Invesco Galaxy Bitcoin ETF 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Index to Financial Statements Documents Page Report of Independent Registered Public Accounting Firm (PCAOB ID 238) 40 Statement of Financial Condition at December 31, 2023 41 Statement of Changes in Shareholder’s Equity for the Period December 20, 2023 to December 31, 2023 42 Statement of Cash Flows for the Period December 20, 2023 to December 31, 2023 43 Notes to Financial Statements 44 39 Report of Independent Registered Public Accounting Firm To the Board of Managers of Invesco Capital Management LLC (as Sponsor of Invesco Galaxy Bitcoin ETF) and Shareholders of Invesco Galaxy Bitcoin ETF Opinion on the Financial Statements We have audited the accompanying statement of financial condition of Invesco Galaxy Bitcoin ETF (the "Fund") as of December 31, 2023, and the related statements of changes in shareholder’s equity and of cash flows, including the related notes, for the period December 20, 2023 through December 31, 2023 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2023, and the changes in its shareholder’s equity and its cash flows for the period December 20, 2023 through December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/PricewaterhouseCoopers LLP Chicago, Illinois March 7, 2024 We have served as the Fund’s auditor since 2023. 40 Invesco Galaxy Bitcoin ETF Statement of Financial Condition December 31, 2023 December 31, 2023 Assets Cash held by custodian $ 100,000 Total Assets $ 100,000 Liabilities Total Liabilities $ — Commitments and Contingencies (Note 6) — Net Assets $ 100,000 Shares outstanding 4,000 Net asset value per share $ 25.00 See accompanying Notes to Financial Statements which are an integral part of the financial statements. 41 Invesco Galaxy Bitcoin ETF Statement of Changes in Shareholder’s Equity For the Period December 20, 2023 to December 31, 2023 Shares Total Shares Total Equity Shareholder's Equity Balance at December 20, 2023 — $ — $ — Purchases of Shares 4,000 100,000 100,000 Redemption of Shares — — — Net Increase (Decrease) due to Share Transactions 4,000 100,000 100,000 Net Income (Loss) Net Investment Income (Loss) — — Net Realized Gain (Loss) on bitcoin — — Net Change in Unrealized Gain (Loss) on bitcoin — — Net Income (Loss) — — Net Change in Shareholder's Equity 4,000 100,000 100,000 Balance at December 31, 2023 4,000 $ 100,000 $ 100,000 See accompanying Notes to Financial Statements which are an integral part of the financial statements. 42 Invesco Galaxy Bitcoin ETF Statement of Cash Flows For the Period December 20, 2023 to December 31, 2023 2023 Cash flows from operating activities: Net Income (Loss) $ — Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Net cash provided by (used in) operating activities — Cash flows from financing activities: Proceeds from purchases of Shares 100,000 Net cash provided by (used in) financing activities 100,000 Net change in cash 100,000 Cash at beginning of period — Cash at end of period $ 100,000 Supplemental disclosure of cash flow information Cash paid for interest $ — See accompanying Notes to Financial Statements which are an integral part of the financial statements. 43 Invesco Galaxy Bitcoin ETF Notes to Financial Statement s December 31, 2023 Note 1 – Organization Invesco Galaxy Bitcoin ETF (the “Trust”) is a Delaware statutory trust, formed on April 5, 2021 pursuant to the Delaware Statutory Trust Act (“DSTA”). The Trust continuously issues common shares representing fractional undivided beneficial interest in and ownership of the Trust. The Trust operates pursuant to its Second Amended and Restated Declaration of Trust and Trust Agreement, dated as of January 5, 2024 (the “Trust Agreement”). Delaware Trust Company, a Delaware trust company, is the Delaware trustee of the Trust (the “Trustee”). The Trust is managed and controlled by Invesco Capital Management LLC (the “Sponsor”). On December 20, 2023, Invesco Ltd., the Seed Capital Investor, subject to certain conditions, purchased 4,000 Shares in exchange for $100,000, which comprise the initial purchase of the Trust’s Shares. Through December 31, 2023, the Trust had no operations other than those related to its organization and registration and the sale of Shares to the Seed Capital Investor. As a result, the Statement of Operations has been omitted. As of December 31, 2023, the Seed Capital Investor owns one hundred percent of the outstanding Shares. The Trust has an unlimited number of shares authorized for issuance. The Trust’s investment objective is to reflect the performance of the spot price of bitcoin less the Trust’s expenses and other liabilities. In seeking to achieve its investment objective, the Trust will hold bitcoin. Coinbase Custody Trust Company, LLC (the “Bitcoin Custodian”) will hold all of the Trust’s bitcoin on the Trust’s behalf as bitcoin custodian. The Trust offers common shares of beneficial interest (the “Shares”) only to certain eligible financial institutions (the “Authorized Participants”) in one or more blocks of 5,000 Shares (“Creation Baskets”) based on the quantity of bitcoin attributable to each Share of the Trust. This Annual Report (the “Annual Report”) covers the period beginning December 20, 2023 to December 31, 2023. Note 2 – Summary of Significant Accounting Policies A. Basis of Presentation The financial statements of the Trust have been prepared using accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Trust is considered an investment company under U.S. GAAP for financial statement purposes and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services — Investment Companies , but is not registered, and is not required to be registered, under the Investment Company Act of 1940, as amended. B. Accounting Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statement. Actual results could differ from those estimates. In addition, the Trust monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are issued. C. Trust Expenses The Sponsor is responsible for all routine operational, administrative and other ordinary expenses of the Trust, including, but not limited to, the Trustee’s fees, the fees of the Bank of New York Mellon (the “Administrator” and the “Transfer Agent”), the fees of the Bitcoin Custodian), the fees of Galaxy Digital Funds LLC (the “Execution Agent”), Exchange listing fees, Securities and Exchange Commission registration fees, printing and mailing costs, legal costs and audit fees. The Trust will pay the Sponsor a unified fee (the “Sponsor Fee”) as compensation for services performed under the Trust Agreement (as defined herein). The Sponsor Fee will be accrued daily and paid monthly in arrears on the first Business Day of the month in U.S. dollars, and will be calculated by the Administrator. The Sponsor also paid the costs of the Trust’s organization. As of December 31, 2023, the Sponsor Fee was 0.59% per annum of the daily total net assets of the Trust. Subsequent to period end, the Sponsor decreased the Sponsor Fee. Please see Note 7 – Subsequent Events for more information. In certain cases, the Trust will pay for some expenses in addition to the Sponsor’s fee. These exceptions include expenses not assumed by the Sponsor (i.e., expenses other than those identified in the first paragraph of Section C of this Note 2), litigation and 44 indemnification expenses, judgments, transactional expenses, taxes and other expenses not expected to be incurred in the ordinary course of the Trust’s business. D. Federal Income Taxes The Sponsor intends to take 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 and, therefore, no provision for federal income taxes is required. 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. Neither the Sponsor nor the Trustee will request a ruling from the IRS with respect to the classification of the Trust for U.S. federal income tax purposes or with respect to any other matter. If the IRS were to assert successfully that the Trust is not classified as a “grantor trust,” the Trust would likely be classified as a partnership for U.S. federal income tax purposes, which may affect the timing and other tax consequences to the Shareholders, and might be classified as a publicly traded partnership that would be taxable as a corporation for U.S. federal income tax purposes, in which case the Trust would be taxed in the same manner as a corporation on its taxable income and distributions to Shareholders out of the earnings and profits of the Trust would be taxed to Shareholders as ordinary dividend income (which may be eligible for preferential rates, in the case of non-corporate taxpayers, or a dividends received deduction, in the case of corporate taxpayers). However, due to the uncertain treatment of digital currency for U.S. federal income tax purposes, there can be no assurance in this regard. Note 3 – Concentration Risk Unlike other funds that may invest in diversified assets, the Trust’s investment strategy is concentrated in a single asset: bitcoin. This concentration maximizes the degree of the Trust’s exposure to a variety of market risks associated with bitcoin, including the rise or fall in its price, sometimes rapidly or unexpectedly. By concentrating its investment strategy solely in bitcoin, any losses suffered as a result of a decrease in the value of bitcoin can be expected to reduce the value of an interest in the Trust proportionately and will not be offset by other gains such as may have occurred if the Trust were to invest in underlying assets that were diversified. There is no assurance that bitcoin will maintain its long-term value in terms of purchasing power in the future. In the event that the price of bitcoin declines, the Sponsor expects the value of an investment in the Shares to decline proportionately. Each of these events could have a material effect on the Trust’s financial position and the results of its operations. Note 4 – Service Providers and Related Party Agreements The Trustee Delaware Trust Company, a Delaware trust company, acts as the Trustee of the Trust as required to create a Delaware statutory trust in accordance with the Trust Agreement and the DSTA. The Sponsor Invesco Capital Management LLC is the Sponsor of the Trust. The Sponsor arranged for the creation of the Trust and is responsible for the ongoing registration of the Shares for their public offering, the listing of Shares on Cboe BZX Inc. (the “Exchange”) and valuing the bitcoin held by the Trust. The Sponsor is a limited liability company formed in the state of Delaware on February 7, 2003, and is a wholly-owned subsidiary of Invesco Ltd. Invesco Ltd. and its subsidiaries, including the Sponsor, are an independent global investment management group. The Administrator The Bank of New York Mellon (“BNYM”) serves as the Trust’s Administrator. Under the