Form 8-K
8-K — Avalanche Treasury Corp
Accession: 0001104659-26-068289
Filed: 2026-05-29
Period: 2026-05-29
CIK: 0002092446
SIC: 6199 (FINANCE SERVICES)
Item: Entry into a Material Definitive Agreement
Item: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
Item: Other Events
Item: Financial Statements and Exhibits
Documents
8-K — tm2615904d1_8k.htm (Primary)
EX-10.1 — EXHIBIT 10.1 (tm2615904d1_ex10-1.htm)
EX-10.2 — EXHIBIT 10.2 (tm2615904d1_ex10-2.htm)
EX-99.1 — EXHIBIT 99.1 (tm2615904d1_ex99-1.htm)
EX-99.2 — EXHIBIT 99.2 (tm2615904d1_ex99-2.htm)
8-K — FORM 8-K
8-K (Primary)
Filename: tm2615904d1_8k.htm · Sequence: 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
May 29, 2026
Commission
File Number
Registrant; State of Incorporation
Address; and Telephone Number
I.R.S. Employer
Identification No.
333-294684
Avalanche
Treasury Corporation
39-4863126
11 W. 42nd Street, 2nd Floor New York, NY 10036
Delaware
Telephone:
332-240-1155
333-294684-01
Avalanche
Treasury Company, LLC
39-4274406
11 W. 42nd Street, 2nd Floor, New York, NY 10036
Delaware
Telephone:
332-240-1155
Not Applicable
(Former name or former address, if changed since
last report)
Check the appropriate box below if the Form 8-K
filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
x Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
None
None
None
Indicate by check mark whether the registrant
is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the
Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company x
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 1.01 Entry into a Material Definitive Agreement.
Master Lender Agreement, Loan Term Sheet
On March 20, 2026, Avalanche Treasury Company, LLC (“AVAT”)
signed a Master Lender Agreement (the “Master Lender Agreement”) with FalconX Charlie, Inc. (the “Lender”) to
facilitate the potential future execution of collateralized Loans in which the Lender may lend to AVAT certain Digital Currency or cash
(dependent on the loaned asset specified in the relevant executed loan term sheet) and AVAT would pay a Loan Fee as well as pledge Collateral
on or prior to the date of any drawdown pursuant to such future loan term sheet, as applicable. The Loans under the Master Lender Agreement
may be Open Loans without a Maturity Date, whereby AVAT may repay and Lender may recall the Loan at any time, or Term Loans with a predetermined
Maturity Date.
On May 29, 2026, AVAT and the Lender executed a loan term sheet, pursuant
to which AVAT agreed to borrow from the Lender, and the Lender agreed to lend to AVAT, a Loan of $25 million pursuant to an Open Loan
(the “May 2026 Collateralized Open Loan”). The Loan Fee is 7% per annum.
At closing of the business combination
between, among others, AVAT and Mountain Lake Acquisition Corp. (the “Business Combination”), AVAT will pledge
approximately 5.6 million AVAX pursuant to the May 2026 Collateralized Open Loan, which is based on an Initial Collateral Ratio of
200%. The Collateral will be held in a segregated custody account with Anchorage Digital Bank N.A. (“Anchorage”)
pursuant to an Account Control Agreement among Anchorage, AVAT and the Lender.
The Margin Call Limit is 180%, whereby if the Collateral Ratio drops
below such Margin Call Limit, the Lender has the right to require AVAT by way of a Margin Call to provide the Lender with additional Collateral
to cause the Collateral Ratio to equal the Initial Collateral Ratio. The Default Limit is 160%, whereby if the Collateral Ratio drops
below such Default Limit, the Lender has the option to declare an Event of Default. The Refund Limit is 230%, whereby if the Collateral
Ratio increases above such Refund Limit for a continuous period of thirty (30) days, AVAT has the right to require the Lender to return
an amount of Collateral such that the Collateral Ratio is equal to the Initial Collateral Ratio.
Staking of the Collateral is subject to the following limitations:
(i) no more than 75% of the Collateral may be staked at any given time and (ii) all staked Collateral must be structured using a laddered
epoch strategy ensuring that a minimum of 50% of the aggregate staked position matures and reverts to an unstaked, fully liquid status
on a rolling seven-day (weekly) cycle.
The Loaned Assets may be drawn by AVAT after closing of the Business
Combination once the Collateral is received by the Lender. AVAT intends to use the May 2026 Collateralized Open Loan to finance certain
closing costs in connection with the Business Combination.
All capitalized terms used in this Current Report on Form 8-K but not
otherwise defined have the meaning ascribed to such terms in the exhibits set forth herein as Exhibits 10.1 and 10.2. The foregoing descriptions
of the Master Lender Agreement and May 2026 Collateralized Open Loan are qualified in their entirety by reference to the full text of
the agreements, which are attached hereto as Exhibits 10.1 and 10.2, respectively, and incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation
under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth above in item 1.01 is incorporated by reference
into this Item 2.03.
Item 8.01 Other Events.
On May 29, 2026, Avalanche Treasury Corporation and Avalanche Treasury
Company, LLC made available their financial results for the three months ended March 31, 2026, which are filed herewith as Exhibits 99.1
and 99.2 hereto, respectively.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit
No.
Description
10.1
Master Lender Agreement, dated March 20, 2026, by and between Avalanche Treasury Company, LLC and FalconX Charlie, Inc.
10.2
Loan Term Sheet, dated May 29, 2026, between Avalanche Treasury Company, LLC and FalconX Charlie, Inc.
99.1
Unaudited condensed financial statements of the Avalanche Treasury Corporation as of and for the three months ended March 31, 2026.
99.2
Unaudited condensed financial statements of Avalanche Treasury Company, LLC as of and for the three months ended March 31, 2026.
SIGNATURE
Pursuant to the requirements
of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
AVALANCHE TREASURY CORPORATION
Date: May 29, 2026
By:
/s/ Gerald Bartholomew Smith
Name:
Gerald Bartholomew Smith
Title:
Chief Executive Officer
AVALANCHE TREASURY COMPANY, LLC
Date: May 29, 2026
By:
/s/ Gerald Bartholomew Smith
Name:
Gerald Bartholomew Smith
Title:
President
EX-10.1 — EXHIBIT 10.1
EX-10.1
Filename: tm2615904d1_ex10-1.htm · Sequence: 2
Exhibit 10.1
CERTAIN IDENTIFIED INFORMATION HAS BEEN REDACTED
FROM THIS EXHIBIT, BECAUSE IT IS (1) NOT MATERIAL AND (2) THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL. “[***]”
INDICATES THAT INFORMATION HAS BEEN REDACTED.
MASTER LENDER AGREEMENT
This
Master Lender Agreement (“Agreement”) is made on this March 20, 2026 (“Effective Date”)
by and between FalconX Charlie, Inc, (“Lender”), a corporation organized and existing under the laws of Delaware
with its principal place of business at 1850 Gateway Drive, 6th floor San Mateo CA, 94404 US and Avalanche Treasury Company LLC (“Borrower”)
a corporation residing and existing under the laws of Wilmington with its principal place of business at 413 W 14th Street, Suite #4633,
Floor 2, New York, NY 10014.
Lender
and Borrower are each individually, a “Party,” and collectively the “Parties.”
RECITALS
WHEREAS,
subject to the terms and conditions of this Agreement, Borrower may, from time to time, seek to initiate a transaction pursuant to which
Lender, in its sole and absolute discretion, will lend Digital Currency or U.S. Dollars (depending on the Loaned Asset specified on the
Loan Term Sheet) to Borrower, and Borrower will pay a Loan Fee and return an equivalent amount of such Digital Currency or U.S. Dollars
to Lender upon the termination or maturity of the Loan.
Now, therefore, in consideration of the foregoing
and other good and valuable consideration, the receipt and sufficiency of which hereby acknowledged, the Borrower and the Lender hereby
agree as follows:
I. Definitions
“Airdrop”
means a distribution of a new token or tokens resulting from the ownership of a preexisting token. For the purposes of Section V,
an “Applicable Airdrop” is an Airdrop for which the distribution of new tokens can be definitively calculable according
to its distribution method, such as a pro rata distribution based on the amount of the relevant Digital Currency held at a specified time.
A “Non-Applicable Airdrop” is an Airdrop for which the distribution of new tokens cannot be definitively calculated,
such as a random distribution, a distribution to every wallet of the relevant Digital Currency, or a distribution that depends on a wallet
of the relevant Digital Currency meeting a threshold requirement.
“Additional
Collateral” has the meaning set forth in Section IV(d).
“Authorized
Agent” has the meaning set forth in Exhibit A.
“Borrower”
means Avalanche Treasury Company LLC.
“Borrower
Email” means [***].
“Business
Day” means a day on which banks are open for business, in New York, New York.
“Business
Hours” means between the hours of 8:00 a.m. to 8:00 p.m. Eastern Standard Time on a Business Day.
“Call Option”
means Lender has the option to demand immediate payment of a portion or the entirety of the Loan Balance at any time, subject to this
Agreement.
“Close of
Business” means 8:00 p.m. Eastern Standard Time.
“Collateral”
is defined as set forth in Section IV(a).
“Collateral
Ratio” is defined as set forth in Section IV(d).
“Collateral
Refund Rate” is defined as set forth in Section IV(e).
“Digital
Currency” means Bitcoin (BTC), Ether (ETH), or any digital currency that the Borrower and Lender agree upon (as specified in
the Loan Term Sheet).
“Digital
Currency Address” means an identifier of alphanumeric characters that represents a digital identity or destination for a transfer
of Digital Currency.
“Early Termination
Fee” has the meaning ascribed to such term in Section III(e) herein.
“Fixed Term
Loan” means a Loan with a pre-determined Maturity Date, where Borrower does not have a Prepayment Option and Lender does not
have a Call Option.
“Hard Fork”
means a permanent divergence in the blockchain (e.g., when non-upgraded nodes cannot validate blocks created by upgraded nodes that follow
newer consensus rules, or an airdrop or any other event which results in the creation of a new token).
“Initial
Collateral Ratio” has the meaning ascribed to such term in Section IV(d).
“Late Fee” has the meaning
ascribed to such term in Section III(c) herein.
“Lender”
means FalconX Charlie, Inc.
“Lender Email”
means: if operations, [***].
“Loan”
means a loan of Digital Currency or U.S. Dollars made pursuant to and in accordance with this Agreement and a Loan Term Sheet.
“Loan Balance”
means the sum of all outstanding amounts of Loaned Assets, including New Tokens, Loan Fees, Late Fees, and any Earlier Termination Fee
or Hard Fork Fees for a particular Loan.
“Loan Documents”
means this Master Lender Agreement and any and all Loan Term Sheets entered into between Lender and Borrower.
“Loan Effective
Date” means the date upon which a Loan is made, as specified in the Loan Term Sheet.
“Loan Fee”
has the meaning ascribed to such term in Section III(a) herein.
“Loan Term
Sheet” means the agreement between Lender and Borrower on the particular terms of an individual Loan. Such Loan Term Sheet shall
be memorialized either (i) in an agreement as set forth in Exhibit B, or (ii) through actions performed within Lender’s
platform constituting the approval of individual loan terms and conditions, or (iii) in a form approved by Lender comparable therewith.
Such Loan Term Sheet shall supersede any applicable term in this Agreement.
“Loaned Assets”
means any Digital Currency or U.S. Dollar amount transferred in a Loan hereunder until such Digital Currency (or identical Digital Currency)
or U.S. Dollar amount is transferred back to Lender hereunder in accordance with the terms herein, except that, if any new or different
Digital Currency is created or split by a Hard Fork or other alteration in the underlying blockchain and meets the requirements set forth
in Section V of this Agreement, such new or different Digital Currency shall be deemed to become Loaned Assets in addition to the
former Digital Currency for which such exchange is made. For purposes of return of Loaned Assets by Borrower or purchase or sale of Digital
Currencies, such term shall include Digital Currency of the same quantity and type as the Digital Currency, as adjusted pursuant to the
preceding sentence.
“Margin Call”
has the meaning ascribed to such term in Section IV(d) herein.
“Margin Call
Limit” has the meaning ascribed to such term in Section IV(d).
“Margin Call
Rate” has the meaning ascribed to such term in Section IV(d).
2
“Margin Notification”
has the meaning ascribed to such term in Section IV(d).
“Margin Notification
Time Period” has the meaning ascribed to such term in Section IV(d).
“Maturity
Date” means the pre-determined future date upon which a Loan becomes due in full for whatever reason.
“New Tokens”
has the meaning ascribed to such term in Section V(c) herein.
“Open Loan”
means a Loan without a Maturity Date where Borrower has a Prepayment Option and Lender has a Call Option.
“Prepayment
Option” means the Borrower has the option to repay or return the Loaned Assets prior to the Maturity Date without incurring
Early Termination Fees, subject to this Agreement and in particular Section II(c)(iii).
“Reference
Exchange” means Coinbase Pro or another exchange as mutually agreed to in writing by the Lender and the Borrower.
“Refunded
Collateral” has the meaning ascribed to such term in Section IV(e).
“Request
Day” has the meaning ascribed to such term in Section II(b) herein.
“Refund Limit”
has the meaning ascribed to such term in Section IV(e).
“Securities”
means any tokenized assets agreed by the parties and specified in the Loan Term Sheet, including but not limited to (i) securities
issued by, or unconditionally guaranteed as to the timely payment of principal and interest by, the U.S. Department of Treasury, a U.S.
government agency or the European Central Bank and (ii) redeemable securities in a pooled investment fund issued and redeemed only
on the basis of the fund’s net assets that are eligible under applicable regulatory requirements.
“Term”
means the period from the Loan Effective Date through Termination Date.
“Term Loan
with Call Option” means a Loan with a pre-determined Maturity Date where Lender has a Call Option.
“Term Loan
with Prepayment Option” means a Loan with a pre-determined Maturity Date where Borrower has a Prepayment Option.
“Termination
Date” means the date upon which a Loan is terminated or matures in accordance with the terms herein.
II. General Loan Terms.
a. Loans of Digital Currency or U.S. Dollars
Subject to the terms and conditions hereof, Borrower
may, in its sole and absolute discretion, request from the Lender a Loan of a specified amount of Digital Currency or U.S. Dollars, and
Lender may, in its sole and absolute discretion, extend such Loan or decline to extend such Loan on terms and conditions acceptable to
Lender and as set forth in a corresponding Loan Term Sheet.
b. Loan Procedure
From
time to time during the term of this Agreement, during the hours of 8:00 a.m. Eastern Standard Time to 8:00 p.m. Eastern Standard
Time on a Business Day (the “Request Day”), by email directed to Lender Email (or such other address as Lender
may specify in writing), an Authorized Agent of Borrower may request from Lender a Loan of a specific amount of Digital Currency or U.S.
Dollars (a “Lending Request”). Provided Lender receives such Lending Request prior to 3:00 p.m. Eastern Standard
Time, Lender shall by email directed to Borrower Email (or such other address as Borrower may specify in writing) to inform Borrower whether
Lender agrees to make such a Loan. If Lender fails to accept a Lending Request prior to Close of Business on the Request Day, such Lending
Request shall be deemed to have been denied by Lender.
3
As part of its Lending Request, Borrower shall
provide the following proposed terms:
i. whether U.S. Dollars or Digital Currency, and if Digital Currency, the type of Digital Currency being
requested;
ii. the amount of Digital Currency or U.S. Dollars being requested;
iii. whether the Loan is to be a Fixed Term Loan, a Term Loan with Prepayment Option, a Term Loan with a Call
Option or an Open Loan;
iv. the required Loan Effective Date;
v. the Collateral;
vi. the Initial Collateral Ratio;
vii. the Margin Call Limit;
viii. the Refund Limit; and
ix. the Maturity Date (for all Loans other than an Open Loan).
x. Call Option (if applicable)
xi. Prepayment Option (if applicable)
If Lender agrees to make a Loan in accordance
with Borrower’s proposed terms and the Borrower has delivered to and the Lender has received the Collateral required pursuant to
the terms herein, Lender shall commence transmission to either (x) the Borrower’s Digital Currency Address the amount of Digital
Currency, or (y) Borrower’s bank account by bank wire the amount of U.S. Dollars, as applicable, as such Digital Currency Address
or bank wire instruction is set forth in the Lending Request on or before Close of Business on the Request Day.
The specific and final terms of a Loan shall be
memorialized within the applicable Loan Term Sheet, which shall be delivered and executed after the final terms of a Loan are agreed to
and prior to the delivery of the Loaned Assets. In the event of a conflict of terms between this Master Lender Agreement and a Loan Term
Sheet, the terms in the Loan Term Sheet shall govern.
c. Loan Repayment Procedure
i. Loan Repayment
Unless
otherwise specified in subsections (ii) and (iii) below, upon the earlier of the Maturity Date, the Recall Delivery Day, or the Redelivery
Day (as defined below) for a Loan (the “Repayment Date”), Borrower shall repay the entirety of the Loan Balance
to Lender by Close of Business on the Repayment Date. If Lender has not provided to Borrower the Lender’s Digital Currency Address
(if the Loaned Assets is Digital Currency) or the Lender’s bank wire details (if the Loaned Asset is U.S. Dollars) for receiving
the repayment of a Loan by Close of Business on the day prior to the Repayment Date then such Loan will become an Open Loan on such Repayment
Date and no additional Loan Fees shall be accrued after the Maturity Date or the Redelivery Day.
ii. Call Option
For
Term Loans with a Call Option (or an Open Loan), Lender may during Business Hours during any Business Day (the “Recall
Request Day”) demand repayment of a portion or the entirety of the Loan Balance (the “Recall Amount”). Within
such request, Lender shall notify Borrower that it is exercising its Call Option by email to Borrower’s Email. Borrower will then
have until Close of Business on the third (3rd) Business Day after the Recall Request Day (each a “Recall Delivery Day”)
to deliver the Recall Amount to the Lender.
In the event of a Call Option where Lender demands
repayment of only a portion of any given Loan, Borrower shall repay such portion of the Loan on the Recall Delivery Day and the remaining
portion of the Loan on the earlier of the Maturity Date or the subsequent Recall Delivery Day.
