Sol Strategies Inc (STKE) 2025 Q2 法說會逐字稿

Good day, everyone. Welcome to the Sol Strategies Inc fiscal quarter ended March 31, 2025, earnings conference call. (Operator Instructions)

On the call is Leah Wald, Chief Executive Officer; Doug Harris, Chief Financial Officer; and Max Kaplan, Chief Technology Officer; and John Ragozzino from ICR.

At this time, I would like to turn the conference over to John Ragozzino with ICR. Please go ahead, sir.

Good afternoon, and thank you all for joining the Sol Strategies fiscal second quarter 2025 earnings conference call. Before we get started, I want to remind everyone that certain statements discussed on this call are based on information as of today, June 2, 2025, and contain forward-looking statements, which are subject to risks and uncertainties given our operating history, market volatility and industry growth.

Trends could materially deviate from today's levels, and as such, actual results could differ materially from our forward-looking statements. The comments made during this conference call were in the latest reports in SEDAR filings each of which can be found on our website at www.solstrategies.io, or under our profile at www.sedarplus.ca.

The company has made assumptions that no significant events occur outside the company's normal course of business and that the current trends in respect of digital assets continue. Listeners are cautioned that metrics of our business fluctuate and may increase and decrease from time to time, and as such fluctuations are beyond the company's control.

The company does not undertake any duty to update any forward-looking statements, except where required by law. The company also wants to caution listeners that past performance is not indicative of future performance and that current trends in the business and demand for digital assets may not continue, and listeners should not put undue reliance on past performance and current trends.

This call will touch on certain unaudited performance metrics of the business through the quarter ended March 31, 2025, provided in the earnings press release issued on May 30, 2025, and I would encourage each of you to review the forward-looking statements, risk factors disclosures and similar disclosures in the press release. Please note the dollar amounts referenced are in Canadian dollars unless otherwise noted.

Leah will review Sol Strategies' progress towards the company's strategic objectives within the rapidly growing digital assets industry during the March quarter, Doug will then review the financial performance during the quarter and provide an update on our balance sheet and capital markets activity, and Max will discuss our operations and technology initiatives before we open the floor for your questions.

With that, let me turn the call over to Leah.

Thank you, John. This quarter marked a watershed moment in our transformation. We acquired Laine, one of the most respected validator operations in the Solana ecosystem propelling our total stake assets from $1.57 million Sol in December to $3.39 million Sol by quarter end, a 113% increase that now places Sol Strategies among the largest validator operators on the network. We now support over 5,500 unique wallets and have been recognized as a preferred validator within BitGo's institutional platform.

With industry-leading compliance certifications in place and our planned uplisting to the Nasdaq, we're not just scaling, we're setting the institutional standard for secure and transparent staking, redefining what institutional-grade blockchain infrastructure looks like.

These milestones are not isolated achievements. They are clear signals of our role in shaping the financial rails of tomorrow. We're standing on the edge of a generational shift in capital markets and Sol Strategies is building the rails for it. Years ago, I was drawn to Bitcoin for its promise to democratize access to financial systems. It was a bold foundational change.

Today, we're witnessing that same transformational potential through tokenization. Just as electronic trading disrupted Wall Street, tokenization has the potential to transform how the world can access and trade assets, making markets faster, cheaper, more transparent and truly global, and this transformation can only be built at scale on Solana.

Solana's unmatched speed, -- aren't just nice to have. They're prerequisites for tokenizing real-world assets at scale. That's why we're not just betting on Solana, we're building on it with conviction. Tokenization isn't a buzzword for us. It's a strategic mandate. We are positioning Sol Strategies to become the first public company to tokenize equity on Solana, and we're leading that charge with intent, speed and credibility.

We're witnessing a fundamental shift in how financial market operates. StablePoint regulation is crystallizing globally with Solana processing the second largest volume on USBC transactions worldwide. Real-world assets organization isn't theoretical anymore. It's happening right now. And we're not just watching from the sidelines. We're building the infrastructure that makes it possible.

This is where Sol Strategies' unique positioning becomes critical. We are a technology company, Solana's technology company. We build infrastructure, operate validators, develop products and innovate within the ecosystem. Every initiative we pursue flows back to strengthening our core business, delivering sustainable long-term value to shareholders.

