Canton Strategic Holdings, Inc.: Form 10-Q for the period ended Jun 30, 2026

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited interim condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as may be amended, supplemented, or superseded from time to time by other reports we file with the SEC. All amounts in this report are in U.S. dollars, unless otherwise noted.

Throughout this Quarterly Report on Form 10-Q, references to “we,” “our,” “us,” the “Company,” or “Canton Strategic Holdings,” refer to Canton Strategic Holdings, Inc., individually, or as the context requires, collectively with its subsidiary.

Overview

During the year ended December 31, 2025, we began a strategic shift in our business to prioritize digital asset treasury management and investment in the digital asset ecosystem, specifically the Canton Network. From 2022 through late 2025, we primarily operated as a biotechnology company developing therapeutic candidates in inflammatory and immunologic conditions. In November 2025, we undertook a strategic shift to prioritize a disciplined digital asset treasury strategy.

In connection with this shift, in November 2025 we completed a private placement offering, strengthening our liquidity and supporting our digital asset treasury strategy. Concurrently, we entered into an at-the-market equity program through a shelf registration statement. In January 2026, we completed a registered direct offering of common stock and pre-funded warrants, further strengthening our capital position.

Our digital asset treasury strategy is centered on acquiring, holding and deploying CC and supporting the Canton Network through validator operations, application support and ecosystem participation.

Recent Developments

Board Update

On July 13, 2026, we held our 2026 annual meeting of stockholders (the “Annual Meeting”). Sean Galvin, Pamela L, Carter, and Rishi Nangalia were elected as directors of the Board of Directors, effective July 13, 2026.

Gravitas Transaction

A definitive agreement (the “Purchase Agreement”) with Gravitas Collective Corp., a Delaware corporation (“Buyer”), pursuant to which the Company agreed to sell, and Buyer agreed to purchase, all of the issued and outstanding membership interests (the “Purchased Securities”) of Gravitas, which was converted from a Delaware corporation into a Delaware limited liability company on July 16, 2026 (the “Transaction”). The Transaction was completed on July 17, 2026. As consideration for the Purchased Securities, Buyer and Gravitas issued to the Company an unsecured promissory note in the original principal amount of $3,500,000 (the “Gravitas Note”) and agreed to pay to the Company certain development milestone payments in the event such payments become due and payable. The Gravitas Note bears interest at a rate of 15% per annum, payable in kind and compounding semi-annually, with accrued interest added to the outstanding principal balance.

Components of Results of Operations

Revenue

During the three and six months ended June 30 2026, the Company recorded revenues for Canton Network validation rewards and for CC locking services.

Network validation rewards

The Company operates node infrastructure on the Canton Network in two capacities:

• Super Validator (“SV”): an institutional-grade operator that runs Byzantine fault-tolerant consensus infrastructure for the Global Synchronizer, participates in network governance, and helps maintain the shared ordering and settlement layer used by all network participants.
• Validator: an operator of a node used to participate in the network (directly or on behalf of application users), demonstrating uptime and processing transaction traffic.

The Canton Network’s native token, CC, is issued under a burn-and-mint equilibrium model rather than a fixed block-reward schedule:

• New CC is minted approximately every ten minutes (a “round”) and allocated among three participant classes — Super Validators, Validators, and application providers — based on protocol-defined formulas.
• CC supply follows a declining issuance curve designed to reward early contributors while trending toward long-term sustainability. CC issuance started high to bootstrap participation and app development, then halves periodically (with the next halving in the second quarter of 2029) to balance inflation and burn. The share of new CC issuances has shifted from favoring SVs to applications.
• Network usage fees are separately burned (removed from circulating supply), and the protocol targets a long-run equilibrium between coins minted and coins burned.
• Rewards are earned as mintable “coupons” that the validator’s software claims each round; unclaimed coupons expire and are not carried forward.
• Actual minting of SV rewards requires the node operator to meet specific deliverables as outlined in an approved Canton Improvement Proposal (“CIP”) to operate on the Canton Network. Upon initial approval, a SV’s reward weight is recorded after each round to a ghost (or “escrow”) node but actual CC minting to the SV’s wallet only occurs after their initially approved weight is unlocked (in whole or in part) via explicit approval of the Canton Foundation Accountability Committee who determines if deliverables required have been met. Upon Accountability Committee approval, the approved unlock portion begins minting to the SV wallet on a per-round basis. The approved weight portion of any accumulated rewards captured in the escrow node are subject to further review and calculation verification and a second committee approval vote, at which time a “one time mint” event occurs and a lump sum of CC is then minted to the SV wallet accordingly.