4
iii. Prepayment Option
For
Open Loans and Term Loans with Prepayment Option, Borrower may notify Lender during Business Hours of Borrower’s intent to repay
the Loan prior to the Maturity Date or a Recall Delivery Day, as may be applicable, without being subject to Early Termination Fees as
set forth in Section III(e) herein. Lender’s exercising of its Call Option shall also not be subject to Early Termination Fees
as set forth in Section III(e). Borrower shall provide such notice at least one Business Day prior to the date on which the Borrower
will repay all or a portion of the Loan (the “Redelivery Day”). Borrower’s exercising of its Prepayment
Option shall not relieve it of any of its obligations herein, including without limitation its payment of outstanding Loan Fees and Late
Fees.
In the event the Borrower repays only a portion
of the Loan Balance, Borrower shall repay the remaining portion of the Loan Balance on the earlier of the Maturity Date, Recall Delivery
Day, or subsequent Redelivery Day.
d. Termination of Loan
A Loan will terminate upon the earlier of:
i. the Maturity Date;
ii. the repayment of the Loan Balance by Borrower prior to the Maturity Date;
iii. the occurrence of an Event of Default as defined in Section VII; however, Lender shall have the right
in its sole discretion to waive any Event of Default upon terms and conditions acceptable to Lender in its sole discretion.
iv. in the event any or all of the Loaned Assets becomes in Lender’s sole discretion a risk of being:
(1) considered a security, swap, derivative, or other similarly-regulated financial instrument or asset by any regulatory authority,
whether governmental, industrial, or otherwise, or by any court of law or dispute resolution organization. arbitrator, or mediator; or
(2) subject to future regulation materially impacting this Agreement, the Loan, or Lender’s business.
Nothing in the forgoing shall cause, limit, or otherwise
affect the Term and termination of this Agreement except as specified in Section XXIV.
In the event of a termination of a Loan, any Loaned Assets
shall be redelivered immediately and any fees or any amounts owing hereunder shall be payable immediately to the appropriate party specified
herein. Upon Lender’s receipt of the Loaned Assets and all other amounts owing to it hereunder, the Lender shall deliver the Collateral
to the Borrower in accordance with Section IV(g).
e. Redelivery in an Illiquid Market
If
(i) the seven-day average daily trading volume across Coinbase Pro, Kraken and Bitstamp (collectively, the “Liquidity
Exchanges”) for the applicable Digital Currency (as measured against the 30-day average daily trading volume of the applicable
Digital Currency on the Loan Effective Date) has decreased by ninety percent (90%) or more or (ii) the Digital Currency ceases to
be listed on any of the Liquidity Exchanges (the duration of either event herein designated, the “Illiquid Period”),
Borrower may repay the Loan in U.S. Dollars equal to the volume-weighted average price of the Digital Currency on the Liquidity Exchanges
(measured at 4:00 p.m. Eastern Standard Time) (the “Illiquid Market Spot Rate”) during the Illiquid Period, up
to a maximum of 30 days.
If all of the Liquidity Exchanges limit or suspend
withdrawals or transactions in the Digital Currency on the Maturity Date, the Recall Delivery Day, or the Redelivery Day, whichever applicable,
the requirement for the Borrower to return the Digital Currency shall be temporarily suspended, without penalty or default, including
without limitation the incurring of additional Loan Fees, until such time that one of the Liquidity Exchanges allow the resumption of
withdrawals and transactions in the Digital Currency.
5
III. Loan Fees and Transaction Fees.
a. Loan Fee
Unless
otherwise agreed, Borrower agrees to pay Lender a financing fee on each Loan (the “Loan Fee”). When a Loan is
executed, the Borrower will be responsible to pay the Loan Fee as agreed to herein and annualized in the relevant Loan Term Sheet and
subject to change if thereafter agreed by Borrower and Lender. Except as Borrower and Lender may otherwise agree, Loan Fees shall accrue
from and include the date on which the Loaned Assets are transferred to Borrower to the date on which such Loaned Assets are repaid in
their entirety to Lender in accordance with the terms herein. For any Loan, the minimum Loan Fee shall be the Loan Fee that would accrue
for one day.
Lender shall calculate any Loan Fees owed on a
daily basis of a 365-day year for the actual number of days elapsed and provide Borrower with the calculation upon request. The Loan Fee
will be calculated off all outstanding portions of the Loaned Assets. The Loan Fee is payable monthly by Borrower in arrears.
Lender may adjust the Loan Fee by taking into
account any Minimum Fees paid by Borrower under any FalconX Direct Market Access User Agreement executed between the Borrower and the
Lender or its parent or its affiliates.
b. Origination Fee
For
certain Loans, Lender may charge Borrower a fee (the “Origination Fee”) to be paid at the time the Collateral
is delivered to Lender. If an Origination Fee applies to a Loan, the Loan Term Sheet shall set forth the amount of the Origination Fee
and whether the Origination Fee is to be paid in U.S. Dollars or in a Digital Currency.
c. Late Fee
For
each calendar day in excess of the Maturity Date or the Recall Delivery Day (whichever is applicable) in which Borrower has not returned
the entirety of the Loaned Assets or failed to timely pay any outstanding Loan Fee in accordance with the terms herein, Borrower shall
incur an additional fee (the “Late Fee”) equal to two percent (2%) (annualized, calculated daily) on all outstanding
portions of the Loaned Assets and Loan Fees which remain outstanding. If a Late Fee is imposed under this Section III(c) due to an
event that would constitute an Event of Default under Section VII, the imposition of a Late Fee by the Lender does not constitute
a waiver of its right to declare an Event of Default for the same event.
d. Payment of Loan Fees and Late Fees
Unless
otherwise agreed, any Loan Fee, Late Fee, Early Termination Fee, Token Fee or any other amounts payable hereunder shall be paid by Borrower
to Lender upon the earlier of (i) five (5) Business Days after receipt of an invoice from Lender setting out the amounts of the outstanding
fees or (ii) the termination of all Loans hereunder (the “Payment Due Date”). An invoice for Loan Fees
and any Late Fees (the “Invoice Amount”) shall be sent out on the first Business Day of the month and shall include
any Loan Fees, Late Fees, and Early Termination Fees incurred and outstanding during the previous month. Borrower shall have up to five
Business Days from the date of said Invoice to pay the Invoice Amount. Failure of Lender to timely send an invoice in accordance with
the preceding sentence shall not be considered a default hereunder nor shall it relieve Borrower of its obligation to pay any Loan Fees,
Late Fees, Early Termination Fees or any other amounts owed herein nor negate any Event of Default resulting from Borrower’s failure
to timely pay such fees. The Loan Fee, Late Fees, and Early Termination Fees shall be payable, unless otherwise agreed by the Borrower
and Lender in the Loan Term Sheet, whether U.S. Dollars or Digital Currency on the same blockchain and of the same type that was loaned
by the Lender during the Loan.
Notwithstanding the foregoing, in all cases, all
Loan Fees, Late Fees, and Early Termination Fees shall be payable by Borrower immediately upon the occurrence of an Event of Default hereunder
by Borrower.
e. Early Termination Fees
For
Fixed Term Loans and Term Loans with Call Options, if Borrower returns the Loaned Assets prior to the Maturity Date, Borrower shall pay
to Lender a fee equal to twenty percent (20%) of the Loan Fee that would have accrued from the date of the repayment until the Maturity
Date of the Loan (the “Early Termination Fee”). The Early Termination Fee is due and payable with the repayment
of the Loaned Assets. The Early Termination Fee shall not apply if Borrower returns the Loaned Assets to Lender in the event of a Hard
Fork or if Lender moves up the Maturity Date to an earlier date by exercising a Call Option.
6
f. Taxes and Fees
Neither Borrower nor Lender shall have any liability
to the other party for any taxes due under this Agreement.
IV. Collateral Requirements
a. Collateral
Borrower,
as security for the obligations hereunder, hereby pledges with, assigns to, and grants Lender a continuing first priority security interest
in, and a lien upon, the Collateral, which shall attach upon the transfer of the first Loaned Assets under this Agreement to Borrower.
Unless otherwise agreed by the parties, or modified in the Loan Term Sheet or as set forth below, Borrower shall provide, as security
for its obligations under this Agreement, collateral in an amount of U.S. Dollars, Digital Currency or Securities (such choice at the
sole discretion of the Lender) to be determined and agreed upon by the Borrower and Lender (“Collateral”) and
memorialized using the Loan Term Sheet. Borrower shall, prior to or concurrently with the transfer of the Loaned Assets to Borrower, but
in no case later than the Close of Business on the day of such transfer, transfer to Lender the agreed upon Collateral.
For the avoidance of doubt, upon the repayment
of the Loaned Assets at the termination of a Loan, Lender shall return to Borrower the same amount and type of Collateral that was deposited,
net of any Additional Collateral or Margin Call adjustments. If a Hard Fork occurs, resulting in the creation of New Tokens while Lender
is holding such Digital Currency as Collateral and the New Token Criterion is satisfied, Lender shall return the New Tokens to Borrower
in addition to the Collateral and Additional Collateral upon the termination of a Loan. If a Hard Fork occurs resulting in the creation
of New Tokens and the New Token Criterion is not satisfied, Lender shall have no obligation to return any New Tokens to Borrower.
b. Use of Collateral
Notwithstanding
anything to the contrary in this Agreement, the Collateral transferred by Borrower to Lender, as adjusted herein, shall be security for
Borrower’s obligations in respect of such Loan and any other obligations it may have under the Loan Term Sheet, and any other obligations
to FalconX and its affiliates hereunder or in any other Agreement (collectively, the “Obligations”). Borrower,
as security for the Obligations, hereby pledges with, assigns to, and grants Lender a continuing first priority security interest in,
and a lien upon, the Collateral, which shall attach upon the transfer of the Loaned Assets by Lender to Borrower and which shall cease
upon (i) the return of the Loaned Assets by Borrower to Lender; and (ii) satisfaction of all Obligations by Borrower to Lender.
During the term of the Loan, Borrower agrees and affirms Lender’s entitlement to and the exclusive use of the Collateral for the
purpose of security for the loans that are borrowed.
c. Loan and Collateral Transfer
If Lender transfers Loaned Assets to Borrower
and Borrower does not transfer Collateral to Lender as provided in Section IV(a), Lender shall have the absolute right to the return
of the Loaned Assets; and if Borrower transfers Collateral to Lender, as provided in Section IV(a), and Lender does not transfer
the Loaned Assets to Borrower, Borrower shall have the absolute right to the return of the Collateral.
d. Margin Calls
Unless
otherwise agreed between the parties, during the term of any Loan, the following “Collateral Ratio” shall be
applied to such Loan: A/B where A = the total value of Collateral held with the Lender and B = the value of the Loaned Asset. The Collateral
Ratio shall be measured against a threshold value specified in the applicable Loan Term Sheet (the “Margin Call Limit”).
If the Collateral Ratio drops below the Margin Call Limit, the Lender shall have the right to require the Borrower by way of a margin
call (each a “Margin Call”) to provide the Lender with additional Collateral (the “Additional Collateral”)
to cause the Collateral Ratio to be equal to the value listed in the Loan Term Sheet (the “Initial Collateral Ratio”).
The value of the Loaned Assets and the Collateral comprised of Digital Currency shall be measured on the spot rate published on the Reference
Exchange, or if the Collateral is comprised of Securities, based on the value of such Securities, as determined by Lender (such rate,
the “Margin Call Rate”). The Collateral shall always be valued in U.S. Dollars and shall be subject to a haircut or
discount determined at the sole discretion of the Lender (“Collateral Haircut”).
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If
Lender requires Borrower to contribute Additional Collateral, it shall send an electronic notification (the “Margin Notification”)
to the Borrower via email, telephone, Telegram, WhatsApp, Slack, or any other electronic means of communication agreed by the parties
that sets forth: (i) the value of the Loaned Assets, (ii) the value of the Collateral, (iii) the Margin Call Rate, if applicable,
and (iv) the amount of Additional Collateral required based on the Collateral Ratio or, if applicable, the Margin Call Rate. Borrower
shall have twenty-four (24) hours from the time Lender sends such Margin Notification (the “Margin Notification Time Period”),
to (x) respond and send payment to Lender in accordance with subsection (f) below, or (y) respond that the Required Collateral
Ratio has once again been obtained. If Lender agrees by email that Borrower’s response according to (y) above is correct, then no
other action is required by Borrower. If Lender fails to agree by email with Borrower’s response in accordance with (y) by
Close of Business that same day, such shall be deemed as Lender’s rejection of Borrower’s response and a re-statement of Lender’s
original demand for Borrower to contribute Additional Collateral.
Upon Lender’s rejection of Borrower’s
response to the Margin Notification, whether affirmatively by email or by non-reply by the Close of Business that same day, Borrower shall
make immediate payment of Additional Collateral as set forth in Section IV(f) below. Failure to provide Additional Collateral, or
failure by Borrower to respond to the Margin Notification, shall give Lender the option to declare an Event of Default under Section VII
below.
Notwithstanding
anything in this Section, the value of the Collateral, which is subject to Collateral Haircut, must at all times be above a threshold
limit of 105% of the value of the Loaned Asset unless otherwise specified and agreed to by the Party’s in the applicable Loan
Term Sheet (the “Default Limit”). If the Collateral drops below the Default Limit, the Lender shall have the
option to declare an Event of Default under Section VII.
Borrower acknowledges that its obligations under
this Section continue regardless of Lender’s request for Additional Collateral and Borrower’s acceptance or rejection of the
same. Borrower agrees that it is its responsibility to monitor its Collateral and to assure that it is equal to or higher than the applicable
Margin Call Limit and Default Limit. Borrower agrees that Lender may, automatically and without prior notice, liquidate or otherwise convert
the Collateral, in its sole judgment and discretion, determines that the amount of Collateral supporting the position is insufficient
to satisfy the Default Limit of 105% or otherwise specified in a Loan Term Sheet.
Borrower acknowledges that its obligations hereunder,
including those in this Section IV, continue regardless of Lender’s request for Additional Collateral and Borrower’s
acceptance or rejection of the same.
e. Refund of Collateral
If
during the term of a Loan the Collateral Ratio increases such that the Collateral Ratio is higher than the value specified in the Loan
Term Sheet (the “Refund Limit”) for a continuous period of thirty (30) days or more, the Borrower shall have
the right to require the Lender to return an amount of Collateral (the “Refunded Collateral”) such that the Collateral
Ratio is equal to the Initial Collateral Ratio. The value of the Loaned Assets and the Collateral comprised of Digital Currency shall
be measured by the spot rate published on the Reference Exchange, and the value of the Collateral comprised of Securities shall be based
on the value of such Securities, as determined by the Lender (the “Collateral Refund Rate”). Lender shall deliver the
Refunded Collateral to Borrower within two Business Days.
f. Payment of Additional Collateral
Payment of the Additional Collateral shall be
made by bank wire to the account, or if applicable the Digital Currency Address, specified in the Loan Term Sheet or by a return of the
amount of Loaned Assets necessary to obtain the Required Collateral Ratio. For any return of Loaned Assets made in accordance with this
Section, Borrower is still responsible for payment of any Early Termination Fees that apply to the particular Loan.
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g. Return of Collateral
Upon Borrower’s repayment of the Loan and
any other amounts owing hereunder and acceptance by Lender of the Loaned Assets into Lender’s Digital Currency Address, with such
delivery being confirmed on the relevant Digital Currency blockchain ten times, Lender shall initiate the return of Collateral within
five Business Days to a bank account designated by Borrower or, where Digital Currency or Securities is Collateral, into an applicable
Digital Currency Address on the behalf of Borrower.
h. Rehypothecation
Lender shall have the right to sell, pledge, rehypothecate,
assign, invest, use, commingle or otherwise dispose of, or otherwise use in its business any Collateral it holds, free from any claim
or right of any nature whatsoever of the Borrower, including any equity or right of redemption by the Borrower, and register any Collateral
in the name of Lender or its custodian, if applicable. For purposes of satisfying the rights and obligations of both parties pursuant
to this Agreement, Lender will be deemed to continue to hold all Collateral, regardless of whether the Lender has exercised any rights
with respect to Collateral pursuant to this section.
V. Hard Fork
a. Notification
In the event of a public announcement of a future
Hard Fork or an Airdrop in the blockchain for any Loaned Assets or Collateral, Lender shall provide email notification to Borrower.
b. No Immediate Termination of Loans Due to Hard Fork
In the event of a Hard Fork in the blockchain
for any Loaned Assets or an Airdrop, any outstanding Loans will not be automatically terminated. Borrower and Lender may agree, regardless
of Loan type, either (i) to terminate the Loan without any penalties on an agreed upon date or (ii) for Lender to manage the
Hard Fork on the behalf of Borrower. If the Lender manages the Hard Fork on behalf of Borrower, Borrower shall return the Loaned Assets
to Lender two Business Days prior to the scheduled Hard Fork or Airdrop. Lender shall not be obligated to return any Collateral to the
Borrower during the period in which Lender manages the Loaned Assets on the behalf of Borrower. Lender shall fork the Loaned Assets, and
following the Hard Fork shall return to Borrower the Loaned Assets but not any New Tokens (as defined below). For any whole days in which
Lender manages the Loan Digital Currency pursuant to this section, the Loan Fee for those days shall not accrue. Nothing herein shall
relieve, waive, or otherwise satisfy Borrower’s obligations hereunder, including without limitation, the return of the Loaned Assets
at the termination of the Loan and payment of accrued Loan Fees, which includes the per diem amounts for days on which Borrower transfers
Digital Currency to Lender and Lender transfers said Digital Currency back to Borrower pursuant to this section.
c. Lender’s Right to New Tokens
Lender
will receive the benefit and ownership of any incremental tokens generated as a result of a Hard Fork in the Digital Currency protocol
or an Applicable Airdrop (the “New Tokens”) if any two of the following four conditions are met (the “New
Token Criterion”):
· Hash Power: the average hash power mining the New Token on the 30th day following the occurrence
of the Hard Fork or Applicable Airdrop (calculated as a 30-day average on such date) is at least five percent (5%) of the hash power mining
the Loaned Assets on the day preceding the Hard Fork or Applicable Airdrop (calculated as a 3-day average of the 3 days preceding the
Hard Fork).
