Karbon-X revenue jumps to $55.9M but loss widens
Rhea-AI Filing Summary
Karbon-X Corp. (KARX) reports a year of rapid scale-up in voluntary carbon markets, with revenue for the year ended May 31, 2026 rising to $55.9 million from $3.2 million, driven mainly by industrial carbon credit trading through new subsidiaries formed after the Allcot asset acquisition.
Despite this growth, gross profit was only $0.86 million (a 1.5% margin) and the company recorded a net loss of $13.6 million, negative operating cash flow of $7.9 million and a shareholders’ deficit of $6.0 million. At May 31, 2026, Karbon-X had negative working capital of $4.0 million, total liabilities of $15.6 million and cash of $1.2 million, leading management and the auditor to highlight substantial doubt about its ability to continue as a going concern.
The business is funded largely through convertible notes, long-term debt and receivables financing; many notes convert at discounts to market, and the company estimated about 23.9 million shares were issuable on conversion at year-end, creating significant dilution risk. One customer represented 86% of revenue, and a large invoice to that customer was derecognized after collectibility was reassessed. Management also disclosed a material weakness in internal control over financial reporting due to rapid growth and complex transactions, with remediation efforts under way.
Positive
- Revenue surged to $55.9 million, up from $3.2 million, mainly from industrial carbon credit trading through new subsidiaries, showing the company can generate substantial top-line volume in voluntary carbon markets.
- The Allcot AG asset acquisition gave Karbon-X a long-dated project pipeline and new international entities, potentially supporting future carbon credit generation and geographic diversification.
Negative
- Auditor and management disclosed substantial doubt about going concern, with negative working capital of $4.0 million, a shareholders’ deficit of $6.0 million and reliance on new financing.
- Profitability is weak: gross margin fell to 1.5% and the company recorded a $13.6 million net loss and $7.9 million of cash used in operations in fiscal 2026.
- Capital structure is risky, with $5.4 million raised from convertible notes, $4.8 million from long-term debt and an estimated 23.9 million shares issuable on floating-price note conversions, creating significant potential dilution.
- Customer concentration is high: one customer generated 86% of revenue, and a large invoice of EUR 3,797,500 for undelivered credits was derecognized after collectibility concerns, increasing counterparty risk.
- Management reported a material weakness in internal control over financial reporting, tied to period-end reporting and complex non-routine transactions, which could lead to errors and delayed filings if not remediated.
- Exposure to DevvStream Holdings Inc. is uncertain after its Nasdaq delisting, and Karbon-X warns it may not realize the carrying value of the related equity securities and receivable.
- Shares trade on the OTCQB as a penny stock with limited and sporadic liquidity, adding market and execution risk for investors.
Filing Explained
As of September 10, 2026, Karbon-X reported 98,964,757 shares outstanding, compared with 94,885,028 at May 31, 2026; officers and directors held 17,063,219 shares, so the current ownership base is higher than the year-end base.
Key Figures
Key Terms
going concern financial
material weakness financial
Level 3 financial
beneficial ownership limitation regulatory
penny stock rule regulatory
receivables financing financial
FAQ
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Why is there substantial doubt about Karbon-X’s ability to continue as a going concern?
How reliant is KARX on debt and convertible notes for funding?
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the fiscal year ended
(Commission file number)
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
| (IRS Employer Identification No.) |
(Address and telephone number of principal executive offices)
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(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.
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 during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company | |||
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.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The aggregate market value of the voting and non-voting common equity held by non-affiliates as of November 28, 2025, the last business day of the registrant’s most recently completed second fiscal quarter, was $
At September 10, 2026, the registrant had
DOCUMENTS INCORPORATED BY REFERENCE: None.
TABLE OF CONTENTS
PART I |
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Item 1. | Description of Business |
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Item 1A | Risk Factors |
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Item 1B | Unresolved Staff Comments |
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Item 1C | Cybersecurity Risk |
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Item 2. | Description of Property |
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Item 3. | Legal Proceedings |
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Item 4. | Mine Safety Disclosures |
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PART II |
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Item 5. | Market for Common Equity and Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities |
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Item 6. | Selected Financial Data |
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Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operation |
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Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
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Item 8. | Financial Statements |
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Item 9. | Changes In and Disagreements With Accountants on Accounting and Financial Disclosures |
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Item 9A. | Controls and Procedures |
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Item 9B. | Other Information |
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Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
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PART III |
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Item 10. | Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act |
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Item 11. | Executive Compensation |
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Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
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Item 14. | Principal Accountant Fees and Services |
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PART IV |
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Item 15. | Exhibits |
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION
This Annual Report on Form 10-K, the other reports, statements, and information that we have previously filed or that we may subsequently file with the Securities and Exchange Commission, or SEC, and public announcements that we have previously made or may subsequently make include, may include, incorporate by reference or may incorporate by reference certain statements that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are intended to enjoy the benefits of that act. Unless the context is otherwise, the forward-looking statements included or incorporated by reference in this Form 10-K and those reports, statements, information and announcements address activities, events or developments that Karbon-X Corp. (hereinafter referred to as “we,” “us,” “our,” “our Company” or “Karbon-X”) expects or anticipates, will or may occur in the future. Any statements in this document about expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “will continue,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” and similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties, which could cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this document. All forward-looking statements concerning economic conditions, rates of growth, rates of income or values as may be included in this document are based on information available to us on the dates noted, and we assume no obligation to update any such forward-looking statements. It is important to note that our actual results may differ materially from those in such forward-looking statements due to fluctuations in interest rates, inflation, government regulations, economic conditions and competitive product and pricing pressures in the geographic and business areas in which we conduct operations, including our plans, objectives, expectations and intentions and other factors discussed elsewhere in this Report.
Certain risk factors could materially and adversely affect our business, financial conditions and results of operations and cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us, and you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made and we do not undertake any obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. The risks and uncertainties we currently face are not the only ones we face. New factors emerge from time to time, and it is not possible for us to predict which will arise. There may be additional risks not presently known to us or that we currently believe are immaterial to our business. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. If any such risks occur, our business, operating results, liquidity and financial condition could be materially affected in an adverse manner. Under such circumstances, you may lose all or part of your investment.
The industry and market data contained in this report are based either on our management's own estimates or, where indicated, independent industry publications, reports by governmental agencies or market research firms or other published independent sources and, in each case, are believed by our management to be reasonable estimates. However, industry and market data is subject to change and cannot always be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey of market shares. We have not independently verified market and industry data from third-party sources. In addition, consumption patterns and customer preferences can and do change. As a result, you should be aware that market share, ranking and other similar data set forth herein, and estimates and beliefs based on such data, may not be verifiable or reliable.
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Item 1. Description of Business
Karbon-X Corp (or "Karbon-X" or "the Company") is a public Nevada corporation that offers investors exposure to certified carbon credits which are a key instrument used by both individuals and corporations to achieve their carbon neutral and net-zero carbon goals. The company is environmental, social and governance (ESG) principled and focuses on partnering with high-quality projects and/or companies that generate or are actively involved in the voluntary carbon credit market.
Karbon-X Corp is focused on customized transactional options for corporations to offset their carbon footprint and provides scalable access to the Verified Emissions Reduction markets. Karbon-X is changing the marketing framework of traditional carbon marketing by engaging with the public in order to fund multiple forms of technology-based greenhouse gas reduction builds.
Carbon Credit Generation
Karbon-X Corp purchases verified carbon credits from numerous vendors and resells these credits to both industry and the general public. The Company has already begun funding projects in order to generate Karbon-X Corp carbon credits of its own. Once verified these projects will generate carbon credits that will be sold on its proprietary app platform (the Company’s mobile application). The platform generated its first direct application sales during fiscal 2026; the amounts were immaterial (approximately $6,300).
Developments
On June 27, 2025, the Company completed an asset acquisition from Allcot AG consisting of a portfolio of carbon-offset projects, together with intellectual property, database and contract rights; the subsidiary shares originally contemplated under the agreement were carved out by the parties and none were transferred. The cost of the acquisition, comprising the cash consideration paid and directly attributable legal and due-diligence costs, was $666,990 (see Note 5 to the consolidated financial statements). The transaction did not meet the definition of a business combination under ASC 805-10, because substantially all of the fair value of the gross assets acquired was concentrated in the project pipeline, a group of similar identifiable assets, and no processes, workforce or operations were acquired, and was accounted for as an asset acquisition under ASC 805-50. In connection with the acquisition the Company established Karbon-X Trading Limited (Cyprus), Allcot Limited, Karbon-X Iberia SL (formerly Allcot Soluciones España S.L.) and Allcot X Colombia S.A.S., each of which is consolidated from their inception date.
For the year ended May 31, 2026 the Company generated $55,860,322 of revenue, compared with $3,163,772 for the year ended May 31, 2025, principally from industrial carbon credit trading conducted through Karbon-X Trading Limited and Karbon-X Project, Inc.
During the year ended May 31, 2026, the Company issued 380,000 shares for cash proceeds of $242,000 (an average of $0.64 per share), 1,842,061 shares as compensation valued at $681,069 (an average of $0.37 per share), 24,038 shares in settlement of a finder’s fee, 88,000 commitment shares in connection with note financings, and 10,558,072 shares upon the conversion of convertible notes payable and accrued interest. At May 31, 2026 the Company had 94,885,028 shares of common stock issued and outstanding.
On August 13, 2025, the Company issued a $3,500,000 convertible note to Hedera Foundation SEZC. The note, together with $1,135,342 of accrued interest, was converted into common stock on May 29, 2026.
During the year the Company issued convertible notes to four other lenders with an aggregate face amount of $889,000, and issued two tranches of $500,000 each under a Master Note facility with an institutional lender (the “Lender”) on January 8, 2026 and February 18, 2026. In connection with the two tranches the Company issued warrants to purchase 250,000 and 258,064 shares of common stock at an exercise price of $0.001 per share.
On January 8, 2026, the Company issued a maintenance note to the Lender in the principal amount of $1,682,000. No cash was received on issuance; the note consideration was recorded as consideration payable to a customer, presented within other assets and other current assets, in accordance with ASC 606-10-32-25 through 32-27.
On November 24, 2025, the Company drew a $5,000,000 note from a lender. The note bears interest at 18% per annum, has a five-year term and is classified as long-term debt.
On February 9, 2026, the Company advanced CAD $2,300,000 to a borrower under a secured loan agreement bearing interest at 12.00% per annum. The loan is secured by a first-priority interest in 2,666,666 common shares of a British Columbia company listed on the TSX Venture Exchange
In April 2026, the Company entered into receivables financing arrangements with two financing providers. These arrangements do not qualify for sale accounting under ASC 860 and are accounted for as secured borrowings.
Historical Company Information
Karbon-X was incorporated in the State of Nevada on September 13, 2017 under the name Cocoluv, Inc. The articles provided for 200,000,000 authorized shares. At that time Reymund Guillermo was appointed as sole officer and director. On June 9, 2020, the Corporation filed a Certificate of Amendment with the State of Nevada effectuating a 50 for 1 forward stock split. On March 1, 2022, a change of control occurred when Mr. Guillermo resigned as director and all executive officer positions with the Company. Concurrent with Mr. Guillermo’s resignation, Mr. Chad Clovis was appointed as CEO, Director and President.
On February 21, 2022 Karbon-X Corp, formerly known as Cocoluv, Inc., a Nevada Corporation (“Karbon-X”) entered into a Reorganization and Stock Purchase Agreement (the “Reorganization Agreement”) to acquire 100% of the issued and outstanding equity of Karbon-X Project, Inc., a Canadian company (“Karbon-X Project”). Effective March 21, 2022, the parties closed the Reorganization Agreement.
The Company’s principal office is located at 6575 West Loop South, Suite 500, Bellaire, TX 77401. Our telephone number is 844-462-3637. The Company email is info@karbon-x.com.
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Competition
Many of our competitors have greater resources that may enable them to compete more effectively than us in the carbon credit industry.
The industry in which we operate is subject to intense and increasing competition. Some of our competitors have a longer operating history and greater capital resources and facilities, which may enable them to compete more effectively in this market. We expect to face additional competition from existing licensees and new market entrants, who are not yet active in the industry. If a significant number of competitors develop, we may experience increased competition for market share and may experience downward pricing pressure on our products as new entrants increase production. Such competition may cause us to encounter difficulties in generating revenues and market share, and in positioning our products in the market. If we are unable to successfully compete with existing companies and new entrants to the market, our lack of competitive advantage will have a negative effect on our business and financial condition.
We have identified many of our key competitors including the following:
Indigo Carbon
As the name most recognized name in the farming community, Indigo Carbon has an impressive list of well known corporate buyers like The North Face, Blue Bottle Coffee, and JP Morgan Chase. While Indigo is touted as a leader in the emerging industry, it may not be the best option for all. Indigo carbon has a proprietary software platform that allows farmers to easily input data from enrolled fields. After enrolling, farmers have access to Indigo’s agronomists and support teams to help implement changes and answer questions. Farmers only get paid for adopting new practices (ie. cover cropping, no-till, reduced N fertilizer, etc.), so if a farmer has been cover cropping for years, they are unlikely to be eligible. Right now they only service specific states (Arkansas, Colorado, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Minnesota, Mississippi, Missouri, Nebraska, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, and Texas).
Nori
Nori is a blockchain-enabled company whose sole mission is to be a leading carbon marketplace. Unique to the carbon-removal industry, they are powered by cryptocurrency. Through this pioneering approach, they hope to create efficient and transparent carbon removal transactions. Companies can purchase NORI tokens (whose price depends on the market price of a carbon removal credit at time of purchase). Once it has a NORI token, the company can exchange it for an NRT (or Nori Removal Token). Farmers create NRTs when they sequester 1 ton of CO2. That NRT translates into a NORI token which is priced at market value and can be sold.
TruCarbon by TruTerra
TruTerra is a subsidiary of Land O’Lakes – the world’s largest farmer owned cooperative. The current state of the program is only available to farmers with data from 2016-2020. They have a tool called Truterra Insights Engine that allows farmers to aggregate data from the past five years in a format best suited to enroll in a carbon program. Enrollment is contingent upon committing to a 20 year reporting period using the Truterra Insights Engine (carbon reporting contracts are similar to conservation easements, meaning that they can be transferred in the case of transfer of property).
Bayer Carbon Initiative
Bayer’s recently announced Carbon Initiative is still in its beginning phases with very little public detail. That said, they (like many of the other carbon credit companies on this list), will only pay farmers for adopting new cover crop or no-till/strip till practices. Bayer is a hugely influential food and agriculture company in its own right, so they have the resources and expertise to roll out a strong program after this pilot season.
Nutrien Ag
Nutrien’s core businesses are creating seeds, fertilizers, herbicides, and software to optimize farm performance. In November 2020 they announced their involvement in the carbon marketplace. Nutrien has a deep bench of agronomists on staff to provide guidance for newly enrolled farmers, so entering the market may have additional benefits for farmers looking for guidance on how best to sequester carbon. As a global retailer they have plenty of connections to influential companies who might be interested in purchasing carbon credits once the program is officially launched.
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Carbon Streaming Corp
Under stream agreements, Carbon Streaming Corp. makes upfront and ongoing delivery payments to project developers for future carbon credits. This financing structure creates carbon credit projects that reduce emissions in a sustainable manner. Our streams and investments then provide us with a diversified portfolio of carbon credits with exposure to potential rising carbon prices.
Base Carbon
Base Carbon partners with corporations, sovereign entities, academic institutions and carbon reduction project developers to produce and commercialize verified carbon credits. Base Carbon differentiates itself through sourcing and underwriting and financing the maturation of nature and technology based carbon reduction credit projects. Base Carbon seeks to simplify the carbon credit economy and become a financier within the voluntary carbon markets.
Climeworks
Climeworks develops, builds and operates direct air capture machines. Climeworks captures carbon dioxide directly from the air; removing CO₂ emissions. The air-captured carbon dioxide can either be recycled and used as a raw material, or completely removed from the air by safely storing it. Climework’s machines consist of modular CO₂ collectors that can be stacked to build machines of any size.
Sales
The Company’s main revenue streams include industrial sales and subscription-based sales through a mobile app and carbon credit trading.
Industrial Sales
Karbon-X Corp primarily operates in the voluntary carbon offset market. The Company sells carbon offsets to mining, forestry, civil earthworks, transportation and oil and gas servicing companies based on their total fossil fuel consumption for individual projects. This simple platform offers companies a way to reach their carbon neutrality goals while supporting C02 reducing projects for years to come.
When companies purchase carbon offsets from Karbon-X Corp directly to offset their fossil fuel consumption the credits are retired in the name of the customer which provides transparency.
Subscription Based Sales
The general public is able purchase carbon offsets from a mobile app that is subscription based, with multiple levels of investment for every budget. Each subscription will support C02 reducing projects such as direct air capture, green hydroelectric energy production, or reforestation and will reduce greenhouse gas emissions with provable, verifiable carbon credits. The app was soft-launched in 2023 and was completed and made publicly available in March 2025. Depending on the subscription selected, subscribers are allocated verified carbon credits corresponding to approximately 200 to 400 kilograms of CO₂ per month.
Karbon-X Corp allows the general public to offset their greenhouse gas emissions from daily life with a subscriber-based app which is shareable on social media.
Totally Covered |
| Exceptional Reduction |
| Doing Your Part |
Permanently offset 400 kg of CO2 /month, 4800 kg of CO2/,year |
| Permanently offset 300kg of CO2 /month, 3600KG of CO2/ year. |
| Permanently offset 200kg of CO2 /month, 2400kg of CO2 /year |
200 kg per year is 60 days of central heating in a home! |
| 600kg per year is 1,460 miles/2,350km driving in a car! |
| 360 kg per year is 13 month energy used for one light bulb! |
$19.99/month |
| $14.99/month |
| $9.99/month |
$199.99/year |
| $149.99/year |
| $99.99/Year |
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Marketing
The Company is working with a combination of outsource marketing and influencer firms, as well as, developing internal marketing resources to launch its app globally.
