021, the Company had **24,149,155 shares** of common stock issued and outstanding[92](index=92&type=chunk) [Note 4. Stock Awards, Warrants and Options](index=27&type=section&id=Note%204.%20Stock%20Awards,%20Warrants%20and%20Options) This note details the Company's stock option plans, warrant activity, and stock-based compensation expense [Warrants](index=27&type=section&id=Warrants) Outstanding Warrants to Purchase Common Stock (September 30, 2021) | Type | Grant Date | Warrants Outstanding | Exercise Price per Share | Expiration Date | | :---------------- | :--------- | :------------------- | :----------------------- | :-------------- | | Common Warrants | 12/19/2019 | 61,173 | $1.10 | 12/19/2024 | | Common Warrants | 3/27/2020 | 65,000 | $1.5313 | 3/27/2025 | | **Total** | | **126,173** | **$1.32 (Weighted Avg)** | | [Stock Options](index=27&type=section&id=Stock%20Options) - The Company has five stock option plans with **3,836,588 options available for issuance** as of September 30, 2021[94](index=94&type=chunk)[103](index=103&type=chunk) - Stock options are granted with an exercise price equal to the closing price on the grant date and generally **vest over one to four years**[104](index=104&type=chunk) - Total unrecognized fair value compensation cost related to non-vested stock options was approximately **$8.5 million** as of September 30, 2021, expected to be recognized over ~1.5 years[111](index=111&type=chunk) Weighted Average Fair Value of Options Granted | Period | Weighted Average Fair Value per Share | | :---------------------------------- | :------------------------------------ | | Three months ended Sep 30, 2021 | ~$4.03 | | Three months ended Sep 30, 2020 | ~$5.23 | | Nine months ended Sep 30, 2021 | ~$3.40 | | Nine months ended Sep 30, 2020 | ~$3.91 | Black-Scholes Option-Pricing Model Assumptions | Assumption | September 30, 2021 | September 30, 2020 | | :------------------ | :----------------- | :----------------- | | Expected volatility | 123% - 124% | 104% - 123% | | Expected term | 6 years | 5 - 6 years | | Dividend yield | 0% | 0% | Employee and Non-Employee Stock-Based Compensation Expense | Category | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | General and administrative | $654,744 | $418,147 | $1,913,005 | $1,287,474 | | Research and development | $65,537 | $68,630 | $272,537 | $191,460 | | **Total** | **$720,281** | **$486,777** | **$2,185,542** | **$1,478,934** | Stock Option Activity (Nine Months Ended September 30, 2021) | Metric | Number of Options | Weighted Average Exercise Price | Aggregate Intrinsic Value | | :---------------------------------- | :---------------- | :------------------------------ | :------------------------ | | Outstanding at December 31, 2020 | 2,361,873 | $1.89 | $4,236,737 | | Granted | 1,636,324 | $3.95 | | | Exercised | (5,883) | $1.39 | $22,761 | | Expired/Cancelled | (149,941) | $3.89 | | | **Outstanding at September 30, 2021** | **3,842,373** | **$2.69** | **$5,737,004** | | Exercisable at September 30, 2021 | 1,454,788 | $1.92 | $3,161,020 | [Note 5. Concentrations](index=31&type=section&id=Note%205.%20Concentrations) This note addresses the Company's cash concentration risk in uninsured bank deposits [Cash Concentration](index=31&type=section&id=Cash%20Concentration) - The Company maintained approximately **$40.6 million of uninsured deposits** as of September 30, 2021, across two financial institutions[112](index=112&type=chunk) - The Company believes it is **not exposed to significant credit risk** on cash, cash equivalents and marketable securities[112](index=112&type=chunk) [Note 6. Government Grant Awards](index=31&type=section&id=Note%206.%20Government%20Grant%20Awards) This note details government grant awards for the HOPE-Duchenne clinical trial and CAP-2003 manufacturing [CIRM Grant Award (HOPE)](index=31&type=section&id=CIRM%20Grant%20Award%20(HOPE)) - Capricor received a **~$3.4 million CIRM Award** in 2016 to fund its Phase I/II HOPE-Duchenne clinical trial for DMD[113](index=113&type=chunk) - The CIRM Award is **classified as a liability** because Capricor has the right to convert it into a loan[116](index=116&type=chunk) - As of September 30, 2021, the liability balance for the CIRM Award was approximately **$3.4 million**[117](index=117&type=chunk) [U.S. Department of Defense Grant Award](index=33&type=section&id=U.S.%20Department%20of%20Defense%20Grant%20Award) - Capricor received a **~$2.4 million DoD grant** in 2016 for developing CAP-2003 manufacturing, utilizing ~$2.3 million[118](index=118&type=chunk) - No revenue was recognized from this award in 2021, and **final close-out documentation was completed** in Q3 2021[118](index=118&type=chunk) [Note 7. Commitments and Contingencies](index=33&type=section&id=Note%207.%20Commitments%20and%20Contingencies) This note outlines the Company's commitments including leases, legal contingencies, and other funding obligations [Leases](index=33&type=section&id=Leases_Note7) - Capricor has a month-to-month lease for corporate offices and extended a facilities lease with CSMC **through July 2022**[119](index=119&type=chunk)[120](index=120&type=chunk) - A new lease agreement for office and laboratory space in San Diego commenced October 1, 2021, with an estimated **ROU asset/liability of ~$2.7 million**[121](index=121&type=chunk) Future Minimum Rental Payments Under Operating Leases (as of Sep 30, 2021) | Year | Operating Leases | | :--- | :--------------- | | 2021 (3 month) | $32,120 | | 2022 | $74,946 | Operating Lease Expenses | Category | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Unrelated parties | $39,219 | $48,687 | $117,657 | $146,061 | | Related parties | $37,218 | $47,415 | $132,048 | $142,245 | [Legal Contingencies](index=35&type=section&id=Legal%20Contingencies) - The Company is **not currently a party** to any material legal proceedings[127](index=127&type=chunk) [Accounts Payable](index=35&type=section&id=Accounts%20Payable) - Estimated liabilities are recorded for vendor payment disputes that are **probable and estimable**[128](index=128&type=chunk) [Other Funding Commitments](index=35&type=section&id=Other%20Funding%20Commitments) - The Company has agreements requiring **future payments for licensed technology milestones or royalties**[129](index=129&type=chunk)[130](index=130&type=chunk) [Employee Severances](index=35&type=section&id=Employee%20Severances) - The Board approved severance packages for specific employees, but **no liability has been recorded** as of September 30, 2021[131](index=131&type=chunk) [Note 8. License Agreements](index=35&type=section&id=Note%208.