The Company was approved for SV weight of four (4) under CIP 102 in January 2026, and was approved for additional SV weight of eleven (11) under CIP 114 in April 2026. Active minting of 0.5 weight SV rewards began in May 2026 when the Company met the first of eight (8) deliverables under CIP 102. The amount reported in Network validation and reward revenue for the three and six months ended June 30, 2026 includes CC rewards from active daily minting of SV rewards at 0.5 weight, along with a one-time CC mint associated with the accumulated 0.5 weight from CIP 102 approval date through the unlock date in May 2026. As of June 30, 2026, in addition to the 0.5 active SV CC rewards minting, a weight of 14.5 is being recorded under both CIP 102 and CIP 114. Such weight is not currently eligible for active reward minting and will become eligible for release only upon satisfaction of the applicable milestone requirements and completion of the applicable Canton Network review and approval processes. Based on the currently applicable milestone schedules, and assuming the Company satisfies all applicable requirements, the Company expects the remaining weight to become eligible for release through the first quarter of 2028:

(1) Under CIP 102, the Company may earn 0.5 SV weight for each quarterly milestone period, consisting of (i) 0.25 SV weight for publishing a quarterly Canton ecosystem research report addressing, among other matters, on-chain analytics, community developments, governance and tokenomics, planned technology updates and dashboard statistics, and (ii) 0.25 SV weight for conducting an open-to-the-public webinar of at least 45 minutes addressing substantially similar topics. The remaining 3.5 SV weight reflected above therefore represents seven quarterly milestone periods.

(2) For the three months ended June 30, 2026, the Company earned 1,253,679 CC in rewards associated with the active CIP 102 0.5 SV weight, which is was recognized as Network validation rewards of $191,226.

(3) Under CIP 114, the Company’s allocated SV weight is subject to quarterly review and a continuing requirement that the Company maintain CC holdings at or above the applicable CC Quantum established under the program. Assuming that requirement continues to be satisfied, 50% of the applicable allocated weight becomes eligible for release following the first quarterly review, and one-fourth of the remaining 50% becomes eligible for release at each of the next four quarterly reviews.

CC Locking Services

CIP 105 requires SVs on the Canton Network to lock a specified amount of CC in order to maintain their minting weight (i.e., their proportional entitlement to network validator rewards). CIP 116 imposes an analogous locking requirement on Featured Applications (“Featured Apps”) in order for those applications to maintain their featured status and associated reward entitlements. Neither CIP requires that the locked CC be owned by the SV or Featured App itself — only that a qualifying amount of CC be identifiably locked and associated with that party’s wallet ID for the Canton Foundation’s compliance-tracking purposes.

This structure has given rise to a market for locking-as-a-service (“LAAS”): parties that hold CC (such as the Company) contract with SVs and Featured Apps to lock Company-owned CC on their behalf, in exchange for a fee, so that those counterparties can satisfy their CIP 105 / CIP 116 obligations without having to source and hold the requisite CC themselves.

For each LAAS customer, the Company places the agreed amount of CC into a separately identified wallet, held for the full term of the agreement within the Company’s qualified custodian. The Company retains legal and beneficial ownership of the CC at all times — the arrangement is not a transfer of the CC to the counterparty and does not constitute a loan of the underlying asset in a legal sense. Only the wallet ID (not custody, title, or control) is shared with the Canton Foundation, solely to allow the Foundation to verify the counterparty’s compliance with the applicable CIP locking provisions.

Because the CC is never transferred to the customer, the Company’s CC treasury holdings continue to be accounted for under the Company’s existing crypto asset accounting policy throughout the term of each LAAS arrangement, irrespective of the compensation structure of that arrangement. What the Company transfers to the customer is, in substance, the benefit of the CC being visibly and verifiably locked in the Company’s wallet — i.e., a stand-ready locking service — not the CC itself.

LAAS enables the Company to generate yield on its CC treasury asset and the majority of LAAS customers pay for the service in CC, which compounds the Company’s own treasury position. Through LAAS arrangements, the Company supports Canton Network ecosystem initiatives that are expected to drive application activity and network utilization, expand our counterparty relationships and our ability to influence the conditions which we believe support long-term CC value.

