Grayscale Ethereum Staking Mini ETF 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read together with, and is qualified in its entirety by reference to, our unaudited financial statements and related notes included elsewhere in this Quarterly Report, which have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The following discussion may contain forward-looking statements based on assumptions we believe to be reasonable. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those set forth under “Part II, Item 1A. Risk Factors” in this Quarterly Report or in “Part I, Item 1A. Risk Factors” and “Forward-Looking Statements” or other sections of our Annual Report. Trust Overview The Trust is a passive entity that is managed and administered by the Sponsor and does not have any officers, directors or employees. The Trust holds Ether and, from time to time on a periodic basis, issues Creation Baskets in exchange for deposits of Ether. On July 22, 2024, in connection with the approval of application under Rule 19b-4 of the Securities Exchange Act of 1934 on July 18, 2024 and the effectiveness of the registration statement on Form S-1, as amended (File No. 333-278878), the Sponsor authorized the commencement of a redemption program. Shares of the Trust began trading on NYSE Arca on July 23, 2024, following the effectiveness of the Trust’s registration statement on Form S-1, as amended. The Trust issues Shares only in one or more blocks of 10,000 Shares (a block of 10,000 Shares is called a “Basket”) to certain Authorized Participants from time to time. Baskets are offered in exchange for Ether. Through its redemption program, the Trust redeems Shares from Authorized Participants on an ongoing basis. As a passive investment vehicle, the Trust’s investment objective is for the value of the Shares (based on Ether per Share) to reflect the value of the Ether held by the Trust, determined by reference to the Index Price, less the Trust’s expenses and other liabilities. While an investment in the Shares is not a direct investment in Ether, the Shares are designed to provide investors with a cost-effective and convenient way to gain investment exposure to Ether. The Trust is not managed like a business corporation or an active investment vehicle. The Trust will not utilize leverage, derivatives or any similar arrangements in seeking to meet its investment objective. On January 1, 2025, GSI consummated an internal corporate reorganization (the “Reorganization”), pursuant to which GSI, the Sponsor of the Trust prior to the Reorganization, merged with and into GSO, a Delaware limited liability company and a consolidated subsidiary of DCG, with GSO continuing as the surviving company (the “Merger”). As a result of the Merger, GSO succeeded by operation of law to all the rights, powers, privileges and franchises and became subject to all of the obligations, liabilities, restrictions and disabilities of GSI, including with respect to the Sponsor Contracts (as defined below), all as provided under the Delaware Limited Liability Company Act. The Reorganization has not had any material impact on the operations of the Trust. In connection with the Reorganization, on January 1, 2025, and promptly following the effectiveness of the Merger, GSO assigned certain contracts pertaining to its role as Sponsor (as such term is defined in the Trust Agreement) of the Trust (such contracts, the “Sponsor Contracts”) to GSIS, a Delaware limited liability company and a wholly owned direct subsidiary of GSO, whereby GSIS assumed all of the rights and obligations of GSO under the Sponsor Contracts. Other than the assumption of the Sponsor Contracts by GSIS, the Reorganization does not alter the rights or obligations under any of the Sponsor Contracts. In connection with the Reorganization, on January 1, 2025, and promptly following the effectiveness of the Merger, GSO and GSIS executed a Certificate of Admission, pursuant to which GSIS was admitted as an additional Sponsor of the Trust under the Trust Agreement, by and among GSO (as successor in interest to GSI), the Trustee, and the shareholders from time to time thereunder, as amended from time to time. GSIS shall be subject to the rights and obligations of a Sponsor under the Trust Agreement. On January 3, 2025, GSO voluntarily withdrew as a Sponsor of the Trust pursuant to the terms of the Trust