HZEN 10-K & 10-Q changes, risk factors and insider trading

AnThe Authorized Participant, the Trust or the Sponsor could be subject to regulation as a money service business or money transmitter, which could result in extraordinary expenses to the Authorized Participant, the Trust or the Sponsor and also result in decreased liquidity for the Shares;

The Sponsor’s services may be discontinued, which could be detrimental to the Trust; and If the Custodian resigns or is removed by the Sponsor, or otherwise, without replacement, it could trigger early termination of the Trust.

The trading prices of many digital assets, including ZEN, have experienced extreme volatility throughout their existence, including in recent periodsperiods, and may continue to do so. For instance, following significant increases throughout the majority of 2020, digital asset prices, including ZEN, experienced significant volatility throughout 2021 and 2022.

This volatility became extreme in November 2022, when FTX, then a major Digital Asset Trading Platform, halted customer withdrawals. Additionally, on October 10, 2025, it was reported that a sharp decline in digital asset market prices triggered the liquidation of approximately $20 billion in leveraged positions across the digital asset industry. Any similar halting of withdrawals or liquidations across leveraged positions in the digital asset industry in the future could further impact trading prices. See “—Recent developments in the digital asset economy have led to extreme volatility and disruption in digital asset markets, a loss of confidence in participants of the digital asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide declines in liquidity.” Digital asset prices, including ZEN, have continued to fluctuate widely throughout 2024 and through the date of this Annual Report.

Digital assets such as ZEN were only introduced within the past two decades, and the medium-to-long term value of the Shares is subject to a number of factors relating to the capabilities and development of blockchain technologies, such as the recentnessrecency of their development, their dependence on the internet and other technologies, their dependence on the role played by users, developersdevelopers, and minersvalidators, and the potential for malicious activity. For example, the realization of one or more of the following risks could materially adversely affect the value of the Shares:

DigitalCertain digital asset networks and related protocols are in the early stages of development. Given the recency of the development of digital asset networks and related protocols, digital assets and the underlying digital asset networks and related protocols may not function as intended and parties may be unwilling to use digital assets, which would dampen the growth, if any, of digital asset networks and related protocols.

Digital asset networks and related protocols are dependent upon the internet. A disruption of the internet or a digital asset network or related protocol, such as the HorizenBase Network, would affect the ability to transfer digital assets, including ZEN, and, consequently, their value.

ZENDigital isassets have only recently become selectively accepted as a means of payment by retail and commercial outlets, andbut there is no meaningful degree of use of ZEN as a means of payment by consumersretail remainsor limited.commercial outlets. Banks and other established financial institutionsinstitutions, whether voluntarily or in response to regulatory feedback, may refuse to process funds for ZEN transactions; process wire transfers to or from Digital Asset Trading Platforms, ZEN-related companies or service providers; or maintain accounts for persons or entities transacting in ZEN. As a result, the prices of ZEN are largely determined by speculators and miners,speculators, thus contributing to price volatility that makes retailers less likely to accept ZEN in the future. While the use of other digital assets, such as Bitcoin, to purchase goods and services from commercial or service businesses is developing, ZEN has not yet been accepted in the same manner due to its infancy and because ZEN has a slightly different purpose than Bitcoin.

The prices of digital assets may be determined on a relatively small number of Digital Asset Trading Platforms by a relatively small number of market participants, many of whom are speculators or those intimately involved with the issuance of such digital assets, such as miners or developers, which could contribute to price volatility that makes retailers less likely to accept digital assets in the future.

Certain privacy-preserving features have been or are expected to be introduced to a number of digital asset networks. ZEN removed some of its privacy features in September 2023. Nevertheless, tradingTrading platforms or businesses that facilitate transactions in ZEN may be at an increased risk of having banking services cut off if there is a concern its privacy features interfere with the performance of anti-money laundering duties and economic sanctions checks. For example, in September 2022, the Digital Asset Trading Platform Huobi delisted seven digital assets with privacy preserving features, including ZEN, a move that Huobi explained was “in compliance with the latest financial regulations.” However, in September 2023, the Horizen protocol implemented an update intended to deprecate these privacy shields, with the intent of causing it to no longer be considered a “privacy coin,” and, following the update, the Horizen Network no longer supported transactions from unshielded addresses to shielded addresses. It is unclear whether the removal of those types of shielded transactions from Horizen would mitigate these concerns by regulators, law enforcement agencies, and other digital asset market participants regarding ZEN.

