Leatherback Long/Short Alternative Yield ETF

Ticker: LBAY

Annual Report

August 31, 2022

Leatherback Long/Short Alternative Yield ETF

TABLE OF CONTENTS

A Message to Our Shareholders

1

Performance Summary

3

Portfolio Allocation

4

Schedule of Investments

5

Statement of Assets and Liabilities

8

Statement of Operations

9

Statement s of Changes in Net Assets

10

Financial Highlights

11

Notes to Financial Statements

12

Report of Independent Registered Public Accounting Firm

21

Expense Example

22

Trustees and Executive Officers

23

Additional Information

25

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This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.

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1

Leatherback Long/Short Alternative Yield ETF

Dear Shareholders,

As a reminder to our shareholders, Leatherback Asset Management, LLC (the “Investment Sub-Adviser”) launched the Leatherback Long/Short Alternative Yield ETF (the “Fund”) on November 16, 2020. The Fund’s investment objective is to seek capital appreciation and income.

Since inception through the period ended August 31, 2022, the Fund generated annualized total returns of 22.51% (NAV) and 22.68% (Market). This compares to the 6.54% annualized total return of the benchmark, the S&P 500 ® Total Return Index. The Fund has returned $1.32 per share in distributions. As of August 31, 2022, the Fund had long exposure of 111.3% and short exposure of -28.3%, resulting in a net exposure of 83.0%.

Performance Returns (as of August 31, 2022)

1 Year

Inception
(11/16/2020)*

Market Price

 17.68%

22.68%

Fund NAV

 17.43%

22.51%

S&P 500 ® Total Return Index

-11.23%

6.54%

<!--[if IE]><FONT style=" width: 14.399999999999999pt; text-indent: -12.0pt; display: inline-block;"><![endif]--> * <!--[if IE]></FONT><![endif]--> Annualized.

The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. Performance current to the most recent month-end can be obtained by calling 833-417-0090.

The fiscal year ended August 31, 2022 has been eventful and provided a multitude of opportunities for our long/short investment strategy. Broader equity markets have shown increased volatility, interest rates have risen at a substantial clip, and we find ourselves experiencing a possible bear market in equities. It is also being debated if the U.S. may be in the midst of a recessionary period.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> We ended the third quarter of 2021 witnessing many asset markets a nd central bank balance sheet levels reaching all-time highs. The definition of transitory with respect to inflation was starting to be contemplated by policymakers. Meanwhile, available jobs in the U.S. far outnumbered the number of workers seeking them. We were discussing inflation, employment, and the expectations of Federal Open Market Committee (“FOMC”) actions. Here we are one year later, and the three topics are major drivers of the conversation and at the forefront of many market participants’ minds.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> Over the course of the fourth quarter of 2021, we expressed our belief that the concept of inflation being transitory would prove to show a level of permanence which would result in inflation numbers continuing a march higher. We also foreshadowed what we thought would be the fallout central banks would feel given the role, perceived or actual, played in asset and debt markets globally. We made a call in thinking corporate profit margins would begin to contract. Nevertheless, risk assets continued to reach all-time high after all-time high, and valuation metrics for many individual companies’ shares were what we thought of as wishful thinking as speculation appeared to us to be prevalent. Housing prices continued to soar, and the FOMC decided it was time to pull back on their open market purchases given the potential impacts on asset values and inflationary undertones. It was becoming more apparent that inflation dynamics were underappreciated, as many were focused on the supply chain impacts and rising energy costs we had pointed to over the time since the launch of the Fund. Ultimately, to end the calendar year, the US Federal Reserve Board (“the Fed”) decided it was time to retire the word transitory, accelerated the taper (reduction in open market purchases), and discussions switched to interest rate increases and balance sheet runoff.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> The first quarter of 2022 started to pull together many of the theses we had been outlining since the beginning of 2021. Policymakers were confounded by the prospect of the number of employees quitting jobs, the lack of pace in new jobs being filled, and the disturbingly high number of job openings. All of this happened with a low rate of unemployment, with workers able to demand increases in wages. The markets appeared to be in a state of shock from the speed with which the FOMC changed from the transitory inflation stance to tapering and discussions about running off their historically large balance sheet. Asset markets began to question whether the concept of the perceived “Fed Put”, whereby the Fed would implement policies to limit the stock market’s decline would come to the rescue this time around. The yield curve began to flatten, which oftentimes leads to a recessionary economy, and analyst forecasts of where many companies were heading for the rest of 2022 were recalibrated. We predicted an increase in volatility given the paradigm shift being expressed by the Fed, and to end the quarter we addressed a topic we had discussed in the second half of 2021: the increase and level of household debt, and the potential impacts interest rate tightening could portend. The quarter ended with the Federal Funds rate being raised in March 2022 for the first time since the end of 2018.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> Quarter two of 2022 began with what may have been an ominous sign: the yield curve inverted ( shorter-term interest rate levels that are lower than longer-term interest rates ) . The notional value of negatively yielding debt was dropping dramatically, asset prices were experiencing turbulence, and many areas of the bond market were beginning to show cracks. Inflation numbers continued to show persistence in price increases, and as we predicted, dissatisfaction with policy decisions were being expressed. The Fed Chair appealed directly to the American people during the May press conference expressing the understanding of the

2

Leatherback Long/Short Alternative Yield ETF

hardship higher prices were causing. This round of the Zero/Near-Zero-Interest-Rate policy regime appeared to be drawing to its conclusion, as U.S. Treasury yields rose higher and more quickly than most had foreseen, 3%, which was unthought of by many market participants less than six months earlier, had become a reality in some Treasury maturities. Broader U.S. Equity markets were suffering one of their worst performance starts to a year. We thought the markets at large were becoming increasingly reactive, price discovery had returned, and the adage “Don’t Fight the Fed” became important advice to heed. It appeared depleted savings, higher debt levels, and increasing costs of borrowing would be important drivers of what may lie ahead.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> The third quarter through August 2022 began what we think is the culmination of everything we have outlined above. The latest interest rate regime appears to have ended, and the Fed is doing what it can to make the message clear. Both fixed income and equity markets reacted, and turbulence was here, at least for the moment. Shares of what we view as lower quality companies saw a rally, but we thought this would be temporary as we may be in the midst of a bear market, and even a recession. We opined that the market setup was different from over the past decade, and that interest rates would be higher, and remain there longer, than markets were discounting. We made a call of higher inflation, a consumer that may be on the ropes, and possible corporate profit margin compression. Finally, we wondered if the realization that the bull market status quo may have disappeared had fully set in.

These themes have led to opportunities in both the long and short space. Presently, we maintain several long positions that we view as attractively valued on both an absolute and relative basis. These names also generate income via dividends, many of which we believe have opportunities to grow these payouts. With the significant decline in valuations broadly across equities, we anticipate the coming months and year could produce a constructive set-up to upgrade our portfolio with high shareholder yielding equities. On the short side of the book, we maintain shorts in high valuation companies with, in our opinion, limited prospects to near-term profitability. The short side of the book has produced significant pr ofit contributors with several names declining in value by 50% or more during the fiscal year. While we do not expect a repeat performance of the past fiscal year, we do observe many short candidates that could prove profitable over the next year. As we wrap up the month of August 2022, we want to thank our corporate and investor partners. We look forward to future dialogue and working together to continue changing the game.

For any questions about the Fund please reach out to us at (833) 417-0090. You may also visit our website at www.leatherbackam.com or reach us via email at info@leatherbackam.com.

Leatherback Asset Management

Before investing you should carefully consider the Fund’s investment objectives, risks, charges and expenses. This and other information is contained in the Fund’s prospectus. The Fund’s prospectus may be obtained by visiting leatherbackam.com. Please read the prospectus carefully before you invest.

Investing involves risk, including the loss of principal.

Past performance does not guarantee future results.

