21Shares Solana 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 laws. Organization and Trust Overview The Trust is a Delaware statutory trust, formed on June 3, 2024, 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 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 “TSOL”. The Sponsor served as the “Seed Capital Investor” to the Trust. On September 17, 2025, the Sponsor, in its capacity as Seed Capital Investor, subject to conditions, purchased the Initial Seed Shares at a per-Share price of $50.00. Total proceeds to the Trust from the sale of these Initial Seed Shares were $100. Delivery of the Seed Shares was made on September 17, 2025. The Trust’s investment objective is to seek to track the performance of solana, 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 solana, 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 Pricing Benchmark Provider. The Pricing Benchmark is designed to reflect the performance of solana in U.S. dollars. In seeking to achieve its investment objective, the Trust holds solana at its Custodians and values its Shares daily based on the Pricing Benchmark. The Trust is a passive investment vehicle and is not a leveraged product. The Sponsor does not actively manage the solana held by the Trust. On June 30, 2026, the Sponsor provided notice to the Pricing Benchmark Provider of the termination, effective August 31, 2026, of the licensing agreement between the Sponsor and the Pricing Benchmark Provider relating to the use of the Pricing Benchmark. The Sponsor intends to enter into a licensing agreement with FTSE on or about August 24, 2026, whereby FTSE will provide each of the Sponsor, the Trust, and their affiliates a non-exclusive, non-transferable, non-sub-licensable, worldwide license to access, view and use FTSE index data to develop, create, calculate, settle, maintain or support and market the Trust. Accordingly, the change in pricing benchmark provider is not expected to have a material impact on the Trust's net asset value, the fair value measurement of the Trust's solana, or the Trust's results of operations, and does not represent a change in accounting principle. The change will be applied prospectively from the date the successor benchmark becomes effective. The Trust issues Shares only in Creation Baskets of 10,000 or multiples thereof. Creation Baskets are issued and redeemed in exchange for cash or in-kind for solana. Individual Shares will not be redeemed by the Trust but are listed and traded on the Exchange under the ticker symbol “TSOL”. 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 NAV (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 Fee accrues daily and is payable in solana weekly in arrears. The Administrator calculates the Sponsor Fee on a daily basis by applying an annualized rate to the Trust’s NAV, and the amount of solana payable in respect of each daily accrual is determined by reference to the Pricing Benchmark. The Sponsor has agreed to pay all operating expenses (except for litigation expenses and other extraordinary expenses) out of the Sponsor Fee. 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. 13 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 Pricing Benchmark price. In determining the NAV of the Trust on any Business Day, the Administrator calculates the price of the solana 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 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. 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 solana is determined using the fair value of solana based on the price in the solana market that the Trust considers its “principal market” as of 4:00 p.m. ET on the valuation date, rather than using the Pricing Benchmark. 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. Staking The Trust’s staking model aims to maximize the portion of the Trust’s solana 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 solana to be staked or the timing of the Trust’s Staking Activities. While the Trust may stake a maximum of 100% of its solana holdings, the amount of solana 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 70% and 90% of the solana it holds, although the amount of solana 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 reduce the amount of solana 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 Staking Provider Consideration is paid directly to the Staking Services Provider from the staking rewards or indirectly through the Custodians’ own accounts. The Trust pays 10% of the staking rewards generated by the Trust’s Staking Activities after deduction of the Staking Provider Consideration to the Sponsor, and retains the remainder. 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. The amount of staking rewards earned will vary based on factors including, but not limited to, the amount of solana held by the Trust, the percentage of the Trust’s solana that is staked, network staking participation rates, protocol reward rates on the Solana network, and network conditions. 