%20License%20Agreements) This note details Capricor's license agreements for intellectual property related to its core technologies [Capricor's Technology - CAP-1002 and Exosomes](index=35&type=section&id=Capricor's%20Technology%20-%20CAP-1002%20and%20Exosomes) - Capricor holds **exclusive license agreements** for intellectual property related to cardiac-derived cells (CAP-1002) and exosomes[132](index=132&type=chunk) - The Company also has a **non-exclusive license** with JHU for COVID-19 imaging-based serology technology[132](index=132&type=chunk) [University of Rome License Agreement](index=37&type=section&id=University%20of%20Rome%20License%20Agreement) - Capricor has an exclusive, worldwide, royalty-bearing license from the University of Rome, requiring annual minimum royalties of **20,000 Euros**[134](index=134&type=chunk)[135](index=135&type=chunk) - The agreement includes a **right of first negotiation** for new cardiac stem cell patents[134](index=134&type=chunk)[136](index=136&type=chunk) [The Johns Hopkins University License Agreements](index=37&type=section&id=The%20Johns%20Hopkins%20University%20License%20Agreements) This section outlines Capricor's multiple license agreements with Johns Hopkins University for its core technologies [License Agreement for CDCs](index=37&type=section&id=License%20Agreement%20for%20CDCs) - Capricor holds an **exclusive, worldwide, royalty-bearing license** from JHU for CDC technology[137](index=137&type=chunk) - Payments include an initial license fee, minimum annual royalties, and **low single-digit running royalties** on net sales[138](index=138&type=chunk) - Development milestone payments up to **$1,850,000** are required, with $250,000 accrued as of September 30, 2021[138](index=138&type=chunk) [License Agreement for Serology Diagnostic](index=39&type=section&id=License%20Agreement%20for%20Serology%20Diagnostic) - Capricor has a **non-exclusive, worldwide, non-royalty-bearing license** from JHU for COVID-19 serology diagnostic technology[141](index=141&type=chunk) [License Agreement for Exosome-based Vaccines and Therapeutics](index=39&type=section&id=License%20Agreement%20for%20Exosome-based%20Vaccines%20and%20Therapeutics) - Capricor entered an **exclusive, worldwide, royalty-bearing license** with JHU for exosome-mRNA vaccines and therapeutics[142](index=142&type=chunk) - The agreement includes an upfront license fee, development milestones, **low single-digit royalties** on sales, and a double-digit percentage of sublicense consideration[143](index=143&type=chunk) - **Minimum annual royalties** will be due starting the third year[143](index=143&type=chunk) [Cedars-Sinai Medical Center License Agreements](index=39&type=section&id=Cedars-Sinai%20Medical%20Center%20License%20Agreements) This section details Capricor's exclusive license agreements with Cedars-Sinai Medical Center for its core technologies [License Agreement for CDCs](index=39&type=section&id=License%20Agreement%20for%20CDCs_CSMC) - Capricor has an **exclusive, worldwide, royalty-bearing license** from CSMC for CDC technology[145](index=145&type=chunk)[148](index=148&type=chunk) - Obligations include **low single-digit royalties** on sales and meeting certain spending and development milestones[149](index=149&type=chunk)[150](index=150&type=chunk) - The agreement can be terminated for reasons including **material breach or failure to exploit patent rights**[151](index=151&type=chunk) [License Agreement for Exosomes](index=41&type=section&id=License%20Agreement%20for%20Exosomes_CSMC) - Capricor holds an **exclusive, worldwide, royalty-bearing license** from CSMC for exosomes technology[153](index=153&type=chunk) - Obligations include a license fee, meeting development milestones, **low single-digit royalties** on sales, and a single-digit percentage of sublicense consideration[154](index=154&type=chunk)[155](index=155&type=chunk) - Numerous amendments have added patent applications and modified deadlines, with **failure to meet milestones** potentially leading to termination[158](index=158&type=chunk) [Sponsored Research Agreement with Johns Hopkins University](index=43&type=section&id=Sponsored%20Research%20Agreement%20with%20Johns%20Hopkins%20University) - Capricor entered a Sponsored Research Agreement with JHU to fund research for its **exosomes program**[159](index=159&type=chunk) [Note 9. Related Party Transactions](index=43&type=section&id=Note%209.%20Related%20Party%20Transactions) This note discloses transactions with related parties, including lease agreements, consulting services, and clinical trial support [Lease and Sub-Lease Agreement](index=43&type=section&id=Lease%20and%20Sub-Lease%20Agreement) - Capricor leases facilities from CSMC (a related party) and previously had a sublease with a company **wholly owned by a director**[160](index=160&type=chunk)[161](index=161&type=chunk) - Sublease income from the related party was **$0** for the nine months ended September 30, 2021, compared to $20,000 in 2020[161](index=161&type=chunk) [Consulting Agreements](index=43&type=section&id=Consulting%20Agreements) - Capricor has a consulting agreement with Dr Frank Litvack, Executive Chairman, for **$10,000 per month**[162](index=162&type=chunk) [Payables to Related Party](index=45&type=section&id=Payables%20to%20Related%20Party) - Payments to CSMC for R&D, clinical trials, and rent were approximately **$292,400** for the nine months ended September 30, 2021[164](index=164&type=chunk) Accounts Payable and Accrued Expenses to Related Parties (CSMC) | Date | Amount | | :----------------- | :----------- | | September 30, 2021 | $497,080 | | December 31, 2020 | $8,972 | [Related Party Clinical Trials](index=45&type=section&id=Related%20Party%20Clinical%20Trials) - Capricor provided CAP-1002 for two CSMC-sponsored clinical trials, receiving approximately **$1.7 million in total compensation**[165](index=165&type=chunk) - Revenue recognized from these trials was approximately **$245,000** for the nine months ended September 30, 2021[165](index=165&type=chunk) - Enrollment for these studies is complete, and **no further material revenues are expected**[165](index=165&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=46&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses the company's financial condition, operational results, liquidity, and critical accounting policies [Overview](index=46&type=section&id=Overview_MD&A) - Capricor Therapeutics is a clinical-stage biotechnology company focused on developing **cell and exosome-based therapeutics**[169](index=169&type=chunk) [Cell Therapy (CAP-1002) Program](index=46&type=section&id=Cell%20Therapy%20(CAP-1002)%20Program) This section details the CAP-1002 cell therapy program's development for Duchenne Muscular Dystrophy and COVID-19 [CAP-1002 - Duchenne Muscular Dystrophy