A fund’s net asset value (“NAV”) per share is the sum of all its assets less any liabilities, divided by the number of shares outstanding. The market price is the most recent price at which the fund was traded.

As with all exchange-traded funds, Fund shares may be bought and sold in the secondary market at market prices. The market price normally should approximate the Fund’s NAV per share, but the market price sometimes may be higher or lower than the NAV. The Fund is newer with a limited operating history. There are a limited number of financial institutions authorized to buy and sell shares directly with the Fund; and there may be a limited number of other liquidity providers in the marketplace. There is no assurance that Fund shares will trade at any volume, or at all, on any stock exchange. Low trading activity may result in shares trading at a material discount to NAV.

“Long” and “short” are investment terms used to describe ownership of securities. To buy securities is to “go long.” The opposite of going long is “selling short.” Short selling is an advanced trading strategy that involves selling a borrowed security. Short sellers make a profit if the price of the security goes down and they are able to buy the security at a lower amount than the price at which they sold the security short.

The S&P 500 ® Total Return Index is an index of 500 large-capitalization companies selected by Standard & Poor’s Financial Services LLC.

Since the Fund is actively-managed it does not seek to replicate the performance of a specified index. The Fund therefore may have higher portfolio turnover and trading costs than index-based funds. The Fund may invest in other funds, and in so doing will incur the expenses and risks of those funds.

The Fund uses short sales and derivatives (forwards, futures, swaps, and options), both of which may involve substantial risk. The loss on a short sale is in principle unlimited since there is no upward limit on the price of a shorted asset. The potential loss from a derivative may be greater than the amount invested due to counter-party default; illiquidity; or other factors. The Fund may hold illiquid assets ( e.g., certain business development companies), to the extent permitted under the Investment Company Act of 1940, as amended, which may cause a loss if the Fund is unable to sell an asset at a beneficial time or price.

The Fund is distributed by Foreside Fund Services, LLC.

3

Leatherback Long/Short Alternative Yield ETF

PERFORMANCE SUMMARY

Total Return s for the period s ended August 31, 2022:

1 Year

Since Inception
(11/16/2020)
(Annualized)

Ending Value
(8/31/2022)

Leatherback Long/Short Alternative Yield ETF - NAV

17.43%

22.51%

$14,380

Leatherback Long/Short Alternative Yield ETF - Market

17.68%

22.68%

14,414

S&P 500 ® Total Return Index

-11.23%

6.54%

11,201

This chart illustrates the performance of a hypothetical $10,000 investment made on November 16, 2020 (commencement of operations), and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The chart assumes reinvestment of capital gains, dividends, and return of capital, if applicable, for a fund and dividends for an index.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling (833) 417-0090. The Fund’s expense ratio is 1. 4 3% (as of the Fund’s most recently filed Prospectus.)

4

Leatherback Long/Short Alternative Yield ETF

ALLOCATION OF PORTFOLIO HOLDINGS  at August 31, 2022 (Unaudited)

Sector 

% of Total
Investments

Consumer, Non-cyclical

26.1

%

Financials

21.1

Industrial

11.7

Cash & Cash Equivalents (1)

9.6

Basic Materials

9.3

Consumer, Cyclical

7.0

Technology

6.0

Energy

4.1

Communications

2.7

Utilities

2.4

 

 

100.0

%

ALLOCATION OF SECURITIES SOLD SHORT at August 31, 2022 (Unaudited)

 

Sector 

% of Total
Securities
Sold Short

Consumer, Cyclical

41.5

%

Financials

37.7

Technology

10.4

Communications

10.4

 

 

100.0

%

<!--[if IE]><FONT style=" width: 14.399999999999999pt; text-indent: -12.0pt; display: inline-block;"><![endif]--> (1) <!--[if IE]></FONT><![endif]--> Represents cash, short-term investments and liabilities in excess of other assets.

Leatherback Long/Short Alternative Yield ETF

5

The accompanying notes are an integral part of these financial statements.

SCHEDULE OF INVESTMENTS  at August 31, 2022

 

Shares

 

Value

 

Common Stocks — 111.3%

 

Aerospace & Defense — 3.2%

L3Harris Technologies, Inc. (1)

7,683

$ 1,753,184

 

Agriculture — 5.2%

Bunge Ltd. (1) (2)

28,707

2,846,873

 

Banks — 4.1%

Popular, Inc. (1)

28,824

2,225,789

 

Beverages — 5.2%

The Coca—Cola Co. (1)

23,132

1,427,476

Keurig Dr Pepper, Inc. (1)

36,262

1,382,307

 

2,809,783

 

Building Materials — 3.8%

Carrier Global Corp. (1)

52,845

2,067,296

 

Chemicals — 7.5%

Air Products and Chemicals, Inc. (1)

7,925

2,000,666

Nutrien Ltd. (1)

22,754

2,088,135

 

4,088,801

 

Commercial Services — 7.0%

H&R Block, Inc. (1)

47,524

2,138,580

S&P Global, Inc. (1)

4,757

1,675,320

 

3,813,900

 

Diversified Financial Services — 9.4%

The Charles Schwab Corp. (1)

35,179

2,495,950

Intercontinental Exchange, Inc. (1)

11,072

1,116,611

Visa, Inc. - Class A (1) (2)

7,600

1,510,196

 

5,122,757

 

Electric — 3.0%

PG&E Corp. (1)

134,224

1,654,982

 

Entertainment — 2.9%

Vail Resorts, Inc. (1)

6,936

1,558,381

 

Food — 3.7%

Lancaster Colony Corp. (1)

11,776

1,984,845

 

Healthcare - Products — 7.8%

Medtronic PLC (1)

22,200

1,951,824

Zimmer Biomet Holdings, Inc. (1)

21,799

2,317,670

 

4,269,494

 

Insurance — 4.1%

Old Republic International Corp. (1)

102,088

2,229,602

 

Machinery — Diversified — 3.0%

Xylem, Inc. (1)

18,091

1,648,090

 

 

Shares

 

Value

 

Common Stocks — 111.3% (Continued)

 

Mining — 4.3%

Barrick Gold Corp. (1)

85,875

$ 1,275,244

Rio Tinto PLC — ADR (1) (2)

19,288

1,085,721

 

2,360,965

 

Miscellaneous Manufacturers — 1.9%

General Electric Co. (1)

14,327

1,052,175

 

Oil & Gas — 5.2%

Exxon Mobil Corp. (1)

29,763

2,845,045

 

Packaging & Containers — 2.8%

Packaging Corp. of America (1)

11,237

1,538,570

 

Pharmaceuticals — 4.3%

AbbVie, Inc. (1)

17,523

2,356,143

 

Real Estate Investment Trusts (REITs) — 5.8%

AGNC Investment Corp. (1)

92,969

1,995,115

PotlatchDeltic Corp. (1) (2)

25,523

1,184,777

 

3,179,892

 

Retail — 2.7%

Restaurant Brands International, Inc. (1)

24,400

1,439,600

 

Software — 7.6%

Activision Blizzard, Inc. (1)

22,403

1,758,411

Fidelity National Information
Services, Inc.
(1)

26,194

2,393,346

 

4,151,757

 

Telecommunications — 3.4%

AT&T, Inc. (1)

106,114

1,861,240

 

Toys, Games & Hobbies — 3.4%

Hasbro, Inc. (1)

23,281

1,835,008

 

Total Common Stocks

(Cost $61,647,834)

60,694,172

 

Convertible Preferred Stocks — 3.4%

 

Real Estate Investment Trusts (REITs) — 3.4%

EPR Properties 

5.750% (3)

85,990

1,847,908

 

Total Convertible Preferred Stocks

(Cost $2,093,577)

1,847,908

 

Short-Term Investments — 8.8%

 

Money Market Funds — 8.8%

First American Government
Obligations Fund, Class X, 2.042% (4)

4,816,185

4,816,185

 

Total Short-Term Investments

(Cost $4,816,185)

4,816,185

 


Leatherback Long/Short Alternative Yield ETF

6

The accompanying notes are an integral part of these financial statements.