Agreement, and, effective May 3, 2025, GSIS became the sole remaining Sponsor of the Trust. Critical Accounting Policies and Estimates Investment Transactions and Revenue Recognition The Trust considers investment transactions to be the receipt of Ether by the Trust in connection with Share creations and the delivery of Ether by the Trust in connection with Share redemptions or for payment of expenses in Ether. The Trust records its investment transactions on a trade date basis and changes in fair value are reflected as net change in unrealized appreciation or depreciation on investments. Realized gains and losses are calculated using the specific identification method. Realized gains and losses are recognized in connection with transactions including settling obligations for the Sponsor’s Fee in Ether. 20 Principal Market and Fair Value Determination To determine which market is the Trust’s principal market (or in the absence of a principal market, the most advantageous market) for purposes of calculating the Trust’s net asset value in accordance with U.S. GAAP (“Principal Market NAV”), the Trust follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820-10, Fair Value Measurement , which outlines the application of fair value accounting. ASC 820-10 determines fair value to be the price that would be received for Ether in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820-10 requires the Trust to assume that Ether is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. The Trust only receives Ether in connection with a creation order from the Authorized Participant (or a Liquidity Provider) and does not itself transact on any Digital Asset Markets. Therefore, the Trust looks to market-based volume and level of activity for Digital Asset Markets. The Authorized Participant(s), or a Liquidity Provider, may transact in a Brokered Market, a Dealer Market, Principal-to-Principal Markets and Exchange Markets (referred to as “Trading Platform Markets” in this Quarterly Report), each as defined in the FASB ASC Master Glossary (collectively, “Digital Asset Markets”). In determining which of the eligible Digital Asset Markets is the Trust’s principal market, the Trust reviews these criteria in the following order: • First, the Trust reviews a list of Digital Asset Markets that maintain practices and policies designed to comply with anti-money laundering (“AML”) and know-your-customer (“KYC”) regulations, and non-Digital Asset Trading Platform Markets that the Trust reasonably believes are operating in compliance with applicable law, including federal and state licensing requirements, based upon information and assurances provided to it by each market. • Second, the Trust sorts these Digital Asset Markets from high to low by market-based volume and level of activity of Ether traded on each Digital Asset Market in the trailing twelve months. • Third, the Trust then reviews pricing fluctuations and the degree of variances in price on Digital Asset Markets to identify any material notable variances that may impact the volume or price information of a particular Digital Asset Market. • Fourth, the Trust then selects a Digital Asset Market as its principal market based on the highest market-based volume, level of activity and price stability in comparison to the other Digital Asset Markets on the list. Based on information reasonably available to the Trust, Trading Platform Markets have the greatest volume and level of activity for the asset. The Trust therefore looks to accessible Trading Platform Markets as opposed to the Brokered Market, Dealer Market and Principal-to-Principal Markets to determine its principal market. As a result of the aforementioned analysis, a Trading Platform Market has been selected as the Trust’s principal market. The Trust determines its principal market (or in the absence of a principal market the most advantageous market) annually and conducts a quarterly analysis to determine (i) if there have been recent changes to each Digital Asset Market’s trading volume and level of activity in the trailing twelve months, (ii) if any Digital Asset Markets have developed that the Trust has access to, or (iii) if recent changes to each Digital Asset Market’s price stability have occurred that would materially impact the selection of the principal market and necessitate a change in the Trust’s determination of its principal