Program](index=46&type=section&id=CAP-1002%20-%20Duchenne%20Muscular%20Dystrophy%20Program) - CAP-1002 is being investigated for **immunomodulatory activity and cellular regeneration** in DMD[170](index=170&type=chunk) - The **Phase II HOPE-2 trial met its primary efficacy endpoint** (Mid-level PUL 1.2) and secondary cardiac endpoints[170](index=170&type=chunk) - A Phase III trial protocol has been submitted to the FDA, but enrollment is **contingent on securing a partner or additional capital**[170](index=170&type=chunk) [CAP-1002 - COVID-19 Program](index=46&type=section&id=CAP-1002%20-%20COVID-19%20Program) - An Expanded Access program for severe COVID-19 patients showed some biomarker improvements, but **efficacy was not demonstrated**[171](index=171&type=chunk) - The Phase II INSPIRE trial for severe/critical COVID-19 patients **completed enrollment of 63 patients** in November 2021[172](index=172&type=chunk)[173](index=173&type=chunk) - The Company is **actively seeking partners** for the COVID-19 program[173](index=173&type=chunk) [Exosomes Program](index=48&type=section&id=Exosomes%20Program_MD&A) This section outlines Capricor's exosome program, including vaccine development and therapeutic applications [Exosomes-Based Vaccine](index=48&type=section&id=Exosomes-Based%20Vaccine) - The Company is developing a **multivalent exosome-mRNA vaccine** candidate for COVID-19 prevention[175](index=175&type=chunk) - A **pre-IND meeting with the FDA has occurred**, and an IND filing is planned[175](index=175&type=chunk) [Exosome-Based Therapeutics](index=48&type=section&id=Exosome-Based%20Therapeutics) - Capricor is developing its exosomes platform as a next-generation therapeutic for **delivering nucleic acids** (e.g., mRNA)[176](index=176&type=chunk) - The Company recently **licensed intellectual property** related to exosome-mRNA vaccines and therapeutics from JHU[177](index=177&type=chunk) [CDC-Derived Exosomes (CAP-2003)](index=48&type=section&id=CDC-Derived%20Exosomes%20(CAP-2003)) - An IND for CAP-2003 in DMD patients was filed, but the FDA has **requested more manufacturing information**[178](index=178&type=chunk) - CAP-2003 is also being evaluated for **trauma-related injuries** in collaboration with the U.S. Army[179](index=179&type=chunk) - The exosomes pipeline is supported by **collaborations with JHU, DoD, NIH, and CSMC**[180](index=180&type=chunk) [Our Technologies](index=49&type=section&id=Our%20Technologies) This section describes Capricor's core technologies, Cardiosphere-Derived Cells (CAP-1002) and Exosomes [Cardiosphere-Derived Cells (CAP-1002)](index=49&type=section&id=Cardiosphere-Derived%20Cells%20(CAP-1002)) - CAP-1002 is an allogeneic cardiac-derived cell therapy with **immunomodulatory activity**, being developed for DMD[183](index=183&type=chunk)[187](index=187&type=chunk) - Preclinical studies show CDCs **stimulate cell proliferation**, blood vessel growth, and inhibit cell death/scar formation[184](index=184&type=chunk) - CDCs are small enough for **intracoronary or peripheral venous infusion**[185](index=185&type=chunk)[187](index=187&type=chunk) [Exosomes](index=49&type=section&id=Exosomes_MD&A) - Exosomes are nano-scale vesicles that mediate therapeutic activities like **cell survival, proliferation, and tissue regeneration**[188](index=188&type=chunk)[189](index=189&type=chunk) - Preclinical data indicates CDCs mediate most therapeutic activities through **exosome secretion**[188](index=188&type=chunk) - Exosomes are considered a new class of therapeutic agents due to their **size, low immunogenicity, and cell-free nature**[189](index=189&type=chunk) [Background on Duchenne Muscular Dystrophy](index=51&type=section&id=Background%20on%20Duchenne%20Muscular%20Dystrophy) - DMD is a rare, progressive muscular dystrophy affecting **15,000-20,000 males in the US**[191](index=191&type=chunk) - DMD patients experience progressive muscle weakness, loss of ambulation, and abbreviated lifespan, with **cardiomyopathy being the leading cause of death**[192](index=192&type=chunk) [Phase II HOPE-2 Clinical Trial](index=51&type=section&id=Phase%20II%20HOPE-2%20Clinical%20Trial) - The HOPE-2 trial was a randomized, double-blind, placebo-controlled Phase II study in **20 DMD patients**[193](index=193&type=chunk)[194](index=194&type=chunk) - The primary efficacy endpoint was the **Performance of the Upper Limb (PUL) test**[195](index=195&type=chunk) - CAP-1002 was **generally safe and well-tolerated**, with hypersensitivity reactions mitigated by pre-medication[202](index=202&type=chunk) HOPE-2 12-Month Final Efficacy Data (CAP-1002 vs. Placebo) | Metric | Change from Baseline (Δ) | p-value | | :---------------------------------- | :----------------------- | :------ | | **Skeletal-Muscle (Upper Limb Function)** | | | | Mid-level PUL (version 1.2) | 2.6 | 0.01 | | Shoulder + Mid + Distal PUL (version 1.2) | 3.2 | 0.02 | | Shoulder + Mid + Distal PUL (version 2.0) | 1.8 | 0.04 | | **Cardiac Function** | | | | LV Ejection Fraction % | 4.0 | 0.002 | | LV End-Diastolic Volume, Indexed mL/m² | -12.4 | 0.03 | | LV End-Systolic Volume, Indexed mL/m² | -4.2 | 0.01 | | Creatine Kinase-MB (% of total CK) | -2.2 | 0.02 | [Phase I/II HOPE-Duchenne Clinical Trial](index=53&type=section&id=Phase%20I/II%20HOPE-Duchenne%20Clinical%20Trial) - The HOPE-Duchenne trial evaluated a **one-time intracoronary infusion** of CAP-1002 in 25 DMD patients[203](index=203&type=chunk) - 12-month data showed **significant improvement in mid-distal PUL subscales** for lower-functioning patients and reduced heart muscle scarring[204](index=204&type=chunk) - CAP-1002 was **generally safe and well-tolerated** in this trial[207](index=207&type=chunk) [Regulatory Designations for CAP-1002 for the treatment of DMD](index=55&type=section&id=Regulatory%20Designations%20for%20CAP-1002%20for%20the%20treatment%20of%20DMD) - CAP-1002 received **Orphan Drug, Rare Pediatric Disease, and RMAT designations** for DMD[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk) - These designations provide incentives such as **market exclusivity and eligibility for a Priority Review Voucher**[208](index=208&type=chunk)[209](index=209&type=chunk) - RMAT designation **expedites development and review**, including potential for accelerated approval[210](index=210&type=chunk) [CAP-1002 for the Treatment of SARS-CoV-2](index=55&type=section&id=CAP-1002%20for%20the%20Treatment%20of%20SARS-CoV-2) - CAP-1002 is being investigated for SARS-CoV-2 treatment due to its potential to **attenuate cytokine storm and cardiac complications**[211](index=211&type=chunk) - Enrollment for the **INSPIRE Phase II clinical trial** in SARS-CoV-2 patients has been completed[211](index=211&type=chunk) [CAP-1002 for the Treatment of Cardiac