6.            COMMITMENTS AND CONTINGENCIES

Short-Term Operating Leases

Capricor leases office space in Beverly Hills, California from The Bubble Real Estate Company, LLC ("Bubble Real Estate") pursuant to a lease beginning in 2013. Capricor subsequently entered into several amendments modifying certain terms of the lease. 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. 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 months 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 to November 19, 2025, with an increased monthly base rent of $41,247 beginning May 21, 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 three months ended June 30, 2025 and 2024 were $353,298 and $354,703, respectively, and $722,476 and $447,617 for the six months ended June 30, 2025 and 2024. Short-term operating lease payments for the three months ended June 30, 2025 and 2024 were $335,970 and $380,357, respectively, and $705,148 and $764,714 for the six months ended June 30, 2025 and 2024.

Long-Term Operating Leases

Capricor leases facilities in Los Angeles, California from CSMC, pursuant to a lease (the “Facilities Lease”) entered into in 2014. Capricor subsequently entered into several amendments modifying certain terms of the 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 for an additional term of five years. The Company 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 fourth lease amendment with Altman (the “Fourth Amendment”). 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, the 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. The Fourth Amendment commenced on July 1, 2025, and the Company estimates the amendment will result in an increase of approximately $13.5 million in operating lease liabilities and $13.4 million in right-of-use assets in the third quarter of 2025.

Effective November 1, 2021, the Company entered into a vivarium agreement with Explora BioLabs, Inc. (“Explora”), a Charles River Company, for vivarium space and services. 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. 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. 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 condensed consolidated balance sheets 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 condensed consolidated balance sheets.

The table below excludes short-term operating leases. The following table summarizes maturities of lease liabilities and the reconciliation of lease liabilities as of June 30, 2025:

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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:

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Legal Contingencies

On July 17, 2025 a putative securities class action was filed in the Southern District of California, naming Capricor Therapeutics, Inc. and our chief executive officer, Linda Marbán. The action alleges certain violations of the U.S. federal securities laws and seeks unspecified damages.  

On August 1, 2025 a derivative action was filed in the Southern District of California naming each of the Directors on the Board of Capricor Therapeutics, Inc. The action alleges, among other things, breaches of fiduciary duties and seeks unspecified damages.  

In addition, from time to time, the Company may become involved in various other legal proceedings that arise in the ordinary course of its business or otherwise. The Company records a loss contingency reserve for a legal proceeding when it considers the potential loss probable and it can reasonably estimate the amount of the loss or determine a probable range of loss. The Company has not recorded any material accruals for loss contingencies as of June 30, 2025.

Accounts Payable

During the normal course of business, disputes with vendors may arise. If a vendor disputed payment is probable and able to be estimated, we will record an estimated liability.

Other Funding Commitments

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, 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 from time to time may approve severance packages for specific full-time employees based on their length of service and position ranging up to twelve months of their base salaries, in the event of termination of their employment, subject to certain conditions. No liability under these severance packages has been recorded as of June 30, 2025.