Before we dive into our results, I want to acknowledge the remarkable dedication of our team and the continued support of our stakeholders during what has been a transformative quarter. But more than that, I want to share why this moment in time represents an unprecedented opportunity, not just for sole strategies, but for everyone who believes in the future of digital finance. To make our vision real, we made a major strategic acquisition this quarter. We acquired one of the most respected validator operations in the Solana ecosystem, Laine. But this is far more than a validator acquisition. It marked a strategic turning point.

Alongside this respected operation, we brought on Michael Hubbard as Chief Strategy Officer, a rare talent with deep expertise in both Solana's technical architecture and global capital markets. Michael now leads our tokenization road map and other transformative initiatives core to our long-term vision. His leadership is already accelerating on execution and sharpening our strategic edge.

What drives me personally, it's the people. Across our validators, Laine, Cogent, OrangeFin and our Sol Strategies node, we now serve over 5,500 unique wallets with industry-leading performance metrics. Retail participants who have been staking with our acquired validators for years through market cycles, through volatility, without tapering off. And let me be unequivocal. We are not a fund. We are not a NAV story. We are not some pseudo tech marketing wrapper pretending to be innovation.

This company was founded to shape the future, not chase someone else's past. We've been building the infrastructure, products and systems that will power the next era of finance. I'm here to lead builders. We're here to win.

Our longer-term vision for Sol Strategies is to be the premier institutional grade staking partner as the current trend of adoption continues to accelerate. By leveraging our focus on industry-leading compliance, transparency, performance and technology to create the best user experience combined with industry-leading performance and transparency, we expect to be the clear choice for the tremendous inflow of capital just beginning to step into the market.

We have the team to execute this vision and as the only publicly traded pure-play Solana native tech company in the world, we are not just a bet on Sol. We are the strongest, clearest expression of belief in its long-term dominance. I'm incredibly proud of what we're building and even more excited for what comes next.

This quarter, we also expanded our validator infrastructure through our white label program, including the addition of a dedicated validator for Pudgy Penguins, a globally recognized multibillion dollar brand. It's a strong signal of institutional trust and the growing reach of our platform. We continued on our march to become the definitive institutional staking platform in the Solana ecosystem.

The market cap for cryptocurrencies is already $3.29 trillion and expected to continue to grow. Solana already capable of handling 10% of Nasdaq's capacity and is becoming the backbone for tokenizes real-world asset flows. As this trend accelerates, our infrastructure becomes increasingly vital. Our institutional staking strategy is taking hold. We've expanded our client base and secured additional delegated sale through our integration with [Victa], where we've been selected as a preferred validator within their institutional offering.

This provides us with a powerful distribution channel to tap into a growing pipeline of high-quality institutional delegators. A standout success this quarter was our exclusive partnership with Digital X facilitated through Bitco's infrastructure, representing one of the largest institutional staking mandates in the Asia Pacific region. It's a powerful validation of both our performance and the trust Bitco and their clients place in our platform.

We're actively in conversations with traditional asset managers, family offices and crypto-native ETFs. Institutional adoption is accelerating, and our pipeline is the strongest it's ever been. A critical pillar of this growth is our investment in compliance. The company completed SO1 and SOC2 Type 1 audits alongside the already existing ISO 27001 certification. As Max will elaborate upon more in a moment. This level of transparency, risk management and control is what gives institutions the confidence necessary to delegate significant capital to our platform.

On the tech slide, we launched our staking app, not just a product milestone but a leap forward in validator management infrastructure. With features like advanced analytics, real-time performance monitoring and integrated risk tools, we're making staking institutional grade. Capital markets activity was also transformative this quarter. We filed a preliminary USD1 billion base shelf prospectus, giving us the flexibility to raise capital as opportunities emerge. We drew down an initial USD20 million tranche of our $500 million convertible note facility with ATW Partners, a first of its client structure in the sector.

In the past six months, we have secured over US $525 million in capital commitments. We currently hold approximately CAD100 million of Sol on our balance sheet and due to our capital-raising activities, we have the flexibility to raise much more.

This isn't just financing. It's a validation of how capital markets are evolving to support blockchain infrastructure. We've deployed that capital to expand our Sol balance sheet and validate our network. Unlike others who outsource, we operate our own validator nodes, that means in addition to stacking rewards earned on our Sol, we earn an additional unique revenue stream through the block rewards as well as driving an enhanced return on our space Sol, which compounds over time.

