Sol Strategies Inc.

Now, your meeting is about to begin. Good day, everyone. Welcome to the Sol Strategies fiscal first quarter ended December 31st, 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's prepared remarks, we will conduct a question and answer session. On the call today is Mr. Michael Hubbard, Interim Chief Executive Officer, Mr. Doug Harris, Chief Financial Officer, and Mr. Max Kaplan, Chief Technology Officer. At this time, I would like to turn the conference over to Mr. John Ragazzino with IZR. Mr. Ragazzino, please go ahead, sir.

Good afternoon, and thanks for joining Soul Strategy's fiscal first quarter 2026 earnings conference call. Before we begin, I want to remind everyone that certain statements on this call contain forward-looking statements subject to risks and uncertainties. Actual results may differ materially from these statements. We refer you to our latest press release, MD&A and CEDAR Plus filings for detailed risk factors and assumptions. All dollar amounts are in Canadian dollars unless otherwise noted. The company assumes no significant events occur outside our normal course of business and that current trends in the digital assets marketplace continue. However, listeners should note that crypto markets are volatile and that our business metrics can fluctuate significantly. With that, let me turn it over to Michael Hubbard, Soul Strategies intern CEO.

Thanks, John. Good afternoon, everyone. I want to start with our most significant development. In January, we launched StakeSol, our liquid staking token, commonly referred to as an LST. This is a major strategic milestone that fundamentally expands what Sol strategies offers to the market. How it works? When Sol holders stake through our protocol, they receive StakeSol, a receipt token representing a stake position that continues to earn accrued staking rewards. That token can be held, traded, used as collateral in DeFi applications, or deployed for additional yield opportunities, all while the underlying SOA continues earning staking rewards. What is unique about StakeSOA is that when it allocates SOA across validators, it uses our own StakeWiz score, which intelligently allocates SOA across validators based on performance, security, and decentralization metrics. This moves us from being a player in the arena with other validators into an aggregator role, advancing decentralization by supporting dozens of vital smaller validators that help keep Solana safe, all while providing a new revenue stream to the company. LSTs solve several problems in the staking market. First, native Solana token staking locks tokens with roughly two-day unstaking periods, limiting liquidity, Second, stakers traditionally must choose between earning yield and capital deployment. Our LST eliminates that choice. Holders maintain full exposure to staking economics while preserving liquidity through a tradable receipt token that appreciates to reflect accumulated rewards. Third, staking to a single validator carries risk of lost rewards if that validator experiences downtime. Our LST delegates to dozens of validators, significantly reducing the risk of a single validator's failure. Lastly, LSTs carry significant tax advantages for holders, as they don't earn new tokens every few days from staking rewards, instead experiencing a gradual increase in their exchange rate back to Seoul, resulting in long-term capital gains rather than short-term income. This is of course jurisdiction dependent and not tax advice. From a business perspective, this presents a new product line in our staking business. Our staking business now encompasses our proprietary validators, earning commissions and block rewards, our white-label validators, earning revenue based on our commercial agreements with customers, our staking services and reporting business with customers like the VanEck Solana ETF, and now a liquid staking business, earning commission on all the soil held within the liquid staking protocol. By providing superior utility, competitive yields, and through our robust and reputable infrastructure platform, we expect to drive meaningful growth in our assets under delegation. The LSD becomes both a distribution channel and a differentiation tool in what has largely become a commoditized staking market. In just a few weeks since launch, we have already seen strong early adoption, with over 675,000 souls staked. The market recognizes and respects our commitment to the Solana economy, our compliance infrastructure, and transparent reporting that we are seeing translate into growth. Now let me provide context on Q1 fiscal 26, which set the foundation for this launch and our momentum heading into the remainder of the year. Our validator network scaled significantly. We recently announced we are now serving over 31,000 unique wallets, up 63% from 19,000 at the end of September. Assets under delegation grew to over 3.3 million SOL, up from 2.8 million just three months prior. Our validators maintain 99.999% uptime, while consistently delivering yields above network average. To drill down on the unique wallets for a second, This is a key point for us. Unique wallets are akin to unique customers, and they are staking with us epoch after epoch. In an analogy to the software-as-a-service world, these are equivalent to monthly active users. The entire Solana network, as of the 10th of this month, has approximately 576,000 unique wallets, with the average validator having just 685. This means we are punching well above our weight with 5.5% of all staking users choosing us, more than 46 times the average. VanEck selected us as the sole staking provider for their US Botswana ETF. This isn't just another partnership. VanEck is a Tier 1 asset manager, and they chose us over every other validator operator in the ecosystem. That's