Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

Explanatory Note:

On June 11, 2026, the Company completed its business combination with MLAC pursuant to a double-dummy merger structure. The business combination, consummated on June 11, 2026, was accounted for as a reverse recapitalization under ASC 805-40. As part of the transaction, both the Company and MLAC became wholly owned subsidiaries of a newly formed parent company, Avalanche Treasury Corporation ("Pubco"). This Quarterly Report on Form 10-Q is filed by Pubco under its current name and CIK. However, because the business combination closed after the period covered by this report (March 31, 2026), the financial statements and related disclosures presented herein reflect the historical operations of the Company and Pubco as stand-alone companies. MLAC filed its Form 10-Q on May 15, 2026. The operations of the Company and MLAC will be included in the Company's consolidated financial statements beginning with the Form 10-Q for the period ending June 30, 2026.

For purposes of Management's Discussion and Analysis, the references to "we", "us", "our" or "the Company", refers to the combined entities of the Company, Pubco and MLAC.

Overview

The Company is a newly formed operating company focused exclusively on business lines relating to Avalanche and AVAX. Our strategy is to offer public-market investors a differentiated, capital-efficient way to gain exposure to Avalanche and AVAX through (i) the targeted accumulation of AVAX; (ii) tailored treasury management geared towards staking yield and other asset management levers intended to compound AVAX per share over time and (iii) the further ecosystem integration including the potential provision of Avalanche-focused infrastructure, such as the operation of validator nodes, L1 activation and other corporate development activities, that we believe will expand our exposure to Avalanche. In connection with the consummation of the Business Combination, the Company merged with and into Avalanche Company Merger Sub LLC, a Delaware limited liability company ("Company Merger Sub"), with the Company continuing as the surviving subsidiary and a wholly owned subsidiary of Pubco.

Business Combination with MLAC

On October 1, 2025, MLAC, Pubco, Avalanche SPAC Merger Sub LLC, a Delaware limited liability company ("MLAC Merger Sub"), Company Merger Sub, the Company and the Seller entered into the Business Combination Agreement. In connection with the closing of the Business Combination Agreement, on June 11, 2026, (i) MLAC domesticated by way of continuation out of its jurisdiction of incorporation from the Cayman Islands into the State of Delaware (the "Domestication"), (b) MLAC Merger Sub merged with and into MLAC, with MLAC surviving the MLAC Merger as a wholly owned subsidiary of Pubco, and (c) Company Merger Sub merged with and into the Company (the "Acquisition Merger" and, together with the MLAC Merger, the "Mergers", and together with the Domestication and all other transactions contemplated by the Business Combination Agreement, the "Business Combination"), with the Company surviving the Acquisition Merger as a wholly owned subsidiary of Pubco.

Concurrently with the signing of the Business Combination Agreement, on October 1, 2025, Pubco, Company and MLAC entered into the Company Unit Subscription Agreements with the company unit investors ("Company Unit Investors"), pursuant to which the Company Unit Investors purchased, payable in cash, USDC or AVAX, and the Company issued and sold, approximately $216 million worth of Company Class A units ("Company Units") at a price of $10.00 per Company Unit the ("Company Unit Subscription"). At Closing, each Company Unit held by Company Unit Investors converted automatically into one share of non-voting Class A common stock, par value $0.01 per share, of Pubco ("Pubco Class A Stock").

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Concurrently with the execution of the Business Combination Agreement, the Seller, Company, 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 the Contribution Agreement, pursuant to which, (a) the Foundation sold a minimum of $200 million of AVAX tokens on a pre-discount basis to Company and (b) the Seller contributed, directly and indirectly through certain related funds, 1,960,040 AVAX tokens to the Company in exchange for 5,805,638 Company Units.

Concurrently with the execution of the Business Combination Agreement and the Contribution Agreement, the Company, Pubco, Avalanche BVI and Avalanche Cayman entered into the Token Sales Agreement, pursuant to which, in October 2025, the Foundation sold a minimum of $200 million of AVAX tokens on a pre-discount basis to the Company in exchange for, at a 60% discount, (i) $50 million in cash or USDC and (ii) $30 million in the form of up to 3,000,000 shares of Pubco Class A Stock.