· Market Capitalization: the average market capitalization of the New Token (defined as the total
value of all New Tokens) on the 30th day following the occurrence the Hard Fork or Applicable Airdrop (calculated as a 30-day average
on such date) is at least five percent (5%) of the average market capitalization of the Loaned Assets (defined as the total value of the
Loaned Assets) (calculated as a 30-day average on such date).
· 24-Hour Trading Volume: the average 24-hour trading volume of the New Token on the 30th day following
the occurrence the Hard Fork or Applicable Airdrop (calculated as a 30-day average on such date) is at least one percent (1%) of the average
24-hour trading volume of the Loaned Assets (calculated as a 30-day average on such date).
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· Wallet Compatibility: the New Token is supported by the Lender or a custodian mutually designated
by the Borrower and the Lender within 30 days of the Hard Fork or Applicable Airdrop.
For the above calculations, the source for the
relevant data on the Digital Currency hash power, market capitalization, and 24-Hour trading volume will be blockchain.info (or, if blockchain.info
does not provide the required information, bitinfocharts.com, and if neither provides the required information, the parties shall
discuss in good faith to mutually agree upon another data source) and the source for the hash power of the New Token will be bitinfocharts.com
(or, if bitinfocharts.com does not provide the required information, the parties shall discuss in good faith to mutually agree
upon another data source prior to the 30-day mark of the creation of the New Token).
If
the Hard Fork or Applicable Airdrop meets the criteria above, Borrower will have up to sixty (60) days from the Hard Fork or Applicable
Airdrop to transfer the New Tokens to Lender. If sending the New Tokens to Lender is burdensome, upon Lender’s written agreement
with Borrower, Borrower can reimburse Lender for the value of the New Tokens by either (i) a one-time payment in the same Loaned
Assets transferred as a part of the Loan reflecting the amount of the New Tokens owed using the spot rate determined by Lender in its
reasonable discretion at the time of said repayment, or (ii) returning the borrowed Digital Currency so that Lender can manage the
split of the underlying digital tokens as described in Section IV(b) above. Alternatively, subject to Lender’s written agreement,
the parties may agree to other methods of making Lender whole for Borrower’s failure to transfer New Tokens to Lender. In all cases,
Borrower will be solely responsible for payment of additional costs incurred by any transfer method other than returning the New Tokens
to Lender, including but not limited to technical costs, third party fees, and tax obligations for the transaction, including but not
limited to a tax gross-up payment. For the avoidance of doubt, if Borrower returns a Loan to Lender prior to the 30th day following
a Hard Fork, Borrower’s obligations under this Section V shall continue for any New Tokens that meet the criteria in this subsection (c)
for such Loan on the 30th day following the Hard Fork. Lender’s rights to New Tokens as set forth in this Section shall
survive the termination of the relevant Loan, return of the Loaned Assets, and termination of this Agreement. If Borrower fails to transfer
the New Tokens to Lender, or provide alternative compensation to Lender as agreed to in accordance with this subsection, within ninety
(90) days from the Hard Fork or Applicable Airdrop, such failure will be considered an Event of Default in accordance with Section VII(b),
and Borrower shall incur an additional fee (the “Hard Fork Fee”) equal to ten percent (3%) (annualized, calculated
daily) of all outstanding portions of the Loaned Digital Currencies and Loan Fees. Lender’s charging of the Hard Fork Fee does not
constitute a waiver of its right to declare an Event of Default for the same event.
VI. Representations and Warranties.
Borrower hereby makes the following representations
and warranties, which shall continue during the term of this Agreement and any Loan hereunder:
a. Borrower
(individually, a “Party”, collectively the “Parties”)
represents and warrants that (i) it has the power to execute and deliver this Agreement,
to enter into the Loans contemplated hereby and to perform its obligations hereunder, (ii) it
has taken all necessary action to authorize such execution, delivery and performance, and
(iii) this Agreement constitutes a legal, valid, and binding obligation enforceable
against it in accordance with its terms.
b. Borrower hereto represents and warrants that it has not relied on Lender for any tax or accounting advice
concerning this Agreement and that it has made its own determination as to the tax and accounting treatment of any Loan, any Digital Currency,
Collateral, or funds received or provided hereunder.
c. Borrower hereto represents and warrants that it is acting for its own account.
d. Borrower hereto represents and warrants that it is a sophisticated party and fully familiar with the inherent
risks involved in the transactions contemplated in this Agreement, including, without limitation, risk of new financial regulatory requirements,
potential loss of money and risks due to volatility of the price of the Loaned Assets, and voluntarily takes full responsibility for any
risk to that effect.
e. Borrower represents and warrants that it is not insolvent and is not subject to any bankruptcy or insolvency
proceedings under any applicable laws.
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f. Borrower represents and warrants there are no proceedings pending or, to its knowledge, threatened, which
could reasonably be anticipated to have any adverse effect on the transactions contemplated by this Agreement or the accuracy of the representations
and warranties hereunder or thereunder.
g. Borrower represents and warrants that to its knowledge the transactions contemplated in this Agreement
are not prohibited by law or other authority in the jurisdiction of its place of incorporation, place of principal office, or residence
and that it has necessary licenses and registrations to operate in the manner contemplated in this Agreement.
h. Borrower represents and warrants that it has, or will have at the time of return of any Loaned Assets,
the right to transfer such Loaned Assets subject to the terms and conditions hereof, and, free and clear of all liens and encumbrances
other than those arising under this Agreement.
i. Borrower represents and warrants that it has, or will have at the time of transfer of any Collateral,
the right to grant a first priority security interest in said Collateral subject to the terms and conditions hereof.
VII. Default
It
is further understood that any of the following events shall constitute an event of default hereunder, and shall be herein referred to
as an “Event of Default” or “Events of Default”:
a. the failure of the Borrower to return any and all Loaned Assets and any New Tokens as defined by Section V
upon termination of any Loan in accordance with the terms herein;
b. the failure of Borrower to pay any and all Loan Fees, Late Fees, or Early Termination Fees when due hereunder,
or to remit any New Tokens or pay any Hard Fork Fee in accordance with the terms herein;
c. the failure of the Borrower to transfer Collateral or Additional Collateral, as required herein;
d. a default by Borrower in the performance of any of the other agreements, conditions, covenants, provisions
or stipulations contained in this Agreement;
e. any bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief
of debtors or dissolution proceedings that are instituted by or against the Borrower and are not be dismissed within thirty (30) days
of the initiation of said proceedings;
f. any representation or warranty made by either Party in any of the Loan Documents that proves to be incorrect
or untrue in any material respect as of the date of making or deemed making thereof however, to the extent capable of cure, a party shall
have one (1) Calendar Days to cure such default.
g. Any material or intentional misrepresentation or omission of information by the Borrower regarding the
Borrower’s financial status, business activities, or any other material aspect affecting the Borrower’s creditworthiness or
public reputation.
h. any event or circumstance occurs or exists that is a material adverse effect on the business, operations,
prospects, property, assets, liabilities or financial condition of, the Borrower, taken as a whole, or a material adverse effect on the
ability of the Borrower to perform its obligations under this Agreement, including but not limited to the ability to return, transfer,
repay, or pay any and all Loaned Assets, and/or New Tokens and pay any applicable fee; or
i. the occurrence or existence of any event of default or other similar condition or event (however described)
in respect of Borrower under any agreements or instruments relating to an obligation (whether present or future, contingent or otherwise,
as principal or surety or otherwise) in respect of borrowed money with any third party.
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VIII. Remedies
a. Upon the occurrence and during the continuation of any Event of Default by Borrower, the Lender may, at
its option: (1) declare the entire Loan Balance outstanding for any Loan hereunder immediately due and payable; (2) terminate
this Agreement and any Loan upon notice to Borrower; (3) transfer any Collateral from the collateral account to Lender’s operating
account necessary for the payment of any nonpayment, liability, obligation, or indebtedness created by this Agreement or by Lender in
furtherance of its performance hereunder and/or its lending business, including but not limited to using the Collateral to purchase the
relevant Digital Currency to replenish Lender’s supply of the relevant Digital Currency or selling any Collateral in a relevant
market for such Digital Currency; (4) purchase on Lender’s own account a like amount of Loaned Assets in a relevant market
for such Digital Currency and then collect from Borrower amounts expended by Lender for such purchase; (5) exercise its rights under
Section XII herein; (6) require the Borrower to adjust Borrower’s positions or unilaterally liquidate Borrower’s
positions on held with Lender or through any services provided by any of Lender’s affiliates (7) exercise all other rights
and remedies available to the Lender hereunder, under applicable law, or in equity; provided, that upon any Event of Default pursuant
to Section VII as to a particular Loan, the entire Loan Balance then outstanding hereunder shall automatically become and be immediately
due and payable.
b. On the occurrence of any Event of Default under this Agreement and any and all Loans made pursuant to
this Agreement shall be terminated immediately and become due and payable, and Lender shall have immediate right to the Collateral to
the fullest extent permitted herein and by law.
c. In the event that the purchase price of any replacement Digital Currency pursuant to Section VIII
(a)(3) & (a)(4) above exceeds the amount of the Collateral, Borrower shall be liable to Lender for the amount of such excess together
with interest thereon in the amount of ten percent (10%) or as modified in the Term Sheet. As security for Borrower’s obligation
to pay such excess, Lender shall have, and Borrower hereby grants, a security interest in any property of Borrower then held by or for
Lender and a right of setoff with respect to such property and any other amount payable by Lender to Borrower. The purchase price of replacement
Digital Currency purchased under this Section shall include, and the proceeds of any sale of Collateral shall be determined after deduction
of, broker’s fees and commissions and all other reasonable costs, fees and expense related to such purchase or sale (as the case
may be). In the event Lender exercises its rights under this Section, Lender may elect in its sole discretion, in lieu of purchasing all
or a portion of the replacement Digital Currencies or selling all or a portion of the Collateral, to be deemed to have made, respectively,
such purchase of replacement Digital Currencies or sale of Collateral for an amount equal to the price therefor on the date of such exercise
obtained from a generally recognized source.
d. To the extent that the Loans are now or hereafter secured by property other than the Collateral, or by
the guarantee, endorsement or property of any other person, then upon an Event of Default by Borrower, Lender shall have the right in
its sole discretion to determine which rights, security, liens, security interests or remedies Lender shall at any time pursue, relinquish,
subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of them or any of Lender’s
rights hereunder.
e. In connection with the exercise of its remedies pursuant to this Section VIII, Lender may (1) exchange,
enforce, waive or release any portion of the Collateral or Loans in favor of the Lender or relating to any other security for the Loans;
(2) apply such Collateral or security and direct the order or manner of sale thereof as the Lender may, from time to time, determine;
and (3) settle, compromise, collect or otherwise liquidate any such Collateral or security in any manner following the occurrence
of an Event of Default, without affecting or impairing the Lender’s right to take any other further action with respect to any Collateral
or security or any part thereof.
f. In addition to its rights hereunder, the non-defaulting Party shall have any rights otherwise available
to it under any other agreement or applicable law.
g. LIMITATION OF LIABILITY; BORROWER EXPRESSLY UNDERSTANDS AND AGREES THAT LENDER AND ITS AFFILIATES AND
SERVICE PROVIDERS, AND THEIR RESPECTIVE OFFICERS, DIRECTORS, AGENTS, JOINT VENTURERS, EMPLOYEES, AND REPRESENTATIVES WILL NOT BE LIABLE
FOR ANY INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL, EXEMPLARY DAMAGES, OR DAMAGES FOR LOSS OF PROFITS INCLUDING WITHOUT LIMITATION DAMAGES
FOR LOSS OF GOODWILL, USE, DATA, OR OTHER INTANGIBLE LOSSES (EVEN IF LENDER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES), WHETHER
BASED ON CONTRACT, TORT, NEGLIGENCE, STRICT LIABILITY, OR OTHERWISE, RESULTING FROM LENDER’S ACTIONS OR INACTIONS PURSUANT TO
THIS AGREEMENT.
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IX. Rights and Remedies Cumulative.
No delay or omission by the Lender in exercising
any right or remedy hereunder shall operate as a waiver of the future exercise of that right or remedy or of any other rights or remedies
hereunder. All rights of the Lender stated herein are cumulative and in addition to all other rights provided by law, in equity.
X. Survival of Rights and Remedies.
All remedies hereunder and all obligations with
respect to any Loan shall survive the termination of the relevant Loan, return of Loaned Assets or Collateral, and termination of this
Agreement.
XI. Collection Costs.
In the event Borrower fails to pay any amounts
due or to return any Digital Currency or upon the occurrence of any Event of Default in Section VII hereunder, Borrower shall, upon
demand, pay to Lender all reasonable costs and expenses, including without limitation, reasonable attorneys’ fees and court costs,
broker fees, and technology costs incurred by the Lender in connection with the enforcement of its rights hereunder.
XII. Governing Law; Dispute Resolution.
This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the state of New York, United States, without giving effect to the principles of conflicts
of law thereof. Any controversy, claim or dispute arising out of or relating to this Agreement or the breach thereof shall be settled
solely and exclusively by binding arbitration in New York, New York, United States administered by JAMS. Such arbitration shall be conducted
in accordance with the then prevailing JAMS Streamlined Arbitration Rules & Procedures, with the following exceptions to such rules
if in conflict: (a) one arbitrator, who shall be a retired judge, shall be chosen by JAMS; (b) each Party to the arbitration
will pay an equal share of the expenses and fees of the arbitrator, together with other expenses of the arbitration incurred or approved
by the arbitrator; and (c) arbitration may proceed in the absence of any Party if written notice (pursuant to the JAMS’ rules
and regulations) of the proceedings has been given to such Party. Each Party shall bear its own attorneys’ fees and expenses. The
Parties agree to abide by all decisions and awards rendered in such proceedings. Such decisions and awards rendered by the arbitrator
shall be final and conclusive. All such controversies, claims or disputes shall be settled in this manner in lieu of any action at law
or equity.
XIII. Confidentiality.
a. Each
Party to this Agreement shall hold in confidence all information obtained from the other
Party in connection with this Agreement and the transactions contemplated hereby, including
without limitation any discussions preceding the execution of this Agreement (collectively,
“Confidential Information”). Confidential Information shall not include
information that the receiving Party demonstrates with competent evidence was, or becomes,
(i) available to the public through no violation of this Section XIII, (ii) in
the possession of the receiving Party on a non-confidential basis prior to disclosure, (iii) available
to the receiving Party on a non-confidential basis from a source other than the other Party
or its affiliates, subsidiaries, officers, directors, employees, contractors, attorneys,
accountants, bankers or consultants (the “Representatives”), or (iv) independently
developed by the receiving Party without reference to or use of such Confidential Information.
b. Each Party shall (i) keep such Confidential Information confidential and shall not, without the prior
written consent of the other Party, disclose or allow the disclosure of such Confidential Information to any third party, except as otherwise
herein provided, and (ii) restrict internal access to and reproduction of the Confidential Information to a Party’s Representatives
only on a need to know basis; provided, however, that such Representatives shall be under an obligation of confidentiality at least as
strict as set forth in this Section XIII.
13
c. Each Party also agrees not to use Confidential Information for any purpose other than in connection with
transactions contemplated by this Agreement.
d. The provisions of this Section XIII will not restrict a Party from disclosing the other Party’s
Confidential Information to the extent required by any law, regulation, or direction by a court of competent jurisdiction or government
agency or regulatory authority with jurisdiction over said Party; provided that the Party required to make such a disclosure uses reasonable
efforts to give the other Party reasonable advance notice of such required disclosure in order to enable the other Party to prevent or
limit such disclosure. Notwithstanding the foregoing, Lender may disclose the other Party’s Confidential Information without notice
pursuant to a written request by a governmental agency or regulatory authority.
e. The
obligations with respect to Confidential Information shall survive for a period of three
(3) years from the date of this Agreement. Notwithstanding anything in this agreement to
the contrary, a Party may retain copies of Confidential Information (the “Retained
Confidential Information”) to the extent necessary (i) to comply with its
recordkeeping obligations, (ii) in the routine backup of data storage systems, and (iii) in
order to determine the scope of, and compliance with, its obligations under this Section XIII;
provided, however, that such Party agrees that any Retained Confidential Information shall
be accessible only by legal or compliance personnel of such Party and the confidentiality
obligations of this Section XIII shall survive with respect to the Retained Confidential
Information for so long as such information is retained.
XIV. Notices.
Unless otherwise
provided in this Agreement, all notices or demands relating to this Agreement shall be in writing and shall be personally delivered
or sent by Express or certified mail (postage prepaid, return receipt requested), overnight courier, electronic mail (at such email
addresses as a Party may designate in accordance herewith), or to the respective address set forth below:
Lender:
[***]
Borrower:
[***]
Either Party may change its address by giving
the other Party written notice of its new address as herein provided.
XV. Modifications.
All modifications or amendments to this Agreement
or any Term Sheet shall be effective only when reduced to writing and signed by both parties hereto. Such modifications or amendments
may be made through additional language included in a Loan Term Sheet or through the execution of an agreement by the Borrower with a
FalconX affiliate (including, but not limited to Falcon Labs, Ltd), in which scenario the FalconX affiliate shall have the full authorization
and power of Lender to modify or revise this Agreement on behalf of Lender
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XVI. Single Agreement
Borrower
and Lender acknowledge that, and have entered into this Agreement in reliance on the fact that, all Loans hereunder constitute a single
business and contractual relationship and have been entered into in consideration of each other. Accordingly, Borrower and Lender hereby
agree that payments, deliveries, and other transfers made by either of them in respect of any Loan shall be deemed to have been made in
consideration of payments, deliveries, and other transfers in respect of any other Loan hereunder, and the obligations to make any such
payments, deliveries and other transfers may be applied against each other and netted. In addition, Borrower and Lender acknowledge that,
and have entered into this Agreement in reliance on the fact that, all Loans hereunder have been entered into in consideration of each
other. Accordingly, Borrower and Lender hereby agree that (a) each shall perform all of its obligations in respect of each Loan hereunder,
and that a default in the performance of any such obligation by Borrower or by Lender (the “Defaulting Party”)
in any Loan hereunder shall constitute a default by the Defaulting Party under all such Loans hereunder, and (b) the non-defaulting
Party shall be entitled to set off claims and apply property held by it in respect of any Loan hereunder against obligations owing to
it in respect of any other Loan with the Defaulting Party.