App Development
The Karbon-X app was soft-launched in 2023 and was completed and made publicly available in March 2025.
Employees
As of the date of this filing on Form 10-K, the Company has 43 employees and is actively recruiting new team members at all levels of the organization. (See "Executive Compensation"). The Company believes that its relations with its employees are good.
Legal Proceedings
In February 2024, Karbon-X were notified of a former employee filing a lawsuit against the company for wrongful termination. The Company has settled this suit.
In addition, a former contractor whose engagement was terminated in January 2026 has, through counsel, asserted claims for unpaid contractor fees and has threatened litigation. No proceeding has been commenced. The Company disputes the claims, considers that it has no liability for them and has asserted claims of its own against the contractor arising from the termination. The outcome of the dispute and the amount of any loss, if any, cannot presently be estimated. Other than as described above, as of the date hereof the Company is not party to any material legal proceedings.
Item 1A. Risk Factors.
An investment in our securities involves a high degree of risk. Before making an investment decision, you should carefully consider the risks described below. Our business, financial condition, results of operations and cash flows could be materially adversely affected by any of these risks, and the market or trading price of our securities could decline due to any of these risks. In addition, please read the cautionary statement regarding forward-looking statements at the beginning of this Annual Report. Please note that additional risks not presently known to us or that we currently deem immaterial may also impair our business and operations. In this Section, the terms the “Company,” “we”, “our” and “us” refer to Karbon-X Corp. as well as our subsidiaries Karbon-X Project, Inc, Karbon-X USA Corp, Karbon-X Trading, Allcot Limited, Karbon-X Iberia SL and Allcot X Colombia S.A.S.
Risks Related to Our Operations
We will incur losses and there is no guarantee that we will ever become profitable.
There is no guarantee that we will ever become profitable. The costs for research, product development, along with marketing and selling expenses, and the general and administrative expenses, will be principal causes of our costs and/or potential losses. We may never become profitable and if we do not become profitable your investment could be harmed or lost completely.
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We may need additional capital in the future in order to continue our operations.
During the year ended May 31, 2026 we raised approximately $5.4 million from convertible note issuances, $4.8 million from long-term debt, $0.6 million from receivables financing arrangements and $0.2 million from sales of common stock, which we are using for development and operations. However, if in the future we do not turn profitable or generate cash from operations and additional capital is needed to support operations, economic and market conditions may make it difficult or impossible to raise additional funds through debt or equity financings. If funds are not sufficient to support operations, we may need to pursue additional financings or reduce expenditures to meet our cash requirements. If we do obtain such financing, we cannot assure that the amount or the terms of such financing will be as attractive as we may desire, and your equity interest in the company may be diluted considerably. If we are unable to obtain such financing when needed, or if the amount of such financing is not sufficient, it may be necessary for us to take significant cost saving measures or generate funding in ways that may negatively affect our business in the future. To reduce expenses, we may be forced to make personnel reductions or curtail or discontinue development programs. To generate funds, it may be necessary to monetize future royalty streams, sell intellectual property, divest of technology platforms or liquidate assets. However, there is no assurance that, if required, we will be able to generate sufficient funds or reduce spending to provide the required liquidity. Long-term capital requirements will depend on numerous factors, including, but not limited to, the status of collaborative arrangements, the progress of research and development programs and the receipt of revenues from sales of products. Our ability to achieve and/or sustain profitable operations depends on a number of factors, many of which are beyond our control.
We have identified a material weakness in our internal control over financial reporting, and if we fail to remediate it our financial statements may contain errors and investor confidence may be adversely affected.
As described in Item 9A, management concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective as of May 31, 2026 because of a material weakness in our period-end financial reporting process. During fiscal 2026 our operations expanded significantly and we entered into a number of complex, non-routine transactions, and the accounting resources and review procedures in place for most of the year were not sufficient to ensure that those transactions and the year-end close were recorded and reviewed on a timely basis. We appointed a Chief Accounting Officer in February 2026 and have implemented additional close and review controls, but remediation is in progress and will require those controls to operate for a sufficient period before we can conclude that the material weakness has been remediated. If we are unable to remediate the material weakness, or if we identify additional material weaknesses, our financial statements could contain material misstatements, we could fail to meet our reporting obligations on a timely basis, and the market price of our common stock could be adversely affected.
There is substantial doubt about our ability to continue as a going concern.
Our consolidated financial statements have been prepared assuming that we will continue as a going concern. We have incurred recurring losses, had negative working capital of $(4,040,004) and a stockholders’ deficit of $(5,984,102) at May 31, 2026, and have an accumulated deficit of $25,580,380. These conditions raise substantial doubt about our ability to continue as a going concern, as described in Note 1 to the consolidated financial statements. Our ability to continue depends on raising additional capital and ultimately achieving profitable operations, and there is no assurance that we will be able to do so on acceptable terms or at all. If we cannot, we may be forced to curtail or cease operations, and investors could lose their entire investment.
We depend on a small number of customers and counterparties, and our largest customer has not paid amounts invoiced.
One customer accounted for approximately 86% of our consolidated revenue for the year ended May 31, 2026, and a single trade receivable represented 69% of accounts receivable at that date. During the year we invoiced our largest customer EUR 6,457,500 for credits not yet delivered, of which EUR 3,797,500 remained unpaid at May 31, 2026 and has not been recognized as a receivable; we have made a written demand for payment. The loss of, or a dispute with, a significant customer or trading counterparty, or the failure of a counterparty to pay or to deliver credits, could materially reduce our revenue and cash flows.
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Conversion of our outstanding convertible notes at floating prices could substantially dilute existing stockholders.
Substantially all of our convertible notes are convertible at discounts to the market price of our common stock, with conversion prices that reset by reference to recent trading prices. At May 31, 2026 we estimated that approximately 23.9 million shares were issuable on conversion of notes then outstanding, and we have issued further notes since the year end. Declines in our stock price increase the number of shares issuable and the dilution to existing holders, and sales of shares received on conversion could depress the market price of our common stock. Beneficial ownership limitations in the notes restrict the number of shares any holder may hold at one time but do not limit the aggregate number of shares issuable over time.
We operate in multiple countries and currencies, which exposes us to foreign exchange, regulatory and tax risks.
We conduct business through subsidiaries in Canada, Cyprus, Ireland, Spain and Colombia and transact in Canadian dollars, euros and Colombian pesos as well as U.S. dollars. Fluctuations in exchange rates affect our reported results and the U.S. dollar value of our foreign-currency receivables, payables and financing obligations. Operating in multiple jurisdictions also subjects us to differing carbon-market, tax, employment and regulatory regimes, and to the cost and complexity of maintaining compliance and internal controls across those jurisdictions.
The value of the DevvStream securities we hold and are entitled to receive is uncertain following the delisting of those shares.
We hold common shares of DevvStream Holdings Inc. and are entitled to receive additional shares under our agreements with that company. Those shares were delisted from the Nasdaq Stock Market on June 24, 2026, which may materially reduce their liquidity and value. Although the agreements provide a price-based true-up, the value we ultimately realize depends on the counterparty’s ability to deliver shares and on the market for those shares, and we may be unable to realize the carrying value of the securities and the related receivable.
We launched our products in 2023 and as a company, we have limited sales and marketing experience.
We soft-launched our app in early 2023 and it was completed and made publicly available in March 2025, and although we have hired highly qualified personnel with specialized expertise, as a company, we have limited experience commercializing products on our own. In order to commercialize the app and our carbon credits business, we have to build our sales, marketing, distribution, managerial and other non-technical capabilities and make arrangements with third parties to perform these services when needed. We may have to hire sales representatives and district managers to fill sales territories. To the extent we rely on third parties to commercialize our business, we may receive less revenues or incur more expenses than if we had commercialized the products ourselves. In addition, we may have limited control over the sales efforts of any third parties involved in our commercialization efforts. If we are unable to successfully implement our commercial plans and drive adoption of our products by customers through our sales, marketing and commercialization efforts, or if our partners fail to successfully commercialize our products, then we may not be able to generate sustainable revenues from product sales which will have a material adverse effect on our business and future product opportunities. Similarly, we may not be successful in establishing the necessary commercial infrastructure, including sales representatives, wholesale distributors, legal and regulatory affairs teams. The establishment and development of commercialization capabilities to market our products has been and will continue to be expensive and time-consuming. As we continue to develop these capabilities, we will have to compete with other companies to recruit, hire, train and retain sales and marketing personnel. If we have underestimated the necessary sales and marketing capabilities or have not established the necessary infrastructure to support successful commercialization, or if our efforts to do so take more time and expense than anticipated, our ability to market and sell our products may be adversely affected.
Commercialization of our products will require significant resources, and if we do not achieve the sales expected, we may lose the substantial investment made in our products.
We are continuing to make substantial expenditures commercializing our products. We are devoting substantial resources to building our research and development. We have and expect to continue to devote substantial resources to establish and maintain a marketing capability for our products. If we are unsuccessful in our commercialization efforts and do not achieve the sales levels of our products that we expect, we may be unable to recover the large investment we have made in research, development, and marketing efforts, and our business and financial condition could be materially adversely affected.
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We rely on third parties to perform many necessary services for our products, including services related to the distribution and invoicing.
We have begun to retain and partner with third-party service providers to perform a variety of functions related to the sale and distribution of our products, key aspects of which are out of our direct control. If these third-party service providers fail to comply with applicable laws and regulations, fail to meet expected deadlines, or otherwise do not carry out their contractual duties to us, or encounter physical damage or natural disaster at their facilities, our ability to deliver product to meet commercial demand would be significantly impaired. We do not currently have the internal capacity to perform these important commercial functions, and we may not be able to maintain commercial arrangements for these services on reasonable terms.
The failure of any of our third-party distributors to market, distribute and sell our products as planned may result in us not meeting revenue and profit targets.
If one or more of these distributors fail to pursue the development or marketing of the products as planned, our revenues and profits may not reach expectations or may decline. The success of the marketing organizations of our partners, as well as the level of priority assigned to the marketing of the products by these entities, which may differ from our priorities, may determine the success of the product sales. Competition in this market could also force us to reduce the prices of our products below currently planned levels, which could adversely affect our revenues and future profitability.
If we cannot develop and market our products as rapidly or cost-effectively as our competitors, we may never be able to achieve profitable operations.
Our success depends, in part, upon maintaining a competitive position in the development of products. If we cannot maintain competitive products and technologies, our current and potential distribution partners may choose to adopt the products of our competitors. Our competitors may develop products that are more effective or are less costly than our products.
Some of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, and marketing and distribution than we do.
Our business could be harmed if we fail to comply with regulatory requirements and, as a result, are subject to sanctions.
If we, or companies with whom we are developing technologies or products on our behalf, fail to comply with applicable regulatory requirements, the companies, and we, may be subject to sanctions, including the following:
| · | warning letters; |
| · | fines; |
| · | injunctions; |
| · | total or partial suspension of production; |
| · | criminal prosecutions. |
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Risks Related to our Common Stock
Future conversions or exercises by holders of options could dilute our common stock.
Purchasers of our common stock will experience dilution of their investment upon exercise of the employee stock option and other stock options, note conversions or issued common shares.
Sales of our common stock by our officers and directors may lower the market price of our common stock.
Our officers and directors beneficially own a significant aggregate of shares of our outstanding common stock. If our officers and directors, or other significant stockholders, sell a substantial amount of our common stock, it could cause the market price of our common stock to decrease.
We do not expect to pay dividends in the foreseeable future.
We intend to retain any earnings in the foreseeable future for our continued growth and, thus, do not expect to declare or pay any cash dividends in the foreseeable future.
Anti-takeover effects of certain certificate of incorporation and bylaw provisions could discourage, delay or prevent a change in control.
Our certificate of incorporation and bylaws could discourage, delay or prevent persons from acquiring or attempting to acquire us. Our certificate of incorporation authorizes our board of directors, without action of our stockholders, to designate and issue preferred stock in one or more series, with such rights, preferences and privileges as the board of directors shall determine. In addition, our bylaws grant our board of directors the authority to adopt, amend or repeal all or any of our bylaws, subject to the power of the stockholders to change or repeal the bylaws. In addition, our bylaws limit who may call meetings of our stockholders.
Dependence upon Management and Key Personnel
The Company is, and will be, heavily dependent on the skill, acumen and services of the management of the Company. The loss of the services of these individuals or any other key individuals, including specifically Chad Clovis, and certain others, for any substantial length of time would materially and adversely affect the Company’s results of operation and financial position.
Item 1B. Unresolved Staff Comments
Not Applicable.
Item 1C. Cybersecurity Risk
We are committed to using technology to improve our competitive position. We depend on a variety of information systems and technologies (including cloud technologies) to manage the operations of our growing customer base. Our core business systems consist mostly of purchased and licensed software programs that integrate together and with our app.
We manage data security and privacy at the highest levels. Our Chief Executive Officer (CEO) is actively engaged in oversight of cybersecurity and IT infrastructure and works with outsourced vendors to manage all network operations. Our vendors keep our CEO informed on cybersecurity and privacy matters throughout the year. We have strengthened our data protection capabilities through investments in our infrastructure hardware and software.
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During the fiscal year ended May 31, 2026, the Company did not experience any
Given the limited nature of its operations and reliance on
The Board of Directors is
Item 2. Properties.
The Company has entered into an operating lease for office space in Calgary, Alberta commencing on July 1, 2025, with an early occupancy period beginning on February 1, 2025. The lease has a term of 5 years, expiring on June 30, 2030, and base rent escalates annually under the lease. Monthly payments, which are denominated in Canadian dollars and include the tenant’s proportionate share of occupancy costs, are CAD 13,070 to June 2026, CAD 14,179 to June 2027, CAD 14,733 to June 2029 and CAD 15,288 thereafter (approximately $9,472 to $11,080 at the May 31, 2026 exchange rate).
The Company’s principal executive offices are located at 6575 West Loop South, Suite 500, Bellaire, Texas, occupied under a month-to-month sublease from Cutler Law Group, P.C., the Company’s securities counsel.
Lease right-of-use assets represent the right to use an underlying asset pursuant to the lease for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Lease right-of-use assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists. These assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using our estimated incremental borrowing rate generally applicable to the location of the lease right-of-use asset, unless an implicit rate is readily determinable. We combine lease and certain non-lease components in determining the lease payments subject to the initial present value calculation. Lease right-of-use assets include upfront lease payments and exclude lease incentives, if applicable. When lease terms include an option to extend the lease, we have not assumed the options will be exercised.
Lease expense for operating leases generally consists of both fixed and variable components. Expense related to fixed lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are generally expensed as incurred and include agreed-upon changes in rent, certain non-lease components, such as maintenance and other services provided by the lessor, and other charges included in the lease. Leases with an initial term of twelve months or less are not recorded on the balance sheet. We recognized total lease expense of approximately $183,059 and $167,086 for the years ended May 31, 2026 and 2025, including variable and short-term lease costs.
Item 3. Legal Proceedings.
In February 2024, we were notified of a former employee filing a lawsuit against the company for wrongful termination. We have settled this suit.
In addition, a former contractor whose engagement was terminated in January 2026 has, through counsel, asserted claims against us for unpaid contractor fees and has threatened litigation. No proceeding has been commenced. We dispute the claims, consider that we have no liability for them and have asserted claims of our own against the contractor arising from the termination. The outcome of the dispute and the amount of any loss, if any, cannot presently be estimated. We are not aware of any other legal proceedings contemplated by any governmental authority or any other party involving us or our properties.
As of the date of this report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Other than the threatened claim described above, we are not aware of any other legal proceedings pending or threatened against us or our properties.
From time to time the Company may be named in claims arising in the ordinary course of business. Currently, no legal proceedings or claims, other than those disclosed above, are pending against or involve the Company that, in the opinion of management, could reasonably be expected to have a material adverse effect on its business and financial condition.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is traded in United States markets by OTC Markets Group, Inc., under the symbol “KARX.” The stock currently listed for trading on the OTCQB Market maintained by OTC Markets Group, Inc. The Company is working to regain a listing on the OTCQX market. However, there is no assurance that the common stock will continue to be traded on the OTC Markets or that any liquidity exists for our shareholders.
Market Price
The Company’s common stock is quoted on the OTCQB market maintained by OTC Markets Group, Inc. Trading has been limited and sporadic, and historical market prices do not necessarily reflect the current operations of the Company.
As of May 31, 2026, the Company had 200,000,000 shares of common stock authorized with 94,885,028 shares issued and outstanding.
Penny Stock Regulations
Our common stock trades on the OTCQB maintained by OTC Markets Group, Inc., a privately owned company headquartered in New York City, under the symbol “KARX.” The sale price of our common stock has been less than $5.00 per share. As such, the Company's common stock is subject to provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), commonly referred to as the “penny stock rule.”
Section 15(g) sets forth certain requirements for transactions in penny stocks, and Rule 15g-9(d) incorporates the definition of “penny stock” that is found in Rule 3a51-1 of the Exchange Act. The SEC generally defines “penny stock” to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. As long as the Company's common stock is deemed to be a penny stock, trading in the shares will be subject to additional sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors.
Dividends
The Company has not issued any dividends on the common stock to date, and does not intend to issue any dividends on the common stock in the near future. We currently intend to use all profits to further the growth and development of the Company.
Holders
As of May 31, 2026, there were approximately 142 record holders of our common stock. This does not include the holders of our common stock who held their shares in street name as of that date.
