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in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as may be amended, supplemented, or superseded from time to time by other reports we file with the SEC.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. 4 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: Three Months Ended 2026 2027 2028 30-Jun 30-Sep 31-Dec 31-Mar 30-Jun 30-Sep 31-Dec 31-Mar CIP 102(1) Active weight(2) 0.5 Additional weight 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Total CIP 102 weight 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 CIP 114(3) Additional weight 5.5 1.375 1.375 1.375 1.375 - - Total CIP 114 weight 0.0 5.5 6.875 8.25 9.625 11 11 11 Total SV weight 0.5 6.5 8.375 10.25 12.125 14.0 14.5 15.0 (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. 5 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 Three Months Ended June 30, 2026 2025 Change Consolidated Statements of Continuing Operations Data: Revenue Network validation rewards $ 191,226 $ - $ 191,226 Other revenue 1,304,633 - 1,304,633 Total revenue 1,495,859 - 1,495,859 Operating expenses: Research and development - 123,638 (123,638 ) General and administrative 2,698,013 1,304,956 1,393,057 Total operating expenses 2,698,013 1,428,594 1,269,419 Other income (expense): Interest expense - (6,161 ) 6,161 Interest income 311,848 2,168 309,680 Unrealized loss from digital assets holdings (23,735,950 ) - (23,735,950 ) Total other income (expense) (23,424,102 ) (3,993 ) (23,420,109 ) Total loss before income taxes $ (24,626,256 ) $ (1,432,587 ) $ (23,193,669 ) 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. 6 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 Six Months Ended June 30, 2026 2025 Change Consolidated Statements of Continuing Operations Data: Revenue Network validation revenue $ 191,226 $ - $ 191,226 Other revenue 1,304,633 - 1,304,633 Total revenue 1,495,859 - 1,495,859 Operating expenses: Research and development - 215,087 (215,087 ) General and administrative 37,919,194 3,257,555 34,661,639 Total operating expenses 37,919,194 3,472,642 34,446,552 Other income (expense): Interest expense - (14,632 ) 14,632 Interest income 630,026 15,604 614,422 Unrealized loss from digital assets holdings (38,749,254 ) - (38,749,254 ) Total other income (expense) (38,119,228 ) 972 (38,120,200 ) Total loss before income taxes $ (74,542,563 ) $ (3,471,670 ) $ (71,070,893 ) 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. 7 Known Trends, Events and Uncertainties