AVAT 8-K
Avalanche Treasury Corp (AVAT)
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
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 | ||
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).
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“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.
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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.
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| 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.
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| 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.
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| 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. |
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| 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.
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| 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
[***]
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 | |||
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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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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