Derivatives – Option Contracts

During the quarter ended June 30, 2026, the Company began entering into CC-denominated option contracts through the sale of cash secured put options, as a part of its digital asset strategy. The Company records premiums earned and fair value remeasurement in Other revenue.

Research and Development Expenses

Research and development expenses include personnel costs associated with research and development activities, including third-party contractors to perform research, conduct clinical trials, and manufacture drug supplies and materials as well as stock-based compensation for our research and development personnel. Research and development expenses are charged to operations as incurred. With the exception of costs related to the Oncology Program (see Note 11 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q), all research and development expenses have been classified as discontinued operations.

General and Administrative Expenses

General and administrative expenses consist primarily of compensation and consulting related expenses, including stock-based compensation for our general and administrative personnel. General and administrative expenses also include professional fees and other corporate expenses, including legal fees relating to corporate matters; professional fees for accounting, auditing, tax, and consulting services; insurance costs; travel expenses and other operating costs that are not specifically attributable to research activities. General and administrative expenses also include expenses related to our canton-centric digital asset treasury strategy.

We expect that our general and administrative expenses will increase in the future as we increase our personnel headcount to support our digital asset treasury strategy and continued research activities and development of our product candidates. We also incur expenses associated with being a public company, including expenses related to compliance with the rules and regulations of the SEC and Nasdaq, directors and officers insurance expenses, corporate governance expenses, investor relations activities and other administrative and professional services.

Interest Income

Interest income consists of interest income from funds held in our cash and cash equivalents accounts.

Unrealized Loss from Digital Asset Holdings

The unrealized gain (loss) from digital assets holdings represents the change in fair value of our digital assets (CC) and any CC denominated receivables. We use a USD/CC reference price from a crypto market data provider for purposes of periodic fair value remeasurement.

Results of Continuing Operations

Three Months Ended June 30, 2026 Compared to the Three Months Ended June 30, 2025

Revenue

Revenues increased by $1.5 million for the three months ended June 30, 2026. Network validation revenue was $0.2 million, primarily SV rewards commencing in May with respect to our CIP 102 0.5 weight unlock. Other revenue was $1.3 million, primarily earned under LAAS agreements commencing in April. We did not generate any revenue for the same period in 2025 as we did not operate an SV or have LAAS activities.

General

Research and Development Expenses

Research and development expenses decreased by $0.1 million, or 100%, to $0 for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. The Company has not incurred any research and development expenses related to the Oncology Program during the current period.

General and Administrative Expenses

General and administrative expenses increased by $1.4 million, or 107%, to $2.7 million for the three months ended June 30, 2026 from $1.3 million for the three months ended June 30, 2025. The change in general and administrative expenses was primarily due to increases of (i) $1.1 million in compensation and benefits expenses, (ii) $0.3 million in insurance expense, (iii) $0.2 million in information technology and digital asset custody expenses, partially offset by a $0.2 million decrease in stock based compensation expense.

Interest Expense

Interest expense decreased by $0.06 million, or 100%, to $0 for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. The interest expense incurred in 2025 was primarily related to a director and officer insurance premium financing liability as well as a note payable. We have paid such obligations in full as of December 31, 2025 and did not incur any interest expense for the three months ended June 30, 2026.

Interest Income

Interest income increased by approximately $0.3 million, to $0.3 million for the three months ended June 30, 2026 from $0.02 million for the three months ended June 30, 2025. The increase in interest income was due to the increase in investible cash and equivalents.

Unrealized Loss from Digital Assets Holdings

We recorded an unrealized loss from digital assets holdings of $23.7 million for the three months ended June 30, 2026. We did not have any loss (or gain) from digital asset holdings for the three months ended June 30, 2025. We did not own digital assets prior to the Cryptocurrency Offering in November 2025. The current period unrealized loss is a result of the reference price of CC as of June 30, 2026 being less than the weighted average cost of our CC holdings. See Note 3 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information about our digital assets holdings

Six Months Ended June 30, 2026 Compared to the Six Months Ended June 30, 2025

Revenue

Revenues increased by $1.5 million for the six months ended June 30, 2026. Network validation revenue was $0.2 million, primarily SV rewards commencing in May with respect to our CIP 102 0.5 weight unlock. Other revenue was $1.3 million, primarily earned under LAAS agreements commencing in April. We did not generate any revenue for the same period in 2025 as we did not operate an SV or have LAAS activities.