XVII. Entire Agreement.
This Agreement, each exhibit referenced herein,
and all Loan Term Sheets constitute the entire Agreement among the parties with respect to the subject matter hereof and supersedes any
prior negotiations, understandings and agreements. Nothing in this Section XVII shall be construed to conflict with or negate Section XVI
above.
XVIII. Successors and Assigns.
This Agreement shall bind and inure to the benefit
of the respective successors and assigns of each of the parties; provided, that Borrower may not assign this Agreement or any rights or
duties hereunder without the prior written consent of the Lender (such consent to not be unreasonably withheld). Lender may assign this
Agreement or any rights or duties hereunder upon notice to Borrower. Notwithstanding the foregoing, in the event of a change of control
of Lender or Borrower, prior written consent shall not be required so such Party provides the other Party with written notice prior to
the consummation of such change of control. For purposes of the foregoing, a “change of control” shall mean a transaction
or series of related transactions in which a person or entity, or a group of affiliated (or otherwise related) persons or entities acquires
from stockholders of the Party shares representing more than fifty percent (50%) of the outstanding voting stock of such Party. Neither
this Agreement nor any provision hereof, nor any Exhibit hereto or document executed or delivered herewith, or Loan Term Sheet hereunder,
shall create any rights in favor of or impose any obligation upon any person or entity other than the parties hereto and their respective
successors and permitted assigns. For the avoidance of doubt, any and all claims and liabilities against the Lender arising in
any way out of this Agreement are only the obligation of the Lender, and not any of its parents or affiliates. The Parties agree that
none of the Lender’s parents or affiliates shall have any liability under this Agreement nor do such related entities guarantee
any of the Lender’s obligations under this Agreement.
XIX. Severability of Provisions.
Each provision of this Agreement shall be severable
from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.
XX. Counterpart Execution.
This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same Agreement. Delivery of an executed counterpart of this Agreement
by email or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this
Agreement. Any Party delivering an executed counterpart of this Agreement by email or other electronic method of transmission also shall
deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect
the validity, enforceability, and binding effect of this Agreement.
15
XXI. Relationship of Parties.
Nothing contained in this Agreement shall be deemed
or construed by the Parties, or by any third party, to create the relationship of partnership or joint venture between the parties hereto,
it being understood and agreed that no provision contained herein shall be deemed to create any relationship between the parties hereto
other than the relationship of Borrower and Lender.
XXII. No Waiver.
The failure of or delay by either Party to enforce
an obligation or exercise a right or remedy under any provision of this Agreement or to exercise any election in this Agreement shall
not be construed as a waiver of such provision, and the waiver of a particular obligation in one circumstance will not prevent such Party
from subsequently requiring compliance with the obligation or exercising the right or remedy in the future. No waiver or modification
by either Party of any provision of this Agreement shall be deemed to have been made unless expressed in writing and signed by both parties.
XXIII. Indemnification.
The
Borrower shall indemnify and hold harmless the Lender, or any of its parents or affiliates, and each of the foregoing’s respective
directors, officers, contractors and employees (each, an “Indemnified Party”) from and against any and all third
party claims, demands, losses, expenses and liabilities of any and every nature (including attorneys’ fees of the Party choosing
to defend against any such claims, demands, losses, expenses and liabilities) that it may sustain or incur or that may be asserted against
it arising out of the lending or borrowing of Digital Currency or U.S. Dollars under this Agreement, except for any and all claims, demands,
losses, expenses and liabilities arising out of or relating to such Indemnified Party’s bad faith, gross negligence or willful misconduct
in the performance of its duties under this Agreement. This indemnity shall be a continuing obligation of each Party, its successors and
assigns, notwithstanding the termination of this Agreement.
XXIV. Term and Termination.
Subject to Section VII (Remedies), the Term
of this Agreement shall commence on the date hereof and continue unless either Party provides written notice of its intention to terminate
this Agreement to the other Party on no less than thirty (30) days’ notice, in which case this Agreement shall terminate on the
date specified by such party in such notice of termination, provided that if there are any Loans outstanding at the time either Party
sends a notice of termination pursuant to this Section XXIV, such termination of this Agreement will not be effective until all Loans
are terminated and repaid in full in accordance with the terms herein.
Notwithstanding anything to the contrary in this
Agreement, in the event of a termination of this Agreement, all accrued and unpaid fees and other amounts hereunder shall be due and payable
immediately.
XXV. No Reliance.
Except as expressly set forth in this Agreement,
each party acknowledges that it is entering into this Agreement based solely upon its own investigation and evaluation, and not in reliance
upon any statement, representation, warranty, or agreement of the other party except those specifically included in this Agreement. Each
party acknowledges that no representation or warranty not specifically contained in this Agreement has been made by or on behalf of the
other party.
Each party further acknowledges that it has
had such opportunity as it deems necessary to independently verify the information contained herein, and to seek advice from its own legal,
tax, and business advisors and such other experts as it has deemed necessary in connection with its decision to enter into this Agreement.
To the extent that, prior to the execution
of this Agreement, either party has received or may receive information from the other party, that party understands and agrees that it
is not relying on any such information in deciding to engage in this transaction, unless such information is expressly incorporated into
this Agreement.
16
XXVI. Miscellaneous.
Whenever used herein, the singular number shall
include the plural, the plural the singular, and the use of the masculine, feminine, or neuter gender shall include all genders where
necessary and appropriate. This Agreement is solely for the benefit of the parties hereto and their respective successors and assigns,
and no other Person shall have any right, benefit, priority or interest under, or because of the existence of, this Agreement. The section
headings are for convenience only and shall not affect the interpretation or construction of this Agreement. The Parties acknowledge that
the Agreement and any Lending Request are the result of negotiation between the Parties which are represented by sophisticated counsel
and therefore none of the Agreement’s provisions will be construed against the drafter.
XXVII. Perfection and Security Interest.
Borrower shall take at its own expense all such
actions that may be necessary and that Lender may reasonably request so as at all times to maintain the validity, perfection, enforceability
and first priority of Lender’s security interest in and lien on the Collateral and to enable Lender to protect, exercise or enforce
its rights hereunder and in the Collateral, including, but not limited to, (i) promptly discharging all liens on the Collateral other
than Lender’s security interest or any other liens permitted by this Agreement and (ii) executing and delivering financing
statements, control agreements, security agreements, custody agreements, instruments of pledge, notices and assignments, in each case,
in form and substance satisfactory to Lender, relating to the creation, validity, perfection, maintenance or continuation of Lender’s
security interest in and lien on the Collateral under the UCC or other applicable law. Borrower hereby authorizes Lender to file against
Borrower one or more financing, continuation or amendment statements pursuant to the UCC (or its equivalent), in each case, in the appropriate
jurisdiction and in form and substance satisfactory to Lender.
[Signature page follows]
17
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed and delivered as of the Effective Date.
LENDER:
BORROWER:
FalconX Charlie, Inc
Avalanche Treasury Company LLC
By:
/s/ Matthew Whaley
By:
/s/ Gerald Bartholomew Smith
Name: Matthew Whaley
Name: Gerald Bartholomew Smith
Title: Treasurer
Title: CEO
EXHIBIT A
Authorized Agents. The following are authorized
to deliver Lending Requests on behalf of Borrower in accordance with Section II hereof:
Name:
Email:
Name:
Email:
Borrower may change its Authorized Agents by notice
given to Lender as provided herein.
EXHIBIT B
LOAN TERM SHEET
[***]
EX-10.2 — EXHIBIT 10.2
EX-10.2
Filename: tm2615904d1_ex10-2.htm · Sequence: 3
Exhibit 10.2
LOAN TERM SHEET
This Loan Term Sheet dated 5/29/2026 (the “Loan
Effective Date”) between FalconX Charlie, Inc (“Lender”) and Avalanche Treasury Company LLC
(“Borrower”) and incorporates all of the terms of the Master Lender Agreement between Lender and Borrower on
March 20, 2026 as per the following specific terms:
Lender:
FalconX Charlie, Inc.
Borrower:
Avalanche Treasury Company LLC
Loaned Assets:
$25,000,000
Loan Fee:
7.00% p.a.
Loan Type:
Open Loan
Collateral:
AVAX
Initial Collateral Ratio:
200%
Margin Call Limit:
180%
Liquidation Threshold/Default Limit:
160%
Refund Limit:
230%
Additional Terms:
Permitted staking of the AVAX Collateral
is strictly subject to the following limitations: (i) no more than seventy-five percent (75%) of the total AVAX Collateral may be staked
at any given time; and (ii) all staked AVAX must be structured using a laddered epoch strategy ensuring that a minimum of fifty percent
(50%) of the aggregate staked position matures and reverts to an unstaked, fully liquid status on a rolling seven-day (weekly) cycle.
FalconX Charlie, Inc
Avalanche Treasury Company LLC
By:
/s/ Matthew Lepow
By:
/s/ Gerald Bartholomew Smith
Name: Matthew Lepow
Name: Gerald Bartholomew Smith
Title: Authorized Signer
Title: Authorized Signer
EX-99.1 — EXHIBIT 99.1
EX-99.1
Filename: tm2615904d1_ex99-1.htm · Sequence: 4
Exhibit 99.1
AVALANCHE TREASURY CORPORATION
BALANCE SHEET
AS OF MARCH 31, 2026
AND DECEMBER 31, 2025
March 31, 2026
December 31, 2025
(unaudited)
ASSETS
Current Assets
Deferred transaction costs
$ 2,224,203
$ 1,629,758
Total Current Assets
2,224,203
1,629,758
TOTAL ASSETS
$ 2,224,203
$ 1,629,758
COMMITMENTS AND CONTINGENCIES (NOTE 6)
LIABILITIES AND STOCKHOLDER’S DEFICIT
Current Liabilities
Accrued transaction costs
$ 282,214
$ 121,703
Accounts payable and accrued expenses
447,662
72,161
Accrued legal fees
200,820
157,427
Due to related party
1,578,524
1,423,849
Total Current Liabilities
2,509,220
1,775,140
TOTAL LIABILITIES
2,509,220
1,775,140
STOCKHOLDER’S DEFICIT
Common stock, $0.01 par value; 1,000 shares authorized; 1,000 issued and outstanding as of March 31,
2026 and December 31, 2025
10
10
Subscription receivable
(10 )
(10 )
Accumulated deficit
(285,017 )
(145,382 )
Total Stockholder’s Deficit
(285,017 )
(145,382 )
TOTAL LIABILITIES AND STOCKHOLDER’S DEFICIT
$ 2,224,203
$ 1,629,758
The accompanying notes
are an integral part of these unaudited condensed financial statements.
1
AVALANCHE TREASURY CORPORATION
CONDENSED STATEMENT OF
OPERATIONS
(UNAUDITED)
For
the three months ended
March 31, 2026
Operating expenses:
General and administrative
$ 139,635
Net loss
$ (139,635 )
Weighted average number of shares of common stock outstanding,
basic and diluted
1,000
Basic and diluted net loss per share of common stock
(139.64 )
The accompanying notes are an integral part
of these unaudited condensed financial statements.
2
AVALANCHE TREASURY CORPORATION
CONDENSED STATEMENT OF
CHANGES IN STOCKHOLDER’S EQUITY
(UNAUDITED)
Common Stock
Shares
Amount
Subscription
receivable
Accumulated
Deficit
Total
Stockholder’s
Deficit
Balance, December 31, 2025
1,000
$ 10
$ (10 )
$ (145,382 )
$ (145,382 )
Net loss
-
-
-
(139,635 )
(139,635 )
Balance, March 31, 2026
1,000
$ 10
$ (10 )
$ (285,017 )
$ (285,017 )
The accompanying notes are an integral part
of these unaudited condensed financial statements.
3
AVALANCHE TREASURY CORPORATION
CONDENSED STATEMENT OF
CASH FLOWS
(UNAUDITED)
For
the three months ended
March 31, 2026
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$ (139,635 )
Adjustments to reconcile net loss to net cash used in operations:
Deferred transaction costs
(433,934 )
Accounts payable and accrued expenses
375,501
Accrued legal fees
43,393
Due to related party
154,675
CASH USED IN OPERATING ACTIVITIES
-
Net change in cash
-
Cash, beginning of period
-
Cash, end of period
$ -
Non-cash investing and financing activities:
Deferred transaction costs included in accrued transaction costs
$ 160,511
The accompanying notes are an integral part
of these unaudited condensed financial statements.
4
AVALANCHE TREASURY CORPORATION
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
FOR THE THREE MONTHS
ENDED MARCH 31, 2026
Note 1. Organization
Description of Business
Avalanche Treasury Corporation
(the “Company” or “PubCo”) was incorporated in Delaware on September 22, 2025. The Company was formed to be the public
registrant in connection with the Business Combination Agreement, as disclosed in Note 6.
Note 2. Liquidity and Going
Concern
For the three months ended
March 31, 2026, the Company has not generated revenue and has incurred net losses since inception. As of March 31, 2026, the Company
had no cash on hand and a working capital deficit of $285,017.
The Company assesses its liquidity
in terms of its ability to generate adequate amounts of cash to meet current and future needs. Its expected primary uses of cash on a
short- and long-term basis are for working capital requirements, business acquisitions, and other liquidity needs. The Company’s management
expects that future operating losses and negative operating cash flows may increase from historical levels because of additional costs
and expenses related to the business operations and the development of market and strategic relationships with other businesses.
The Company’s future capital
requirements will depend on many factors, including the timing of the consummation of the Business Combination Agreement, as defined
in Note 6. In order to finance these opportunities, the Company will need to raise additional financing. While there can be no assurances,
the Company intends to raise such capital through issuances of additional common stock. If additional financing is required from outside
sources, the Company may not be able to raise such capital on terms acceptable to the Company or at all. If the Company is unable to
raise additional capital when desired, the Company’s business, results of operations, and financial condition would be materially and
adversely affected.
In connection with the Company’s
assessment of going concern considerations in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards
Update (“ASU”) 2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern (ASC Subtopic
205-40), management has evaluated whether conditions and events, considered in the aggregate, raise substantial doubt about the Company’s
ability to continue as a going concern within one year after the date the financial statements are issued. Based on this assessment,
management has determined that the Company’s current liquidity condition, recurring losses since inception, and lack of committed financing
raise substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance date of these financial
statements.
5
Management’s plans to alleviate
this substantial doubt primarily consist of seeking additional capital through the issuance of equity securities and/or other financing
arrangements and completing the Business Combination Agreement described in Note 6. However, the completion of the transactions contemplated
thereby is subject to the approval of Mountain Lake Acquisition Corp.’s shareholders among other closing conditions that are not within
the parties’ control. There is no assurance that the necessary shareholder approvals will be obtained, the required closing conditions
will be satisfied or waived, the Company will raise additional capital it needs to fund its operations, or that the transactions contemplated
by the Business Combination Agreement will be completed. Accordingly, management has concluded that substantial doubt about the Company’s
ability to continue as a going concern is not alleviated.
Note 3. Summary of Significant
Accounting Policies
Basis of Presentation
The accompanying unaudited
condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in
the United States of America (“GAAP”) for interim financial information and pursuant to the accounting rules and regulations
of the Securities and Exchange Commission (the “SEC”). References to GAAP issued by the Financial Accounting Standards Board
(“FASB”) in these accompanying notes to the unaudited condensed financial statements are to the FASB Accounting Standards Codification
(“ASC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with
GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these unaudited condensed financial statements
should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Registration Statement
on Form S-4, as filed with the SEC.
Use of Estimates
The preparation of the accompanying
financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts
and disclosure of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting
period.
Making estimates requires
management to exercise significant judgment. It is at least reasonably possible that the estimate is the effect of a condition, situation
or set of circumstances that existed at the date of the financial statements, which could change in the near term due to one or more
future confirming events. Accordingly, the actual results could differ significantly from those estimates.
There were no significant
estimates for the three months ended March 31, 2026.
Concentration of Credit
Risk
Financial instruments that
potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution. Cash accounts in
a financial institution may at times exceed the Federal Depository Insurance Corporation limit. There was no cash at March 31, 2026 and
December 31, 2025.
Cash and Cash Equivalents
The Company considers all
short-term investments with an original maturity date of three months or less when purchased to be cash equivalents. The Company did
not have any cash or cash equivalents as of March 31, 2026 and December 31, 2025.
6
Net Loss Per Share
Basic net loss per share is
computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss
per share is computed by giving effect to all potential shares of common stock.
The computation of basic and
dilutive net income per common stock for the three months ended March 31, 2026 is as follows:
For
the three months ended
March 31, 2026
Numerator:
Net loss
$ (139,635 )
Denominator:
Weighted-average number of shares of common stock outstanding
- basic and diluted
1,000
Basic and diluted net loss per share of common stock
$ (139.64 )
Segment Information
ASC 280, “Segment Reporting”
(“ASC 280”), defines operating segments as components of an enterprise where discrete financial information is available that
is evaluated regularly by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and in assessing
performance. The Company operates as a single operating segment. The Company’s CODM is the Chief Executive Officer, who has ultimate
responsibility for the operating performance of the Company and the allocation of resources. Currently, the CODM currently reviews total
expenses as the primary measure to manage the business and does not segment the business for internal reporting or decision making. The
CODM does not review segment assets at a level other than that presented in the Company’s balance sheet. There are no significant expense
categories regularly provided to the CODM beyond those disclosed in the statement of operations.
Derivative Financial Instruments
The Company evaluates its
financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance
with ASC Topic 815, “Derivatives and Hedging.” For derivative financial instruments that are accounted for as liabilities,
the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with
changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities
are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument
could be required within 12 months of the balance sheet date. There are no derivative financial instruments as of March 31, 2026 and
December 31, 2025.
Income taxes
The Company follows the asset
and liability method of accounting for income taxes under FASB ASC 740 “Income Taxes”, which requires an asset and liability
approach to financial accounting and reporting for income taxes. Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
7
FASB ASC 740 prescribes a
recognition threshold and a measurement attribute for the financial statement recognition and the measurement of tax positions taken
or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained
upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as
income tax expense. The Company is currently not aware of any issues under review that could result in significant payments, accruals
or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Deferred Transaction Costs
The Company capitalizes transaction
costs, which primarily consist of direct, incremental legal, professional, and other third-party fees relating to the Company’s closing
of the Transactions and are presented as an asset in the balance sheet. The deferred costs will be offset against proceeds upon the consummation
of an offering resulting from the closing of the Transactions. If the Transactions are not consummated, such deferred costs would be
expensed in the period in which the Transactions are abandoned. As of March 31, 2026 and December 31, 2025, deferred transaction costs
totaled $2,224,203 and $1,629,758, respectively.
Recent Accounting Pronouncements:
Recent Accounting Pronouncements,
not yet adopted:
ASU 2024-03, “Disaggregation
of Income Statement Expenses (“DISE”)” (“ASU 2024-03”) requires disclosures about specific types of expenses
included in the expense captions presented on the face of the income statement as well as disclosure about selling expenses. ASU 2024-03
is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods within annual reporting periods
beginning after December 31, 2027, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its financial
statements and disclosures.
In May 2025, the FASB issued
ASU No. 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition
of a Variable Interest Entity. The standard revises current guidance for determining the accounting acquirer for a transaction effected
primarily by exchanging equity interests in which the legal acquiree is a variable interest entity (“VIE”) that meets the definition
of a business. The amendments differ from current U.S. GAAP because, for certain transactions, they replace the requirement that the
primary beneficiary of a VIE is always the acquirer with an assessment that requires an entity to consider the factors to determine which
entity is the accounting acquirer. Under the amendments, acquisition transactions in which the legal acquiree is a VIE will, in more
instances, result in the same accounting outcomes as economically similar transactions in which the legal acquiree is a voting interest
entity. The ASU does not change the accounting for a transaction determined to be a reverse acquisition or a transaction in which the
legal acquirer is not a business and is determined to be the accounting acquiree. The new guidance will become effective for interim
and annual reporting periods beginning on January 1, 2027, will require a prospective transition method for business combinations that
occur after the initial adoption date, and early adoption is permitted. Management is currently evaluating the impact of the new standard
on the Company’s financial statements.
Recently Adopted Accounting
Pronouncements
In December 2023, the FASB
issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about
a reporting entity’s effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency
and decision usefulness of income tax disclosures. This ASU will be effective for the annual period ending December 31, 2025, with early
adoption permitted. The adoption of this guidance did not have an impact on the Company’s financial statements.
8
Note 4. Stockholder’s Deficit
Common stock —
The Company is authorized to issue 1,000 shares of common stock with $0.01 par value. As of March 31, 2026 and December 31, 2025, there
were 1,000 shares of common stock issued and outstanding which was issued as the initial contribution for a nominal amount. Each share
of common stock entitles the holder to one vote.
On September 25, 2025, Seller
(as defined below) subscribed for 1,000 shares of common stock of the Company for $0.01 per share or $10 in the aggregate. The Company
has recorded a $10 subscription receivable for the shares issued which is included in stockholder’s deficit as of March 31, 2026 and
December 31, 2025.
Note 5. Related Party Transactions
Due to related party
The amounts due to related
party represent legal fees previously invoiced and paid on behalf of the Company by Avalanche Treasury Company LLC, an affiliate and
related party. As of March 31, 2026 and December 31, 2025, $1,578,524 and $1,423,849, respectively, was recorded in due to related party
on the balance sheet.
Note 6. Commitments and
Contingencies
Business Combination Agreement
On October 1, 2025, Pubco
entered into a Business Combination Agreement (the “Agreement”) with Mountain Lake Acquisition Corp. (“SPAC”), Avalanche
Treasury Company LLC, a Delaware limited liability company (“OpCo”), Avalanche SPAC Merger Sub LLC (“SPAC Merger Sub”),
Avalanche Company Merger Sub LLC (“Company Merger Sub,” and together with SPAC Merger Sub, the “Company Subsidiaries”),
and Dragonfly Digital Management, LLC (the “Seller”), pursuant to which the transactions contemplated therein (collectively,
the “Closing”) will be consummated.
Under the terms of the Agreement,
and subject to its conditions, (i) SPAC Merger Sub will merge with and into SPAC (the “SPAC Merger”), with SPAC continuing
as the surviving entity and a wholly owned subsidiary of Pubco, and (ii) Company Merger Sub will merge with and into OpCo (the “Subsidiary
Merger,” and together with the SPAC Merger, the “Mergers”).
In connection with the Subsidiary
Merger, each member of OpCo other than the Seller will receive one share of the Pubco’s Class A common stock, par value $0.01 per share
(“Class A Stock”), for each unit held immediately prior to the merger, and the Seller will receive one share of Class A Stock
and one share of Class B common stock, par value $0.01 per share (“Class B Stock”), for each unit it holds. As a result of
the Closing, Pubco will become a publicly traded entity, and OpCo will become its wholly owned subsidiary.
As additional merger consideration,
Pubco will issue to the Seller 4,000,000 shares of Class A Stock and 4,000,000 shares of Class B Stock, of which 2,000,000 shares of
each class (the “Seller Earnout Shares”) will be held in escrow and released in tranches if Pubco’s stock achieves VWAP thresholds
of $13.00, $15.00, and $17.00 per share, or earlier upon a change in control as defined in the Agreement. Any Seller Earnout Shares not
vested by the fifth anniversary of the Closing will be forfeited.
9
Following the Closing, Class
A Stock will carry economic rights and be listed on Nasdaq, while Class B Stock will carry one vote per share but no economic rights
and will be held solely by the Seller.
First Amendment to the
Business Combination Agreement
On January 13, 2026, SPAC,
Pubco, the Pubco Subsidiaries, the Company, Seller Related Parties and Astral Horizon, L.P (“Astral”) entered into the First
Amendment, and pursuant to which, among other things, the parties thereto agree that:
(i) Astral
and Dragonfly Ventures, L.P, a Cayman Islands exempted limited partnership (“DV”) and Dragonfly Ventures, II L.P, a Cayman
Islands exempted limited partnership (“DV II”, and together with DV, “DVs” and together with the Seller “Seller
Related Parties) were added as parties to the Agreement and they agreed to be bound by, and to comply with, the terms and conditions
of the Agreement, in the same manner as if they were original signatories thereto;
(ii) the
Company Units held by the DVs are to be treated as the Company Units held by Seller such that, as a result of the Company Merger, the
DVs will receive one (1) Pubco Class A Stock and one
(1) Pubco Class B Stock for
each Company Unit held by the DVs;
(iii) the
Additional Merger Consideration Shares to be issued at Closing will (i) be issued to Astral rather than to Seller as provided in the
original version of the Agreement, and (ii) consist of 4,000,000 shares of Pubco Class A Stock only, with no Pubco Class B Stock to be
allotted as Additional Consideration because Pubco Class B Stock will be issued to Seller Related Parties;
(iv) the
Representations and Warranties of the Seller are to be made severally but not jointly by the Seller Related Parties and Astral rather
than solely by Seller as provided in the original version of the Agreement;
(v) certain
references to the Seller (as specified in the First Amendment) shall be considered as references to the Seller Related Parties, Astral
or the Seller Related Parties and/or Astral, as applicable;
(vi) Exhibit
E (Terms of Pubco Stock) to the original version of the Agreement be deleted in its entirety and replaced by the new Exhibit E, in the
form attached to the First Amendment.
(vii) The
First Amendment is effective as of October 1, 2025.
Second Amendment to the
Business Combination Agreement
On March 17, 2026, MLAC, Pubco,
the Pubco Subsidiaries, the Company, the Seller Related Parties, and Astral entered into Amendment No.2 of the Agreement, pursuant to
which the parties agreed to postpone the issuance by Pubco to Astral of the 2,000,000 shares of Pubco Class A Stock by thirty (30) calendar
days following the closing date of the Agreement.
Sponsor Support and Lock-Up
Agreements
On October 1, 2025, the SPAC
entered into a Sponsor Support Agreement with the SPAC’s sponsor (the “Sponsor”). Under the agreement, the Sponsor agreed to
vote its SPAC securities in favor of the Business Combination Agreement and the transactions contemplated thereby, to waive certain anti-dilution
and redemption rights, and to comply with customary transfer and lock-up restrictions on its founder shares and private placement warrants.
The Sponsor Support Agreement also includes covenants restricting transfers prior to Closing and customary representations and warranties
of the parties.
Concurrently, the SPAC entered
into Lock-Up Agreements with the Sponsor, the Seller, and certain other equity holders (collectively, the “Lock-Up Parties”).
The Lock-Up Agreements restrict the sale or transfer of Company common stock received in the Business Combination for specified periods
following Closing, subject to customary early-release conditions, including specified trading-price thresholds and underwriter consent
in connection with future registered offerings. The Lock-Up Agreements include standard exceptions for permitted transfers and establish
procedures for legends, notice, and release timing consistent with market practice for de-SPAC transactions.
10
Each of the foregoing agreements
was entered into concurrently with the Business Combination Agreement and forms an integral part of the overall transaction structure
described therein.
Amended and Restated
Registration Rights Agreement
Concurrently with the Closing,
Pubco, SPAC, the Sponsor, the Seller, Avalanche (BVI), Inc., a company incorporated in the British Virgin Islands (“Avalanche BVI”),
Avalanche Cayman, a Cayman Islands exempted company (“Avalanche Cayman” and together with Avalanche BVI, the “Foundation”)
and certain securityholders shall enter into an amended and restated registration rights agreement, which will add Pubco as a party and
cover the resale of the shares of Pubco Stock held by the Sponsor, the Seller, the Foundation and such other securityholders (the “Amended
and Restated Registration Rights Agreement”), which provides for customary demand registration rights, piggyback registration rights
and shelf registration rights for the benefit of the holders of Pubco Stock named therein, subject to customary cutbacks and issuer suspension
rights. The Amended and Restated Registration Rights Agreement also includes customary provisions relating to underwriting participation,
registration expenses, indemnification and coordination of sales in underwritten offerings, and will become effective upon the Closing
and will supersede SPAC’s existing registration rights agreement in its entirety.
Subscription Agreement
On October 1, 2025, the OpCo,
SPAC, and certain investors entered into Subscription Agreements providing for a private placement of Opco Units at $10.00 per unit,
payable in cash or AVAX tokens, for an aggregate value of approximately $216 million. The proceeds from the sale of Opco Units are intended
to provide capitalization for the Opco and the post-Closing combined entity. Upon Closing, each Opco Unit will automatically convert
into one share of the Pubco’s Class A common stock. During October and November 2025, OpCo received proceeds with a fair value of approximately
$178.2 million which consisted of $96.5 million, 22,300,205 USDC, valued at $22.3 million, and 3,340,696 AVAX, valued at $59.4 million
pursuant to the Subscription Agreements and issued 21,235,349 membership interests.
Contribution, Asset
Purchase, and Token Sale Agreements
Concurrently with the execution
of the Business Combination Agreement and the TSA (as defined below), the Seller, Pubco, Avalanche Treasury Company LLC (“Opco”
or the “Vehicle”), Avalanche (BVI), Inc., a company incorporated in the British Virgin Islands (“Avalanche BVI”)
and Avalanche Cayman, a Cayman Islands exempted company (“Avalanche Cayman” and together with Avalanche BVI, the “Foundation”),
Dragonfly Digital Management, LLC, a Delaware limited liability company, entered into an asset sale and contribution agreement (the “Contribution
Agreement”), pursuant to which, on the date of the Business Combination Agreement: (a) the Foundation agreed to sell a minimum of
$200 million of AVAX tokens on a pre-discount basis to Opco on the terms and subject to the conditions set forth in a Token Sale Agreement
(the “TSA”) by and between Opco and the Foundation (the “Foundation Transaction”), and (b) the Seller agreed to contribute,
directly and indirectly through certain related funds, 1,960,040 AVAX tokens to Opco in exchange for 5,805,638 Opco units (the “Seller
Units”) (the “Dragonfly Contribution”) for an aggregate contract value of approximately $58 million. During November 2025,
Opco received 1,960,040 AVAX tokens from the Dragonfly Contribution and issued 5,805,638 membership interests.
The Contribution Agreement
included certain covenants including (i) an 18-months exclusivity in favor of Opco on sale of AVAX by the Foundation in Competing Transactions
(as defined in the Contribution Agreement), (ii) a right of first refusal in favor of Opco for AVAX sale other than in Competing Transactions
during the Covered Period, (iii) a 5-year right of first refusal in favor of the Foundation for sales of AVAX sold by Opco in one or
more transactions, each exceeding certain thresholds. The Foundation is also granted the right to designate a board member in Pubco for
a period of 5 years from the Closing date (extendable in case of further sales on terms similar to the terms in the TSA before the expiration
of the 5 years).
Concurrently with the execution
of the Business Combination Agreement and the Contribution Agreement, Opco, Pubco, Avalanche BVI and Avalanche Cayman entered into the
TSA, pursuant to which, on the date of the Business Combination Agreement, the Foundation agreed to sell a minimum of $200 million of
AVAX tokens on a pre-discount basis to Opco in exchange for, at a 60% discount, (i) $50 million in cash or USDC and (ii) $30 million
in the form of 3,000,000 shares of Pubco Class A Stock (the “Foundation Shares”). If at any time following the Closing Date,
the Pubco Class A Stock cease to be nonvoting securities and at such time the Foundation owns a number of Foundation Shares in excess
of 4.7% of the then-outstanding Pubco Class A Stock (the “Maximum Percentage”), the Foundation may request to exchange the
number of Foundation Shares in excess of the Maximum Percentage for an equal number of pre-funded warrants convertible, at the Foundation’s
request, into Pubco Class A Stock on a one-to-one basis. The AVAX tokens delivered pursuant to the TSA are subject to certain restrictions
for 5 years following the date of the TSA. The TSA shall be terminated upon termination of the Contribution Agreement.
11
During October 2025, Opco
purchased 7.3 million of AVAX tokens from the Foundation for $50 million in cash and USDC pursuant to the TSA. The 3,000,000 shares of
Pubco Class A Stock will be issued upon the Closing of the Business Combination.
Contingent Transaction
Fees
The Company, and related party,
signed agreements during September 2025 with certain third-party service providers and deal advisors for fees payable upon the closing
of the Business Combination. One agreement provides for an advisory fee of 5.5% of the aggregate cash proceeds from the sale of securities
to be payable at closing. Another agreement provides for an M&A advisory fee of $2,750,000, also payable at closing. These fees relate
to services provided by external vendors and transaction brokers in connection with the Closing. No amounts were incurred or payable
as of March 31, 2026 and December 31, 2025.
Note 7. Segment Information
ASC Topic 280, “Segment
Reporting,” establishes standards for companies to report in their financial statements information about operating segments, products,
services, geographic areas, and major customers. Operating segments are defined as components of an enterprise that engage in business
activities from which it may recognize revenues and incur expenses, and for which separate financial information is available that is
regularly evaluated by the Company’s chief operating decision maker, or group, in deciding how to allocate resources and assess performance.
The Company’s chief operating
decision maker (“CODM”) has been identified as the Chief Executive Officer, who uses operating expenses as the primary measure
to manage the business and does not segment the business for internal reporting or decision making. Accordingly, management has determined
that there is only one reportable segment.
The CODM assesses performance
for the single segment and decides how to allocate resources based on net loss that also is reported on the statements of operations
as net loss. As the Company is in the start-up phase, the CODM currently reviews general and administrative expenses to manage and forecast
cash to ensure enough capital is available to achieve its business plan over the short-term period (i.e. less than a year). The CODM
also reviews general and administrative costs to manage, maintain and enforce all contractual agreements to ensure costs are aligned
with all agreements and budget. Operating costs, as reported on the statement of operations, are the significant segment expenses provided
to the CODM on a regular basis.
When evaluating the Company’s
performance and making key decisions regarding resource allocation, the CODM reviews several key metrics included in net income or loss.
For
the three months ended
March 31, 2026
Operating expenses
General and administrative
$ 139,635
Net loss
$ (139,635 )
Note 8. Subsequent Events
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date up to May 29, 2026, the date the financial statements are issued.
Based on this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed
financial statements.
12
EX-99.2 — EXHIBIT 99.2
EX-99.2
Filename: tm2615904d1_ex99-2.htm · Sequence: 5
Exhibit 99.2
AVALANCHE TREASURY COMPANY LLC
INDEX TO THE FINANCIAL STATEMENTS
PAGE
Condensed Balance Sheets as of March 31, 2026
(unaudited) and December 31, 2025
2
Condensed Statement of Operations for the Three Months
Ended March 31, 2026 (unaudited)
3
Condensed Statement of Changes in Member’s Equity for
the Three Months Ended March 31, 2026 (unaudited)
4
Condensed Statement of Cash Flows for the Three Months
Ended March 31, 2026 (unaudited)
5
Notes to Unaudited Condensed Financial Statements
6
1
AVALANCHE TREASURY COMPANY LLC
BALANCE SHEET
AS OF MARCH 31, 2026 AND DECEMBER 31,
2025
March 31, 2026
December 31, 2025
(unaudited)
ASSETS
Current Assets
Cash
$ 1,222,052
$ 1,758,802
USDC
2,391,023
3,373,564
Prepaid expenses
96,998
114,167
Deferred transaction costs
3,537,869
1,845,131
Due from related
party
1,578,524
1,423,849
Total Current Assets
8,826,466
8,515,513
Digital assets - AVAX
122,758,140
167,093,560
Digital assets
- stAVAX
10,187,157
15,246,914
TOTAL ASSETS
$ 141,771,763
$ 190,855,987
LIABILITIES AND MEMBERS’ EQUITY
Accounts payable and accrued expenses
$ 1,353,029
$ 334,210
Accrued transaction costs
1,327,121
112,046
Token sale liability
15,203,085
40,010,988
Total current liabilities
17,883,235
40,457,244
TOTAL LIABILITIES
17,883,235
40,457,244
COMMITMENTS AND CONTINGENCIES (SEE
NOTE 9)
MEMBERS’ EQUITY
Class A member interests, 27,368,672
units issued and outstanding as of March 31, 2026 and December 31, 2025
215,389,322
215,917,042
Subscription receivable
(5,125,002 )
(5,922,749 )
Accumulated deficit
(86,375,792 )
(59,595,550 )
Total members’ equity
123,888,528
150,398,743
TOTAL LIABILITIES AND MEMBERS’ EQUITY
$ 141,771,763
$ 190,855,987
The accompanying notes are an integral part
of these unaudited condensed financial statements.
