Note 3. Reverse Recapitalization.

As discussed in Note 1, “Organization and Description of the Business”, the Business Combination was consummated on June 11, 2026, which for accounting purposes, was treated as the equivalent of the Company issuing stock for the net assets of MLAC, accompanied by a recapitalization. Under this method of accounting, MLAC was treated as the acquired company for financial accounting and reporting purposes under GAAP.

Transaction proceeds

Upon the closing of the Business Combination, the Company received gross proceeds of $1.6 million from the Business Combination offset by total transaction costs of $1.6 million. The following table reconciles the elements of the Business Combination to the condensed consolidated statement of cash flows and the condensed consolidated statement of changes in stockholders’ equity for the six months ended June 30, 2026:

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The number of shares of Common Stock issued immediately following the consummation of the Business Combination were as follows:

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MLAC Rights

Upon consummation of the Business Combination, each outstanding right automatically converted into one-tenth (1/10) of one share of the Company’s Class A common stock. No fractional shares were issued in connection with the conversion of the rights, and the rights ceased to be outstanding following the Business Combination.

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The table below summarizes the Company Units and corresponding PubCo common stock outstanding following the Business Combination:

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Transaction Overview

On June 11, 2026 (the “Closing Date”), Avalanche Treasury Corporation consummated the transactions contemplated by the Agreement. The Business Combination included the domestication of MLAC, the MLAC Merger, the Company Merger and the other related transactions contemplated by the Agreement, including the Company Unit Subscription, the Foundation Transaction and the Dragonfly Contribution (each defined below).

Domestication and Merger Steps

On the Closing Date, MLAC domesticated by way of continuation from the Cayman Islands to the State of Delaware (the “Domestication”). Following the Domestication, Avalanche SPAC Merger Sub LLC (“MLAC Merger Sub”) merged with and into MLAC, with MLAC surviving as a wholly owned subsidiary of the Company (the “MLAC Merger”). Company Merger Sub also merged with and into Avalanche Treasury Company, LLC, with Avalanche Treasury Company, LLC surviving as a wholly owned subsidiary of the Company (the “Company Merger” and, together with the MLAC Merger, the “Mergers”).

Consideration and Exchange Mechanics

The Business Combination and related transactions included the following consideration and exchange mechanics. Legacy Company Units converted on a one-for-one basis into shares of the Company’s common stock, as described below:

Company Unit Subscription, Token Sale and Contribution

Concurrently with the execution of the Agreement, the Company, Avalanche Treasury Company, LLC and MLAC entered into Company Unit Subscription Agreements pursuant to which investors purchased approximately $216 million of Company Units at $10.00 per Company Unit, payable in cash, USDC or AVAX (the “Company Unit Subscription”). At Closing, each Company Unit held by the Company Unit Investors converted automatically into one share of non-voting Class A common stock, par value $0.01 per share, of the Company.

The Business Combination also included (i) the contribution by Dragonfly, directly and indirectly through certain related funds, of 1,960,040 AVAX tokens to Avalanche Treasury Company, LLC in exchange for 5,805,638 Company Units (the “Dragonfly Contribution”) and (ii) the sale by Avalanche BVI and Avalanche Cayman (together, the “Foundation”) of AVAX tokens to Avalanche Treasury Company, LLC pursuant to the Token Sale Agreement dated October 1, 2025 (the “Foundation Transaction”).

Transactions costs

For the three and six months ended June 30, 2026, transaction costs incurred within the condensed consolidated statements of operations were as follows:

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Contingent Consideration

In connection with the Business Combination Agreement and the Sponsor Support Agreement, the Company entered into earn-out arrangements with certain former equity holders of Astral (the “Astral Earn-out”) and the sponsor (the “Sponsor Earn-out,” and together with the Astral Earn-out, the “Earn-out Arrangements”). The Earn-out Arrangements provide for the issuance or release of shares of the Company’s common stock upon achievement of specified market-price thresholds following the Business Combination and include provisions that may accelerate issuance or release upon certain change-in-control events.

The Earn-out Arrangements were negotiated in connection with the Business Combination and do not represent settlement of pre-existing relationships, compensation for post-combination services or reimbursement of acquisition-related costs. Accordingly, the Company determined that the Earn-out Arrangements represent contingent consideration issued in connection with the Business Combination.