Conditions](index=55&type=section&id=CAP-1002%20for%20the%20Treatment%20of%20Cardiac%20Conditions) - The Company has completed trials for CAP-1002 in heart failure and post-MI cardiac dysfunction but has **decided not to pursue these indications**[212](index=212&type=chunk)[213](index=213&type=chunk) - **No further material expenses** are expected for these cardiac programs[214](index=214&type=chunk) [CAP-1002 - Investigator Sponsored Clinical Trials](index=57&type=section&id=CAP-1002%20-%20Investigator%20Sponsored%20Clinical%20Trials) - Capricor provided CAP-1002 for two CSMC-sponsored trials, both of which have **completed enrollment**[215](index=215&type=chunk) - **No further material revenues** are expected from these investigator-sponsored trials[215](index=215&type=chunk) [Exosomes Program (Detailed)](index=57&type=section&id=Exosomes%20Program%20(Detailed)) This section details the expanded exosomes program, including vaccines, engineered platforms, and CDC-derived exosomes [Exosomes-Based Vaccine Platform](index=57&type=section&id=Exosomes-Based%20Vaccine%20Platform) - The Company is developing exosome-based vaccines for COVID-19, aiming for **multivalent exosome-mRNA vaccines**[219](index=219&type=chunk)[220](index=220&type=chunk) - **Positive preclinical data** for an exosome-mRNA vaccine approach was announced in December 2020, and an IND filing is planned[220](index=220&type=chunk) - A non-exclusive license for an **imaging-based serology test platform** for COVID-19 was obtained from JHU[221](index=221&type=chunk) [Engineered Exosomes Platform](index=59&type=section&id=Engineered%20Exosomes%20Platform) - Capricor is actively developing an engineered exosomes platform for **delivering nucleic acids**, including mRNA[223](index=223&type=chunk) - Published data demonstrated exosome-mediated mRNA delivery with **enhanced expression and lower toxicity** compared to lipid nanoparticles[223](index=223&type=chunk) [CDC-Exosomes (CAP-2003)](index=59&type=section&id=CDC-Exosomes%20(CAP-2003)_Detailed) - CAP-2003 has **promising preclinical data** in indications like DMD, sepsis, GVHD, and trauma[224](index=224&type=chunk) - An IND for CAP-2003 in DMD was filed, but the FDA **requires more manufacturing information** before potential acceptance[225](index=225&type=chunk) [Financial Operations Overview](index=59&type=section&id=Financial%20Operations%20Overview) This section reviews Capricor's financial operations, highlighting its reliance on equity financing and significant R&D expenses [Revenue](index=59&type=section&id=Revenue_FinOps) - The Company has **no commercial product sales** to date and does not expect to generate revenue for several years, if ever[227](index=227&type=chunk) [Operating Expenses](index=59&type=section&id=Operating%20Expenses_FinOps) - R&D expenses include salaries, supplies, **clinical trial costs, and manufacturing costs**[228](index=228&type=chunk) - G&A expenses cover **executive, finance, and administrative salaries**, professional fees, and insurance[229](index=229&type=chunk) - Non-cash stock-based compensation expense is recorded for stock options and warrants, expensed over their vesting period using the **Black-Scholes model**[230](index=230&type=chunk)[231](index=231&type=chunk) [Products Under Active Development](index=63&type=section&id=Products%20Under%20Active%20Development) - Expected R&D spending for CAP-1002 in 2021 is **$6.0 million to $8.0 million**[241](index=241&type=chunk) - Expected R&D spending for exosome technologies in 2021 is **$6.0 million to $8.0 million**[242](index=242&type=chunk) - Future expenditures are **highly uncertain** and depend on trial results, funding, and strategic partners[243](index=243&type=chunk) [Results of Operations](index=61&type=section&id=Results%20of%20Operations) This section analyzes revenue and operating expenses for the three and nine months ended September 30, 2021, versus 2020 [Revenue](index=61&type=section&id=Revenue_Results) This subsection details changes in grant, miscellaneous, and other income for the reported periods [Grant Income](index=61&type=section&id=Grant%20Income) - The decrease in grant income is due to the **expiration of the DoD Grant Award** in September 2020[232](index=232&type=chunk) Grant Income | Period | 2021 | 2020 | Change | | :------------------------------ | :--- | :------- | :----- | | Three months ended Sep 30 | $0 | ~$17,000 | -$17,000 | | Nine months ended Sep 30 | $0 | ~$0.2 million | -$0.2 million | [Miscellaneous Income](index=61&type=section&id=Miscellaneous%20Income_Results) - The increase in miscellaneous income was related to providing CAP-1002 for **CSMC-sponsored clinical trials**[233](index=233&type=chunk) Miscellaneous Income | Period | 2021 | 2020 | Change | | :------------------------------ | :----------- | :----------- | :------- | | Three months ended Sep 30 | $0 | $0 | $0 | | Nine months ended Sep 30 | ~$0.2 million | ~$0.1 million | +~$0.1 million | [Other Income](index=61&type=section&id=Other%20Income_Results) - Other income for 2021 was related to the **Employer Retention Credit** under the CARES Act[234](index=234&type=chunk) Other Income | Period | 2021 | 2020 | Change | | :------------------------------ | :----------- | :--- | :----------- | | Three months ended Sep 30 | ~$0.4 million | $0 | +~$0.4 million | | Nine months ended Sep 30 | ~$0.4 million | $0 | +~$0.4 million | [Operating Expenses](index=61&type=section&id=Operating%20Expenses_Results) This subsection analyzes changes in G&A and R&D expenses for the three and nine months ended September 30, 2021 [General and Administrative Expenses](index=61&type=section&id=General%20and%20Administrative%20Expenses) - The increase in G&A expenses for Q3 2021 was primarily due to a **~$0.2 million increase in stock-based compensation**[235](index=235&type=chunk) - The nine-month increase was mainly driven by a **~$1.0 million increase in salaries, recruiting, and stock-based compensation**[236](index=236&type=chunk) General and Administrative Expenses | Period | 2021 | 2020 | Change | | :------------------------------ | :----------- | :----------- | :----------- | | Three months ended Sep 30 | ~$1.8 million | ~$1.3 million | +~$0.5 million | | Nine months ended Sep 30 | ~$5.5 million | ~$4.0 million | +~$1.5 million | [Research and Development Expenses](index=61&type=section&id=Research%20and%20Development%20Expenses) - The Q3 2021 decrease was due to a net **~$0.7 million decrease in CAP-1002 clinical development**, offset by a ~$0.6 million increase in exosome R&D[237](index=237&type=chunk) - The nine-month increase was primarily due to a **~$1.9 million increase in exosome program R&D** and a **~$1.3 million increase in CAP-1002 