validation of our compliance stack, our technical performance, our reporting product, and our operational excellence at the institutional level. Turning briefly to our balance sheet, during the quarter we further optimized our balance sheet by restructuring a $25 million credit facility with our largest shareholder, simplifying our capital structure, and significantly reducing liabilities. Additionally, we successfully completed a $30 million live equity offering, further enhancing our financial flexibility and improving liquidity in our stock. Looking ahead, we remain focused on continually evaluating ways to become more capital efficient. We were active throughout the quarter, engaging with existing shareholders, potential investors, and telling our story about being a diversified Solana economy company as we participated in dozens of one-on-one meetings with new investors at several major institutional investor conferences during the quarter. We look forward to continue to engage with new and existing investors and will continue to actively tell our story at a variety of conferences and events in 26. Now let me address the elephant in the room. Solve price movement in recent weeks. Times of such significant volatility don't change our thesis. They reinforce it. Times like these are when the active builders within the ecosystem are separated from the passive participants. When prices are rising, we all look very smart. When they're falling, it becomes clear who's actually building sustainable infrastructure and creating value versus just passively riding market momentum. We are not a digital asset treasury. That's just one subset of public crypto companies. We're building operating infrastructure that drives recurring streams of revenue regardless of token price. We are using this period to build. When SOAR goes down, we look at network activity and see a variety of opportunities because our business is driven by our operating infrastructure, not passive token exposure. First, we remain highly focused on our Validate operations, with best-in-class performance and staking yield metrics. We also continue to actively pursue new staking partnerships on the institutional front. The VanEck Agreement announced in November is an important validation on that front. Our pipeline continues to expand, Our stakes or product launched on schedule and we're executing regardless of price action because we're building long-term infrastructure, not chasing short-term pumps. Second, we continue to pursue a dual-pronged growth strategy by complementing our organic pipeline development with an active M&A strategy. We're currently evaluating several strategic M&A opportunities as recent market conditions have created an increasingly attractive environment for highly strategic bolt-on opportunities. Businesses with proven track records or significant technology enhancements in the Solana ecosystem, but whose operators may be struggling with balance sheet stress. Here's the reality. Institutional adoption of blockchain infrastructure doesn't move in lockstep with token prices. The VanEck mandate didn't happen because Sol was up or down. It happened because we met their institutional requirements. ETF launches, custody integrations, traditional finance build-out, these trends are multi-year and largely price agnostic. If anything, lower prices accelerate institutional interest because fiduciaries can deploy at better entry points with reduced downside risk from recent highs. Even amid broader macroeconomic corrections across crypto and global markets and ongoing shifts in fiscal policy and interest rates, we continuously see strong evidence that blockchain technology remains well positioned for long-term adoption within the global financial system. So yes, Solana token pricing is down, but we will continue to execute our strategy and be an integral part of the Solana ecosystem. And when Sol recovers, which it will, because Solana's technical advantages and ecosystem growth haven't changed, we will have more tokens staked, more institutional relationships secured, and more operational leverage built. This is exactly when you want to be aggressive, not defensive. We have the capital and the team to execute, so when others falter, we accelerate. The Solana economy is still in the early innings, and we are continuing to see the building continue. Most traditional finance institutions haven't started evaluating on-chain applications yet. When they do, and they will, they need operators who meet multiple needs. That's us. Now let me turn it over to Max to talk about developments in our staking and infrastructure business.

Thanks, Michael. As Michael said, Q1 marked an exciting quarter for us with the launch of Stakesol, one of our flagship new staking products. StakeSol is a liquid staking token giving users more optionality into how they want to stake with us. In just a short period of time, StakeSol has grown to 661,000 sol in TBL, total value locked, and integrated into every blue-chip Solana DeFi protocol. One of the most unique parts of StakeSol is our algorithmic delegation strategy, which picks which validator the pool stakes with based on a number of key metrics and also spreads downtime risks across 75 validators. With native staking, if a validator goes down, the staker loses out on potential rewards. By staking across 75 validators, if any single validator goes down, the risk is greatly minimized, providing stakers more assurances about their returns. For managing and developing the infrastructure for the pool, Sol Strategies takes 5% of the rewards the pool generates, marking a new revenue stream for the company, which is quite exciting. We have a lot more planned for the future that I'm excited to launch. With that, I'll hand it over to Doug to discuss our financials.