The Company evaluated the Earn-out Arrangements under ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity. Because certain settlement provisions may result in settlement outcomes that are not indexed solely to the Company’s own stock, the Earn-out Arrangements do not meet the criteria for equity classification under ASC 815-40 and are therefore classified as liabilities.

The Astral Earnout Shares, together with any shares received upon equitable adjustment of the Astral Earnout Shares, shall be subject to the Astral Transfer at the end of the Earnout Period in the event that not all of the Triggering Events are achieved by the Company during the Earnout Period.

The Astral Earnout Shares shall vest, shall no longer be subject to the Astral Transfer and shall be released from the Astral Escrow Account to Astral, in the amounts specified below, upon the Company meeting the price milestones specified below:

Each Triggering Event shall only occur once, if at all, and all Astral Earnout Shares not released by the end of the Earnout Period will be transferred to the Company through an Astral Transfer, in each case as set forth in the Business Combination Agreement.

In addition, 1,600,000 Sponsor Earnout Shares have been deposited into an escrow account with Continental Stock Transfer and Trust Company and will be released in tranches as provided in the Sponsor Support Agreement and the Sponsor Escrow Agreement. The Sponsor agreed that all of the Sponsor Earnout Shares, together with any shares received upon equitable adjustment of the Sponsor Earnout Shares, shall be subject to the Sponsor Transfer at the end of the Earnout Period in the event that not all of the Triggering Events are achieved by the Company.

The Sponsor Earnout Shares shall vest, no longer be subject to the Sponsor Transfer and shall be released from the escrow account to the Sponsor, in the amounts specified below, upon the Company meeting the price milestones specified below:

The Earn-out Arrangements were initially recognized at fair value as of the Closing Date in accordance with ASC 820, Fair Value Measurement. The fair value measurement considers the contractual terms of the arrangements, including applicable stock-price thresholds, expected volatility of the Company’s common stock, expected term, risk-free interest rate and the probability and timing of potential settlement events, as applicable. The earn-out contingent consideration was valued using a Monte Carlo simulation based on a Geometric Brownian Motion in a risk-neutral framework. Due to the use of significant unobservable inputs, the Earn-out Arrangements are classified within Level 3 of the fair value hierarchy.

Astral and the Company executed a side-letter agreement on August 13, 2026 and agreed that the issuance of the 2,000,000 Astral Post-Closing Shares shall be delivered on a date identified by Astral but in any event by September 11, 2026 (see Note 13). The post-closing liability associated with those 2,000,000 Astral shares were initially valued at $1.85 per share, or approximately $3.7 million.

The Company remeasures the Earn-out Arrangements at fair value at each reporting date until the respective obligations are settled, with changes in fair value recognized in earnings in the period in which they occur. Upon settlement, the related liability is derecognized, with any difference between its carrying amount immediately prior to settlement and the settlement value recognized in earnings.

The following table presents a reconciliation of the Company’s Earn-out Arrangements measured at fair value for the six months ended June 30, 2026:

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As of June 30, 2026, the Earn-out Arrangements shares of 3,600,000 are are issued in Escrow with the transfer agent but not outstanding.

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Accounting Treatment

The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP, with Avalanche Treasury Company, LLC treated as the accounting acquirer and MLAC treated as the acquired company for financial accounting and reporting purposes. Because MLAC did not meet the definition of a business under ASC 805, Business Combinations, the transaction was not accounted for as a business combination using acquisition accounting.

Accordingly, the consolidated financial statements of the combined company represent a continuation of the financial statements of Avalanche Treasury Company, LLC. The transaction was treated as the equivalent of Avalanche Treasury Company, LLC issuing equity for the net assets of MLAC, accompanied by a recapitalization. The net assets of MLAC were recorded at historical cost, and no goodwill or other intangible assets were recognized as a result of the Business Combination.

In connection with the reverse recapitalization, the historical equity structure of Avalanche Treasury Company, LLC was recast to reflect the legal capital structure of the combined company following the Business Combination.

Earnings Per Share

As a result of the reverse recapitalization, the Company’s historical equity structure was recast to reflect the Company’s common stock structure, and weighted-average shares outstanding for the periods presented were calculated using the post-recapitalization share structure, applying the applicable exchange mechanics to the legacy equity interests of Avalanche Treasury Company, LLC. Pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statement of operations were based on the number of combined company shares outstanding, assuming the Business Combination occurred on January 1, 2025.