Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

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 to financial statements included with this report (this "Report"). The discussion and analysis that follows may contain statements that relate to future events or future performance. In some cases, such forward-looking statements can be identified by terminology such as "may," "will," "should," "could," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or the negative of these terms or other comparable terminology. All statements (other than statements of historical fact) included in this Report that address activities, events or developments that may occur in the future, including such matters as changes in commodity prices and market conditions (for AVAX and the common shares of beneficial interest (the "Shares") of VanEck Avalanche ETF (the "Trust")), the operations of the Trust, the plans of VanEck Digital Assets, LLC (the "Sponsor") and references to the Trust's future success and other similar matters are forward-looking statements. These statements are only predictions. Actual events or results may differ materially. These statements are based upon certain assumptions and analyses made by the Sponsor on the basis of its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. Whether or not actual results and developments will conform to the Sponsor's expectations and predictions is subject to a number of risks and uncertainties, including the special considerations discussed in this Report, general economic, market and business conditions, changes in laws or regulations, including those concerning taxes, made by governmental authorities or regulatory bodies, and other world economic and political developments. Consequently, all the forward-looking statements made in this Report are qualified by these cautionary statements, and there can be no assurance that the actual results or developments the Sponsor anticipates will be realized or, even if substantially realized, will result in the expected consequences to, or have the expected effects on, the Trust's operations or the value of the Shares issued by the Trust. Moreover, neither the Sponsor nor any other person assumes responsibility for the accuracy or completeness of the forward-looking statements. Neither the Trust nor the Sponsor undertakes an obligation to publicly update or conform to actual results any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

Introduction

The Trust is a Delaware statutory trust. The Trust does not have directors, officers or employees. The creation and operation of the Trust have been arranged by the Sponsor. The Trust is governed by the trust agreement (the "Trust Agreement"), among the Sponsor and CSC Delaware Trust Company (the "Trustee"). The Trust is managed and controlled by the Sponsor, a wholly-owned subsidiary of Van Eck Associates Corporation ("VanEck"). The Sponsor is not governed by a board of directors.

The Trust's investment objective is to reflect the performance of the price of AVAX and rewards from staking a portion of the Trust's AVAX, 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, by jeopardizing the Trust's ability to qualify as a grantor trust for tax purposes, less the operating expenses of the Trust. The Trust is a passive investment vehicle that does not seek to pursue any investment strategy beyond tracking the price of AVAX and earning staking rewards. The Trust does not engage in any activities designed to obtain a profit from, or ameliorate losses caused by, changes in the price of AVAX.

The Trust issues and redeems Shares only in aggregations of 25,000 Shares (each a "Basket"), or integral multiples thereof, and only in transactions with authorized participants.

Shares of the Trust trade on The Nasdaq Stock Market LLC (the "Exchange") under the ticker symbol "VAVX."

Computation of Net Asset Value

The Trust's net asset value ("NAV") is calculated based on the Trust's net asset holdings as reconciled to the accounts of the custodians of the Trust's AVAX (the "AVAX Custodians") on a market approach, determined on a daily basis in accordance with the MarketVector^TM Avalanche Benchmark Rate price at 4:00 p.m. Eastern Time. The Trust's NAV per Share is calculated by taking the current market value of its total assets, subtracting any liabilities, and then dividing that total by the total number of outstanding Shares. The Trust Agreement gives the Sponsor the exclusive authority to determine the Trust's NAV and the Trust's NAV per Share, which it has delegated to the Trust's administrator (the "Administrator").

Liquidity

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. In exchange for a fee, the Sponsor has agreed to assume most of the expenses incurred by the Trust. As a result, the only expenses of the Trust that will be incurred will be the Sponsor's fee (the "Sponsor Fee"). The Trust also incurs fees in connection with staking activities, which are deducted from staking rewards in accordance with the applicable staking arrangements.

The Trust's primary source of liquidity is the sale of AVAX, including AVAX received as staking rewards, which may be sold to fund quarterly cash distributions to holders of Shares ("Shareholders"). To manage liquidity and redemption risks associated with staking, the Sponsor intends to maintain a portion of the Trust's AVAX holdings unstaked to accommodate anticipated redemptions and other liquidity needs.

Significant Accounting Policies

In preparing financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amount of revenue and expenses reported during the period. Actual results could differ from these estimates. A description of the valuation of AVAX, a critical accounting policy that the Trust believes is important to understanding its results of operations and financial position, is provided in the section entitled "Computation of Net Asset Value" above. In addition, please refer to Note 2 to the financial statements included in this Report for further discussion of the Trust's accounting policies.

Results of Operations

The Three Months Ended September 30, 2026

The Trust's net assets increased from $11,563,028 at June 30, 2026 to $22,057,853 at September 30, 2026, a 90.76% increase. The increase in the Trust's net assets resulted from an increase in the price of AVAX, which increased 65.82% from $6.70 at June 30, 2026 to $11.11 at September 30, 2026, and an increase in the number of outstanding Shares from 825,000 Shares at June 30, 2026 to 950,000 Shares at September 30, 2026. This is the net result of 125,000 Shares (5 Baskets) being created and no Shares being redeemed during the three months. The Trust also paid distributions to Shareholders of $140,003 ($0.17 per Share) from staking rewards during the three months.

The 65.62% increase in the NAV per Share from $14.02 at June 30, 2026 to $23.22 at September 30, 2026 is primarily related to the 65.86% increase in the price of AVAX during the three months, as well as income from staking activities.

The NAV per Share of $23.69 on September 29, 2026, was the highest during the three months, compared with a low during the three months of $12.92 on July 24, 2026.

Net increase in net assets resulting from operations for the three months ended September 30, 2026 was $8,129,206, resulting from a net change in unrealized appreciation (depreciation) from investment in AVAX of $8,046,314 and net investment income of $139,353 from staking activities, partially offset by a net realized loss of $52,185 on AVAX sold for the staking reward distribution and a net realized loss of $4,276 from AVAX sold to pay expenses during the three months. Other than the Sponsor Fee of $6,562, the Trust had no other expenses during the three months.

The Nine Months Ended September 30, 2026

The Trust's net assets increased from $2,517,563 at December 31, 2025 to $22,057,853 at September 30, 2026, a 776.16% increase. The increase in the Trust's net assets resulted primarily from an increase in the number of outstanding Shares, which increased from 100,000 Shares at December 31, 2025 to 950,000 Shares at September 30, 2026. This is the net result of 850,000 Shares (34 Baskets) being created and no Shares being redeemed during the nine months. This was partially offset by a decrease in the price of AVAX, which decreased 9.08% from $12.22 at December 31, 2025 to $11.11 at September 30, 2026. The Trust also paid distributions to Shareholders of $140,003 ($0.17 per Share) from staking rewards during the nine months.

The 7.78% decrease in the NAV per Share from $25.18 at December 31, 2025 to $23.22 at September 30, 2026 is primarily related to the 9.06% decrease in the price of AVAX during these nine months, partially offset by income from staking activities.

The NAV per Share of $30.22 on January 14, 2026, was the highest during the nine months, compared with a low during the nine months of $12.75 on June 25, 2026.

Net increase in net assets resulting from operations for the nine months ended September 30, 2026 was $3,315,317, resulting from a net change in unrealized appreciation (depreciation) from investment in AVAX of $3,063,339 and net investment income of $309,055 from staking activities, partially offset by a net realized loss of $52,185 on AVAX sold for the staking reward distribution and a net realized loss of $4,892 from AVAX sold to pay expenses during the nine months. Other than the net Sponsor Fee of $15,108, the Trust had no other expenses during the nine months.