Research and Development Expenses

Research and development expenses decreased by $0.2 million, or 100%, to $0 for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. The Company has not incurred any research and development expenses related to the Oncology Program during the current period.

General and Administrative Expenses

General and administrative expenses increased by $34.6 million, or 1064%, to $37.9 million for the six months ended June 30, 2026 from $3.3 million for the six months ended June 30, 2025. The change in general and administrative expenses was primarily due to increases of (i) $31.9 million in stock based compensation expense (see Note 5 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q), (ii) $1.6 million in compensation and benefits expenses, (iii) $0.6 million in insurance expense, (iv) $0.4 million in information technology and digital asset custody expenses, and (v) $0.2 million in legal and professional expenses.

Interest Expense

Interest expense decreased by $0.015 million, or 100%, to $0 for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. The interest expense incurred in 2025 was primarily related to a director and officer insurance premium financing liability as well as a note payable. We have paid such obligations in full as of December 31, 2025 and did not incur any interest expense for the six months ended June 30, 2026.

Interest Income

Interest income increased by approximately $0.6 million, to $0.6 million for the six months ended June 30, 2026 from $0.016 million for the six months ended June 30, 2025. The increase in interest income was due to the increase in investible cash and equivalents.

Unrealized Loss from Digital Assets Holdings

We recorded an unrealized loss from digital assets holdings of $38.7 million for the six months ended June 30, 2026. We did not have any loss (or gain) from digital asset holdings for the six months ended June 30, 2025. We did not own digital assets prior to the Cryptocurrency Offering in November 2025. The unrealized loss for the six months ended June 30, 2026 is a result of the reference price of CC as of June 30, 2026 being less than the weighted average

cost of our CC holdings. See Note 3 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information about our digital assets holdings.

Known Trends, Events and Uncertainties

Business operations. Following our November 2025 and January 2026 financings, we have focused on expanding our digital asset treasury strategy and Canton Network operations. We continue to grow our CC holdings through operation as a SV on the Canton Network. We have also launched our LAAS to other Canton Network participants recently. Our ability to execute this strategy depends on continued capital availability and favorable market conditions for CC.

Canton Coin price volatility. Our financial results and the carrying value of our digital asset holdings are significantly affected by the market price of CC, which has historically been volatile. Fluctuations in the price of CC could materially affect our financial position, results of operations and cash flows, and our ability to raise additional capital on acceptable terms.

Capital markets and liquidity. We believe November 2025 and January 2026 financings, shelf registration and ATM Program provide flexibility to access equity capital opportunistically to support working capital and selective investments aligned with our strategy. Adverse market conditions or unfavorable industry sentiment could constrain our ability to raise capital on acceptable terms.

Regulatory environment. Evolving U.S. and foreign regulations related to digital assets, blockchain networks, staking and validation services, and custody of crypto assets may impose new compliance obligations or restrictions on our business.

Liquidity and Capital Resources

On November 3, 2025, we raised net proceeds of over $537 million through a private placement offering, and on January 21, 2026 we raised approximately $53 million in a registered direct offering and have raised approximately $39 million year to date pursuant to the 2025 ATM Agreement and March 2026 ATM Agreement. We believe we have sufficient liquidity to fund anticipated cash requirements for operations and working capital purposes through at least June 2027.

Cash Flow Activities for the Six Months Ended June 30, 2026 and 2025

The following table sets forth a summary of our cash flows for the periods presented.

Cash Flows from Operating Activities

Cash used in operating activities – continuing operations for the six months ended June 30, 2026 was $5.4 million which consisted of net loss from continuing operations of $63.7 million, adjusted for non-cash stock based compensation of approximately $32.3 million, unrealized loss from digital asset holdings of approximately $38.7 million, a decrease of $10.9 million for deferred tax benefit, non-cash revenue adjustment of $1.5 million for network validation and related services, and a net increase in operating assets and liabilities of approximately $1.4 million. Cash used in operating activities – discontinued operations was $4.5 million for the six months ended June 30, 2026.

Cash used in operating activities – continuing operations for the six months ended June 30, 2025 was $3.1 million which consisted of net loss from continuing operations of $3.5 million, adjusted for non-cash stock based compensation of $0.4 million. Cash used in operating activities – discontinued operations was $0.7 million for the six months ended June 30, 2025.