2
AVALANCHE TREASURY COMPANY LLC
CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2026
(UNAUDITED)
Three
Months Ended
March 31, 2026
Staking revenue, net of fees
$ 2,057,074
Operating expenses:
General and administrative
1,942,410
Change in fair value of digital assets
46,192,584
Realized loss on digital assets
477,431
Impairment of digital assets
5,059,757
Loss from operations
(51,615,108 )
Other income:
Change in fair value of token sale liability
24,807,903
Other income
21,059
Interest income
5,904
Total other income, net
24,834,866
Net loss
$ (26,780,242 )
Weighted average number of Class A
Member units, basic and diluted
27,368,672
Basic and diluted net loss per unit
of Class A Member units
$ (0.98 )
The accompanying notes are an integral part
of these unaudited condensed financial statements.
3
AVALANCHE TREASURY COMPANY LLC
CONDENSED STATEMENT OF CHANGES IN MEMBERS’
EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2026
(UNAUDITED)
Class A
Class A
Subscription
Members’
Total Members’
Member
Units
Member
Interests
Receivable
Deficit
Equity
Balance, December 31, 2025
27,368,672
$ 215,917,042
$ (5,922,749 )
$ (59,595,550 )
$ 150,398,743
Partial subscription received
-
-
270,027
-
270,027
Change in fair value related to subscription receivable collected
-
(527,720 )
527,720
-
-
Net loss
-
-
-
(26,780,242 )
(26,780,242 )
Balance, March 31, 2026
27,368,672
$ 215,389,322
$ (5,125,002 )
$ (86,375,792 )
$ 123,888,528
The accompanying notes are an integral part
of these unaudited condensed financial statements.
4
AVALANCHE TREASURY COMPANY LLC
CONDENSED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2026
(UNAUDITED)
For
the Three Months Ended
March 31, 2026
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$ (26,780,242 )
Adjustments to reconcile net loss to net cash used in operations:
Digital assets received from staking
rewards
(2,093,347 )
USDC received recorded as other income
(21,059 )
Digital assets disposed of through
staking fees
28,779
Non-cash payments of USDC
3,600
Change in fair value of digital assets
- AVAX
46,192,584
Change in fair value of token sale
liability
(24,807,903 )
Realized loss on digital assets - AVAX
477,431
Impairment of digital assets - stAVAX
5,059,757
Changes in operating assets and liabilities:
Accounts payable and accrued expenses
1,018,819
Prepaid expense
17,169
Due from related
party
(154,675 )
CASH USED IN OPERATING ACTIVITIES
(1,059,087 )
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from
disposal of USDC
1,000,000
CASH PROVIDED BY INVESTING ACTIVITIES
1,000,000
CASH FLOWS FROM FINANCING ACTIVITIES
Deferred transaction costs
(477,663 )
CASH FLOWS USED IN FINANCING ACTIVITIES
(477,663 )
NET CHANGE IN CASH
(536,750 )
Cash, beginning of period
1,758,802
Cash, end of period
$ 1,222,052
Supplemental disclosure of non-cash investing and financing
activities:
Deferred transaction costs
$ 1,215,075
Subscription receivable, change in
fair value related to subscription receivable collected
$ 527,720
Subscription receivable, digital assets
received at fair value
$ 270,027
The accompanying notes are an integral part
of these unaudited condensed financial statements.
5
AVALANCHE TREASURY COMPANY LLC
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2026
(UNAUDITED)
Note 1. Organization
Description of Business
Avalanche Treasury Company
LLC (the “Company”) was formed in Delaware on August 20, 2025. The Company operates pursuant to the terms of its limited
liability company agreement (the “Operating Agreement”). The Company’s Class A membership units are held by its members
whose rights and obligations are governed by the Operating Agreement. The business and affairs of the Company are managed by Dragonfly
Digital Management, LLC, the sole managing member, and no vote is required by the members, except for the specific provisions as described
in the Operating Agreement. Any action requiring members to act as a class will require the approval of the majority of the outstanding
units. Profits and losses are allocated to the members pro rata in accordance with their units. Distributions to the members are made
at the discretion of the members, subject to the terms of the Operating Agreement. The debts, obligations, and liabilities of the Company
are solely debts, obligations, and liabilities and none of the members are obligated personally. The Company will dissolve upon the first
to occur (i) the written consent of the managing member and members, (ii) an event that makes it unlawful for the business
of the Company to be carried on, or (iii) the termination of the Business Combination Agreement, as disclosed in Note 9.
The Company was formed in
connection with the Business Combination Agreement and will be a subsidiary of Avalanche Treasury Corporation which operates in the blockchain
industry. The Company accumulates tokens and stakes the assets to earn rewards.
On October 1, 2025, the
Company entered into a Business Combination Agreement (the “Agreement”) with Mountain Lake Acquisition Corp. (“SPAC”),
Avalanche Treasury Corporation (“Pubco”), Avalanche SPAC Merger Sub LLC (“SPAC Merger Sub”), Avalanche Company Merger
Sub LLC (“Company Merger Sub,” and together with SPAC Merger Sub, the “Pubco Subsidiaries”), and Dragonfly Digital
Management, LLC (the “Seller”), pursuant to which the transactions contemplated therein (collectively, the “Closing”)
will be consummated (See Note 9). Concurrently with the signing of the Agreement, Pubco, the Company and the SPAC entered into the subscription
agreements (“the Company Unit Subscription Agreements”) with certain investors (the “Company Unit Investors”) pursuant
to which the Company Unit Investors agreed to purchase, payable in cash, USD Coin (“USDC”) or AVAX (or a combination of cash,
USDC and/or AVAX), and the Company issued 21,563,032 membership units (the “Company Units”) at a contractual price of $10.00
per Company Unit, resulting in an aggregate contractual value of approximately $216.0 million. The aggregate fair value of the Company
Units issued was $180.4 million as of the date the contributions were received (see Note 9).
Concurrently with the execution
of the Agreement, the Company, the Seller, Pubco, Avalanche (BVI), Inc., a company incorporated in the British Virgin Islands (“Avalanche
BVI”) and Avalanche Cayman, a Cayman Islands exempted company “(Avalanche Cayman” and together with Avalanche BVI, the
“Foundation”) entered into an asset sale and contribution agreement (the “Contribution Agreement”), pursuant to which
(a) the Foundation sold a minimum of $200 million of AVAX tokens on a pre-discount basis to the Company on the terms and subject
to the conditions set forth in a token sale agreement (the “TSA”) by and between the Company and the Foundation (the “Foundation
Transaction”) and (b) the Seller contributed, directly and indirectly through Dragonfly Ventures L.P and Dragonfly Ventures
II, L.P (the “Funds”) and together with the other Seller controlled vehicles (the “Seller Related Parties”), 1,960,040
AVAX in exchange for 5,805,638 Company membership units at the per unit price, with an approximate contractual value of approximately
$58 million and a fair value of $29.6 million as of the date the contribution was received (the “Dragonfly Contribution”) (See
Note 9).
6
Pursuant to the TSA, the Foundation
sold a minimum of $200 million AVAX tokens on a pre-discount basis to the Company in exchange for, at a 60% discount (i) $50 million
in cash and USDC and (ii) $30 million in the form of 3,000,000 shares of Pubco Class A stock to be issued at the Closing (the
“Foundation Shares”) (See Note 9). The Company received 7,317,966 AVAX tokens with a fair value of $142.2 million as of the
date of purchase. As of March 31, 2026 and December 31, 2025, the fair value of the token sale liability was $15,203,085 and
$40,010,988 respectively, as presented on the accompanying balance sheet.
Note 2. Liquidity and Going
Concern
For the three months ended
March 31, 2026, the Company has generated revenue from staking rewards, net of fees of $2,057,074 and reported a net loss of $26,780,242.
As of March 31, 2026, the Company had aggregate cash of $1,222,052 and a net working capital deficit of $9,056,769.
The Company assesses its liquidity
in terms of its ability to generate adequate amounts of cash to meet current and future needs. Its expected primary uses of cash on a
short- and long-term basis are for working capital requirements, business acquisitions, and other liquidity needs. The Company’s future
capital requirements will depend on many factors, including the consummation of the Agreement.
In connection with the Company’s
assessment of going concern considerations in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards
Update (“ASU”) 2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern (ASC Subtopic
205-40), management has evaluated whether conditions and events, considered in the aggregate, raise substantial doubt about the Company’s
ability to continue as a going concern within one year after the date the unaudited condensed financial statements are issued. Based
on this assessment, management has determined that the Company’s liquidity condition, recurring losses since inception and lack of committed
funding should the business combination not be consummated raise substantial doubt about the Company’s ability to continue as a going
concern within one year after the issuance of these unaudited condensed financial statements.
Management’s plan to alleviate
this substantial doubt is to complete the Business Combination Agreement. However, the completion of the Business Combination Agreement
is subject to the approval of the SPAC’s shareholders among other closing conditions that are not within the parties’ control. There
is no assurance that the necessary shareholder approvals will be obtained, the required closing conditions will be satisfied or waived,
or that the transactions contemplated by the Business Combination Agreement will be completed. Accordingly, management has concluded
that substantial doubt about the Company’s ability to continue as a going concern is not alleviated.
Note 3. Summary of Significant
Accounting Policies
Basis of Presentation
The accompanying unaudited
condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States of America (“GAAP”) for interim financial information and pursuant to the accounting rules and regulations of the
Securities and Exchange Commission (the “SEC”). References to GAAP issued by the Financial Accounting Standards Board (“FASB”)
in these accompanying notes to the unaudited condensed financial statements are to the FASB Accounting Standards Codification (“ASC”).
Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed
or omitted pursuant to such rules and regulations. Accordingly, these unaudited condensed financial statements should be read in
conjunction with the audited financial statements and the notes thereto included in the Company’s Registration Statement on Form S-4,
as filed with the SEC.
In the opinion of management,
the accompanying unaudited condensed financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary
for a fair presentation of the Company’s financial position as of March 31, 2026, and the results of its operations and its cash
flows for the three months ended March 31, 2026. The results of operations for the three months ended March 31, 2026 are not
necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2026 or any future interim period.
7
Use of Estimates
The preparation of the accompanying
unaudited condensed financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect
the reported amounts and disclosure of assets and liabilities at the date of the unaudited condensed financial statements and the reported
amounts of revenues and expenses during the reporting period.
Making estimates requires
management to exercise significant judgment. It is at least reasonably possible that the estimate is the effect of a condition, situation
or set of circumstances that existed at the date of the unaudited condensed financial statements, which could change in the near term
due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Segment Information
ASC 280, “Segment Reporting”
(“ASC 280”), defines operating segments as components of an enterprise where discrete financial information is available that
is evaluated regularly by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and in assessing
performance. The Company operates as a single operating segment. The Company’s CODM is the Chief Executive Officer, who has ultimate
responsibility for the operating performance of the Company and the allocation of resources. The CODM reviews profit and loss information
as an overall basis, as presented in the accompanying unaudited condensed statement of operations. The CODM does not review segment assets
at a level other than that presented in the Company’s balance sheet. There are no significant expense categories regularly provided to
the CODM beyond those disclosed in the unaudited condensed statement of operations.
Cash
The Company considers all
short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company maintains
cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) which may, at
times exceed federally insured limits. As of March 31, 2026 and December 31, 2025, the Company had approximately $1,222,052
and $1,758,802 in cash respectively and did not hold any cash equivalents.
Concentration of Credit
Risk
Cash
Financial instruments that
potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are
insured by the FDIC up to $250,000 per depositor, per insured bank. As of March 31, 2026, the Company had $954,051 in cash balances
in excess of the FDIC insured limit. The Company has not experienced any losses in such accounts and believes it is not exposed to any
significant credit risk on cash.
USD Coin
The Company holds USDC, a
fiat-backed stablecoin issued on public blockchain networks. USDC is accounted for as a financial asset. Based on the terms governing
USDC, the Company has a contractual right to redeem USDC for U.S. dollars on demand. Because this right represents a contractual claim
to cash, USDC meets the definition of a financial asset under ASC 825-10, Financial Instruments — Overall. USDC is recognized
as a financial asset upon acquisition.
8
The Company classifies its
USDC as current assets on the balance sheet. The Company safeguards its USDC through third-party custodians. As of March 31, 2026
and December 31, 2025, the Company held USDC balances of $2,391,023 and $3,373,564, respectively, with third-party custodian Coinbase
Custody Trust Company, LLC. The Company’s USDC holdings are subject to the creditworthiness and reserve practices of the issuer. Although
USDC is designed to maintain a stable value, de-pegging events, regulatory actions, or issuer level risks could impair the Company’s
ability to redeem USDC at par.
For the three months ended
March 31, 2026 the Company earned yield of $21,059 USDC on USDC balances through participation in a third-party wallet and recorded
$21,059 related to these USDC as other income in the accompanying unaudited condensed statement of operations. The Company’s purchases,
sales, and dispositions of USDC are reflected within investing activities in the statement of cash flows. Contributions of USDC received
in connection with private placement member interest agreements are presented as non-cash financing activities in the accompanying statement
of cash flows.
Digital Assets
The Company holds Digital
Assets, which include Avalanche (“AVAX”) and staked Avalanche (“stAVAX”) which expose it to concentrations of market,
credit and custodial risk. As of March 31, 2026 and December 31, 2025, digital assets represented a significant portion of
the Company’s total assets. The Company’s holdings of AVAX and stAVAX are not insured or guaranteed by any government or third-party
institution. Changes in market prices, protocol performance, or blockchain network conditions could materially affect the fair value
of these assets.
The Company safeguards its
digital assets through third-party custodians. As of March 31, 2026 and December 31, 2025, the Company held approximately 8,462,227
and 8,329,871 AVAX, respectively, at Coinbase Custody Trust Company, LLC. In addition, as of March 31, 2026 and December 31,
2025, the Company held approximately 5,323,608 and 5,249,578 AVAX, respectively, and approximately 1,180,516 and 1,180,516 stAVAX, respectively,
at BitGo Trust Company, Inc.
The Company’s AVAX and stAVAX
holdings are dependent on the performance and security of the underlying Avalanche blockchain and the specific staking protocol that
issues AVAX and stAVAX. Smart contract vulnerabilities, validator performance issues, or protocol governance actions could adversely
affect the value or liquidity of AVAX and stAVAX.
Digital asset markets may
experience periods of reduced liquidity. The Company may be unable to convert AVAX or stAVAX into fiat currency or other digital assets
on a timely basis or at expected prices.
Concentration and Current
Vulnerability
The Company’s activities consisted
principally of investing, staking and evaluating digital token technologies that run on the Avalanche public blockchain network. Due
to the current nature of the Company’s operations and the scale of business transacted on the Avalanche Network, a concentration could
potentially result in vulnerability as of the reporting date. The concentration and potential associated vulnerabilities are listed below:
● A
decline in, or loss of, staking rewards earned from the staking of AVAX and stAVAX delegated
to one or more validator nodes on the network;
● A
decline in, or loss of, the Company’s AVAX or stAVAX holdings and its utility to the Avalanche
network and a source of liquidity for its business; and
● Disruption
to the nature and extent of the business plan should the Avalanche public blockchain fail
or become redundant due to technological obsolescence or regulatory action.
The AVAX and stAVAX tokens
perform various functions within the Avalanche Ecosystem, including incentivizing network security and functionality and acting as the
payment currency on the primary network. Therefore this concentration may result in vulnerability to a near-term severe impact, and at
least a possibility that there could be events outside of the Company’s control that may result in a severe impact in the near future.
9
Based on the above concentrations,
as of the date of these unaudited condensed financial statements, and in the event of a dissolution of Avalanche Foundation or an inability
of the Avalanche public blockchain and/or AVAX or stAVAX to function as expected, these could result in near-term severe impacts to the
Company’s business.
Management monitors these
concentrations on an ongoing basis and may adjust its USDC and digital asset exposure in response to market, regulatory, or operational
developments.
The Company relies on third-party
service providers to perform certain functions essential to its operations. Any disruptions to the Company’s service providers’ business
operations resulting from business failures, financial instability, security failures, government mandated regulation or operational
problems could have an adverse impact on the Company’s ability to access critical services and be disruptive to the operations of the
Company.
If the Company were to liquidate
a significant block of AVAX in a single transaction, this may adversely impact the price per AVAX in the market. Although substantial
portions of the AVAX are subject to lock-up restrictions, there could be liquidity risk if the Company were to sell a significant block
of AVAX.
Digital Assets
The Company’s digital assets
include holdings of AVAX, the native token of the Avalanche blockchain network, which are measured at fair value in accordance with ASU
2023-08, Intangibles — Goodwill and Other — Crypto Assets, codified in ASC Subtopic 350-60 and stAVAX, a liquid
staking token on the Avalanche blockchain network, which fall within the scope of ASC 350-30. The digital assets are included in non-
current assets in the accompanying balance sheet.
The Company’s AVAX are measured
at fair value as of each reporting period using Level 1 inputs in accordance with ASC 820, Fair Value Measurement. Level 1 inputs
are based on quoted prices in active markets for identical assets that the Company has the ability to access. The Company has determined
its principal market to be Coinbase, which serves as its primary digital asset exchange for purchases and sales and the market in which
it conducts the majority of its trading activity and due to the most volume of all accessible markets. Fair value is determined using
the closing price as of 12:00 AM UTC on Coinbase on the Company’s financial statement measurement date. Changes in fair value are recognized
within change in fair value of digital assets within operating expense in the Company’s accompanying unaudited condensed statement of
operations. Realized gains and losses on disposition are recognized using specific identification.