Thank you, Max. Good afternoon, everyone. I'd like to walk you through the financial results for the three months ended December 31st, 2025, and provide some important context around the numbers. Keep in mind that the following discussion includes non-GAAP financial measures. Please refer to our MD&A for more information. The key takeaway from our results are that our staking income grew 69% year-over-year, 120% on a sole basis. Our sole treasury expanded to approximately 529,000 tokens. Our reported loss is dominated by non-cash items. and our capital structure was strengthened through the post-quarter retirement of the unsecured credit facility. Total staking and validation income reached $2.1 million, up 69% from $1.2 million in Q1 fiscal 2025, consisting of $1.6 million in staking rewards on our sole holdings and $471,000 in net validation service income from third-party delegators. On a sole basis, rewards were up 120% year over year, with the difference from the fiat figure attributable to the decline in the average sole price and the strengthening Canadian dollar. Reported net loss was $11.9 million, compared to net income of $3.2 million in the prior year's period. Adding back non-cash and non-recurring items, amortization of $2.4 million, share-based compensation of $1.3 million, non-cash interest and accretion of $1.2 million, realized cryptocurrency transaction losses of $6 million. Note that these are primarily related to coin-to-coin swaps that are required to be recognized as a disposition by IFRS accounting standards. And non-recurring legal expenses of $475,000, produced total add-backs of approximately 10.9 million and an adjusted loss of approximately 500,000. In that loss line, other comprehensive loss included a 53.5 million unrealized markdown on our cryptocurrency holdings, reflecting the decline in sold price from approximately $290 Canadian at September 30th to $174 Canadian at December 31st. This markdown fluctuates with the sold price from quarter to quarter and has no impact on our operating cash flow. Total operating expenses were $7.7 million versus $1.3 million in the prior period. Four line items, amortization, share-based compensation, professional fees, and interest expense, account for approximately $6 million of that total, three of which are non-cash or capital structure related. The remaining net operating expenses were $1.8 million, including G&A of $668,000 and consulting fees of $692,000. On the balance sheet, total assets were $132 million at December 31st, down from $169.6 million at year-end. This is driven entirely by unrealized sole markdowns. Cryptocurrency holdings were carried at $92.2 million at quarter-end. Total debt of $52.3 million was comprised of $14.9 million in credit facilities and $34.9 million in convertible debentures. Subsequent to quarter end, we fully retired the unsecured credit facility provided by a significant shareholder through the issuance of 2.3 million shares and cash payments totaling $4.9 million. The asset quarter end was $223,000, consistent with our treasury strategy of holding the majority of our assets in Seoul. We also have access to the Camino decentralized credit facility, providing stablecoin liquidity against our Seoul collateral without requiring us to liquidate our cryptocurrency holdings. During the quarter, we completed a life offering, raising $30 million in gross proceeds, $27.9 million net. through the issuance of 4.38 million units at $6.85 per unit. APW conversions of 1.26 million Canadian reduced that facility to 9.5 million U.S. dollars, and shares outstanding grew from 23 million to 28.6 million. In summary, our sole holdings grew over 90,000 sold to approximately 529,000 sold at quarter end, Our staking income grew 69% year over year, 120% on a sold basis. Our reported loss is dominated by non-cash and non-recurring items. And subsequent to year end, our capital structure was strengthened through the retirement of the unsecured credit facility. With that, I'll turn it back over to Michael.

Thanks, team. Let me wrap up with where we're headed. Q1 proved institutional Solana adoption isn't slowing down. VanEck was the validation. 105% growth in unique wallets was the proof. The Stixel launch opened the next chapter. But here's what matters most. We're still early. Most institutional capital hasn't moved on-chain yet. Most traditional finance firms are still evaluating whether blockchain infrastructure is real. When they decide it is, and they will, they need partners who deliver institutional-grade compliance, performance, and reliability. That's us. That's our position. That's where we're building. We're not a passive treasury vehicle hoping for token appreciation. We're an operating company generating recurring revenue from critical infrastructure while holding strategic exposure to the asset powering that infrastructure. The next 12 months, we'll see more ETF launches, more institutional custody integrations, more traditional finance service building on Solana. We intend to capture our share. To our shareholders, Q1 was about execution. The remainder of fiscal 26 will be about acceleration. We have the right strategy, the right team, and the right positioning. We look forward to sharing some of our M&A developments in the near future. With that, operator, let's open it up for questions.