market. The cost basis of the Ether received by the Trust in connection with a creation order is recorded by the Trust at the fair value of Ether at 4:00 p.m., New York time, on the creation date for financial reporting purposes. The cost basis recorded by the Trust may differ from proceeds collected by the Authorized Participant from the sale of the corresponding Shares to investors. Investment Company Considerations The Trust is an investment company for U.S. GAAP purposes and follows accounting and reporting guidance in accordance with the FASB ASC Topic 946, Financial Services—Investment Companies . The Trust uses fair value as its method of accounting for Ether 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. U.S. 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. 21 Review of Financial Results (unaudited) Financial Highlights for the Three and Nine Months Ended September 30, 2025 and the Period from July 23, 2024 (the Commencement of the Trust’s Operations) to September 30, 2024 (All amounts in the following table and the subsequent paragraphs, except Share, per Share, Ether and price of Ether amounts, are in thousands) Three Months Ended September 30, 2025 For the Period from July 23, 2024 (the Commencement of the Trust’s Operations) to September 30, 2024 Nine Months Ended September 30, 2025 For the Period from July 23, 2024 (the Commencement of the Trust’s Operations) to September 30, 2024 Net realized and unrealized gain (loss) on investment in Ether $ 932,923 $ (289,749 ) $ 544,923 $ (289,749 ) Net increase (decrease) in net assets resulting from operations $ 931,931 $ (289,749 ) $ 543,202 $ (289,749 ) Net assets (1) $ 3,001,975 $ 1,015,027 $ 3,001,975 $ 1,015,027 (1) Net assets in the above table and subsequent paragraphs are calculated in accordance with U.S. GAAP based on the Digital Asset Market price of Ether on the Digital Asset Trading Platform that the Trust considered its principal market, as of 4:00 p.m., New York time, on the valuation date. Net realized and unrealized gain on investment in Ether for the three months ended September 30, 2025 was $932,923, which includes a realized gain of $152 on the transfer of Ether to pay the Sponsor’s Fee, a realized gain of $66,728 on the sale of Ether to meet redemptions, and net change in unrealized appreciation on investment in Ether of $866,043. Net realized and unrealized gain on investment in Ether for the period was driven by Ether price appreciation from $2,516.23 per Ether as of June 30, 2025, to $4,161.61 per Ether as of September 30, 2025. Net increase in net assets resulting from operations was $931,931 for the three months ended September 30, 2025, which consisted of the net realized and unrealized gain on investment in Ether, less the Sponsor’s Fee of $992. Net assets increased to $3,001,975 at September 30, 2025, a 126% increase for the three-month period. The increase in net assets resulted from the aforementioned Ether price appreciation and the contribution of approximately 285,004 Ether with a value of $1,115,426 to the Trust in connection with Share creations during the period, partially offset by the redemption of approximately 92,076 Ether with a value of $375,638 from the Trust, and the withdrawal of approximately 249 Ether to pay the foregoing Sponsor’s Fee. Net realized and unrealized loss on investment in Ether for the period from July 23, 2024 (the commencement of the Trust’s operations) to September 30, 2024 was ($289,749), which includes a realized loss of ($3,536) on the sale of Ether to meet redemptions and net change in unrealized depreciation on investment in Ether of ($286,213). Net realized and unrealized loss on investment in Ether for the period was driven by Ether price depreciation from $3,458.99 per Ether as of July 23, 2024 (the commencement of the Trust’s operations), to $2,594.43 per Ether as of September 30, 2024. Net decrease in net assets resulting from operations was ($289,749) for the period from July 23, 2024 (the commencement of the Trust’s operations) to September 30, 2024, which consisted of the net realized and unrealized loss on investment in Ether. Net assets increased to $1,015,027 at September 30, 2024. The increase in net assets resulted from the contribution of approximately 105,001 Ether with a value of $310,876 to the Trust in connection with Share creations during the period and the contribution of approximately 292,263 Ether with a value of $1,010,935 to the Trust in connection with the Initial Distribution from Grayscale Ethereum Trust ETF, partially offset by the aforementioned Ether price depreciation and the redemption of approximately 6,031 Ether, with a value of $17,035 from the Trust. Net realized and unrealized gain on investment in Ether for the nine months ended September 30, 2025 was $544,923, which includes a realized loss of ($158) on the transfer of Ether to pay the Sponsor’s Fee, a realized gain of $25,468 on the sale of Ether to meet redemptions, and net change in unrealized appreciation on investment in Ether of $519,613. Net realized and unrealized gain on investment in Ether for the period was driven by Ether price appreciation from $3,340.40 per Ether as of December 31, 2024, to $4,161.61 per Ether as of September 30, 2025. Net increase in net assets resulting from operations was $543,202 for the nine months ended September 30, 2025, which consisted of the net realized and unrealized gain on investment in Ether, less the Sponsor’s Fee of $1,721. Net assets increased to $3,001,975 at September 30, 2025, a 91% increase for the nine-month period. The increase in net assets resulted from the aforementioned Ether price appreciation and the contribution of approximately 391,068 Ether with a value of $1,380,889 to the Trust in connection with Share creations during the period, partially offset by the redemption of approximately 140,031 Ether, with a value of$495,030 from the Trust and the withdrawal of approximately 564 Ether to pay the foregoing Sponsor’s Fee. 22 Cash Resources and Liquidity The Trust only receives and holds cash in order to facilitate creations and redemptions pursuant to Cash Orders, and has not otherwise had or maintained a cash balance at any time since the completion of the Initial Distribution. When selling Ether in the Digital Asset Market to pay Additional Trust Expenses on behalf of the Trust, the Sponsor endeavors to sell the exact amount of Ether needed to pay expenses in order to minimize the Trust’s holdings of assets other than Ether. In addition, upon the consummation or deemed failure of a Cash Order to create or redeem Baskets, the Trust will promptly return any excess cash it continues to hold with respect to such Cash Order to the applicable counterparty. As a consequence, the Sponsor expects that the Trust will not record any cash flow from its operations and that its cash balance will be zero at the end of each reporting period. Furthermore, the Trust is not a party to any off-balance sheet arrangements. Generally, the Trust does not intend to hold cash, except in connection with Cash Orders for creations or redemptions of Baskets. Cash includes non-interest bearing non-restricted cash with one institution. Cash in a bank deposit account, at times, may exceed U.S. federally insured limits. The Trust has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk on such bank deposits. In exchange for the Sponsor’s Fee, the Sponsor has agreed to assume most of the expenses incurred by the Trust. As a result, the only ordinary expense of the Trust during the periods covered by this Quarterly Report was the Sponsor’s Fee. 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. Effective July 23, 2024, the Sponsor determined to waive a portion of the Sponsor’s Fee for the first six months of the Trust’s operation, so that the fee was 0% of the NAV of the Trust for the first $2.0 billion of the Trust’s assets. If the Trust’s assets exceeded $2.0 billion prior to the end of the six-month period, the Sponsor’s Fee charged on assets over $2.0 billion would have become 0.15%. Following the expiration date of the six-month waiver period on January 23, 2025 (the “Sponsor’s Fee Waiver Expiration Date”), the Sponsor’s Fee is 0.15%. For the period from the Sponsor’s Fee Waiver Expiration Date through September 30, 2025, the Trust incurred Sponsor’s Fees of $1,720,471. The Trust is not aware of any trends, demands, conditions or events that are reasonably likely to result in material changes to its liquidity needs. 