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Item 2. Management’s Discussion and Analysis

2026-05-15 compared with 2025-11-14 · 157 added, 136 removed, 90 unchanged (77% of the section changed)

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 of 1933, as amended, 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

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.

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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 laws.

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

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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 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 the ticker symbol “TETH”.

The Sponsor served as the

“Seed Capital Investor” to the Trust.

On May 1, 2024, the Sponsor, in its capacity as Seed Capital Investor, subject to certain

conditions, purchased two Shares at a per-Share price of $50.00 (the “Initial Seed Shares”).

Total proceeds to the Trust from

the sale of these Initial Seed Shares were $100.

Delivery of the Seed Shares was made on May 1, 2024.

On June 18, 2024

(the “Seed Capital Purchase Date”), the Sponsor, in its capacity as Seed Capital Investor, purchased the initial Seed

Creation Baskets comprising 20,000 Shares (the “Initial Seed Creation Baskets”).

In its capacity as the Seed

Capital Investor, the Sponsor has acted as a statutory underwriter in connection with this purchase.

The total proceeds to the Trust

from the sale of the Initial Seed Creation Baskets were $340,739.

On June 18, 2024, the Trust purchased ether with the proceeds

of the Initial Seed Creation Baskets by transacting with an ether Trading Counterparty to acquire ether on behalf of the Trust in

exchange for cash provided by the Sponsor in its capacity as Seed Capital Investor.

On July 22, 2025 the Sponsor redeemed its

Initial Seed Creation Basket of 20,000 Shares.

All ether acquired in connection with the Initial Seed Creation Baskets is held by

the Custodians.

The Trust is not registered

as an investment company under the 1940 Act, and is not a commodity pool for purposes of the Commodity Exchange Act.

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 21co Holdings Limited.

The ultimate parent company of 21co Holdings Limited is FalconX.

The Sponsor is not subject

to regulation by the Commodity Futures Trading Commission 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 shares 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 the ticker symbol “TETH”.

The Trust’s investment

objective is to seek to track the performance of ether, as measured by the performance of the Index, adjusted for the Trust’s expenses

and other liabilities, and to reflect rewards from staking a portion of the Trust’s ether, to the extent the Sponsor in its sole discretion

determines that the Trust may do so without undue legal or regulatory risk, such as, without limitation, the risk of jeopardizing the

Trust’s ability to qualify as a grantor trust for U.S.

objective is to seek to track the performance of ether, as measured by the performance of the Pricing Benchmark, adjusted for the Trust’s

expenses and other liabilities, and to reflect rewards from staking a portion of the Trust’s ether, to the extent the Sponsor in

its sole discretion determines that the Trust may do so without undue legal or regulatory risk, such as, without limitation, the risk

of jeopardizing the Trust’s ability to qualify as a grantor trust for U.S.

Federal income tax purposes.

CF Benchmarks Ltd.

is the Index Provider.

The Index is designed to reflect the performance of ether in U.S.

In seeking to achieve its investment objective, the Trust holds ether 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.

Pricing Benchmark Provider.

The Pricing Benchmark is designed to reflect the performance of ether in U.S.

In seeking to achieve

its investment objective, the Trust holds ether at its Custodians and values its Shares daily based on the Pricing Benchmark.

is a passive investment vehicle and is not a leveraged product.

The Sponsor does not actively manage the ether held by the Trust.

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The Trust pays the unitary

Sponsor fee of 0.21% of the Trust’s ether 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 six-month period which commenced on

July 23, 2024 (the day the Trust’s Shares were initially listed on the Exchange), or (ii) the first $500 million of Trust assets,

whichever came first.

The six-month waiver period ended on January 23, 2025, at which time the Sponsor began collecting the Sponsor fee.

Except for during periods during which the Sponsor fee is being waived, the Sponsor fee accrues daily and is payable in ether weekly in

Sponsor fee of 0.21% of the Trust’s ether holdings (the “Sponsor Fee”).

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

six-month period which commenced on July 23, 2024 (the day the Trust’s Shares were initially listed on the Exchange), or (ii) the

first $500 million of Trust assets, whichever came first.

The six-month waiver period ended on January 23, 2025, at which time the Sponsor

began collecting the Sponsor Fee.