trust administration and accounting agreement, the Administrator provides necessary administrative, tax and accounting services and financial reporting for the maintenance and operations of the Trust, including calculating the NAV of the Trust and the net assets of the Trust. The Transfer Agent BNYM also serves as the Transfer Agent for the Trust. The Transfer Agent is responsible for (1) issuing and redeeming Shares, (2) responding to correspondence by holders of the Shares (“Shareholders”) and others relating to its duties, (3) maintaining Shareholder accounts and (4) making periodic reports to the Trust. The Bitcoin Custodian Coinbase Custody Trust Company, LLC serves as the Trust’s Bitcoin Custodian. Under the custodial agreement, the Bitcoin Custodian is responsible for (1) safekeeping all of the bitcoin owned by the Trust, (2) opening an account that holds the Trust’s bitcoin 45 and (3) facilitating the transfer of bitcoin required for the operation of the Trust, as directed by the Sponsor. The Bitcoin Custodian is chartered as a limited purpose trust company by the New York State Department of Financial Services (“NYSDFS”) and is authorized by the NYSDFS to provide digital asset custody services. The Bitcoin Custodian is a wholly-owned subsidiary of Coinbase Global, Inc. The Cash Custodian Under the Cash Custody Agreement, BNYM, the Cash Custodian, is responsible for holding the Trust’s cash in connection with creation and redemption transactions effected in cash. The Cash Custodian is a New York state-chartered bank and a member of the Federal Reserve System. The Marketing Agent Invesco Distributors, Inc. (the “Marketing Agent”) is responsible for: (1) working with the Transfer Agent to review and approve, or reject, purchase and redemption orders of Creation Baskets placed by Authorized Participants with the Transfer Agent; and (2) reviewing and approving the marketing materials prepared by the Trust for compliance with applicable SEC and FINRA advertising laws, rules, and regulations. The Execution Agent The Sponsor has entered into an agreement with Galaxy Digital Funds LLC, a subsidiary of Galaxy Digital LP (“Galaxy”), to serve as Execution Agent. At the direction of the Sponsor, the Execution Agent is responsible for selling bitcoin on behalf of the Trust to the extent necessary to permit the payment of the Trust’s expenses. The Trust also may utilize the services of the Execution Agent to purchase or sell bitcoin in connection with cash creations and redemptions. In addition, as part of this agreement, the Execution Agent has agreed to co-brand and co-market the Trust, and the Sponsor has licensed the use of certain Galaxy trademarks, service marks and trade names in connection with the Trust. Galaxy is a subsidiary of Galaxy Digital Holdings LP (“Galaxy Holdings”). Galaxy Digital Holdings Ltd., which holds a limited partner interest in Galaxy Holdings, is listed on the Toronto Stock Exchange under the symbol “GLXY.” Note 5 – Organization and Offering Costs The Sponsor has agreed to pay the organizational and initial offering costs of the Trust and the Trust will not be obligated to reimburse the Sponsor. The organizational and initial offering costs include preparation and filing of incorporation documents, bylaws, declarations of trust, registration statements, board materials, state and federal registration of shares and audit fees. As a result, the Trust’s financial statements will not reflect these organizational and offering costs. Note 6 – Commitments and Contingencies The Trust’s organizational documents provide for the Trust to indemnify the Sponsor and any affiliate of the Sponsor that provides services to the Trust to the maximum extent permitted by applicable law, subject to certain exceptions for disqualifying conduct by the Sponsor or such an affiliate. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Note 7 – Subsequent Events On January 2, 2024, the Sponsor (in such role, the “Seed Capital Investor”) purchased an additional 200,000 Shares at a per-Share price of $25.00 (“Seed Creation Baskets”). Total proceeds to the Trust from the sale of the Initial Seed Shares and the Seed Creation Baskets were $5,100,000. On January 4, 2024, the Sponsor redeemed the Initial Seed Shares and the Seed Creation Baskets for cash at a per-Share price of $25.00 for a total redemption value of $5,100,000 and immediately created 110,000 Shares (22 Creation Baskets) at a price of $44.16305 per Share based on the Benchmark price as of 4:00 p.m. ET on January 4, 2024. The price of the Shares acquired by the Seed Capital Investor was determined as described in the Prospectus, and such Shares could be sold at different prices if sold by the Seed Capital Investor at different times. Effective January 10, 2024, the Trust’s registration statement was declared effective by the SEC. The Fund commenced trading on the Cboe BZX Inc. (the “Exchange”) on January 11, 2024. The Sponsor Fee as of December 31, 2023 was 0.59% per annum. On January 9, 2024, the Sponsor reduced the Sponsor Fee to 0.39% per annum. The Sponsor Fee was further reduced to 0.25% per annum on January 29, 2024. For a 6-month period commencing on the day the Trust’s Shares were initially listed on the Exchange (January 11, 2024), the Sponsor agrees to waive the entire Sponsor Fee on the first $5 billion of Trust assets. 46 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.