Looking forward, the tailwinds are undeniable. Solana's daily active users and total value loss in DeFi are growing rapidly. Solana Mobile, ecosystem grants, and regulatory clarity or accelerating developer momentum and institutional interest. We've laid the groundwork, we've built the infrastructure, we've earned the trust and now we're scaling. Thank you for your continued belief in our mission.

With that, I'll turn it over to Doug.

Thank you, Leah. I'm pleased to present Sol Strategies financial results for the three and six months ended March 31, 2025. Before I dive into the specifics of the financial results for the period, I would like to take a moment to provide some important context around the various factors impacting the reported results.

Overall, we are very encouraged by the financial results achieved in our second fiscal quarter, which serve as an early validation of the long-term trajectory we expect for our staking and validator business. Performance this quarter reflects meaningful progress in both operational scale and revenue generation driven by growing state balances and the early contribution from our recent acquisition of the Laine validator.

For the three months ending March 31, 2025, our total comprehensive loss was approximately $32.5 million compared to $7.7 million of total comprehensive income for the prior period. During the first half of fiscal 2025, total comprehensive loss was $24.7 million compared to total comprehensive income of $14.7 million in the first half of fiscal 2024. It's important to emphasize that these figures include significant noncash mark-to-market adjustments related to the decline in Sol prices during the quarter. which resulted in an unrealized loss on cryptocurrencies of $27.7 million compared to a $7.9 million unrealized gain in the prior period.

In the six-month period ending March 31, 2025, the unrealized loss on cryptocurrencies was $23 million compared to income of $12.2 million in the first half of the prior year. These results reflect an accounting treatment for Sols held on our balance sheet rather than any operational weakness of the company. Encouragingly, Sol prices have rebounded over 30% since the lows experienced near quarter end. And if these levels hold or the rebound continues, we would expect a similarly positive mark-to-market contribution to comprehensive income in the third fiscal quarter.

Additionally, we cautioned against drawing straight line comparisons either to prior quarters or when attempted to extrapolate a run rate from this quarter's figures. Second fiscal quarter results reflect only 14 days of contribution from the Laine Validator, which required in mid-March and therefore, do not yet reflect the full impact of that acquisition.

At the same time, this is the first full quarter that operations from our base taking and validator infrastructure further limiting comparability to any prior periods. Despite the nuances staking and validating income more than doubled to $2.53 million, up 104% from $1.24 million in the first quarter of 2025, supported by both organic growth and the Laine acquisition.

In the first half of fiscal 2025, staking and validating income was $2.8 million compared to 0 in the first half of fiscal 2024. We believe this strong early momentum demonstrates the scalability of our platform and sets the stage for continued growth in the quarters ahead.

Operating expenses in Q2 '25 increased to $8.5 million, up $8.3 million over the prior period, operating expenses of $174,000. In the first half of fiscal 2025, the operating expenses were $9.8 million compared to $465,000 in the first half of fiscal 2024. The significant increase in operating expenses occurred mostly in the second quarter of fiscal 2025, reflecting the first full quarter of reported financial results from our speaking and validating operations and includes several noteworthy items, which include the following. First, stock-based compensation during the fiscal second quarter of $3.2 million was up significantly over the prior period levels of $25,000.

The sequential increase in stock-based compensation reflects the issuance of option contracts of [1.25] million shares and 550,000 RSUs to various employees, consultants and company directors during the quarter. The fair value of these contracts used for accounting purposes is calculated using the [block sols] option pricing model and resulted in a $3.2 million expense during the second quarter.

Going forward, stock-based compensation expense is expected to normalize at a more modest level, subject to the future opportunistic use of options or RSUs as compensation for services in the future.

In the first half of fiscal 2025, stock-based compensation was $3.8 million compared to $63,000 in the prior period as most of the grants occurred during the second quarter of fiscal 2025. Second, amortization expense of $2.5 million compared to nil in the prior period. This represents an amortization of the present value of our validator acquisitions which totaled approximately $76.6 million, including future share issuances.