Cash Flows from Investing Activities

Cash used in investing activities for the six months ended June 30, 2026 was $59.6 million, representing the purchase of digital assets. There were no cash flows from investing activities during the six months ended June 30, 2025.

Cash Flows from Financing Activities

Cash provided by financing activities for the six months ended June 30, 2026 was $91.2 million. The net increase in financing activities was due to proceeds from the January 2026 Offering of $54.9 million, proceeds from the 2025 ATM Agreement and March 2026 ATM Agreement offerings of $39.8 million, proceeds from the exercise of warrants of $0.2 million. These increases were offset by payments of issuance costs of $3.6 million.

Cash provided by financing activities for the six months ended June 30, 2025 was $2.5 million. The net increase in financing activities was due to proceeds from a private investment in public equity offering of $2.5 million, proceeds from at-the-market offerings of $0.3 million, proceeds from insurance premium financing liability of $0.3 million, offset by payments of issuance costs of $0.3 million, payments of the insurance premium financing liability of $0.2 million and repayments of the note payable of less than $0.1 million.

Critical Accounting Policies and Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. We consider the following areas to be our critical accounting estimate: fair value of digital assets, research and development expense recognition, stock-based compensation, allowances of deferred tax assets, and cash flow assumptions regarding going concern considerations. Although management believes the estimates that have been used are reasonable, actual results could vary from the estimates that were used.

Critical Accounting Policies

Discontinued Operations

During the three months ended June 30, 2026, management committed to a plan for the divestiture of the Company’s wholly owned subsidiary, Gravitas. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205-20, management evaluated the held for sale criteria under ASC 360-10-45-9 and concluded that Gravitas should be reported as discontinued operations.

The assets and liabilities of the discontinued operations are aggregated and reported separately as assets and liabilities held for sale in the Condensed Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025. The results of the discontinued operations are aggregated and presented separately in the Condensed Consolidated Statement of Operations as net loss from discontinued operations for the three and six months ended June 30, 2026 and 2025. The cash flows of the discontinued operations are reflected as cash flows from discontinued operations within the Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2026 and 2025.

Amounts presented in assets and liabilities held for sale, and discontinued operations have been derived from our condensed consolidated financial statements and accounting records using the historical basis of assets, liabilities, results of operations, and cash flows of Gravitas business activities.

Digital Assets

We account for digital assets, which are comprised of CC, as indefinite-lived intangible assets in accordance with ASC 350-60, Intangibles—Goodwill and Other-Crypto Assets. Our digital assets are initially recorded at cost. Subsequently, they are measured at fair value with the gain or loss associated with remeasurement of the digital assets recognized in net income (loss) during each reporting period. Upon disposal of a digital asset (e.g., by sale, exchange or transfer), we derecognize the asset and recognize a realized gain or loss in net income, calculated as the difference between the sale proceeds and the asset’s carrying amount.

The fair value of the digital assets is determined based on the quoted price in its principal market at the time of measurement. We determine its principal market as the market that it has access to and has the greatest volume and level or orderly transactions in accordance with ASC 820, Fair Value Measurement. We track the cost of its digital assets using the first-in-first-out (FIFO) method.

Revenue Recognition

The Company earns CC reward revenue through operating as a Validator and SV on the Canton Network. The Canton Network’s native token, CC, is issued under a burn-and-mint equilibrium model rather than a fixed block-reward schedule. New CC is minted approximately every ten minutes (a “round”) and allocated among three participant classes — SVs, Validators, and application providers — based on protocol-defined formulas. There is no identifiable counterparty that has contracted with the Company, negotiated terms, or agreed to pay consideration in exchange for a distinct good or service provided by the Company to that counterparty. As there is no customer or contract associated with the CC reward revenue, the Company applies the recognition and measurement principles of ASC 606 by analogy. The Company’s obligation is to provide validation/liveness services to the network for a given round. That obligation is satisfied — and the related reward is earned — at the completion of each round, when the Company has performed the requisite activity and the reward coupon becomes claimable/mintable. Rewards are received in CC, a non-cash asset. Under ASC 606-10-32-21 (applied by analogy), non-cash consideration is measured at fair value at the point control is obtained. No further performance obligations exist once a round’s reward is minted; there is no unsatisfied obligation requiring deferral of income into future periods.