Users, developersdevelopers, and minersother ecosystem members may switch to or adopt certain digital asset networks or protocols at the expense of their engagement with other digital asset networks and protocols, which may negatively impact those networks and protocols, including the Horizen Network.

ZEN is designed to fosterfacilitate sidechainthe operations,use of compliance-oriented privacy-enabling technology by other applications on the Base Network, but it has not been widely adoptedadopted. even inIf the contextHorizen of ZEN transactions. If ZEN’sprotocol’s capabilities are not more widely utilized, itZEN may struggle to compete with other digital assets.

Horizen’s privacy-preserving features may have been seen by some as primary attributes distinguishing ZEN from its competitors. Horizen's upgradeintegration deprecatingof shieldedcompliance-oriented poolsfunctionalities could diminish ZEN's popularity, which could adversely affect the value of ZEN.

Changes in the governance of a digital asset network or protocol may not receive sufficient support from usersHorizen andDAO miners,members, which may negatively affect that digital asset network’s or protocol’s ability to grow and respond to challenges.

The governance of some digital asset networks and protocols, such as the Horizen Network, is generally by voluntary consensus andof openvoters competition.in Forthe suchHorizen networksDAO. and protocols,Nonetheless, there may be a lack of consensusconsensus, participation, or clarity on that network’s or protocol’s governance, which may stymie such network’s or protocol’s utility, adaptability and ability to grow and face challenges.

The foregoing notwithstanding, the underlying software for some digital asset networks and protocols, such as the Horizen Network, is informally or formally managed or developed by a group of core developers that propose amendments to the relevant network’s or protocol’s source code. Core developers’ roles may evolve over time, generally based on self-determined participation. If athe significantHorizen majority of users and minersDAO were to adopt amendments to the Horizen Network based on the proposals of such core developers, the Horizen Network would be subject to new source code that may adversely affect the value of ZEN.

As corresponding increases in throughput lag behind growth in the use of digital asset networks, average transaction fees and settlement times may increase considerably. For example, the Bitcoin Network has been, at times, at capacity, which has led to increased transaction fees. Since January 1, 2021,2022, Bitcoin average daily transaction fees have ranged from $0.38 per transaction on September 8, 2024, to as high as $124.17 per transactiontransaction, on April 20, 2024. As of September 30, 2024,2025, Bitcoin average daily transaction fees stood at $0.79$0.65 per Bitcoin transaction. Increased transaction fees and decreased settlement speeds could preclude certain uses for ZEN (e.g., micropayments), and could reduce demand for, and the price of, ZEN, which could adversely impact the value of the Shares.

It is possible that persons or entities control multiple wallets that collectively hold a significant amount of ZEN, even if they individually only hold a small amount, and it is possible that some of these wallets are controlled by the same person or entity. Because of the privacy-preserving features of the Horizen Network, it is not possible to determine whether such concentration of ownership of ZEN exists. If there is any such concentration of ownership, large sales or distributions by such holders could have an adverse effect on the market price of ZEN. Concentrated ownership of ZEN could also enable a limited number of holders to exert disproportionate influence over governance decisions made through the Horizen DAO, including proposals affecting protocol parameters, treasury allocations, or other matters that may materially impact the Horizen ecosystem and the value of ZEN.

If a malicious actor or botnet obtains control of more than 50% of the processing power onover the Horizen Network by compromising the centralized sequencer supporting the Base Network, the rollup infrastructure or smart contracts underlying the Base Network, or otherwisethe Ethereum Network itself, or obtains control over the Horizen Network through itsother influence over core developers or otherwise,means, such actor or botnet could manipulate the BlockchainHorizen Network to adversely affect the value of the Shares or the ability of the Trust to operate.

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 ZEN and, from time to time on a periodic basis, issues Creation Baskets in exchange for deposits of ZEN. As a passive investment vehicle, the Trust’s investment objective is for the value of the Shares (based on ZEN per Share) to reflect the value of ZEN held by the Trust, determined by reference to the Reference Rate Price, less the Trust’s expenses and other liabilities. While an investment in the Shares is not a direct investment in ZEN, the Shares are designed to provide investors with a cost-effective and convenient way to gain investment exposure to ZEN. To date, the Trust has not met its investment objective and the Shares quoted on OTCQX have not reflected the value of ZEN held by the Trust, less the Trust’s expenses and other liabilities, but instead have traded at both premiums and discounts to such value, which at times have been substantial. The Trust is not managed like a business corporation or an active investment vehicle. On October 7, 2021, the Trust completed a 10-for-1 Share split (the “Share Split”) of the Trust’s issued and outstanding Shares. Each Shareholder of record as of the close of business on October 6, 2021 received 9 additional Shares of the Trust for each Share held. The number of outstanding Shares and per-Share amounts disclosed for all periods prior to October 7, 2021 have been retroactively adjusted to reflect the effects of the Share Split. 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.