SCHEDULE OF INVESTMENTS  at August 31, 2022 (Continued)

 

Shares

 

Value

 

Investments Purchased with Collateral from
Securities Lending — 3.3%

Mount Vernon Liquid Assets Portfolio, LLC, 2.470% (4)

1,787,187

$ 1,787,187

 

Total Investments Purchased with
Collateral From Securities Lending

(Cost $1,787,187)

1,787,187

 

Total Investments in Securities — 126.8%

(Cost $70,344,783)

69,145,452

Liabilities in Excess of Other
Assets — (26.8)%

(14,616,971

)

 

Total Net Assets — 100.0%

$ 54,528,481

ADR

American Depositary Receipt

(1)

All or a portion of the shares of this security have been committed as collateral for securities sold short.

(2)

This security or a portion of this security was out on loan as of August 31, 2022. Total loaned securities had a value of $1,742,004 or 3.2% of the Fund’s net assets. The remaining contractual maturity of all of the securities lending transactions is overnight and continuous.

(3)

Perpetual maturity.

(4)

The rate shown is the annualized seven-day effective yield as of August 31, 2022.

Leatherback Long/Short Alternative Yield ETF

7

The accompanying notes are an integral part of these financial statements.

SCHEDULE OF SECURITIES SOLD SHORT  at August 31, 2022 

 

Shares

 

Value

 

Common Stocks (1) — 28.3%

Auto Manufacturers — 2.7%

Rivian Automotive, Inc. - Class A 

17,972

$ 587,864

Tesla, Inc. 

3,102

854,942

 

1,442,806

Banks — 2.4%

Silvergate Capital Corp. 

5,779

526,582

SVB Financial Group 

1,933

785,803

 

1,312,385

Diversified Financial Services — 4.4%

American Express Co. 

4,537

689,624

BlackRock, Inc. 

1,320

879,635

Stifel Financial Corp. 

14,302

848,252

 

2,417,511

Entertainment — 1.7%

DraftKings, Inc. - Class A 

58,461

938,884

 

Insurance — 1.7%

Trupanion, Inc. 

13,066

922,198

 

Internet — 3.0%

Airbnb, Inc. - Class A 

7,264

821,704

DoorDash, Inc. - Class A 

13,076

783,252

 

1,604,956

Leisure Time — 2.6%

Planet Fitness, Inc. - Class A 

11,751

796,130

YETI Holdings, Inc. 

16,900

623,441

 

1,419,571

Real Estate Investment Trusts (REITs) — 2.1%

Equinix, Inc. 

859

564,681

Prologis, Inc. 

4,825

600,761

 

1,165,442

Retail — 4.8%

Chipotle Mexican Grill, Inc. 

576

919,757

Lululemon Athletica, Inc. 

2,673

801,793

Ollie’s Bargain Outlet Holdings, Inc. 

15,718

869,363

 

2,590,913

Semiconductors — 1.5%

Broadcom, Inc. 

1,666

831,517

 

Shares

 

Value

 

Common Stocks (1) — 28.3%

Software — 1.4%

Salesforce, Inc. 

4,962

$ 774,667

 

Total Common Stocks

(Proceeds $16,901,340)

15,420,850

 

Total Securities Sold Short — 28.3%

(Proceeds $16,901,340)

$ 15,420,850

<!--[if IE]><FONT style=" width: 14.399999999999999pt; text-indent: -12.0pt; display: inline-block;"><![endif]--> (1) <!--[if IE]></FONT><![endif]--> Non-income producing securit ies .


Leatherback Long/Short Alternative Yield ETF

8

The accompanying notes are an integral part of these financial statements.

STATEMENT OF ASSETS AND LIABILITIES  at August 31, 2022 

Assets:

 

Investments in securities, at value (Cost $70,344,783) (Note 2) (1)

$ 69,145,452

Collateral at broker for securities sold short

2,372,837

Receivables:

Dividends and interest

266,639

Securities lending income, net (Note 5)

394

Total assets

71,785,322

 

Liabilities:

 

Collateral received from securities loaned (Note 5)

1,787,187

Securities sold short (Proceeds $16,901,340) (Note 2)

15,420,850

Payables:

Dividends on securities sold short

6,799

Management fees (Note 4)

42,005

Total liabilities

17,256,841

Net Assets

$ 54,528,481

 

Components of Net Assets:

 

Paid-in capital

$ 53,656,670

Total distributable (accumulated) earnings (losses)

871,811

Net assets

$ 54,528,481

 

Net Asset Value (unlimited shares authorized):

Net assets

$ 54,528,481

Shares of beneficial interest issued and outstanding

2,000,000

Net asset value

$ 27.26

<!--[if IE]><FONT style=" width: 14.399999999999999pt; text-indent: -12.0pt; display: inline-block;"><![endif]--> (1) <!--[if IE]></FONT><![endif]--> Includes loaned securities with a value of $1,742,004.

Leatherback Long/Short Alternative Yield ETF

9

The accompanying notes are an integral part of these financial statements.

STATEMENT OF OPERATIONS  For the Year Ended August 31, 2022 

Investment Income:

 

Dividend income (net of foreign withholding tax of $11,291)

$ 1,053,406

Interest income

10,703

Securities lending income, net (Note 5)

1,581

Total investment income

1,065,690

 

Expenses:

 

Management fees (Note 4)

249,829

Total expenses before dividends on securities sold short and interest

249,829

Dividends on securities sold short

32,729

Interest

53,516

Net expenses

336,074

Net investment income (loss)

729,616

 

Realized and Unrealized Gain (Loss) on Investments and Securities Sold Short:

Net realized gain (loss) on:

Investments

(1,287,799

)

Securities sold short

2,635,972

Change in net unrealized appreciation/depreciation on:

Investments

(2,088,795

)

Securities sold short

1,541,107

Net realized and unrealized gain (loss) on investments and securities sold short

800,485

Net increase (decrease) in net assets resulting from operations

$ 1,530,101

Leatherback Long/Short Alternative Yield ETF

10

The accompanying notes are an integral part of these financial statements.

STATEMENT S OF CHANGES IN NET ASSETS

 

 

Year Ended
August 31, 2022

 

Period Ended August 31, 2021 (1)

 

 

Increase (Decrease) in Net Assets From:

 

Operations:

Net investment income (loss)

$ 729,616

$ 112,091

Net realized gain (loss) on investments, securities sold short, and options written

1,348,173

(24,963

)

Change in net unrealized appreciation/depreciation on investments and securities sold short

(547,688

)

828,847

Net increase (decrease) in net assets resulting from operations

1,530,101

915,975

 

Distributions to Shareholders:

Net distributions to shareholders

(776,289

)

(124,500

)

 

Capital Share Transactions:

Net increase (decrease) in net assets derived from net change in outstanding shares (2)

47,795,642

5,187,552

Total increase (decrease) in net assets

48,549,454

5,979,027

 

Net Assets:

Beginning of year/period

5,979,027

End of year/period

$ 54,528,481

$ 5,979,027

<!--[if IE]><FONT style=" width: 14.399999999999999pt; text-indent: -12.0pt; display: inline-block;"><![endif]--> (1) <!--[if IE]></FONT><![endif]--> The Fund commenced operations on November 16, 2020. The information presented is from November 16, 2020 to August 31, 2021.

<!--[if IE]><FONT style=" width: 14.399999999999999pt; text-indent: -12.0pt; display: inline-block;"><![endif]--> (2) <!--[if IE]></FONT><![endif]--> Summary of share transactions is as follows:

Year Ended
August 31, 2022

Period Ended
August 31, 2021
(1)

 

Shares

Value

Shares

Value

Shares sold

1,925,000

$ 52,585,897

250,000

$ 5,187,552

Shares redeemed

(175,000

)

(4,790,255

)

Net increase (decrease)

1,750,000

$ 47,795,642

250,000

$ 5,187,552

Leatherback Long/Short Alternative Yield ETF

11

The accompanying notes are an integral part of these financial statements.