The Company’ s stAVAX are
intangible assets that do not meet the criteria in ASC 350-60-15-1 and are accounted for as indefinite-lived intangible assets. The Company
exchanges AVAX for a receipt token, stAVAX, in connection with its liquid staking activities, which entitles the holder to redeem the
digital intangible assets for which it was exchanged. Holders of stAVAX have a claim on the underlying staked AVAX and the associated
yield, therefore it is not just a standalone intangible asset but a wrapped token that conveys rights to another asset. ASU 2023-08 excludes
digital assets that provide enforceable rights to underlying goods, services, or other assets. Therefore, the Company tests the digital
intangible assets for impairment (i) with annual impairment testing and (ii) more frequent impairment testing when events or
changes in circumstances indicate that fair value is below carrying amount. If fair value exceeds carrying value, no upward adjustment
is recorded. The Company monitors the value of AVAX, subsequent to the initial recognition of the AVAX, on an intraday basis for changes
in circumstances that may indicate that the carrying amount of the stAVAX may not be recoverable. This ongoing assessment considers significant
declines in the market value of AVAX. While impairment assessments are performed daily, any identified impairment losses are formally
recorded on a quarterly basis in the Company’s financial statements. The Company recognizes impairment on the stAVAX at the lowest
intraday value of AVAX identified during the period from January 1, 2026 through March 31, 2026, which was below the carrying
value of the stAVAX. For the three months ended March 31, 2026, the Company recorded an impairment loss on the stAVAX of $5,059,757
which is presented in operating expenses in the accompanying unaudited condensed statement of operations.
10
The Company’ s current treasury
strategy is to retain digital assets as held for investment. The Company does not engage in regular trading of these assets but may stake
them. Digital assets held for investment that are staked remain recorded within digital assets in the balance sheet. Staking rewards
earned by the Company through staking of these assets are recognized as an addition to digital assets held for investment and in staking
rewards in the accompanying unaudited condensed statement of operations in the period received. Based on this strategy, the Company classifies
its digital assets as non-current assets on the balance sheet.
Purchases of digital assets
are reflected as cash flows used in investing activities in the accompanying statement of cash flows. Contributions of digital assets
received in connection with private placement member interest agreements are presented as non-cash financing activities in the accompanying
statement of cash flows.
Staking Rewards
The Company recognizes revenue
from its staking activities in accordance with ASC 606, Revenue from Contracts with Customers, applied by analogy. To determine
the appropriate amount of revenue to be recognized the Company performs the following steps: (i) identify the contract with the
customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including the constraint
on variable consideration, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize
revenue when (or as) the Company satisfies each performance obligation.
The Company participates in
direct staking in proof-of-stake blockchain networks by staking or delegating digital assets held for investment. The Company utilizes
third-party node operators to operate validator infrastructure on the Company’s behalf, provide staking facilitation services,
and support staking- related reporting and monitoring. The Company is entitled to receive protocol-defined staking rewards only when
the validator to which it has staked tokens successfully maintains protocol defined uptime. The Company’s performance obligation
is the delegation of its AVAX tokens to a third-party node operator for a defined staking period. This obligation is satisfied over time
as the node operator maintains the required uptime throughout the staking period, since the customer simultaneously receives and consumes
the benefit provided. The transaction price, measured at inception, is recognized ratably over the staking period. The staking terms
are contractually fixed at inception and the Company does not have the practical ability to withdraw its tokens prior to the expiration
of the staking period. Staked digital assets remain under the Company’s ownership and continue to be measured at fair value.
The Company delegates to third-party
node operators to facilitate its staking operations, including the setup, operation, and maintenance of their validator nodes. While
the Company determines the amount of AVAX staked and the timing of staking and unstaking, the third-party service providers control the
underlying infrastructure critical to the staking process, including node availability and the ability to meet the network’s uptime
requirements necessary to earn staking rewards. Because the Company is dependent on the third-party vendors’ infrastructure to
meet the performance obligation of the node and to generate rewards, and because the vendors bear primary responsibility for ensuring
the nodes remain operational and eligible for rewards, the Company has determined that it acts as the agent in these arrangements. Although
the Company retains ownership of the underlying digital assets and directs certain aspects of the staking process, the nature and extent
of the vendors’ involvement in delivering the staking service is the predominant factor in this assessment. Accordingly, the Company
recognizes staking rewards on a net basis as revenue, net of fees paid to the third-party service providers.
The transaction price consists
entirely of variable consideration in the form of staking rewards, which is contingent upon successful uptime requirements by the node
operator. The Company constrains variable consideration until it is probable that a significant reversal of cumulative revenue recognized
will not occur. Validators are required to maintain a minimum uptime of 90% (previously 80%) throughout the staking period. Failure to
meet this threshold results in the forfeiture of all staking rewards for the validator and its delegators, including the Company. As
such, the consideration the Company expects to receive is contingent upon the node operator’s performance and is accounted for
as variable consideration under ASC 606, by analogy. The transaction price is measured at inception using either the most likely amount
or expected value method, depending on which method the Company expects to better predict the amount of consideration to which it will
be entitled. Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal
in the amount of cumulative revenue recognized will not occur when the associated uncertainty is subsequently resolved. The performance
obligation is satisfied over time as the node operator maintains the required uptime throughout the staking period, since the customer
simultaneously receives and consumes the benefit provided. The transaction price is recognized ratably over the staking period, subject
to the variable consideration constraint. Revenue is not recognized until the uncertainty associated with the variable consideration
is resolved, which is typically at the end of the validation period. As of the March 31, 2026 and December 31, 2025 there were
no active validation periods in progress.
11
The fair value of reward tokens
is determined using quoted prices on the principal market for the related digital asset at contract inception, which corresponds to the
date the staking arrangement is initiated and the transaction price is established. The performance obligation is satisfied over time
throughout the staking period as the node operator maintains the required uptime.
The Company participates in
liquid staking by staking AVAX in a liquid staking protocol rather than operating its own validator. The Company receives stAVAX tokens,
a receipt token representing a claim on the underlying AVAX plus accumulated staking rewards, which are custodied in Bitgo. Unlike direct
staking, rewards are not paid separately. Instead, the AVAX-to-stAVAX exchange rate increases over time. The Company may later redeem
stAVAX assets for AVAX through the protocol. The Company recognizes the income through liquid staking when the Company earns the reward
tokens and the rewards are measurable and realizable. As of March 31, 2026 and December 31, 2025, the Company had 1,180,516
and 1,180,516 stAVAX tokens with a carrying value of $10,187,157 and $15,246,914 respectively after recording a loss on impairment of
$5,059,757. The Company did not recognize any reward tokens related to the liquid staking during the three months ended March 31,
2026.
Restrictions on AVAX
On or about October 1,
2025 (the Effective Date), the Company acquired a total of 8,658,685 restricted AVAX tokens from six counterparties, with a fair value
of $106.5 million, pursuant to a combination of the Contribution Agreement, the TSA, and separate subscription or contribution agreements
with each investor.
All AVAX tokens received by
the Company are subject to contractual transfer restrictions that prevent the Company from selling, transferring, or otherwise disposing
of the tokens during the applicable lockup periods. These restrictions are implemented through a combination of paper-lock provisions
(contractual restrictions enforced through the terms of the applicable agreements) and P-chain lock provisions (protocol- enforced restrictions
embedded at the Avalanche blockchain level). The lockup schedules vary by investor, with restriction periods ranging from approximately
7 months to approximately 56 months. Each tranche is subject to a staged unlock schedule under which tokens become freely transferable
in periodic monthly increments over the restriction period.
The Company is permitted to
engage in certain activities with respect to the restricted tokens during the lockup period, including protocol staking, liquid staking,
yield generation, and limited liquidity provision, subject to the terms and conditions specified in the applicable agreements. The restrictions
limit the Company’s ability to access the liquidity for these AVAX until the lock-up periods expire. The Company may be exposed to increased
price volatility to restricted AVAX because it cannot sell these positions during the lock-up period. Changes in protocol governance,
network performance or market conditions could affect the timing or value of future unlocks.
The Company considered the
restrictions noted above in accordance with ASU 2022-03, Fair Value Measurement (Topic 820) — Fair Value Measurement of Equity
Securities Subject to Contractual Sale Restrictions, and determined that all of the restrictions would be considered entity-specific
or sales restrictions rather than restrictions on the underlying token (i.e. the restrictions don’t follow the underlying token), therefore
the Company will not consider these restrictions in determining the fair value of the digital assets.
12
The following summarizes the
restrictions on the locked AVAX as of March 31, 2026 and December 31, 2025:
AVAX tokens
Fair value
as of
March 31, 2026
Restriction period
7,317,966
$ 65,198,024
Tokens unlock over 48 equal
monthly increments beginning September 2026 and concluding August 2030.
541,326
$ 4,822,842
Tokens unlock over a period spanning
September 2025 through June 2027 at a rate of approximately 6-7% per month through October 2026, after which the schedule tapers
off periodically through the conclusion of the unlock period in June 2027.
98,718
$ 879,508
Tokens unlock over a period spanning
October 2025 through July 2026 with equal monthly increments of approximately 11.1%
143,573
$ 1,279,134
Tokens unlock over a period spanning
March 2026 through August 2026, with equal monthly increments of approximately 16.7% per month.
13,233
$ 117,897
Tokens unlock over 24 equal monthly
increments beginning October 2025 and concluding September 2027.
42,664
$ 380,106
Tokens unlock
over 32 equal monthly increments beginning February 2025 and concluding September 2027.
8,157,480
$ 72,677,511
AVAX tokens
Fair value
as of
December 31, 2025
Restriction period
7,317,966
$ 90,010,982
Tokens unlock over 48 equal monthly increments
beginning September 2026 and concluding August 2030.
833,003
10,245,937
Tokens unlock over a period spanning September 2025
through June 2027 at a rate of approximately 6-7% per month through October 2026, after which the schedule tapers off periodically
through the conclusion of the unlock period in June 2027.
275,000
3,382,500
Tokens unlock over a period spanning October 2025 through
July 2026 with equal monthly increments of approximately 11.1%
167,502
2,060,275
Tokens unlock over a period beginning March 2026 through
August 2026, with equal monthly increments of approximately 16.7% per month.
15,439
189,900
Tokens unlock over 24 equal monthly increments beginning
October 2025 and concluding September 2027.
49,775
612,233
Tokens unlock over 24 equal monthly
increments beginning February 2025 and concluding September 2027.
8,658,685
$ 106,501,827
Token Sale Liability
The TSA represents an asset
acquisition funded through a combination of cash, USDC and equity-based consideration. The token sale liability represents the fair value
of the obligation to issue Pubco Class A stock to settle the remaining contractual consideration of $30.0 million. The token sale
liability meets the criteria in ASC 480-10-25-14(a) for liability classification and the liability is subsequently remeasured at
fair value each reporting period until settlement through issuance of shares.
13
Subscription Receivable
The Company records subscription
receivables when Class A member units are issued pursuant to executed subscription agreements for which consideration, including
cash, USDC, or digital assets, has not yet been received. Subscription receivables are presented as a contra-equity balance within members’
equity in the accompanying condensed balance sheets.
The subscription receivable
is initially measured based on the fair value of the AVAX tokens to be received on the issuance date of the related Class A member
units. Subsequent changes in the fair value of the AVAX tokens underlying the subscription receivable are recognized through equity as
an adjustment to member interests and do not impact the unaudited condensed statements of operations.
As of March 31, 2026
and December 31, 2025, the subscription receivable represented 166,179 and 192,923 AVAX tokens to be received under executed subscription
agreements, with carrying amounts of $5,125,002 and $5,922,749, respectively.
Fair Value Measurement
The Company measures certain
assets and liabilities at fair value in accordance with ASC 820. ASC 820 defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes
between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs)
and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the
circumstances (unobservable inputs).
The fair value hierarchy consists
of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted
quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 — Inputs other
than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted
prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that
are not active; inputs other than quoted prices that are observable for the asset or liability (e.g. interest rates); and inputs that
are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 — Inputs that
are both significant to the fair value measurement and unobservable.
The estimated fair value of
certain financial instruments, including cash, accounts payable, accrued expenses are carried at historical cost basis, which approximates
their fair values because of the short-term nature of these instruments.
14
Net Loss Per Class A
Member Units
Basic net loss per unit is
computed by dividing net loss by the weighted average number of Class A member units outstanding during the period. Income and losses
are shared prorate based on percentage of ownership of Class A member units. Diluted net loss per Class A Member Unit is computed
by giving effect to all potential Class A member units to the extent dilutive. There were no potentially diluted Class A member
units equivalents for the three months ended March 31, 2026.
For
the three months ended
3/31/2026
Numerator:
Net loss
$ (26,780,242 )
Denominator:
Weighted average number of Class A Member units, basic
and diluted
27,368,672
Basic and diluted net loss per unit
of Class A Member unit
$ (0.98 )
Deferred Transaction Costs
The Company capitalizes transaction
costs, in accordance with ASC 340-40, Other Assets and Deferred Costs — Contracts with Customers, which primarily consist
of direct, incremental legal, professional, accounting and other third-party fees relating to the Company’s closing of the Transactions.
The deferred costs will be offset against proceeds upon the consummation of an offering resulting from the closing of the Transactions.
Should the planned Transactions prove to be unsuccessful, these deferred costs, as well as additional expenses to be incurred, will be
charged to operations. At March 31, 2026 and December 31, 2025, the Company recorded $3,537,869 and $1,845,131 in deferred
transaction costs on the accompanying balance sheet.
Income taxes
The Company is a Limited Liability
Company taxed as a partnership for federal and state income tax purposes and is therefore not directly subject to income taxes; however,
the Company’s members are individually responsible for paying income taxes based on their share of the Company’s taxable income. Accordingly,
no income tax expense has been recorded in the accompanying unaudited condensed financial statements, and no income tax payments were
made during this period. As of March 31, 2026 and December 31, 2025, the Company has not filed any tax returns in the United
States, as applicable. All results from operations were domestic in nature.
Recent accounting pronouncements
Recent Accounting Pronouncements,
not yet adopted:
ASU 2024-03, Disaggregation
of Income Statement Expenses (“DISE”) (“ASU 2024-03”), requires disclosures about specific types of expenses
included in the expense captions presented on the face of the statement of operations, as well as disclosure about selling expenses.
ASU 2024-03 is effective for annual reporting periods beginning after December 31, 2026 and interim reporting periods within annual
reporting periods beginning after December 31, 2027, with early adoption permitted. The Company is currently evaluating the impact
of this ASU on its unaudited condensed financial statements and disclosures.
Recent Accounting Pronouncements
adopted
In December 2023, the
FASB issued Accounting Standards Update (“ASU”) 2023-08, Intangibles — Goodwill and Other — Crypto Assets
(Subtopic 350-60): Accounting for and Disclosure of Crypto Assets. The ASU requires that certain crypto assets meeting defined
criteria be measured at fair value at each reporting date, with changes in fair value reported in net income, and introduces enhanced
disclosure requirements related to significant holdings, fair value measurement, restrictions on transfer, and a roll forward of activity.
This ASU is effective for fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-08 on August 20, 2025,
the date of inception. Because the Company did not exist in prior periods and therefore had no previously recognized crypto assets or
related carrying amounts, adoption of the standard did not result in a cumulative-effect adjustment to opening retained earnings. The
Company’s accounting and disclosures for crypto assets in the current period reflect the requirements of ASU 2023-08.
15
Note 4. Digital Assets
Digital assets —
AVAX
The following table summarizes
the Company’s total digital assets — AVAX holdings, as shown on the accompanying balance sheet as of March 31, 2026 and December 31,
2025:
The cost basis for the AVAX
represents the cost at the time the Company received or purchased the AVAX.
March 31,
2026
Asset
Tokens
Cost basis
Fair value
AVAX
13,785,835
$ 265,289,075
$ 122,758,140
December 31,
2025
Asset
Tokens
Cost basis
Fair value
AVAX
13,579,449
$ 263,431,911
$ 167,093,560
The following table presents
a roll forward of the Company’s AVAX as of March 31, 2026:
Amount
AVAX at fair value as of December 31, 2025
$ 167,093,560
Contribution of AVAX via subscription receivable
270,027
AVAX received from staking rewards
2,093,347
AVAX used to pay staking fees
(28,779 )
Realized loss on digital assets
(477,431 )
Change in fair value of AVAX
(46,192,584 )
AVAX at fair value as of March 31, 2026
$ 122,758,140
For the three months ended
March 31, 2026, the Company received 179,636AVAX tokens through staking activities and recorded $2,057,074 of staking activities,
which was recorded net of fees of $36,273, related to these tokens in the accompanying unaudited condensed statement of operations.
16
Digital assets —
stAVAX
The following table summarizes
the Company’s total digital assets — stAVAX holdings, as shown on the accompanying balance sheet as of March 31, 2026 and
December 31, 2025:
March 31,
2026
Asset
Tokens
Cost basis
Carrying
value
stAVAX
1,180,516
$ 15,246,914
$ 10,187,157
December 31,
2025
Asset
Tokens
Cost basis
Carrying
value
stAVAX
1,180,516
$ 28,813,672
$ 15,246,914
The following table presents a roll forward of the Company’s stAVAX
as of March 31, 2026:
Tokens
Amount
Balance at December 31, 2025
1,180,516
$ 15,246,914
Impairment loss on stAVAX tokens
-
(5,059,757 )
Balance at March 31, 2026
1,180,516
$ 10,187,157
Note 5. Members’ Equity
Class A Member Units
For the three months ended
March 31, 2026, the Company did not issue any membership units in exchange for cash, USDC, and digital assets in connection with
the Company Unit Subscription Agreements and the Contribution Agreement. The business and affairs of the Company are managed by the Members,
acting by a majority vote. Profits and losses of the Company are allocated to the Members in proportion to their respective percentage
units. Distributions to Members, if any, are made at such times and in such amounts as determined in the sole discretion of the Members,
subject to applicable law.
In October 2025, the
Company entered Company Unit Subscription Agreements (See Note 9) with certain investors who agreed to contribute AVAX in exchange for
Class A member units in the Company.
As a result of staking restrictions
in the wallets of certain investors, there were approximately 166,179 AVAX which could not be transferred to the Company until the staking
restrictions expire. The Company has recorded a subscription receivable at the value of the AVAX as of March 31, 2026 of the Class A
member units of $5,125,002. Subsequent changes in the fair value of the AVAX underlying the subscription receivable of $797,747, resulted
in a loss of $527,720 which is recognized in the accompanying unaudited condensed statement of changes in members equity for the three
months ended March 31, 2026.
Note 6. Related Party Transactions
Loan agreements
On October 10, 2025,
certain members of the Company (the “Contributing Members”), considered related parties, entered into loan contribution
agreements with the Company and Avalanche Treasury Corporation, an affiliate and related party, to fund formation and general and
administrative expenses prior to the Business Combination (as defined in Note 9). The loans are unsecured, bear interest at 4.35%
per annum compounded annually, and are repayable from the proceeds of the Business Combination or other available funds thereafter.
