Grayscale Bitcoin Mini Trust ETF 10-Q

Item 1. Financial Statements (Unaudited) GRAYSCALE BITCOIN MINI TRUST (BTC) STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) June 30, 2024 Assets: Cash $ 100,000 Total assets $ 100,000 Liabilities: Total liabilities - Net assets $ 100,000 Shares issued and outstanding, no par value (unlimited Shares authorized) 10,000 Net asset value per Share $ 10.00 See accompanying notes to the unaudited financial statements. 4 GRAYSCALE BITCOIN MINI TRUST (BTC) STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED) For the Period from April 29, 2024 (Date of Seeding) to June 30, 2024 Increase (decrease) in net assets from operations: Net investment loss $ - Net realized gain (loss) on investment in Bitcoin sold to pay expenses - Net realized gain (loss) on investment in Bitcoin sold for redemption of Shares - Net change in unrealized appreciation (depreciation) on investment in Bitcoin - Net increase (decrease) in net assets resulting from operations - Increase (decrease) in net assets from capital share transactions: Shares issued 100,000 Shares redeemed - Net increase (decrease) in net assets resulting from capital share transactions 100,000 Total increase (decrease) in net assets from operations and capital share transactions 100,000 Net assets: Beginning of period - End of period $ 100,000 Change in Shares outstanding: Shares outstanding at beginning of period - Shares issued 10,000 Shares redeemed - Net increase in Shares 10,000 Shares outstanding at end of period 10,000 See accompanying notes to the unaudited financial statements. 5 GRAYSCALE BITCOIN MINI TRUST (BTC) STATEMENT OF CASH FLOWS (UNAUDITED) For the Period from April 29, 2024 (Date of Seeding) to June 30, 2024 Cash provided by (used in) operating activities Net increase (decrease) in net assets resulting from operations $ - Net cash provided by (used in) operating activities $ - Cash provided by financing activities Proceeds from issuance of capital shares $ 100,000 Net cash provided by financing activities $ 100,000 Cash Net increase (decrease) in cash $ 100,000 Cash, beginning of period - Cash, end of period $ 100,000 See accompanying notes to the unaudited financial statements. 6 GRAYSCALE BITCOIN MINI TRUST (BTC) NOTES TO THE UNAUDITED FINANCIAL STATEMENTS 1. Organization Grayscale Bitcoin Mini Trust (BTC) (the “Trust”) is a Delaware Statutory Trust that was formed on March 12, 2024. Grayscale Investments, LLC (“Grayscale” or the “Sponsor”) acts as the Sponsor of the Trust and is a wholly owned subsidiary of Digital Currency Group, Inc. (“DCG”). On July 26, 2024, the Securities and Exchange Commission (the “SEC”) approved an application under Rule 19b-4 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) by NYSE Arca, Inc. (“NYSE Arca”) to list the Shares of the Trust, which began trading on NYSE Arca on July 31, 2024. As of the date of this Quarterly Report, the Trust is an SEC reporting company with its Shares registered pursuant to Section 12(b) of the Exchange Act. The following notes to the unaudited financial statements have been prepared as of June 30, 2024. Please refer to the subsequent events discussed in Note 6, Subsequent Events, for details on the Initial Distribution (as defined below). The Sponsor is responsible for the day-to-day administration of the Trust pursuant to the provisions of the Trust Agreement. The administrator for the Trust (the “Administrator”) is BNY Mellon Asset Servicing, a division of The Bank of New York Mellon. BNY Mellon Asset Servicing provides administration and accounting services to the Trust. The Administrator’s fees are paid on behalf of the Trust by the Sponsor. In general, the Trust intends to hold Bitcoin (“BTC”) and, from time to time, issue common units of fractional undivided beneficial interest (“Shares”) in exchange for Bitcoin. The Trust will seek to create and redeem Shares at such times and for such periods as determined by the Sponsor, but only in one or more whole Baskets. A Basket shall equal 10,000 Shares. The creation of a Basket will require the delivery to the Trust of the number of Bitcoin represented by one Share immediately prior to such creation multiplied by 10,000 . The redemption of a Basket will require distribution by the Trust of the number of Bitcoin represented by one Share immediately prior to such redemption multiplied by 10,000 . The Trust may from time to time halt creations and redemptions for a variety of reasons, including in connection with forks, airdrops and other similar occurrences. The Trust has had no operations other than a sale to the Sponsor of 10,000 shares of common stock for $ 100,000 ($ 10.00 per share). The Sponsor did not receive from the Trust, or any of its affiliates, any fee or other compensation in connection with the initial seed sale. The Trust’s investment objective is for the value of the Shares (based on Bitcoin per Share) to reflect the value of Bitcoin held by the Trust, less the Trust’s expenses and other liabilities. 2. Summary of Significant Accounting Policies The following is a summary of significant accounting policies followed by the Trust: The financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The Trust qualifies as an investment company for accounting purposes pursuant to the accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies . The Trust uses fair value as its method of accounting for Bitcoin in accordance with its classification as an investment company for accounting purposes. The Trust is not a registered investment company under the Investment Company Act of 1940. GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates and these differences could be material. Indemnifications In the normal course of business, the Trust enters into certain contracts that provide a variety of indemnities, including contracts with the Sponsor and affiliates of the Sponsor, DCG and its officers, directors, employees, subsidiaries and affiliates, and Coinbase Custody Trust Company, LLC (the “Custodian”) as well as others relating to services provided to the Trust. The Trust’s maximum exposure under these and its other indemnities is unknown. However, although the Sponsor has determined that there are no liabilities that currently exist under these indemnities, there can be no assurances in this regard, there is no expectation that any will occur in the future. Cash and Cash Equivalents Cash includes non-interest bearing, non-restricted cash maintained with one banking institution that does not exceed U.S. federally insured limits. 