FINANCIAL HIGHLIGHTS  For a capital share outstanding throughout the year/period

 

 

Year Ended
August 31, 2022

 

Period Ended
August 31, 2021
(1)

Net asset value, beginning of year/period

$ 23.92

$ 20.00

 

Income (Loss) from Investment Operations: 

 

 

 

Net investment income (loss) (2)

0.76

0.52

Net realized and unrealized gain (loss) on investments

3.36

3.94

Total from investment operations

4.12

4.46

 

Less Distributions: 

 

 

 

From net investment income

(0.77

)

(0.54

)

From net realized gains

(0.01

)

Total distributions

(0.78

)

(0.54

)

 

Net asset value, end of year/period

$ 27.26

$ 23.92

Total return (4)

17.43

%

22.46

% (3)

 

Ratios / Supplemental Data:

 

 

 

Net assets, end of year/period (millions)

$ 54.5

$ 6.0

Portfolio turnover rate

73

%

47

% (3)

Ratio of expenses to average net assets (5) (6)

1.28

%

1.23

%

Ratio of net investment income (loss) to average net assets (5) (7)

2.77

%

2.88

%

<!--[if IE]><FONT style=" width: 14.399999999999999pt; text-indent: -12.0pt; display: inline-block;"><![endif]--> (1) <!--[if IE]></FONT><![endif]--> The Fund commenced operations on November 16, 2020. The information presented is from November 16, 2020 to August 31, 2021.

<!--[if IE]><FONT style=" width: 14.399999999999999pt; text-indent: -12.0pt; display: inline-block;"><![endif]--> (2) <!--[if IE]></FONT><![endif]--> Calculated using average shares outstanding method.

<!--[if IE]><FONT style=" width: 14.399999999999999pt; text-indent: -12.0pt; display: inline-block;"><![endif]--> (3) <!--[if IE]></FONT><![endif]--> Not annualized.

<!--[if IE]><FONT style=" width: 14.399999999999999pt; text-indent: -12.0pt; display: inline-block;"><![endif]--> (4) <!--[if IE]></FONT><![endif]--> The total return is based on the Fund’s net asset value. Additional performance information is presented in the Performance Summary.

<!--[if IE]><FONT style=" width: 14.399999999999999pt; text-indent: -12.0pt; display: inline-block;"><![endif]--> (5) <!--[if IE]></FONT><![endif]--> Annualized.

<!--[if IE]><FONT style=" width: 14.399999999999999pt; text-indent: -12.0pt; display: inline-block;"><![endif]--> (6) <!--[if IE]></FONT><![endif]--> The ratio of expenses to average net assets includes dividends and interest on securities sold short. The expense ratio excluding dividends and interest on securities sold short is 0.95% for the year ended August 31, 2022 and 0.95% for the period ended August 31, 2021.

<!--[if IE]><FONT style=" width: 14.399999999999999pt; text-indent: -12.0pt; display: inline-block;"><![endif]--> (7) <!--[if IE]></FONT><![endif]--> The net investment income (loss) ratios include dividends and interest on securities sold short.

12

Leatherback Long/Short Alternative Yield ETF

NOTES TO FINANCIAL STATEMENTS  August 31, 2022 

NOTE 1 – ORGANIZATION

The Leatherback Long/Short Alternative Yield ETF (the “Fund”) is a non-diversified series of shares of beneficial interest of Tidal ETF Trust (the “Trust”). The Trust was organized as a Delaware statutory trust on June 4, 2018 and is registered with the Securities and Exchange Commission (the “SEC”) under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company and the offering of the Fund’s shares is registered under the Securities Act of 1933, as amended. The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 “Financial Services—Investment Companies.” The Fund commenced operations on November 16, 2020.

The investment objective of the Fund is to seek capital appreciation and income.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by the Fund. These policies are in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> A. <!--[if IE]></FONT><![endif]--> Security Valuation. Equity securities, which may include Real Estate Investment Trusts (“REITs”), Business Development Companies (“BDCs”), and Master Limited Partnerships (“MLPs”), listed on a securities exchange, market or automated quotation system for which quotations are readily available (except for securities traded on the NASDAQ Stock Market, LLC (“NASDAQ”)), including securities traded over the counter, are valued at the last quoted sale price on the primary exchange or market (foreign or domestic) on which they are traded on the valuation date (or at approximately 4:00 p.m. EST if a security’s primary exchange is normally open at that time), or, if there is no such reported sale on the valuation date, at the most recent quoted bid price or mean between the most recent quoted bid and ask prices for long and short positions. For a security that trades on multiple exchanges, the primary exchange will generally be considered the exchange on which the security is generally most actively traded. For securities traded on NASDAQ, the NASDAQ Official Closing Price will be used. Prices of securities traded on the securities exchange will be obtained from recognized independent pricing agents (“Independent Pricing Agents”) each day that the Fund is open for business.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> Options are valued at the last quoted sales price. If there is no such reported sale on the valuation date, both long and short positions are valued at the mean between the most recent quoted bid and ask prices.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> For securities for which quotations are not readily available, a fair value will be determined by the Valuation Committee using the Fair Value Procedures approved by the Trust’s Board of Trustees (the “Board”). When a security is “fair valued,” consideration is given to the facts and circumstances relevant to the particular situation, including a review of various factors set forth in the Fair Value Procedures adopted by the Board. Fair value pricing is an inherently subjective process, and no single standard exists for determining fair value. Different funds could reasonably arrive at different values for the same security. The use of fair value pricing by a fund may cause the net asset value of its shares to differ significantly from the net asset value that would be calculated without regard to such considerations.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> As described above, the Fund utilizes various methods to measure the fair value of its investments on a recurring basis. U.S. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of inputs are:

<!--[if IE]><FONT style=" width: 51.6pt; text-indent: -43.0pt; display: inline-block;"><![endif]--> Level 1 – <!--[if IE]></FONT><![endif]--> Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.

<!--[if IE]><FONT style=" width: 51.6pt; text-indent: -43.0pt; display: inline-block;"><![endif]--> Level 2 – <!--[if IE]></FONT><![endif]--> Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.

<!--[if IE]><FONT style=" width: 51.6pt; text-indent: -43.0pt; display: inline-block;"><![endif]--> Level 3 – <!--[if IE]></FONT><![endif]--> Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available; representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability and would be based on the best information available.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

13

Leatherback Long/Short Alternative Yield ETF

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> The following is a summary of the inputs used to value the Fund’s investments as of August 31, 2022:

Investments in Securities

Investments Measured at Net Asset Value

Level 1

Level 2

Level 3

Total

Common Stocks (1)

$

$ 60,694,172

$

$

$ 60,694,172

Convertible Preferred Stocks (1)

1,847,908

1,847,908

Short-Term Investments

4,816,185

4,816,185

Investments Purchased With Collateral From Securities Lending (2)

1,787,187

1,787,187

Total Investments in Securities

$ 1,787,187

67,358,265

$

$

$ 69,145,452

 

Securities Sold Short

 

Level 1

Level 2

Level 3

Total

Common Stocks (1)

$

$ 15,420,850

$

$

$ 15,420,850

Total Securities Sold Short

$

$ 15,420,850

$

$

$ 15,420,850

<!--[if IE]><FONT style=" width: 14.399999999999999pt; text-indent: -12.0pt; display: inline-block;"><![endif]--> (1) <!--[if IE]></FONT><![endif]--> See Schedule of Investments for the industry breakout.

<!--[if IE]><FONT style=" width: 14.399999999999999pt; text-indent: -12.0pt; display: inline-block;"><![endif]--> (2) <!--[if IE]></FONT><![endif]--> Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Schedule of Investments.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> B. <!--[if IE]></FONT><![endif]--> Federal Income Taxes. The Fund has elected to be taxed as a “regulated investment company” and intends to distribute substantially all taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. Therefore, no provision for federal income taxes or excise taxes has been made.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> In order to avoid imposition of the excise tax applicable to regulated investment companies, the Fund intends to declare as dividends in each calendar year at least 98.0% of its net investment income (earned during the calendar year) and at least 98.2% of its net realized capital gains (earned during the twelve months ended October 31) plus undistributed amounts, if any, from prior years.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> As of August 31, 2022, the Fund did not have any tax positions that did not meet the threshold of being sustained by the applicable tax authority. Generally, tax authorities can examine all the tax returns filed for the last three years. The Fund identifies its major tax jurisdiction as U.S. Federal and the Commonwealth of Delaware; however, the Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> C. <!--[if IE]></FONT><![endif]--> Securities Transactions and Investment Income. Investment securities transactions are accounted for on the trade date. Gains and losses realized on sales of securities are determined on a specific identification basis. Discounts/premiums on debt securities purchased are accreted/amortized over the life of the respective securities using the effective interest method. Dividend income is recorded on the ex-dividend date. Dividends received from REITs generally are comprised of ordinary income, capital gains, and may include return of capital. Debt income is recorded on an accrual basis. Other non-cash dividends are recognized as investment income at the fair value of the property received. Withh olding taxes on foreign dividends have been provided for in accordance with the Trust’s understanding of the applicable country’s tax rules and rates.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> D. <!--[if IE]></FONT><![endif]--> Options Contracts. The Fund may invest in options contracts that may be used to modify or hedge the Fund’s exposure to a particular investment market related risk, as well as to manage the volatility of the Fund. When the Fund purchases an option, an amount equal to the premium paid by the Fund is recorded as an investment and is subsequently adjusted to the current value of the option purchased. If an option expires on the stipulated expiration date or if the Fund enters into a closing sale transaction, a gain or loss is realized. If a call option is exercised, the cost of the security acquired is increased by the premium paid for the call. If a put option is exercised, a gain or loss is realized from the sale of the underlying security, and the proceeds from such sale are decreased by the premium originally paid. Options are non-income producing securities. During the year ended August 31 , 2022, the Fund did not invest in options contracts.

NOTES TO FINANCIAL STATEMENTS  August 31, 2022 (Continued)

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Leatherback Long/Short Alternative Yield ETF

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> E. <!--[if IE]></FONT><![endif]--> Distributions to Shareholders. Distributions to shareholders from net investment income, if any, for the Fund are declared and paid at least monthly. Distributions to shareholders from net realized gains on securities, if any, for the Fund normally are declared and paid on an annual basis. Distributions are recorded on the ex-dividend date.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> F. <!--[if IE]></FONT><![endif]--> Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. Actual results could differ from those estimates.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> G. <!--[if IE]></FONT><![endif]--> Share Valuation. The NAV per share of the Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash or other assets, minus all liabilities by the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on the days on which the New York Stock Exchange (“NYSE”) is closed for trading.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> H. <!--[if IE]></FONT><![endif]--> Guarantees and Indemnifications. In the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> I. <!--[if IE]></FONT><![endif]--> Illiquid Investments. Pursuant to Rule 22e-4 under the 1940 Act, the Fund has adopted a Board-approved Liquidity Risk Management Program (the “Program”) that requires, among other things, that the Fund limit its illiquid investments that are assets to no more than 15% of the value of the Fund’s net assets. An illiquid investment is any investment that the Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. If the Fund should be in a position where the value of illiquid investments held by the Fund exceeds 15% of the Fund’s net assets, the Fund will take such steps as set forth in the Program.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> J. <!--[if IE]></FONT><![endif]--> Derivatives Transactions. On October 28, 2020, the SEC adopted new regulations governing the use of derivatives by registered investment companies as Rule 18f-4 under the 1940 Act (“Rule 18f-4”). Rule 18f-4 imposes limits on the amount of derivatives a fund can enter into, eliminates the asset segregation and cover framework arising from prior SEC guidance for covering derivatives and certain financial instruments currently used by funds to comply with Section 18 of the 1940 Act and treats derivatives as senior securities. Under Rule 18f-4 a fund’s derivatives exposure is limited through a value-at-risk test. Funds whose use of derivatives is more than a limited specified exposure amount are required to establish and maintain a comprehensive derivatives risk management program, subject to oversight by a fund’s board of trustees, and appoint a derivatives risk manager. Management implemented a Rule 18f-4 Derivative Risk Management Program effective August 19, 2022, that complies with Rule 18f-4.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> K . <!--[if IE]></FONT><![endif]--> Reclassification of Capital Accoun ts. In U.S. GAAP requires that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or NAV per share. These differences are primarily due to adjustments for redemptions in-kind. For the year ended August 31, 2022, the following adjustments were made:

Paid-In Capital

 

Total Distributed (Accumulated) Earnings (Losses)

$673,476

$(673,476)

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> During the year ended August 31, 2022, the Leatherback Long/Short Alternative ETF realized $521,487, in net capital gains resulting from in-kind redemptions, in which shareholders exchanged Fund shares for securities held by the Fund rather than for cash. Because such gains are not taxable to the Fund, and are not distributed to shareholders, they have been reclassified from accumulated losses to paid-in capital. These differences are primarily due to adjustments for redemptions in-kind activity, fund distributions equalization and tax adjustments for non-deductible expenses.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> L . <!--[if IE]></FONT><![endif]--> Recently Issued Accounting Pronouncements.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> In December 2020, the SEC adopted a new rule providing a framework for fund valuation practices (“Rule 2a-5”). Rule 2a-5 establishes requirements for determining fair value in good faith for purposes of the 1940 Act. Rule 2a-5 will permit fund boards to designate certain parties to perform fair value determinations, subject to board oversight and certain other conditions. Rule 2a-5 also defines when market quotations are “readily available” for purposes of the 1940 Act and the threshold for determining whether a fund must fair value a security. In connection with Rule 2a-5, the SEC also adopted related recordkeeping requirements and is rescinding previously issued guidance, including with respect to the role of a board in determining fair value and the accounting and auditing of fund investments. The Fund began complying with Rule 2a-5 effective September 8, 2022.Effective on that date, securities for which market quotations are not readily available

NOTES TO FINANCIAL STATEMENTS  August 31, 2022 (Continued)

15

Leatherback Long/Short Alternative Yield ETF

will have a fair value determined by the Valuation Designee (as defined in Rule 2a-5) in accordance with the Pricing and Valuation Policy and Fair Value Procedures, as applicable, of the Fund’s investment adviser, Toroso Investments, LLC (the “Adviser”), subject to oversight by the Board. When a security is “fair valued,” consideration is given to the facts and circumstances relevant to the particular situation, including a review of various factors set forth in the Adviser’s Pricing and Valuation Policy and Fair Value Procedures, as applicable.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> In June 2022, the FASB issued Accounting Standards Update 2022-03, which amends Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). ASU 2022-03 clarifies guidance for fair value measurement of an equity security subject to a contractual sale restriction and establishes new disclosure requirements for such equity securities. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023 and for interim periods within those fiscal years, with early adoption permitted. Management is currently evaluating the impact, if any, of these amendments on the financial statements.