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. On the Solana network, in addition to staking rewards there are block rewards that are paid to validators. Block rewards are not newly minted solana from inflation but are composed of transaction fees, with half the fee being burned and the other half going to the validator who produces and validates the block. Validators also earn through inflation rewards for securing the network and may receive additional revenue from MEV. Validators are paid immediately upon block production, and delegators receive their share of rewards from the validator they stake with, usually at the end of an epoch. As such, block rewards and transaction fees are not considered staking rewards and will not accrete to the Trust. 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. 14 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 solana 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 solana is sold in its principal market to market participants (or in the absence of a principal market, the most advantageous market). The Trust utilizes an exchange traded price from the Trust’s principal market for solana as of 4:00 p.m. ET on the Trust’s financial statement measurement date. Results of Operations For the Three Months Ended June 30, 2026* The Trust’s NAV decreased from $2,876,514 on March 31, 2026 to $2,847,364 on June 30, 2026, a 1.01% decrease. The decrease resulted primarily from a 10.95% decline in the price of solana, which fell from $82.66 on March 31, 2026 to $73.61 on June 30, 2026, partially offset by a net increase in outstanding Shares from 360,000 on March 31, 2026 to 400,000 on June 30, 2026, as a result of 40,000 Shares (4 Baskets) being created and 0 Shares (0 Baskets) being redeemed during the quarter. The Trust had 90.80% of its solana holdings staked as of June 30, 2026, with an average of 43.15% staked on a daily basis during the quarter. Net decrease in net assets resulting from operations for the three months ended June 30, 2026 was $(293,613), resulting from a net change in unrealized depreciation on investment in solana of $(296,506), a net realized loss of $0 from solana sold for redemptions, a net realized loss of $(10,572) from solana sold for distributions, a net realized loss of $(1,599) from solana sold to pay the Sponsor Fee, and a net realized loss of $(420) on in-kind liabilities paid, partially offset by a net investment income of $14,792 and a net change in unrealized appreciation on Sponsor Fee payable of $692. Net investment income comprised Staking Rewards of $18,105 less the Sponsor Fee of $1,503 and the Staking Fee of $1,810. In addition to net assets resulting from operations, the Trust paid total staking income distributions of $14,379 ($0.035949 per Share on June 29, 2026) to Shareholders during the quarter. Except for the Sponsor Fee and Staking Fee, the Trust had no other expenses during the quarter. * No prior year comparative period has been provided as the Trust did not have any operations as of June 30, 2025. For the Six Months Ended June 30, 2026* The Trust’s NAV decreased from $5,735,019 on December 31, 2025 to $2,847,364 on June 30, 2026, a 50.35% decrease. The decrease resulted primarily from a 40.62% decline in the price of solana, which fell from $123.97 on December 31, 2025 to $73.61 on June 30, 2026. The decrease was amplified by a net decrease in outstanding Shares from 460,000 on December 31, 2025 to 400,000 on June 30, 2026, as a result of 80,000 Shares (8 Baskets) being created and 140,000 Shares (14 Baskets) being redeemed during the period. The Trust had 90.80% of its solana holdings staked as of June 30, 2026, with an average of 41.96% staked on a daily basis during the period. Net decrease in net assets resulting from operations for the six months ended June 30, 2026 was $(1,600,591), resulting from a net change in unrealized depreciation on investment in solana of $(1,300,734), a net realized loss of $(232,315) from solana sold for redemptions, a net realized loss of $(97,043) from solana sold for distributions, a net realized loss of $(5,401) from solana sold to pay the Sponsor Fee, and a net realized loss of $(2,370) on in-kind liabilities paid, partially offset by a net investment income of $33,783 and a net change in unrealized appreciation on Sponsor Fee payable of $3,489. Net investment income comprised Staking Rewards of $41,460 less the Sponsor Fee of $3,531 and the Staking Fee of $4,146. In addition to net assets resulting from operations, the Trust paid total staking income distributions of $134,559 ($0.316871 per Share on February 13, 2026, $0.016962 per Share on March 30, 2026, and $0.035949 per Share on June 29, 2026) to Shareholders during the period. Except for the Sponsor Fee and Staking Fee, the Trust had no other expenses during the period. * No prior year comparative period has been provided as the Trust did not have any operations as of June 30, 2025. 15 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 ordinary recurring expenses are the Sponsor Fee and the Staking Fee. In exchange for the Sponsor 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 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 solana on an as-needed basis to pay the Sponsor Fee. On July 27, 2026, the Sponsor agreed to voluntarily waive the Sponsor Fee for a period of one year beginning on July 28, 2026 and ending on July 27, 2027. Off-Balance Sheet Arrangements The Trust does not have any off-balance sheet arrangements. Item 3. 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.