Ark 21Shares Bitcoin ETF 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations This information should be read in conjunction with the financial statements and notes included in Item 1 of Part I of this Form 10-Q. This Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, and such forward-looking statements involve risks and uncertainties. All statements (other than statements of historical fact) included in this Form 10-Q that address activities, events or developments that may occur in the future, the Trust’s operations, the Sponsor’s plans and references to the Trust’s future success and other similar matters are forward-looking statements. Words such as “could,” “would,” “may,” “expect,” “intend,” “estimate,” “predict,” and variations on such words or negatives thereof, and similar expressions that reflect our current views with respect to future events and Trust performance, are intended to identify such forward-looking statements. These forward-looking statements are only predictions, subject to risks and uncertainties that are difficult to predict and many of which are outside of our control, and actual results could differ materially from those discussed. Forward-looking statements involve risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed therein. We express our estimates, expectations, beliefs, and projections in good faith and believe them to have a reasonable basis. However, we make no assurances that management’s estimates, expectations, beliefs, or projections will be achieved or accomplished. These forward-looking statements are based on assumptions about many important factors that could cause actual results to differ materially from those in the forward-looking statements. We do not intend to update any forward-looking statements even if new information becomes available or other events occur in the future, except as required by the federal securities law s. Organization and Trust Overview The Trust is a Delaware statutory trust, formed on June 22, 2021, pursuant to the DSTA. The Trust operates pursuant to the Trust Agreement. The Trust is not registered as an investment company under the 1940 Act and is not a commodity pool for purposes of the CEA. The Trust is managed and controlled by the Sponsor. The Sponsor is a limited liability company formed in the state of Delaware on June 16, 2021, and is a wholly owned subsidiary of Jura Pentium Inc., whose ultimate parent company is 21co Holdings Limited (formerly known as Amun Holdings Limited). The Sponsor is not subject to regulation by the CFTC as a commodity pool operator with respect to the Trust, or a commodity trading advisor with respect to the Trust. The Trust is an exchange-traded fund that issues common units of beneficial interest representing fractional undivided beneficial interests in its net assets that trade on the Exchange. The Shares are listed for trading on the Exchange under a ticker symbol “ARKB”. On December 12, 2023, the Sponsor, in its capacity as Seed Capital Investor, subject to conditions, purchased the initial Seed Shares comprising 2 Shares at a per-Share price of $50.00, as described in “Seed Capital Investor.” Total proceeds to the Trust from the sale of these Seed Shares were $100. Delivery of the Seed Shares was made on December 12, 2023. These Seed Shares were redeemed for cash on or about January 5, 2024. On January 9, 2024 (the “Seed Capital Purchase Date”), the Seed Capital Investor purchased Seed Creation Baskets comprising 10,000 Shares (the “Initial Seed Creation Baskets”) at a per-share price of $46.88. Total proceeds to the Trust from the sale of the Seed Creation Baskets were $468,806.44. On January 9, 2024, the Trust purchased 10 bitcoins with the proceeds of the Seed Creation Baskets by transacting with a Bitcoin Counterparty to acquire bitcoin on behalf of the Trust in exchange for cash provided by the Sponsor in its capacity as Seed Capital Investor. These Seed Creation Baskets were redeemed for cash on or about January 19, 2024. On June 2, 2025, the Trust announced that the Sponsor had approved the Share Split of all of the Shares. In connection with the Share Split, every one Share that was held by the Trust’s Record Holders at the close of business on June 12, 2025, automatically split into three Shares after market close on June 13, 2025. The Share Split became effective at market open on June 16, 2025. Following the Share Split, the Shares will continue to trade under the ticker symbol “ARKB” under the same CUSIP, and the total NAV of the Trust did not change as a result of the Share Split. In addition, each Record Holder will continue to hold the same percentage of the Trust’s outstanding Shares as held immediately prior to the Share Split, and the Share Split will not modify the rights or preferences of the Shares. The investment objective, strategy, and underlying holdings of the Trust will remain unchanged. The Trust’s investment objective is to seek to track the performance of bitcoin, as measured by the performance of the Index, adjusted for the Trust’s expenses and other liabilities. CF Benchmarks Ltd. is the administrator for the Index Provider. The Index is designed to reflect the performance of bitcoin in U.S. dollars. In seeking to achieve its investment objective, the Trust holds bitcoin at its Custodians and values its Shares daily based on the Index. The Trust is a passive investment vehicle and is not a leveraged product. The Sponsor does not actively manage