NOTE 3 – PRINCIPAL INVESTMENT RISKS

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> A. <!--[if IE]></FONT><![endif]--> Associated Risks of Short Selling. The Fund may make short sales of securities, which involves selling a security it does not own in anticipation that the price of the security will decline. Short sales may involve substantial risk and leverage. Short sales expose the Fund to the risk that it will be required to buy (“cover”) the secu rity sold short when the security has appreciated in value or is unavailable, thus resulting in a loss to the Fund. Short sales also involve the risk that losses may exceed the amount invested and may be unlimited.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> B. <!--[if IE]></FONT><![endif]--> BDC Risk. BDCs generally invest in debt securities that are not rated by a credit rating agency and are considered below investment grade quality (“junk bonds”). Little public information generally exists for the type of companies in which a BDC may invest and, therefore, there is a risk that the Fund may not be able to make a fully informed evaluation of the BDC and its portfolio of investments. In addition, investments made by BDCs are typically illiquid and are difficult to value for purposes of determining a BDC’s net asset value.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> C. <!--[if IE]></FONT><![endif]--> Closed-End Fund Risk. Shares of closed-end funds frequently trade at a price per share that is less than the net asset value per share. There can be no assurance that the market discount on shares of any closed-end fund purchased by the Fund will ever decrease or that when the Fund seeks to sell shares of a closed-end fund it can receive the net asset value of those shares.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> D. <!--[if IE]></FONT><![endif]--> Convertible Securities Risk. Convertible securities rank senior to the issuer’s common stock, but may be subordinate to senior debt obligations. In part, the total return for a convertible security may depend upon the performance of the underlying stock into which it can be converted. Synthetic convertibles may respond differently to market fluctuations than traditional convertible securities. They are also subject to counterparty risk.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> E. <!--[if IE]></FONT><![endif]--> Depositary Receipt Risk. Depositary receipts involve risks similar to those associated with investments in foreign securities and certain additional risks. Depositary receipts listed on U.S. exchanges are issued by banks or trust companies, and entitle the holder to all dividends and capital gains that are paid out on the underlying foreign shares (“Underlying Shares”). When the Fund invests in depositary receipts as a substitute for an investment directly in the Underlying Shares, the Fund is exposed to the risk that the depositary receipts may not provide a return that corresponds precisely with that of the Underlying Shares.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> F. <!--[if IE]></FONT><![endif]--> Equity Market Risk. The equity securities held in the Fund’s portfolio may experience sudden, unpredictable drops in value or long periods of decline in value. This may occur because of factors that affect securities markets generally or factors affecting specific issuers, industries, or sectors in which the Fund invests. Common stocks, such as those held by the Fund, are generally exposed to greater risk than other types of securities, such as preferred stock and debt obligations, because common stockholders generally have inferior rights to receive payment from issuers.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> G. <!--[if IE]></FONT><![endif]--> Exchange Traded Fund (“ETF”) Risks.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> Authorized Participants, Market Makers, and Liquidity Providers Concentration Risk. The Fund has a limited number of financial institutions that are authorized to purchase and redeem shares of the Fund (“Shares”) directly from the Fund (known as “Authorized Participants” or “APs”). In addition, there may be a limited number of market makers and/or liquidity providers in the marketplace. To the extent either of the following events occur, Shares may trade at a material discount to NAV and possibly face delisting: (i) APs exit the business or otherwise become unable to process creation and/or redemption orders and no other APs step forward to perform these services; or (ii) market makers and/or liquidity providers exit the business or significantly reduce their business activities and no other entities step forward to perform their functions.

NOTES TO FINANCIAL STATEMENTS  August 31, 2022 (Continued)

16

Leatherback Long/Short Alternative Yield ETF

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> Cash Redemption Risk. The Fund’s investment strategy may require it to redeem Shares for cash or to otherwise include cash as part of its redemption proceeds. For example, the Fund may not be able to redeem in-kind certain securities held by the Fund (e.g., TBA transactions, short positions, derivative instruments, and bonds that cannot be broken up beyond certain minimum sizes needed for transfer and settlement). In such a case, the Fund may be required to sell or unwind portfolio investments to obtain the cash needed to distribute redemption proceeds. This may cause the Fund to recognize a capital gain that it might not have recognized if it had made a redemption in-kind. As a result, the Fund may pay out higher annual capital gain distributions than if the in-kind redemption process was used.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> Costs of Buying or Selling Shares. Due to the costs of buying or selling Shares, including brokerage commissions imposed by brokers and bid-ask spreads, frequent trading of Shares may significantly reduce investment results and an investment in Shares may not be advisable for investors who anticipate regularly making small investments.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> Shares May Trade at Prices Other Than NAV. As with all ETFs, Shares may be bought and sold in the secondary market at market prices. Although it is expected that the market price of Shares will approximate the Fund’s NAV, there may be times when the market price of Shares is more than the NAV intra-day (premium) or less than the NAV intra-day (discount) due to supply and demand of Shares or during periods of market volatility. This risk is heightened in times of market volatility, periods of steep market declines, and periods when there is limited trading activity for Shares in the secondary market, in which case such premiums or discounts may be significant.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> Trading. Although Shares are listed on a national securities exchange, such as NYSE Arca, Inc. (the “Exchange”) and may be traded on U.S. exchanges other than the Exchange, there can be no assurance that Shares will trade with any volume, or at all, on any stock exchange. In stressed market conditions, the liquidity of Shares may begin to mirror the liquidity of the Fund’s underlying portfolio holdings, which can be significantly less liquid than Shares.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> H. <!--[if IE]></FONT><![endif]--> Fixed Income Risk.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> The value of the Fund’s investments in fixed income securities will fluctuate with changes in interest rates. Typically, a rise in interest rates causes a decline in the value of fixed income securities owned indirectly by the Fund. On the other hand, if rates fall, the value of the fixed income securities generally increases. The Fund may be subject to a greater risk of rising interest rates due to the current period of historically low rates and the effect of potential government fiscal policy initiatives and resulting market reaction to those initiatives. In general, the market price of fixed income securities with longer maturities will increase or decrease more in response to changes in interest rates than shorter-term securities.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> I . <!--[if IE]></FONT><![endif]--> Market Capitalization Risk.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> Large-Capitalization Investing. The securities of large-capitalization companies may be relatively mature compared to smaller companies and therefore subject to slower growth during times of economic expansion. Large-capitalization companies may also be unable to respond quickly to new competitive challenges, such as changes in technology and consumer tastes.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> M id-Capitalization Investing. The securities of mid-capitalization companies may be more vulnerable to adverse issuer, market, political, or economic developments than securities of large-capitalization companies. The securities of mid-capitalization companies generally trade in lower volumes and are subject to greater and more unpredictable price changes than large capitalization stocks or the stock market as a whole.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> Small-Capitalization Investing. The securities of small-capitalization companies may be more vulnerable to adverse issuer, market, political, or economic developments than securities of large- or mid-capitalization companies. The securities of small-capitalization companies generally trade in lower volumes and are subject to greater and more unpredictable price changes than large- or mid-cap italization stocks or the stock market as a whole. There is typically less publicly available information concerning smaller-capitalization companies than for larger, more established companies.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> J . <!--[if IE]></FONT><![endif]--> Non-Diversification Risk. Although the Fund intends to invest in a variety of securities and instruments, the Fund is considered to be non-diversified, which means that it may invest a greater percentage of its assets in the securities of a single issuer or a smaller number of issuers than if it were a diversified fund. As a result, the Fund may be more exposed to the risks associated with and developments affecting an individual issuer or a smaller number of issuers that a fund that invests more widely. This may increase the Fund’s volatility and cause the performance of a relatively smaller number of issuers to have a greater impact on the Fund’s performance.