On October 8, 2025, the Sponsor agreed to voluntarily waive the fee it receives from the Trust as compensation

for the Sponsor’s services rendered to the Trust for a period of one year beginning on October 9, 2025, and ending on October 8,

Except for during periods during which the Sponsor Fee is being waived, the Sponsor Fee accrues daily and is payable in ether weekly

The Administrator calculates the Sponsor Fee on a daily basis by applying a 0.21% annualized rate to the Trust’s total

ether holdings, and the amount of ether payable in respect of each daily accrual is determined by reference to the Index.

The Trust incurred

Sponsor fees for the nine-month period ended September 30, 2025 and for the period May 1, 2024 (initial seed creation date) through September

30, 2024 of $38,251 and $0, net of Sponsor fee waivers of $2,169 and $3,777, respectively.

ether holdings, and the amount of ether payable in respect of each daily accrual is determined by reference to the Pricing Benchmark.

The Trust incurred Sponsor Fee for the quarters ended March 31, 2026 and 2025 of $0 and $5,907 net of Sponsor Fee waiver of $12,125 and

$2,169, respectively.

The Trust also pays 25% of

the Staking Rewards to the Sponsor and retains the remainder of the Staking Rewards.

The Trust incurred Staking Fee for the three ended

March 31, 2026 of $15,555.

The Trust had no staking operations during the three months ended March 31, 2025.

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.

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.

Calculation of NAV and NAV per Share

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 ether held by the Trust as of 4:00 p.m.

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.

The NAV is calculated on each day other

than a day when the Exchange is closed for regular trading (a “Business Day”) and is equal to the aggregate value of the Trust’s

assets less its liabilities based on the Pricing Benchmark price.

In determining the NAV of the Trust on any Business Day, the Administrator

calculates the price of the ether 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

NAV and NAV per Share, for purposes of the Trust’s financial statements, the Trust determines the net asset value of the Trust determined

on a GAAP basis (the “Principal Market NAV”) and net asset value of the Trust per Share determined on a GAAP basis (the “Principal

Market NAV per Share”) on each valuation date for such financial statements.

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using the fair value of ether based on the price in the ether market that the Trust considers its “principal market” as of

ET on the valuation date, rather than using the Index.

ET on the valuation date, rather than using the Pricing Benchmark.

NAV and NAV per Share are

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Share, respectively.

The Trust’s staking

model aims to maximize the portion of the Trust’s ether available for staking while controlling for liquidity and redemption risks.

The model determines an optimal utilization rate by balancing expected yield against potential costs (including borrowing costs during

redemptions, assuming we have access to suitable credit).

The Staking Services Providers

exercise no discretion as to the amount of the Trust’s ether to be staked or the timing of the Trust’s Staking Activities.

While the Trust may stake a maximum of 100% of its ether holdings, the amount of ether that remains unstaked is determined based on the

Trust’s utilization rate analysis, and accordingly may vary from time to time.

Based on utilization rate analysis applied to historical

data, the Trust generally intends to stake between 40% and 70% of the ether it holds, although the amount of ether that is staked may

be lesser or greater from time to time.

The precise percentage to be staked is based on the estimated liquidity needs of the Trust and

other factors, as determined by the Sponsor.

The rewards owed or paid to

the Staking Services Provider reduces the amount of staking rewards that are generated from the Trust’s Staking Activities that

are available in the assets of the Trust.

Each Staking Services Provider that generates staking rewards is entitled to compensation determined

as a portion of the Staking Rewards, which is generally determined by a low single-digit percentage of the overall rewards amount (the

“Staking Provider Consideration”).

The portion of the consideration paid to the Sponsor for arranging for the staking of the

Trust’s ether (the “Staking Fee”) is comprised of an aggregate of 25% of the Staking Rewards.

Of the Staking Fee, the

Sponsor pays the Staking Provider Consideration.

The Trust receives and retains the remainder of the Staking Rewards.

The Trust intends to pay cash

distributions at least quarterly to Shareholders to distribute staking rewards earned by the Trust.