7 Fair Value Measurement Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the ‘exit price’) in an orderly transaction between market participants at the measurement date. GAAP utilizes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Trust. Unobservable inputs reflect the Trust’s assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows: • Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Trust has the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, these valuations do not entail a significant degree of judgment. • Level 2 – Valuations based on quoted prices in markets that are not active or for which significant inputs are observable, either directly or indirectly. • Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The availability of valuation techniques and observable inputs can vary by investment. To the extent that valuations are based on sources that are less observable or unobservable in the market, the determination of fair value requires more judgment. Fair value estimates do not necessarily represent the amounts that may be ultimately realized by the Trust. Calculation of Net Asset Value The Trust’s Bitcoin will be carried, for financial statement purposes, at fair value, as required by GAAP. The Trust’s policy will be to determine the fair value of Bitcoin based on the price provided by the Digital Asset Market that the Trust considers its principal market as of 4:00 p.m., New York time, on the valuation date. The net asset value of the Trust determined on a GAAP basis is referred to as Principal Market NAV. The Trust will use the Index Price to calculate its net asset value (“NAV”) which is the aggregate value, expressed in U.S. dollars, of the Trust’s assets (other than U.S. dollars or other fiat currency), less the U.S. dollar value of the Trust’s expenses and other liabilities. NAV per Share is calculated by dividing NAV by the number of Shares currently outstanding. NAV and NAV per Share are not measures calculated in accordance with GAAP. NAV is not intended to be a substitute for the Trust’s Principal Market NAV calculated in accordance with GAAP, and NAV per Share is not intended to be a substitute for the Trust’s Principal Market NAV per Share calculated in accordance with GAAP. Income Taxes The Sponsor takes the position that the Trust is properly treated as a grantor trust for U.S. federal income tax purposes. Assuming that the Trust is a grantor trust, the Trust will not be subject to U.S. federal income tax. Rather, if the Trust is a grantor trust, each beneficial owner of Shares will be treated as directly owning its pro rata Share of the Trust’s assets and a pro rata portion of the Trust’s income, gain, losses and deductions will “flow through” to each beneficial owner of Shares. If the Trust were not properly classified as a grantor trust, the Trust might be classified as a partnership for U.S. federal income tax purposes. However, due to the uncertain treatment of digital assets for U.S. federal income tax purposes, there can be no assurance in this regard going forward. If the Trust were classified as a partnership for U.S. federal income tax purposes, the tax consequences of owning Shares generally would not be materially different from the tax consequences described herein, although there might be certain differences, including with respect to timing. In addition, tax information reports provided to beneficial owners of Shares would be made in a different form. If the Trust were not classified as either a grantor trust or a partnership for U.S. federal income tax purposes, it would be classified as a corporation for such purposes. In that event, the Trust would be subject to entity-level U.S. federal income tax (currently at the rate of 21 %) on its net taxable income and certain distributions made by the Trust to shareholders would be treated as taxable dividends to the extent of the Trust’s current and accumulated earnings and profits. In accordance with GAAP, the Trust has defined the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the applicable taxing authority and requires measurement of a tax position meeting the “more-likely-than-not” threshold, based on the largest benefit that is more than 50% likely to be realized. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current period. As of, and during the period ended June 30, 2024, the Trust did not have a liability for any unrecognized tax amounts. However, the Sponsor’s conclusions 8 concerning its determination of “more-likely-than-not” tax positions may be subject to review and adjustment at a later date based on factors including, but not limited to, further implementation guidance, and ongoing analyses of and changes to tax laws, regulations and interpretations thereof. The Sponsor of the Trust has evaluated whether or not there are uncertain tax positions that require financial statement recognition and has determined that no reserves for uncertain tax positions related to federal, state and local income taxes existed as of June 30, 2024. 3. Trust Expenses In accordance with the Trust Agreement governing the Trust, the Trust pays a fee to the Sponsor, calculated as 0.15 % of the aggregate value of the Trust’s assets, less its liabilities (which include any accrued but unpaid expenses up to, but excluding, the date of calculation), as calculated and published by the Sponsor or its delegates in the manner set forth in the Trust Agreement (the “Sponsor’s Fee”). The Sponsor’s Fee accrues daily in U.S. dollars and is payable in Bitcoin, daily in arrears. The amount of Bitcoin payable in respect of each daily U.S. dollar accrual will be determined by reference to the same U.S. dollar value of Bitcoin used to determine such accrual. For purposes of these financial statements, the U.S. dollar value of Bitcoin is determined by reference to the Digital Asset Trading Platform Market that the Trust considers its principal market as of 4:00 p.m., New York time, on each valuation date. The Trust held no Incidental Rights or IR Virtual Currency as of June 30, 2024. In exchange for the Sponsor’s Fee, the Sponsor shall assume and pay all fees and other expenses incurred by the Trust in the ordinary course of its affairs, excluding taxes, but including: (i) the Marketing Fee, (ii) the Administrator Fee, (iii) the Custodian Fee, (iv) the Transfer Agent Fee, (v) the Trustee fee, (vi) the fees and expenses related to the listing, quotation or trading of the Shares on any Secondary Market (including customary legal, marketing and audit fees and expenses) in an amount up to $ 600,000 in any given fiscal year, (vii) ordinary course legal fees and expenses, (viii) audit fees, (ix) regulatory fees, including, if applicable, any fees relating to the registration of the Shares under the Securities Act or the Exchange Act, (x) printing and mailing costs, (xi) costs of maintaining the Trust’s website and (xii) applicable license fees. The Sponsor, from time to time, may temporarily waive all or a portion of the Sponsor’s Fee of the Trust in its discretion for stated periods of time. Presently, the Sponsor does not intend to waive any of the Sponsor’s Fee for the Trust and there are no circumstances under which the Sponsor has determined it will definitely waive the fee. There have been no Sponsor ’ s fees incurred as of June 30, 2024 . 4. Related Parties The Trust considered the following entities, their directors, and certain employees to be related parties of the Trust: DCG, Genesis Global Trading, Inc., Grayscale and Grayscale Securities, LLC. The Sponsor’s parent, an affiliate of the Trust, holds a minority interest in Coinbase, Inc., the parent company of the Custodian, that represents less than 1.0 % of Coinbase Inc.’s ownership. As of June 30, 2024 , the Sponsor owned 10,000 Shares of the Trust. As of June 30, 2024 , there are no amounts due to or from the related parties of the Trust. 5. Commitments and Contingent Liabilities In the normal course of business, the Trust may enter into contracts with service providers that contain general indemnification clauses, as disclosed in Note 2, Indemnifications. The Trust ’ s maximum exposure under these arrangements is unknown as this would involve future claims that may be against the Trust which cannot be predicted with any certainty. 9 6. Subsequent Events On July 19, 2024, the Sponsor caused the Trust to distribute $ 100,000 to the Sponsor in redemption of the 10,000 Shares held by the Sponsor. On July 19, 2024 , the Sponsor of the Trust issued a press release announcing that the Sponsor, at the direction of its board of directors, declared a pro rata distribution on the shares of the Grayscale Bitcoin Trust (BTC) (“GBTC”), a Delaware statutory trust sponsored by the Sponsor, pursuant to which each holder of GBTC shares as of 4:00 PM ET on July 30, 2024 (the “Record Date,” and such holders, the “GBTC Record Holders”) was entitled to receive Shares of the Trust in connection with its previously announced initial creation and distribution of such Shares (such transactions collectively, the “Initial Distribution”), as described in GBTC’s definitive information statement on Schedule 14C filed with the Securities and Exchange Commission on July 30, 2024. In the Initial Distribution, GBTC contributed approximately 10 % of the Bitcoin that it held as of 4:00 PM ET on the Record Date to the Trust, and each GBTC Record Holder was entitled to receive Shares pro rata based on a 1 :1 ratio, such that for each one (1) GBTC share held by a GBTC Record Holder, such GBTC Record Holder was entitled to receive one (1) Share of the Trust on the Distribution Date. In connection therewith, on July 31, 2024, GBTC completed its previously announced pro rata distribution of 303,690,100 Shares of the Trust to shareholders of GBTC as of 4:00 PM ET on the Record Date and contributed to the Trust an amount of Bitcoin equal to approximately 10 % of the total Bitcoin held by GBTC as of the Record Date, equal to approximately 26,935.83753443 Bitcoin, as consideration and in exchange for the issuance of Shares of the Trust. On July 26, 2024, the SEC approved an application under Rule 19b-4 of the Exchange Act by NYSE Arca to list the Shares of the Trust. On July 29, 2024 the Sponsor amended its registration statement on Form S-1, originally filed on March 12, 2024, to register the Shares of the Trust under the Securities Act of 1933. The registration statement on Form S-1 was declared effective on July 30, 2024. Shares of the Trust began trading on NYSE Arca on July 31, 2024. As of the close of business on August 26, 2024 , the fair value of Bitcoin determined in accordance with the Trust’s accounting policy was $ 63,369.76 per Bitcoin. There are no known events that have occurred that require adjustment or additional disclosure other than that which has already been disclosed in these notes to the financial statements. 10