NOTES TO FINANCIAL STATEMENTS  August 31, 2022 (Continued)

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<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> K . <!--[if IE]></FONT><![endif]--> Options Risk. Options enable the Fund to purchase exposure that is significantly greater than the premium paid. Consequently, the value of such options can be volatile, and a small investment in options can have a large impact on the performance of the Fund. The Fund risks losing all or part of the cash paid (premium) for purchasing options. Even a small decline in the value of a reference asset underlying call options or a small increase in the value of a reference asset underlying put options can result in the entire investment in such options being lost. Additionally, the value of the option may be lost if the Sub-Adviser (as defined herein) fails to exercise such option at or prior to its expiration.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> L . <!--[if IE]></FONT><![endif]--> Preferred Securities Risk. Preferred stocks are subject to the risks of equity securities generally and also risks associated with fixed-income securities, such as interest rate risk. A company’s preferred stock, which may pay fixed or variable rates of return, generally pays dividends only after the company makes required payments to creditors, including vendors, depositors, counterparties, holders of its bonds and other fixed-income securities. As a result, the value of a company’s preferred stock will react more strongly than bonds and other debt to actual or perceived changes in the company’s financial condition or prospects. Preferred stock may be less liquid than many other types of securities, such as common stock, and generally has limited or no voting rights. In addition, preferred stock is subject to the risks that a company may defer or not pay dividends, and, in certain situations, may call or redeem its preferred stock or convert it to common stock. To the extent that the Fund invests a substantial portion of its assets in convertible preferred stocks, declining common stock values may also cause the value of the Fund’s investments to decline.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> M . <!--[if IE]></FONT><![endif]--> REIT Risk. A REIT is a company that owns or finances income-producing real estate. Through its investments in REITs, the Fund is subject to the risks of investing in the real estate market, including decreases in property revenues, increases in interest rates, increases in property taxes and operating expenses, legal and regulatory changes, a lack of credit or capital, defaults by borrowers or tenants, environmental problems and natural disasters.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> REITs are subject to additional risks, including those related to adverse governmental actions; declines in property value and the real estate market; the potential failure to qualify for tax-free pass through of income; and exemption from registration as an investment company. REITs are dependent upon specialized management skills and may invest in relatively few properties, a small geographic area, or a small number of property types. As a result, investments in REITs may be volatile. To the extent the Fund invests in REITs concentrated in specific geographic areas or property types, the Fund may be subject to a greater loss as a result of adverse developments affecting such area or property types. REITs are pooled investment vehicles with their own fees and expenses and the Fund will indirectly bear a proportionate share of those fees and expenses.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> N . <!--[if IE]></FONT><![endif]--> Sector Risk. To the extent the Fund invests more heavily in particular sectors of the economy, its performance will be especially sensitive to developments that significantly affect those sectors.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> <!--[if IE]></FONT><![endif]--> Financial Services Sector Risk. The Fund may invest in companies in the financial services sector, and therefore the performance of the Fund could be negatively impacted by events affecting this sector. This sector can be significantly affected by changes in interest rates, government regulation, the rate of defaults on corporate, consumer and government debt and the availability and cost of capital, among other factors. Insurance companies, in particular, may be significantly affected by changes in interest rates, catastrophic events, price and market competition, the imposition of premium rate caps, or other changes in government regulation or tax law and/or rate regulation, which may have an adverse impact on their profitability. This sector has experienced significant losses in the recent past, and the impact of more stringent capital requirements and of recent or future regulation on any individual financial company or on the sector as a whole cannot be predicted. In recent years, cyber attacks and technology malfunctions and failures have become increasingly frequent in this sector and have caused significant losses.

<!--[if IE]><FONT style=" width: 21.599999999999998pt; text-indent: -18.0pt; display: inline-block;"><![endif]--> O . <!--[if IE]></FONT><![endif]--> YieldCo Risk. Investments in securities of YieldCos involve risks that differ from investments in traditional operating companies, including risks related to the relationship between the YieldCo and the company responsible for the formation of the YieldCo (the “YieldCo Sponsor”). YieldCos typically remain dependent on the management and administration services provided by or under the direction of the YieldCo Sponsor and on the ability of the YieldCo Sponsor to identify and present the YieldCo with acquisition opportunities, which may often be assets of the YieldCo Sponsor itself. YieldCo Sponsors may have interests that conflict with the interests of the YieldCo, and may retain control of the YieldCo via classes of stock held by the YieldCo Sponsor. YieldCo securities can be affected by macro-economic and other factors affecting the stock market in general, expectations of interest rates, investor sentiment towards YieldCos or the energy sector, changes in a particular issuer’s financial condition, or unfavorable or unanticipated poor performance of a particular issuer (in the case of YieldCos, generally measured in terms of distributable cash flow). Any event that limits the YieldCo’s ability to maintain or grow its distributable cash flow would

NOTES TO FINANCIAL STATEMENTS  August 31, 2022 (Continued)

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NOTES TO FINANCIAL STATEMENTS  August 31, 2022 (Continued)

likely have a negative impact on the YieldCo’s share price. YieldCos may finance their growth strategy with debt, which may increase a YieldCo’s leverage and the risks associated with the YieldCo. The ability of a YieldCo to maintain or grow its dividend distributions may depend on the entity’s ability to minimize its tax liabilities through the use of accelerated depreciation schedules, tax loss carryforwards, and tax incentives. Changes to the current tax code could result in greater tax liabilities, which would reduce the YieldCo’s distributable cash flow.

NOTE 4 – COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS

The Adviser serves as investment adviser to the Fund pursuant to an investment advisory agreement between the Adviser and the Trust, on behalf of the Fund (the “Advisory Agreement”), and, pursuant to the Advisory Agreement, provides investment advice to the Fund and oversees the day-to-day operation of the Fund, subject to the direction and oversight of the Board. The Adviser is also responsible for trading portfolio securities on behalf of the Fund, including selecting broker-dealers to execute purchase and sales transactions, subject to the supervision of the Board.

Pursuant to the Advisory Agreement, the Fund pays the Adviser a unitary management fee (the “Management Fee”) based on the average dai ly net assets of the Fund at the annualized rate of 0.95%. Out of the Management Fee, the Adviser is obligated to pay or arrange for the payment of substantially all expenses of the Fund, including the cost of sub-advisory, transfer agency, custody, fund administration, and all other related services necessary for the Fund to operate. Under the Advisory Agreement, the Adviser has agreed to pay all expenses incurred by the Fund except for interest charges on any borrowings, dividends and other expenses on securities sold short, taxes, brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, accrued deferred tax liability, extraordinary expenses, distribution fees and expenses paid by the Fund under any distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act (collectively, “Excluded Expenses”). The Management Fees incurred are paid monthly to the Adviser. Management Fees for the year ended August 31, 2022 are disclosed in the Statement of Operations.

Leatherback Asset Management, LLC (the “Sub-Adviser”) serves as sub-adviser to the Fund, pursuant to a sub-advisory agreement between the Adviser and the Sub-Adviser with respect to the Fund (the “Sub-Advisory Agreement”). Pursuant to the Sub-Advisory Agreement, the Sub-Adviser is responsible for the day-to-day management of the Fund’s portfolio, including determining the securities purchased and sold by the Fund, subject to the supervision of the Adviser and the Board. The Sub-Adviser is paid a fee by the Adviser, which is calculated and paid monthly, at an annual rate of 0.75% of the Fund’s average daily net assets. The Sub-Adviser has agreed to assume the Adviser’s obligation to pay all expenses incurred by the Fund, except for Excluded Expenses. For assuming the payment obligation, the Adviser has agreed to pay the Sub-Adviser the profits, if any, generated by the Fund’s Management Fee. Expenses incurred by the Fund and paid by the Sub-Adviser include fees charged by Tidal (defined below).

Tidal ETF Services LLC (“Tidal”), an affiliate of the Adviser, serves as the Fund’s administrator and, in that capacity, performs various administrative and management services for the Fund. Tidal coordinates the payment of Fund-related expenses and manages the Trust’s relationships with its various service providers.

U.S. Bancorp Fund Services, LLC, doing business as U.S. Bank Global Fund Services (“Fund Services”), serves as the Fund’s sub-administrator, fund accountant and transfer agent. In those capacities Fund Services performs various administrative and accounting services for the Fund. Fund Services prepares various federal and state regulatory filings, reports and returns for the Fund, including regulatory compliance monitoring and financial reporting; prepares reports and materials to be supplied to the Board; and monitors the activities of the Fund’s custodian. U.S. Bank N.A. (the “Custodian”), an affiliate of Fund Services, serves as the Fund’s custodian. The Custodian acts as the securities lending agent (the “Securities Lending Agent”) for the Fund.