The amount of any distribution, if

any, will depend on the staking rewards actually earned by the Trust during each quarter and cannot be predicted with certainty.

of staking rewards earned will vary based on factors including, but not limited to, the amount of ether held by the Trust, the percentage

of the Trust’s ether that is staked, network staking participation rates, protocol reward rates on the Ethereum network, and network

Accordingly, there can be no assurance as to the amount of distributions that will be paid in any quarter, and it is possible

that no distributions will be paid in a given quarter if insufficient staking rewards are earned.

Critical Accounting Estimates

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Results of Operations

As of September 30, 2025, the Trust had a net closing balance of 11,034.4578 ether with a value of $45,591,732, based on the Index price of $4,131.76 on September

30, 2025 (CME CF Ether-Dollar Reference Rate – New York Variant, non-GAAP methodology).

As of September 30, 2025, the total market

value of the Trust's ether was $45,916,365, based on the price of ether in the principal market of $4,161.18 on September 30, 2025.

For the Three Months ended on September 30,

The Trust’s NAV increased from

$23,002,554 on June 30, 2025 to $45,914,704 on September 30, 2025.

The increase in the Trust’s NAV resulted primarily

from an increase in the price of ether of 65.37% (from $2,516.24 per ether on June 30, 2025 to $4,161.18 per ether on September 30, 2025)

and a net increase in the number of shares outstanding of 1,830,000 from June 30, 2025 to 2,210,000 on September 30, 2025.

The Trust’s net increase in net assets resulting

from operations for the three months ended September 30, 2025 was $16,956,542.

This was the result of a change in unrealized appreciation

on investment in ether of $4,375,913, a net realized gain of $913 on the sale of ether for purposes of distributing to the Sponsor as

the Sponsor’s fee, and net realized gain on investment in ether sold for redemptions of $12,602,477.

The Trust’s expenses for the

three-month period were $22,761, relating to the Sponsor’s fees.

For the Three Months ended on September 30,

Net realized and change in

unrealized loss on investment in ether for the three months ended September 30, 2024, was $(3,223,608) which includes a net change in

unrealized depreciation on investment in ether of $(3,222,608).

Net realized and unrealized loss on investment in ether for the period

was driven by ether price depreciation from $3,423.00 per ether as of June 30, 2024 to $2,594.43 per ether as of September 30, 2024.

increase in net assets resulting from operations was $ 12,240,686 for the period ended September 30, 2024, which consisted of a net increase

in the number of shares outstanding offset by the aforementioned net realized and change in unrealized loss on investment in ether.

For the Nine Months ended on September 30,

The Trust’s NAV

increased from $16,869,879 on December 31, 2024 to $45,914,704 on September 30, 2025.

The increase in the Trust’s NAV resulted primarily from an increase in the price of ether of 24.56% (from $3,340.57 per ether on December 31, 2024 to $4,161.18

per ether on September 30, 2025) and a net increase in the number of shares outstanding of 1,010,000 from December 31, 2024 to 2,210,000

on September 30, 2025.

The Trust’s net increase

in net assets resulting from operations for the nine months ended September 30, 2025 was $13,553,224.

This was the result of a change

in unrealized appreciation on investment in ether of $4,464,507, a net realized gain of $593 on the sale of ether for purposes of distributing

to the Sponsor as the Sponsor’s fee, and net realized gain on investment in ether sold for redemptions of $9,126,375.

expenses for the nine-month period were $38,251, relating to the Sponsor’s fees net of waiver reimbursement.

For the period May 1, 2024 (initial seed creation)

through September 30, 2024

Net realized and change in

unrealized loss on investment in ether for the period May 1, 2024 (date of initial seeding) through September 30, 2024, was $(3,222,047)

which includes a net change in unrealized depreciation on investment in ether of $(3,222,047).

Net realized and unrealized loss on investment

in ether for the period was driven by ether price depreciation from $3,483.68 per ether as of June 18, 2024 to $2,594.43 per ether as

of September 30, 2024.

Net increase in net assets resulting from operations was $ 12,582,986 for the period ended September 30, 2024,

which consisted of a net increase in the number of shares outstanding offset by the aforementioned net realized and change in unrealized

loss on investment in ether.

For the Three Months Ended March 31, 2026

The Trust’s NAV decreased

from $31,298,450 on December 31, 2025 to $18,191,793 on March 31, 2026, a 41.88% decrease.

