Item 7. Management’s Discussion and Analysis
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
following discussion and analysis of the Trust’s financial condition and results of operations should be read together with, and
is qualified in its entirety by reference to, the Trust’s audited financial statements and related notes included elsewhere in
this Annual Report, which have been prepared in accordance with GAAP. See “Cautionary Statement Regarding Forward-Looking Statements”
above.
Overview
of the Trust
The
Trust is an exchange-traded fund that issues Shares that are listed and trade on the Exchange. The Trust’s investment objective
is to seek to provide exposure to the price of SOL held by the Trust, less the expenses of the Trust’s operations and other liabilities.
A secondary investment objective is for the Trust to earn additional SOL through the validation of transactions in the SOL network’s
(the “Solana Network”) proof-of-stake (“PoS”) process. In seeking to achieve its investment objectives, the Trust
holds SOL and establish its NAV on each business day by reference to the Pricing Benchmark. The Pricing Benchmark is calculated by the
Benchmark Provider based on a 60-minute time-weighted average price of the Underlying Index, which is an aggregation of executed trade
flow of Constituent Platforms. The Benchmark Provider publishes the Pricing Benchmark. The Trust is sponsored by the Sponsor.
The
Shareholders of the Trust take no part in the management or control, and have no voice in, the Trust’s operations or business.
Except to elect a successor Sponsor upon the resignation of the Sponsor or as otherwise required by laws of the state of Delaware, Shareholders
have no voting rights under the Trust Agreement.
Liquidity
and Capital Resources
The
Trust typically does not hold a cash balance except in connection with the creation and redemption of “Baskets” ( i.e. ,
blocks of 10,000 Shares) or to pay expenses not assumed by the Sponsor. The Trust pays the Sponsor an annual unified fee of 0.50% of
the Trust’s SOL Holdings (the “Sponsor Fee”). The Trust’s “SOL Holdings” is the quantity of the Trust’s
SOL plus any cash or other assets held by the Trust represented in SOL as calculated using the Pricing Benchmark price, less its liabilities
(which include estimated accrued but unpaid fees and expenses) represented in SOL as calculated using the Pricing Benchmark price.
The
Trust may also incur certain extraordinary, nonrecurring expenses that are not assumed by the Sponsor, including, but not limited to,
brokerage and transaction costs associated with the sale or transfer of SOL, taxes and governmental charges, expenses and costs of any
extraordinary services performed by the Sponsor (or any other service provider) on behalf of the Trust to protect the Trust, the Trust’s
assets, or the interests of Shareholders, any indemnification of the Custodians or other agents, service providers or counterparties
of the Trust, and extraordinary legal fees and expenses, including any legal fees and expenses incurred in connection with litigation,
regulatory enforcement or investigation matters (collectively, “Extraordinary Expenses”). To the extent on-chain transaction
fees are incurred in connection with transfers or sales of SOL to pay Extraordinary Expenses, the Trust bears such fees.
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To
the extent it does not have cash readily available, the Sponsor shall cause the transfer or sale of SOL in such quantity as may be
necessary to permit the payment of Trust expenses and liabilities not assumed by the Sponsor or for payment of redemption proceeds
to Authorized Participants. The Trust does not bear any costs associated with the transfer or sale of SOL to pay the Sponsor Fee. To
the extent the Trust incurs any Extraordinary Expenses, the Trust bears the costs of any transfers or sales of SOL to pay such
expenses. The Trust seeks to transfer SOL at such times and in the smallest amounts required to permit such payments as they become
due. With respect to transfers or sales necessary to pay Trust expenses and liabilities that are denominated other than in SOL, the
amount of SOL transferred or sold may vary from time to time depending on the actual sales price of SOL relative to the
Trust’s expenses and liabilities ( e.g. , if the price of SOL falls, the amount of SOL needed to be transferred or sold
to pay an expense denominated in U.S. dollars will increase). To the extent the Trust must buy or sell SOL, the Trust may do so
through a third-party digital asset broker or dealer. When the Trust buys or sells SOL, the Sponsor seeks quotes from its SOL
trading counterparties. Such transactions are typically conducted over the counter rather than over a trading platform or similar
order matching service. The Sponsor selects third party brokers or dealers that it believes have implemented adequate AML, KYC and
other legal compliance policies and procedures.
Results
of Operations for the Period Ended December 31, 2025
The
Trust commenced operations and its net asset value increased from $0 at the start of business on November 17, 2025, to $1,926,808 on
December 31, 2025. The change in the Trust’s net assets resulted from an increase in outstanding Shares, which grew from 0 at the
start of business on November 17, 2025, to 80,000 at December 31, 2025, as a result of 80,000 Shares (80 Baskets) being created and 0
Shares (0 Baskets) being redeemed during the period, and a decrease in the value of SOL, which depreciated –4.57% from $129.81
at November 17, 2025 (the initial share purchase date) to $123.87 at December 31, 2025.
The
net asset value per Share decreased -3.69% from $25.00 as of November 17, 2025 (the initial share purchase date) to $24.09 as of December
31, 2025.
The
net asset value per Share of $27.60 as of November 26, 2025 was the highest during the period, compared with a low of $22.10 as of
December 18, 2025.
The
decrease in net assets from operations for the period ended December 31, 2025 was $(158,893), resulting from staking income of $10,331
and unrealized depreciation of the Trust’s SOL investment of $(169,224).
Off-Balance
Sheet Arrangements
As
of December 31, 2025, the Trust has not used, nor does it expect to use in the future, special purpose entities to facilitate off balance
sheet financing arrangements and has no loan guarantee arrangements or off-balance sheet arrangements of any kind other than agreements
entered into in the normal course of business, which may include indemnification provisions related to certain risks service providers
undertake in performing services which are in the best interests of the Trust. While the Trust’s exposure under such indemnification
provisions cannot be estimated, these general business indemnifications are not expected to have a material impact on the Trust’s
financial position.
Critical
Accounting Policies
Principal
Market and Fair Value Determination
The
Trust’s periodic financial statements are prepared in accordance with the FASB ASC Topic 820 and utilize an exchange-traded price
from the Trust’s principal market for SOL on the Trust’s financial statement measurement date. The Sponsor determined in
its sole discretion the valuation sources and policies used to prepare the Trust’s financial statements in accordance with GAAP.
The Trust engaged a third-party vendor to obtain a price from a principal market for SOL, which was determined and designated by such
third-party vendor daily based on its consideration of several exchange characteristics, including oversight, and the volume and frequency
of trades. Under GAAP, such a price is deemed a Level 1 input in accordance with ASC Topic 820 because it is a quoted price in active
markets for identical assets or liabilities.
Item
7A. Quantitative and Qualitative Disclosures About Market Risk.
As
a smaller reporting company, the Trust is not required to provide the information required by this item.
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