23 Selected Operating Data Three Months Ended September 30, 2025 For the Period from July 23, 2024 (the Commencement of the Trust’s Operations) to September 30, 2024 Nine Months Ended September 30, 2025 For the Period from July 23, 2024 (the Commencement of the Trust’s Operations) to September 30, 2024 (All Ether balances are rounded to the nearest whole Ether) Ether: Opening balance 528,670 - 470,876 - Creations 285,004 105,001 391,068 105,001 Creation from Initial Distribution (1) - 292,263 - 292,263 Redemptions (92,076 ) (6,031 ) (140,031 ) (6,031 ) Sponsor’s Fee, related party (249 ) - (564 ) - Closing balance 721,349 391,233 721,349 391,233 Accrued but unpaid Sponsor’s Fee, related party - - - - Net closing balance 721,349 391,233 721,349 391,233 Number of Shares: (2) Opening balance 56,140,788 - 49,970,788 - Creations 30,270,000 11,143,000 41,530,000 11,143,000 Creation from Initial Distribution (1) - 31,015,850 - 31,015,850 Redemptions (9,780,000 ) (640,000 ) (14,870,000 ) (640,000 ) Closing balance 76,630,788 41,518,850 76,630,788 41,518,850 As of September 30, 2025 2024 Price of Ether on principal market (3) $ 4,161.61 $ 2,594.43 Principal Market NAV per Share (2)(4) $ 39.17 $ 24.45 Index Price (5) $ 4,161.97 $ 2,592.73 NAV per Share (2)(5) $ 39.18 $ 24.43 (1) Represents the impact of the Initial Distribution of 292,262.98913350 Ether, with a value of approximately $1,010.9 million from Grayscale Ethereum Trust ETF, completed on July 23, 2024, as discussed in Note 4 of the notes to the financial statements. (2) Share and per Share amounts have been retroactively adjusted to reflect the 1-for-10 Reverse Share Split of the Trust’s issued and outstanding Shares completed on November 19, 2024. (3) The Trust performed an assessment of the principal market at September 30, 2025, and identified the principal market as Crypto.com. The Trust performed an assessment of the principal market at September 30, 2024 and identified the principal market as Coinbase. (4) As of September 30, 2025, the Principal Market NAV per Share was calculated using the fair value of Ether based on the price provided by Crypto.com, the Digital Asset Trading Platform that the Trust considered its principal market, as of 4:00 p.m., New York time, on the valuation date. As of September 30, 2024, the Principal Market NAV per Share was calculated using the fair value of Ether based on the price provided by Coinbase, the Digital Asset Trading Platform that the Trust considered its principal market, as of 4:00 p.m., New York time, on the valuation date. (5) The Trust’s NAV per Share is derived from the Index Price as represented by the Index as of 4:00 p.m., New York time, on the valuation date. The Trust’s NAV per Share is calculated using a non-GAAP methodology where the price is derived from multiple Digital Asset Trading Platforms. See “Item 1. Business—Overview of the Ethereum Industry and Market—Ether Value—The Index and the Index Price” in our Annual Report for a description of the Index and the Index Price. On September 21, 2025, the Index Provider added Gemini to the Index due to the trading platform meeting the Index Provider’s minimum liquidity requirement, and removed Bullish due to the trading platform failing to meet the Index Provider’s minimum liquidity requirement, as part of its scheduled quarterly review. The Digital Asset Trading Platforms included in the Index (the “Constituent Trading Platforms”) as of September 30, 2025, were Coinbase, Kraken, Crypto.com, LMAX Digital, and Gemini. The Digital Asset Trading Platforms included in the Index as of September 30, 2024, were Coinbase, Kraken, LMAX Digital and Crypto.com. See “Item 1. Business—Valuation of Ether and Determination of NAV” in our Annual Report for a description of the Trust’s NAV per Share. 24 The Trust reflects creations and redemptions and the Ether for proceeds receivable or payable with respect to such creations and redemptions, respectively, on the business day following the receipt of a notification of a creation or redemption order by an Authorized Participant. Creation and redemption orders are settled on T+1 or T+2, as established at the time of order placement, and therefore the Ether for proceeds receivable or payable with respect to such creations and redemptions, respectively, are recorded as a receivable or payable until the Ether are delivered or removed from the Trust for settlement. As of September 30, 2025, the Trust had a net closing balance of 721,349.34169850 Ether with a value of $3,002,234,320, based on the Index Price of $4,161.97 on September 30, 2025 (non-GAAP methodology). As of September 30, 2025, the total market value