Certainly, Mr. Hubbard. Thank you, sir. Ladies and gentlemen, at this time, if you would like to ask a question, press star 1 on your keypad. To leave the queue at any time, press star 2. Once again, that is star 1 to ask a question, and we'll pause for just a moment to allow everyone a chance to join the queue. And we'll go first this afternoon to John Roy with Water Tower Research. John, please go ahead. Your line is open.

thank you so michael i'm curious if you can give us any more color on your m a thoughts maybe the type of acquisitions you're looking at i mean we're trying to get an idea of what you see might be coming in the future absolutely thanks john so we're looking at a few different opportunities and we're very actively involved in evaluating options at the moment so we have a strong pipeline and a few different paths we can go down We're looking at opportunities that both involve larger scale, more developed businesses that have strong existing revenue that are in the infrastructure space or in the product space in the Solana ecosystem. But we're also evaluating opportunities that are smaller teams that have very big, very strong promise, that have a really strong team that we think will be accretive to our internal engineering teams.

and business teams but also that are building exciting technology that we think will fit in and slot in with our other great um and kind of maybe switching gears just a little bit the lst i'm kind of really trying to think about how it fits in your existing you know staking business Is it really going to compete with the native validation business and any kind of revenue expectations you might have longer term?

Absolutely. So when we think about the staking market, it's sort of like a layer cake where you've got the validators right at the bottom and then you've got the stakers at the top. And over the last two or three years, we've seen this middle layer evolve, which is the liquid staking market. And that market is growing consistently. We've seen over the last two years it's grown from basically zero to now I think it's about 15%, 17% of the total market, total staking market on Solana. Now, what's very important is that liquid staking acts as kind of an aggregator above the validator layer. So there's an important market and important use case for native staking, which is staking directly to the validators. It provides you with the ability to choose your validator, to have a relationship with that validator if you want, which is important for institutions. And with liquid staking, you get the other side, which is where you have a token that you can hold in your wallet. You can deploy it in DeFi. You can potentially collateralize it. You might have some tax advantages depending on your jurisdiction. Obviously, check with the tax advisor. This is not tax advice. But liquid staking gives you that flexibility. And what it means for us is that rather than competing with our validators where we're really serving a different segment of the staking market, we're stepping into that aggregator role where now we are providing the ability for liquid staking users to get exposure to dozens of different validators and we're acting as an intermediary that is helping secure the network, supporting dozens of validators based on our algorithmic scoring and So we're really focused on smaller validators with good track records. You know, we're using 120,000 data points, evaluating every single validator that we delegate to. So with that, we're really trying to improve the network and offer a unique use case to those liquid-staking users. And sorry, just on the revenue front, you can think of it similar to operating an additional validator. we charge a 5% fee on all of the rewards that the liquid staking protocol generates. So all of the sole people deposit generates staking rewards. We charge a 5% fee on that. So that's kind of similar to running a validator with a 5% commission, the difference being here that we're sitting at that intermediary aggregation layer.

Great. Thanks so much. That does clear up some things. Thanks so much.

Thank you. And just a quick reminder, ladies and gentlemen, again, that's star 1 for any questions this afternoon. And, again, we'll pause for just a moment to allow everyone a chance to join the queue. And, gentlemen, nothing else coming in at this time, but I would like to remind everyone one final time, again, star 1 for any questions today, and we'll pause for just one moment. And gentlemen, it appears we have no further questions this afternoon. Mr. Hubbard, I'd like to turn things back to you, sir, for any closing comments.

Thank you all for joining us today. We're extremely excited about the future of global finance on Solana, and we continue to work diligently to capture that upside. I think the reports really speak for themselves. Year over year, we've seen good growth. Our validated and staking business is maturing. Additional verticals have come in now with the liquid staking and the institutional partnerships. So we are on a strong footing, and we're excited for the year ahead. With that, we end our earnings call today, and I thank you all for joining.

Thank you, gentlemen. Again, ladies and gentlemen, that will conclude the Sol Strategies Fiscal First Quarter Earnings Conference Call. Again, thank you all so much for joining us today, and we wish you all a great evening. Goodbye.