This has been amortized over five years on a straight-line basis. Amortization in the six months ended March 31, 2025, was $2.8 million compared to $15,000 in the prior period. The majority of the amortization expense occurred during the second quarter as the Cogent and OrangeFin acquisitions occurred in late Q1 of fiscal 2025 and the Laine acquisition occurred late in the second quarter of fiscal 2025.

The interest expense for the quarter of $669,000 compared to the prior period's interest expense of $32,000, driven by the closing of the $30 million convertible debenture offering as well as an increase in our $25 million rate facility.

The first half interest expense was $702,000 compared to nil in the prior period. Majority of the interest expense occurred during the second quarter of fiscal 2025 and due to the convertible venture offering, which closed in Q2 and an increased drawdown on our credit facility, which was increased in the second quarter of fiscal 2025.

Finally, other expense items, including G&A, consulting fees and various professional and consulting fees saw a notable sequential increases commensurate with the full quarter of operations in our staking and validator business.

This is compounded by financing activities and the closure of the Laine acquisition during the quarter. This resulted in a loss before tax of $6 million in Q2 2025 compared to a loss of $241,000 in the prior period. In the first half of fiscal 2025, the loss before tax was $1.6 million compared to income before tax of $2.4 million in the prior period.

As part of our commitment to enhancing transparency and providing investors with a clearer view of our financial performance, we are introducing adjusted EBITDA as a supplemental metric this quarter. Under IFRS, our reported results may reflect significant noncash mark-to-market adjustments related to equity compensation, the fair value of digital assets, particularly Solana and other noncash expenses. These accounting impacts can meaningfully influence reported net income from quarter-to-quarter, but do not reflect the underlying operating performance or cash generating ability of our core staking and validator business.

Adjusted EBITDA will provide a more consistent and comparable view of our financial trajectory by excluding these noncash items, and we believe it offers investors a more relevant measure of the earnings power of our platform as it scales within the Solana ecosystem.

With the three months ended March 31, 2025, we generated adjusted EBITDA of $714,000 compared to $243,000 in the prior period. For the six-month period ending March 31, 2025, the company generated $5.6 million of adjusted EBITDA compared to $2.5 million of adjusted EBITDA during the prior period. Adjusted EBITDA in the six-month period ending March 31, 2025 reflects a $4.4 million realized gain on the sales of cryptocurrencies, which occurred in the first quarter of fiscal 2025.

Moving to the balance sheet. As of March 31, 2025, we had $1.7 million in cash, $257,000 Solana and 3.17 Bitcoin to had a combined value of $48.3 million. This is a significant increase from the end of the prior quarter and reflects the recent $30 million convertible debenture financing in which ParaFi Capital is the lead investor.

On the liability side. At March 31, 2025, we had total long-term liabilities of $40.2 million, including $14 million of convertible debentures, $4.3 million in liabilities related to future share issuance and as well as $60.2 million in short-term borrowings on our credit facility.

Our Chief Technology Officer, Max Kaplan, will now provide an update on our staking and validator operations including several notable milestones regarding compliance and our institutional partnership portfolio, which highlight meaningful progress on our strategic plans to build the premier institutional grade taking platform within the Solana ecosystem.

With that, I will turn the call over to Max.

Thank you, Doug. I also want to echo Leah's sentiment on how excited I am for the future of Solana. Like Leah, I also started in the Bitcoin ecosystem. I wanted to make it an important distinction, however, Bitcoin is an asset, Solana is a network. Solana is more than just a blockchain.

It's the most capable infrastructure layer for the next wave of real-world asset tokenization with unmet throughput, instant finality and low transaction costs, Solana offers a scalability and efficiency required to support the institutional tokenization of real assets. This doesn't just mean equities, but also real estate, credit, commodities and more.

As tokenization gains traction across financial markets, the need for a high-performance network that can support massive transaction volumes becomes increasingly clear, and Solana stands alone in its ability to meet that demand today. This emerging shift presents a multitrillion dollar opportunity for the Solana ecosystem.

At Sol Strategies, we're proud to lead this transformation. We recently announced our intention to become the first company to natively tokenize its common equity on Solana, a move that reinforces our position as both a technological leader and a capital markets innovator. We're not alone in this vision. Kraken, one of the world's largest centralized exchanges, has also announced plans to issue tokenized equities on Solana, selecting it over their own Ethereum base layer two. The conversion in traditional markets and blockchain is happening, and Solana is quickly establishing itself as the foundational infrastructure powering this evolution.