Transfer Agent
Our registrar and transfer agent is VStock Transfer, LLC., 18 Lafayette Place, Woodmere, New York 11598
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Recent Sales of Unregistered Securities
During the year ended May 31, 2026, Karbon-X Corp completed the following issuances of unregistered securities pursuant to Rule 506(c) of the Securities Act of 1933, as amended, and Section 4(a)(2) thereof.
During the year ended May 31, 2026, the Company sold 380,000 shares of common stock for total cash proceeds of $242,000.
During the year ended May 31, 2026, the Company issued 1,842,061 shares of common stock as compensation, with a recorded value of $681,069.
During the year ended May 31, 2026, the Company issued 24,038 shares of common stock in settlement of a finder’s fee, with a recorded value of $12,980.
During the year ended May 31, 2026, the Company issued 88,000 commitment shares in connection with note financings, with a recorded value of $54,040.
During the year ended May 31, 2026, the Company issued 10,558,072 shares of common stock upon conversion of convertible notes payable and accrued interest totaling $7,008,995, which is presented in the consolidated statements of changes in shareholders’ equity and of cash flows net of $15,020 of costs applied against one conversion, or $6,993,975.
On January 8, 2026 and February 18, 2026, the Company issued warrants to purchase 250,000 and 258,064 shares of common stock, respectively, at an exercise price of $0.001 per share, in connection with an institutional lender’s Master Note facility.
Item 6. Selected Financial Data.
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion relates to the historical operations and financial statements of Karbon-X Corp. for the fiscal years ended May 31, 2026 and May 31, 2025.
Forward-Looking Statements
The following Management’s Discussion and Analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this Annual Report. The Management’s Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Annual Report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the heading “Risks Factors” in our various filings with the Securities and Exchange Commission. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report.
The following discussion highlights the Company’s results of operations and the principal factors that have affected its consolidated financial condition as well as its liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the Company’s consolidated financial condition and results of operations presented herein. The following discussion and analysis are based Karbon-X Corp’s audited consolidated financial statements contained in this Annual Report, which have been prepared in accordance with generally accepted accounting principles in the United States. You should read the discussion and analysis together with such financial statements and the related notes thereto.
Overview
Karbon-X Corp. was incorporated in the State of Nevada under the name Cocoluv, Inc. on September 13, 2017 and established a fiscal year end of May 31. On April 14, 2022 the Company changed its name to Karbon-X Corp.
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On February 21, 2022, pursuant to the terms of a Share Exchange Agreement, the Company acquired all of the issued and outstanding shares of common stock of Karbon-X Project Inc. ("Karbon-X"), and Karbon-X became the wholly owned subsidiary of the Company in a reverse merger (the "Reverse Acquisition"). Pursuant to the Reverse Acquisition, all of the issued and outstanding shares of Karbon-X common stock were converted, at an exchange ratio of 20,000-for-1, into an aggregate of 20,000,000 shares of the Company's common stock, resulting in Karbon-X becoming a wholly owned subsidiary of the Company and all debt owed to the related party of Cocoluv, Inc. was forgiven. The accompanying financial statements' share information has been retroactively adjusted to reflect the exchange ratio in the Reverse Acquisition.
Karbon-X provides customized transactional options, tailored insights, and scalable access to the Verified Emissions Reduction markets.
Karbon-X changes the marketing framework of traditional carbon marketing by engaging the public vs industry with multiple forms of technology based greenhouse gas reduction builds. Karbon-X will allow the public to purchase carbon offsets from an app that is subscription based, with multiple levels of investment for every budget. Each subscription will support clean energy projects such as solar or wind power, methane capture, or reforestation and will reduce greenhouse gas emissions with provable, verifiable carbon credits.
Critical Accounting Policies
The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Critical accounting policies and estimates are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The following policies involve significant judgments and estimates. Our significant accounting policies are described further in Note 1 to the consolidated financial statements.
Carbon Credit Inventory
Carbon credit inventory is carried at the lower of cost and net realizable value. Judgment is required in assessing net realizable value for credits of different vintages, registries and project types, for which observable market prices may be limited.
Asset Acquisition and Acquired Intangible Assets
The June 2025 acquisition of assets from Allcot AG was accounted for as an asset acquisition under ASC 805-50, with the consideration paid, including transaction costs, allocated to the acquired project pipeline as a single asset group. Judgment is required in determining the unit of account, the 27-year weighted-average useful life over which the pipeline is amortized, and in evaluating the asset group for recoverability, which depends on management’s forecasts of project development cash flows.
Fair Value of Financial Instruments
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are defined as follows:
| · | Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; |
|
|
|
| · | Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and |
|
|
|
| · | Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions. |
Other than the derivative liabilities presented below, the carrying amount of the Company’s financial assets and liabilities approximate their fair values. The securities receivable (Note 16) represents the Company’s entitlement under the price-floor provisions of the Carbon Credit Purchase Agreement, is measured at the guaranteed amount of $1,137,197 less the fair value of the DEVS shares held, and is remeasured at each reporting date as that fair value changes; its carrying amount therefore approximates fair value.
The Company measures certain financial instruments at fair value on a recurring basis in accordance with ASC 820, Fair Value Measurement. As of May 31, 2026, the Company evaluated the conversion features embedded in certain convertible promissory notes and determined that they require bifurcation and measurement at fair value as derivative liabilities.
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The Company uses a path-dependent valuation model to estimate the fair value of the derivative liabilities associated with its convertible notes. The model incorporates significant unobservable inputs, including:
| · | Expected stock price volatility |
| · | Risk-free interest rates |
| · | Estimated time to maturity |
| · | Probability of uplisting |
| · | Expected trading volumes |
Because these inputs are unobservable and require significant management judgment, the Company has classified the derivative liabilities as Level 3 in the fair value hierarchy.
For the derivative embedded in the note issued under the Maintenance Agreement, the model measures the full conversion feature at a floating conversion price equal to 85% of the lowest volume weighted average price over the trailing ten trading days, resetting at each conversion, and applies the 4.99% beneficial ownership limitation as a path-dependent constraint on the timing of exercise rather than as a cap on the amount subject to conversion. The assumed rate of disposal of conversion shares is calibrated to the median daily trading volume of the Company’s common stock over the term of the note of approximately 15,000 shares per day.
During the year ended 31 May 2026 the Company changed the valuation technique used to measure its embedded conversion derivatives from a binomial lattice to a path-dependent Monte Carlo simulation. The conversion features carry a beneficial ownership limitation restricting the holder to 4.99% of the shares outstanding, the effect of which depends on the sequence of prior conversions and cannot be represented in a recombining lattice. The Company changed technique because the simulation reflects that feature and is therefore more representative of fair value. The change was applied prospectively as a change in accounting estimate. Under the lattice technique previously applied, which did not reflect the beneficial ownership limitation as a path-dependent constraint, the derivative embedded in the note issued under the Maintenance Agreement would have been measured at approximately $724,568 at May 31, 2026 using the same inputs; the simulation measured it at $302,715, a reduction of approximately $421,853, substantially all of which reflects the incorporation of the 4.99% limitation.
The following table summarizes the fair value hierarchy of the Company’s financial assets and financial liabilities measured at fair value on a recurring basis as of May 31, 2026 and 2025:
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
May 31, 2026 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Investments in equity securities |
|
| 22,663 |
|
|
| - |
|
|
| - |
|
|
| 22,663 |
|
Total financial assets |
|
| 22,663 |
|
|
| - |
|
| $ | - |
|
| $ | 22,663 |
|
May 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in equity securities |
|
| 301,260 |
|
|
| - |
|
|
| - |
|
|
| 301,260 |
|
Total financial assets |
|
| 301,260 |
|
|
| - |
|
| $ | - |
|
| $ | 301,260 |
|
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
May 31, 2026 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative liabilities – convertible note conversion features |
|
| - |
|
|
| - |
|
|
| 731,168 |
|
|
| 731,168 |
|
Total financial liabilities |
|
| - |
|
|
| - |
|
| $ | 731,168 |
|
| $ | 731,168 |
|
May 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities – convertible note conversion features |
|
| - |
|
|
| - |
|
|
| 168,358 |
|
|
| 168,358 |
|
Total financial liabilities |
|
| - |
|
|
| - |
|
| $ | 168,358 |
|
| $ | 168,358 |
|
The following table summarizes the changes in Level 3 derivative liabilities measured at fair value on a recurring basis for the years ended May 31, 2026 and 2025.
|
| May 31, 2026 |
|
| May 31, 2025 |
| ||
Balance at beginning of period |
|
| 168,358 |
|
|
| - |
|
Recognized on issuance of convertible notes |
|
| 1,443,150 |
|
|
| 95,431 |
|
Released to equity on conversion |
|
| (23,951 | ) |
|
| - |
|
Change in fair value recognized in earnings |
|
| (856,389 | ) |
|
| 72,927 |
|
Balance at end of period |
|
| 731,168 |
|
|
| 168,358 |
|
The gain of $845,280 presented in the consolidated statements of operations for the year ended May 31, 2026 comprises the $856,389 change in fair value shown above, net of $11,109 recognized on the initial measurement of derivatives issued during the year.
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Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, applying the five-step model: identifying the contract with the customer, identifying the performance obligations, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when or as each performance obligation is satisfied.
Principal versus agent. For substantially all of its revenue the Company has concluded that it acts as principal. In those arrangements the Company obtains control of the carbon credits before they are transferred to the customer: it holds the credits in its own registry accounts, bears inventory risk from the point of purchase or issuance until delivery, and has discretion in establishing the price charged to the customer. Revenue in those arrangements is recognized gross, at the consideration to which the Company expects to be entitled, with the cost of the credits presented in cost of revenue.
A minor portion of the Company’s revenue arises from arrangements in which the Company facilitates a trade between a counterparty and a purchaser without obtaining control of the underlying credits. In those arrangements the Company acts as agent and revenue is recognized net, in an amount equal to the commission or fee to which the Company is entitled.
Financial Condition and Results of Operations
Fiscal year ended May 31, 2026
For the Fiscal Year ended May 31, 2026 the Company generated $55,860,322 in revenue from its business operations and incurred a net loss of $13,589,546. As of May 31, 2026, the Company had negative working capital of $(4,040,004).
Sales and Revenue
For the Fiscal Year ended May 31, 2026 the Company generated $55,860,322 in revenue, an increase of $52,696,550 over the $3,163,772 generated in the year ended May 31, 2025. The increase is principally attributable to industrial carbon credit trading conducted through Karbon-X Trading Limited, a newly formed subsidiary, together with growth in the Company's existing carbon credit programs. Cost of revenue was $55,000,480, producing gross profit of $859,842 and a gross margin of 1.5%, compared with gross profit of $801,467 and a gross margin of 25.3% in the prior year. The decline in gross margin reflects the shift in the revenue mix towards high-volume, low-margin trading activity.
Operating Expenses
Operating expenses for the Fiscal Year ended May 31, 2026 totaled $11,925,399, compared with $7,449,148 in the prior year. Operating expenses included salaries and wages of $5,558,515, marketing expenses of $3,037,475, professional fees of $1,471,523 (including legal costs of the former-contractor dispute described in Item 3), a provision for credit losses on the loan receivable of $628,196 and other operating expenses of $1,229,690. The increase reflects the cost of the subsidiaries newly established following the Allcot asset acquisition and the expansion of the Company’s trading and corporate functions.
Net Loss
Net loss after income taxes was $13,589,546 during the Fiscal Year ended May 31, 2026, compared with $7,053,492 in the prior year. Total comprehensive loss, including a foreign currency translation gain of $241,080, was $13,348,466. The increase in net loss is principally attributable to interest expense of $3,321,168, which includes $1,003,557 of debt discount amortization, $125,570 of debt discount written off on conversion and $19,518 written off on the non-cash settlement of maintenance fees, together with the $628,196 provision for credit losses recorded on the loan receivable and the increase in operating expenses described above.
Liquidity and Capital Resources
The following table sets forth the major components of our statements and consolidated statements of cash flows for the periods presented.
|
| Fiscal Year Ended May 31, 2026 |
| |
Cash used in operating activities |
| $ | (7,861,240 | ) |
Cash provided by financing activities |
| $ | 10,503,188 |
|
Cash used in investing activities |
| $ | (2,433,113 | ) |
Change in cash during the year |
| $ | 450,943 |
|
Effect of exchange rate changes on cash |
| $ | 242,108 |
|
Cash, beginning of period |
| $ | 704,346 |
|
Cash, end of period |
| $ | 1,155,289 |
|
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As of May 31, 2026, the Company had $6,061,591 in current assets and $10,101,595 in current liabilities, resulting in negative working capital of $(4,040,004).
Total assets at May 31, 2026 were $9,617,713 (May 31, 2025: $6,779,972) and total liabilities were $15,601,815 (May 31, 2025: $8,149,045). Amounts invoiced under contracts on which neither the Company nor the counterparty had performed at the balance sheet date, and the corresponding contract liabilities and supplier balances, are not recognized; see Notes 9 and 16.
To date, the Company has financed its operations through equity sales, convertible note issuances, long-term debt and receivables financing arrangements.
During the year ended May 31, 2026, the Company received $5,370,145 of cash proceeds from convertible notes payable, $4,788,155 from long-term debt, $591,080 from receivables financing obligations and $242,000 from the sale of common stock.
Future Financing
In connection with its proposed business plan and possible acquisitions, the Company will be required to complete substantial and significant additional capital formation. Such formation could be through additional equity offerings, debt, bank financings or a combination of any source of financing. There can be no assurance that the Company will be successful in completion of such financings.
Plan of Operations
As noted above, the continuation of our current plan of operations requires us to raise significant additional capital. If we are successful in raising capital through the sale of common shares, we believe that we will have sufficient cash resources to fund our plan of operations through fiscal 2027. If we are unable to do so, we may have to curtail and possibly cease some operations. We intend to use the net proceeds from the offering for research and development, operations, regulatory compliance, intellectual property, working capital and general corporate purposes.
We continually evaluate our plan of operations to determine the manner in which we can most effectively utilize our limited cash resources. The timing of completion of any aspect of our plan of operations is highly dependent upon the availability of cash to implement that aspect of the plan and other factors beyond our control. There is no assurance that we will successfully obtain the required capital or revenues, or, if obtained, that the amounts will be sufficient to fund our ongoing operations.
Capital Expenditures
As of May 31, 2026 we had capital expenditures of $4,341 and capitalized app development costs of $82,146.
Commitments and Contractual Obligations
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
Off-balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Going Concern
To date the Company has generated $59,436,151 in revenues from its business operations and has incurred an accumulated deficit of $25,580,380. As of May 31, 2026, the Company has negative working capital of $(4,040,004). The Company will require additional funding to meet its ongoing obligations and to fund anticipated operating losses. The ability of the Company to continue as a going concern is dependent on raising capital to fund its business plan and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company’s ability to continue as a going concern.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not required for smaller reporting companies.
| 18 |
| Table of Contents |
Item 8. Financial Statements and Supplementary Data.
Contents
Part 1 | FINANCIAL INFORMATION |
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Report of Independent Registered Public Accounting Firm |
| F-1 |
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| Consolidated Balance Sheets as of May 31, 2026 and 2025 |
| F-2 |
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| Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended May 31, 2026 and 2025 |
| F-3 |
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| Consolidated Statements of Changes in Shareholders’ Equity for the years ended May 31, 2026 and 2025 |
| F-4 |
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| Consolidated Statements of Cash Flows for the years ended May 31, 2026 and 2025 |
| F-5 |
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| Notes to Consolidated Financial Statements |
| F-6 |
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| 19 |
| Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Karbon-X Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Karbon-X Corp. and Subsidiaries (“the Company”) as of May 31, 2026 and 2025, and the related consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity, and cash flow for each of the years in the two-year period ended May 31, 2026, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2026 and 2025 and the results of its operations and its cash flows for each of the years in the two-year period ended May 31, 2026, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred an accumulated deficit since inception, has a negative working capital, and will require additional funding to meet its ongoing obligations and to fund anticipated operating losses. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.
We have served as the Company’s auditor since 2022.
September 15, 2026
| F-1 |
| Table of Contents |
KARBON-X CORP.
Consolidated Balance Sheets
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| May 31, 2026 |
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| May 31, 2025 |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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Accounts receivable, net |
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Inventories, net |
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Loan receivable, net of allowance of $628,196 |
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Prepaid expenses |
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Deposits |
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Investments in equity securities |
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Securities receivables |
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Other current assets |
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Total current assets |
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Property and equipment, net |
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Right of use asset, net |
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Contract fulfillment assets |
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Other assets |
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Internally developed software, net |
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Intangible assets, net |
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Total assets |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities |
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Accounts payable |
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Deferred revenue |
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Convertible notes payable, net of discounts |
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Convertible notes – interest payable |
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Embedded derivative |
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Current portion of lease liabilities |
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Receivables financing obligations |
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Other current liabilities |
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Total current liabilities |
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Long-term debt |
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Non-current portion of lease liabilities |
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Convertible notes payable, non-current |
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Total liabilities |
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Commitments and contingencies |
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Shareholders’ equity (deficit) |
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Common stock $ |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive gain (loss) |
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Total shareholders’ equity (deficit) |
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Total liabilities and shareholders’ equity |
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The accompanying notes are an integral part of these consolidated financial statements
| F-2 |
| Table of Contents |
KARBON-X CORP.