the bitcoin held by the Trust. The Trust issues Shares only in Creation Baskets of 5,000 or multiples thereof. Creation Baskets are issued and redeemed in exchange for cash. Individual Shares will not be redeemed by the Trust but are listed and traded on the Exchange under the ticker symbol “ARKB.” The Trust issues Shares in Creation Baskets on a continuous basis at the applicable NAV per Share on the creation order date. The Trust pays the unitary Sponsor fee of 0.21% of the Trust’s bitcoin holdings. The Sponsor fee is paid by the Trust to the Sponsor as compensation for services performed under the Trust Agreement. The Sponsor agreed to waive the entire Sponsor fee for (i) a nine-month period which commenced on January 11, 2024 (the day the Trust’s Shares were initially listed on the Exchange), or (ii) the first $1 billion of Trust assets, whichever came first. The Trust assets exceeded $1 billion in February 2024, at which time the waiver period ended. The Trust incurred Sponsor fees for the six-month periods ended June 30, 2025 and 2024 of $4,811,499 and $2,183,009 net of Sponsor fees waived of $93,111, respectively. 12 The Trust is an “emerging growth company” as that term is used in the Securities Act and, as such, the Trust may elect to comply with certain reduced public company reporting requirements. The NAV of the Trust is used by the Trust in its day-to-day operations to measure the net value of the Trust’s assets. The NAV is calculated on each Business Day and is equal to the aggregate value of the Trust’s assets less its liabilities based on the Index price. In determining the NAV of the Trust on any Business Day, the Administrator calculates the price of the bitcoin held by the Trust as of 4:00 p.m. ET on such day. The Administrator also calculates the “NAV per Share” of the Trust, which equals the NAV of the Trust divided by the number of outstanding Shares. In addition to calculating NAV and NAV per Share, for purposes of the Trust’s financial statements, the Trust determines the Principal Market NAV and Principal Market NAV per Share on each valuation date for such financial statements. The determination of the Principal Market NAV and Principal Market NAV per Share is identical to the calculation of NAV and NAV per Share, respectively, except that the value of bitcoin is determined using the fair value of bitcoin based on the price in the bitcoin market that the Trust considers its “principal market” as of 4:00 p.m. ET on the valuation date, rather than using the Index. NAV and NAV per Share are not measures calculated in accordance with GAAP and are not intended as substitutes for Principal Market and Principal Market NAV per Share, respectively. Critical Accounting Estimates The financial statements and accompanying notes are prepared in accordance with GAAP. The preparation of these financial statements relies on estimates and assumptions that impact the Trust’s financial position and results of operations. These estimates and assumptions affect the Trust’s application of accounting policies. Below is a summary of accounting policies on cash and investment valuation. There were no material estimates involving a significant level of estimation uncertainty that had or are reasonably likely to have had a material impact on the Trust’s financial condition used in the preparation of the financial statements. In addition, please refer to Note 2 to the Financial Statements included in this report for further discussion of the Trust’s accounting policies. Cash Cash includes non-interest bearing, non-restricted cash maintained with one financial institution that does not exceed U.S. federally insured limits. Investment Valuation The Trust’s policy is to value investments held at fair value. The Trust follows the provisions of ASC 820, Fair Value Measurements (“ASC 820”). ASC 820 provides guidance for determining fair value and requires increased disclosure regarding the inputs to valuation techniques used to measure fair value. ASC 820 determines fair value to be the price that would be received for bitcoin in a current sale, which assumes an exit price resulting from an orderly transaction between market participants on the measurement date. ASC 820-10 requires the assumption that bitcoin is sold in its principal market to market participants (or in the absence of a principal market, the most advantageous market). Trust utilizes an exchange traded price from the Trust’s principal market for bitcoin as of 4:00 p.m. ET on the Trust’s financial statement measurement date. Results of Operations (Amounts in thousands, except price of bitcoin and Shares outstanding) As of June 30, 2025, the Trust had a net closing balance of 46,722.8267 bitcoins with a value of $5,022,119, based on the Index price of $107,487.49 on June 30, 2025 (CME CF Bitcoin Reference Rate – New York Variant, non-GAAP methodology). As of June 30, 2025, the total market value of the Trust’s bitcoin was $5,034,561, based on the price of a bitcoin in the principal market of $107,753.77 on June 30, 2025. For the Three Months ended on June 30, 2025 Net realized and change in unrealized loss on investment in bitcoin for the three months ended June 30, 2025, was $1,200,104 which includes a net change in unrealized appreciation on investment in bitcoin of $859,932. Net realized and change in unrealized gain on investment in bitcoin for the period was driven by bitcoin price appreciation throughout the period from $82,444.71 per bitcoin as of March 31, 2025 to $107,753.77 per bitcoin as of June 30, 2025. Net increase in net assets resulting from operations was $1,197,660 for the three months ended June 30, 2025, primarily driven by the aforementioned net realized and change in unrealized gain on investment in bitcoin. 13 For the Three Months ended on June 30, 2024 The Trust’s NAV decreased from $3,160,033 on March 31, 2024 to $2,849,575 on June 30, 2024. The decrease in the Trust’s NAV resulted primarily from a decrease in bitcoin price of 12.48% (from $70,761.62 per bitcoin as of March 31, 2024 to $61,929.29 per bitcoin as of June 30, 2024) and an increase of number of shares outstanding from 134,010,000 on March 31 2024 to 139,500,000 on June 30, 2024. The Trust’s net decrease in net assets resulting from operations for the quarter ended June 30, 2024 was $(409,214). This number is largely the result of a change in unrealized depreciation on investment in bitcoin of $(543,311), which was partially offset by a realized gain of $327 on the sale of bitcoin for purposes of distributing to the Sponsor as the Sponsor’s fee and net realized gain on investment in bitcoin sold for redemptions of $135,325. The Trust’s expenses for the quarter were $1,555, relating to the Sponsor’s fees. For the Six Months Ended June 30, 2025 The Trust’s NAV increased from $4,352,288 on December 31, 2024 to $5,034,361 on June 30, 2025. The increase in the Trust’s NAV resulted primarily from an increase in the price of bitcoin of 15.46% (from $93,320.22 per bitcoin on December 31, 2024 to $107,753.77 per bitcoin on June 30, 2025) and a net increase of 93,880,000 in the number of shares outstanding from December 31, 2024 to June 30, 2025. The Trust’s net increase in net assets resulting from operations for the six months ended June 30, 2025 was $610,112. This was the result of a change in unrealized depreciation on investment in bitcoin of $(47,364), a net realized gain of $1,129 on the sale of bitcoins for purposes of distributing to the Sponsor as the Sponsor’s fee, and net realized gain on investment in bitcoin sold for redemptions of $661,158. The Trust’s expenses for the six-month period were $(4,811) relating to the Sponsor’s fees. For the Six Months Ended June 30, 2024 The Trust’s NAV increased from $100 on December 31, 2023 to $2,849,575 on June 30, 2024. The increase in the Trust’s NAV resulted primarily from an increase in the price of bitcoin of 32.70% (from $46,666.89 per bitcoin on January 11, 2024 to $61,929.29 per bitcoin on June 30, 2024) and a net increase of 138,149,994 in the number of shares outstanding from December 31, 2023 to June 30, 2024. The Trust’s net increase in net assets resulting from operations for the six months ended June 30, 2024 was $435,396. This was the result of a change in unrealized depreciation on investment in bitcoin of $302,012, a net realized gain of $327 on the sale of bitcoins for purposes of distributing to the Sponsor as the Sponsor’s fee, and net realized gain on investment in bitcoin sold for redemptions of $135,239. The Trust’s expenses for the six-month period were $2,183, relating to the Sponsor’s fees net of Sponsor’s fee waived. Liquidity and Capital Resources The Trust is not aware of any trends, demands, commitments, events, or uncertainties that are reasonably likely to result in material changes to its liquidity needs. The Trust’s only ordinary recurring expense is the fee paid to the Sponsor at an annual rate of 0.21% of the daily NAV of the Trust. The Sponsor agreed to waive the entire Sponsor fee for (i) a nine-month period which commenced on January 11, 2024 (the day the Trust’s Shares were initially listed on the Exchange), or (ii) the first $1 billion of Trust assets, whichever came first. The Trust assets exceeded $1 billion in February 2024, at which time the waiver period ended. The aggregate Sponsor fee paid to the Sponsor for the period ended June 30, 2025 was $4,969. In exchange for the Sponsor’s fee, the Sponsor has agreed to assume the ordinary fees and expenses incurred by the Trust, including but not limited to the following: fees charged by the Sub-Adviser, Administrator, the Custodians, Transfer Agent and the Trustee, the Marketing Fee, the Exchange’s listing fees, typical maintenance and transaction fees of the DTC, SEC registration fees, printing and mailing costs, website fees, tax reporting fees, audit fees, license fees and expenses, up to $100,000 per annum in ordinary legal fees and expenses. The Sponsor bears expenses in connection with the Trust’s organization and initial offering costs. 14 The Sponsor is not required to pay any extraordinary or non-routine expenses. Extraordinary expenses are fees and expenses which are unexpected or unusual in nature, such as legal claims and liabilities and litigation costs or indemnification or other unanticipated expenses. Extraordinary fees and expenses also include material expenses which are not currently anticipated obligations of the Trust. The Trust will be responsible for the payment of such expenses to the extent any such expenses are incurred. Routine operational, administrative, and other ordinary expenses are not deemed extraordinary expenses. The Trust will sell bitcoin on an as-needed basis to pay the Sponsor’s fee. Off-Balance Sheet Arrangements The Trust does not have any off-balance sheet arrangements. Item 3. Quantitative and Qualitative Disclosures about Market Risks We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.