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.

The cost basis of the ZEN received by the Trust in connection with a creation order is recorded by the Trust at the fair value of ZEN 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.

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 ZEN 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.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.

Financial Highlights for the Years ended September 30, 2024,2025, 20232024 and 20222023 (All amounts in the following table and the subsequent paragraphs, except Share, per Share, ZEN and price of ZEN amounts, are in thousands)

The Trust’s NAV per Share is derived from the Reference Rate Price as represented by the Reference Rate 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. Prior to February 7, 2024, NAV was referred to as Digital Asset Holdings and NAV per Share was referred to as Digital Asset Holdings per Share. See “Item 1. Business—Overview of the ZEN Industry and Market—ZEN Value—The Reference Rate and the Reference Rate Price” for a description of the Reference Rate and the Reference Rate Price. Effective June 16, 2023, the Reference Rate Provider removed Binance.US from the Reference Rate due to Binance.US’s announcement that the trading platform was suspending U.S. dollar deposits and withdrawals and planned to delist its U.S. dollar trading pairs, and did not add any Constituent Trading Platforms as part of its review. As a result of this removal, there were no longer sufficient Constituent Trading Platforms for the Reference Rate Provider to continue producing the Reference Rate pursuant to the Constituent Trading Platform selection methodology described in “Item 1. Business—Overview of the ZEN Industry and Market—ZEN Value—The Reference Rate and the Reference Rate Price—Constituent Trading Platform Selection.” If the Reference Rate becomes unavailable, the Sponsor employs an alternative method to determine the Reference Rate Price under the cascading set of rules set forth in “Item 1. Business—Overview of the ZEN Industry and Market—ZEN Value—The Reference Rate and the Reference Rate Price—Determination of the Reference Rate Price When Reference Rate Price is Unavailable.” Effective June 20, 2023, CoinDesk Indices, Inc. no longer determines the Reference Rate Price, and the Reference Rate Price is the Secondary Reference Rate Price, which is the price set by Coin Metrics Real-Time Rate as of 4:00 p.m., New York time, on the valuation date. The Secondary Reference Rate Price is a real-time reference rate price, calculated using trade data from constituent markets selected by Coin Metrics, Inc., the Secondary Reference Rate Provider. Effective June 20, 2023, any references to the “Reference Rate Price” in this Annual Report refers to the Secondary Reference Rate Price set by the Secondary Reference Rate selected by the Secondary Reference Rate Provider. The Digital Asset Trading Platforms included in the Reference Rate as of September 30, 20242025 were Coinbase, Binance, Bybit, Huobi, MEXC and KuCoin. As of September 30, 2024, the Digital Asset Trading Platforms included in the Reference Rate consisted of Coinbase, Binance, Bybit, Gate.io and KuCoin. As of September 30, 2023, the Digital Asset Trading Platforms included in the Reference Rate consisted of Coinbase, Binance, Gate.io and OKX. As of September 30, 2022, the Digital Asset Trading Platforms included in the Reference Rate consisted of Coinbase, Binance.US and Bittrex.

The following table sets out the range of high and low closing prices for the Shares as reported by OTCQX, the Trust’s Principal Market NAV per Share calculated in accordance with U.S. GAAP and the Trust’s NAV per Share for each of the quarters sinceof Octoberthe 19,prior 2021.three years.

HZEN Premium/(Discount): HZEN Share Price vs. NAV per Share (Non-GAAP) ($) (1)

HZEN Premium/(Discount): HZEN Share Price vs. NAV per Share (Non-GAAP) (%) (1)

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 ZEN and, from time to time on a periodic basis, issues Creation Baskets in exchange for deposits of ZEN. As a passive investment vehicle, the Trust’s investment objective is for the value of the Shares (based on ZEN per Share) to reflect the value of the ZEN held by the Trust, determined by reference to the Reference Rate Price, less the Trust’s expenses and other liabilities. While an investment in the Shares is not a direct investment in ZEN, the Shares are designed to provide investors with a cost-effective and convenient way to gain investment exposure to ZEN. To date, the Trust has not met its investment objective and the Shares quoted on OTCQXOTC Markets have not reflected the value of the ZEN held by the Trust, less the Trust’s expenses and other liabilities, but instead have traded at both premiums and discounts to such value, which at times have been substantial. 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.

Financial Highlights for the Three and Six Months Ended MarchJune 31,30, 2026 and 2025 (All amounts in the following table and the subsequent paragraphs, except Share, ZEN and price of ZEN amounts, are in thousands)

Net realized and unrealized loss on investment in ZEN for the three months ended MarchJune 31,30, 2026 was ($3,321$1,500), which includes a realized loss of ($69$79) on the transfer of ZEN to pay the Sponsor’s Fee and net change in unrealized appreciation/depreciation on investment in ZEN of ($3,252$1,421). Net realized and unrealized loss on investment in ZEN for the period was driven by ZEN price depreciation from $9.14 per ZEN as of December 31, 2025, to $5.63 per ZEN as of March 31, 2026, to $4.03 per ZEN as of June 30, 2026. Net decrease in net assets resulting from operations was ($3,363$1,532) for the three months ended MarchJune 31,30, 2026, which consisted of the net realized and unrealized loss on investment in ZEN, plus the Sponsor’s Fee of $42.$32. Net assets decreased to $5,310$3,778 at MarchJune 31,30, 2026, a 39%29% decrease for the three-month period. The decrease in net assets resulted from the aforementioned ZEN price depreciation and the withdrawal of approximately 5,8355,863 ZEN to pay the foregoing Sponsor’s Fee.

Net realized and unrealized loss on investment in ZEN for the three months ended MarchJune 31,30, 2025 was ($18,139$1,366), which includes a realized loss of ($21$61) on the transfer of ZEN to pay the Sponsor’s Fee and net change in unrealized appreciation/depreciation on investment in ZEN of ($18,118$1,305). Net realized and unrealized loss on investment in ZEN for the period was driven by ZEN price depreciation from $28.91 per ZEN as of December 31, 2024, to $8.81 per ZEN as of March 31, 2025, to $7.38 per ZEN as of June 30, 2025. Net decrease in net assets resulting from operations was ($18,229$1,418) for the three months ended MarchJune 31,30, 2025, which consisted of the net realized and unrealized loss on investment in ZEN, plus the Sponsor’s Fee of $90.$52. Net assets decreased to $8,408$7,096 at MarchJune 31,30, 2025, a 67%16% decrease for the three-month period. The decrease in net assets resulted from the aforementioned ZEN price depreciation and the withdrawal of approximately 5,6636,007 ZEN to pay the foregoing Sponsor’s Fee, partially offset by the contribution of approximately 70,65813,062 ZEN with a value of $924$106 to the Trust in connection with Share creations during the period.

The Trust’s NAV and NAV per Share are derived from the Reference Rate Price, as represented by the Reference Rate 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. The Digital Asset Trading Platforms included in the Reference Rate (the “Constituent Trading Platforms”) as of MarchJune 31,30, 2026 were Coinbase, Binance, ByBit, and OKX. The Digital Asset Trading Platforms included in the Reference Rate as of MarchJune 31,30, 2025 were Coinbase, Binance, ByBit, KuCoin, Huobi and MEXC. See “Item 1. Business—Overview of the ZEN Industry and Market—ZEN Value—The Reference Rate and the Reference Rate Price” in our Transition Report for a description of the Reference Rate and Reference Rate Price.

The following chart illustrates the movement in the Trust’s NAV per Share versus the Reference Rate Price and the Trust’s Principal Market NAV per Share from August 6, 2018 (the inception of the Trust’s operations) to MarchJune 31,30, 2026. For more information on the determination of the Trust’s NAV, see “Item 1. Business—Overview of the ZEN Industry and Market—ZEN Value—The Reference Rate and the Reference Rate Price” in our Transition Report.

The following table illustrates the movements in the Reference Rate Price from AprilJuly 1, 2021 to MarchJune 31,30, 2026. The Sponsor has not observed a material difference between the Reference Rate Price and average prices from the Constituent Trading Platforms individually or as a group.

The following table illustrates the movements in the Digital Asset Market price of ZEN, as reported on the Trust’s principal market, from AprilJuly 1, 2021 to MarchJune 31,30, 2026.

The following chart sets out the historical closing prices for the Shares as reported by OTCQXOTC Markets and the Trust’s NAV per Share from October 19, 2021 to MarchJune 31,30, 2026.

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 OTCQXOTC Markets divided by the Trust’s NAV per Share from October 19, 2021 to MarchJune 31,30, 2026.