Due to our validator business, which I will get into next, we are uniquely positioned to benefit from the significant increases in transaction activity that the broader trends of tokenized real world assets, including equities, such as our own shares are poised to drive to the Solana network. This past quarter was incredible for us from a growth perspective. To begin, I'd like to take a moment to remind everyone of how our business model functions, particularly for those newer to the story. As a leading validator on the Solana network, Sol Strategies plays a critical role in supporting the security and operation of the blockchain.

In return for providing this infrastructure, we earn rewards denominated in Sol based upon the amount of stake delegated to our validators. These rewards represent our core source of revenue. Simply put, the more Sol that's at stake with us, whether from our own treasury or from the broader community, the more revenue we generate.

And as Solana network activity increases, so too does the size and frequency of the reward pool. This is where our strategic positioning becomes especially compelling. As a real-world asset tokenization gains momentum, whether it's tokenized equities, real estate or other financial instruments, the underlying infrastructure must scale to support that activity.

Solana's unmatched speed, low cost and composability make it the clear platform of choice for these use cases. As the trend plays out, validator operators like Sol Strategies stand to benefit directly from the resulting growth in network activity and transaction volume, which expands with staking base and increases the total rewards distributed across the ecosystem.

Now turning to some specific updates from the quarter. As of the end of the second fiscal quarter, our total assets under delegation reached 3.39 million Sol. Our unique speaker count also grew significantly, up to 5,209 wallets. Importantly, only 11% of our total stake originates from our own treasury, further reinforcing that our growth is driven by community trust and adoption, not just internal capital. Combined, this places Sol Strategies among the top 25 validator operators on the Solana network alongside the largest centralized exchanges in the world.

Innovation remains core to who we are. This quarter, we are proud to launch our performance dashboard on Dune, which allows anyone, investors, stakers or ecosystem participants to view our unaudited performance data with daily granularity. In a world where most public companies report only quarterly. We believe this level of real-time transparency sets a new standard. It's a reflection of both our values and our long-term commitment to building the most trusted and institutionally aligned validator platform in Solana ecosystem.

In line with our commitment to building the most trusted and reliable institutional staking platform in the flat ecosystem, we recently achieved three critical combined milestones. SOC1 Type 1, SOC 2 Type 1 and our ISO 27001 recertification. These independent third-party audits validate the strength of our internal controls, data security practices and operational reliability, key prerequisites for onboarding institutional partners, many of whom are subject to similar regulatory and audit requirements themselves.

These certifications position Sol Strategies as a highly credible compliant counterparty capable of meeting the rigorous standards of today's institutional allocators. We also remain on track to complete SOC2 Type 2 by year-end further raising the bar.

Separately, we were honored to be named a validator for Marinade Select, a curated set of the top 30 staking operators in the Solana ecosystem. Marinade Select was recently identified as the infrastructure partner for a proposed Solana ETF in the US. And if approved, Sol Strategies would receive a portion of ETF-related inflows yet another reflection of our credibility and growing influence within the institutional speaking landscape.

As we continue to scale our validator and staking business, the momentum we're seeing from both institutional and retail channels is accelerating what we view as a powerful flywheel effect as more capital and participants join the Solana ecosystem, validator revenue rises, staking inflows increase and Sol Strategies is uniquely positioned to capture the upside from this compounding network growth.

On the institutional side, one of our most impactful developments this quarter was our partnership with BitGo, one of the world's largest digital asset custodians. This integration enables BitGo's institutional clients who collectively manage billions in crypto assets to directly state their SOL with Sol Strategies validators. Access to BitGo's platform is limited to a select group of providers, and this marks a major milestone in expanding our reach amongst institutional allocators.

Following that, we announced a new staking partnership with DigitalX, a publicly traded digital asset management firm that maintains SOL on its corporate treasury. This makes DigitalX our second public company partner alongside Neptune Digital Assets that has entrusted Sol Strategies as their preferred staking provider, validating our platform's compliance credential, uptime reliability and strategic alignment with institutional needs.