manufacturing**[240](index=240&type=chunk) Research and Development Expenses | Period | 2021 | 2020 | Change | | :------------------------------ | :----------- | :----------- | :----------- | | Three months ended Sep 30 | ~$2.5 million | ~$2.6 million | -~$0.1 million | | Nine months ended Sep 30 | ~$9.3 million | ~$5.7 million | +~$3.6 million | [Liquidity and Capital Resources](index=63&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses Capricor's liquidity, cash flow, and capital-raising efforts, highlighting the need for additional capital [Financing Activities by the Company](index=67&type=section&id=Financing%20Activities%20by%20the%20Company) This subsection details the Company's equity financing activities, including ATM programs and public offerings [June 2021 ATM Program](index=67&type=section&id=June%202021%20ATM%20Program_LiqCap) - Initiated on June 21, 2021, for up to **$75.0 million** in common stock sales[255](index=255&type=chunk) June 2021 ATM Program Sales (June 21 - Sep 30, 2021) | Metric | Value | | :-------------------- | :---------------- | | Shares sold | 1,267,475 | | Average price per share | ~$5.89 | | Gross proceeds | ~$7.5 million | | Commissions & fees | ~$0.3 million | | Remaining to be sold | ~$67.5 million | [May 2020 ATM Program](index=67&type=section&id=May%202020%20ATM%20Program_LiqCap) - Initiated on May 4, 2020, for up to **$40.0 million** in common stock sales, which expired on June 21, 2021[256](index=256&type=chunk)[258](index=258&type=chunk) May 2020 ATM Program Sales (May 4, 2020 - June 21, 2021) | Metric | Value | | :-------------------- | :---------------- | | Shares sold | 6,027,852 | | Average price per share | ~$6.15 | | Gross proceeds | ~$37.1 million | | Commissions & fees | ~$1.2 million | [March 2020 Warrant Inducement](index=69&type=section&id=March%202020%20Warrant%20Inducement_LiqCap) - Generated **~$4.9 million in gross proceeds** from the exercise of 4,000,000 warrants[259](index=259&type=chunk)[261](index=261&type=chunk) - New Warrants have an exercise price of **$1.27 per share** and a 5.5-year term[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk) [December 2019 Public Offering](index=69&type=section&id=December%202019%20Public%20Offering) - Issued common shares and warrants for aggregate proceeds of **~$5.1 million** (net ~$4.4 million)[262](index=262&type=chunk) - As of September 30, 2021, **61,173 December 2019 Common Warrants** remained outstanding[262](index=262&type=chunk) [August 2019 ATM Program](index=70&type=section&id=August%202019%20ATM%20Program_LiqCap) - Sold 360,316 common shares, generating **~$1.1 million in gross proceeds**[264](index=264&type=chunk) - This program **expired on May 4, 2020**, and was replaced by the May 2020 ATM Program[264](index=264&type=chunk) [Financing Activities by Capricor, Inc.](index=71&type=section&id=Financing%20Activities%20by%20Capricor,%20Inc.) This subsection details government grant awards received by the Company and their financial implications [CIRM Grant Award](index=71&type=section&id=CIRM%20Grant%20Award_LiqCap) - Capricor received a **~$3.4 million CIRM Award** in 2016 for the HOPE-Duchenne clinical trial[265](index=265&type=chunk) - The award is accounted for as a **liability** due to the option to convert it into a loan[266](index=266&type=chunk) - As of September 30, 2021, the CIRM Award liability balance was approximately **$3.4 million**[267](index=267&type=chunk) [U.S. Department of Defense Grant Award](index=71&type=section&id=U.S.%20Department%20of%20Defense%20Grant%20Award_LiqCap) - Capricor received a **~$2.4 million DoD grant** in 2016 for CAP-2003 manufacturing, utilizing ~$2.3 million[268](index=268&type=chunk)[269](index=269&type=chunk) - No revenue was recognized from this award in 2021, and **final close-out documentation was completed** in Q3 2021[270](index=270&type=chunk) [Off-Balance Sheet Arrangements](index=73&type=section&id=Off-Balance%20Sheet%20Arrangements) - The Company did **not have any off-balance sheet arrangements** during the periods presented[271](index=271&type=chunk) [Critical Accounting Policies and Estimates](index=73&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section outlines critical accounting policies requiring significant judgment, including leases, revenue, R&D, and stock compensation [Leases](index=73&type=section&id=Leases_CritAcc) - The Company adopted ASC 842, recognizing **ROU assets and lease liabilities** for operating leases[273](index=273&type=chunk)[275](index=275&type=chunk)[276](index=276&type=chunk) - The Company elects to account for **lease and non-lease components together** for real estate leases[277](index=277&type=chunk) [Revenue Recognition](index=73&type=section&id=Revenue%20Recognition_CritAcc) - The Company applies **ASU 606**, Revenue from Contracts with Customers, for all contracts[278](index=278&type=chunk) [Grant Income](index=73&type=section&id=Grant%20Income_CritAcc) - Grant income is recognized when **reimbursable expenses are incurred**[279](index=279&type=chunk)[281](index=281&type=chunk) [Miscellaneous Income](index=75&type=section&id=Miscellaneous%20Income_CritAcc) - Miscellaneous income is recognized **upon delivery of doses** from past R&D efforts[282](index=282&type=chunk) [CIRM Grant Award](index=75&type=section&id=CIRM%20Grant%20Award_CritAcc) - CIRM grant disbursements are accounted for as **long-term liabilities** due to the right to convert the award into a loan[283](index=283&type=chunk) [Research and Development Expenses and Accruals](index=75&type=section&id=Research%20and%20Development%20Expenses%20and%20Accruals) - R&D expenses are **expensed as incurred**[284](index=284&type=chunk) - Cost accruals for R&D activities are based on **estimates of services received** and efforts expended[285](index=285&type=chunk)[286](index=286&type=chunk) - Estimates may differ from actual invoiced amounts, but **no material adjustments** have been recognized[285](index=285&type=chunk)[289](index=289&type=chunk) [Stock-Based Compensation](index=77&type=section&id=Stock-Based%20Compensation_CritAcc) - Non-cash stock-based compensation expense is recognized **over the vesting period**[290](index=290&type=chunk)[291](index=291&type=chunk) - Fair value of stock options is determined using the **Black-Scholes model**[291](index=291&type=chunk) - Awards vest based on **time-based or performance-based conditions**, and forfeitures are accounted for upon occurrence[291](index=291&type=chunk)[292](index=292&type=chunk)[293](index=293&type=chunk) [Clinical Trial Expense](index=77&type=section&id=Clinical%20Trial%20Expense_CritAcc) - Clinical trial accrual process **estimates expenses from vendor contracts** and clinical site agreements[294](index=294&type=chunk) - Accrual estimates are based on **patient progression and trial timing**, adjusted if actual results differ[294](index=294&type=chunk) [Recently Issued or Newly Adopted Accounting Pronouncements](index=77&type=section&id=Recently%20Issued%20or%20Newly%20Adopted%20Accounting%20Pronouncements_CritAcc) - The Company adopted ASU 2019-12 (Income Taxes) in Q1 2021, which **did not have a material impact**[297](index=297&type=chunk) - Other recent accounting pronouncements are **not expected to have a material impact**[298](index=298&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=79&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the Company's exposure to market risk, primarily from interest rate sensitivity [Interest Rate Sensitivity](index=79&type=section&id=Interest%20Rate%20Sensitivity) - The Company's market risk exposure is primarily from **interest rate changes** affecting marketable securities and cash[299](index=299&type=chunk) - The investment policy aims to limit risk by investing in **high-rated credit issuers and short-term maturities**[300](index=300&type=chunk) [Item 4. Controls and Procedures](index=79&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and reports no material changes in internal controls [Changes in Internal Controls over Financial Reporting](index=79&type=section&id=Changes%20in%20Internal%20Controls%20over%20Financial%20Reporting) - **No material changes** in internal control over financial reporting occurred during the quarter ended September 30, 2021[303](index=303&type=chunk) [PART II — OTHER INFORMATION](index=81&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=81&type=section&id=Item%201.%20Legal%20Proceedings) The Company is not involved in any material pending or threatened legal proceedings - The Company is **not involved in any material pending or threatened legal proceedings**[306](index=306&type=chunk) [Item 1A. Risk Factors](index=81&type=section&id=Item%201A.%20Risk%20Factors) This section refers to risk factors previously disclosed in the Company's Annual Report, stating no material changes - **No material changes** in risk factors from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020[307](index=307&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=81&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable to the current report - **Not applicable**[309](index=309&type=chunk) [Item 3. Defaults Upon Senior Securities](index=81&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the current report - **Not applicable**[311](index=311&type=chunk) [Item 4. Mine Safety Disclosures](index=81&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the current report - **Not applicable**[313](index=313&type=chunk) [Item 5. Other Information](index=81&type=section&id=Item%205.%20Other%20Information) No other information is reported under this item - **None**[315](index=315&type=chunk) [Item 6. Exhibits](index=82&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q - The report includes exhibits such as merger agreements, certificates of incorporation, bylaws, officer certifications, and **financial information in iXBRL format**[317](index=317&type=chunk) [Signatures](index=84&type=section&id=Signatures) This section contains the required signatures for the Quarterly Report on Form 10-Q - The report is signed by Linda Marbán, Ph.D., Chief Executive Officer, and Anthony J Bergmann, Chief Financial Officer, on **November 10, 2021**[322](index=322&type=chunk)

Financial Data and Key Metrics Changes - As of September 30, 2021, the company's cash and cash equivalents totaled approximately $40.8 million, compared to approximately $32.7 million on December 31, 2020, indicating a positive cash flow situation [40] - For the first nine months of 2021, the net cash used in operating activities was approximately $11.2 million, with a net loss of approximately $13.8 million compared to a net loss of approximately $9.5 million for the same period in 2020 [41][42] Business Line Data and Key Metrics Changes - The research and development expense for Q3 2021, excluding stock-based compensation, was approximately $2.4 million, a decrease from approximately $2.6 million in Q3 2020 [41] - General and administrative expenses for Q3 2021, excluding stock-based compensation, were approximately $1.1 million, compared to approximately $900,000 in Q3 2020, indicating an increase in administrative costs [42] Market Data and Key Metrics Changes - The company is focused on two main pipeline programs: CAP-1002 for Duchenne muscular dystrophy (DMD) and severe COVID-19, and an emerging platform technology involving exosomes as drug delivery vehicles [5][22] Company Strategy and Development Direction - The company is committed to advancing CAP-1002 for DMD and has received FDA clearance to proceed with the HOPE-3 trial, aiming to enroll approximately 70 patients [10][11] - The company is also developing an exosome platform technology for drug delivery, which is seen as a cornerstone for future vaccine development and other therapeutic applications [26][34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the data from the HOPE-2 trial and is actively working on initiating the HOPE-3 study [44] - The company is in a strong position regarding manufacturing readiness and supply chain management, indicating no expected issues for the upcoming studies [45][46] Other Important Information - The company has secured important regulatory designations, including RMATs for CAP-1002, and is working closely with the FDA to ensure commercial supply readiness [11][46] - The company has relocated its R&D headquarters to San Diego, California, and has assembled a strong team to advance its exosome platform [35] Q&A Session Summary Question: Update on HOPE-3 study and potential partnership - Management is encouraged by HOPE-2 data and is developing plans to initiate HOPE-3, with a focus on enrolling patients [44] Question: Manufacturing readiness and supply chain impacts - Management confirmed that they are well-prepared for manufacturing and do not anticipate issues related to global supply chain challenges [45] Question: Next steps pending INSPIRE trial data - Management will evaluate next steps based on the data from the INSPIRE trial and will keep stakeholders updated [47] Question: Visibility on exosome platform development - Management indicated that they have several targets in development and will provide updates on the exosome platform in early 2022 [49]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2021 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to Commission File Number: 001-34058 CAPRICOR THERAPEUTICS, INC. (Exact Name Of Registrant As Specified In Its Charter) Delaware 88-0363465 (State or ot ...

Financial Data and Key Metrics Changes - As of June 30, 2021, the company's cash and cash equivalents totaled approximately $38.1 million, an increase from approximately $32.7 million on December 31, 2020, indicating a positive cash flow situation [21] - The net cash used in operating activities for the first half of 2021 was approximately $7.8 million, with a net loss of approximately $9.9 million compared to a net loss of approximately $5.6 million for the first half of 2020 [22] Business Line Data and Key Metrics Changes - Research and development expenses for Q2 2021 were approximately $3.4 million, up from approximately $1.8 million in Q2 2020, reflecting increased investment in clinical programs [22] - General and administrative expenses for Q2 2021 were approximately $1.2 million, compared to approximately $1 million in Q2 2020, indicating a slight increase in operational costs [22] Market Data and Key Metrics Changes - The company is planning to expand its footprint to San Diego, California, to enhance its research capabilities and attract talent, which is expected to support its clinical programs [5][19] - The company is engaging with payers regarding the reimbursement potential for CAP-1002, with projected price targets in line with other cell and gene therapies for rare diseases [10] Company Strategy and Development Direction - The company plans to proceed with a Phase 3 pivotal trial for CAP-1002 in Duchenne muscular dystrophy (DMD) after a productive end-of-phase meeting with the FDA [7] - The company is also advancing its engineered exosome platform technology, with plans to develop a multivalent COVID-19 vaccine and explore other therapeutic indications [14][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential impact of CAP-1002 in treating severe COVID-19, citing positive data from previous studies and ongoing enrollment in the INSPIRE trial [13][12] - The company is committed to securing a partner for the commercialization of CAP-1002 and is actively discussing potential partnerships [10][36] Other Important Information - The company has recruited a team of experienced scientists for its exosome platform technology, which is expected to drive innovation in vaccine development [15] - The company anticipates submitting an IND for its COVID-19 vaccine in the fourth quarter of 2021, despite delays due to supply chain challenges [18] Q&A Session Summary Question: Details on trial endpoints for CAP-1002 - The primary efficacy endpoint for the Phase 3 trial will be the PUL 2.0, with secondary endpoints including cardiac measures [24] Question: Eligibility of HOPE-2 patients for HOPE-3 - Patients from HOPE-2 will not roll directly into HOPE-3 but will continue in an open-label extension study [25] Question: Estimated cost of HOPE-3 study - The estimated cost for the HOPE-3 study is around $15 million, which is considered low for a Phase 3 trial [28] Question: Clinical development of the booster vaccine - The company is actively exploring the booster vaccine strategy and has received supportive feedback from the U.S. government [29] Question: Route of administration for the booster vaccine - The booster vaccine will be administered via intramuscular injection, similar to existing vaccines [32] Question: Plans for EUA submission if COVID-19 trial data is positive - The company is open to all possibilities regarding EUA submission based on the trial data [33] Question: Epigenetic modification profile of CAP-1002 exosomes - Preclinical work has shown that CAP-1002 may suppress certain cytokines, but further data from the current study is being analyzed [34] Question: Focus of the INSPIRE trial - The company is currently focused on severe COVID-19 but may explore broader applications for respiratory distress in the future [42] Question: Manufacturing costs and scalability of exosomes - The company is confident in solving manufacturing challenges for engineered exosomes and is in scale-up mode [44]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2021 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to Commission File Number: 001-34058 CAPRICOR THERAPEUTICS, INC. (Exact Name Of Registrant As Specified In Its Charter) Delaware 88-0363465 (State or o ...

Capricor Therapeutics, Inc. (NASDAQ:CAPR) Q1 2021 Earnings Conference Call May 13, 2021 4:30 PM ET Company Participants AJ Bergmann - Chief Financial Officer Linda Marbán - Chief Executive Officer Conference Call Participants Alan Leong - BioWatch News Operator Greetings. And welcome to Capricor Therapeutics First Quarter 2021 Earnings and Corporate Update Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions ...

Financial Performance - Grant income for the years ended December 31, 2020 and 2019 was approximately $0.2 million and $0.5 million, respectively, indicating a decrease of approximately 60% in 2020 compared to 2019[535]. - General and Administrative (G&A) expenses for the years ended December 31, 2020 and 2019 were approximately $5.5 million and $3.6 million, respectively, reflecting an increase of approximately 52.8% in 2020[537]. - The increase in G&A expenses in 2020 was primarily due to a $1.2 million increase in stock-based compensation expense and a $0.5 million increase in salaries and recruiting related expenses[537]. - Investment income decreased from $94,791 in 2019 to $32,943 in 2020, a decline of approximately 65.3% due to reduced interest rates[540]. - The company reported a net loss of approximately $13.7 million for the year ended December 31, 2020, compared to a net loss of $10.4 million in 2019[548]. - Cash used in operating activities rose to approximately $10.1 million in 2020 from $6.8 million in 2019, an increase of about 48.5%[548]. - The company raised approximately $33.0 million from the sale of common stock in 2020, compared to $9.2 million in 2019, marking an increase of about 258.7%[550]. Research and Development - Research and Development (R&D) expenses increased from approximately $5.1 million in 2019 to $8.5 million in 2020, a rise of about 66.7%[539]. - R&D expenses primarily include salaries, clinical trial costs, and manufacturing costs, with expenses recognized as incurred[583]. - The accrual policy for R&D activities aims to match expenses with actual services received, with variations in payment flows due to contract negotiations[585]. - The company monitors activity levels through communication with CROs and vendors, ensuring expenses align with budgeted amounts[584]. - The clinical trial accrual process is designed to reflect appropriate expenses in financial statements based on the progress of trials[592]. Clinical Trials and Product Development - The company has completed the Phase II clinical trial (HOPE-2) for CAP-1002, showing improvements in multiple measures of upper limb, cardiac, and respiratory functions[507]. - The FDA has encouraged the company to conduct a Phase III study for CAP-1002, although discussions regarding the pathway forward are still ongoing[507]. - The INSPIRE trial for CAP-1002 in severe or critical COVID-19 patients is a Phase II, randomized, double-blind, placebo-controlled study enrolling up to 60 patients[509]. - The company is developing two vaccine candidates for COVID-19, including a tripartite exosome-mRNA vaccine, with plans to file an IND by the third quarter of 2021[510]. - The company has submitted an IND for CAP-2003 to investigate its use in patients with Duchenne Muscular Dystrophy (DMD) and is evaluating the next steps for this program[514]. Funding and Grants - The Company received a CIRM Grant Award of approximately $3.4 million for its Phase I/II clinical trial, requiring a co-funding of about $2.3 million from the Company[565]. - As of December 31, 2020, the liability balance for the CIRM Award was approximately $3.4 million, with all milestones completed by June 2019[567]. - The NIH grant for CAP-2003 amounted to approximately $4.2 million, with $0.7 million incurred by June 30, 2019, and the award was closed in Q2 2019[568]. - The Department of Defense grant totaled approximately $2.4 million, with about $2.3 million utilized, and a no-cost extension granted until September 29, 2020[569]. Cash and Investments - Cash, cash equivalents, and marketable securities increased from approximately $9.9 million in 2019 to $32.7 million in 2020, a growth of about 230.5%[544][550]. - The net increase in cash and cash equivalents for 2020 was approximately $28.8 million, compared to a decrease of $646,000 in 2019[547]. - The fair value of cash and cash equivalents as of December 31, 2020, was approximately $32.7 million[598]. - The investment portfolio primarily consists of money market funds and short-term U.S. treasuries, aiming to limit credit exposure and default risk[598]. - The company does not hedge interest rate exposure and believes that a hypothetical 100 basis point change in interest rates would not significantly impact the fair value of its investment portfolio[599]. Stock-Based Compensation - Stock-based compensation expense is recognized over the vesting period, with significant future non-cash compensation expenses expected[591]. - The company accounts for stock options using the Black-Scholes option-pricing model, requiring assumptions about various variables[589].