Foreside Fund Services, LLC (the “Distributor”) acts as the Fund’s principal underwriter in a continuous public offering of the Fund’s shares.

Certain officers and a trustee of the Trust are affiliated with the Adviser and Fund Services. Neither the affiliated trustee nor the Trust’s officers receive compensation from the Fund.

NOTE 5 – SECURITIES LENDING

The Fund may lend up to 33 1/3% of the value of the securities in its portfolio to brokers, dealers and financial institutions (but not individuals) under the terms of participation in a securities lending program administered by the Securities Lending Agent. The securities lending agreement requires that loans are collateralized at all times in an amount equal to at least the market value of the securities loaned by the Fund. The Fund receives compensation in the form of fees and earned interest on the cash collateral. Due to timing issues of when

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NOTES TO FINANCIAL STATEMENTS  August 31, 2022 (Continued)

a security is recalled from loan, the financial statements may differ in presentation. The amount of fees depends on a number of factors including the type of security and length of the loan. The Fund continues to receive interest payments or dividends on the securities loaned during the borrowing period. Gain or loss in the value of securities loaned that may occur during the term of the loan will be for the account of the Fund. The Fund has the right under the terms of the securities lending agreements to recall the securities from the borrower on demand.

As of August 31, 2022, the market value of the securities on loan and payable on collateral received for securities lending were as follows:

Market Value of
Securities on Loan

Payable on
Collateral Received

Percentage of Net Assets
of Securities on Loan

$1,742,004

$1,787,187

3.2%

The cash collateral is invested in the Mount Vernon Liquid Assets Portfolio, LLC, of which the investment objective is to seek to maximize income to the extent consistent with the preservation of capital and liquidity and maintain a stable NAV of $1.00. Although risk is mitigated by the collateral, the Fund could experience a delay in recovering its securities and possible loss of income or value if the borrower fails to return the borrowed securities. In addition, the Fund bears the risk of loss associated with the investment of cash collateral received. During the year ended August 31, 2022, the Fund loaned securities that were collateralized by cash. The cash collateral received was invested in the Mount Vernon Liquid Assets Portfolio, LLC as listed in the Fund’s Schedule of Investments. Securities lending income is disclosed in the Fund’s Statement of Operations.

The Fund is not subject to a master netting agreement with respect to the Fund’s participation in securities lending; therefore, no additional disclosures regarding netting arrangements are required.

NOTE 6 – PURCHASES AND SALES OF SECURITIES

For the year ended August 31, 2022, the cost of purchases and proceeds from the sales or maturities of securities, excluding short- term investments and U.S. government securities were $34,458,748 and $24,001,029, respectively.

There were no purchases or sales of long-term U.S. Government securities for the year ended August 31, 2022.

For the year ended August 31, 2022, in-kind transactions associated with creations and redemptions for the Fund were $52,094,084 and $4,066,992, respectively.

NOTE 7 – INCOME TAXES AND DISTRIBUTIONS TO SHAREHOLDERS

The tax character of distributions paid during the year ended August 31, 2022 and the period ended August 31, 2021 was as follows:

Distributions paid from:

August 31, 2022

August 31, 2021

Ordinary income

$766,134

$124,500

Long-term capital gain

10,155

As of August 31, 2022, the components of accumulated earnings/(losses) on a tax basis were as follows:

Cost of investments (1)

$54,037,360

Gross tax unrealized appreciation

5,020,070

Gross tax unrealized depreciation

(5,332,828

)

Net tax unrealized appreciation (depreciation)

(312,758

)

Undistributed ordinary income (loss)

1,184,569

Undistributed long-term capital gain (loss)

Total distributable earnings

1,184,569

Other accumulated gain (loss)

Total accumulated gain (loss)

$871,811

<!--[if IE]><FONT style=" width: 14.399999999999999pt; text-indent: -12.0pt; display: inline-block;"><![endif]--> (1) <!--[if IE]></FONT><![endif]--> The difference between book and tax-basis cost of investments was attributable primarily to the treatment of wash sales.

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NOTES TO FINANCIAL STATEMENTS  August 31, 2022 (Continued)

Net capital losses incurred after October 31 and net investment losses incurred after December 31, and within the taxable year, are deemed to arise on the first business day of the Fund’s next taxable year. As of August 31, 2022 the Fund had no late year losses and no short-term capital loss carryover.

NOTE 8 – SHARE TRANSACTIONS

Shares of the Fund are listed and traded on the Exchange. Market prices for the shares may be different from their NAV. The Fund issues and redeems shares on a continuous basis at NAV generally in large blocks of shares (“Creation Units”). Creation Units are issued and redeemed principally in-kind for securities included in a specified universe. Once created, shares generally trade in the secondary market at market prices that change throughout the day. Except when aggregated in Creation Units, shares are not redeemable securities of the Fund. Creation Units may only be purchased or redeemed by Authorized Participants. An Authorized Participant is either (i) a broker - dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a Depository Trust Company participant and, in each case, must have executed a Parti cipant Agreement with the Distributor. Most retail investors do not qualify as Authorized Participants nor have the resources to buy and sell whole Creation Units. Therefore, they are unable to purchase or redeem the shares directly from the Fund. Rather, most retail investors may purchase shares in the secondary market with the assistance of a broker and are subject to customary brokerage commissions or fees.

The Fund currently offers one class of shares, which has no front-end sales load, no deferred sales charge, and no redemption fee. A fixed transaction fee is imposed for the transfer and other transaction costs associated with the purchase or sale of Creation Units. The standard fixed transaction fee for the Fund is $250, payable to the Custodian. The fixed transaction fee may be waived on certain orders if the Fund’s Custodian has determined to waive some or all of the costs associated with the order or another party, such as the Adviser, has agreed to pay such fee. In addition, a variable fee may be charged on all cash transactions or substitutes for Creation Units of up to a maximum of 2% of the value of the Creation Units subject to the transaction. Variable fees are imposed to compensate the Fund for transaction costs associated with the cash transactions. Variable fees received by the Fund, if any, are disclosed in the capital shares transactions section of the Statements of Changes in Net Assets. The Fund may issue an unlimited number of shares of beneficial interest, with no par value. All shares of the Fund have equal rights and privileges.

NOTE 9 – RECENT MARKET EVENTS

U.S. and international markets have experienced significant periods of volatility in recent years and months due to a number of economic, political and global macro factors including the impact of COVID-19 as a global pandemic and related public health crisis, growth concerns in the U.S. and overseas, uncertainties regarding interest rates, rising inflation, trade tensions, and the threat of tariffs imposed by the U.S. and other countries. T he global recovery from COVID-19 is proceeding at slower than expected rates due to the emergence of variant strains and may last for an extended period of time. A s a result of continuing political tensions and armed conflicts, including the war between Ukraine and Russia, the U.S. and the European Union imposed sanctions on certain Russian individuals and companies, including certain financial institutions, and have limited certain exports and imports to and from Russia. The war has contributed to recent market volatility and may continue to do so. These developments, as well as other events, could result in further market volatility and negatively affect financial asset prices, the liquidity of certain securities and the normal operations of securities exchanges and other markets, despite government efforts to address market disruptions. Continuing market volatility as a result of recent market conditions or other events may have adverse effects on your account.

NOTE 10 – SUBSEQUENT EVENTS

In preparing these financial statements, Management has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued. Management has determined that there are no subsequent events that would need to be disclosed in the Fund’s financial statements.

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Leatherback Long/Short Alternative Yield ETF

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of
Leatherback Long/Short Alternative Yield ETF and
The Board of Trustees of
Tidal ETF Trust

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Leatherback Long/Short Alternative Yield ETF (the “Fund”), a series of Tidal ETF Trust