At the same time, we're making meaningful inroads on the retail front. Last month, we launched the OrangeFin mobile app on iOS, Android and Solana Mobile, making it the world's first dedicated mobile app for native Solana taking. Since launch, OrangeFin has already facilitated nearly USD0.5 million in staking inflows with a median stake size of just USD250. That signals strong early adoption from a growing base of everyday users and long-tail retail participants.

We also debuted our white label validator offering, launching our first partnership with Pudgy Penguins, one of the most recognizable consumer brands in crypto. This business line allows high-profile web three brands to extend their footprint to Solana while sharing in validated rewards via branded staking experiences, a model we believe has broad scalability and revenue potential.

Together, these partnerships across institutional retail and brand-driven channels, not only reinforce our positioning within the Solana ecosystem, but also amplify the economic engine driving our business. With each new partner or delegation, the flywheel turns faster fuelling further growth in stake, revenue and validator influence across the network.

As we reflect on progress made this quarter, our first full quarter of staking milder operations, I couldn't be more enthusiastic about the path ahead. The pace at which we've established ourselves as a credible compliant and fast-scaling leader in the Solana ecosystem is both validating and energizing.

From onboarding institutional partners through expanding our retail footprint and launching our new revenue-generating business line, we've built meaningful momentum that positions us exceptionally well for continued growth in the quarters to come. With the flywheel now in motion and strong tailwinds supporting increased network activity, I believe we are just beginning to unlock the full potential of this platform.

With that, I'll turn the call back over to Leah for some closing thoughts.

Thank you, Max, for the update on our staking and validator strategy. At Sol Strategies, we believe Solana isn't just a blockchain, it's the infrastructure layer of the future of finance. Its speed, scalability and low-cost position it as a platform of choice for institutional adoption, and we're building every day to meet that moment.

We're committed to operating at the highest levels of security, compliance and transparency. That's why we've completed SOC1 Type 1, SOC 2 Type 1 and ISO 27001 audits, not just for our own business, but as a signal of how we believe the validator landscape should operate.

And because blockchain data is inherently public, we've taken an extra step of making our performance more accessible and digestible. Our dashboard on Dune referenced in our MD&A provides a daily unaudited view of validated revenue and activity, offering more visibility than traditional public companies, which typically report only quarterly. We believe transparency should be the default. We're proud to lead by example and invite others to follow our journey through this level of open reporting.

Sol Strategies isn't just participating in the next chapter of finance, we're helping build it. Thank you all for joining today. Operator, please open the line for questions.

(Operator Instructions) We'll go first this afternoon to Darren Aftahi, ROTH.

And congrats on the progress, just a short time. Two if I may. Can you just start -- like you talked about tokenization and the Solana network, can you just kind of maybe talk about your road map there and what that looks like and where you kind of plan to invest money going forward?

Yes, I'll start for one second. But Darren, thank you so much for the great question. And I'm glad that Max jumps in here again, our CTO. I will toss it to him here because I think that it's the most exciting initiative at the firm.

Cool. Yes, I can talk a little bit about that. So I think we announced our intentions to be the first company, public company in the world to issue its shares natively on Solana. And I think one of the really exciting things about our business is really this. It's that because we run validators, the more use the network is the more revenue the company is going to generate.And if there are more assets and there's more trading volume that's on Solana, we're going to directly capture that really because we're running validators.

And really, in general, the more volume that happens, the more volume that happens on chain, the more revenue the company is going to generate. So in terms of road map, we're going to keep pushing on -- we announced our intention to be the first company to listed shares there. We're going to keep focusing on our staking business. And then there's other things that I think we're going to look at, but nothing to say just yet there.

Great. A couple more if I could. Just on your tech stack beyond tokenization kind of the plans for investment there? And then I'm kind of curious, as you think through your balance sheet, when you look at the opportunities between kind of investment, maybe a third tranche versus investment in acquiring validators versus just buying Solana in the open market via treasury, like how do you kind of think about the use of your balance sheet kind of deploying that for the overall platform?

Well, yes, I'll take the tech question, and then I'll hand over the balance sheet one to Leah. But in terms of investment, we're really focused on building right now the premier staking product that there is, there's a lot of things that I'll talk about there. But our total assets under delegation is growing pretty quickly, where right now, we're at 3.5 million SOL delegated to us, which puts us in about the top 20, I believe, operators on the network. We're going to keep focusing on building better products there.