Recent Developments

On March 20, 2026, the Company 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 the Company certain digital currency or cash (dependent on the loaned asset specified in the relevant executed loan term sheet) and the Company 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 the Company may repay and Lender may recall the loan at any time, or term loans with a predetermined maturity date.

On May 29, 2026, the Company and the Lender executed a loan term sheet, pursuant to which the Company agreed to borrow from the Lender, and the Lender agreed to lend to the Company, 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, the Company pledged 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, the Company and the Lender. On the date of filing of this Form 10-Q, the Company had pledged approximately 7.8 million AVAX.

Principal Factors Affecting Our Results of Operations and Material Trends

The Company's future results are expected to be impacted by the highly volatile nature of AVAX's valuation, as well as conditions and trends relating to demand for AVAX or other digital assets. We also expect the Company's future results to be impacted by the successful execution of our business strategies, such as our AVAX acquisition strategy, our support of L1s and validator resources, our fostering of partnerships with respect to our AVAX financial and technological infrastructure solutions, regulatory and technical developments surrounding AVAX and cryptocurrencies, the rapid evolution of the AVAX technology infrastructure landscape and our ability to innovate in and add value to the AVAX ecosystem. The primary factors that are expected to impact our results and present significant opportunities, as well as pose risks and challenges, are described below. We believe that our performance and future success depend on the factors discussed below and those mentioned in the section titled "Risk Factors" and elsewhere in the Proxy Statement/Prospectus and in the Form 8-K filed following the closing of the business combination that includes comprehensive disclosure regarding the combined company (the "Super 8-K").

The following macroeconomic factors and trends as they relate to AVAX may specifically impact our business:

Plan of Operations and Expected Revenue Sources

The Company anticipates revenue generation through the following key business lines in this initial period following the Business Combination:

Results of Operations (Predecessor)

The following table sets forth our condensed statement of operations for the three months ended March 31, 2026:

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Staking Revenue, Net of Fees

Staking revenue, net of fees, for the three months ended March 31, 2026, was $2.1 million. 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.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related costs, professional fees, and other corporate overhead expenses. For the three months ended March 31, 2026, general and administrative expenses totaled $1.9 million. Personnel-related costs included $0.6 million of salary and bonus expense. Professional fees totaled $1.0 million and were primarily attributable to legal, accounting and auditing, advisory, and other professional services, incurred in part due to the Transaction and costs associated with being a public company. The remaining general and administrative expenses consisted of insurance, technology, facilities, and other corporate costs incurred during the period.

Changes in Fair Value of Digital Assets

An unrealized loss of $46.2 million was recognized during the three months ended March 31, 2026. The unrealized loss is driven by the unfavorable changes in digital asset fair value from December 31, 2025 to March 31, 2026.

Realized Loss on Digital Assets

A realized loss of $0.5 million was recognized during the three months ended March 31, 2026. The realized loss is primarily driven by sales of digital assets at price lower than the balance sheet fair value.

Impairment of Digital Assets

The Company recognized $5.1 million of digital asset impairment during the three months ended March 31, 2026 due to the change in fair value of stAVAX tokens held.

Other Income

Other income, net for the three months ended March 31, 2026, was $24.8 million, primarily driven by changes in fair value of token sale liability. We recognized an unrealized gain of $24.8 million related to changes in the token sale liability. Other income and interest income were less than $0.1 million.

Net Loss

Net loss for the three months ended March 31, 2026, was approximately $26.8 million, primarily driven by an unrealized loss of $46.2 million from changes in the fair value of digital assets, $5.1 million of digital asset impairment, and a $0.5 million realized loss on digital asset sales. These losses were partially offset by $24.8 million of other income from an unrealized gain on the token sale liability and $2.1 million of staking revenue, net of fees. General and administrative expenses of $1.9 million also contributed to the net loss.

Results of Operations (Successor)

From December 31, 2025 through March 31, 2026, Pubco did not have any operating history and had not yet generated any revenue. For the three months ended March 31, 2026, Pubco had a net loss of $139,635, which consists primarily of general and administrative expenses.

Risks and Uncertainties Associated with Future Results of Operations

We have a very limited operating history, which makes it difficult to accurately forecast our future results of operations, and which is subject to a number of uncertainties, including our ability to grow the value of our AVAX holdings, develop and implement our AVAX-focused infrastructure strategy and the market size and growth opportunities in each of our anticipated lines of business.

Our ability to generate cash flow initially will largely be dependent on our ability to raise capital to acquire additional AVAX, secure participation and contribution from AVAX holders through in-kind investments, successfully apply yield generation strategies, financial trading strategies and risk-management techniques in our active management of our AVAX holdings and develop or enter into partnerships for end-to-end AVAX-focused financial and technology infrastructure. Our business strategy may not be realized as quickly as planned, or even at all. Further, even if we achieve growth in the near term, in future periods that growth could slow or decline for a number of reasons, including, but not limited to, AVAX volatility, increased competition, digital assets that compete with and may result in a decline in utilization of AVAX or replace AVAX, our inability to develop, improve or effectively scale AVAX acquisition or to develop or enter into partnerships for AVAX-related infrastructure, government regulation or our failure, for any reason, to continue to take advantage of any growth opportunities. For additional information see the "Risk Factors" section of the Proxy Statement/Prospectus and the "Risk Factors" section of the Super 8-K.

Liquidity and Capital Resources

Overview

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 because of additional costs and expenses related to the business operations and the development of market and strategic relationships with other businesses.

As of March 31, 2026, the Company had cash of approximately $1.2 million and a working capital deficit of $9.1 million.

As of March 31, 2026, Pubco had a working capital deficit of $0.3 million.

For the three months ended March 31, 2026, the Company reported a net loss of approximately $26.8 million. This net loss was primarily driven by factors that are inherently volatile and subject to market conditions, including:

For the three months ended March 31, 2026, Pubco reported a net loss of approximately $0.1 million, which was driven by general and administrative expenses.

Because digital assets and derivative instruments are measured at fair value, our results of operations may fluctuate significantly from period to period.

We do not maintain any committed external sources of liquidity, including credit facilities or other financing arrangements. Our liquidity is derived primarily from cash on hand.

In connection with the Company and Pubco'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, has materially improved as a result of (1) the successful completion of the Business Combination and (2) the receipt of net loan proceeds at Closing. These events directly address the conditions previously identified as raising substantial doubt including the Company's liquidity condition, recurring losses since inception and lack of committed funding should the Business Combination not be consummated.

As a result of the closing of the Business Combination, the Company received access to the capital and resources associated with the transaction, which management believes will support the Company's operations and liquidity needs for at least the next twelve months from the date of the filing of this Form 10-Q.

Accordingly, management concluded that the Company's primary plan to alleviate substantial doubt, completion of the Business Combination, has now occurred. The uncertainties previously identified, including the risk that the necessary shareholder approvals will be obtained and that the transaction might not be completed, have been resolved. Based on the improved liquidity profile and the removal of the previously identified uncertainties, management has concluded that substantial doubt about the Company's ability to continue as a going concern is alleviated for the twelve-month look-forward period from the date of the filing of this Form 10-Q.

Cash Flows (Predecessor)

The following table summarizes the Company's cash flows for the periods indicated:

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Cash Flows from Operating Activities

Net cash used in operating activities for the three months ended March 31, 2026 was $1,059,087 and is primarily related to the net loss of $26.8 million, partially offset by a $24.8 million gain related to the change in fair value of the token sale liability, a $5.1 million impairment charge associated with stAVAX digital assets, a $46.2 million loss from changes in the fair value of AVAX digital assets, and a $0.5 million realized loss on the disposition of AVAX tokens.

Additional non-cash adjustments included digital assets received through staking rewards and USDC received and recognized as other income.

Cash Flows from Investing Activities

Net cash provided by investing activities for the three months ended March 31, 2026, was $1.0 million and was driven by proceeds from the disposal of USDC.