Consolidated Statements of Operations and Comprehensive Income (Loss)
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Operations |
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Total revenue |
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Cost of revenue |
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Gross profit |
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Marketing expenses |
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Salaries and wages |
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Professional fees |
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Provision for credit losses |
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Other operating expenses |
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Total operating expenses |
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Loss from operations |
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Interest income (expense) |
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Gain (loss) on investment |
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Gain (loss) on change in fair value of derivative liabilities |
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Other income (expenses) |
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Net loss before income taxes |
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Federal income tax expense |
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Net loss |
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Other comprehensive income (loss) |
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Foreign currency translation gain (loss) |
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Total comprehensive loss |
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Earnings Per Share |
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Weighted average basic and diluted shares outstanding |
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Basic and fully diluted loss per share |
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The accompanying notes are an integral part of these consolidated financial statements
| F-3 |
| Table of Contents |
KARBON-X CORP.
Consolidated Statement of Changes in Shareholders’ Equity
For the Years Ended May 31, 2026 and 2025
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Balance at May 31, 2024 |
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Issuance of shares for cash, net |
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Issuance of shares upon exercise of warrants |
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Issuance of shares as compensation |
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Issuance of shares upon conversion of notes payable |
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Option compensation expense |
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Cancelled shares |
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Net loss |
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Foreign currency translation |
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Balance at May 31, 2025 |
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Issuance of shares for cash |
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Issuance of shares as compensation |
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Issuance of shares for finder's fee |
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Issuance of commitment shares |
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Issuance of shares upon conversion of notes payable and accrued interest |
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Option compensation expense |
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Issuance of warrants |
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Net loss |
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Foreign currency translation |
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Balance at May 31, 2026 |
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The accompanying notes are an integral part of these consolidated financial statements
| F-4 |
| Table of Contents |
KARBON-X CORP.
Consolidated Statements of Cash Flow
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Cash flows from operating activities |
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Net loss |
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Adjustments to reconcile net loss to net cash: |
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Depreciation and amortization |
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Amortization of right of use asset |
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Amortization of debt discount |
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Debt discount written off on conversion and on settlement of maintenance fees |
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(Gain) loss on change in fair value of derivative liabilities |
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Provision for credit losses |
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Equity-based compensation expense |
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Other non-cash equity issuances, net |
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Costs incurred on contract fulfillment assets (Note 6) |
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Operating lease payments |
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Unrealized loss on equity securities and the related securities receivable, net |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Inventories |
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Prepaid expenses |
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Other current assets |
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Accounts payable |
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Deferred revenue |
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Accrued interest payable |
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Other current liabilities |
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Intercompany balances and other assets, net |
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Cash used in operating activities |
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Acquisition of property and equipment |
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Capitalized app development costs |
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Loan receivable issued |
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Acquisition of project pipeline (Note 5) |
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Cash used in investing activities |
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Payments on convertible notes payable |
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Proceeds from long-term debt |
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Proceeds from receivables financing obligations, net |
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Proceeds from short-term advance (included in other current liabilities) |
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Proceeds from sale of common stock |
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Cash provided by financing activities |
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Effect of translation changes on cash |
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Change in cash and cash equivalents |
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Cash, beginning of period |
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Cash, end of period |
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Conversion of notes payable and accrued interest to common stock |
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Debt discount recognized at issuance – convertible notes |
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Convertible note issued as consideration payable to a customer (Note 7) |
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Shares and warrants issued in connection with note financings |
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Reclassification of a convertible note to long-term |
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Interest prepaid at closing, withheld from the advance |
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Maintenance fees earned and settled against convertible notes payable and accrued interest |
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Derecognition of the securities receivable and deferred revenue on termination of the DevvStream forward purchase agreement |
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Supplemental disclosures |
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Cash paid for interest |
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Cash paid for income taxes |
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The accompanying notes are an integral part of these consolidated financial statements
| F-5 |
| Table of Contents |
KARBON-X CORP.
Notes to Consolidated Financial Statements
May 31, 2026
Note 1 – Basis of Presentation and Significant Accounting Policies
Karbon-X Corp. was incorporated in the State of Nevada under the name Cocoluv, Inc. on September 13, 2017 and established a fiscal year end of May 31.
On February 21, 2022, pursuant to the terms of a Share Exchange Agreement, the Company acquired all of the issued and outstanding shares of common stock of Karbon-X Project Inc. ("Karbon-X"), and Karbon-X became the wholly owned subsidiary of the Company in a reverse merger (the "Reverse Acquisition"). Pursuant to the Reverse Acquisition, all of the issued and outstanding shares of Karbon-X common stock were converted, at an exchange ratio of
Under generally accepted accounting principles in the United States ("US GAAP"), because the combined entity will be dependent on Karbon-X's senior management, the Reverse Acquisition was accounted for as a recapitalization effected by a share exchange, wherein Karbon-X is considered the acquirer for accounting and financial reporting purposes. On the date of the reorganization, the assets and liabilities of Karbon-X have been brought forward at their book value and consolidated with Cocoluv, Inc.’s assets. No goodwill has been recognized. Accordingly, the assets and liabilities and the historical operations that are reflected in the consolidated financial statements are those of Karbon-X and are recorded at the historical cost basis of Karbon-X.
Going concern
The Company has generated significant revenue from its business operations but has incurred an accumulated deficit of $
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its subsidiaries: Karbon-X Project, Inc. (Canada), Karbon-X USA Corp. (Nevada), Karbon-X Trading Limited (Cyprus), Allcot Limited (Ireland), Karbon-X Iberia SL (formerly Allcot Soluciones España S.L.) (Spain) and Allcot X Colombia S.A.S. (Colombia). Karbon-X Trading Limited, Allcot Limited, Karbon-X Iberia SL and Allcot X Colombia S.A.S. were formed during the year ended May 31, 2026 and are consolidated from their respective formation dates. All significant intercompany accounts and transactions have been eliminated in consolidation.
The consolidated financial statements present the consolidated balance sheet, statements of operations, stockholders’ equity and cash flows of the Company. These consolidated financial statements are presented in the United States dollar and have been prepared in accordance with accounting principles generally accepted in the United States.
Use of Estimates and Assumptions
Preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain 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 period. Significant estimates include the inputs used to value embedded derivatives, options and warrants, the expected credit losses on the loan receivable, the variable consideration under the Maintenance Agreement, the useful lives of long-lived assets and the realizability of deferred tax assets. Accordingly, actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.
| F-6 |
| Table of Contents |
Accounts Receivable
Accounts receivable represent amounts due from customers for goods or services provided by the Company. Accounts receivable are recorded at the invoiced amount, net of an allowance for credit losses of $0 and $0 as of May 31, 2026 and 2025, respectively. The Company does not charge interest on outstanding balances and does not require collateral.
In accordance with ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), the Company applies a forward-looking current expected credit loss model to financial assets carried at amortized cost. The Company applies a loss-rate method by pool, adjusted for current conditions and reasonable and supportable forecasts, as permitted by ASC 326-20-30-3. Trade receivables arising from contracts with customers are assessed as a single pool. Receivables arising from operating leases are outside the scope of ASC 326 under ASC 326-20-15-3 and their collectibility is assessed under Topic 842 instead, where a collectibility concern is reflected as a limitation on lease income rather than as an allowance for credit losses. The receivable for costs recharged to a related party under a cost-sharing arrangement does not share risk characteristics with the pool and is evaluated individually. The loan receivable and the securities receivable are also evaluated individually.
In assessing expected credit losses at May 31, 2026 management considered the absence of any credit losses recognized in the years ended May 31, 2024, 2025 and 2026; the ageing of the pooled trade receivables, every balance in which was current or less than 30 days past due at the year end; counterparty credit quality, no counterparty with a recognized receivable being in default, in insolvency proceedings or subject to a known dispute; and current conditions and forward-looking information, including volatility in voluntary carbon market pricing, which affects the carrying value of credits held as inventory rather than the collectibility of amounts already invoiced for credits delivered. Applying a nil historical loss rate, with no adjustment indicated, produces a nil allowance. Accordingly no allowance for credit losses is recognized at May 31, 2026 and none has been recognized in any prior period. There is no allowance account to roll forward and there have been no recoveries of previously written off amounts.
Of the $
Amounts invoiced to a customer in advance of delivery under contracts that require payment before the Company transfers the credits are not recognized as receivables unless the Company has an unconditional right to the consideration and collection is probable. During the year ended May 31, 2026 the Company reassessed the collectibility of EUR 3,797,500 (USD $4,421,809) invoiced to a single customer for credits not yet delivered and, because collection of that amount was no longer considered probable, derecognized the receivable and the corresponding contract liability under ASC 606-10-25-6 and 606-10-25-7. The derecognition is not a credit loss, no allowance or write-off has been recorded, and it has no effect on the statement of operations. See Note 9.
Receivables Financing
The Company has entered into receivables financing arrangements whereby it receives cash advances in exchange for rights to future trade receivables. These transactions do not qualify for sale accounting under ASC 860 and are accounted for as secured borrowings. The advances are secured by rights to receivables as they arise rather than by specific outstanding invoices; the related obligations are recorded within current liabilities and are reduced as collections on the related receivables are remitted. The obligations are carried at the net proceeds received and accreted to the purchased amount using the effective interest method under ASC 835-30, with the accretion recorded in interest expense. See Note 13.
Costs to Fulfill a Contract
The Company capitalizes costs incurred to fulfill a contract with a customer under ASC 340-40-25-5 where those costs relate directly to an identified contract, generate or enhance resources that will be used to satisfy performance obligations under the contract, and are expected to be recovered. Capitalized costs are recognized in cost of revenue on a systematic basis consistent with the transfer to the customer of the credits to which they relate, beginning when deliveries under the contract commence; no amortization has been recognized to date. See Note 6.
| F-7 |
| Table of Contents |
Project Costs
The cost of acquiring a portfolio of carbon-offset projects in an asset acquisition is capitalized as an acquired project pipeline intangible asset. The pipeline consists of the Company’s contractual and registry rights in the acquired projects — project development and offtake agreements, registry listings, project design documentation and the related database and intellectual property — rather than physical assets or issued credits, and is therefore accounted for as an intangible asset under ASC 350-30 and amortized over the weighted-average period in which the projects are expected to generate credits (Note 5). Costs incurred after acquisition to develop projects and generate credits are capitalized as contract fulfillment assets where they relate to an identified offtake contract and meet the criteria in ASC 340-40-25-5, or as inventory when credits are issued to the Company’s registry accounts, and are recognized in cost of revenue when the related credits are delivered or sold. All other project development costs are expensed as incurred. The Company carries no project work in process within inventory at May 31, 2026.
Loan Receivable
Loans receivable are recorded at the principal amount outstanding plus accrued interest. Interest income is recognized as earned. Loans receivable are assessed individually for expected credit losses under ASC 326 based on the borrower’s financial condition, its identified sources of repayment and the fair value of collateral held. An allowance for credit losses of $
Capitalized Application Development Costs
The Company develops mobile applications for use by its customers and, because the software is not sold, leased or otherwise marketed as a separate product, accounts for the related costs as internal-use software under ASC 350-40. Costs incurred during the preliminary project stage are expensed as incurred; costs incurred during the application development stage are capitalized; and costs incurred after the software is substantially complete and ready for its intended use, including maintenance and post-implementation costs, are expensed as incurred. Capitalized costs are amortized on a straight-line basis over an estimated useful life of three years beginning when the software is substantially complete and ready for its intended use. Capitalized costs of applications still in the application development stage are carried as in-process software and are not amortized until that date. See Note 17.
Intangible Assets
Intangible assets acquired in an asset acquisition are recorded at cost, being the consideration transferred plus directly attributable acquisition costs, in accordance with ASC 805-50. The acquired project pipeline is a finite-lived intangible asset and is amortized on a straight-line basis over its weighted-average estimated useful life of 27 years from the acquisition date. Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. See Note 5.
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets which are between three to seven years.
Costs of major additions and improvements are capitalized while expenditures for maintenance and repairs, which do not extend the life of the asset, are expensed. Upon sale or disposition of property and equipment, the cost and related accumulated depreciation and amortization are eliminated from the accounts and any resulting gain or loss is credited or charged to income. Long-lived assets held and used by us are reviewed based on market factors and operational considerations for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Inventory
Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. The Company periodically reviews inventories for obsolescence and any inventories identified as obsolete are written down or written off. There was no authoritative U.S. GAAP effective for the year ended May 31, 2026 addressing the recognition and measurement of environmental credits. In the absence of then-effective authoritative guidance specific to environmental credits, the Company accounts for carbon credits held for sale in the ordinary course of business by analogy to ASC 330, Inventory, consistent with prevailing industry practice. ASC 818, Environmental Credits and Environmental Credit Obligations, established by ASU 2026-02 and issued in May 2026, was not effective for the periods presented; see Recently Issued Accounting Standards below. This policy is disclosed in accordance with ASC 235-10-50-1 because the accounting for a non-physical, non-traditional asset by analogy to inventory represents an unusual or innovative application of generally accepted accounting principles that materially affects the determination of financial position and results of operations. Carbon credit inventory of $
Investments
The Company accounts for investments with a 20% to 50% ownership and a significant but not controlling influence as equity method investments. Investments with a greater than 50% ownership and a controlling influence are accounted for using the consolidation method. The Company assesses the potential impairment of equity method investments when indicators such as a history of operating losses, negative earnings and cash flow outlook, and the financial condition and prospects for the investee’s business segment might indicate a loss in value. The Company has accounted for its investment in its subsidiary Karbon-X Project, Inc using the consolidation method.
The Company also holds equity securities that do not give it significant influence. Such securities are measured at fair value with changes recognized in earnings in accordance with ASC 321, Investments—Equity Securities. Where a contractual true-up provision guarantees recovery of a fixed value, the shortfall between the fair value of the securities and the guaranteed amount is recognized as a securities receivable. See Note 16.
| F-8 |
| Table of Contents |
Fair Value of Financial Instruments
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are defined as follows:
| · | Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; |
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| · | Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and |
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| · | Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions. |
Other than the derivative liabilities presented below, the carrying amount of the Company’s financial assets and liabilities approximate their fair values. The securities receivable (Note 16) represents the Company’s entitlement under the price-floor provisions of the Carbon Credit Purchase Agreement, is measured at the guaranteed amount of $
The Company measures certain financial instruments at fair value on a recurring basis in accordance with ASC 820, Fair Value Measurement. As of May 31, 2026, the Company evaluated the conversion features embedded in certain convertible promissory notes and determined that they require bifurcation and measurement at fair value as derivative liabilities.
The Company uses a path-dependent valuation model to estimate the fair value of the derivative liabilities associated with its convertible notes. The model incorporates significant unobservable inputs, including:
| · | Expected stock price volatility |
| · | Risk-free interest rates |
| · | Estimated time to maturity |
| · | Probability of uplisting |
| · | Expected trading volumes |
Because these inputs are unobservable and require significant management judgment, the Company has classified the derivative liabilities as Level 3 in the fair value hierarchy.
For the derivative embedded in the note issued under the Maintenance Agreement, the model measures the full conversion feature at a floating conversion price equal to 85% of the lowest volume weighted average price over the trailing ten trading days, resetting at each conversion, and applies the 4.99% beneficial ownership limitation as a path-dependent constraint on the timing of exercise rather than as a cap on the amount subject to conversion. The assumed rate of disposal of conversion shares is calibrated to the median daily trading volume of the Company’s common stock over the term of the note of approximately
During the year ended 31 May 2026 the Company changed the valuation technique used to measure its embedded conversion derivatives from a binomial lattice to a path-dependent Monte Carlo simulation. The conversion features carry a beneficial ownership limitation restricting the holder to 4.99% of the shares outstanding, the effect of which depends on the sequence of prior conversions and cannot be represented in a recombining lattice. The Company changed technique because the simulation reflects that feature and is therefore more representative of fair value. The change was applied prospectively as a change in accounting estimate. Under the lattice technique previously applied, which did not reflect the beneficial ownership limitation as a path-dependent constraint, the derivative embedded in the note issued under the Maintenance Agreement would have been measured at approximately $
The following table summarizes the fair value hierarchy of the Company’s financial assets and financial liabilities measured at fair value on a recurring basis as of May 31, 2026 and 2025:
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| Level 1 |
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| Level 2 |
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| Level 3 |
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| Total |
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May 31, 2026 |
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Investments in equity securities |
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Total financial assets |
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| $ |
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May 31, 2025 |
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Investments in equity securities |
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Total financial assets |
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| $ |
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| $ |
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| Level 1 |
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| Level 2 |
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| Level 3 |
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| Total |
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May 31, 2026 |
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Derivative liabilities – convertible note conversion features |
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Total financial liabilities |
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May 31, 2025 |
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Derivative liabilities – convertible note conversion features |
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Total financial liabilities |
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| F-9 |
| Table of Contents |
The following table summarizes the changes in Level 3 derivative liabilities measured at fair value on a recurring basis for the years ended May 31, 2026 and 2025.
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| May 31, 2026 |
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| May 31, 2025 |
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Balance at beginning of period |
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Recognized on issuance of convertible notes |
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Released to equity on conversion |
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Change in fair value recognized in earnings |
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Balance at end of period |
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The gain of $
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, applying the five-step model: identifying the contract with the customer, identifying the performance obligations, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when or as each performance obligation is satisfied.
Revenue by product and service consisted substantially of carbon credit sales in both periods presented. Subscription revenue from the mobile application was approximately $
Principal versus agent. For substantially all of its revenue the Company has concluded that it acts as principal. In those arrangements the Company obtains control of the carbon credits before they are transferred to the customer: it holds the credits in its own registry accounts, bears inventory risk from the point of purchase or issuance until delivery, and has discretion in establishing the price charged to the customer. Revenue in those arrangements is recognized gross, at the consideration to which the Company expects to be entitled, with the cost of the credits presented in cost of revenue.
A minor portion of the Company’s revenue arises from arrangements in which the Company facilitates a trade between a counterparty and a purchaser without obtaining control of the underlying credits. In those arrangements the Company acts as agent and revenue is recognized net, in an amount equal to the commission or fee to which the Company is entitled.
Sales of carbon credits. Revenue is recognized at the point in time at which control of the credit transfers to the customer, which is when the credit is retired on the customer’s behalf or transferred into the customer’s registry account.
Subscription revenue. Revenue from the Company’s mobile application subscriptions is recognized over the subscription period as the related performance obligation is satisfied over time.
Consulting and service revenue. Rates for consulting services are typically charged per day, per hour or on a similar basis. Revenue is recognized over the period in which the service is provided. Where the Company’s right to consideration corresponds directly with the value to the customer of the services performed to date, the Company applies the practical expedient in ASC 606-10-55-18 and recognizes revenue in the amount it has the right to invoice, and does not disclose the transaction price allocated to the remaining performance obligations of those contracts.
Contract balances. Consideration received before the related credits are transferred to the customer is recorded as deferred revenue and recognized in revenue when control transfers. See Note 9. The Company also provides advisory and property maintenance services under a long-term maintenance agreement with a customer. Maintenance fees are earned monthly, are variable based on the net rental income of the serviced facility, and are recognized over time as the services are performed; one-time or emergency services are recognized at the point in time the service is delivered. Consideration payable to a customer is recognized as a reduction of the transaction price under ASC 606-10-32-25 and 32-27; the related asset of $
Disaggregation of revenue. The following table disaggregates revenue by the jurisdiction of the contracting subsidiary:
Year ended |
| May 31, 2026 |
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| May 31, 2025 |
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United States |
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Canada |
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Cyprus |
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Ireland |
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Colombia |
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Spain |
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Total revenue |
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| $ |
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| F-10 |
| Table of Contents |
Revenue above is disaggregated by the jurisdiction of the contracting subsidiary, which is not necessarily the location of the customer. The prior year comparative was earned substantially in Canada.
Foreign Currency Translation
The reporting currency of the Company is the United States dollar ("USD"). The functional currency of each entity is the currency of the primary economic environment in which it operates: the Canadian dollar for Karbon-X Project, Inc.; the United States dollar for Karbon-X Corp., Karbon-X USA Corp. and Allcot Limited; the euro for Karbon-X Trading Limited and Karbon-X Iberia SL; and the Colombian peso for Allcot X Colombia S.A.S.
For financial reporting purposes, the consolidated financial statements are translated into the Company’s reporting currency, USD. Asset and liabilities are translated using the closing exchange rate in effect at the balance sheet date with the resulting translation adjustments included as a separate component of shareholder’s equity through other comprehensive income (loss) in the consolidated statement of operations.
Income and expenses are translated at the average yearly rates of exchange. The Company includes realized gains and losses from foreign currency transactions in other income (expense), net in the consolidated statement of operations.
Compensated Absences
Employees earn vacation that accumulates with service and, to the extent unused, is payable on termination of employment. The Company accrues a liability for vacation earned but unused at each balance sheet date, measured at current rates of pay, in accordance with ASC 710. At May 31, 2026 the accrued vacation liability was $
Warrants and Options
There is estimation uncertainty with respect to selecting inputs to the Black-Scholes model used to determine the fair value of warrants (Note 15) and options (Note 18). For warrants issued during the year ended May 31, 2026 these inputs included a
The above estimates and assumptions are reviewed regularly. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Earnings per Common Share
The basic loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the year. The diluted loss per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. As of May 31, 2026, potential dilutive securities of approximately
| F-11 |
| Table of Contents |
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, trade receivables, the securities receivable and the loan receivable. The Company maintains its cash with financial institutions in Canada, the United States, Cyprus, Ireland, Spain and Colombia; balances may from time to time exceed insured limits. The Company performs ongoing credit evaluations of its counterparties and does not generally require collateral, other than in respect of the loan receivable. See Note 22.
Segment Reporting
The Company’s Chief Executive Officer is the chief operating decision maker. He reviews financial information on a consolidated basis to allocate resources and assess performance, and does not review discrete measures of profit or loss or assets for any subsidiary, jurisdiction, product or activity. The Company therefore operates as a single operating and reportable segment, being the sourcing, development and sale of environmental credits. The chief operating decision maker reviews gross profit, EBITDA and net loss, each on a consolidated basis, together with the consolidated cash forecast, and uses them to monitor performance against budget and the prior year and to decide the allocation of capital, the Company’s cost structure and its financing. The measure of segment profit or loss reported below is consolidated net loss, being the measure most consistent with the measurement principles used in these consolidated financial statements. Segment revenue, profit or loss and assets equal the corresponding consolidated amounts, so no reconciling items arise. The significant expense categories regularly provided to the chief operating decision maker, and the amount of other segment items, are set out in the table below.
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| May 31, 2026 |
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| May 31, 2025 |
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Revenue |
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Cost of revenue |
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Salaries and wages, excluding stock compensation |
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Stock compensation |
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Marketing expenses |
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Professional fees |
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Travel and entertainment |
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Depreciation and amortization |
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Rent |
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Dues and subscriptions |
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Office and administrative |
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Bank and transaction fees |
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Provision for credit losses |
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Other operating expenses |
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Total significant segment expenses |
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Revenue less significant segment expenses |
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Other segment items |
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Net loss |
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Stock compensation is option expense presented within salaries and wages; a further $
Reclassifications
Certain amounts in the consolidated financial statements for the prior year have been reclassified to conform to the current year presentation. These reclassifications had no impact on net loss, total stockholders’ equity or cash flows. Prior year prepaid expenses, other assets, capitalized app development costs and lease liabilities have been presented on separate lines consistent with the current year balance sheet captions.
| F-12 |
| Table of Contents |
Recently Issued Accounting Standards
The Financial Accounting Standards Board (FASB) has issued several updates relevant to the Company:
Update 2025-01: Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date Effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the disclosure impact; the update does not affect recognition or measurement and is not expected to have a material effect.
Update 2023-09: Income Taxes (Topic 740): Improvements to Income Tax Disclosures. Effective for public business entities for annual periods beginning after December 15, 2024. Adopted for the year ended May 31, 2026; the expanded rate reconciliation categories and income taxes paid disclosures are reflected in Note 19 and did not affect recognition or measurement.
| Update 2024-04: Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. Effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual periods. Early adoption is permitted. Not yet adopted; the Company is evaluating the update and does not expect a material effect. |
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| Update 2024-03: Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. Effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the disclosure impact; the update does not affect recognition or measurement and is not expected to have a material effect. |
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| Update 2024-02: Codification Improvements—Amendments to Remove References to the Concepts Statements. Effective for public business entities for fiscal years beginning after December 15, 2024. For all other entities, effective for fiscal years beginning after December 15, 2025. Early application is permitted. Adopted for the year ended May 31, 2026 with no effect on the consolidated financial statements. |
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| Update 2024-01: Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards. Effective for public business entities for annual periods beginning after December 15, 2024, and interim periods within those annual periods. For all other entities, effective for annual periods beginning after December 15, 2025, and interim periods within those annual periods. Early adoption is permitted. Adopted for the year ended May 31, 2026 with no effect, as the Company has not granted profits interest awards. |
In May 2026 the FASB issued ASU 2026-02, Environmental Credits and Environmental Credit Obligations (Topic 818), which establishes recognition, measurement, presentation and disclosure requirements for entities that generate, purchase or receive environmental credits, or that have a regulatory compliance obligation that may be settled with environmental credits. Environmental credit assets are recognized and measured according to their intended use and how they were obtained. The standard is effective for public business entities for annual periods beginning after December 15, 2027, including interim periods within those periods, which for the Company is the fiscal year beginning June 1, 2028, with early adoption permitted as of the beginning of an annual reporting period. Because the Company generates, purchases and holds carbon credits, ASU 2026-02 is expected to be significant to the Company and management is assessing its effect on the consolidated financial statements.
The Company applied the amendments in ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, for the year ended May 31, 2025, and has applied them retrospectively to all periods presented; the interim disclosure requirements of the Update were first applied in the quarter ended August 31, 2025. The Company is evaluating the impact of the remaining standards above on its consolidated financial statements.
In July 2025 the FASB issued ASU 2025-05, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments permit an entity to apply a practical expedient under which current conditions as of the balance sheet date are assumed to remain unchanged for the remaining life of current accounts receivable and current contract assets arising from transactions accounted for under Topic 606. The amendments are effective for annual reporting periods beginning after December 15, 2025, and interim periods within those periods, and are applied prospectively. Early adoption is permitted. The Company has not early adopted the amendments and will adopt them in the year ending May 31, 2027. The Company does not expect adoption to have a material effect on its consolidated financial statements, as no allowance for credit losses is recognized and trade accounts receivable are short-dated.
| F-13 |
| Table of Contents |
Note 2 – Prepaid Expenses
As of May 31, 2026 and May 31, 2025, prepaid expenses consisted of the following:
Description |
| May 31, 2026 |
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| May 31, 2025 |
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Prepaid carbon credit procurement |
| $ |
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| $ |
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Prepaid sponsorship and marketing |
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Prepaid biochar equipment deposit |
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Other prepaids |
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Total |
| $ |
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At May 31, 2026 the Company had been invoiced EUR 6,375,000 (USD $
Note 3 – Inventory
Inventory as of May 31, 2026 and May 31, 2025, consisted of the following:
Description |
| May 31, 2026 |
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| May 31, 2025 |
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Carbon credit inventory |
| $ |
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| $ |
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Total |
| $ |
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| $ |
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Carbon credit inventory represents carbon credits currently held for sale and is stated at the lower of cost or net realizable value. No project work in process is carried within inventory at May 31, 2026. Project costs incurred during the year that met the recognition criteria for the acquired project pipeline and for contract fulfillment assets are presented within those captions rather than within inventory. See Notes 5 and 6. Carbon credit inventory is accounted for by analogy to ASC 330 in the absence of then-effective authoritative guidance specific to environmental credits, as described in Note 1. The carbon credit inventory held by Karbon-X Project Inc. is subject to the general security interest granted under the receivables financing arrangements described in Note 13.
Note 4 – Property and Equipment
The amount of property and equipment as of May 31, 2026 and May 31, 2025, consisted of the following:
Description |
| May 31, 2026 |
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| May 31, 2025 |
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Furniture and fixtures |
| $ |
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| $ |
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Computer and equipment |
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Total property cost |
| $ |
|
| $ |
| ||
Accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
Property and equipment, net |
| $ |
|
| $ |
| ||
Depreciation expense for the years ended May 31, 2026 and May 31, 2025 was $
| F-14 |
| Table of Contents |
Note 5 – Acquired Project Pipeline
On May 14, 2025 the Company entered into an Asset Purchase Agreement with Allcot AG to acquire specified assets, including intellectual property, a database, a project pipeline and contract rights; the subsidiary shares originally contemplated under the agreement were carved out by the parties and none were transferred. The acquisition completed on June 27, 2025.
The transaction did not meet the definition of a business combination under ASC 805-10 because substantially all of the fair value of the gross assets acquired was concentrated in the project pipeline, a group of similar identifiable assets, and the acquired group of assets did not include an integrated set of activities, processes or an organized workforce capable of producing outputs. Accordingly the acquisition has been accounted for as an asset acquisition in accordance with ASC 805-50, under which the cost of the acquisition is the consideration transferred plus directly attributable transaction costs, allocated to the assets acquired on the basis of their relative fair values. No goodwill is recognized.
The acquired project pipeline is presented within intangible assets on the consolidated balance sheet and comprised the following at May 31, 2026:
Description |
| May 31, 2026 |
|
| May 31, 2025 |
| ||
Acquired project pipeline, at cost |
| $ |
|
| $ |
| ||
Accumulated amortization |
|
| ( | ) |
|
|
| |
Intangible assets, net |
| $ |
|
| $ |
| ||
The acquired project pipeline comprises the cash consideration paid to the sellers together with the legal and due diligence costs directly attributable to the acquisition, and is accounted for as a single asset group because the assets were acquired for one undivided purchase price. Amortization is recognized on a straight-line basis over a weighted-average useful life of
In connection with the acquisition the Company established Karbon-X Trading Limited (Cyprus), Allcot Limited, Karbon-X Iberia SL (formerly Allcot Soluciones España S.L.) and Allcot X Colombia S.A.S., each a newly incorporated subsidiary consolidated from its formation date. No legal entities, employees or operations were acquired from Allcot AG.
Note 6 – Contract Fulfillment Assets
The Company capitalizes costs incurred to fulfill a contract with a customer in accordance with ASC 340-40-25-5 when such costs relate directly to an identified contract, generate or enhance resources that will be used to satisfy performance obligations under the contract, and are expected to be recovered through future contract revenues. Capitalized fulfillment costs are recognized in cost of revenue on a systematic basis consistent with the delivery of the credits to which they relate, beginning when deliveries under the contract commence.
Contract fulfillment assets represent costs incurred to fulfill the ABC Mangrove Senegal offtake contract with Woodside, capitalized under ASC 340-40. The related performance obligations are expected to be satisfied over a period greater than twelve months from the balance sheet date, currently expected in late calendar 2027 and the asset is therefore presented as non-current. Contract fulfillment assets comprised the following:
Description |
| May 31, 2026 |
|
| May 31, 2025 |
| ||
ABC Mangrove Senegal – costs to fulfill the Woodside offtake contract |
| $ |
|
| $ |
| ||
Total |
| $ |
|
| $ |
| ||
No amortization was recorded during the year ended May 31, 2026 because deliveries under the contract have not commenced; amortization will begin when the first credits are delivered to the customer, currently expected in late calendar 2027. The asset is assessed for impairment at each reporting date; no impairment was recognized in the year ended May 31, 2026.
| F-15 |
| Table of Contents |
Note 7 – Other Assets, Maintenance Agreement and Consideration Payable to a Customer
On January 8, 2026, the Company entered into a Maintenance Agreement with an institutional lender that also holds convertible notes of the Company (the “Lender”) to provide property maintenance and related services at a commercial facility in Corsicana, Texas through October 2035. Fees are payable monthly and are calculated as gross rental income from the facility, less specified operating costs and a maintenance reserve. As consideration for the Lender’s execution of the agreement, the Company issued the Lender a convertible promissory note with an original principal amount of $
The Company accounts for the $
The Company began performing services under the agreement in January 2026. Monthly fees earned have been applied against the outstanding balances of the Lender’s Master Note Tranche 1 and Tranche 2 rather than settled in cash. Fees earned from January through May 2026 were $
At May 31, 2026 the unamortized consideration payable to the customer was $
Consideration under the agreement is entirely variable: fees are calculated monthly under the agreement's fee schedule as the facility's gross rental income for the preceding month, less insurance, taxes, utilities and any third-party service provider costs, and less a maintenance reserve of 5% of rental income until that reserve reaches $50,000. There is no fixed or minimum monthly fee and no fee based on service hours. The consideration is estimated using the expected value method, constrained to the amount for which a significant revenue reversal is not probable. Management forecasts net fees of $
Other assets consisted of the following:
Description |
| May 31, 2026 |
|
| May 31, 2025 |
| ||
Consideration payable to a customer – Maintenance Agreement |
| $ |
|
| $ |
| ||
Deferred offering costs |
|
|
|
|
|
| ||
Long-term security deposits |
|
|
|
|
|
| ||
Due from related party |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
The current portion of the consideration payable to a customer, $
Each other component of other assets is expected to be realized or consumed more than twelve months after the balance sheet date and is therefore presented as non-current.
| F-16 |
| Table of Contents |
Note 8 – Loan Receivable
On February 9, 2026, the Company advanced CAD $
The loan is measured at amortized cost under ASC 310-10 and is classified as a current asset. The balance is denominated in Canadian dollars and translated at the period-end spot rate in accordance with ASC 830-20; foreign currency transaction gains and losses are recognized in other income (expense).
At May 31, 2026 the loan remained outstanding and comprises principal of $
The stated maturity of the loan was 30 days from advance, extendable by mutual written agreement for up to two further 30-day periods. Both 30-day extensions were granted, and the extended term matured on May 10, 2026. The loan had not been repaid at May 31, 2026 and was therefore past due at the balance sheet date, which the Company attributes to the borrower's liquidity. The extensions were granted to a borrower experiencing financial difficulty and are term extensions within the scope of ASC 310-10-50-42; they extended the maturity on otherwise unchanged contractual terms, and no principal or interest was forgiven and no other concession was made.
The Company applies the current expected credit loss model in ASC 326-20 to the loan receivable and evaluates it individually. Because the loan is past due, management estimated expected credit losses using a probability-weighted analysis of recovery scenarios, considering the borrower's identified source of repayment (a pending sale of equipment by an entity the borrower controls), written confirmation from the borrower of intended remittance, the quoted market value of the pledged shares of $
In connection with the loan, on February 6, 2026 the issuer of the pledged shares agreed to issue to the Company share purchase warrants for that number of its shares equal to CAD $
Note 9 – Deferred Revenue
The Company receives consideration in advance of delivering carbon credits. Amounts received before the related credits are transferred to the customer are recorded as deferred revenue and recognized in revenue when control of the credits transfers to the customer. Deferred revenue consisted of the following:
Description |
| May 31, 2026 |
|
| May 31, 2025 |
| ||
Revenue deferred - credits not yet delivered |
| $ |
|
| $ |
| ||
Development cost prepayments received |
|
|
|
|
|
| ||
Other customer prepayments |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
| F-17 |
| Table of Contents |
Included in deferred revenue at May 31, 2026 is EUR 2,660,000 (USD $
Revenue on the deferred revenue balance outstanding at May 31, 2026 is expected to be recognized within twelve months of the balance sheet date, except $
Note 10 – Other Current Liabilities
Other current liabilities comprised the following:
Description |
| May 31, 2026 |
|
| May 31, 2025 |
| ||
Loan payable – short-term advance |
| $ |
|
| $ |
| ||
Employee and statutory payroll liabilities |
|
|
|
|
|
| ||
Value added and sales tax balances, net |
|
| ( | ) |
|
|
| |
Goods received not invoiced |
|
|
|
|
|
| ||
Other accruals |
|
| ( | ) |
|
|
| |
Total |
| $ |
|
| $ |
| ||
On May 20, 2026 a British Columbia company listed on the TSX Venture Exchange advanced CAD $
The Company also holds a loan receivable from a borrower whose obligation is secured by shares of the same British Columbia company (Note 8). That company is not a related party of the Company.
Note 11 – Convertible Notes
During the year ended May 31, 2026 the Company issued convertible promissory notes with an aggregate face amount of $
During the year ended May 31, 2026 the Company converted notes with principal of $
| F-18 |
| Table of Contents |
The Company recorded debt discounts of $1,915,274 on issuance of the convertible notes, amortized $
The notes issued during the year ended May 31, 2026 are convertible into common stock at the option of the holder at any time following issuance.
Conversion prices are set by reference to a discount to the volume weighted average price ("VWAP") of the Company’s common stock over a defined measurement period preceding conversion, subject in most cases to a floor price. The conversion terms of the notes outstanding at May 31, 2026 are as follows:
The notes outstanding at May 31, 2026 are convertible at discounts ranging from
Conversion is further restricted by beneficial ownership limitations of
The Company may prepay the principal amount and any unpaid interest, or any portion thereof, at any time without notice, bonus or penalty, provided that a minimum of six months’ interest is payable regardless of the prepayment date.
The issuance of these convertible promissory notes provided the Company with necessary capital to support its operations and strategic initiatives while offering investors the potential for equity participation in the Company's future growth.
As of May 31, 2026, the Company had convertible note principal outstanding of $
Convertible notes payable consisted of the following:
Description |
| May 31, 2026 |
|
| May 31, 2025 |
| ||
Notes issued in prior years – four holders (repaid or converted in fiscal 2026) |
| $ |
|
| $ |
| ||
Note issued fiscal 2025 – one lender (non-current) |
|
|
|
|
|
| ||
The Lender – Master Note Tranche 1 |
|
|
|
|
|
| ||
The Lender – Master Note Tranche 2 |
|
|
|
|
|
| ||
The Lender – Maintenance Note |
|
|
|
|
|
| ||
Notes issued fiscal 2026 – three other lenders |
|
|
|
|
|
| ||
Total principal outstanding |
| $ |
|
| $ |
| ||
Less: unamortized debt discount |
|
| ( | ) |
|
| ( | ) |
Less: amounts classified as non-current |
|
| ( | ) |
|
| - |
|
Convertible notes payable, current, net of discounts |
| $ |
|
| $ |
| ||
| F-19 |
| Table of Contents |
Note 12 – Long-Term Debt
On November 24, 2025 the Company drew a note from a lender with a face amount of $
The note is secured by a security interest in substantially all of the present and future assets of Karbon-X Corp., including a collection account into which specified receipts are deposited, and is supported by a limited-recourse personal guarantee from the Company’s Chief Executive Officer (Note 21). The loan agreement restricts the Company from granting other liens on its assets, subject to permitted exceptions. See Note 13 for the carrying amount of the assets pledged as collateral.
Description |
| May 31, 2026 |
|
| May 31, 2025 |
| ||
Term note – face amount |
| $ |
|
| $ |
| ||
Unamortized debt discount and issuance costs |
|
| ( | ) |
|
|
| |
Total long-term debt |
| $ |
|
| $ |
| ||
Principal amortizes at $
Note 13 – Receivables Financing Obligations
During the year ended May 31, 2026, Karbon-X Project Inc. entered into two receivables financing arrangements, denominated in Canadian dollars, under which the providers advanced cash in exchange for a specified purchased amount of the Company’s future receivables. The agreements are drafted as purchases of future receivables; however, the Company remains obligated to remit the full purchased amount irrespective of collections, has guaranteed the providers’ recovery, is required to reconcile remittances to actual collections and is subject to default provisions that are not limited to the performance of the receivables. Because the Company has not surrendered control over the receivables, the arrangements do not meet the conditions for derecognition under ASC 860 and are accounted for as secured borrowings. The receivables remain on the consolidated balance sheet and the obligations are carried at the net proceeds received, accreted to the purchased amount using the effective interest method under ASC 835-30, with the accretion recorded in interest expense. The obligations are recorded within current liabilities and, at May 31, 2026, amounted to CAD $459,332 (US$
The obligations are secured by a general security interest in the present and after-acquired personal property of Karbon-X Project Inc., including its accounts receivable, inventory and equipment, and one of the arrangements is personally guaranteed by the Company’s Chief Executive Officer (Note 21).
Description |
| May 31, 2026 |
|
| May 31, 2025 |
| ||
Provider A – funded April 28, 2026 |
| $ |
|
| $ |
| ||
Provider B – funded April 24, 2026 |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
Assets pledged as collateral
The term note described in Note 12 is secured by a security interest in substantially all of the present and future assets of Karbon-X Corp., the parent company, including its equity interests in and intercompany claims against its subsidiaries and a collection account into which specified receipts are deposited. Assets of Karbon-X Corp. recognized in the consolidated balance sheet at May 31, 2026, after elimination of intercompany balances, were $
The receivables financing obligations described above are secured by a general security interest in the present and after-acquired personal property of Karbon-X Project Inc., including its accounts receivable, inventory and equipment. Assets of that subsidiary recognized in the consolidated balance sheet at May 31, 2026, after elimination of intercompany balances, were $
The convertible notes described in Note 11 are unsecured. No assets of the Company were pledged as collateral at May 31, 2025. The guarantees given by the Company’s Chief Executive Officer in respect of the term note and one of the receivables financing arrangements are described in Note 21.
| F-20 |
| Table of Contents |
Note 14 – Shareholders’ Equity
During the year ended May 31, 2026, Karbon-X Corp. completed the following issuances of common stock.
During the year ended May 31, 2026, the Company sold
During the year ended May 31, 2026, the Company issued
During the year ended May 31, 2026, the Company issued
During the year ended May 31, 2026, the Company recorded option compensation expense of $
At May 31, 2026 there were
Note 15 – Warrants
During the year ended May 31, 2026, the Company issued two common stock purchase warrants in connection with the Lender’s Master Note facility: a warrant for
A detail of warrant activity for the year ended May 31, 2026 is as follows:
Description |
| Number |
|
| Weighted average exercise price |
|
| Weighted average remaining contractual life (in years) |
| |||
Outstanding May 31, 2025 |
|
| - |
|
| $ | - |
|
|
|
| |
Granted – Master Note Tranche 1, January 8, 2026 |
|
|
|
|
|
|
|
|
| |||
Granted – Master Note Tranche 2, February 18, 2026 |
|
|
|
|
|
|
|
|
| |||
Exercised |
|
| - |
|
|
| - |
|
|
|
|
|
Expired |
|
|
|
|
|
|
|
|
|
| ||
Outstanding May 31, 2026 |
|
|
|
| $ |
|
|
|
| |||
At May 31, 2026 the aggregate intrinsic value of the
| F-21 |
| Table of Contents |
Note 16 – Investments and Securities Receivable
On October 24, 2024, Karbon-X Corp. entered into a Carbon Credit Purchase Agreement with DevvStream Holdings Inc. ("DEVS") with an aggregate value of $
On October 28, 2024, Karbon-X Corp. entered into a Carbon Credit Forward Purchase Agreement with DEVS with an aggregate price of $
Initial Recognition and Measurement
At initial recognition, the common shares of New Pubco, the company formed from the merger of DEVS and Focus Impact Acquisition Corp. and listed on the Nasdaq Stock Market (“New Pubco”), received under the agreements are classified as equity securities and measured at fair value upon initial recognition in accordance with ASC 321, "Investments—Equity Securities". The Company recorded an initial fair value of the securities based on observable market prices at the time of execution, consistent with a Level 1 fair value measurement, as the shares were actively traded on the Nasdaq Stock Market. The shares were subsequently delisted from the Nasdaq Stock Market on June 24, 2026; see Note 24.
| · | For the Carbon Credit Purchase Agreement, the fair value of the |
|
|
|
| · | For the Carbon Credit Forward Purchase Agreement, the |
Subsequent Measurement and True-Up Provision
Subsequent to initial recognition, the equity securities are measured at fair value in accordance with ASC 321, "Investments—Equity Securities". Additionally, as the securities are denominated in a foreign currency, a currency translation adjustment (CTA) is recorded to reflect the impact of exchange rate fluctuations. The CTA is included in other comprehensive income (OCI) in accordance with ASC 830, "Foreign Currency Matters".
DEVS is an equity security with a readily determinable fair value and is measured at fair value through net income under ASC 321. May 31, 2026 fell on a weekend, so the position was measured by reference to the DEVS closing price on Friday, May 29, 2026, the last trading day of the fiscal year. The shares are held by a subsidiary whose functional currency is the Canadian dollar, and the carrying value is translated into U.S. dollars at the year-end exchange rate. The carrying value of the equity securities decreased by $
| · | The fair value of the position was measured by reference to the closing price of the shares on May 29, 2026, the last trading day of the fiscal year, translated at the year-end exchange rate. |
|
|
|
| · | To address the difference between the contractual price and the current market price, Karbon-X recorded a securities receivable for the true-up portion guaranteed under the agreements. The true-up provision ensures that the Company will be made whole if the market value of the shares remains below the contracted value during the adjustment period. As of May 31, 2026, no additional shares have been issued under these provisions. The remaining securities receivable was settled through the issuance of additional shares subsequent to year end. See Note 24. |
| F-22 |
| Table of Contents |
As of May 31, 2026, the balances were as follows:
Description |
| Balance (USD) |
| |
Investments in equity securities |
| $ |
| |
Securities receivable |
| $ |
| |
Total value |
| $ |
| |
Fair Value Hierarchy
The equity securities of New Pubco are measured using Level 1 inputs, as the shares are actively traded on the Nasdaq Stock Market.
The Company's exposure to impairment is mitigated by the true-up provision, which ensures no loss is ultimately recognized. While the securities are remeasured to fair market value quarterly, the receivable reflects the guaranteed recovery under the agreement.
Note 17 – Internally Developed Software
The Company capitalizes the costs of developing its mobile applications as internal-use software under ASC 350-40. The Company’s original carbon-offset application was substantially complete and ready for its intended use on March 1, 2025, from which date its capitalized cost has been amortized over an estimated useful life of three years and further costs relating to it have been expensed as incurred. During the year ended May 31, 2026 the Company capitalized the application development stage costs of three further applications: SkyXero, which was released and ready for its intended use on April 21, 2026 and is amortized over three years from that date; and Klimagotchi and a social media application developed with a third-party developer, both of which remained in the application development stage at May 31, 2026 and are carried as in-process software of $
As of May 31, 2026 and May 31, 2025, the Company had capitalized application development costs, net of accumulated amortization, of $
Estimated aggregate amortization expense for the capitalized software in service at May 31, 2026, translated at the year-end rate, is $
Note 18 – Stock Option Plan
Description of the Plan
The Company has adopted the 2024 Employees', Directors', Officers', and Consultants' Stock Option Plan (the "Plan") on May 16, 2024, which authorizes
Types of Options
The Plan provides for the issuance of both Incentive Stock Options (ISOs) and Nonstatutory Stock Options (NSOs). ISOs are intended to qualify under Section 422 of the Internal Revenue Code, while NSOs do not qualify under Section 422.
Eligibility
Options may be granted to employees, directors, officers, and consultants of the Company. Special provisions apply to individuals owning more than
Administration
The Plan is administered by the Compensation Committee of the Board of Directors, which has the authority to determine the terms and conditions of each option grant.
| F-23 |
| Table of Contents |
Shares Available
The maximum number of shares that may be issued under the Plan is
Option Terms:
| · | Exercise Price: The exercise price of incentive stock options granted under the Plan must be at least 100% of the fair market value of the stock on the date of grant, and at least 110% for incentive stock options granted to holders of more than 10% of the voting stock; nonqualified options may be granted at exercise prices determined by the Board. |
| · | Term: Options granted under the Plan have a maximum term of ten years from the date of grant. |
| · | Vesting: The vesting schedule for options is determined by the Compensation Committee at the time of grant. |
Payment for Shares
Upon exercise of an option, the optionee may pay the exercise price in cash or cashless exercise, , by tendering shares of common stock.
Adjustments
In the event of a stock split, merger, or other corporate event, the number of shares subject to the Plan and the exercise price of outstanding options will be adjusted as determined by the Compensation Committee.
Transferability
Options granted under the Plan are generally non-transferable, except under specific conditions as outlined in the Plan.
Termination of Employment
The Plan provides specific rules for the exercise of options upon termination of employment, including termination for cause, disability, or death.
Legal Compliance
The issuance of shares under the Plan is subject to compliance with federal and state securities laws.
Plan Duration
The Plan became effective upon adoption by the Board of Directors and options may not be granted after December 31, 2026.
Activity Under the Plan
As of May 31, 2026, the following activity has occurred under the Plan:
Description |
| Number of Shares |
|
| Weighted Average Exercise Price |
|
| Weighted average remaining life (in years) |
| |||
Options authorized |
|
|
|
|
|
|
|
|
| |||
Outstanding at May 31, 2025 |
|
|
|
| $ |
|
|
|
| |||
Granted |
|
|
|
| $ |
|
|
|
| |||
Exercised |
|
| - |
|
| $ |
|
|
|
|
| |
Forfeited |
|
| ( | ) |
| $ |
|
|
|
|
| |
Expired |
|
| ( | ) |
| $ |
|
|
|
|
| |
Outstanding at May 31, 2026 |
|
|
|
| $ |
|
|
|
| |||
Exercisable at May 31, 2026 |
|
|
|
| $ |
|
|
|
| |||
Unvested at May 31, 2026 |
|
|
|
| $ |
|
|
|
| |||
As of May 31, 2026, the intrinsic value of the
| F-24 |
| Table of Contents |
Fair Value of Options
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. Options granted during the year ended May 31, 2026 used the following weighted-average assumptions: expected volatility of
Expected volatility of 35% has been applied consistently to all grants made under the Plan, including those made during the year ended May 31, 2026. The 85% volatility used to value the warrants issued during the year was derived from the historical volatility of a single peer, Carbon Streaming Corp., at the respective warrant issuance dates. Because the warrants were issued deeply in-the-money at an exercise price of $0.001, their fair value closely approximates intrinsic value and is insensitive to the volatility assumption.
Stock-Based Compensation Expense
For the year ended May 31, 2026, the Company recognized stock-based compensation expense of $
Note 19 – Income Taxes
The Company accounts for income taxes in accordance with ASC 740, “Income Taxes.” Deferred income taxes are recognized for temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards. A valuation allowance is established when, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
Given the Company’s history of operating losses and negative evidence outweighing positive evidence, the Company has recorded a full valuation allowance against its net deferred tax assets. Accordingly, no income tax expense (benefit) has been recognized for the years presented.
Components of loss before income taxes were as follows:
|
| May 31, 2026 |
|
| May 31, 2025 |
| ||
Domestic |
|
| ( | ) |
|
| ( | ) |
Foreign |
|
| ( | ) |
|
| ( | ) |
Total |
|
| ( | ) |
|
| ( | ) |
| F-25 |
| Table of Contents |
The provision for income taxes consisted of:
|
| May 31, 2026 |
|
| May 31, 2025 |
| ||
Federal |
|
|
|
|
|
| ||
State |
|
|
|
|
|
| ||
Foreign |
|
|
|
|
|
| ||
Total income tax expense (benefit) |
|
|
|
|
|
| ||
|
| May 31, 2026 |
|
| May 31, 2025 |
| ||
Deferred tax assets: |
|
|
|
|
|
| ||
Net operating loss carryforwards |
|
|
|
|
|
| ||
Accrued compensation and other |
|
|
|
|
|
| ||
Allowance for credit losses |
|
|
|
|
|
| ||
Valuation allowance |
|
| ( | ) |
|
| ( | ) |
Net deferred tax assets |
|
|
|
|
|
| ||
Deferred tax liabilities |
|
|
|
|
|
| ||
Net deferred tax asset (liability) |
|
|
|
|
|
| ||
As of May 31, 2026, the Company had net operating loss carryforwards in each of its tax jurisdictions. Federal net operating losses generated in tax years beginning after December 31, 2017 do not expire but their use is limited to 80% of taxable income in any year. The Company has not filed United States federal income tax returns to date; loss carryforwards are generally not available until the return establishing them has been filed. The gross deferred tax asset, the loss carryforwards by jurisdiction and their expiry profile, and any limitation under Section 382 of the Internal Revenue Code arising from the share issuances and note conversions during the year, are being finalized with the assistance of the Company’s tax advisers. Because the deferred tax assets are fully reserved, management does not expect the outcome of that work to affect the net deferred tax position.
The following table reconciles the income tax benefit computed at the U.S. federal statutory rate to the income tax expense recognized:
|
| May 31, 2026 |
|
| % of pre-tax loss |
|
| May 31, 2025 |
|
| % of pre-tax loss |
| ||||
Loss before income taxes |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
Expected benefit at the U.S. federal statutory rate |
|
| ( | ) |
|
| % |
|
| ( | ) |
|
| % | ||
State and local income taxes, net of federal benefit |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign tax rate differential |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Nondeductible expenses and other |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Change in valuation allowance |
|
|
|
|
| ( | )% |
|
|
|
|
| ( | )% | ||
Income tax expense (benefit) / effective tax rate |
|
|
|
|
| % |
|
|
|
|
| % | ||||
No income taxes were paid in any federal, state or foreign jurisdiction during the years ended May 31, 2026 or May 31, 2025. The deferred tax asset on loss carryforwards has been measured at the U.S. federal statutory rate of
| F-26 |
| Table of Contents |
Note 20 – Loss Per Share
Basic loss per share is calculated by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the year. Diluted loss per share is calculated using the treasury stock and if-converted methods. For the years ended May 31, 2026 and 2025 the Company reported a net loss and all potentially dilutive securities were therefore antidilutive and excluded from the calculation of diluted loss per share.
The following potentially dilutive securities were excluded from the calculation of diluted loss per share:
Description |
| May 31, 2026 |
|
| May 31, 2025 |
| ||
Options outstanding |
|
|
|
|
|
| ||
Warrants outstanding |
|
|
|
|
| - |
| |
Convertible notes, if converted |
|
|
|
|
|
| ||
Total |
|
|
|
|
|
| ||
Weighted average shares outstanding for the year ended May 31, 2026 were
Basic and diluted loss per share for the year ended May 31, 2026 was $(
Shares issuable on conversion of the notes outstanding at May 31, 2026 have been estimated using a conversion price of $
Note 21 – Related Party Transactions
During the year ended May 31, 2026 the Company drew a note of $
At May 31, 2026 the Company had a receivable of $
The Company is party to an employment contract with Chad Clovis, Chief Executive Officer, President and Director, under which Mr. Clovis is paid an annual salary of $
Mr. Clovis has provided a limited-recourse personal guarantee of the term note described in Note 12 and a personal guarantee of one of the receivables financing arrangements described in Note 13. No consideration was paid to Mr. Clovis for these guarantees and no amount has been recognized in respect of them.
| F-27 |
| Table of Contents |
Note 22 – Concentrations
Revenue. For the year ended May 31, 2026, $
Long-lived assets. Long-lived assets, comprising property and equipment and right-of-use assets, were held as follows: Canada $
Customers. One customer accounted for approximately
Cash. The Company maintains cash with financial institutions in Canada, the United States, Cyprus, Ireland, Spain and Colombia. Balances may from time to time exceed amounts insured by the relevant deposit insurance schemes. The Company has not experienced any losses on such balances.
Trade receivables. At May 31, 2026 one customer accounted for $
Note 23 – Commitments and Contingencies
Legal Proceedings
In February 2024, the Company was notified of a former employee filing a lawsuit against the Company for wrongful termination. The Company has settled this suit.
Operating Leases
The Company has entered into an operating lease for office space in Calgary, Alberta commencing on July 1, 2025, with an early occupancy period beginning on February 1, 2025. The
The Company subleases part of the Calgary premises to a related party under common ownership. The sublease is a verbal arrangement running month to month at CAD $4,500 per month plus goods and services tax, against the head lease cost of CAD $14,179 per month. Because either party may terminate on one month’s notice without more than an insignificant penalty, the enforceable lease term is one month and the sublease is classified as an operating lease. The Company accounts for the head lease and the sublease separately; the right-of-use asset and the related lease liabilities remain recognized. Sublease income of $
Lease right-of-use assets represent the right to use an underlying asset pursuant to the lease for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Lease right-of-use assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists. These assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using our estimated incremental borrowing rate generally applicable to the location of the lease right-of-use asset, unless an implicit rate is readily determinable. We combine lease and certain non-lease components in determining the lease payments subject to the initial present value calculation. Lease right-of-use assets include upfront lease payments and exclude lease incentives, if applicable. When lease terms include an option to extend the lease, we have not assumed the options will be exercised.
Lease expense for operating leases generally consists of both fixed and variable components. Expense related to fixed lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are generally expensed as incurred and include agreed-upon changes in rent, certain non-lease components, such as maintenance and other services provided by the lessor, and other charges included in the lease. Leases with an initial term of twelve months or less are not recorded on the balance sheet. We recognized total lease expense of approximately $
| F-28 |
| Table of Contents |
Future minimum lease payments under operating leases that have initial noncancelable lease terms in excess of one year at May 31, 2026 were as follows:
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS |
| Total |
| |
Fiscal Year Ended May 31, |
|
|
| |
2027 |
|
|
| |
2028 |
|
|
| |
2029 |
|
|
| |
2030 |
|
|
| |
Thereafter |
|
|
| |
Total lease payments |
|
|
| |
Less: imputed interest |
|
| ( | ) |
Operating lease liabilities |
|
|
| |
|
|
|
|
|
Operating lease liability – current |
|
|
| |
Operating lease liability – non-current |
| $ |
| |
SCHEDULE OF OTHER SUPPLEMENTAL INFORMATION UNDER OPERATING LEASE |
|
|
| |
Weighted average discount rate |
|
| % | |
Weighted average remaining lease term (years) |
|
|
| |
Note 24 – Subsequent Events
The Company evaluated subsequent events through the date these consolidated financial statements were issued.
On July 7, 2026 the Company and DevvStream Holdings, Inc. ("DEVS") executed a Mutual Termination Agreement, effective May 29, 2026, terminating the Carbon Credit Forward Purchase Agreement dated October 28, 2024 in its entirety with a full mutual release, expressly including the Company’s obligation to deliver carbon credits and DEVS’s obligation to issue the consideration shares. Neither party had performed under the forward. The termination was effective before the balance sheet date and the securities receivable and deferred revenue previously carried in respect of the forward were derecognized at May 31, 2026 with no effect on net loss; see Note 16.
On June 24, 2026 the Company and DEVS entered into a Share Cancellation Addendum under which the
Also on June 24, 2026, the common shares of DEVS were delisted from the Nasdaq Stock Market. The shares held at May 31, 2026 are measured using the quoted Nasdaq closing price on the last trading day of the fiscal year, a Level 1 input; the delisting is a condition arising after the balance sheet date and is a nonrecognized subsequent event. Following the delisting, subsequent-period fair value measurements of the DEVS holding may no longer be based on a quoted price in an active market.
Following the exchange the Company expects to hold
| F-29 |
| Table of Contents |
Financing
Convertible notes issued. Between July 17 and September 15, 2026 the Company issued seven convertible promissory notes to six lenders, one of which is an affiliate of an existing lender, with an aggregate principal amount of $
Receivables financing and term loans.
Conversions of convertible notes
Between June 3 and September 15, 2026 the holders of five convertible promissory notes delivered notices of conversion under which an aggregate of approximately $
Equity
On June 4 and June 24, 2026 the Board of Directors approved grants of options to purchase an aggregate of
The Company also issued
Between June 1, 2026 and August 31, 2026 the Company issued
Related party
The outstanding sublease rent receivable from the related party described in Note 21 of $
| F-30 |
| Table of Contents |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures.
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of May 31, 2026. Based on that evaluation, our principal executive officer and principal financial officer concluded that, because of the material weakness in internal control over financial reporting described below, our disclosure controls and procedures were not effective as of May 31, 2026.
Management’s Annual Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
Our management evaluated the effectiveness of the Company’s internal control over financial reporting as of May 31, 2026. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013). Based on that evaluation, management concluded that the Company’s internal control over financial reporting was not effective as of May 31, 2026 because of the material weakness described below. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The material weakness relates to the Company’s period-end financial reporting process. During the year ended May 31, 2026 the Company’s operations expanded significantly, including the formation and acquisition of subsidiaries in Europe and Latin America and the entry into a number of complex, non-routine transactions, and the accounting resources and review procedures in place during most of the year were not sufficient to ensure that those transactions and the year-end close were recorded and reviewed on a timely basis. As a result, a number of adjustments to the consolidated financial statements were identified and recorded during the preparation and audit of the annual financial statements. All of these adjustments were recorded before the financial statements were issued, and management believes that the consolidated financial statements included in this report present fairly, in all material respects, the Company’s financial position, results of operations and cash flows in accordance with generally accepted accounting principles.
Remediation. Management began to address these matters before the end of the fiscal year. In February 2026 the Company appointed a Chief Accounting Officer and, in the final months of the fiscal year, implemented formal preparation, review and approval controls over the close and reporting process, as described under Changes in Internal Control over Financial Reporting below. Management expects to continue this work through fiscal 2027, including further additions to accounting resources, a formal technical accounting review of significant and non-routine transactions each quarter, and the implementation of a new enterprise accounting system across the group. Management will consider the material weakness remediated when the enhanced controls have operated for a sufficient period and management has concluded, through testing, that they are operating effectively.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permits us to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting.
During the year ended May 31, 2026 the Company strengthened its internal control over financial reporting. In February 2026 the Company appointed a Chief Accounting Officer, and in connection with that appointment implemented formal preparation, review and approval controls over the close and reporting process, including documented reconciliations with independent review, segregation of preparer and reviewer responsibilities over journal entries and account reconciliations, a formal close calendar with control sign-offs, and structured review of significant accounting judgments. The Company also integrated the subsidiaries acquired and formed during the year into that framework. Management considers these changes to have materially affected the Company’s internal control over financial reporting and to be a substantial step toward remediating the material weakness described above; remediation remains in progress.
Item 9B. Other Information
During the quarter ended May 31, 2026, no director or officer of the Company adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement, as those terms are defined in Item 408 of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
| 20 |
| Table of Contents |
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The table below reflects the Company's executive officers and directors. There is no agreement or understanding between the Company and each current or proposed director or executive officer pursuant to which he was selected as an officer or director. The address for each such officer and director is 6575 West Loop South, Suite 500, Bellaire, TX 77401.
Name |
| Age |
| Positions and Offices |
|
|
|
|
|
Chad Clovis |
| 47 |
| Chief Executive Officer, President and Director |
Brett Hull |
| 62 |
| Director |
Justin Bourque |
| 45 |
| Director |
Adriana Ebell |
| 57 |
| Chief Financial Officer |
Samuel Nelson |
| 31 |
| Chief Accounting Officer |
The Directors and Officers named above will serve until the next annual meeting of the stockholders or until their respective resignation or removal from office. Thereafter, Directors are anticipated to be elected for one-year terms at the annual stockholders’ meeting. Officers will hold their positions at the pleasure of the Board of Directors.
Effective July 29, 2025, Christopher Mulgrew ceased to be Chief Financial Officer of the Company and Adriana Ebell was appointed Chief Financial Officer. In February 2026 Samuel Nelson was appointed Chief Accounting Officer.
Chad Clovis, Chief Executive Officer, President and Director
Chad Clovis is the Chief Executive Officer of Karbon-X Corp. which he founded in 2022. Mr. Clovis has been the CEO of Chenn Holdings since 2013 performing business development and business expansion services for multiple businesses in the dirt works and oilfield transportation space. In 2014 he was the founder and Operations Manager of CCV Ltd a full-service oilfield trucking company which was successfully sold to Petrogas Logistics in 2016 where Mr.Clovis became the Manager of Northern Operations. After founding Karbon-X in early 2022 Mr.Clovis completed a reverse take over of Cocoluv, Inc., an OTC listed company, and raised substantial funds to operate the business through its growth period. Chad Clovis is 47 years old.
Chad Clovis is a professional operator with more then 80,000 hours operating various pieces of oilfield equipment including high pressure chemical pumpers, sour sealed tank units, high pressure water blast units and hydro vac units of various configurations. Mr. Clovis attended BCIT in 2011 to obtain the National Safety Officer designation, Leadership in Business Excellence designation and Janus Mentor Training designation which he graduated with honors.
Brett Hull, Director
Brett Andrew Hull is a Canadian–American former ice hockey player and general manager, and currently an executive vice president of the St. Louis Blues of the National Hockey League (NHL). He played for the Calgary Flames, St. Louis Blues, Dallas Stars, Detroit Red Wings, and Phoenix Coyotes between 1986 and 2005. His career total of 741 goals is fifth highest in NHL history, and he is one of five players to score 50 goals in 50 games. He was a member of two Stanley Cup winning teams — 1999 with the Dallas Stars and 2002 with the Detroit Red Wings. In 2017 Hull was named one of the 100 Greatest NHL Players in history.
Known as one of the game's greatest snipers, Hull was an elite scorer at all levels of the game. He played college hockey for the University of Minnesota-Duluth Bulldogs, where he scored 52 goals in 1985–86. He scored 50 the following year with the Moncton Golden Flames of the American Hockey League (AHL) and had five consecutive NHL seasons of at least 50 goals. His 86 goals in 1990–91 is the third-highest single-season total in NHL history, with the first two being the same person, Wayne Gretzky. Hull won the Hart Memorial Trophy and Lester B. Pearson Award that year as the league's most valuable player. He was named a first team all-star on three occasions and played in eight NHL All-Star Games.
| 21 |
| Table of Contents |
Justin Bourque, Director
Justin Bourque is an experienced and passionate leader with 27 years of diverse Industry and Indigenous Community development experience.
Presently, Justin is the Founder and President of Asokan Generational Developments, a consulting firm providing strategic advisory services focused on bridging the gap between Industry and Indigenous Communities.
As a passionate Indigenous leader, Justin is deeply committed to enhancing the relationships between corporations and Indigenous Communities. with extensive experience in both, he sees the value in mutually beneficial relationships. Building Indigenous resilience, economic sovereignty and shareholder value through development and management of meaningful partnerships between Indigenous Communities and Industry. He has been at the forefront of ideating, developing and successfully executing a number of major projects, both greenfield and brownfield, representing Indigenous Communities as well as corporate clients. These projects included a number of complex Indigenous equity ownership transactions, where he has served in diverse roles, including as an advisor, management committee representative, project lead, lead negotiator, Indigenous Community leader, President and Director of the Board post-closing. Most recently, Justin has played an integral role in three major Indigenous equity transactions worth approximately $2.6 billion and involving more than 35 unique Indigenous Communities throughout Alberta. As part of executing these transactions, Justin supported the raise of nearly $0.5 billion in capital.
In recognition of his exemplary leadership and invaluable contributions to Indigenous Communities, in December 2022, Justin was awarded Queen Elizabeth II’s Platinum Jubilee Medal. In November 2023, Asokan was added to the Indigenomics Institute 10 To Watch List for demonstrating excellence and leadership in the emerging $100 billion Indigenous economy. Justin was also named one of Canada’s Top 20 Dynamic CEOs by The CEO Publication; One of 10 Most Innovative Business Leaders to Follow in 2022 by CIO Views; and Top 50 Under 50 by YMM. Justin has also been awarded the JA Northern Alberta Business Hall of Fame "Innovator" Award for his forward-thinking leadership and innovative spirit during his tenure as CEO of Willow Lake Métis Nation in Anzac, Alberta. During his time as CEO, Justin built the Nation’s innovative governance and ESG frameworks, and forged several strategic partnerships to create revenue and job opportunities, spur community development, and secure the Nation’s future. Under his leadership, Willow Lake Métis became a self-governing Nation. In addition, through the Sohkastwawin initiative, which in Cree means “the act of being resilient”, the previously landless Nation purchased 205 acres of land that it plans to reclaim and develop in a sustainable way, providing their community a home for the first time.
Samuel Nelson, Chief Accounting Officer
Mr. Nelson joined the Company as Chief Accounting Officer in February 2026, with responsibility for SEC reporting, technical accounting and internal control over financial reporting. From November 2023 to February 2026 he was Chief Financial Officer of FCL Dental, a Texas-regulated dental health maintenance organization based in Sugar Land, Texas, and from November 2017 to November 2023 he was an Audit Supervisor with TPS Thayer, a certified public accounting firm in Houston, Texas, where he supervised audit engagements. Mr. Nelson specializes in U.S. GAAP, SEC reporting and PCAOB audit coordination.
Adriana Ebell, Chief Financial Officer
Ms. Ebell joined the Company in April 2025 as Global Controller and was appointed Chief Financial Officer effective July 29, 2025 on the departure of Mr. Mulgrew. From February 2022 to April 2025 she was Business Controller of TGS, a geoscience and energy data company, in Houston, Texas, and from February 2018 to February 2022 she was an Account Manager with Intertek, a testing, inspection and certification company, responsible for financial reporting under U.S. GAAP and IFRS. Earlier in her career she held senior accounting and analyst positions with Schlumberger and AutoZone. Ms. Ebell is a Certified Public Accountant with Big Four public accounting experience at Deloitte and specializes in U.S. GAAP and IFRS compliance, financial strategy and multinational financial reporting systems.
Involvement in Certain Legal Proceedings
No director, executive officer, promoter or control person of Karbon-X has, during the last ten years: (i) been convicted in or is currently subject to a pending a criminal proceeding (excluding traffic violations and other minor offenses); (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to any federal or state securities or banking or commodities laws including, without limitation, in any way limiting involvement in any business activity, or finding any violation with respect to such law, nor (iii) any bankruptcy petition been filed by or against the business of which such person was an executive officer or a general partner, whether at the time of the bankruptcy or for the two years prior thereto.
Committees of the Board
Decisions of the Board of Directors are generally taken by written unanimous resolutions. The current Board comprises three members and is intending to hold regularly scheduled meetings. The entire board provides the functions of Audit, Compensation and Governance committees until such time as charters for these committees can be adopted and they can be populated by independent directors.
| 22 |
| Table of Contents |
Family Relationships
None
Code of Ethics
The Company has not adopted a code of ethics applicable to its principal executive officer, principal financial officer and principal accounting officer. Given the small number of executive officers, the Board has concluded that it can rely on its direct oversight of management; the Board intends to adopt a code of ethics as the Company’s operations and management team grow.
Audit Committee and Audit Committee Financial Expert
The Company does not have a separately designated audit committee; the entire Board of Directors performs the functions of an audit committee. The Board has not designated an audit committee financial expert, as the Company’s financial reporting expertise resides with its Chief Financial Officer and Chief Accounting Officer, who are not directors.