The decrease in the Trust’s NAV resulted

primarily from a 29.33% decrease in the price of ether, which fell from $2,971.02 on December 31, 2025 to $2,094.53 on March 31, 2026.

The decrease was further amplified by a net decrease in outstanding Shares, which fell from 2,110,000 on December 31, 2025 to 1,740,000

on March 31, 2026, as a result of 1,690,000 Shares (169 Baskets) being created and 2,060,000 Shares (206 Baskets) being redeemed during

During the quarter, the Trust staked an average of 22.69% of its ether holdings on a daily basis and had 23.02% of its ether

staked as of March 31, 2026.

Net decrease in net assets

resulting from operations for the three months ended March 31, 2026 was $(7,993,753), resulting from a net change in unrealized appreciation

on investment in ether of $1,094,647 — partially offset by net realized losses of $(9,135,133) comprising $(9,122,723) from ether

sold for redemptions and $(12,410) from ether sold to fund the staking income distribution — and net investment income of $46,733.

Net investment income comprised staking income of $62,288, less the Staking Fee of $15,555.

The Sponsor Fee of $12,125 was fully waived

during the quarter pursuant to the Sponsor’s one-year fee waiver effective October 9, 2025.

In addition to net assets resulting from operations,

the Trust paid a staking income distribution of $41,605 ($0.010378 per Share on January 8, 2026, and $0.012530 per Share on March 30,

2026) to Shareholders during the quarter.

Other than the Staking Fee, the Trust had no net expenses during the quarter.

For the Three Months ended on March 31, 2025

The Trust’s NAV decreased from $16,869,879 on December 31, 2024

to $8,403,421 on March 31, 2025, a 50.17% decrease.

The decrease in the Trust’s NAV resulted primarily from a 45.33% decrease in

the price of ether, which fell from $3,340.57 on December 31, 2024 to $1,827.55 on March 31, 2025.

The decrease was further amplified

by a net decrease in outstanding Shares, which fell from 5,050,000 on December 31, 2024 to 4,960,000 on March 31, 2025, as a result of

520,000 Shares being created and 610,000 Shares being redeemed during the quarter.

The Trust had no staking operations during the three

months ended March 31, 2025.

Net decrease in net assets

resulting from operations for the three months ended March 31, 2025 was $(9,861,010), resulting from a net change in unrealized depreciation

on investment in ether of $(6,380,524), a net realized loss of $(3,476,102) from ether sold for redemptions, and a net investment loss

of $(5,907), partially offset by a net change in unrealized appreciation on Sponsor Fee payable of $1,523.

The Trust’s only expense during

the quarter was the net Sponsor Fee of $5,907 after a waiver of $2,169.

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 Trust’s total

ether holdings.

The Sponsor agreed to waive the entire Sponsor fee for (i) a six-month period which commenced on July 23, 2024 (the day

the Trust’s Shares were initially listed on the Exchange), or (ii) the first $500 million of Trust assets, whichever came first.

The six-month waiver period ended on January 23, 2025, at which time the Sponsor began collecting the Sponsor fee.

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 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.

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

expenses are the Sponsor Fee and the Staking Fee.

The Sponsor agreed to waive the entire Sponsor Fee for (i) a six-month period which

commenced on July 23, 2024 (the day the Trust’s Shares were initially listed on the Exchange), or (ii) the first $500 million of

Trust assets, whichever came first.

The six-month waiver period ended on January 23, 2025, at which time the Sponsor began collecting

the Sponsor Fee.

On October 8, 2025, the Sponsor agreed to voluntarily waive the fee it receives from the Trust as compensation for the

Sponsor’s services rendered to the Trust for a period of one year beginning on October 9, 2025 and ending on October 8, 2026.

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 Administrator, the Custodians, the Transfer Agent and the Trustee, the Marketing

Fee, the Exchange’s listing fees, typical maintenance and transaction fees of the Depository Trust Company (“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.

The Sponsor is not required

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off-balance sheet arrangements.

Quantitative and Qualitative Disclosures

about Market Risks

The Trust is a smaller reporting company as defined by Rule 12b-2

of the Exchange Act and is not required to provide the information otherwise required under this item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis