UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended May 31, 2016
o	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from __________ to __________
	Commission File Number: 333-179028

x	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended August 31, 2016

o	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________

Commission File Number: 333-179028

Avalanche International, Corp.

(Exact name of registrant as specified in its charter)

Nevada	38-3841757
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

5940 S. Rainbow Blvd, Las Vegas, NV 89118

(Address of principal executive offices)

(888) 863-9490
(Registrant’s telephone number)


	(Former name, former address and former fiscal year, if changed since last report)

Indicated by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days o Yes x No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

State the number of shares outstanding of each of the issuer’s ~~classes~~ classes of common stock, as of the latest practicable date: 5,529,200 common shares as of ~~December~~March 520, ~~2018~~2019.

	TABLE OF CONTENTS	Page
PART I - FINANCIAL INFORMATION
Item 1:	Consolidated Financial Statements	F-1
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	7
Item 4:	Controls and Procedures	7
PART II - OTHER INFORMATION
Item 1:	Legal Proceedings	89
Item 1A:	Risk Factors	89
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	89
Item 3:	Defaults Upon Senior Securities	910
Item 4:	Mine Safety Disclosures	910
Item 5:	Other Information	910
Item 6:	Exhibits	1011

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our consolidated financial statements included in this Form 10-Q are as follows:

Condensed Consolidated Balance Sheets as of May 31, 2016 (unaudited) and November 30, 2015	F-1
Condensed Consolidated Balance Sheets as of August 31, 2016 (unaudited) and November 30, 2015	F-1
Condensed Consolidated Statements of Operations for the Three and Six Months ended May 31, 2016 (unaudited) and 2015 (unaudited)	F-2
Condensed Consolidated Statements of Operations for the Three and Nine Months ended August 31, 2016 (unaudited) and 2015 (unaudited)	F-2
Condensed Consolidated Statements of Cash Flows for the Three and Six Months ended May 31, 2016 (unaudited) and 2015 (unaudited)	F-3 – F-4
Condensed Consolidated Statements of Cash Flows for the Nine Months ended August 31, 2016 (unaudited) and 2015 (unaudited)	F-3 – F-4
Notes to Consolidated Financial Statements (unaudited)	F-5 – F-2322

Table of Contents

Avalanche International, Corp. and Subsidiaries

Condensed Consolidated Balance Sheets

	May 31, 2016			November 30, 2015
	August 31, 2016			November 30, 2015
	(Unaudited)
Assets:
Current assets:
Cash	$	~~2,562~~33		$	405
Accounts receivable		5,438			-
Accounts receivable, related party		17,222			17,222
Notes receivable		103,659			-
Other current assets		16,361			705
Other current assets		8,078			705
Total current assets		39,054			18,332
Total current assets		131,521			18,332
Notes receivable, net of discount of $15,247		309,753			-
Notes receivable, net of discount of $53,159		271,841			-
Total assets	$	348,807		$	18,332
Total assets	$	403,362		$	18,332
Liabilities and Stockholders' Deficit:
Current liabilities:
Accounts payable and accrued expenses	$	~~145~~159,~~519~~371		$	105,137
Accounts payable and accrued expenses, related party		~~198~~118,~~209~~283			63,699
Accrued interest on convertible and promissory notes payable		~~213~~244,~~165~~176			71,867
Derivative warrant liabilities		2413,900			-
Convertible notes payable, net of discount of $33,650
Convertible notes payable, net of discount of $22,915
and $202,325, respectively		1,~~928~~612,~~334~~304			1,729,987
Notes payable, net of discount of $68,369 and
Notes payable, net of discount of $22,645 and
and $19,294, respectively		~~510~~467,~~706~~355			135,031
Notes payable, related party, net of discount of $2,800		38,137			-
Notes payable, related party, net of discount of $197		37,978			-
Total current liabilities		32,~~058~~653,~~970~~367			2,105,721
Convertible notes payable, net of discount of $165,683		206,053			-
Convertible notes payable, net of discount of $251,542		246,150			-
Derivative warrant liabilities		82,~~054~~786			-
Total liabilities		32,~~273~~902,~~077~~303			2,105,721
Stockholders' Deficit:
Preferred stock, $0.001 par value: 10,000,000 shares authorized;		-			-
Class A Convertible Preferred Stock, $20 stated value
per share: 50,000 shares designated; nil shares issued
and outstanding at May 31, 2016 and November 30, 2015		-			-
and outstanding at August 31, 2016 and November 30, 2015		-			-
Class B Convertible Preferred Stock, $50 stated value
per share: 100,000 shares designated; nil shares issued
and outstanding at May 31, 2016 and November 30, 2015		-			-
and outstanding at August 31, 2016 and November 30, 2015		-			-
Common stock, $0.001 par value: 75,000,000 shares authorized;
6,842,254 and 6,309,635 shares issued and outstanding
at May 31, 2016 and November 30, 2015, respectively		6,843			6,310
at August 31, 2016 and November 30, 2015, respectively		6,843			6,310
Additional paid-in capital		1,326,633			1,119,118
Accumulated deficit		(43,~~203~~886,~~191~~972	)		(3,212,817	)
Total stockholders' deficit		(2,~~869~~553,~~715~~496	)		(2,087,389	)
Total liabilities and stockholders' deficit	$	~~403~~348,~~362~~807		$	18,332

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

F-1

Table of Contents

Avalanche International, Corp. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

	For the Three						For the ~~Six~~Nine
	Months Ended May 31,						Months Ended May 31,
	Months Ended August 31,						Months Ended August 31,
	2016			2015			2016			2015
Revenue:
Revenue - related party	$	-160,000		$	~~23,547~~-		$	-160,000		$	3334,~~848~~017
Revenue		-5,438			~~120~~169			-5,438			4,814
Total Revenue		-165,438			~~23,667~~169			-165,438			38,~~662~~831
Cost of revenue		-			(~~20,758~~258	)		-			(29,~~292~~550	)
Gross profit		-165,438			~~2,909~~(89	)		-165,438			9,~~370~~281
Operating expenses:
General and administrative expenses		~~196~~207,~~225~~689			~~313~~488,~~005~~466			~~371~~579,~~995~~685			~~499~~1,~~835~~057,315
Total operating expenses		~~196~~207,~~225~~689			~~313~~488,~~005~~466			~~371~~579,~~995~~685			~~499~~1,~~835~~057,315
Loss from operations		(~~196~~42,~~225~~251	)		(~~310~~488,~~096~~555	)		(~~371~~414,~~995~~247	)		(~~490~~1,~~465~~048,034	)
Other income (expense):
Interest income		4251,~~268~~019			-6,074			4899,~~708~~727			-6,074
Interest expense, including penalties		(109,351	)		(68,669	)		(192,671	)		(79,869	)
Interest expense, including default penalties		(59,119	)		(28,208	)		(251,789	)		(39,063	)
Interest expense - debt discount		(118,351	)		(84,178	)		(258,867	)		(84,178	)
Interest expense – accretion of debt discount		(77,401	)		(164,685	)		(336,269	)		(248,863	)
Loss on issuance of convertible debt		(68,522	)		(301,309	)		(71,061	)		(301,309	)
Excess interest on issuance of convertible debt		(7,614	)		(55,093	)		(78,675	)		(356,402	)
Loss on conversion of convertible debt		-			-			(154,694	)		-
Change in fair value of bifurcated
embedded conversion options and
derivatives and warrant liabilities		451,586			(2,968	)		461,792			179,808
derivative warrant liabilities		(231,937	)		182,776			10,206			182,776
Total other income (expense), net		358,471			(244,880	)		(259,908	)		(458,446	)
Total other expense, net		(485,893	)		(271,380	)		(618,379	)		(282,580	)
Net income (loss) available to common shareholders	$	316,220		$	(733,435	)	$	(674,155	)	$	(1,506,480	)
Net loss		(682,118	)		(581,476	)		(990,374	)		(773,045	)
Basic net income (loss) per share	$	0.05		$	(0.13	)	$	(0.10	)	$	(0.28	)
Preferred dividends		-			-			-			-
Diluted net income (loss) per share	$	0.00		$	(0.13	)	$	(0.10	)	$	(0.28	)
Net loss available to common shareholders	$	(682,118	)	$	(581,476	)	$	(990,374	)	$	(773,045	)
Basic and diluted net loss per share	$	(0.10	)	$	(0.11	)	$	(0.15	)	$	(0.14	)
Weighted average shares outstanding,
basic and diluted		6,842,254			5,451,384			6,680,701			5,336,296
Basic		6,942,254			5,651,549			6,834,020			5,442,147
Diluted		18,929,825			5,651,549			6,834,020			5,442,147

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

F-2

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Avalanche International, Corp. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	For the Six Months Ended May 31,
	For the Nine Months Ended August 31,
	2016			2015
Cash Flows from Operating Activities:
Net loss	$	(~~990~~674,~~374~~155	)	$	(~~773~~1,~~045~~506,480	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization expense-loan fees		-			48,095
Interest income-amortization of original issue discount		(73,086	)		-
Interest income-amortization of original issue discount		(35,174	)		-
Interest expense on warrant issuance		26,250			-
Interest expense-debt discount		~~258~~336,~~867~~269			84248,~~178~~863
Loss on issuance of convertible debt		7178,~~061~~675			~~301~~356,~~309~~402
Loss on conversion of convertible debt		154,694			-
Change in fair value of bifurcated embedded conversion options and
derivative warrant liabilities		(10461,~~206~~792	)		(~~182~~179,~~776~~808	)
Stock-based compensation		20,000			~~251~~680,~~833~~487
Stock issued for loan fees		-			50,314
Changes in operating assets and liabilities:
Accounts receivable		-			(1617,~~919~~190	)
Other current assets		(7,373	)		-
Accounts receivable-related party		(5,438	)		-
Inventories		-			25,900
Other current assets		(15,656	)		-
Other assets		-			(179	)
Inventories		-			23,220
Accounts payable and accrued expenses		40,382			81,339
Other assets		-			8,860
Accounts payable and accrued expenses, related parties		109,510			(47,024	)
Accounts payable and accrued expenses		54,233			35,284
Accrued interest on convertible and promissory notes payable		162,322			6,610
Accounts payable and accrued expenses, related parties		29,584			(88,572	)
Net cash used in operating activities		(200,041	)		(170,365	)
Accrued interest on convertible and promissory notes payable		193,333			28,401
Net cash used in operating activities		(337,089	)		(410,533	)
Cash Flows from Investing Activities:
Purchase of note receivable		(345,000	)		(150,000	)
Payments made for note receivable		-			(12,798	)
Principal payments received on note receivable		19,674			-
Purchase of notes receivable		(345,000	)		(160,197	)
Net cash used in investing activities		(325,326	)		(150,000	)
Principal payments received on note receivable		48,333			-
Net cash used in investing activities		(296,667	)		(172,995	)
Cash Flows from Financing Activities:
Proceeds from issuance of common stock		5,000			2,000
Payments to related parties		-			(7,335	)
Proceeds from issuance of preferred stock		-			76,900
Proceeds from issuance of convertible notes		157,000			330,000
Advances from related parties		-			58,366
Payments of convertible notes payable		(5,000	)		-
Payments to related parties		-			(52,584	)
Proceeds from issuance of notes payable		355,000			-
Proceeds from issuance of convertible notes		307,000			508,000
Proceeds from issuance of notes payable, related party		51,625			-
Payments of convertible notes payable		(32,192	)		-
Payments of notes payable		(20,250	)		(5,000	)
Proceeds from issuance of notes payable		355,000			21,305
Payments of notes payable, related party		(15,851	)		-
Proceeds from issuance of notes payable, related party		52,745			-
Net cash provided by financing activities		527,524			319,665
Payments of notes payable		(34,325	)		(32,050	)
Net change in cash		2,157			(700	)
Payments of notes payable, related party		(19,844	)		-
Net cash provided by financing activities		633,384			581,937
Net change in cash		(372	)		(1,591	)
Cash - beginning of the period		405			2,247
Cash - ending of the period	$	~~2,562~~33		$	~~1,547~~656
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	2,200		$	-

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

F-3

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Avalanche International, Corp. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (continued)

(Unaudited)

	For the Six Months Ended May 31,
	For the Nine Months Ended August 31,
	2016			2015
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	32,207		$	-
Supplemental schedule of non-cash investing and financing activities:
Decrease in accounts payable and accrued expenses-related party	$	25,000		$	-
in connection with the purchase of a third-party note receivable	$	~~25,000~~		$	-
Decrease in notes payable in connection with reduction in note receivable	$	(1085,000	)	$	-
Common stock issued for conversion of debt and accrued interest	$	183,048		$	-4,518
Decrease in notes payable in connection with common stock issued	$	(7,330	)	$	-
Decrease in accrued interest in connection with common stock issued	$	(21,024	)	$	-
Issuance of preferred stock to shareholder for payment of accrued expenses, related party	$	-		$	76,900
Issuance of preferred stock to shareholder for payment of accrued
expenses, related party	$	-		$	76,900
Warrants issued in connection with notes payable	$	30,987		$	-

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

F-4

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Avalanche International, Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

ORGANIZATION AND DESCRIPTION OF BUSINESS

Avalanche International, Corp. (the “Company” or “Avalanche”) was incorporated under the laws of the State of Nevada on April 14, 2011. The Company is a holding company with operations at the subsidiary level only. The Company has formed two wholly-owned subsidiaries, Smith and Ramsay Brands, LLC (“SRB”) and Restaurant Capital Group, LLC (“RCG”). SRB was formed on May 19, 2014, and RCG was formed on October 22, 2015. SRB was originally formed as a manufacturer and distributor of flavored liquids for electronic vaporizers and eCigarettes and accessories; this business ceased in June 2015. RCG was formed to hold the Company’s investments in the restaurant industry.

LIQUIDITY AND GOING CONCERN

The accompanying unaudited ~~condensed~~ condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern. The Company has incurred recurring losses and reported losses available to common stockholders for the ~~six~~nine months ended ~~May~~August 31, 2016 and 2015, totaling $~~990~~674,~~374~~155 and $~~773~~1,~~045~~506,480, respectively, as well as an accumulated deficit as of ~~May~~August 31, 2016 amounting to $43,~~203~~886,~~191~~972. As a result of the Company’s continued losses, at ~~May~~August 31, 2016, the Company’s current liabilities significantly exceed current assets, resulting in negative working capital of $2,~~927~~614,~~449~~313. Further, the Company does not have adequate cash to cover projected operating costs for twelve months from the issuance date of these financial statements and to repay convertible notes payable and notes payable in the aggregate principal amount of $~~716~~679,~~575~~278 that are in default at ~~May~~August 31, 2016. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In order to ensure the continued viability of the Company, either future equity or debt financings must be obtained or profitable operations must be achieved in order to repay the existing short-term debt and to provide a sufficient source of operating capital. To address its liquidity issues, the Company continues to explore opportunities for additional financing and/or restructuring of its existing debt. No assurances can be made that the Company will be successful obtaining additional equity or debt financing and/or in restructuring existing debt, or that the Company will achieve profitable operations and positive cash flow. The unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. Further, subsequent to year end the Company has primarily funded its operations through the issuance of additional debt financings (see Note 12).

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Securities and Exchange Commission (the “SEC”) Form 10-Q and Article 8 of SEC Regulation S-X and do not include all the information and disclosures required by generally accepted accounting principles in the United States of America (“GAAP”). The Company has made estimates and judgments affecting the amounts reported in our condensed consolidated financial statements and the accompanying notes. The actual results experienced by the Company may differ materially from our estimates. The consolidated financial information is unaudited but reflects all normal adjustments that are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended November 30, 2015, filed with the SEC on April 28, 2017. Results for the three and ~~six~~nine months ended August ~~May~~ 31, 2016, are not necessarily indicative of the results to be expected for the full year ending November 30, 2016.

Principles of Consolidation

The unaudited condensed consolidated financial statements include accounts of Avalanche and its wholly-owned subsidiaries, SRB and RCG (collectively referred to as the “Company”). ~~No operations existed in RCG during the six months ended May 31, 2016.~~ All significant intercompany accounts and transactions have been eliminated in consolidation.

Accounting Estimates

The preparation of financial statements, in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s critical accounting policies that involve significant judgment and estimates include fair value of bifurcated embedded conversion options and derivative warrant liabilities and the valuation of deferred income taxes. Actual results could differ from those estimates.

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Avalanche International, Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Fair Value of Financial Instruments

The Company’s significant financial instruments include cash, accounts receivable, notes receivable, accounts payable and accrued expenses, notes payable, and convertible notes payable. The recorded values of cash, accounts receivable, notes receivable, and accounts payable approximate their fair values based on their short-term nature. Notes payable and convertible notes payable are recorded inclusive of the value of any bifurcated embedded feature, which approximates their fair value.

Equity-Linked Financial Instruments

Derivative liabilities are recognized in the consolidated balance sheets at fair value based on the criteria specified in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815-15 – Derivatives and Hedging – Embedded Derivatives (“ASC 815-15”). The Company evaluates all of its financial instruments, including embedded conversion features in convertible debt and warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

Pursuant to ASC Topic 815-15 an evaluation of the embedded conversion feature of convertible debt is evaluated to determine if the embedded debt conversion feature is required to be bifurcated from the debt instrument, valued and classified with the related loan host instrument. When the terms of the embedded conversion features of the Company’s convertible debt provides for the issuance of shares of common stock at the election of the holders and the number of shares is subject to adjustment for a decline in the price of the Company’s common stock, the Company determined that the embedded conversion option should be bifurcated. The estimated fair value of the conversion features, when bifurcated, are primarily determined using a Monte Carlo model or, in certain circumstances, the Black-Scholes option pricing model. The models utilize Level 3 unobservable inputs to calculate the fair value of the derivative liabilities at each reporting period. The Company determined that in instances where a Black-Scholes option pricing model was used that using an alternative valuation model such as a Monte Carlo model would result in minimal differences. Each reporting period the embedded conversion feature for each applicable debt instrument is re-valued and adjusted through the caption “change in fair value of derivative liability” on the consolidated statements of operations.

Certain of the Company’s convertible notes issued during the year ended November 30, 2015 contain conversion terms that provide for a variable conversion price (e.g. 55% of the lowest trading price of the Company’s common stock for the 25 days preceding conversion) for a fixed amount (i.e. face value of the note). This results in the number of shares to be issued upon conversion to be essentially indeterminable and prevents the Company from concluding that the related conversion feature does not need to be bifurcated as a derivate liability in accordance with ASC 815. Thus, equity-linked financial instruments, which are convertible or exercisable into common stock, issued subsequent to the convertible notes are classified as derivative liabilities, with the exception of instruments related to employee share-based compensation.

Warrant Liability

The Company accounts for certain common stock warrants outstanding as a liability at fair value and adjusts the instruments to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company's consolidated statements of operations. The fair value of the warrants issued by the Company has been estimated using a Black-Scholes option pricing model, at each measurement date.

Debt Discounts

The Company accounts for debt discounts originating in connection with conversion features that remain embedded in the related notes in accordance with ASC 470-20, Debt with Conversion and Other Options. These costs are classified on the consolidated balance sheet as a direct deduction from the debt liability. The Company amortizes these costs over the term of its debt agreements as interest expense-debt discount in the consolidated statement of operations.

Sequencing

As of March 1, 2016, the Company adopted a sequencing policy whereby all future instruments may be classified as a derivative liability with the exception of instruments related to share-based compensation issued to employees or directors.

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Avalanche International, Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Revenue Recognition

The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

NoDuring ~~revenue was recorded during~~ the three and nine ~~six~~ months ended ~~May~~August 31, 2016, the Company’s revenues primarily consisted of services provided under the management services agreement with Alzamend. During the three and ~~six~~nine months ended ~~May~~August 31, ~~2016~~2015, the Company’s revenues consisted solely of sales of flavored liquids for electronic vaporizers and eCigarettes and accessories from SRB.

Net Income (Loss) per Common Share

Pursuant to ASC Topic No. 260, Earnings per Share, basic net income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted-average number of common shares outstanding. Diluted net income (loss) per share is computed similar to basic net income (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted net income (loss) per common share reflects the potential dilution that could occur if diluted instruments were to be exercised or converted or otherwise resulted in the issuance of common stock that then shared in the earnings of the Company.

Since the effects of the conversion of convertible debt are anti-dilutive in all periods presented, shares of common stock underlying these instruments have been excluded from the computation of loss per common share.

The following sets forth the number of shares of common stock underlying convertible debt as of ~~May~~August 31, 2016 and 2015:

	May 31,
	August 31,
	2016		2015
Convertible notes payable		11,~~449~~987,~~546~~571		~~604~~2,~~167~~254,942
Common stock warrants		175,000		-
Conversion of preferred stock		-		528,193
		11,624,546		604,167
Common stock warrants 1		75,000		-
Total		12,062,571		2,783,135

~~Reclassifications~~(1) The Company has excluded the 100,000 warrants with an exercise price of $0.01 per share in its anti-dilutive securities but included the warrants in its weighted average shares outstanding.

~~Certain~~The ~~prior~~following ~~period~~table ~~amounts~~sets ~~have~~forth ~~been~~the ~~reclassified~~inputs for ~~comparative purposes to conform to~~ the ~~current~~computation ~~period financial statement presentation. These reclassifications had no effect on previously reported results~~ of ~~operations.~~basic ~~In addition,~~and ~~certain~~diluted ~~prior~~net ~~period~~income ~~amounts~~(loss) ~~from~~per ~~the~~common ~~revised~~share ~~amounts have been reclassified~~ for ~~consistency with~~ the ~~current~~ period ~~presentation.~~ indicated:

Recent Accounting Pronouncements

	For the Three Months Ended August 31, 2016
Income:
Net income (loss)	$	316,220
Interest expense - convertible notes		37,331
Mark-to-market - convertible notes (gain)/loss		(435,318	)
Adjusted net income (loss)	$	(81,767	)

Common Shares:
Basic - weighted average common shares		6,942,254
Effect of dilutive securities:
Convertible notes		11,987,571
Diluted - weighted average common shares		18,929,825

Basic earnings per share	$	0.05
Basic weighted average shares outstanding		6,942,254

Diluted earnings per share	$	0.00
Diluted weighted average shares outstanding		18,929,825

The Company has considered all recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its condensed consolidated financial statements.

F-7

Table of Contents

Avalanche International, Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

4.Recent ~~REVISION~~Accounting ~~OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS~~Pronouncements

~~The~~In ~~condensed~~May 2014, ~~consolidated~~the ~~financial~~Financial ~~statements~~Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-9, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-9”). ASU 2014-9 outlines a new, single comprehensive model for ~~the~~entities ~~three~~to use in accounting for revenue arising from contracts with customers and ~~six~~supersedes ~~months~~most ~~ended~~current ~~May~~revenue 31recognition guidance, ~~2015~~including ~~have~~industry-specific ~~been~~guidance. ~~revised~~This tonew ~~expense~~revenue ~~the~~recognition ~~previously~~model ~~capitalized~~provides ~~licensing~~a five-step analysis in determining ~~fee~~when and how revenue is recognized. The new model will require revenue recognition to ~~reclassify~~depict ~~original~~the ~~issue~~transfer ~~discount~~of ~~that~~promised ~~was~~goods ~~initially~~or services ~~recorded~~to ascustomers in an amount that reflects the consideration a ~~prepaid~~company ~~asset~~expects to ~~debt~~receive ~~discount~~in exchange for those goods or services. AnThe FASB subsequently issued additional clarifying standards to address issues arising from implementation of the new ~~analysis~~revenue standard, including a one-year deferral of the effective date for the new revenue standard. Public companies should now apply the guidance in ASU 2014-9 to annual reporting periods beginning after December 15, 2017 and interim periods within those ~~revised~~annual ~~numbers~~periods. Earlier application is ~~reflected~~permitted ~~below~~only as of annual reporting periods beginning after December 15, 2016, including interim periods within that annual period. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-9. The Company is currently assessing the impact that adopting this new accounting guidance will have on its financial statements and footnote disclosures.

Condensed Consolidated Balance Sheet (unaudited)
	May 31, 2015
	As reported		Adjustment			As revised
Assets:
Total current assets	$	356,883	$	-		$	356,883
Total assets	$	411,588	$	(54,000	)	$	357,588
Liabilities and Stockholders' Deficit:
Total current liabilities	$	687,772	$	-		$	687,772
Total liabilities and stockholders' deficit	$	411,588	$	(54,000	)	$	357,588

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which defines management’s responsibility to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures if there is substantial doubt about its ability to continue as a going concern. The pronouncement is effective for annual reporting periods ending after December 15, 2016 with early adoption permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements.

Condensed Consolidated Statement of Operations (unaudited)
	For the Three Months Ended May 31, 2015
	As reported			Adjustment			As revised
General and administrative expenses	$	301,755		$	11,250		$	313,005
Loss from operations	$	(298,846	)	$	(11,250	)	$	(310,096	)
Net loss	$	(570,226	)	$	(11,250	)	$	(581,476	)
Basic and diluted net loss per share	$	(0.10	)	$	(0.00	)	$	(0.11	)
Weighted average shares outstanding, basic and diluted		5,451,384			5,451,384			5,451,384

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. This update is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. The adoption of ASU No. 2015-17 is not expected to have a material effect on our consolidated financial position, results of operations, or cash flows.

Condensed Consolidated Statement of Operations (unaudited)
	For the Six Months Ended May 31, 2015
	As reported			Adjustment			As revised
General and administrative expenses	$	475,085		$	24,750		$	499,835
Loss from operations	$	(465,715	)	$	(24,750	)	$	(490,465	)
Net loss	$	(748,295	)	$	(24,750	)	$	(773,045	)
Basic and diluted net loss per share	$	(0.14	)	$	(0.00	)	$	(0.14	)
Weighted average shares outstanding, basic and diluted		5,336,296			5,336,296			5,336,296

In February 2016, the FASB issued ASU No. 2016-2, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. Public business entities should apply the amendments in ASU 2016-2 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early application is permitted for all public business entities and all nonpublic business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently assessing the impact that adopting this new accounting guidance will have on its financial statements and footnote disclosures.

In ~~accordance with~~March 2016, ~~SEC~~the ~~Staff~~FASB ~~Accounting~~issued ~~Bulletin~~ASU ~~No 108~~2016-9, Compensation ~~the~~- ~~Company~~Stock ~~has~~Compensation ~~evaluated~~(Topic ~~this~~718): ~~error,~~Improvements ~~based~~to onEmployee anShare-Based ~~analysis~~Payment Accounting. ofThe ~~quantitative~~amendments are intended to improve the accounting for employee share-based payments and ~~qualitative factors,~~affect asall toorganizations that ~~whether~~issue itshare-based ~~was~~payment ~~material~~awards to ~~the~~their ~~condensed~~employees. ~~consolidated~~Several ~~statements~~aspects of ~~operations for~~ the ~~three~~accounting ~~and~~for ~~six~~share-based ~~months~~payment ~~ended~~award transactions ~~May~~are 31simplified, ~~2015~~including: ~~and~~(a) income iftax ~~amendments~~consequences; (b) classification of ~~previously~~awards ~~filed~~as ~~financial~~either ~~statements~~equity ~~with~~or liabilities; and (c) classification on the ~~SEC~~statement ~~are~~of ~~required~~cash flows. ~~The~~For ~~Company~~public ~~has~~companies, ~~determined that~~ the ~~adjustment~~ isamendments ~~qualitatively~~are ~~not~~effective ~~material~~for ~~and~~annual periods beginning after December 15, ~~therefore~~2016, ~~the~~and ~~error~~interim ~~has~~periods nowithin ~~material~~those ~~impact~~annual toperiods. ~~the~~Early ~~condensed~~adoption ~~consolidated~~is ~~statements~~permitted in any interim or annual period. The adoption of ~~operations~~ASU ~~for~~No. ~~the~~2016-9 ~~three~~is ~~and~~not ~~six~~expected ~~months~~to ~~ended~~have ~~May~~a 31material effect on our consolidated financial position, results ~~2015~~of operations, or ~~other~~cash ~~prior periods~~flows.

5. WARRANTS

During the six months ended May 31, 2016, the Company issued a total of 175,000 warrants at an average exercise price of $0.13 per share.

F-8

Table of Contents

Avalanche International, Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~(i) On December 2, 2015, the Company issued warrants to purchase an aggregate of 100,000 shares of common stock at an exercise price equal to $0~~4.01 ~~per share of common stock in connection with the issuance of a promissory note in the aggregate principal amount of $125,000 (See Note 8d).~~WARRANTS

~~(ii)~~During Onthe ~~January~~nine 20months ended August 31, 2016, the Company ~~entered~~issued ~~into an agreement with LG Capital Funding, LLC to amend the terms of~~ a ~~convertible~~total ~~promissory note in the principal amount~~ of ~~$50~~175,000. ~~Pursuant to the amendment, the Company granted LG Capital 75,000~~ warrants ~~with~~at an average exercise price of $0.3013 per share ~~(See Note 7f)~~.

~~The~~(i) ~~following~~On ~~table summarizes~~December ~~information~~2, ~~about~~2015, ~~common~~the ~~stock~~Company issued warrants ~~outstanding~~to purchase an aggregate of 100,000 shares of common stock at ~~May~~an 31exercise price equal to $0.01 per share of common stock in connection with the issuance of a promissory note to Livingston in the aggregate principal amount of $125,000 ~~2016:~~(See Note 7d).

Outstanding							Exercisable
			Weighted
			Average		Weighted				Weighted
			Remaining		Average				Average
Exercise	Number		Contractual		Exercise		Number		Exercise
Price	Outstanding		Life (Years)		Price		Exercisable		Price
$0.01		100,000		0.51	$	0.01		100,000	$	0.01
$0.30		75,000		2.64	$	0.30		75,00	$	0.30
$0.01 - $0.30		175,000		1.42	$	0.13		175,000	$	0.13

(ii)

On January 20, 2016, the Company entered into an agreement with LG Capital Funding, LLC to amend the terms of a convertible promissory note in the principal amount of $50,000. Pursuant to the amendment, the Company issued to LG Capital 75,000 warrants with an exercise price of $0.30 per share (See Note 6f).

The ~~Company~~following ~~has valued~~table ~~the~~summarizes ~~warrants~~information atabout ~~their~~common ~~date~~stock ~~of grant utilizing the Black-Scholes option pricing model. This model is dependent upon several variables such as the~~ warrants’ ~~term,~~outstanding ~~exercise~~at ~~price,~~August ~~current stock price~~31, risk-free interest rate and estimated volatility of our stock over the contractual term of the warrants. The risk-free interest rate used in the calculations is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the contractual life of the warrants.2016:

The following weighted average assumptions were used for grants during the six months ended May 31, 2016:

Outstanding					Exercisable
		Weighted
		Average	Weighted			Weighted
		Remaining	Average			Average
Exercise	Number	Contractual	Exercise		Number	Exercise
Price	Outstanding	Life (Years)	Price		Exercisable	Price
$0.01	100,000	0.25	$	0.01	100,000	$	0.01
$0.30	75,000	2.39	$	0.30	75,000	$	0.30
$0.01 - $0.30	175,000	1.17	$	0.13	175,000	$	0.13

	May 31, 2016
Weighted average risk-free interest rate		0.52%
Weighted average life (in years)		2.0
Volatility		167.9% — 184.9%
Expected dividend yield		0%
Weighted average grant-date fair value per share of warrants granted	$	0.41

The Company valued the warrants at their date of grant utilizing the Black-Scholes option pricing model. This model is dependent upon several variables such as the warrants’ term, exercise price, current stock price, risk-free interest rate and estimated volatility of our stock over the contractual term of the warrants. The risk-free interest rate used in the calculations is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the contractual life of the warrants.

6.The ~~NOTES~~following ~~RECEIVABLE~~weighted average assumptions were used for grants during the nine months ended August 31, 2016:

	May 31, 2016
	August 31, 2016
Notes receivable - Philo Group	$	325,000
Weighted average risk-free interest rate	0.52%
Notes receivable - JS Technologies, Inc.		103,659
Weighted average life (in years)	2.0
Total notes receivable		428,659
Volatility	167.9% — 184.9%
Less: original issue discount		(53,159	)
Expected dividend yield	0%
Total notes receivable, net	$	375,500
Weighted average grant-date fair value per share of warrants granted	$ 0.41
Less: current portion		(103,659	)
Notes receivable – long-term portion	$	271,841

NOTES RECEIVABLE

	August 31, 2016

Notes receivable - Philo Group	$	325,000
Total notes receivable		325,000
Less: original issue discount		(15,247	)
Total notes receivable, net	$	309,753

F-9

Table of Contents

Avalanche International, Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

On April 13, 2016, the Company entered into an agreement to finance a new restaurant owned by Philo Group, LLC (“Philo”). Between April 13, 2016 and ~~May~~August 31, 2016, the Company provided $250,000 in financing to Philo under the terms of a Senior Secured Property Note dated April 4, 2016, as amended (the “Philo Note”). The Philo Note bears interest at a rate of sixteen percent (16%) per annum, requires monthly interest payments, and was due within six (6) months from the date of issue. Due to delays in the opening of the restaurant, the Philo Note has not yet been repaid and is in default. The Company has not made a formal demand upon Philo for payment but has reserved its rights as provided for in the Philo Note. The Company is currently in discussions with Philo regarding payment of the Philo Note and actively monitoring the restaurant operations. The Philo Note features an original issue discount of $75,000 and allows for legal fees up to $5,000. The Philo Note is personally guaranteed by the principal of Philo and secured by all assets of Philo. In addition, the principal of Philo has agreed to further secure the loan by pledging several pieces of real property located in California.

The original issue discount of $75,000 on the Philo Note is being amortized as interest income through the maturity date using the interest rate method. During the three and ~~six~~nine months ended ~~May~~August 31, 2016, the Company recorded $2137,~~841~~ 912 and $59,753, respectively, of interest income from the discount accretion and $813,~~208~~107 and $21,315, respectively, of interest income based upon the 16% contractual rate.

JS Technologies, Inc.

On August 4, 2015, the Company entered into a Secured Promissory Note (the “JST Note”) with JS Technologies, Inc. (“JST”). Under the JST Note, the Company entered into an agreement to lend up to $400,000 to JST in order to provide short-term financing pending the Company’s proposed acquisition of JST. The JST Note accrues interest at a rate of ten percent (10%) per annum and was due on August 5, 2016. The JST Note is secured by substantially all of the assets of JST. Between December 3, 2015 and February 26, 2016, the Company loaned JST $120,000 pursuant to the term of the JST Note, which included an original issue discount of $13,333 to the overall JST Note. Of the $120,000 loaned to JST, a payment of $95,000 was made by the Company and a payment of of $25,000 was made by MCKEA Holdings, LLC (“MCKEA”) directly to JST on the Company’s behalf. The ~~Through~~note ~~May~~receivable ~~31,~~fully ~~2016,~~repaid ~~the~~on ~~note~~June ~~receivable~~15, ~~was~~2016 ~~offset~~ by apayments ~~payment~~ of $1948,~~674~~333 by JST and JST’s payment of $1085,000 directly to a third-party noteholder. The $1085,000 payments made by JST reduced the Company’s outstanding note payable. ~~The JST Note was fully repaid on June 15, 2016.~~

The original issue discount of $13,333 on the JST Note was ~~being~~ amortized as interest income using the effective interest rate method. During the ~~three~~ three and ~~six~~nine months ended ~~May~~August 31, 2016, the Company recorded ~~$9,358~~nil and $13,333, respectively, of interest income from the discount accretion and ~~$2,860~~nil and $5,326, respectively, of interest income based upon the 10% contractual rate.

CONVERTIBLE NOTES PAYABLE

	August 31, 2016		November 30, 2015
Adar Bays, LLC Note (a):
Principal	$	115,000	$	115,000
Fair value of bifurcated put option		190,589		207,659
Debt discount		-		(40,411	)
Carrying amount		305,589		282,248

Union Capital, LLC Note (a):
Principal		115,000		115,000
Fair value of bifurcated put option		190,589		207,536
Debt discount		-		(40,096	)
Carrying amount		305,589		282,440

Typenex Co-Investement, LLC Note (b):
Principal		87,500		87,500
Fair value of bifurcated put option		315,692		380,858
Debt discount		-		(28,130	)
Carrying amount		403,192		440,228

F-10

Table of Contents

Avalanche International, Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

7. CONVERTIBLE NOTES PAYABLE

	August 31, 2016			November 30, 2015
Gary Gelbfish Note (c):
Principal		87,808			100,000
Fair value of bifurcated put option		136,921			118,391
Debt discount		-			-
Carrying amount		224,729			218,391

JMJ Financial Note (d):
Principal		60,500			60,500
Fair value of bifurcated put option		80,293			155,017
Debt discount		(22,915	)		(44,576	)
Carrying amount		117,878			170,941

Black Mountain Equities, Inc. Note (e):
Principal		42,670			55,000
Fair value of bifurcated put option		37,471			81,951
Debt discount		-			(28,028	)
Carrying amount		80,141			108,923

LG Capital Funding, LLC Note (f):
Principal		42,500			50,000
Fair value of bifurcated put option		71,102			94,905
Debt discount		-			-
Carrying amount		113,602			144,905

GCEF Opportunity Fund, LLC Note (g):
Principal		27,500			27,500
Fair value of bifurcated put option		30,346			50,532
Debt discount		-			(15,973	)
Carrying amount		57,846			62,059

Lord Abstract, LLC Note (h):
Principal		1,300			8,800
Fair value of bifurcated put option		2,438			16,163
Debt discount		-			(5,111	)
Carrying amount		3,738			19,852

JLA Realty Notes (i):
Principal		325,600			-
Fair value of bifurcated conversion option		143,874			-
Debt discount		(243,235	)		-
Carrying amount		226,239			-

Other convertible notes payable (j):
Principal		11,000			-
Fair value of bifurcated put option		17,218			-
Debt discount		(8,307	)		-
Carrying amount		19,911			-
Total carrying amount of convertible notes		1,858,454			1,729,987
Less current portion of carrying amount of convertible notes		1,612,304			-
Non-current portion of carrying amount of convertible notes	$	246,150		$	-

	May 31, 2016			November 30, 2015
Adar Bays, LLC Note (a):
Principal value	$	115,000		$	115,000
Fair value of bifurcated put option of Adar Bays, LLC Note		186,694			207,659
Debt discount		-			(40,411	)
Carrying amount of Adar Bays, LLC Note		301,694			282,248
Union Capital, LLC Note (a):
Principal value		115,000			115,000
Fair value of bifurcated put option of Union Capital, LLC Note		186,611			207,536
Debt discount		-			(40,096	)
Carrying amount of Union Capital, LLC Note		301,611			282,440
Typenex Co-Investement, LLC Note (b):
Principal value		87,500			87,500
Fair value of bifurcated put option of Typenex Co-Investement, LLC Note		373,733			380,858
Debt discount		(153	)		(28,130	)
Carrying amount of Typenex Co-Investement, LLC Note		461,080			440,228

F-11

Table of Contents

Avalanche International, Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

	May 31, 2016			November 30, 2015
	August 31, 2016			November 30, 2015
Gary Gelbfish Note (c):
Total convertible notes payable:
Principal value		100,000			100,000
Principal	$	916,378		$	619,300
Fair value of bifurcated put option of Gary Gelbfish Note		203,030			118,391
Fair value of bifurcated put option		1,216,533			1,313,012
Debt discount		-(274,457	)		-(202,325	)
Carrying amount of Gary Gelbfish Note		303,030			218,391
Carrying amount	$	1,858,454		$	1,729,987
JMJ Financial Note (d):
Principal value		60,500			60,500
Fair value of bifurcated put option of JMJ Financial Note		212,973			155,017
Debt discount		(30,160	)		(44,576	)
Carrying amount of JMJ Financial Note		243,313			170,941
Black Mountain Equities, Inc. Note (e):
Principal value		42,670			55,000
Fair value of bifurcated put option of Black Mountain Equities, Inc. Note		57,516			81,951
Debt discount		(453	)		(28,028	)
Carrying amount of Black Mountain Equities, Inc. Note		99,733			108,923
LG Capital Funding, LLC Note (f):
Principal value		50,000			50,000
Fair value of bifurcated put option of LG Capital Funding, LLC Note		76,462			94,905
Debt discount		-			-
Carrying amount of LG Capital Funding, LLC Note		126,462			144,905
GCEF Opportunitity Fund, LLC Note (g):
Principal value		27,500			27,500
Fair value of bifurcated put option of GCEF Opportunity Fund, LLC Note		39,809			50,532
Debt discount		(2,185	)		(15,973	)
Carrying amount of GCEF Opportunitity Fund, LLC Note		65,124			62,059
Lord Abstract, LLC Note (h):
Principal value		8,800			8,800
Fair value of bifurcated put option of Lord Abstract, LLC Note		18,186			16,163
Debt discount		(699	)		(5,111	)
Carrying amount of Lord Abstract LLC Note		26,287			19,852
JLA Realty Notes (i):
Principal value		160,600			-
Fair value of bifurcated conversion option of JLA Realty Notes		166,930			-
Debt discount		(156,451	)		-
Carrying amount of JLA Realty Notes		171,079			-
Other convertible notes payable (j):
Principal value		11,000			-
Fair value of bifurcated put option of other convertible notes payable		33,206			-
Debt discount		(9,232	)		-
Carrying amount of other convertible notes payable		34,974			-
Total carrying amount of convertible notes	$	2,134,387		$	1,729,987
Total short-term carrying amount of convertible notes	$	1,928,334		$	-
Total long-term carrying amount of convertible notes	$	206,053		$	-

Accounting for Redemption Feature - Put Option

Management determined that the variable share settlement feature as a “conversion feature” as defined above represents, in substance, a put option (redemption feature) because the value of the variable share settlement feature does not depend on the issuer’s stock price and does not vary with the value of the shares. Management determined that this put option should be bifurcated from the notes and accounted for as a separate derivative liability primarily because the number of shares issuable upon net share settlement is indeterminate. The Company does not have a sufficient quantity of authorized but unissued shares and, therefore, the put option does not meet conditions necessary for it to be classified in stockholders’ equity.

The put option, with a fair value of approximately $1.2 million at inception, was recorded as a derivative liability on the accompanying condensed consolidated balance sheet with a corresponding discount to the note. The Company accreted the discount to interest expense in the accompanying condensed consolidated statements of operations over the term of the note using the effective interest method. During the three months ended August 31, 2016 and 2015, the Company recognized aggregate interest expense of $77,401 and $164,685, respectively, resulting from accreting the discount for the above convertible promissory notes. During the nine months ended August 31, 2016 and 2015, the Company recognized interest expense of $336,269 and $248,863, respectively, resulting from accreting the discount for the above convertible promissory notes. The issuance date fair value in excess of the principal amount of the notes is reflected as excess interest on issuance of convertible debt. During the three and nine months ended August 31, 2016, excess interest on issuance amounted to $7,614 and $78,675, respectively. In January 2016, the Company issued 457,619 shares of common stock in payment of principal and accrued interest on three of its convertible notes. The shares were valued based on the closing price of the Company’s common stock on the date of issuance, $183,048, resulting in a loss on extinguishment of $154,694. The accrued interest associated with the convertible notes was $147,899 as of August 31, 2016. All long-term notes are due in fiscal year 2019.

(a)

The Adar Bays, LLC and Union Capital, LLC convertible notes payable were due and payable 12 months after issuance date of May 11, 2015 with interest at 8% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the notes were convertible into shares of the Company’s common stock at any time prior to maturity at a conversion price per share equal to a forty percent (40%) discount to the lowest trading price for the twenty (20) consecutive trading days immediately preceding the notice of conversion. If these notes were not paid at maturity, the outstanding principal due under these notes shall increase by 10%. In January 2016, the notes were amended to decrease the conversion price per share to a forty-five percent (45%) discount to the lowest trading price for the twenty-five (25) consecutive trading days immediately preceding the notice of conversion, and the pre-payment penalty was increased to 150%. The notes were not repaid on the maturity date of May 12, 2016 and as such were in default as of August 31, 2016. The Company recorded a default penalty charge of $11,500 for each note, representing 10% of the outstanding principal balance of these notes, as a component of interest expense in the accompanying condensed consolidated statements of operations. As of August 31, 2016, there were 1,900,826 shares issuable upon conversion for each note.

On January 23, 2018, the Company, Adar Bays, LLC and Union Capital, LLC entered into Note Settlement and Termination Agreements. Pursuant to the terms of the settlement agreements, the Company agreed to satisfy each of the outstanding notes for $200,000 in cash and 100,000 shares of common stock. The payments were made on January 26, 2018. The closing price of the Company's common stock on January 23, 2018 was $1.40 per share resulting in an aggregate settlement amount of $340,000 for each note.

(b)

The Typenex Co-Investment, LLC convertible note payable was due and payable 13 months after its issuance date of May 29, 2015 with interest at 10% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the note are convertible into shares of the Company’s common stock at any time prior to maturity at a conversion price per share equal to $1.30. However, in the event the Company’s market capitalization falls below $3.0 million at any time, the conversion price per share shall be equal to the lower of $1.30 or the market price at the date of conversion. The note was not repaid on the maturity date of June 29, 2016 and as such was in default as of August 31, 2016. The Company recorded a default penalty of $18,200 in the accompanying condensed consolidated statements of operations. As of August 31, 2016, there were 2,272,727 shares issuable upon conversion of this note.

F-12

Table of Contents

Avalanche International, Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

	May 31, 2016			November 30, 2015
Total convertible notes payable:
Principal value	$	778,570		$	619,300
Fair value of bifurcated put option of other convertible notes payable		1,555,150			1,313,012
Debt discount		(199,333	)		(202,325	)
Carrying amount of other convertible notes payable	$	2,134,387		$	1,729,987

On or about April 19, 2016, the Company received from counsel for Typenex, a written demand to accelerate payment of the entire outstanding balance of the Typenex note. On June 7, 2016, Typenex filed suit in the State of Utah, the Third Judicial District Court, County of Salt Lake, for repayment of all principal, default effects, late fee and accrued interest. According to the complaint, Typenex asserted an aggregate amount due, as of June 6, 2016, of $149,054. On April 4, 2017, the Company and Typenex agreed to settle the lawsuit for payment of $90,000, which was made in April 2017. On May 9, 2017, an order of dismissal with prejudice was entered by the Third Judicial District Court.

~~Accounting~~(c) The Gary Gelbfish convertible note payable was due and payable six months after its issuance date of March 27, 2015 with interest at 10% per annum. If this note was not paid at maturity, at the election of the holder, outstanding principal and accrued but unpaid interest under the note was convertible into shares of the Company’s common stock at a conversion price per share equal to lesser of: (i) fifty percent (50%) discount to the average closing price for ~~Redemption~~the ~~Feature-~~twenty ~~Put Option~~(20) consecutive trading days immediately preceding the maturity date or (ii) $0.50 per share. The note was not repaid on the maturity date of September 23, 2015 and as such was in default as of August 31, 2016 and remains in default as of the date of this report. As of August 31, 2016, there were 1,000,663 shares issuable upon conversion of this note.

~~Management~~(d) ~~determined that~~The ~~the~~JMJ ~~variable~~Financial ~~share~~convertible ~~settlement~~note ~~feature~~payable asis adue ~~“conversion~~and ~~feature”~~payable as24 ~~defined~~months ~~above~~after ~~represented~~its issuance date of April 29, in2015 ~~substance~~with interest at 12% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the notes are convertible into shares of the Company’s common stock at any time prior to maturity at a ~~put~~ ~~option~~conversion ~~(redemption~~price ~~feature~~per share equal to a forty percent (40%) ~~designed~~discount to ~~provide~~the lowest trading price for the ~~investor~~twenty-five ~~with~~(25) aconsecutive ~~fixed~~trading ~~monetary~~days ~~amount,~~immediately ~~settleable~~preceding inthe ~~shares~~notice of conversion. ~~Management determined~~As ~~that~~of ~~this~~August ~~put~~31, ~~option~~2016, ~~should~~there bewere ~~separated~~1,008,333 ~~and~~shares ~~accounted~~issuable ~~for~~upon asconversion aof ~~derivative~~this ~~and~~note. ~~classified~~Between asMay a2018 ~~liability~~and ~~primarily~~July ~~because~~ 2018, the ~~put~~Company ~~option~~made ~~met~~principal ~~the~~payments ~~net~~of ~~settlement~~$35,000 ~~criterion~~on this note and the ~~settlement~~remaining ~~provisions~~principal ~~were~~balance ~~not~~of ~~consistent~~$25,500 ~~with~~is ain ~~fixed-for-fixed~~default ~~equity instrument~~as of the date of this report.

(e) The ~~put~~ ~~option,~~Black ~~with~~Mountain aEquities, ~~fair value of approximately $1~~Inc.2 ~~million~~convertible atnote ~~inception,~~payable ~~was~~is ~~initially~~due ~~recorded as a derivative liability on the accompanying balance sheet~~ and apayable ~~corresponding~~12 ~~discount~~months toafter ~~the~~its ~~note.~~issuance ~~The~~date ~~Company~~of ~~accreted~~June ~~the~~4, ~~discount~~2015 towith interest ~~expense~~at on10% ~~the statement~~per ofannum. ~~operations~~At ~~over~~ the ~~term~~election of the ~~note using the effective interest rate method. During the three months ended May 31~~holder, ~~2016~~outstanding principal and ~~2015,~~accrued ~~the~~but ~~Company~~unpaid ~~recognized~~ interest ~~expense~~under ofthe ~~$75,891~~note ~~and~~is ~~$84,178,~~convertible ~~respectively,~~into ~~resulting~~shares ~~from amortization~~ of the ~~debt~~Company’s ~~discount~~common ~~for~~stock ~~the~~at ~~above~~any ~~convertible~~time ~~promissory~~prior ~~notes.~~to ~~During~~maturity ~~the~~at ~~six~~a ~~months~~conversion ~~ended~~price ~~May~~per ~~31,~~share ~~2016~~equal ~~and~~to ~~2015,~~ the ~~Company recognized~~lesser ~~interest expense~~ of: ~~$170,441~~(i) ~~and~~forty ~~$84,178,~~percent ~~respectively,~~(40%) ~~resulting~~discount ~~from~~to ~~amortization of~~ the ~~debt~~lowest ~~discount~~trading price for the ~~above convertible~~twenty-five ~~promissory~~(25) ~~notes. The~~consecutive ~~difference~~trading ~~between~~days ~~the~~immediately ~~estimated~~preceding ~~fair~~the ~~value~~notice of ~~the~~ conversion ~~feature~~or ~~and~~(ii) ~~the~~$1.06 ~~debt~~per ~~discount was~~share. ~~reflected~~As ~~as a loss on issuance~~ of ~~convertible~~August ~~debt and during the three and six months ended March~~ 31, 2016, ~~the~~there ~~loss~~were ~~on issuance amounted to $68~~494,~~522~~381 ~~and $71,061, respectively. In January 2016, the Company issued 457,619~~ shares ofissuable ~~common~~upon ~~stock~~conversion ~~in payment~~ of ~~principal~~ ~~and~~this ~~accrued interest on three of its convertible notes~~note. The ~~shares~~Note ~~were~~was ~~valued~~not ~~based~~repaid on the ~~closing~~maturity ~~price of the Company’s common stock on the~~ date of ~~issuance,~~June ~~$183~~4,~~048,~~ ~~resulting~~2016 inand aremains ~~loss~~in ondefault ~~conversion~~as of ~~$154,694. The accrued interest associated with~~ the ~~convertible~~date ~~notes was $130,419 as~~ of ~~May~~this ~~31, 2016~~report. ~~All long-term notes are due in fiscal year 2019.~~

(af) The ~~Adar~~LG ~~Bays, LLC and Union~~ Capital Funding, LLC convertible ~~notes~~note payable ~~were~~was due and payable 1213 months after its issuance date of ~~May~~November 113, ~~2015~~2014 ~~and~~with ~~bore~~ interest at 8% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the ~~notes~~note were convertible into shares of the Company’s common stock, at any time ~~prior~~after to180 ~~maturity~~days from the date of issuance, at a conversion price per share equal to a forty percent (40%) discount to the lowest trading price for the twenty (20) consecutive trading days immediately preceding the notice of conversion. IfIn ~~these~~January, ~~notes were not paid at maturity~~2016, the ~~outstanding~~note ~~principal~~was ~~due~~amended ~~under~~to ~~these~~grant ~~notes~~LG ~~shall~~Capital ~~increase by 10%. In January 2016~~75,000 ~~the~~warrants ~~notes~~with ~~were~~an ~~amended~~exercise toprice ~~decrease~~of ~~the~~$0.30 ~~conversion price~~ per share, ~~equal~~and to apermit ~~forty-five~~the ~~percent~~Company ~~(45%) discount~~ to re-pay the ~~lowest~~LG ~~trading~~Capital ~~price~~Note ~~for~~with ~~the~~a ~~twenty~~pre-~~five~~payment ~~(25)~~penalty ~~consecutive~~of ~~trading~~120%. ~~days~~The ~~immediately~~fair ~~preceding~~value ~~the notice~~ of ~~conversion, and~~ the ~~pre-payment~~warrants ~~penalty~~amounted ~~was increased~~ to ~~150%.~~$26,250, ~~The~~which ~~amendments~~was ~~did~~expensed ~~not~~at ~~result~~the intime aof ~~material~~issuance ~~change~~due to the ~~fair~~short-term ~~value~~nature of the ~~notes~~note. The ~~notes~~note ~~were~~was not repaid on the maturity date ~~of May 12, 2016~~ and as such ~~were~~is in default as of ~~May~~August 31, 2016. ~~The~~and ~~Company~~as ~~recorded~~of ~~in interest expense, including penalties, on~~ the ~~condensed~~date ~~statements~~ of ~~operations~~this areport. ~~one-time~~Upon default ~~penalty of $23~~,~~000~~ ~~representing 10% of~~ the ~~outstanding~~note ~~principal~~accrues ~~balance~~interest ofat ~~the~~24% ~~Notes~~per annum. As of ~~May~~August 31, 2016, there were 1643,~~916,667~~939 shares issuable upon conversion ~~for~~of ~~each~~this note.

On(g) ~~January~~The ~~23,~~GCEF ~~2018~~Opportunity Fund, ~~the~~LLC ~~Company, Adar~~convertible ~~Bays,~~note ~~LLC~~payable is due and ~~Union~~payable ~~Capital~~12 months after its issuance date of June 30, ~~LLC~~2015 ~~entered~~with ~~into~~interest ~~Note~~at ~~Settlement~~10% per annum. At the election of the holder, outstanding principal and ~~Termination~~accrued ~~Agreements.~~but ~~Pursuant~~unpaid tointerest under the ~~terms~~note are convertible into shares of the ~~settlement agreements~~Company’s common stock, at any time after 30 days from the ~~Company~~date ~~agreed~~of issuance, at a conversion price per share equal to ~~satisfy~~the ~~each~~lower of: (i) a forty percent (40%) discount to the ~~outstanding~~lowest ~~notes~~closing price for ~~$200,000~~the ~~and~~twenty ~~100,000~~(20) ~~shares~~consecutive trading days immediately preceding the notice of ~~common~~conversion ~~stock~~or (ii) $1.00. ~~The~~If ~~payments were~~this ~~made~~note onis ~~January~~not 26paid at maturity, ~~2018.~~then ~~The~~the ~~closing~~interest ~~price~~rate ofshall ~~the~~increase ~~Company's~~to ~~common~~24% ~~stock~~thereafter. onAs ~~January~~of 23August 31, ~~2018~~2016, ~~was~~there $1were 416,667 shares issuable upon conversion of this note.40 ~~per~~On ~~share~~March ~~resulting in~~9, 2017, the Company issued an aggregate ~~value~~ of ~~$340~~216,~~000~~946 ~~per~~shares of its common stock as full repayment of the principal and accrued interest on the note.

(bh) The ~~Typenex~~Lord ~~Co-Investment~~Abstract, LLC convertible note payable is due and payable 1312 months after its issuance date of ~~May~~June 2930, 2015 ~~and~~with ~~bears~~ interest at 10% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the note are convertible into shares of the Company’s common stock, at any time ~~prior~~after to30 ~~maturity~~days from the date of issuance, at a conversion price per share equal to ~~$1.30.~~a ~~However,~~forty inpercent ~~the~~(40%) ~~event~~discount to the ~~Company’s~~lowest ~~market~~closing ~~capitalization~~price ~~falls~~for ~~below $3.0 million at any time,~~ the ~~conversion~~twenty ~~price~~(20) ~~per~~consecutive ~~share~~trading ~~shall~~days beimmediately ~~equal~~preceding to the ~~lower~~notice of $1conversion.30 orIf ~~the~~this ~~market~~note ~~price~~is atnot ~~the~~paid ~~date~~at ofmaturity, ~~conversion.~~then ~~The~~the ~~note~~interest ~~was~~rate ~~not~~shall ~~repaid~~increase onto ~~the~~24% ~~maturity~~thereafter. ~~date~~As of ~~June~~August 2931, 2016, ~~and~~there ~~was~~were ~~also~~19,697 inshares ~~default~~issuable ofupon ~~certain~~conversion ~~conditions~~ of ~~the~~this note. asBetween ofJune ~~May~~2016 ~~31,~~and August 2016., ~~The~~the Company ~~recorded~~made inpayments ~~interest~~of ~~expense~~$7,500 ~~including penalties,~~ on ~~the~~this ~~condensed~~note ~~statements~~and ofthe ~~operations~~remaining aprincipal ~~one-time~~balance ~~default penalty~~ of ~~approximately~~ $181,~~200.~~300 Asremains ofin ~~May~~default ~~31,~~as ~~2016,~~of ~~there~~the ~~were~~date ~~2,966,548 shares issuable upon conversion~~ of this ~~note~~report.

On or around April 19, 2016, the Company received from counsel for Typenex, a written demand to accelerate and demand payment of the entire outstanding balance of the Typenex note entered into between the Company and Typenex on May 29, 2015. On June 7, 2016, Typenex filed suit in the State of Utah, the Third Judicial District Court, County of Salt Lake, for repayment of all principal, default effects, late fee and accrued interest. According to the complaint, Typenex asserted an aggregate amount due, as of June 6, 2016, of $149,054. On April 4, 2017, the Company and Typenex agreed to settle the lawsuit for payment of $90,000, which was paid in April 2017. On May 9, 2017, an order of dismissal with prejudice was entered by the Third Judicial District Court.

F-13

Table of Contents

Avalanche International, Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(ci) The ~~Gary~~JLA ~~Gelbfish~~Realty convertible note payable ~~was~~is due and payable ~~six~~36 months after proceeds have been received by the ~~issuance~~Company, ~~date~~which ofoccurred ~~March~~between 27April 25, ~~2015~~2016 and ~~bore~~August 8, 2016 with interest at 1012% per annum. IfAt ~~this note was not paid at maturity, at~~ the election of the holder, outstanding principal and accrued but unpaid interest under the note ~~was~~is convertible into shares of the Company’s common stock at any time prior to maturity at a ~~conversion~~fixed price per share equal to ~~lesser~~$0.15. In connection with the issuance of: ~~(i)~~the ~~fifty~~JLA ~~percent~~Realty ~~(50%)~~note ~~discount~~described toabove, the ~~average~~Company ~~closing~~recognized ~~price~~a ~~for~~debt discount of $89,087 and an excess interest of $7,614 during the ~~twenty~~three ~~(20)~~months ~~consecutive~~ended ~~trading~~August ~~days~~31, ~~immediately~~2016, ~~preceding~~which represents the ~~maturity~~excess ~~date~~of orthe ~~(ii)~~fair value of the bifurcated conversion option of approximately $~~0.50~~58,000 ~~per~~over ~~share~~the principal amount of convertible debt issued. The ~~note~~fair ~~was~~value ~~not~~of ~~repaid~~the onconversion ~~the~~feature ~~maturity~~is ~~date~~separately ofmeasured ~~September~~at 23fair value, ~~2015~~with ~~and~~changes asin ~~such~~fair ~~was~~value recognized in ~~default~~operations. asDuring ofthe ~~May~~three and nine months ended August 31, 2016, the Company recognized interest expense of $20,599 and ~~remains~~$24,750, inrespectively, ~~default~~resulting asfrom amortization of the ~~date~~debt discount for the JLA Realty note. As of ~~this~~August ~~report~~31, 2016, the conversion option has a fair value of $247,527 and is presented on a combined basis with the related loan host in the Company’s Condensed Consolidated Balance Sheet at August 31, 2016. As of ~~May~~August 31, 2016, there were ~~767~~2,~~754~~170,667 shares issuable upon conversion of this note.

(dj) The ~~JMJ~~other ~~Financial~~ convertible ~~note~~notes payable isare due and payable 2436 months after issuance ~~date~~with ~~of April 29, 2015 and bears~~ interest at 1210% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the ~~notes~~note are convertible into shares of the Company’s common stock, at any time ~~prior~~after tosix ~~maturity~~months from the date of issuance, at a conversion price per share equal tothe alesser ~~forty~~of: (i) fifty percent (4050%) discount to the ~~lowest~~volume ~~trading~~weighted average price ~~for~~over the twenty~~-five~~ (2520) consecutive trading days immediately preceding the notice of conversion. As of ~~May~~August 31, 2016, there were ~~875~~158,~~000~~845 shares issuable upon conversion of ~~this~~these ~~note~~notes. ~~Between May 2018 and July 2018, the Company made payments of $35,000 on this note and the remaining principal balance of $25,500 remains in default as of the date of this report.~~

~~(e) The Black Mountain Equities, Inc~~7. ~~convertible~~NOTES note payable is due and payable 12 months after issuance date of June 4, 2015 and bears interest at 10% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the note is convertible into shares of the Company’s common stock at any time prior to maturity at a conversion price per share equal to the lesser of: (i) forty percent (40%) discount to the lowest trading price for the twenty-five (25) consecutive trading days immediately preceding the notice of conversion or (ii) $1.06 per share. As of May 31, 2016, there were 627,024 shares issuable upon conversion of this note. The Note was not repaid on the maturity date of June 4, 2016 and remains in default as of the date of this report.PAYABLE

~~(f)~~Notes ~~The LG Capital Funding, LLC convertible note~~ payable ~~was due and payable 13 months after issuance date of November 3, 2014 and bore interest~~ at ~~8% per annum. At the election of the holder~~August 31, outstanding principal and accrued but unpaid interest under the note were convertible into shares of the Company’s common stock, at any time after 180 days from the date of issuance, at a conversion price per share equal to a forty percent (40%) discount to the lowest trading price for the twenty (20) consecutive trading days immediately preceding the notice of conversion. In January, 2016, ~~the~~and ~~note~~November ~~was amended to grant LG Capital 75,000 warrants with an exercise price of $0.~~30 ~~per share~~, and to permit the Company to re-pay the LG Capital Note with a pre-payment penalty of 120%. The amendment did not result in a material change to the fair value of the note. The fair value of the warrants was $262015,~~250,~~ ~~which~~are ~~was~~comprised ~~expensed at the time~~ of ~~issuance due to~~ the short-term nature of the note. The note was not repaid on the maturity date and as such is in default as of May 31, 2016 and as of the date of this report. Upon default, the note accrues interest at 24% per annum. As of May 31, 2016, there were 694,444 shares issuable upon conversion of this note.following:

(g) The GCEF Opportunity Fund, LLC convertible note payable is due and payable 12 months after issuance date of June 30, 2015 and bears interest at 10% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the note are convertible into shares of the Company’s common stock, at any time after 30 days from the date of issuance, at a conversion price per share equal to the lower of: (i) a forty percent (40%) discount to the lowest closing price for the twenty (20) consecutive trading days immediately preceding the notice of conversion or (ii) $1.00. If this note is not paid at maturity, then the interest rate shall increase to 24% thereafter. As of May 31, 2016, there were 381,944 shares issuable upon conversion of this note. On March 9, 2017, the Company issued an aggregate of 216,946 shares of its common stock as full repayment of the principal and accrued interest on the note.

	August 31, 2016			November 30, 2015

Notes payable to Studio Capital, LLC ^(a)	$	117,500		$	125,000
Notes payable to Argent Offset, LLC ^(b)		-			16,825
Notes payable to Strategic IR, Inc. ^(c)		12,500			12,500
Notes payable to Lori Livingston ^(d)		30,000			-
Notes payable to JLA Realty ^(e)		330,000			-
Total notes payable		490,000			154,325
Less: debt discount		(22,645	)		(19,294	)
Total notes payable	$	467,355		$	135,031

~~(h)~~During ~~The~~the ~~Lord~~three ~~Abstract, LLC convertible note payable is due~~ and nine ~~payable 12~~ months ~~after~~ended ~~issuance~~August ~~date~~31, ~~of June 30~~2016, ~~2015~~the ~~and~~Company ~~bears~~recognized interest atexpense ~~10% per annum. At the election~~ of ~~the holder~~$45,723 ~~outstanding principal~~ and ~~accrued~~$127,635, ~~but~~respectively, ~~unpaid~~resulting ~~interest~~from amortization ~~under~~of the ~~note~~debt ~~are~~discount ~~convertible~~for ~~into~~the ~~shares~~above ofnotes ~~the~~payable. The Company’s ~~common~~did ~~stock,~~not atrecognize any ~~time~~interest ~~after~~expense ~~30 days~~ from amortization of the ~~date~~debt ofdiscount ~~issuance,~~during atthe athree ~~conversion~~and ~~price~~nine ~~per~~months ~~share~~ended ~~equal~~August to31, a2015. ~~forty~~The ~~percent~~debt ~~(40%)~~ discount tois ~~the~~being ~~lowest~~amortized ~~closing~~as ~~price~~non-cash ~~for~~interest expense over the ~~twenty~~term ~~(20)~~of ~~consecutive~~the ~~trading~~debt ~~days~~using ~~immediately preceding~~ the ~~notice~~effective ofinterest ~~conversion~~method. IfThe ~~this~~accrued ~~note~~interest isassociated ~~not~~with ~~paid at maturity, then~~ the ~~interest~~above ~~rate~~notes ~~shall~~payable was ~~increase~~$95,323 toas ~~24% thereafter. As~~ of ~~May~~August 31, 2016, ~~there~~which ~~were~~is ~~122,222~~recorded ~~shares~~in ~~issuable~~accrued ~~upon~~interest ~~conversion~~on ofconvertible ~~this note. Between June 2016~~ and ~~August~~promissory ~~2016,~~notes ~~the~~payable ~~Company made payments of $7,500~~ on ~~this note and~~ the ~~remaining~~accompanying condensed ~~principal~~consolidated balance ~~of $1,300 remains in default as of the date of this report~~sheet.

(a)

On October 8, 2015, the Company entered into a promissory note agreement with Studio Capital, LLC, (“Studio Capital”) for an aggregate principal amount of $125,000 (the “Studio Capital Note”). The Studio Capital Note carries an original issue discount of $25,000, provided for a loan fee of 5,000 shares of the Company’s common stock and had a maturity date of April 8, 2016. The Studio Capital Note was not repaid on the maturity date and as such is in default as of August 31, 2016 and remains in default as of the date these financial statements are issued. The Company recorded in interest expense, including penalties, on the condensed statements of operations a one-time default penalty of $25,000 representing 20% of the outstanding principal balance of the Studio Capital Note.

F-14

Table of Contents

Avalanche International, Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(ib) ~~The~~On ~~JLA~~November ~~Realty~~26, ~~convertible~~2014, ~~note payable is due and payable 36 months after proceeds have been received by~~ the Company, ~~which~~entered ~~occurred~~into ~~between~~a ~~April~~promissory ~~25,~~note ~~2016~~agreement ~~and~~with ~~May~~Argent 4Offset, ~~2016~~LLC ~~and~~(“Argent”) ~~bears~~for ~~interest~~an ataggregate ~~12%~~principal ~~per~~amount ~~annum. At the election~~ of ~~the holder~~$13,000 ~~outstanding~~(the ~~principal~~“Argent ~~and~~Note”). ~~accrued~~The ~~but~~Argent ~~unpaid~~Note ~~interest~~included ~~under~~a ~~the~~$500 ~~note~~loan isfee, ~~convertible~~accrues ~~into~~interest ~~shares of the Company’s common stock~~ at ~~any~~10%, ~~time~~compounded ~~prior~~monthly, toand ~~maturity~~had at a ~~fixed~~maturity ~~price~~date ~~per~~of ~~share~~December ~~equal~~5, ~~to $0~~2014.~~15.~~ InOn ~~connection~~February ~~with~~1, ~~the issuance of the JLA Realty note described above~~2015, the Company ~~recognized~~entered ainto ~~debt discount of $146,000 and~~ a ~~loss~~Temporary onForbearance ~~issuance~~Agreement ofwith ~~$68,522~~Argent. ~~during~~Under the ~~three~~forbearance ~~months ended May 31~~agreement, ~~2016, which represents~~ the ~~excess~~Company ofagreed ~~the~~to ~~fair~~pay ~~value~~a offorbearance ~~the~~fee ~~bifurcated conversion feature at initial issuance~~ of ~~approximately~~ $~~215~~7,000 ~~over~~to extend the ~~principal~~maturity ~~amount~~date ofto ~~convertible~~August ~~debt~~1, ~~issued~~2015. ~~The~~Argent ~~fair~~also ~~value~~advanced of the ~~bifurcated~~Company ~~conversion~~an ~~feature~~additional ~~is separately measured at fair value~~$19,825 ~~with~~pursuant ~~changes~~to inthe ~~fair~~terms ~~value~~of ~~recognized~~the inArgent ~~operations~~Note. During the ~~three~~nine ~~and six~~ months ended ~~May~~August 31, 2016, the Company ~~recognized~~paid ~~interest expense of~~ $416,~~151~~825 ~~resulting~~on ~~from amortization of~~ the ~~debt~~Argent ~~discount for the JLA Realty note~~Note. As of ~~May~~August 31, 2016, ~~the~~all ~~bifurcated~~remaining ~~conversion~~amounts ~~option~~due ~~has~~were arepaid ~~fair value of $166,930 and is presented~~ on ~~a combined basis with~~ the ~~related~~Argent ~~loan host in the Company’s Condensed Consolidated Balance Sheet at May 31, 2016~~Note. ~~As of May 31, 2016, there were 1,070,607 shares issuable upon conversion of this note.~~

(jc) ~~The~~On ~~other~~March ~~convertible~~17, ~~notes~~2015, ~~payable~~the ~~are~~Company ~~due~~entered ~~and~~into ~~payable~~a 36promissory ~~months~~note ~~after~~agreement ~~issuance~~with ~~and~~Strategic, ~~bear~~IR, ~~interest~~Inc. at(“Strategic”) ~~10%~~for ~~per~~an ~~annum.~~aggregate Atprincipal ~~the~~amount ~~election~~ of ~~the holder~~$12,500 ~~outstanding principal and accrued but unpaid interest under~~ (the ~~note~~“Strategic ~~are~~Note”). ~~convertible~~The ~~into~~Strategic ~~shares~~Note ofincluded ~~the~~a ~~Company’s~~$1,750 ~~common~~loan ~~stock~~fee, ataccrued ~~any~~interest ~~time~~at ~~after~~10% ~~six~~and ~~months~~had ~~from~~a ~~the~~maturity date of ~~issuance~~April 16, at2015. aThe ~~conversion~~Strategic ~~price~~Note ~~per~~is ~~share~~currently ~~equal~~is ~~the~~in ~~lesser~~default as of: ~~(i)~~August ~~fifty~~31, ~~percent~~2016 ~~(50%)~~and ~~discount~~remains toin ~~the~~default ~~volume~~as ~~weighted~~of ~~average price over~~ the ~~twenty~~date ~~(20)~~these ~~consecutive~~financial ~~trading~~statements ~~days~~are ~~immediately~~issued ~~preceding~~and ~~the~~is ~~notice~~accruing ofinterest ~~conversion.~~at Asthe ofdefault ~~May~~rate ~~31, 2016, there were 110,609 shares issuable upon conversion~~ of ~~these~~21% ~~notes~~per annum.

8. NOTES PAYABLE

Notes payable at May 31, 2016, and November 30, 2015, are comprised of the following:

	May 31, 2016			November 30, 2015
Notes payable to Studio Capital, LLC (a)	$	125,000		$	125,000
Notes payable to Argent Offset, LLC (b)		6,575			16,825
Notes payable to Strategic IR, Inc. (c)		12,500			12,500
Notes payable to Lori Livingston (d)		105,000			-
Notes payable to JLA Realty (e)		330,000			-
Total notes payable		579,075			154,325
Less: debt discount		(68,369	)		(19,294	)
Total notes payable	$	510,706		$	135,031

During the three and six months ended May 31, 2016, the Company recognized interest expense of $35,947 and $81,912, respectively, resulting from amortization of the debt discount for the above notes payable. The Company did not recognize any interest expense from amortization of the debt discount during the three and six months ended May 31, 2015. The debt discount is being amortized as non-cash interest expense over the term of the debt using the effective interest method. The accrued interest associated with the above notes payable was $82,746 as of May 31, 2016, which is recorded in accrued interest on convertible and promissory notes payable on the accompanying condensed consolidated balance sheet.

(a) On October 8, 2015, the Company entered into a promissory note agreement with Studio Capital, LLC, (“Studio Capital”) for an aggregate principal amount of $125,000 (the “Studio Capital Note”). The Studio Capital Note carries an original issue discount of $25,000, provided for a loan fee of 5,000 shares of the Company’s common stock and had a maturity date of April 8, 2016. The Studio Capital Note was not repaid on the maturity date and as such is in default as of May 31, 2016 and remains in default as of the date these financial statements are issued. The Company recorded in interest expense, including penalties, on the condensed statements of operations a one-time default penalty of $25,000 representing 20% of the outstanding principal balance of the Studio Capital Note.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

(b) On November 26, 2014, the Company entered into a promissory note agreement with Argent Offset, LLC (“Argent”) for an aggregate principal amount of $13,000 (the “Argent Note”). The Argent Note included a $500 loan fee, accrues interest at 10%, compounded monthly, and had a maturity date of December 5, 2014. On February 1, 2015, the Company entered into a Temporary Forbearance Agreement with Argent. Under the forbearance agreement, the Company agreed to pay a forbearance fee of $7,000 to extend the maturity date to August 1, 2015. Argent also advanced the Company an additional $19,825 pursuant to the terms of the Argent Note. During the six months ended May 31, 2016, the Company paid $10,250 on the Argent Note. As of November 30, 2016, all remaining amounts due had been repaid on the Argent Note.

(c) On March 17, 2015, the Company entered into a promissory note agreement with Strategic, IR, Inc. (“Strategic”) for an aggregate principal amount of $12,500 (the “Strategic Note”). The Strategic Note included a $1,750 loan fee, accrued interest at 10% and had a maturity date of April 16, 2015. The Strategic Note is currently is in default as of May 31, 2016 and remains in default as of the date these financial statements are issued and is accruing interest at the default rate of 21% per annum.

(d)

On December 2, 2015, the Company entered into a promissory note agreement (the “Livingston Note”) with a third party for an aggregate principal amount of $125,000. The Livingston Note carries an original issue discount of $25,000. As additional consideration to the investor, the Company agreed to issue a warrant to purchase up to 100,000 shares of the Company’s common stock at a price of $0.01 per share. The Company recorded debt discount in the amount of $30,987 based on the fair value of the warrants. The Livingston Note is currently in default and accruing interest at the default rate of 29%. In January 2016, the Company recorded in interest expense a one-time default penalty of $25,000 representing 20% of the outstanding principal balance of the Livingston Note.

(e)

On April 7, 2016 and September 14, 2016, RCG entered into promissory note agreements with JLA Realty (the “JLA Notes”) for an aggregate amount of $480,000. The JLA Notes accrue interest at 16% per annum and have maturity dates of October 4, 2016 and March 14, 2017 and carry an original issue discount of $125,000. Between November 2016 and December 2016, the Company made payments of $150,000 on the JLA Notes and the remaining principal balance of $330,000 remains in default as of the date of these financial statements are issued.

98. NOTE PAYABLE, RELATED PARTY

Note payable, related party, at ~~May~~August 31, 2016 and November 30, 2015, are comprised of the following:

	May 31, 2016			November 30, 2015
	August 31, 2016			November 30, 2015
Note payable to MCKEA Holdings, LLC	$	4038,~~937~~175		$	-
Less: debt discount		(~~2,800~~197	)		-
Total note payable, related party	$	3837,~~137~~978		$	-

On March 4, 2016, RCG entered into a promissory note (the “MCKEA Note”) with MCKEA Holdings, LLC. The MCKEA Note provides for proceeds up to $100,000 and bears interest a rate of fifteen percent (15%) per year. All principal and interest accrued under the MCKEA Note was due on or before August 4, 2016. The MCKEA Note features an original issue discount of 10% of the total cash advanced to RCG. Between March 4, 2016 and ~~May~~ August 31, 2016, $5658,~~788~~216 was advanced to RCG, inclusive of $5,~~163~~275 of original issue discount of which $1519,~~851~~844 has been repaid resulting in an outstanding principal balance of $4038,~~937~~372 at ~~May~~August 31, 2016. During the three and ~~six~~ nine months ended ~~May~~August 31, 2016, the Company recognized interest expense of $2,~~363~~715 and $5,078, respectively, resulting from amortization of the debt discount for the above note payable, related party.

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Avalanche International, Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

109. FAIR VALUE MEASUREMENTS

The following tables classify the Company’s embedded conversion options, put options, and derivative warrant liabilities measured at fair value on a recurring basis into the fair value hierarchy as of ~~May~~August 31, 2016 and November 30, 2015:

Fair value measured at May 31, 2016

Fair value measured at August 31, 2016

Fair value at May 31 2016

Quoted prices in active markets (Level 1)

Significant other observable inputs (Level 2)

Significant unobservable inputs (Level 3)

Fair value at August 31 2016

Quoted prices in active markets (Level 1)

Significant other observable inputs (Level 2)

Significant unobservable inputs (Level 3)

Bifurcated conversion options, put options, and derivative warrant liabilities

1,~~588~~233,~~104~~219

	Fair value measured at November 30, 2015

	Fair value at November 30, 2015		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Bifurcated conversion options and derivative warrant liabilities	$	1,313,012	$	-	$	-	$	1,313,012

There were no transfers between Level 1, 2 or 3 during the ~~six~~nine months ended ~~May~~August 31, 2016 and during the year ended November 30, 2015.

The following table presents changes in Level 3 liabilities measured at fair value for the ~~six~~nine months ended ~~May~~August 31, 2016. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.

		December 1, 2015				Derivative Liabilities from Convertible Notes Payable and Notes Payable				Fair value at Inception				Change in estimated fair value recognized in results of operations				~~May~~August 31, 2016
Embedded conversion options, put options, and derivative warrant liabilities		$	1,313,012			$	~~228~~324,~~061~~762			$	57,237			($	10(461,~~206~~792	)		$	1,~~588~~233,~~104~~219

The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management. The Company’s put options are valued using a using a Monte Carlo model or, in certain circumstances, the Black-Scholes option pricing model. As of ~~May~~August 31, 2016, the inputs used in the analysis included discount rates per the conversion terms of the convertible promissory notes.

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Avalanche International, Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

A summary of quantitative information about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s embedded conversion options that are categorized within Level 3 of the fair value hierarchy for the ~~six~~nine months ended ~~May~~August 31, 2016 and for the year ended ~~November~~ November 30, 2015 is as follows:

	Date of valuation
	May 31, 2016			November 30, 2015
	August 31, 2016			November 30, 2015
Stock price	$	0.2514		$	0.45
Conversion price	$	.15			$0.10 – $0.22
Volatility		7778.1117	%		161% – 239%
Risk free interest rate		10.0392	%		0.11% – 0.86%
Years to maturity		2.9065 – 2.9394			0.45 – 1.74

A summary of quantitative information about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative warrant liabilities that are categorized within Level 3 of the fair value hierarchy for the ~~six~~nine months ended ~~May~~August 31, 2016:

	May 31, 2016
	August 31, 2016
Stock price	$	0.2514
Conversion price		$0.001 – $0.30
Volatility		7569.3186% – 7978.~~70%~~17	%
Risk free interest rate		0.6833% – 10.~~03%~~92	%
Years to maturity		0.7725 – 32.0842

1110. RELATED PARTY TRANSACTIONS

During the three and nine ~~six~~ months ended ~~May~~August 31, 2015, the Company sold ~~$23,547~~nil and $3334,~~784~~017 in products to Vape Nation. These sales represented 88% of total revenue for the ~~six~~nine month period resulting in accounts receivable, related party of $17,222, which was paid in December 2016. Vape Nation, is 50% owned by MCKEA. MCKEA is the majority member of Philou Ventures, LLC (“Philou”), which is the Company’s controlling shareholder. Kristine L. Ault, the wife of Milton C. Ault III, Chairman of the Company’s Board of Directors, is the manager and owner of MCKEA.

At February 29, 2016, the Company owed MCKEA $53,790, which was included in accounts payable and accrued expenses, related party. Of this amount, $25,000 was advanced directly by MCKEA to JST pursuant to the terms of the JST Note (see Note 65). The Company paid the amount owed MCKEA during the three months ended May 31, 2016.

On May 1, 2016, the Company entered into a management services agreement (the “MSA”) with Alzamend Neuro, Inc. (“Alzamend”), a related party. Alzamend was formed on February 26, 2016 under the laws of the State of Delaware to acquire and commercialize patented intellectual property and the know-how to prevent, treat and cure Alzheimer’s. Avalanche provides management, consulting and financial services to Alzamend. Such services include advice and assistance concerning any and all aspects of operations, planning and financing of Alzamend and conducting relations with accountants, attorneys, financial advisors and other professionals. The term of the MSA, as amended, is for the period May 1, 2016 to December 31, 2017, and may be extended by written agreement, with Avalanche having initially received $40,000 per month and, beginning February 2017, currently receiving $20,000 per month for the remainder of 2017. During the three and ~~six~~nine months ended ~~May~~August 31, 2016, the Company recorded no $160,000 in revenue related to the management service agreement with Alzamend.

1211. EQUITY TRANSACTIONS

Preferred Stock

The Company is authorized to issue 10,000,000 shares of Preferred Stock with a par value of $0.001 per share. On July 31, 2014, the Board of Directors designated 50,000 shares of its Preferred Stock as “Class A Convertible Preferred Stock” (the “Class A Preferred Stock”). Each share of Class A Preferred Stock has a stated value of $5.00 per share. The holders of Class A Preferred Stock have no voting rights. The holders are entitled to receive cumulative dividends at a rate of 10% of the stated value per annum, payable twice a year, subject to the availability of funds and approval by the Board of Directors. In the discretion of the Board of Directors, dividends may be paid with common stock. In the event of a liquidation or dissolution of the Company each holder of Class A Preferred Stock shall be entitled to be paid in cash $5.00 per share.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

At any time after August 31, 2015, a holder of Class A Preferred Stock may, at its option, convert all or a portion of its outstanding shares into common stock.

Common Stock

2016 Transactions

On December 10, 2015, the Company entered into a subscription agreement with a third party, whereby it sold 25,000 shares of its common stock at a price of $0.20 per share for total cash proceeds of $5,000.

On January 26, 2016, the Company issued 50,000 fully vested and non-forfeitable shares of common stock to a third-party service provider of consulting services. The aggregate fair value of the shares amounted to $20,000 based on the closing price of the Company’s common stock on the issuance date. The related services were completed during the ~~six~~nine months ended ~~May~~August 31, 2016.

Conversion of debt

2016 Transactions

On January 26, 2016, the Company issued 297,619 shares of common stock to Typenex Co-Investment, LLC in conversion of $12,500 of accrued interest. The shares of common stock were valued at $119,048 resulting in a loss on conversion of $106,548.

On January 28, 2016, the Company issued 100,000 shares of common stock to Black Mountain Equities, Inc. in conversion of $12,830 of principal and accrued interest. The shares of common stock were valued at $40,000 resulting in a loss on conversion of $27,170.

On January 29, 2016, the Company issued 60,000 shares of common stock to JMJ Investments, Inc in conversion of $3,024 of accrued interest. The shares of common stock were valued at $24,000 resulting in a loss on conversion of $20,976.

Common Stock Warrants

On December 2, 2015, in connection with issuing the Livingston Note (see Note 8d7d), the Company issued 100,000 common stock warrants which were valued at $30,987.

In January 2016, in connection with an amendment to the LG Capital Funding, LLC Note (see Note 7f6f), the Company issued 75,000 common stock warrants, which were valued at $26,250.

Stock based compensation

During the three and ~~six~~nine months ended ~~May~~August 31, 2016, the Company issued nil and 50,000 shares, respectively, of common stock to service providers. ~~During~~ During the three and ~~six~~nine months ended ~~May~~August 31, 2015, the Company issued ~~100~~127,~~000~~500 and ~~312~~440,~~500~~000 shares, respectively, of common stock to service providers. The shares of common stock are being expensed over the term of the services being provided. As a result of these issuances, the Company has recorded stock-based compensation during the three and ~~six~~nine months ended ~~May~~August 31, 2016 of nil and $20,000, respectively. The Company recorded stock-based compensation during the three and ~~six~~nine months ended ~~May~~August 31, 2015 of $~~100~~428,~~000~~654 and $~~251~~680,~~833~~487, respectively. The fair value of the shares was determined based on the closing price of the Company’s common stock on the issuance date and is being recognized over the term of the respective consulting agreement.

1312. SUBSEQUENT EVENTS

In accordance with ASC 855-10, the Company has analyzed its operations subsequent to ~~May~~August 31, 2016 through ~~December~~March 621, ~~2018~~2019, the date these financial statements were issued and has determined that there are no material subsequent events to disclose in these financial ~~statements~~ statements except for the following.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

Convertible Notes Payable

On October 5, 2016, November 30, 2016, and February 22, 2017, the Company entered into three convertible promissory notes with DPW Holdings, Inc. (NYSE: DPW) (the “DPW Notes”), a related party. Under the terms of the DPW Notes, the Company borrowed the sum of $1,575,000. The DPW Notes featured an original issue discount of $75,000, resulting in net funding to the Company of $1,500,000. The DPW Notes were due in two years and accrued interest at 12% per annum. The DPW Notes, were convertible into shares of the Company’s common stock at a conversion price of $0.745 per share.

On September 6, 2017, DPW Holdings, Inc. and the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with an effective date of August 21, 2017 pursuant to which DPW will provide the Company a non-revolving credit facility of up to $10,000,000, for a period ending on August 21, 2019.

In consideration of entering into the Loan Agreement, the DPW Notes were cancelled and the DPW Notes were consolidated and a new Convertible Promissory Note was issued (the “New DPW Note”). At December 3, 2018, DPW has provided loans to the Company in the principal amount $6,795,346 and, in addition to the 12% convertible promissory notes, the Company has issued to DPW warrants to purchase 13,590,692 shares of the Company’s common stock. The New DPW Note is due in two years and accrues interest at 12% per annum on the face amount. The New DPW Note contains standard events of defaults. Future advances under the Loan Agreement, if any, will be evidenced by a convertible promissory containing a conversion price feature at $0.50 per share and warrant with an exercise price of $0.50 per share. Further, under the terms of the Loan Agreement, the New DPW Notes are secured by the assets of Avalanche.

Mr. Ault is the Chief Executive Officer and Chairman of the Board of Directors of DPW’s Board of Directors and the Chairman of the Company’s Board of Directors. Mr. William B. Horne is the Chief Financial Officer and a director of DPW and the Chief Financial Officer and a director of the Company.

Preferred Stock

On March 6, 2017, the Company withdrew its former Class A Convertible Preferred Stock (the “Previous Class”), all shares of which were converted into shares of Common Stock as of September 21, 2015. The certificate of designations of the Previous Class was originally filed with the Secretary of State of the State of Nevada on July 31, 2014.

On March 7, 2017, the Company filed a new Certificate of Designations, Preferences, Rights and Limitations of Class A Convertible Preferred Stock (the “Class A Certificate of Designations”) with the Secretary of State of the State of Nevada, setting forth the terms of the Class A Shares.

The Class A Shares each carry a stated value of $20.00. The Class A Shares shall vote together with the shares of Common Stock as a single class and, regardless of the number of Class A Shares outstanding, provided that at least 25,000 of such Class A Shares are outstanding, shall represent eighty percent (80%) of all votes entitled to be voted at any annual or special meeting of shareholders of the Company or action by written consent of shareholders, including any shares of preferred stock other than the Class A Shares that are voted with the Common Stock. Each outstanding Class A Share shall represent its proportionate share of the 80% which is allocated to the outstanding Class A Shares. The Class A Shares are convertible at the Holder’s option into shares of Common Stock of the Company at a conversion price derived by dividing the stated value of each Class A Share by $0.50 per share, subject to customary adjustment, which conversion may occur at any time at the option of the Holder.

On March 7, 2017, the Company entered into an agreement (the “Exchange Agreement”) with Philou pursuant to which it agreed to issue to Philou 50,000 shares of its newly created Class A Convertible Preferred Stock (the “Class A Shares”) and 5,000,000 common stock warrants in exchange for the surrender by Philou of 2,000,000 shares of its Common Stock. On April 26, 2017, the Class A Shares were issued simultaneously with the surrender and cancellation of the 2,000,000 shares of common stock. The warrants have a five year term and an exercise price of $0.35 per share.

On March 7, 2017, the Company filed the Certificate of Designations, Preferences, Rights and Limitations of Class B Convertible Preferred Stock (the “Class B Certificate of Designations”) with the Secretary of State of the State of Nevada, setting forth the terms of its Class B Convertible Preferred Stock (the “Class B Shares”).

The Company designated 100,000 shares of its preferred stock, par value $0.001 per share, as Class B Shares. The Class B Shares will have a priority over all of the shares of Common Stock on liquidation or sale of the Company, at the rate of $50.00 per Class B Share, or a liquidation preference of $5,000,000 (the “Class B Stated Value”) as to all Class B Shares. The Class B Shares will pay an annual dividend (at the option of the Company, either in cash or in additional shares of Common Stock), in an amount that shall be the greater of (i) an annual rate of 5% per annum, or (ii) 5% of MTIX’s net income as determined in accordance with United States Generally Accepted Accounting Principles for the fiscal year then ended. The Class B Shares will vote with the Common Stock on all matters as to which shareholders of the Company are entitled to vote, on an “as converted” basis, as though all outstanding Class B Shares had been converted into Common Stock immediately prior to the taking of the record date for all shareholders entitled to vote at any regular or special meeting of the Company’s shareholders. Commencing two (2) years after the Closing Date, the Class B Shares shall be convertible into shares of Common Stock by dividing the Class B Stated Value by the Conversion Price applicable to the Notes. The Class B Shares shall contain the respective rights, privileges and designations as are set forth in the Certificate of Designations, Preferences, Rights and Limitations of Class B Convertible Preferred Stock.F-19

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Avalanche International, Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Common Stock

On February 28, 2017, the Company issued 250,000 shares of its common stock as payment for services to an officer. The shares were valued at $40,000, $0.16 per share.

On March 9, 2017, the Company issued an aggregate of 216,946 shares of its common stock as repayment of the principal and accrued interest on the convertible note due to GCEF Opportunity Fund, LLC (See Note 7g6g). The shares had an aggregate fair value of $32,542, an average of $0.15 per share.

On May 11, 2018, the Company issued an aggregate of 20,000 shares of its common stock as repayment of $4,550 in principal on the convertible note due to JMJ Financial (See Note 7d6d). The shares had an aggregate fair value of $4,550, an average of $0.23 per share.

MTIX, Ltd. Acquisition

On August 22, 2017, pursuant to the terms of a Share Exchange Agreement dated as of March 3, 2017, and as amended on July 13, 2017 and August 21, 2017 (the “Exchange Agreement”) with MTIX Limited, a company formed under the laws of England and Wales (“MTIX”) and the three (3) shareholders of MTIX (the “Sellers”), the Company completed its acquisition of MTIX. Upon the terms and subject to the conditions set forth in the Exchange Agreement, the Company acquired MTIX from the Sellers through the transfer of all issued and outstanding ordinary shares of MTIX (the “MTIX Shares”) by the Sellers to the Company in exchange (the “Exchange”) for the issuance by the Company of: (a) 7% secured convertible promissory notes (individually, a “Note” and collectively, the “Notes”) in the aggregate principal face amount of $9,500,000 to the Sellers in pro rata amounts commensurate with their current respective ownership percentages of MTIX’s ordinary shares, (b) (i) $500,000 in cash, $50,000 of which was paid on October 26, 2016, and (ii) 100,000 shares of the Company’s newly designated shares of Class B Shares to the principal shareholder of MTIX (the “Majority Shareholder”).

At the Closing the Company delivered to the Majority Shareholder and the two Sellers other than Majority Shareholder (the “Minority Shareholders”) three Notes, which Notes were in the principal face amount of $6,166,666 with respect to the Majority Shareholder and in the principal face amount of $1,666,667 with respect to each of the Minority Shareholders.

The Notes

The Notes bear interest at 7% per annum with interest payable (i) in cash upon maturity or in connection with any voluntary or mandatory conversion or, (ii) at the option of the Seller, in arrears on the first day of each calendar quarter after the date of issuance (the “Closing Date” ) by issuing and delivering that number of shares of Common Stock determined by dividing the interest accrued for such quarter by the average price per share for the ten (10) trading days immediately preceding the determination date as reported by Bloomberg, L.P.

Commencing two (2) years from the Closing Date, the Company may prepay any portion of the principal amount of the Notes without the prior written consent of the holders, provided, however, that the Company shall provide the Sellers with 90 days’ notice of such prepayment, and any prepayment must be undertaken on a pro rata basis for all Notes then outstanding. The holders of Notes shall have the right to convert any or all of the amount to be redeemed into common stock prior to prepayment.

~~Each Note ranks pari passu in right of payment with all other Notes now or hereafter issued in accordance with the Exchange Agreement and matures on the five~~F-year anniversary of the issuance date thereof. Subject to certain limitations, the Notes are convertible at any time at the option of the holder into shares of the Company’s common stock at a conversion price equal to either (i) if the aggregate market capital of the Company on the date of conversion (the “Market Cap”) is $35,000,000 or less, at a 25% discount to the Market Price, or (ii) if the Market Cap is greater than $35,000,000, at a 25% discount to the Market Price, provided that such discount shall be increased by dividing it by the quotient that shall be obtained by dividing $35,0000,000 by the Market Cap at the time of conversion, provided, however, any increase in the discount to the Market Price shall not result in a discount that is greater than a 75% discount (the “Conversion Price”). Notwithstanding the foregoing, in no event shall the Conversion Price be less than $0.35. In addition, the Company may force the conversion of the Notes at any time commencing two (2) years from the Closing Date, provided certain conditions are met.20

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Avalanche International, Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Each Note ranks pari passu in right of payment with all other Notes now or hereafter issued in accordance with the Exchange Agreement and matures on the five-year anniversary of the issuance date thereof. Subject to certain limitations, the Notes are convertible at any time at the option of the holder into shares of the Company’s common stock at a conversion price equal to either (i) if the aggregate market capital of the Company on the date of conversion (the “Market Cap”) is $35,000,000 or less, at a 25% discount to the Market Price, or (ii) if the Market Cap is greater than $35,000,000, at a 25% discount to the Market Price, provided that such discount shall be increased by dividing it by the quotient that shall be obtained by dividing $35,0000,000 by the Market Cap at the time of conversion, provided, however, any increase in the discount to the Market Price shall not result in a discount that is greater than a 75% discount (the “Conversion Price”). Notwithstanding the foregoing, in no event shall the Conversion Price be less than $0.35. In addition, the Company may force the conversion of the Notes at any time commencing two (2) years from the Closing Date, provided certain conditions are met.

Security Agreement

The Notes are secured, pursuant to a Security Agreement, by a lien on certain of the Company’s assets, including but not limited to the intellectual property of MTIX. Upon the occurrence of an event of default under the Notes, a majority in interest of the Notes may require the Company to repay all of its Notes in cash, at a price equal to 100% of the principal, accrued and unpaid interest and any amounts, costs and liquidated damages, as applicable.

Registration Rights Agreement

In connection with the Exchange, the Company and the Sellers entered into a Registration Rights Agreement under which the Company shall be required to file a registration statement with the Commission covering the resale of the shares of the Common Stock issuable pursuant to conversion of: (i) the Notes eighteen (18) months from the Closing Date, and (ii) the Class B Shares twenty-four (24) months from the Closing Date. In addition, the Company use its best efforts to have the registration statement declared effective as soon as practicable, but in no event later than 90 days after the filing date if the registration statement is not subject to a full review by the Commission, or 120 days after filing if the registration statement is subject to a full review by the Commission. The Company will be subject to certain monetary penalties, as set forth in the Registration Rights Agreement, if the registration statement is not filed, does not become effective on a timely basis, or does not remain available for the resale (subject to certain allowable grace periods) of the Registrable Securities, as such term is defined in the Registration Rights Agreement.

MTIX, Ltd. And DPW Agreement

On March 14, 2017, DPW entered into an agreement with MTIX to manufacture and deliver products, which refers to MTIX’s patented, technical textile treatment systems that utilize MTIX’s proprietary laser/plasma hybrid processing technology in exchange for $50.0 million plus a $750,000 annual management fee. MTIX may cancel any order at any time at its’ own discretion. Upon cancellation, MTIX is liable for all verified material and labor expenses incurred up to the date of cancellation plus any cancellation charges owed by DPW to subcontractors.

MTIX, Ltd. Exchange Agreement

On December 5, 2017, DPW entered into an exchange agreement with WT Johnson & Sons (Huddersfield) Limited (the “WT Johnson”), pursuant to which the Company issued to the WT Johnson, (a) a convertible promissory note in the principal amount of $600,000 (“Note A”), and (b) a convertible promissory note in the principal amount of $1,667,766 (“Note B”), in exchange for cancellation of (i) an outstanding loan made by WT Johnson to MTIX in the amount of $265,666; and (ii) cancellation of an aggregate of $2,002,500 owed by MTIX to WT Johnson pursuant to an Agreement for the Sale and Purchase of a Textile Multi-Laser Enhancement Technology Machine dated as of July 21, 2017 by and between MTIX and WT Johnson.

Note A was convertible into DPW’s common stock at a conversion price of $1.00 per share, does not bear interest, and matured two years from issuance. Note B was convertible into DPW’s common stock at a conversion price of $0.85 per share, does not bear interest, and matured two years from issuance. However, WT Johnson did not have the right to convert any portion of Note B, following receipt by WT Johnson of an aggregate of $2,267,766 of gross proceeds from the sale of shares of common stock issued upon conversion of Note A or Note B.

During December 2017, DPW issued 600,000 shares of its common stock upon the conversion of Note A and WT Johnson notified DPW that gross proceeds during the month of December 2017 from sales of the 600,000 shares of common stock were sufficient to satisfy the entire $2,267,766 obligation. As a result of entering into the exchange agreement with WT Johnson, MTIX is obligated to pay DPW $2,668,266, consisting of the amount of the exchange agreement of $2,267,766 and a value added tax of $400,500 from the sale of the Textile Multi-Laser Enhancement Technology Machine. Concurrent with entering into the exchange agreement, MTIX issued a promissory note in the amount of $2,668,266 to DPW and Note B was cancelled.

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Avalanche International, Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Philo Group, LLC Note Receivable

Between June 2016 to November 2017, the Company provided $947,092 in financing to Philo under the terms of a Senior Secured Property Note dated April 4, 2016, as amended (the “Philo Note”). The Philo Note bears interest at a rate of sixteen percent (16%) per year, requires monthly interest payments, and was due within six (6) months from the date of issue.

Stock Incentive Plan

On October 27, 2016, subject to stockholder approval, the Company’s Board of Directors approved the Company’s 2016 Stock Incentive Plan (the ”Plan”), which provides for the issuance of a maximum of three million (3,000,000) shares of the Company’s common stock to be offered to the Company’s directors, officers, employees, and consultants. Options granted under the Plan will have an exercise price equal to or greater than the fair market value of the underlying common stock at the date of grant and become exercisable based on a vesting schedule determined at the date of grant. The options will expire between 5 and 10 years from the date of grant. Restricted stock awards granted under the Plan are subject to a vesting period determined at the date of grant.

On October 27, 2016, the Company’s Board of Directors granted incentive stock option awards for 1,000,000 shares of common stock to each of the Company’s Chairman, President and Chief Executive Officer and Chief Financial Officer (collectively, the “Stock Option Grants”). The Stock Option Grants were issued pursuant to the Plan. Upon obtaining stockholder approval for the Plan an accounting grant date will be established. The Stock Option Grants have an exercise price of $0.16 and are exercisable for seven years. The Stock Option Grants will initially vest equally in annual tranches over a three (3) year period beginning on October 27, 2017. Upon closing of the acquisition of MTIX, the vesting terms of the options change and will vest 50% upon closing and 50% one year after closing.

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Avalanche International, Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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Table of Contents

ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. Words such as “anticipates,” “expects,” “intends,” “goals,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” “will,” “would,” “should,” “could,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, uncertain events or assumptions, and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on management's expectations as of the date of this filing and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include those described throughout this report and our Annual Report on Form 10-K for the fiscal year ended November 30, 2015, particularly the “Risk Factors” sections of such reports. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the Securities and Exchange Commission that disclose risks and uncertainties that may affect our business. The forward-looking statements in this Form 10-Q do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that had not been completed as of ~~December~~March 321, ~~2018~~2019. In addition, the forward-looking statements in this Form 10-Q are made as of the date of ~~this~~ this filing, and we do not undertake, and expressly disclaims any duty, to update such statements, whether as a result of new information, new developments or otherwise, except to the extent that disclosure may be required by law.

General

Avalanche International Corp. (the “Company” or “Avalanche”) is a holding company currently engaged in acquiring and/or developing businesses in which the Company maintains a controlling interest. The Company anticipates that its subsidiaries will be engaged in a number of diverse business activities. The Company initially had two wholly-owned subsidiaries, Smith and Ramsay Brands, LLC (“SRB”) and Restaurant Capital Group, LLC (“RCG”). SRB was formed on May 19, 2014, and RCG was formed on October 22, 2015. SRB was originally formed as a manufacturer and distributor of flavored liquids for electronic vaporizers and eCigarettes and accessories; this business was discontinued in June 2015. RCG was formed to hold the Company’s investments in the restaurant industry.

The Company is engaged in a variety of activities which we believe will expand the number and type of businesses in which we invest and ultimately have a controlling interest. The Company identifies investment opportunities through an extensive network of contacts with investment banking and venture capital firms and other associations with high net-worth individuals and individuals at universities such as the University of South Florida and the Byrd Institute. Upon identification of an investment opportunity the Company relies upon the executive management team to conduct a thorough evaluation of the target and its technology. As required, the executive management team may consult with individuals that have specialized expertise in the target industry. In the case of an investment where the executive management team is satisfied with its evaluation, the basic terms of an investment are negotiated directly by the executive management team and, depending on the amount of the transaction, presented to the Board for approval. Upon mutual acceptance of the basic terms, outside counsel would prepare the transaction investment documents.

Avalanche’s operating businesses are managed on a centralized basis. The Company’s senior management participates in and is ultimately responsible for significant capital allocation decisions, investment activities and the selection of the key executive officers to head each of the operating businesses. Our capital allocation decisions are based on extensive analysis of potential subsidiary companies' business operations supported by an in-depth understanding of the quality of their revenues and cash flow potential, variability of costs and the inherent value of their assets, including proprietary intangible assets and intellectual property.

Restaurant Capital Group, LLC

On April 13, 2016, RCG entered into an agreement to finance a new restaurant owned by Philo Group, LLC (“Philo”). The restaurant is named Giulia and features Italian fusion cuisine and two stylish full-service bars with an intimate lounge atmosphere. Giulia, which opened in March 2017, is located near the Financial District, LA Live, and the Staples Center in downtown Los Angeles. Philo has placed a significant emphasis on the distinctive, contemporary interior design and decor of Giulia. We believe that this stylish restaurant design and decor will contribute to the distinctive dining experience enjoyed by customers and generate higher annual sales per square foot that than is typical in our industry.

Our initial investment in Philo was structured as a loan and between June 2016 to November 2017, the Company provided $947,092 in financing to Philo under the terms of a Senior Secured Property Note dated April 4, 2016, as amended (the “Philo Note”). The Philo Note bears interest at a rate of sixteen percent (16%) per annum and is personally guaranteed by the principal of Philo and secured by all assets of Philo. InWe ~~addition, we~~ expect to renegotiate the terms of our investment in Philo such that we obtain a significant ownership in Giulia.

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Smith and Ramsay Brands, LLC

The Company established SRB as a manufacturer and distributor of flavored liquids for electronic vaporizers and eCigarettes and accessories (the “Vape Business”). SRB had intended to aggressively expand the Vape Business with additional flavors in its signature brand and by expanding through additional new brands and the acquisition and distribution of signature and non-signature accessories. In mid-Fall of 2014, SRB began a targeted rollout of its Vape Business and during June 2015 we made the decision to ~~discontinue~~no longer pursue ~~operations~~opportunities in the Vape Business. ~~The~~due ~~decision~~ to ~~discontinue~~market ~~this~~conditions ~~line~~that ofled ~~business~~to ~~was~~declining ~~based~~sales ~~upon~~and ~~the~~margins ~~highly competitive marketplace~~ and ~~exceedingly~~so ~~small gross margins~~ that we ~~were~~could ~~realizing in the Vape Business combined with other business opportunities, such~~focus ason ~~the~~our restaurant business, ~~where~~which we expect towill generate greater returns.

RESULTS OF OPERATIONS

THREE MONTHS ENDED ~~MAY~~AUGUST 31, 2016 COMPARED TO THREE MONTHS ENDED ~~MAY~~AUGUST 31, 2015

The following table summarizes the results of our operations for the three months ended ~~May~~August 31, 2016 and 2015.

	For the Three Months Ended May 31,
	For the Three Months Ended August 31,
	2016			2015
Revenue - related party	$	-160,000		$	~~23,547~~-
Revenue		-5,438			~~120~~169
Total Revenue		-165,438			~~23,667~~169
Cost of revenue		-			(~~20,758~~258	)
Gross profit		-165,438			~~2,909~~(89	)
Total operating expenses		196,225			313,005
Total general and administrative expenses		207,689			488,466
Loss from operations		(~~196~~42,~~225~~251	)		(~~310~~488,~~096~~555	)
Other income (expense)
Interest income		4251,~~268~~019			-6,074
Interest expense, including penalties		(109,351	)		(68,669	)
Interest expense, including default penalties		(59,119	)		(28,208	)
Interest expense - debt discount		(118,351	)		(84,178	)
Interest expense – accretion of debt discount		(77,401	)		(164,685	)
Loss on issuance of convertible debt		(68,522	)		(301,309	)
Excess interest on issuance of convertible debt		(7,614	)		(55,093	)
Change in fair value of bifurcated conversion options and derivative warrant liabilities		(231,937	)		182,776
Change in fair value of bifurcated derivatives and warrant liabilities		451,586			(2,968	)
Total other expense, net		(485,893	)		(271,380	)
Total other income (expense), net		358,471			(244,880	)
Net loss	$	(682,118	)	$	(581,476	)
Net income (loss)	$	316,220		$	(733,435	)

Operating expenses

For the Three Months Ended May 31,

For the Three Months Ended August 31,

2016

2015

$ Change

Stock-based compensation

~~12,444~~-

~~195~~331,~~125~~292

(~~182~~331,~~681~~292

)

Professional fees

3213,~~037~~530

7328,~~791~~974

(4115,~~754~~444

)

Salaries and employee benefits

~~103~~157,~~953~~675

1328,~~814~~858

90128,~~139~~817

General and administrative

4736,~~791~~484

3099,~~275~~342

17(62,~~516~~858

)

Total operating expenses

~~196~~207,~~225~~689

~~313~~488,~~005~~466

(~~116~~280,~~780~~777

)

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Revenue - related party

On May 1, 2016, we entered into a management services agreement (the “MSA”) with Alzamend Neuro, Inc. (“Alzamend”), a related party. Alzamend was formed on February 26, 2016 under the laws of the State of Delaware to acquire and commercialize patented intellectual property and the know-how to prevent, treat and cure Alzheimer’s. Avalanche provides management, consulting and financial services to Alzamend. Such services include advice and assistance concerning any and all aspects of operations, planning and financing of Alzamend and conducting relations with accountants, attorneys, financial advisors and other professionals. The term of the MSA, as amended, is for the period May 1, 2016 to December 31, 2017, and may be extended by written agreement, with Avalanche having initially received $40,000 per month and, beginning February 2017, currently receiving $20,000 per month for the remainder of 2017. During the three months ended August 31, 2016, the Company recorded $160,000 in revenue related to the management service agreement with Alzamend.

Stock-based compensation

Stock-based compensation expense for the three months ended ~~May~~August 31, 2016 was ~~$12,444~~nil compared to $~~195~~331,~~125~~292 for the three months ended ~~May~~August 31, 2015. During the three months ended May 31, 2016, the Company issued 50,000 shares of common stock as payment for services related to general corporate matters. The shares were valued based on the closing price of the Company's common stock on the issuance date, and were expensed over the term of the consulting agreement. During January 2015, the Company ~~had~~ entered into two consulting agreements for services related to general corporate matters. The terms of these consulting agreements were from six to eleven months and provided for the issuance of 212,500 shares of common stock as payment for the services. The shares were valued at $340,250 and were expensed over the terms of the consulting agreements. The January 2015 issuances resulted in stock-based compensation of $~~195~~331,~~125~~ 292 during the three months ended ~~May~~August 31, 2015.

Professional fees

During the three months ended ~~May~~August 31, 2016, the Company incurred professional fees of $3213,~~037~~530, a decrease of $4115,~~754~~444 as compared to the three months ~~ended~~ ~~May~~ended August 31, 2015. The decrease is attributed to ~~several~~an ~~factors:~~increase of $4,110 in consulting and audit fees caused by an overall increase in operating activities during the three months ended August 31, 2016. This increase was offset by a decrease of $19,553 in legal fees due to an overall decrease in the number of financing transactions conducted and the level of complexity of the transactions entered into during fiscal year 2015.

· The Company experienced a decrease of $28,378 in legal fees due to an overall decrease in the number of financing transactions conducted and the level of complexity of the transactions entered into during fiscal year 2015.

· In December 2014, the Company initiated multiple projects to increase awareness of the Company. As a result, during the three months ended May 31, 2015, the Company incurred $20,000 in fees for public and investor relations services. In the quarter ended May 31, 2016, due to the emphasis on ongoing projects such as the pending acquisition of MTIX, the Company did not make an investment in these types of activities.

Salaries and employee benefits

During the three months ended ~~May~~August 31, 2016, the amount of the Company’s salaries and employee benefits were $~~103~~157,~~953~~675, an increase of $90128,~~139~~ 817 as compared to the $1328,~~814~~858 for the three months ended ~~May~~August 31, 2015. The increase in salaries and employee benefits is primarily ~~attributed~~ attributed to Board Fees of $60,000, ~~monthly compensation~~ paid to the Company’s Chairman, and to a lesser extent the expansion of the ~~management~~ management team. In November 2015, the Company approved the payment of monthly fees to its Chairman, Milton C. Ault III, in the amount of $20,000.

On May 14, 2014, the Company entered into an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations (the “Agreement”) with John Pulos, its prior sole officer and director. In conjunction with the Agreement, there was a change in management and the Company began compensating its officers and directors. Prior to the resignation of Mr. Pulos, which was effective May 15, 2014, the Company did not recognize any compensation expense for the services of its director and officer. Subsequent to May 15, 2014, the Company began compensating its Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors (the “Chairman”) and in November 2015, the Company approved the payment of monthly fees to its Chairman, Milton C. Ault III, in the amount of $20,000.

General and administrative

During the three months ended ~~May~~August 31, 2016, the Company’s general and administrative expenses were $4736,~~791~~484, ana ~~increase~~decrease of $1762,~~516~~858 as compared to to the $3099,~~275~~342 for the three months ended ~~May~~August 31, 2015. The ~~increase~~decrease in general and administrative expenses is primarily due to a decrease of $23,524 related to anthe winding down of SRB and a decrease of 6,300 in marketing related activities. In December 2014, the Company initiated multiple projects to increase awareness of the Company and during the three months ended August 31, 2015, the Company incurred $6,300 in ~~travel~~fees for public and ~~meals~~investor ~~expense~~relations ~~related~~services. During the three months ended August 31, 2016, due to the emphasis on ongoing projects such as the pending acquisition of MTIX, the Company did not make an investment in these types of activities. These decreases were offset by an increase of $16,286 related to the start-up expenses of RCG.

Other Income and Expense

Other income and expense includes interest expense, amortization of discounts on notes payable, changes in the fair value of the Company’s derivative liabilities and losses recognized on issuances of the Company’s derivative liabilities.

Interest income

During the three months ended May 31, 2016 and 2015, interest income totaled $42,268 and nil, respectively. The increase in interest income is due to the secured promissory notes the Company entered into with JS Technologies, Inc. (“JST”) and Philo Group, LLC (“Philo”). The Company recorded interest of $31,200 from the amortization of original issue discounts and contractual interest of $11,068 based on the contractual interest rates on these two secured promissory notes.

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Interest income

During the three months ended August 31, 2016 and 2015, interest income totaled $51,019 and $6,074, respectively. The increase in interest income is due to the secured promissory notes the Company entered into with JS Technologies, Inc. (“JST”) and Philo Group, LLC (“Philo”). The Company recorded interest of $37,912 from the amortization of original issue discounts and contractual interest of $13,107 based on the contractual interest rates on these two secured promissory notes.

Interest expense

During the three months ended ~~May~~August 31, 2016, interest expense totaled $~~227~~136,~~702~~520, ana ~~increase~~decrease of $7456,~~855~~373, as compared to interest expense of $~~152~~192,~~847~~893 in ~~the~~ the three months ended ~~May~~August 31, 2015. The ~~increase~~decrease in interest expense was primarily due to ana ~~increase~~decrease in amortization of debt ~~discounts~~ discounts on convertible notes and notes payable ~~and an increase in the amount of the Company’s total borrowings~~. During the three months ended ~~May~~August 31, 2016 and 2015, the Company recorded amortization of debt discounts of $~~118~~77,~~351~~401 and $84164,~~178~~685, respectively~~, an increase of $34,173~~. The remaining increase in interest expense of $40,682 is primarily due to an increase in the amount of the Company’s total borrowings. At May 31, 2016, the outstanding principal balance of the Company’s convertible notes payable, notes payable and note payable, related party was $1,398,582 compared with $453,750 at May 31, 2015, an increase of $944,832.

Change in fair value of derivative liabilities

Changes in the fair value of the Company's derivative liabilities are attributed to the debt conversion ~~features~~options ~~embedded~~featured in the Company's convertible ~~promissory~~ promissory notes issued during the three months ended ~~May~~August 31, 2016 and 2015 and warrants which are accounted for as derivative ~~liabilities~~ liabilities totaled a ~~loss~~gain of $~~231~~451,~~937~~586 and a ~~gain~~loss of $~~182~~2,~~776~~968, respectively. The Company is required to mark-to-market the fair value of its conversion ~~feature~~options and warrant liabilities.

~~SIX~~NINE MONTHS ENDED ~~MAY~~AUGUST 31, 2016 COMPARED TO ~~SIX~~NINE MONTHS ENDED ~~MAY~~AUGUST 31, 2015

The following table summarizes the results of our operations for the ~~six~~nine months ended ~~May~~August 31, 2016 and 2015.

	For the Six Months Ended May 31,
	For the Nine Months Ended August 31,
	2016			2015
Revenue - related party	$	-160,000		$	3334,~~848~~017
Revenue		-5,438			4,814
Total Revenue		-165,438			38,~~662~~831
Cost of revenue		-			(29,~~292~~550	)
Gross profit		-165,438			9,~~370~~281
Total operating expenses		~~371~~579,~~995~~685			~~499~~1,~~835~~057,315
Loss from operations		(~~371~~414,~~995~~247	)		(~~490~~1,~~465~~048,034	)
Other income (expense)
Interest income		4899,~~708~~727			-6,074
Interest expense, including penalties		(192,671	)		(79,869	)
Interest expense, including default penalties		(251,789	)		(39,063	)
Interest expense - debt discount		(258,867	)		(84,178	)
Interest expense – accretion of debt discount		(336,269	)		(248,863	)
Loss on issuance of convertible debt		(71,061	)		(301,309	)
Excess interest on issuance of convertible debt		(78,675	)		(356,402	)
Loss on conversion of convertible debt		(154,694	)		-
Change in fair value of bifurcated conversion options and derivative warrant liabilities		10,206			182,776
Change in fair value of bifurcated derivatives and warrant liabilities		461,792			179,808
Total other expense, net		(~~618~~259,~~379~~908	)		(~~282~~458,~~580~~446	)
Net loss	$	(~~990~~674,~~374~~155	)	$	(~~773~~1,~~045~~506,480	)

Operating expenses

	For the Six Months Ended May 31,
	2016		2015		$ Change
Stock-based compensation	$	20,000	$	251,833	$	(231,833	)
Professional fees		90,001		153,915		(63,914	)
Salaries and employee benefits		194,952		36,735		158,217
General and administrative		67,042		57,352		9,690
Total operating expenses	$	371,995	$	499,835	$	(127,840	)

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Operating expenses

	For the Nine Months Ended August 31,
	2016		2015		$ Change

Stock-based compensation	$	20,000	$	680,487	$	(660,487	)
Professional fees		94,221		85,467		8,754
Salaries and employee benefits		352,627		31,769		320,858
General and administrative		112,837		259,592		(146,755	)
Total operating expenses	$	579,685	$	1,057,315	$	(477,630	)

Revenue - related party

On May 1, 2016, we entered into a management services agreement (the “MSA”) with Alzamend Neuro, Inc. (“Alzamend”), a related party. Alzamend was formed on February 26, 2016 under the laws of the State of Delaware to acquire and commercialize patented intellectual property and the know-how to prevent, treat and cure Alzheimer’s. Avalanche provides management, consulting and financial services to Alzamend. Such services include advice and assistance concerning any and all aspects of operations, planning and financing of Alzamend and conducting relations with accountants, attorneys, financial advisors and other professionals. The term of the MSA, as amended, is for the period May 1, 2016 to December 31, 2017, and may be extended by written agreement, with Avalanche having initially received $40,000 per month and, beginning February 2017, currently receiving $20,000 per month for the remainder of 2017. During the nine months ended August 31, 2016, the Company recorded $160,000 in revenue related to the management service agreement with Alzamend.

Stock-based compensation

Stock based compensation expense for the ~~six~~nine months ended ~~May~~August 31, 2016 was $20,000 as compared to $~~251~~680,~~833~~487 for the ~~six~~nine months ended ~~May~~August 31 , 2015, a decrease of $~~231~~660,~~833~~487. During the ~~six~~nine months ended ~~May~~August 31, 2016, the Company issued 50,000 shares of common stock as payment for services related to general corporate matters. The shares were valued based on the closing price of the Company's common stock on the issuance date, and were expensed over the term of the consulting agreement. During the ~~six~~nine months ended ~~May~~August 31, 2015, the Company entered into two consulting agreements for services related to general corporate matters. The terms of these consulting agreements were from six to eleven months and provided for the issuance of ~~312~~440,~~500~~000 shares of common stock as payment for the services. The aggregate fair value of these shares ~~were~~ ~~valued~~amounted atto $~~440~~583,~~250~~125 based on the closing price of the Company's common stock on the issuance date, and were expensed over the term of the consulting agreements.

Professional fees

During the ~~six~~nine months ended ~~May~~August 31, 2016, the Company incurred professional fees of $8994,~~997~~221, aan ~~decrease~~increase of $578,~~554~~754 as compared to the ~~six~~nine months ~~ended~~ ~~May~~ended August 31, 2015. The ~~decrease~~increase is attributed to ~~several~~an ~~factors:~~increase of $45,148 in consulting and audit fees caused by an overall increase in operating activities during the nine months ended August 31, 2016. This increase was offset by a decrease of $38,370 in legal fees due to an overall decrease in the number of financing transactions conducted and the level of complexity of the transactions entered into during fiscal year 2015.

· The Company experienced a decrease of $20,617 in legal fees due to an overall decrease in the number of financing transactions conducted and the level of complexity of the transactions entered into during fiscal year 2015.

· In December 2014, the Company initiated multiple projects to increase awareness of the Company. As a result, during the six months ended May 31, 2015, the Company incurred $35,000 in fees for public and investor relations services. In the six months ended May 31, 2016, due to the emphasis on ongoing projects such as the pending acquisition of MTIX, the Company did not make an investment in these types of activities.

Salaries and employee benefits

During the ~~six~~nine months ended ~~May~~August 31, 2016, the amount of the Company’s salaries and employee benefits were $~~194~~352,~~952~~627 an increase of $~~158~~320,~~217~~858 as ~~compared~~ compared to the $3631,~~735~~769 for the ~~six~~nine months ended ~~May~~August 31, 2015. The increase in salaries and employee benefits is primarily attributed to Board Fees of $180,000, ~~monthly compensation~~ paid to the Company’s Chairman, and to a lesser extent the expansion of the ~~management~~ management team. In November 2015, the Company approved the payment of monthly fees to its Chairman, Milton C. Ault III, in the amount of $20,000.

On May 14, 2014, the Company entered into the Agreement with John Pulos, its prior sole officer and director. In conjunction with the Agreement, there was a change in management and the Company began compensating its officers and directors. Prior to the resignation of Mr. Pulos, which was effective May 15, 2014, the Company did not recognize any compensation expense for the services of its director and officer. Subsequent to May 15, 2014, the Company began compensating its Chief Executive Officer, Chief Financial Officer and Chairman and in November 2015, the Company approved the payment of monthly fees to its Chairman, Milton C. Ault III, in the amount of $20,000.

General and administrative

During the ~~six~~nine months ended ~~May~~August 31, 2016, the Company’s general and administrative expenses were $67112,~~046~~837, ana ~~increase~~decrease of $9146,~~694~~755 as compared to the $57259,~~352~~592 for the ~~six~~ nine months ended ~~May~~August 31, 2015. The ~~increase~~decrease in general and administrative expenses is primarily due to a decrease of $91,563 related to anthe ~~increase~~winding down of SRB and a decrease of 82,668 in ~~travel~~marketing related activities. In December 2014, the Company initiated multiple projects to increase awareness of the Company and during the nine months ended August 31, ~~meals~~2015, ~~expense~~the ~~related~~Company incurred $82,668 in fees for public and investor relations services. During the nine months ended August 31, 2016, due to the emphasis on ongoing projects such as the pending acquisition of MTIX, the Company did not make an investment in these types of activities. These decreases were offset by an increase of $30,580 related to the start-up expenses of RCG.

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Other Income and Expense

Other income and expense includes interest income, interest expense, amortization of discounts on notes payable, changes in the fair value of the Company’s derivative liabilities and losses recognized on issuances of the Company’s derivative liabilities.

Interest income

During the ~~six~~nine months ended ~~May~~August 31, 2016 and 2015, interest income totaled $4899,~~708~~727 and ~~nil~~$6,074, respectively. The increase in interest income is due to the secured promissory notes the Company entered into with JST and Philo. The Company recorded interest of $3578,~~174~~412 from the ~~amortization~~ amortization of original issue discounts and contractual interest of $1321,~~534~~315 based on the contractual interest rates on these two secured promissory notes.

Interest expense

During the ~~six~~nine months ended ~~May~~August 31, 2016, interest expense totaled $~~451~~588,~~538~~058, an increase of $~~287~~300,~~491~~132, as compared to interest expense of $~~164~~287,~~047 in~~926 in the ~~six~~nine months ended ~~May~~August 31, 2015. The increase in interest expense was primarily due to an increase in amortization of debt discounts on convertible notes and notes payable and an increase in the amount of the Company’s total borrowings. During the ~~six~~nine months ended ~~May~~August 31, 2016 and 2015, the Company recorded amortization of debt discounts of $~~258~~298,~~867~~591 and $84248,~~178~~863, respectively, an increase of $~~174~~49,~~869~~728. The remaining increase in interest expense of $~~112~~212,~~802~~826 is primarily due to an increase in the amount of the Company’s total borrowings.

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Change in fair value of derivative liabilities

Changes in the fair value of the Company's ~~derivative~~ derivative liabilities are attributed to the debt conversion features embedded in the Company's convertible promissory notes issued ~~during~~ during the ~~six~~nine months ended ~~May~~August 31, 2016 and 2015 and warrants which are accounted for as derivative liabilities totaled a gain of of $10461,~~206~~792 and $~~182~~179,~~776~~808, respectively. The Company is required to mark-to-market the value of its conversion feature liabilities.

FINANCIAL CONDITION

Our negative working capital of $2,~~927~~614,~~449~~313 as of ~~May~~ August 31, 2016, increased by $~~840~~526,~~060~~924 from our November 30, 2015 negative working capital of $2,087,389. Our operating losses during the ~~six~~nine months ended ~~May~~August 31, 2016 were funded primarily by proceeds from convertible notes payable and loans payable of $~~563~~714,~~625~~745.

LIQUIDITY AND CAPITAL RESOURCES

We have historically financed operations through cash flows from equity transactions and debt financings. The outstanding principal balance of the Company’s convertible notes payable and notes payable increased $~~624~~640,~~957~~380 during the ~~six~~nine months ended ~~May~~August 31, 2016 as compared to November 30, 2015. ~~Due~~The Company has incurred recurring losses and reported losses available to common stockholders for the nine months ended August 31, 2016 and 2015, totaling $674,155 and $1,506,480, respectively, as well as an accumulated deficit as of August 31, 2016 amounting to $3,886,972. As a result of the Company’s continued losses, at August 31, 2016, the Company’s current liabilities significantly exceed current assets, resulting in negative working capital of $2,614,313. Further, the Company does not have adequate cash to cover projected operating costs for twelve months from the issuance date of these financial statements and to repay convertible notes payable and notes payable in the aggregate principal amount of $679,278 that are in default at August 31, 2016. Due to the uncertainty of our ability to meet our current operating expenses, there is substantial doubt about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that led to this disclosure. The continuation and expansion of our business is dependent upon either obtaining future equity or debt financings or achieving profitable operations in order to repay the existing short-term debt and to provide a sufficient source of operating capital. No assurances can be made that the Company will be successful in obtaining equity or debt financing needed to continue to fund its operations, or that the Company will achieve profitable operations and positive cash flow. Our inability to take these actions as and when necessary would materially adversely affect our liquidity, results of operations and financial condition.

As reflected in the Company’s condensed consolidated statements of cash flows for the ~~six~~nine months ended ~~May~~August 31, 2016 and 2015, the Company’s ~~reported~~ reported net loss is comprised of non-cash charges, net of $~~485~~81,~~492~~010 and $~~456~~1,~~763~~105,944, respectively. A summary of these non-cash charges is is as follows:

	For the Six Months Ended May 31,
	2016			2015
Stock-based compensation to consultants	$	20,000		$	251,833
Stock issued for loan fees		-			50,314
Amortization expense-loan fees		-			(48,095	)
Interest income on amortization of original issue discount		(35,174	)		-
Interest expense on warrant issuance		26,250			-
Loss on issuance of convertible debt		71,061			301,309
Loss on conversion of convertible debt		154,694			-
Change in fair value of derivative liability		(10,206	)		(182,776	)
Amortization of debt discount		258,867			84,178
Non-cash items included in net loss	$	485,492		$	456,763

Net cash used in operating activities for the six months ended May 31, 2016 was $200,041, excluding the non-cash charges, was impacted by changes in working capital components of $304,841 primarily related to an increase in accrued interest on convertible and promissory notes payable of $155,712.

Net cash used in investing activities for the six months ended May 31, 2016 included payments of $345,000 for notes receivable to Philo offset by proceeds of $19,674 from notes receivable from JST. No further amounts are due from JST.

On April 13, 2016, through our wholly-owned subsidiary, Restaurant Capital Group, LLC (“RCG”) we entered into an agreement to finance a new restaurant owned by Philo. The restaurant, which opened in March 2017, is located in downtown Los Angeles, California.

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Between April 13, 2016 and May 31, 2016, the Company provided $250,000 in financing to Philo under the terms of a Senior Secured Property Note dated April 4, 2016, as amended (the “Philo Note”). The Philo Note bears interest at a rate of sixteen percent (16%) per annum, requires monthly interest payments, and was due within six (6) months from the date of issue. Due to delays in the opening of the restaurant, the Philo Note has not yet been repaid. The Philo Note features an original issue discount of $75,000 and allows for legal fees up to $5,000. The Philo Note is personally guaranteed by the principal of Philo and secured by all assets of Philo. In addition, the principal of Philo has agreed to further secure the loan by pledging several pieces of real property located in California.

	For the Nine Months Ended August 31,
	2016			2015

Stock-based compensation to consultants	$	20,000		$	680,487
Interest income on amortization of original issue discount		(73,086	)		-
Interest expense on warrant issuance		26,250			-
Loss on issuance of convertible debt		78,675			356,402
Loss on conversion of convertible debt		154,694			-
Change in fair value of derivative liability		(461,792	)		(179,808	)
Amortization of debt discount		336,269			248,863
Non-cash items included in net loss	$	81,010		$	1,105,944

Net cash used in ~~financing~~operating activities for the ~~six~~nine months ended ~~May~~August 31, 2016 ~~included~~was ~~proceeds from convertible notes of~~ $~~157~~337,~~000~~089, ~~notes~~excluding ~~payable~~the ofnon-cash ~~$406~~charges,~~625 ($51,625~~ ~~from~~was ~~related~~impacted ~~parties)~~by ~~and~~changes ~~$5,000~~in ~~from~~working capital ~~the~~components ~~sale~~ of 25$256,~~000~~056 ~~shares~~primarily ofrelated ~~common~~to ~~stock~~an ~~offset~~increase byin ~~payments~~accrued interest on convertible ~~notes of $5,000~~ and promissory notes payable of $36193,~~101 ($15,851 from related parties)~~333.

Net cash used in investing activities for the nine months ended August 31, 2016 included payments of $345,000 for notes receivable to Philo offset by proceeds of $48,333 from notes receivable from JST. No further amounts are due from JST.

On April 13, 2016, through our wholly-owned subsidiary, Restaurant Capital Group, LLC (“RCG”) we entered into an agreement to finance a new restaurant owned by Philo. The restaurant, which opened in March 2017, is located in downtown Los Angeles, California.

Between April 13, 2016 and May 31, 2016, the Company provided $250,000 in financing to Philo under the terms of a Senior Secured Property Note dated April 4, 2016, as amended (the “Philo Note”). The Philo Note bears interest at a rate of sixteen percent (16%) per annum, requires monthly interest payments, and was due within six (6) months from the date of issue. Due to delays in the opening of the restaurant, the Philo Note has not yet been repaid and is in default. The Company has not made a formal demand upon Philo for payment but has reserved its rights as provided for in the Philo Note. The Company is currently in discussions with Philo regarding payment of the Philo Note and actively monitoring the restaurant operations. The Philo Note features an original issue discount of $75,000 and allows for legal fees up to $5,000. The Philo Note is personally guaranteed by the principal of Philo and secured by all assets of Philo. In addition, the principal of Philo has agreed to further secure the loan by pledging several pieces of real property located in California.

Net cash used in financing activities for the nine months ended August 31, 2016 included proceeds from convertible notes of $307,000, notes payable of $407,745 ($52,745 from related parties) and $5,000 from the sale of 25,000 shares of common stock offset by payments on convertible notes of $32,192 and notes payable of $54,169 ($19,844 from related parties).

CRITICAL ACCOUNTING POLICIES

In our Annual Report on Form 10-K for the year ended November 30, 2015, we identified the critical accounting policies which affect our more significant estimates and assumptions used in preparing our consolidated financial statements. The basis for developing the estimates and assumptions within our critical accounting policies is based on historical information and known current trends and factors. The estimates and assumptions are evaluated on an ongoing basis and actual results have been within our expectations. We have not changed these policies from those previously disclosed in our Annual Report.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable for a smaller reporting company.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

Our principal executive officer and principal financial officer, with the assistance of other members of the Company's management, have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-~~15(e)~~ ~~and~~7 ~~15d~~-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report and has subsequently determined that our disclosure controls and procedures were not effective as of May 31, 2016 due to certain material weaknesses as described in our Form 10-K for our fiscal year ended November 30, 2015, as filed on April 28, 2017. As a result of such material weaknesses, our disclosure controls and procedures were not effective. Our management has worked and will continue to work to remediate the above material weaknesses in our disclosure controls and procedures.

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Our principal executive officer and principal financial officer, with the assistance of other members of the Company's management, have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report and has subsequently determined that our disclosure controls and procedures were not effective as of August 31, 2016 due to certain material weaknesses as described in our Form 10-K for our fiscal year ended November 30, 2015, as filed on April 28, 2017. As a result of such material weaknesses, our disclosure controls and procedures were not effective. Our management has worked and will continue to work to remediate the above material weaknesses in our disclosure controls and procedures.

Limitations on the Effectiveness of Disclosure Controls.

Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls.

Changes in Internal Control over Financial Reporting

During the most recent fiscal quarter 2016 (the first fiscal quarter of 2016) there were no significant changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Significant changes were and are being implemented and tested during the latter half of fiscal 2016 through the date of this report to remediate our material weaknesses in internal control over financial reporting. Management believes that such measures we have implemented to remediate the material weaknesses in internal control over financial reporting have had a favorable impact on our internal control over financial reporting. Changes in our internal control over financial reporting through the date of this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting are described below.

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Remediation Process for November 30, 2015 Material Weaknesses:

Management, in coordination with the input, oversight and support of our Board of Directors, has identified the measures below to strengthen our control environment and internal control over financial reporting.

We hired a new Chief Financial Officer in June 2016, who performs the following:

assists with documentation and implementation of policies and procedures and monitoring of controls,

prepares budgets, financial statements and journal entries,

reviews account reconciliations and journal entries.

While these remedial actions were implemented in fiscal year 2016, some may not be in place for a sufficient period of time to help us certify that material weaknesses have been fully remediated as of the end of fiscal year 2016. If the remedial measures described above are insufficient to address any of the identified material weaknesses or are not implemented effectively, or additional deficiencies arise in the future, material misstatements in our interim or annual financial statements may occur in the future and we may continue to be delinquent in our filings. We are currently working to improve and simplify our internal processes and implement enhanced controls, as discussed above, to address the material weaknesses in our internal control over financial reporting and to remedy the ineffectiveness of our disclosure controls and procedures. Any unremediated material weaknesses could have the effects described in Part I, Item 1A, “Risk Factors,” in our 2015 Form 10-K filed with the SEC on April 28, 2017, “In preparing our consolidated financial statements, our management determined that our disclosure controls and procedures were ineffective as of November 30, 2015 which could result in material misstatements in our financial statements.”

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PART II — OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

On or around April 19, 2016, we received from counsel for Typenex Co-Investment, LLC, a Utah limited liability company (“Typenex”), a written demand to accelerate and demand payment of the entire outstanding balance of the Convertible Note entered into between the Company and Typenex on May 29, 2015 (the “Typenex Note”). On June 7, 2016, Typenex filed suit in the State of Utah, the Third Judicial District Court, County of Salt Lake, for repayment of all principal, default effects, late fee and accrued interest (the “Typenex Suit”). According to the complaint, Typenex asserted an aggregate amount due, as of June 6, 2016, of $149,054. The Company’s answer to the complaint was filed on February 20, 2017. On April 4, 2017, the Company and Typenex agreed to settle the lawsuit for payment of $90,000, which was paid in April 2017. On May 9, 2017, an order of dismissal with prejudice was entered by the Third Judicial District Court.

There are no other material claims, actions, suits, proceedings, or investigations that are currently pending or, to the Company’s knowledge, threatened by or against the Company or respecting its operations or assets, or by or against any of the Company’s officers, directors, or affiliates

ITEM 1A.

RISK FACTORS

The risks described in Part I, Item 1A, “Risk Factors,” in our 2015 Form 10-K, could materially and adversely affect our business, financial condition and results of operations, and the trading price of our common stock could decline. These risk factors do not identify all risks that we face - our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. The Risk Factors section of our 2015 Annual Report on Form 10-K remains current in all material respects.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On December 2, 2015, the Company issued 100,000 warrants to a third party in connection with a loan to the Company. The warrants were valued at $30,987 and were expensed at the time of issuance as non-cash interest expense using the effective interest method. These securities were issued pursuant to Section 4(a)(2) of the Securities Act. These warrants were issued in reliance upon the exemption provided by Section 4(a)(2) of the Securities Act.

On December 10, 2015, the Company issued and sold to an accredited investor 25,000 shares of its common stock. This issuance resulted in aggregate gross proceeds, which were used for general operating expenses, to the Company of $5,000. These securities were sold in reliance upon the exemption provided by Section 4(a)(2) of the Securities Act and the safe harbor of Rule 506 under Regulation D promulgated under the Securities Act.

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On January 26, 2016, the Company issued 50,000 shares of its common stock as payment for services to a third party for consulting services. The shares were valued at $20,000, an average of $0.40 per share. These shares were issued in reliance upon the exemption provided by Section 4(a)(2) of the Securities Act.

During January 2016, the Company issued an aggregate of 457,619 shares of its common stock as payment for principal and accrued interest. The shares were valued at $183,048, an average of $0.40 per share. These shares were issued in reliance upon the exemption provided by Section 4(a)(2) of the Securities Act.

On February 28, 2017, the Company issued 250,000 shares of its common stock as payment for services to an officer. The shares were valued at $40,000, $0.16 per share. These shares were issued in reliance upon the exemption provided by Section 4(a)(2) of the Securities Act.

On March 9, 2017, the Company issued an aggregate of 216,946 shares of its common stock as payment for principal and accrued interest. The shares were valued at $32,542, an average of $0.15 per share. These shares were issued in reliance upon the exemption provided by Section 4(a)(2) of the Securities Act.

On April 26, 2017, pursuant to the terms of an Exchange Agreement entered on March 7, 2017 between the Company and Philou, the Company issued to Philou 50,000 shares of its newly created Class A Convertible Preferred Stock (the “Class A Shares”) in exchange for the surrender by Philou of 2,000,000 shares of its Common Stock. These Class A Shares were issued in reliance upon the exemption provided by Section 3(a)(9) of the Securities Act.

On January 23, 2018, the Company issued an aggregate of 200,000 shares of its common stock as payment for principal. The shares were valued at $280,000, an average of $1.40 per share. These shares were issued in reliance upon the exemption provided by Section 4(a)(2) of the Securities Act.

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On May 11, 2018, the Company issued an aggregate of 20,000 shares of its common stock as repayment of principal. The shares were valued at $4,550, an average of $0.23 per share. These shares were issued in reliance upon the exemption provided by Section 4(a)(2) of the Securities Act.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

None

ITEM 5.

OTHER INFORMATION

None

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ITEM 6.

EXHIBITS

Exhibit
Number		Description
3.1		Articles of Incorporation of Avalanche International, Corp. (Incorporated by reference to Exhibit 3.1 of the Company’s registration statement on Form S-1 filed with the Securities and Exchange Commission on January 17, 2012)

3.2		Bylaws of Avalanche International, Corp. (Incorporated by reference to Exhibit 3.2 of the Company’s registration statement on Form S-1 filed with the Securities and Exchange Commission on January 17, 2012)

3.3		Certification of Designation of Class A Convertible Preferred Stock of Avalanche International, Corp. (Incorporated by reference to Exhibit 3.2 of the Company’s quarterly report on Form 8-K filed with the Securities and Exchange Commission on March 9, 2017)

3.4		Certification of Designation of Class B Convertible Preferred Stock of Avalanche International, Corp. (Incorporated by reference to Exhibit 3.3 of the Company’s quarterly report on Form 8-K filed with the Securities and Exchange Commission on March 9, 2017)

10.1		Avalanche International, Corp. 2016 Stock Incentive Plan (Incorporated by reference to Exhibit 21 of the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission on April 28, 2016)

21		List of Subsidiaries (Incorporated by reference to Exhibit 21 of the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission on April 28, 2016)

31.1*		Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)

31.2*		Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)

32.1**		Certification of Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

___________________________________________________________________________________________________

* Filed herewith.

** Furnished herewith

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	AVALANCHE INTERNATIONAL, CORP.
Date: December 6, 2018	By:	/s/ Phillip Mansour
Date: March 21, 2019	By:	/s/ Phillip Mansour
		Philip Mansour
		Chief Executive Officer
		Principal Executive Officer
Date: December 6, 2018	By:	/s/ William B. Horne
Date: March 21, 2019	By:	/s/ William B. Horne
		William B. Horne
		Chief Financial Officer
		Principal Accounting Officer

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Filing Compare · AVALANCHE INTERNATIONAL, CORP.