Cash Flows from Financing Activities

Net cash used in financing activities for the three months ended March 31, 2026 was $477,663 and is primarily related to deferred transaction costs incurred in connection with the planned business combination transaction and related capital markets activities.

Cash Flows (Successor)

The following table summarizes Pubco's cash flows for the periods indicated:

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Cash Flows from Operating Activities

Net cash from operating activities for the three months ended March 31, 2026, was $0. Operating cash flows were primarily driven by a net loss of $0.1 million, which was fully offset by changes in working capital, including increases in accounts payable and accrued expenses, accrued legal fees, and amounts due to a related party, partially offset by deferred transaction costs

Cash Flows from Investing Activities

There were no cash flows from investing activities for the three months ended March 31, 2026.

Cash Flows from Financing Activities

There were no cash flows from financing activities for the three months ended March 31, 2026.

Critical Accounting Estimates

Our financial statements and the accompanying notes thereto included in this Form 10-Q are prepared in accordance with U.S. GAAP and pursuant to the accounting rules and regulations of the SEC. The preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, costs and expenses and related disclosures. We base our estimates on assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. There are items within our unaudited condensed consolidated financial statements that require estimation but are not deemed critical, as defined above

Off-Balance Sheet Arrangements

Other than as otherwise described in this Form 10-Q, we do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.

Recent Accounting Pronouncements

See "Recent Accounting Pronouncements" described in Note 3 of our unaudited condensed financial statements included elsewhere in this Form 10-Q.

Internal Control Over Financial Reporting

As a privately held company Avalanche Treasury Company, LLC (the "Predecessor"), we were not required to assess and conclude on the effectiveness of our internal control over financial reporting in a manner that meets the standards of publicly traded companies required by Section 404 of the Sarbanes-Oxley Act. However, during the preparation of our financial statements, we identified a material weakness in our internal control over financial reporting. The PCAOB defines a material weakness as "a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis."

We did not design or maintain an effective control environment commensurate with the financial reporting requirements applicable to U.S. listed companies, including adequate business processes, systems, personnel and related internal controls. As a result, we identified the following material weakness:

We recognize that the material weakness described above could result in misstatements to one or more account balances or disclosures, including substantially all financial statement accounts and disclosures, that would result in a material misstatement to our annual or interim consolidated financial statements that would not be prevented or detected on a timely basis.

We are in the process of implementing measures designed to improve our internal control over financial reporting and remediate the control deficiencies that led to the material weakness:

We will not be able to fully remediate this material weakness until the remediation plan described above has been fully implemented, the applicable controls have been operating for a sufficient period of time, and we have concluded, through testing, that the newly implemented and enhanced controls are operating effectively. We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness in our internal control over financial reporting or that it will prevent or avoid potential future material weaknesses. In addition, our current internal control over financial reporting and disclosure controls and procedures, and any new internal control over financial reporting and disclosure controls and procedures that we develop, may become inadequate because of changes in our business, operations and other factors, some of which may be beyond our control. While we will work to remediate the material weakness as quickly and efficiently as possible, we cannot at this time provide an expected timeline in connection with any remediation plan. These remediation measures may be time-consuming and costly and might place significant demands on our financial and operational resources.

As permitted under the U.S. securities laws, neither we nor our independent registered public accounting firm have performed or are required to perform a formal evaluation of the effectiveness of our internal control over financial reporting pursuant to Section 404. It is possible that, had such an evaluation been performed, additional material weaknesses or significant deficiencies may have been identified, and we may identify further material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain effective internal control over financial reporting could result in misstatements in our financial statements that could lead to a restatement of our financial statements, cause us to fail to meet our reporting obligations or adversely affect investor confidence in our reported financial and other information, which may result in a decline in the market price of our ordinary shares.

See the section titled "Risk Factors - We have identified a material weakness in our internal control over financial reporting. If remediation of this material weakness is not effective, if we experience additional material weaknesses, or if we otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately report their financial condition or results of operations." in the "Risk Factors" section of the Proxy Statement/Prospectus and the "Risk Factors" section of the Super 8-K.

Emerging Growth Company Status

The Company is an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as to those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these unaudited condensed financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.