The Company provides LAAS to Canton Network SVs and Featured Applications, which are required under CIP 105 and 116 to maintain a qualifying amount of CC identifiably locked. The Company locks its own CC on the customer’s behalf in a segregated wallet at its qualified custodian, retaining legal and beneficial ownership throughout; only the wallet ID, not custody or title, is shared with the Canton Foundation. Because the CC is never transferred to the customer, it continues to be accounted for under the Company’s digital asset policy for the full arrangement term. Each arrangement is a contract with a single customer — the SV or Featured Application — containing one performance obligation: a stand-ready obligation to keep the agreed CC balance locked and verifiable throughout the term. Consistent with ASC 606-10-25-27 through 25-29, this obligation is satisfied over time, as the customer simultaneously receives and consumes the benefit of continuous, verifiable locking. The Company is compensated under one of three structures: (i) a stated daily interest rate on the locked CC balance; (ii) a percentage of the customer’s Canton Network rewards, net of an expense offset in certain cases; or (iii) an equity compensation grant from the customer, earned ratably over a one-year term.

Interest / loan-type arrangements - Daily consideration is a fixed quantity of CC (rate × locked balance) that does not vary once accrued. This is noncash consideration under ASC 606-10-32-21 through 32-24; because the CC quantity itself is fixed, no variable-consideration constraint applies under ASC 606-10-32-11 through 32-13, as any resulting USD variability is attributable solely to the form of consideration (ASC 606-10-32-24). Revenue is recognized daily at fair value using that day’s end-of-day CC/USD reference rate, consistent with the right-to-invoice expedient (ASC 606-10-55-18), regardless of whether the counterparty ultimately settles in CC or USD.

Revenue share arrangements-The Company’s percentage of monthly Canton Network rewards, net of any expense offset, is not fixed or determinable until month-end. Consistent with ASC 606-10-32-11 through 32-13, no interim estimate is recognized; revenue is recognized once, at month-end, in the finalized amount, translated at the month-end reference rate.

Equity compensation arrangement - Consideration is an equity grant measured at estimated fair value at contract inception under ASC 606-10-32-21 through 32-24, with subsequent changes in the equity’s value excluded from the transaction price per ASC 606-10-32-24. Revenue is recognized straight-line over the twelve-month service term, with a corresponding contract asset recognized until the equity is issued.

Stock-based compensation

Stock-based compensation represents the cost related to stock-based awards granted to our employees, directors, consultants, and affiliates. We measure stock-based compensation costs at the grant date, based on the estimated fair value of the award and recognize the cost over the requisite service period.

We recognize compensation costs resulting from the issuance of stock-based awards to employees, non-employees and directors as an expense in the consolidated statements of operations over the requisite service period based on a measurement of fair value for each stock-based award. The fair value of each option grant to employees, non-employees and directors is estimated as of the date of grant using the Black-Scholes option-pricing model, net of actual forfeitures. The fair value is amortized as compensation cost on a straight-line basis over the requisite service period of the awards, which is generally the vesting period.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Prior to January 12, 2022, we were a private company and our common stock has only been publicly traded since that date. As a result, we lack company-specific historical and implied volatility information. Therefore, we have estimated our expected stock price volatility based on the historical volatility of a publicly traded set of peer companies. The expected term of stock options granted was between five and seven years. The risk-free interest rate was determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

Recently Issued and Adopted Accounting Standards

See Note 2 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

JOBS Act

On April 5, 2012, the Jumpstart Our Business Startups Act (the “JOBS Act”) was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We have chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise apply to private companies provided under the JOBS Act. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates for complying with new or revised accounting standards.

Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions, including, without limitation, (i) providing an auditor’s attestation report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended, and (ii) complying with the requirement adopted by the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor’s report on financial statements. We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our IPO; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.

Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer evaluated the effectiveness of our “disclosure controls and procedures” as of June 30, 2026, the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is accumulated and communicated to a company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of June 30, 2026, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Risk factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the SEC on March 31, 2026 (“2025 Annual Report”). There have been no material changes in our risk factors from those previously disclosed in our Annual Report. You should carefully consider the risks described in our Annual Report which could materially affect our business, financial condition or future results. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.

On July 17, 2026, we completed the sale of Gravitas. As a result of the completion of this transaction, the risks described under “Risks Related to Our Therapeutic Candidates Developments” in the 2025 Annual Report are no longer applicable.