And similarly, we just launched a mobile app. That's the first real mobile app that's dedicated to staking but also functions as a wallet and there's other things we're looking at in that space. But I think primarily, we want to be an infrastructure provider.

And I think you'll see more things that we do in the infrastructure space. I'll pass it over to Leah to take the balance sheet question.

No. I think that's perfect. And I think that it's definitely the question to ask, and thank you again for the question. So our treasury strategy, as mentioned, is structured to support both the organic and inorganic growth in a disciplined banner. On the organic side, we're focused on reinvesting into the core infrastructure, validator operations technology development that Max just spoke to. And then again, meaningful returns and long-term strategic value by continuing that flywheel.

On the inorganic side, we continue to evaluate acquisitions, we're always going to be evaluating opportunities on that front that creates strategic alignment, return on capital for or validator business. So with respect to capital, as you asked the question around taking down the next tranche, obviously, I can't speak to that at the moment. However, we are definitely explicitly always going to be looking to increase our Sol treasury. We believe that, that makes us the best bet on SOL, as that means that you are -- we are conviction driven.

By increasing SOL exposure, especially when paired with productive staking strategies that we believe we have that supports both the treasury growth and the long-term shareholder value since it's reinvested and we gained that staking yield. So any moves in this area, as you can imagine, will be done methodically and transparently and definitely within existing risk and compliance frameworks, of course.

That's helpful. And if I could just squeeze one more in maybe for Max. I just talked about a ton, but with crypto obviously, cybersecurity is super important. So I'm just kind of curious how your road map quantum cryptography kind of fits into the overall Sol Strategies tech platform?

Yes, great question. On the security front, overall, there's plenty of things that we're doing. And one of the things we talked about was all the security audits that we've done, and we've also published blogpost on security. I know your question was more specifically on Quantum. That is something that I think Solana is going to -- I don't want to just say Solana, but really crypto in general is going to face -- there are -- there is different opinions in terms of how close we are to that.

But Solana was actually one of the first networks to really do some innovation there in terms of like Quantum safe vaults and things like that. It's an area that we're looking at and certainly an area that we want to see Solana takes seriously. And so far from everything we've seen, it definitely is. And we're going to keep looking there, but I think that's what I have to say right now in regards to that.

(Operator Instructions) Kevin Dede, H.C. Wainwright.

Can you hear me okay?

We hear you.

Great. Thanks for having me on the call. I appreciate it. Could you maybe detail a few of the hurdles or bottlenecks you might encounter and the timing you're expecting for your Nasdaq listing?

Thanks, Kevin. We will keep everybody appraised as we can. As of right now, what we press released is that our application has been filed, and we're working towards that goal.

Working towards, I'm sorry?

Working towards the goal of continuing to uplift the future plans being listing on the CSE to Nasdaq and tokenized. Unfortunately, I just can't speak to anything else at the moment. apologies.

No. Okay. Could you offer the business model view of your Pudgy Penguin deal? How are you white labelling? And what are the financial implications?

Yes. I will turn into Max here in a second to actually speak to it. It's very exciting. So business model view, I'll actually step back even further of business strategy. The exciting thing about Pudgy Penguin being it is our expansion of running a white-label validator service, which we believe is definitely going to be seeing explosive growth, especially as more institutional players join not just a real-world tokenized asset world but also continue to tokenize their funds, many of which are being done on Solana.

So with Pudgy Penguins, it was -- it's very interesting to be running their validator, Max, maybe you can speak to some of the economics and how that actually works.

Yes, absolutely. Great question. Yes, the Pudgy Penguin thing is really exciting. Penguins was predominantly on Ethereum, but over the last couple of months, they've moved to Solana. And we're pretty excited to help such a big brand move to Solana.

In terms of the economics, without getting into the details, really what we're doing is the more stake that Pudgy Penguins is going to attracts the more money both of our companies are going to generate and is set up in a way where that really like everyone is incentivized both parties, I should say, are incentivized to roll it out.

And Pudgy Penguins is a big brand, and the validator certainly has been growing. I think it's like 76,000 SOL [validators] or something right now. And really, in general, the more stake that it continues to get which has been growing, the more money we're going to make and the more money Pudgy Penguins were going to make.