Insider Trading Policy
The Company has not adopted a written insider trading policy governing the purchase, sale and other dispositions of its securities by directors, officers and employees. Directors and officers are subject to the prohibitions on insider trading under the federal securities laws, and the Board intends to adopt a written policy.
Compliance with Section 16(A) of The Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that our directors and executive officers and persons who beneficially own more than 10% of our common stock (referred to herein as the “reporting persons”) file with the SEC various reports as to their ownership of and activities relating to our common stock. Such reporting persons are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based solely upon a review of copies of Section 16(a) reports and representations received by us from reporting persons, and without conducting any independent investigation of our own during the fiscal year ended May 31, 2026, all forms required, if any, were filed with the SEC by such reporting persons.
Changes in Nominating Procedures
None
Item 11. Executive Compensation
Summary Compensation Table
Executive Officer and Director Compensation of the Company
Summary Compensation Table
The following table sets forth the total compensation paid to, or accrued by, the Named Executive Officers and any other employees earning over $100,000 per year for the years ended May 31, 2025 and May 31, 2026.
Name |
| Year |
| Salary or fees ($) |
|
| Stock awards ($) |
|
| Option Awards ($) |
|
| Non-equity incentive plan compensation ($) |
|
| Change in pension value and nonqualified deferred compensation earnings |
|
| All other compensation ($) |
|
| Total ($) |
| |||||||
Chad Clovis (1) |
| 2025 |
| $ | 396,076 |
|
|
| 70,751 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 72,750 |
|
| $ | 539,577 |
|
|
| 2026 |
| $ | 450,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| $ | 450,000 |
|
Christopher Mulgrew (2) |
| 2025 |
| $ | 282,077 |
|
|
| 47,312 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 49,312 |
|
| $ | 378,701 |
|
|
| 2026 |
| $ | 62,500 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 66,250 |
|
| $ | 128,750 |
|
Adriana Ebell (3) |
| 2026 |
| $ | 198,542 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 6,765 |
|
| $ | 205,307 |
|
| 23 |
| Table of Contents |
(1) Mr. Clovis, the Company’s Chief Executive Officer, is compensated under his agreement with Karbon-X Project Inc. described under Employment Agreements below, at $450,000 per year. (2) Mr. Mulgrew ceased to be Chief Financial Officer effective July 29, 2025. All other compensation for fiscal 2026 consists of $62,500 paid under his termination and release agreement and $3,750 of employer 401(k) matching contributions. (3) Ms. Ebell was appointed Chief Financial Officer effective July 29, 2025. All other compensation consists of employer 401(k) matching contributions. Samuel Nelson, Chief Accounting Officer since February 2026, received total compensation of less than $100,000 for fiscal 2026 and is not a named executive officer. Subsequent to the year end, on June 4, 2026, the Board granted options to purchase 1,500,000 shares to Mr. Clovis (in replacement of 900,000 options granted in June 2024 that were cancelled on the same date), 360,000 shares to Ms. Ebell and 440,000 shares to Mr. Nelson, each at an exercise price of $0.23 per share, vesting one-third on the first anniversary of grant and monthly thereafter over 24 months; these grants will be reported in the fiscal 2027 compensation table.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth the outstanding equity awards held by the named executive officers at May 31, 2026. No stock awards were outstanding.
Name |
| Number of securities underlying unexercised options (#) exercisable |
|
| Number of securities underlying unexercised options (#) unexercisable |
|
| Option exercise price ($) |
|
| Option expiration date |
| ||||
Chad Clovis (1) |
|
| 868,500 |
|
|
| 31,500 |
|
|
| 0.75 |
|
| June 1, 2029 |
| |
Adriana Ebell |
|
| 33,000 |
|
|
| 67,000 |
|
|
| 0.90 |
|
| May 14, 2030 |
| |
Christopher Mulgrew (2) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
(1) The 900,000 options granted to Mr. Clovis on June 1, 2024 were cancelled on June 4, 2026 and replaced by the grant of 1,500,000 options at $0.23 per share described above. (2) Mr. Mulgrew’s options expired unexercised on his departure.
Employment Agreements
On September 16, 2024 the Company entered into an employment contract with Chad Clovis as President of Karbon-X Project. Pursuant to the contract Mr. Clovis is paid an annual salary of $450,000.
Equity Compensation Plans
On May 16, 2024 the Company adopted the 2024 Employees’, Directors’, Officers’ and Consultants’ Stock Option Plan, which authorizes the Company to issue up to 5,000,000 options to purchase common stock at a price, term and vesting as determined by the Board of Directors. The plan was amended to authorize the issuance of up to 15,000,000 options to purchase common stock. Also on June 24, 2024 the Company issued 2,105,000 options to employees and officers exercisable for five years at an exercise price of $0.75 per share.
The Board may grant incentive bonuses to our executive officers and/or future executive officers in its sole discretion. Bonuses will be granted if the Board believes such bonuses are in the Company’s best interest, after analyzing our current business objectives and growth, if any, and the amount of revenue we are able to generate each month, which revenue is a direct result of the actions and ability of such executives. Other than the 2024 Plan described above and the discretionary bonus arrangements described in this paragraph, we have no equity or incentive compensation plans.
All compensation and stock option plans for executives and employees will be governed by the Compensation and Governance Committee.
Expense Reimbursement
We will reimburse our officers and directors for reasonable expenses incurred during the course of their performance.
Retirement Plans and Benefits.
The Company’s U.S. subsidiary maintains a 401(k) plan under which it makes matching contributions for participating employees. The Company has no other retirement plans.
Director Compensation
We do not have a standard compensation arrangement for cash compensation of directors, although the Board has approved annual issuances of shares to directors for their service, including those described in Note 14, and expects to continue that practice for directors. The Company intends to form a Compensation and Governance Committee to make such determinations, with approval by both the Board of Directors and the Audit Committee.
The following table sets forth the compensation of the Company’s non-employee directors for the year ended May 31, 2026. Mr. Clovis, who is also a director, received no additional compensation for his service as a director; his compensation is reported in the Summary Compensation Table.
Name |
| Fees earned or paid in cash ($) |
|
| Stock awards ($) |
|
| Option awards ($) |
|
| All other compensation ($) |
|
| Total ($) |
| |||||
Brett Hull |
|
| - |
|
|
| 56,666 |
|
|
| - |
|
|
| - |
|
|
| 56,666 |
|
Justin Bourque |
|
| - |
|
|
| 56,666 |
|
|
| - |
|
|
| - |
|
|
| 56,666 |
|
Stock awards represent the grant-date fair value of 41,666 shares issued to each director on October 1, 2025 at $0.52 per share and 175,000 shares issued to each director on May 29, 2026 at $0.20 per share, computed in accordance with ASC 718.
| 24 |
| Table of Contents |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth beneficial ownership of the Company’s common stock as of September 10, 2026, based on 98,964,757 shares issued and outstanding on that date, by each person known to the Company to beneficially own more than 5% of its common stock and by each director and executive officer individually and as a group.
Title of Class |
| Name of Beneficial Owner |
| Amount of Beneficial Ownership |
|
| Percentage of Stock |
| ||
|
|
|
|
|
|
|
|
| ||
Common Stock |
| Chad Clovis, Chief Executive Officer, President and Director (1) |
|
| 16,463,500 |
|
|
| 16.6 | % |
Common Stock |
| Hedera Foundation SEZC |
|
| 5,150,381 |
|
|
| 5.2 | % |
Common Stock |
| CM Equity AG |
|
| 5,000,000 |
|
|
| 5.1 | % |
Common Stock |
| Brett Hull, Director |
|
| 369,443 |
|
|
| 0.4 | % |
Common Stock |
| Justin Bourque, Director |
|
| 327,776 |
|
|
| 0.3 | % |
Common Stock |
| Adriana Ebell, Chief Financial Officer (2) |
|
| 52,167 |
|
| * |
| |
Common Stock |
| Samuel Nelson, Chief Accounting Officer |
|
| - |
|
| * |
| |
Common Stock |
| All directors and executive officers as a group (5 persons) |
|
| 17,212,886 |
|
|
| 17.4 | % |
(1) Consists of 14,356,000 shares held directly or through brokerage accounts by Mr. Clovis, 2,007,500 shares held by Jennifer Clovis, the spouse of Mr. Clovis, and 100,000 shares issuable to Mrs. Clovis on the exercise of vested options. (2) Includes 49,667 shares issuable on the exercise of options vested or vesting within 60 days of September 10, 2026.
* Represents beneficial ownership of less than 1% of the outstanding common stock.
Pursuant to Rule 13d-3 under the Exchange Act, a beneficial owner of securities is a person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has, or shares, voting power and/or investment power with respect to the securities, and any person who has the right to acquire beneficial ownership of the security within 60 days through any means, including the exercise of any option, warrant or right or the conversion of a security. Any shares that are not outstanding that a person has the right to acquire are deemed to be outstanding for the purpose of calculating the percentage of beneficial ownership of such person, but are not deemed to be outstanding for the purpose of calculating the percentage of beneficial ownership of any other person.
Beneficial ownership for directors and executive officers is based on the beneficial ownership reported in the Company’s Form 10-K for fiscal 2025, adjusted for issuances to those persons and transfers by them recorded in the transfer agent’s transfer journals through August 31, 2026; shares transferred by an affiliate into street name through Cede & Co. remain attributed to that affiliate, and the 144,000 shares transferred by Mr. Clovis to a third party in July 2025 have been excluded. Shares registered to Cede & Co. for other holders, totaling 36,556,701 shares, or 38.5% of the shares outstanding, per the transfer agent’s certified list at May 31, 2026, are not attributed to underlying beneficial owners, so a non-affiliate beneficial owner holding more than 5% through a broker would not appear above.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides information as of May 31, 2026 about shares of the Company’s common stock that may be issued under the 2024 Employees’, Directors’, Officers’ and Consultants’ Stock Option Plan, which was adopted by the Board of Directors and has not been submitted to or approved by the Company’s stockholders. The Company has no other equity compensation plan. The table does not reflect the options granted, or the 900,000 options cancelled, after the year end as described in Item 11.
Plan category |
| Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) |
|
| Weighted-average exercise price of outstanding options, warrants and rights (b) |
|
| Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) |
| |||
Equity compensation plans approved by security holders |
|
| - |
|
|
| - |
|
|
| - |
|
Equity compensation plans not approved by security holders |
|
| 3,595,450 |
|
| $ | 0.82 |
|
|
| 11,404,550 |
|
Total |
|
| 3,595,450 |
|
| $ | 0.82 |
|
|
| 11,404,550 |
|
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| Table of Contents |
Item 13. Certain Relationships and Related Transactions, and Director Independence.
At May 31, 2026 the Company had a receivable of $29,253 due from Revive Terra, an entity related to the Company through common ownership with members of management, recorded within other assets, representing travel and related costs recharged under a cost-sharing arrangement; the Company also subleases part of its Calgary premises to Revive Terra and had sublease rent receivable of $41,132 at that date. See Notes 7 and 21. During the year the Company drew and repaid a non-interest-bearing $80,000 loan from Chad Clovis, its Chief Executive Officer. There were no other related party transactions during the year.
Director Independence
The Company is not currently listed on any national exchange, or quoted on any inter-dealer quotation service, that imposes independence requirements on any committee of the Company’s directors, such as an audit, nominating or compensation committee. The Company currently does not currently have any independent directors on its Board.
Item 14. Principal Accounting Fees and Services
Audit Fees
The aggregate fees billed for the fiscal years ended May 31, 2026 and May 31, 2025, for professional services rendered by the principal accountants for the audit of the registrant's annual financial statements and review of the financial statements included in the registrant's Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $111,104 and $67,099, respectively.
Audit Related Fees
Consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the SEC and other accounting consulting. These fees amounted to $0 for the years ended May 31, 2026 and 2025, respectively.
Tax Fees
Consists of all services performed by a principal accountant’s tax division except those related to the audit. Typical services include tax compliance, tax planning, and tax advice. Tax compliance services generally include preparation of original and amended tax returns as well as claims for tax refunds. Tax planning and tax advice services would include, but are not limited to, assistance with tax audits and appeals, requests for tax rulings, and tax planning related to mergers and acquisitions. These fees amounted to $0 for May 31, 2026 and 2025, respectively.
All Other Fees
Other than the services reported above, no other fees billed for professional services provided by the principal accountant.
Audit Committee Pre-Approval Policies
Our Board of Directors performing as the Audit Committee by their Chair has approved the principal accountant's performance of services for the audit of the registrant's annual financial statements and review of financial statements included in our Report on Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal year ending May 31, 2026. Audit-related fees and all other fees, if any, were approved by the Board of Directors.
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| Table of Contents |
PART IV
Item 15. Exhibits, Financial Statement Schedules
The following exhibits are filed as part of this Annual Report.
The following Exhibits are included herein:
Exhibit No. |
| Description |
3.1 |
| Articles of lncorporation of Cocoluv, Inc. dated September 13, 2017 (incorporated by reference to Exhibit 3.1 of the Company’s annual report filing on Form 10-K filed with the Securities and Exchange Commission on September 15, 2025). |
3.2 |
| Articles of Amendment of Cocoluv, Inc. April 22, 2022 (incorporated by reference to Exhibit 3.2 of the Company’s annual report filing on Form 10-K filed with the Securities and Exchange Commission on September 15, 2025). |
3.3 |
| Bylaws (incorporated by reference to Exhibit 3.3 of the Company’s annual report filing on Form 10-K filed with the Securities and Exchange Commission on September 15, 2025). |
10.1 |
| Reorganization Agreement among Karbon-X Corp., Karbon-X Project and Reymund Guillermo dated as of February 21, 2022. (incorporated by reference to Exhibit 3.1(i) of the Company’s filing on Form 8-K filed with the Securities and Exchange Commission on July 1, 2022) |
10.2 |
| Employment Agreement dated February 17, 2022 between the Company and Chad Clovis (incorporated by reference to Exhibit 3.1(i) of the Company’s filing on Form 8-K filed with the Securities and Exchange Commission on July 1, 2022) |
10.3 |
| Employment Agreement dated February 17, 2022 between the Company and Marita Dautel (incorporated by reference to Exhibit 3.1(i) of the Company’s filing on Form 8-K filed with the Securities and Exchange Commission on July 1, 2022) |
10.4 |
| Commercial Lease Agreement dated May 6, 2022 between the Company and 459063 Ltd. (incorporated by reference to Exhibit 3.1(i) of the Company’s filing on Form 8-K filed with the Securities and Exchange Commission on July 1, 2022) |
10.5 |
| Karbon-X Corp. 2024 Employees, Officers’, Directors’ and Consultants’ Stock Option Plan, as amended (incorporated by reference to Exhibit 10.5 of the Company’s annual report filing on Form 10-K filed with the Securities and Exchange Commission on September 15, 2025). |
10.6 |
| Joint Venture Agreement dated November 15, 2022 among Karbon-X Project, Silviculture Systems Corp. and 4EverForest Foundation. (incorporated by reference to Exhibit 10.5 of the Company’s annual report filing on Form 10-K filed with the Securities and Exchange Commission on September 15, 2025). |
10.8 |
| Acquisition Agreement dated May 31, 2023 among Karbon-X Project, Silviculture Systems Corp. and 4EverForest Foundation. (incorporated by reference to Exhibit 10.8 of the Company’s annual report filing on Form 10-K filed with the Securities and Exchange Commission on September 15, 2025). |
10.9 |
| Carbon Credit Purchase Agreement effective as of October 14, 2024 between Karbon-X Corp. and Devvstream Holdings, Inc. (incorporated by reference to Exhibit 10.9 of the Company’s annual report filing on Form 10-K filed with the Securities and Exchange Commission on September 15, 2025). |
10.10 |
| Asset Purchase Agreement between Karbon-X Corp. and Allcot AG dated as of May 14, 2025 (incorporated by reference to Exhibit 10.1 of the Company’s filing on Form 8-K filed with the Securities and exchange Commission on June 30, 2025. |
10.11 |
| Convertible Promissory Note dated August 13, 2025 issued by Karbon-X Corp. to Hedera Foundation SEZC (filed herewith) |
10.12 |
| Carbon Credit Forward Purchase Agreement dated October 28, 2024 between Karbon-X Corp. and DevvStream Holdings Inc. (filed herewith) |
10.13 |
| Mutual Termination Agreement effective May 29, 2026 between Karbon-X Corp. and DevvStream Holdings Inc. (filed herewith) |
21.1 |
| List of Subsidiaries |
31.1 |
| Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Executive Officer |
31.2 |
| Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Financial Officer |
32.1 |
| Section 1350 Certification of Chief Executive Officer |
32.2 |
| Section 1350 Certification of Chief Financial Officer |
101.INS |
| Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document. |
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB |
| Inline XBRL Taxonomy Extension Labels Linkbase Document. |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
| 27 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Karbon-X Corp. |
| |
|
|
|
|
September 15, 2026 | By: | /s/ Chad Clovis |
|
|
| Chad Clovis |
|
|
| Chief Executive Officer (principal executive officer) |
|
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: September 15, 2026 |
| /s/ Chad Clovis | |
| Chad Clovis, Director | ||
| and Chief Executive Officer | ||
| |||
Date: September 15, 2026 |
| /s/ Adriana Ebell | |
| Adriana Ebell Chief Financial Officer (principal financial officer) | ||
Date: September 15, 2026 | /s/ Samuel Nelson | ||
Samuel Nelson, Chief Accounting Officer (principal accounting officer) | |||
| |||
Date: September 15, 2026 |
| /s/ Brett Hull |
|
| Brett Hull, Director |
| |
| |||
Date: September 15, 2026 |
| /s/ Justin Bourque |
|
| Justin Bourque, Director |
|
| 28 |