Financial Data and Key Metrics Changes - As of December 31, 2020, the company's cash, cash equivalents, and marketable securities totaled approximately $32.7 million, compared to approximately $9.9 million on December 31, 2019, indicating significant growth in liquidity [47] - The net loss for the fourth quarter of 2020 was approximately $4.2 million, compared to a net loss of approximately $1.5 million for the fourth quarter of 2019, reflecting increased operational costs [49] - For the full year of 2020, the net loss was approximately $13.7 million, compared to a net loss of approximately $7.6 million for the full year 2019, highlighting a trend of increasing losses [49] Business Line Data and Key Metrics Changes - The research and development expense for Q4 2020 was approximately $2.7 million, up from approximately $800,000 in Q4 2019, indicating a substantial increase in investment in R&D [48] - General and administrative expenses also rose to approximately $1.1 million in Q4 2020 from approximately $800,000 in Q4 2019, reflecting higher operational costs [48] Market Data and Key Metrics Changes - The company is focused on becoming a leading exosome RNA company, with plans to develop engineered exosomes and synthetic mRNAs for therapeutic applications [13][35] - The exosome platform is positioned to address a broad spectrum of diseases, leveraging the success of mRNA vaccines as a market opportunity [9][10] Company Strategy and Development Direction - The company is pivoting from traditional cell therapy towards an exosome platform, which is expected to provide significant opportunities in vaccine and therapeutic development [72] - The strategy includes developing a multi-antigen exosome-mRNA vaccine, with plans to initiate a Phase 1 clinical trial in Q3 of 2021, pending FDA approval [37] - The company aims to optimize its exosome platform for both vaccine and therapeutic applications, with a focus on monogenic diseases and other infectious diseases [35][38] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the progress made in 2020 and the potential of the exosome platform to revolutionize therapeutic delivery [5][45] - The company is awaiting FDA feedback on its pre-IND package and is prepared to move into clinical trials based on that feedback [37][57] - Management emphasized the importance of CAP-1002 for Duchenne muscular dystrophy and the ongoing discussions with the FDA regarding its approval pathway [41][42] Other Important Information - The company has entered into a Sponsored Research Agreement with Johns Hopkins University to support its exosome program, enhancing its research capabilities [6] - The company is exploring partnerships for CAP-1002, targeting corporate partners with existing products in the Duchenne muscular dystrophy space [61] Q&A Session Summary Question: How should Capricor be viewed going forward? - Management sees Capricor positioned between traditional cell therapy companies and those focused on engineered exosomes, emphasizing the shift towards RNA medicines in exosomes [52] Question: Will the mRNA strategy focus on internal development or partnerships? - The plan includes both internal programs and attracting partners for collaborative development, aiming for a plug-and-play model [54] Question: What is the expected cold chain requirement for the exosome-based mRNA vaccine? - Current expectations are for similar cold chain requirements as existing mRNA vaccines, with potential for a single-dose option being explored [55] Question: What work is still required for entering the clinic with the vaccine? - The company is ready to proceed into the clinic based on FDA feedback, leveraging its experience with regulatory processes [57] Question: What is the regulatory pathway for exosome-based therapeutics? - Management believes the regulatory process will be relatively straightforward, drawing on previous experiences with biologics [59] Question: What is the ideal partner for CAP-1002 development? - An ideal partner would have activity or commercial products in the Duchenne muscular dystrophy space, with ongoing discussions with multiple parties [61] Question: Plans for label expansion on post-COVID patients in the INSPIRE trial? - The company is open to label expansion based on trial data and the evolving landscape of COVID-19 treatment [63] Question: What additional studies are being conducted with CAP-1002? - The company is working with consultants and statisticians to analyze the impact of CAP-1002 in Duchenne muscular dystrophy [65] Question: Insights on the exosome platform compared to lipid nanoparticles? - The exosome platform shows promise in safety, repeat dosing, and targeting capabilities, with ongoing research to optimize these aspects [68][70]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2020 or ¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to Commission File Number: 001-34058 CAPRICOR THERAPEUTICS, INC. (Exact Name Of Registrant As Specified In Its Charter) Delaware 88-0363465 (State or other jurisdict ...

Capricor Therapeutics, Inc. (NASDAQ:CAPR) Q3 2020 Earnings Conference Call November 12, 2020 4:30 PM ET Company Participants A.J. Bergmann - Chief Financial Officer Linda Marbán - President, Chief Executive Officer and Director Steve Gould - Executive Consultant Conference Call Participants Emanuela Branchetti - H.C. Wainwright Jason McCarthy - Maxim Group Alan Leong - BioWatch News Operator Greetings, and welcome to the Capricor Therapeutics Inc Third Quarter 2020 Earnings Call. [Operator Instructions]. As ...