So while I have you, Max, can you help me understand biosis aside, how you see Solana advantaged in an RWA application versus Avalanche and [Albern], both of which already have financial applications associated with them, maybe even Polygon because I think that's got real estate attached?

Great, great question. So let's go into that. But really, like I want to start higher level. is like these assets are going to want to go where volume is and users are, right? And if you look at most metrics, right, in terms of like number of transactions, unique wallet Dexus volume, things like that, Solana is really the winner, right? And one of the most important things for like any asset is liquidity. And Solana consistently has been having -- in terms of Dexus, Solana has definitely had the highest volume, right?

In terms of Avalanche, Polygon, those other networks, I think they're really pushing forward in that space, but pushing forward in terms of bizdev, I think some things might go there. But really, in general, I don't know the terms of any deal or anything like that, right? But really, like if you look at in terms of what's really important for an RWA. It really comes down to liquidity, volume and users, and Solana is through and through the winner there, especially compared to the other networks that you talked about, which this data -- the cool thing about this is this data is public.

And the other thing I think I would say, too, is that Solana, the Solana Foundation itself has really -- these tokenized equities, they can't really be treated like normal tokens because to hold the stock, you need to do KYC and things like that. Solana has pushed a standard forward where these assets could actually comply with that where some of these other networks happen, right?

And I think the regulatory stuff is up in the air, and I can't comment on that. But in terms of those three pillars that I talked about, really users liquidity and volume I think it's pretty clear to me and almost -- I would say this. It's clear to me that Solana is going to be the winner there.

Okay. I appreciate that perspective. Can we take your view on [MEV] now. I think [Gito's] closed and guys have read something about [Firedancer] . Help me understand how you're going to maneuver given the validator nodes you're running and the amount of Solana you have state, how you're going to maximize extractive all value?

Another great question there. So you mentioned a few things there. You mentioned Firedancer. You mentioned MEV and Gito. And without getting super in the lead here, we've run -- so we run four validators, and we actually run -- two of them on Firedancer, two of them on Gito and the ones that run on fired answer, they also run Gito as well.

But really, in general, like in maximizing MEV. In terms of extraction, it's not really something that we're necessarily looking to do. And the reason that I say -- I just want to make this clear. we are capturing an MEV. But in terms of MEV can be toxic at points, right? And really, one of our worries is that if users aren't getting the best prices, they're not going to want to come on then to trade a real-world asset, right?

So in the short term, maybe if we were ripping users off in terms of getting good prices and things like that, that might lead to more revenue. In the long run, that really hurts in my opinion, where it's going to it's going to prohibit these institutional flows from actually wanting to trade on chain. We're really focused on doing the right thing here. And if you ask almost anyone in the space, the right thing is to make sure that users are getting good prices.

And not all MEV is bad. Some MEV is really there to make sure that your transactions get through quicker. But we are not going to do anything that you might have heard like sandwiching or things like that. That's just not something that we're going to do because we really believe that if these tokenized assets come on chain and users continue to get the best prices with the best liquidity, that is going to be best for us in Solana overall.

Last question for me. Is your OrangeFin app available in the US?

Yes, it is. It's available on iOS, Android and the Solana mobile store in the US.

(Operator Instructions) James Towers, Stars Family Office.

Okay. Great. So I was wondering, given the $480 million mining under the convertible note facility with ATW Partners and the recent unfiled based shelf sectors for $1 billion in additional securities, how do you guys think about capital allocation winging in against some shareholder dilution?

We're absolutely considering everything and being very measured as we consider financing opportunities. will remain transparent as anything comes. However, we have a very experienced team, very experienced Board. Our CFO, Doug on the call, has many, many years of experience looking at these types of deals. So I think that, that's a great question to ask, especially as a shareholder, and we'll be very measured in our approach of thinking what to do on that front.

Thank you. And Ms. Wald, it appears we have no further questions this afternoon. I'd like to turn the conference back to you for any closing comments.

Yes. Thank you all so much for joining us today and for your continued interest and support of our company. We're excited about opportunities ahead and look forward to updating you again on our progress during our next quarterly call. Have a great week.

Thank you very much, Ms. Wald. Again, ladies and gentlemen, that will conclude today's Sol Strategies fiscal quarter ended March 31, 2025, earnings call. Again, thanks so much for joining us, everyone, and we wish you all a great day. Goodbye.