CAPRICOR THERAPEUTICS, INC. Fair Value Disclosure
2. | FAIR VALUE MEASUREMENTS |
The Company measures certain assets and liabilities in accordance with ASC Topic 820, Fair Value Measurement (“ASC 820”). Assets and liabilities recorded at fair value in the balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The categories are as follows:
Level Input: | | Input Definition: |
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Level I |
| Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date. |
Level II |
| Inputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date. |
Level III |
| Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. |
The following table summarizes the fair value measurements by level at December 31, 2025 and 2024 for assets and liabilities measured at fair value on a recurring basis:
December 31, 2025 | ||||||||||||
| Level I | | Level II | | Level III | | Total | |||||
Marketable Securities | $ | 30,281,603 | $ | — | $ | — | $ | 30,281,603 | ||||
| December 31, 2024 | |||||||||||
| Level I | | Level II | | Level III | | Total | |||||
Marketable Securities | $ | 140,228,881 | $ | — | $ | — | $ | 140,228,881 | ||||
Carrying amounts reported in the balance sheet of cash and cash equivalents, receivables, prepaid expenses and other current assets, accounts payable, 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. Interest and dividend income are recognized separately on the income statement based on classifications provided by the brokerage firm holding the investments. The fair value of borrowings is not considered to be significantly different from its carrying amount because the stated rates for such debt reflect current market rates and conditions.
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.