of the Trust’s Ether was $3,001,974,634, based on the price of one Ether in the principal market (Crypto.com) of $4,161.61 on September 30, 2025. As of September 30, 2024, the Trust had a net closing balance of 391,232.97302030 Ether with a value of $1,014,361,466, based on the Index Price of $2,592.73 on September 30, 2024 (non-GAAP methodology). As of September 30, 2024, the total market value of the Trust’s Ether was $1,015,026,562, based on the price of one Ether in the principal market (Coinbase) of $2,594.43 on September 30, 2024. Historical NAV and Ether Prices As movements in the price of Ether will directly affect the price of the Shares, investors should understand recent movements in the price of Ether. Investors, however, should also be aware that past movements in the Ether price are not indicators of future movements. Movements may be influenced by various factors, including, but not limited to, government regulation, security breaches experienced by service providers, as well as political and economic uncertainties around the world. The following chart illustrates the movement in the Trust’s NAV per Share (as adjusted for the Reverse Share Split for periods prior to November 20, 2024) versus the Index Price and the Trust’s Principal Market NAV per Share (as adjusted for the Reverse Share Split for periods prior to November 20, 2024) from July 23, 2024 (the commencement of the Trust’s operations) to September 30, 2025. For more information on the determination of the Trust’s NAV, see “Item 1. Business—Overview of the Ethereum Industry and Market—Ether Value—The Index and the Index Price” in our Annual Report. 25 The following table illustrates the movements in the Index Price from July 23, 2024 (the commencement of the Trust’s operations) to September 30, 2025. During such period, the Index Price has ranged from $1,465.07 to $4,832.59, with the straight average being $2,922.05 through September 30, 2025. The Sponsor has not observed a material difference between the Index Price and average prices from the Constituent Trading Platforms as of September 30, 2025, individually or as a group. High Low Period Average Index Price Date Index Price Date End of period Last business day July 23, 2024 (the commencement of the Trust’s operations) to September 30, 2024 $ 2,650.95 $ 3,456.85 7/23/2024 $ 2,221.82 9/6/2024 $ 2,592.73 $ 2,592.73 Twelve months ended September 30, 2025 $ 2,974.04 $ 4,832.59 8/22/2025 $ 1,465.07 4/8/2025 $ 4,161.97 $ 4,161.97 July 23, 2024 (the commencement of the Trust’s operations) to September 30, 2025 $ 2,922.05 $ 4,832.59 8/22/2025 $ 1,465.07 4/8/2025 $ 4,161.97 $ 4,161.97 The following table illustrates the movements in the Digital Asset Market price of Ether, as reported on the Trust’s principal market, from July 23, 2024 (the commencement of the Trust’s operations) to September 30, 2025. During such period, the price of Ether has ranged from $1,465.40 to $4,833.89, with the straight average being $2,922.05 through September 30, 2025. High Low Period Average Digital Asset Market Price Date Digital Asset Market Price Date End of period Last business day July 23, 2024 (the commencement of the Trust’s operations) to September 30, 2024 $ 2,650.90 $ 3,458.99 7/23/2024 $ 2,220.15 9/6/2024 $ 2,594.43 $ 2,594.43 Twelve months ended September 30, 2025 $ 2,974.06 $ 4,833.89 8/22/2025 $ 1,465.40 4/8/2025 $ 4,161.61 $ 4,161.61 July 23, 2024 (the commencement of the Trust’s operations) to September 30, 2025 $ 2,922.05 $ 4,833.89 8/22/2025 $ 1,465.40 4/8/2025 $ 4,161.61 $ 4,161.61 26 The following chart sets out the historical closing prices for the Shares as reported by NYSE Arca from July 23, 2024 (the commencement of the Trust’s operations) to September 30, 2025 and the Trust’s NAV per Share from July 23, 2024 (the commencement of the Trust’s operations) to September 30, 2025. ETH Premium/(Discount): ETH Share Price vs. NAV per Share (Non-GAAP) ($) The following chart sets out the historical premium and discount for the Shares calculated as a percentage of the historical closing prices for the Shares as reported by NYSE Arca from July 23, 2024 (the commencement of the Trust’s operations) to September 30, 2025 divided by the Trust’s NAV per Share from July 23, 2024 (the commencement of the Trust’s operations) to September 30, 2025. ETH Premium/(Discount): ETH Share Price vs. NAV per Share (Non-GAAP) (%) 27