Interest is computed on a 365-day basis and limited to the maximum rate permitted by law. As of December 31, 2025 the Company
drew $91,500 on these notes and paid $91,500 on these notes. As of March 31, 2026 and December 31, 2025, there were no
outstanding balances on these loans.
17
Due From Related Party
As of March 31, 2026
and December 31, 2025, the Company made certain payments on behalf of Pubco for shared costs, totaling $1,578,524 and $1,423,849
respectively. The amounts paid on behalf of Pubco are recorded as a due from related party on the accompanying balance sheet and are
due on demand.
Note 7. Fair Value Measurements
The following table presents
information about the Company’s assets and liabilities measured at fair value on a recurring basis and the Company’s estimated level
within the fair value hierarchy of those assets and liabilities as of March 31, 2026 and December 31, 2025:
Fair value
measured at March 31, 2026
Total carrying
value at
March 31, 2026
Quoted
prices in
active markets
(Level 1)
Significant
other
observable inputs
(Level 2)
Significant
unobservable
inputs (Level 3)
Assets:
Digital assets - AVAX
$ 122,758,140
$ 122,758,140
$ -
$ -
USDC
2,391,023
2,391,023
-
-
Total assets
$ 125,149,163
$ 125,149,163
$ -
$ -
Liabilities:
Token sale liability
$ 15,203,085
$ -
$ 15,203,085
$ -
Fair value
measured at December 31, 2025
Total carrying
value at
December 31, 2025
Quoted
prices in
active markets
(Level 1)
Significant
other
observable inputs
(Level 2)
Significant
unobservable
inputs (Level 3)
Assets:
Digital assets - AVAX
$ 167,093,560
$ 167,093,560
$ -
$ -
USDC
3,373,564
3,373,564
-
-
Total assets
$ 170,467,124
$ 170,467,124
$ -
$ -
Liabilities:
Token sale liability
$ 40,010,988
$ -
$ 40,010,988
$ -
AVAX and USDC
In determining the value of
its AVAX and USDC investments, the Company uses quoted prices as determined by utilizing Coinbase closing prices at 12:00 AM UTC.
Token Sale Liability
In determining the fair value
of the token sale liability, the Company used quoted prices as determined by utilizing Coinbase closing prices at 12:00 AM UTC, net of
cash received.
18
stAVAX
Certain assets are measured
at fair value on a nonrecurring basis when events or changes in circumstances indicate that the carrying amount may not be recoverable.
As of March 31, 2026 and December 31, 2025 the Company recognized impairment charges related to its stAVAX, which are accounted
for as indefinite-lived intangible assets.
For the three months ended
March 31, 2026 and for the period from August 20, 2025 (inception) through December 31, 2025, the Company recognized a
$5.06 million and $13.6 million impairment loss related to its stAVAX due to declining market values of AVAX. Fair value was determined
using the quoted price of AVAX because stAVAX does not have a directly observable quoted price in an active market. As such, the stAVAX
was determined to be a Level 2 asset.
Note 8. Staking Revenue
The Company participates in
staking activities on the Avalanche network through validator arrangements with Chorus One AG, Tarmac Labs Inc., and ParaFi Technologies
LLC. Under these arrangements, the service providers operate and maintain validator node infrastructure, including monitoring and reporting
services, under the direction of the Company. The Company sets the contractual staking terms, which could range from 14 to 365 days.
The Company retains ownership and control of its staked AVAX tokens at all times through the staking process.
The Company earns staking
rewards in exchange for delegating digital assets to support network validation activities on the Avalanche blockchain protocol. Staking
rewards consist of block rewards, transaction fees, and, where applicable, supplemental protocol incentives. Rewards are distributed
directly by the Avalanche protocol to the Company’s designated wallet.
Performance Obligation
The Company’s performance
obligation is the delegation of its AVAX tokens to a third-party node operator for a defined staking period. This obligation is satisfied
over time as the node operator maintains the required uptime throughout the staking period, since the customer simultaneously receives
and consumes the benefit provided. The transaction price, measured at inception, is recognized ratably over the staking period. The staking
terms are contractually fixed at inception and the Company does not have the practical ability to withdraw its tokens prior to the expiration
of the staking period. Revenue is measured as the net amount of staking rewards earned by the Company less fees paid to node operators.
Transaction Price and Variable
Consideration
The transaction price consists
of variable consideration in the form of staking rewards net of fees paid to third-party node operators as disclosed in “Service
Fees” below. The amount of rewards is determined by protocol-defined formulas and is affected by factors such as network activity,
validator performance, and total staked amounts.
Because staking rewards are
variable and contingent upon successful validation by the node operator, the Company constrains variable consideration until it is probable
that a significant reversal of cumulative revenue recognized will not occur. Validators are required to maintain a minimum uptime of
90% (previously 80%) throughout the staking period. Failure to meet this threshold results in the forfeiture of all staking rewards for
the validator and its delegators, including the Company. As such, the consideration the Company expects to receive is contingent upon
the node operator’s performance and is accounted for as variable consideration under ASC 606, by analogy. The transaction price
is measured at inception using either the most likely amount or expected value method, depending on which method the Company expects
to better predict the amount of consideration to which it will be entitled. Variable consideration is included in the transaction price
only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when
the associated uncertainty is subsequently resolved. The performance obligation is satisfied over time as the node operator maintains
the required uptime throughout the staking period, since the customer simultaneously receives and consumes the benefit provided. The
transaction price is recognized ratably over the staking period, subject to the variable consideration constraint. Revenue is not recognized
until the uncertainty associated with the variable consideration is resolved, which is typically at the end of the validation period.
As of March 31, 2026 and December 31, 2025, there were no active validation periods in progress.
19
The fair value of reward tokens
is determined using quoted prices on the principal market for the related digital asset at contract inception, which corresponds to the
date the staking arrangement is initiated and the transaction price is established. The performance obligation is satisfied over time
throughout the staking period as the node operator maintains the required uptime. The duration of staking periods ranges from 14 to 365
days as determined by the Company at the time of delegation.
Agent Considerations
The Company engages third-party
service providers to facilitate staking activities on its blockchain nodes. While the Company determines the amount of AVAX staked and
the timing of staking and unstaking, the third-party service providers control the underlying infrastructure critical to the staking
process, including node availability and the ability to meet the network’s uptime requirements necessary to earn staking rewards. Accordingly,
the Company has determined that it is the agent in these arrangements and recognizes staking rewards on a net basis as revenue. For the
three months ended March 31, 2026, the Company recognized revenue from staking rewards of $2,057,074, net of fees paid to third
parties of $36,273 in the accompanying unaudited condensed statement of operations.
Service Fees
Validator node operators are
compensated based on a percentage of staking rewards earned, generally ranging from 2.5% to 3.0%. Fees under the Chorus One and Tarmac
arrangements are settled in AVAX and measured at fair value at contract inception. Fees under the ParaFi arrangement are invoiced monthly
and settled in fiat currency. Fees paid to third-party node operators are netted against gross staking rewards, with the resulting net
amount recognized as revenue in the period the staking rewards are earned.
Note 9. Commitments and
Contingencies
Business Combination Agreement
On October 1, 2025, the
Company entered into the Agreement with SPAC, Pubco, SPAC Merger Sub, the Pubco Subsidiaries, and the Seller, pursuant to which the Closing
will be consummated.
Under the terms of the Agreement,
immediately prior to the closing merger, each outstanding unit of the Company will be exchanged for shares of Pubco common stock. As
part of the transaction, the Seller will receive shares of Pubco Class A common stock and Pubco Class B common stock in exchange
for its ownership interests. Following the Closing, Pubco Class A common stock will carry economic rights and is expected to be
listed on Nasdaq.
In addition to the base merger
consideration, Pubco agreed to issue additional shares to the Seller and the SPAC’s sponsor (the “Sponsor”) that are subject
to vesting based on the future trading price of Pubco’s Class A common stock. As additional merger consideration, Pubco will issue
1,600,000 shares to the Sponsor (the “Sponsor Earnout Shares”) and 4,000,000 shares to the Seller (the “Seller Earnout
Shares”) and deposit the shares in an escrow account. The Sponsor Earnout Shares and the Seller Earnout Shares will be released
in tranches if specified volume-weighted average price targets are met within five years of the closing. Any shares that do not vest
by the end of the earnout period will be forfeited.
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First Amendment to the
Business Combination Agreement
On January 13, 2026,
SPAC, Pubco, the Pubco Subsidiaries, the Company, Seller Related Parties and Astral Horizon, L.P (“Astral”) entered into
the First Amendment, and pursuant to which, among other things, the parties thereto agree that:
(i) Astral
and Dragonfly Ventures, L.P, a Cayman Islands exempted limited partnership (“DV”)
and Dragonfly Ventures, II L.P, a Cayman Islands exempted limited partnership (“DV
II”, and together with DV, “DVs” and together with the Seller “Seller
Related Parties) were added as parties to the Agreement and they agreed to be bound by, and
to comply with, the terms and conditions of the Agreement, in the same manner as if they
were original signatories thereto;
(ii) the
Company Units held by the DVs are to be treated as the Company Units held by Seller such
that, as a result of the Company Merger, the DVs will receive one (1) Pubco Class A
Stock and one (1) Pubco Class B Stock for each Company Unit held by the DVs;
(iii) the
Additional Merger Consideration Shares to be issued at Closing will (i) be issued to
Astral rather than to Seller as provided in the original version of the Agreement, and (ii) consist
of 4,000,000 shares of Pubco Class A Stock only, with no Pubco Class B Stock to
be allotted as Additional Consideration because Pubco Class B Stock will be issued to
Seller Related Parties;
(iv) the
Representations and Warranties of the Seller are to be made severally but not jointly by
the Seller Related Parties and Astral rather than solely by Seller as provided in the original
version of the Agreement;
(v) certain
references to the Seller (as specified in the First Amendment) shall be considered as references
to the Seller Related Parties, Astral or the Seller Related Parties and/or Astral, as applicable;
(vi) Exhibit E
(Terms of Pubco Stock) to the original version of the Agreement be deleted in its entirety
and replaced by the new Exhibit E, in the form attached to the First Amendment.
(vii) The
First Amendment is effective as of October 1, 2025.
Second Amendment to the
Business Combination Agreement
On March 17, 2026, the
SPAC, Pubco, the Pubco Subsidiaries, the Company, the Seller Related Parties, and Astral entered into Amendment No.2 of the Agreement,
pursuant to which the parties agreed to postpone the issuance by Pubco to Astral of the 2,000,000 shares of Pubco Class A Stock
by thirty (30) calendar days following the closing date of the Agreement.
Sponsor Support and Lock-Up
Agreements
In connection with the Agreement,
the SPAC entered into a Sponsor Support Agreement with the Sponsor. Under the agreement, the Sponsor agreed to vote its SPAC securities
in favor of the Business Combination Agreement and to waive certain rights, including anti-dilution and redemption rights. The Sponsor
also agreed to customary restrictions on its founder shares and private placement warrants. The Sponsor Support Agreement also includes
covenants restricting transfers prior to Closing and customary representations and warranties of the parties.
At the same time, lock-up
agreements were entered with the Sponsor, the Seller, and certain other equity holders. These agreements restrict the sale or transfer
of Company common stock received in the Business Combination for specified periods following Closing, subject to customary early-release
conditions, including specified trading-price thresholds and underwriter consent in connection with future registered offerings. The
Lock-Up Agreements include standard exceptions for permitted transfers and establish procedures for legends, notice, and release timing
consistent with market practice for de-SPAC transactions.
Amended and Restated Registration
Rights Agreement
In connection with the Closing,
Pubco, SPAC, the Sponsor, the Seller, the Foundation, which are entities affiliated with the Avalanche blockchain ecosystem that hold
and manage AVAX tokens in connection with ecosystem development and strategic transaction, and certain other securityholders are expected
to enter into an amended and restated registration rights agreement. This agreement will provide the holders of Pubco common stock with
customary demand, piggyback and shelf registration rights to register their shares for resale, subject to standard limitations and issuer
suspension rights. The Amended and Restated Registration Rights Agreement also includes customary provisions relating to underwriting
participation, registration expenses, indemnification and coordination of sales in underwritten offerings, and will become effective
upon the Closing and will supersede SPAC’s existing registration rights agreement in its entirety.
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Contribution, Asset Purchase,
and Token Sale Agreements
At the same time, the Company,
Pubco the Seller, and the Foundation, entered into the Contribution Agreement. Under this agreement: (a) the Foundation agreed to
sell a minimum of $200 million of AVAX tokens on a pre-discount basis to the Company for, at a 60% discount, (i) $50 million or
USDC and (ii) $30 million in the form of 3,000,000 shares of Pubco. In addition, the Seller agreed to contribute 1,960,040 AVAX
tokens to the Company in exchange for 5,805,638 membership units (the “Seller Units”) (the “Dragonfly Contribution”)
(Collectively the “Transactions”).
During October and November 2025,
the Company received 7,317,965 AVAX tokens from the Foundation under the TSA in exchange for 34.5 million USDC and $15.5 million in cash
and recorded a token sale liability of $15.2 million and $40.0 million related to equity to be issued at the Closing as of March 31,
2026 and December 31, 2025, respectively.
The Contribution Agreement
includes certain restrictions and rights related to future sales of AVAX tokens. These provisions include an exclusivity period during
which the Foundation agreed not to sell AVAX in competing transactions, as well as rights of first refusal that give the Company priority
to purchase AVAX offered for sale during specified periods. The agreements also provide the Foundation with certain governance rights,
including the right to designate a board member of the Company for a defined period following the Closing.
AVAX tokens delivered under
the TSA are subject to contractual transfer restrictions that limit the Company’s ability to sell or otherwise transfer the tokens for
up to five years. In addition, if following the Closing the Foundation’s ownership of Pubco Class A common stock were to exceed
specified thresholds, the Foundation may request to exchange shares for pre-funded warrants convertible, at the Foundation’s request,
into Pubco Class A Stock on a one-to-one basis. These restrictions and exchange features are intended to limit voting concentration
and manage the orderly sale of tokens and equity interests.
Contingent Transaction
Fees
The Company signed agreements
during September 2025 with certain third-party service providers and deal advisors for fees payable upon the closing of the Business
Combination. One agreement provides for an advisory fee of 5.5% of the aggregate cash proceeds from the sale of securities to be payable
at closing. Another agreement provides for an M&A advisory fee of $2,750,000, also payable at closing. These fees relate to services
provided by external vendors and transaction brokers in connection with the Closing. No amounts were incurred or payable as of March 31,
2026 and December 31, 2025.
Subscription Agreements
Pursuant to the terms of the
subscription agreements, the AVAX tokens contributed by investors are subject to the consummation of the Company’s proposed business
combination transaction. If the business combination does not close, the Company is obligated to return the AVAX tokens to the investors
in accordance with the terms of the subscription agreements. Accordingly, the related subscription receivable and corresponding member
interest issuance remain subject to the completion of the business combination.
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First Amendment to the
Business Combination Agreement
On January 13, 2026,
MLAC, Pubco, the Pubco Subsidiaries, the Company, Seller Related Parties and Astral Horizon L.P., a Delaware limited partnership (“Astral”)
entered into the First Amendment, and pursuant to which, among other things, the parties thereto agree that:
(i) Astral and the Funds
were added as parties to the Agreement and they agreed to be bound by, and to comply with, the terms and conditions of the BCA, in the
same manner as if they were original signatories thereto;
(ii) the Company Units
held by the Funds are to be treated as the Company Units held by Seller such that, as a result of the Company Merger, the Funds will
receive one (1) Pubco Class A Stock and one (1) Pubco Class B Stock for each Company Unit held by the Funds;
(iii) the Additional
Merger Consideration Shares to be issued at Closing will (i) be issued to Astral rather than to Seller as provided in the original
version of the Agreement, and (ii) consist of 4,000,000 shares of Pubco Class A Stock only, with no Pubco Class B Stock
to be allotted as Additional Consideration because Pubco Class B Stock will be issued to Seller Related Parties;
(iv) the Representations
and Warranties of the Seller are to be made severally but not jointly by the Seller Related Parties and Astral rather than solely by
Seller as provided in the original version of the Agreement;
(v) certain references
to the Seller (as specified in the First Amendment) shall be considered as references to the Seller Related Parties, Astral or the Seller
Related Parties and/or Astral, as applicable;
(vi) Exhibit E (Terms
of Pubco Stock) to the original version of the Agreement be deleted in its entirety and replaced by the new Exhibit E, in the form
attached to the First Amendment.
(vii) The First Amendment
is effective as of October 1, 2025.
Second Amendment to the
Business Combination Agreement
On March 17, 2026, MLAC,
Pubco, the Pubco Subsidiaries, the Company, the Seller Related Parties, and Astral entered into Amendment No. 2 of the Agreement,
pursuant to which the parties agreed to postpone the issuance by Pubco to Astral of the 2,000,000 shares of Pubco Class A Stock
by thirty (30) calendar days following the closing date of the Agreement.
Note 10. Subsequent Events
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date through May 29, 2026, the date these unaudited condensed financial
statements were issued. Based on this review, the Company did not identify any subsequent events that would have required adjustment
or disclosure in the unaudited condensed financial statements, other than those discussed below.
Collateralized Loan Facility
Subsequent to March 31,
2026, the Company entered into a loan agreement pursuant to which it may borrow up to $25.0 million, collateralized by certain of the
Company’s Avalanche (AVAX) digital asset holdings. As of the date of this filing, the Company has not drawn any amounts under the facility.
The loan is open-term with no stated maturity date and bears interest at 7.0% per annum on any outstanding borrowings.
Under the terms of the agreement,
upon any draw on the facility, the Company would be required to pledge AVAX tokens as collateral, the fair value of which must meet or
exceed specified collateral coverage ratios at the time of borrowing and on an ongoing basis. In the event that the fair value of the
pledged AVAX declines below certain maintenance thresholds, the Company may be required to post additional collateral or repay a portion
of the outstanding balance to restore the required coverage ratio. A further decline below a liquidation threshold could result in the
lender liquidating a portion or all of the pledged collateral to satisfy the outstanding obligation. Either party may terminate the agreement
in accordance with its terms, and any outstanding principal and accrued interest would become due upon termination.
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