Karbon-X Corp 10-Q/A for FY2027 Q1
Karbon-X Corp. (KARX)
About this 10-Q/A
Karbon-X Corp filed this 10-Q/A on October 21, 2026, covering the quarter ended August 31, 2026 (FY2027 Q1).
Karbon-X Corp. reported revenue of $343,967 and net loss of $3,955,038 for the three months ended August 31, 2026; cash was $335,445 and negative working capital was $(7,297,897). A material weakness remained unremediated. AI summary
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Amendment No. 1
For the quarterly period ended
Commission File Number
(Exact name of registrant as specified in its charter) |
| ||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code)
____________________________________________________________
(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 whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of October 15, 2026, there were
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-Q/A (this “Amendment”) amends the Quarterly Report on Form 10-Q of Karbon-X Corp. (the “Company”) for the quarter ended August 31, 2026, filed with the Securities and Exchange Commission on October 20, 2026 (the “Original Filing”). This Amendment is being filed (i) to include certain comparative amounts for the three months ended August 31, 2025 in Note 22 and in the segment information table in Note 1, and the weighted average remaining contractual life and exercise price of exercisable and unvested options in Note 18, which were inadvertently omitted from the Original Filing, and (ii) to file as exhibits the convertible promissory notes and securities purchase agreements listed in Item 6, which were inadvertently omitted from the Original Filing. Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, this Amendment sets forth the Original Filing in its entirety, as amended, and includes new certifications of the Company’s principal executive officer and principal financial officer as Exhibits 31.1, 31.2, 32.1 and 32.2. Except as described above, this Amendment does not modify or update the Original Filing and does not reflect events occurring after the filing date of the Original Filing.
TABLE OF CONTENTS
|
|
| ||
|
|
|
|
|
| 3 |
| ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| 4 |
| |
| 8 |
| ||
| 8 |
| ||
|
|
|
| |
|
|
| ||
|
|
|
| |
| 10 |
| ||
| 10 |
| ||
| 10 |
| ||
| 10 |
| ||
| 10 |
| ||
| 11 |
| ||
| 12 |
| ||
|
|
| ||
2 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of August 31, 2026 (Unaudited) and May 31, 2026 |
| F-1 |
|
| F-2 |
| |
| F-3 |
| |
| F-4 |
| |
Notes to the Condensed Consolidated Financial Statements (Unaudited) |
| F-5 |
|
| 3 |
| Table of Contents |
KARBON-X CORP.
Condensed Consolidated Balance Sheets
|
| August 31, 2026 |
|
| May 31, 2026 |
| ||
|
| (Unaudited) |
|
| (Audited) |
| ||
ASSETS |
|
| ||||||
Current assets |
|
| ||||||
Cash and cash equivalents |
| $ |
|
| $ |
| ||
Accounts receivable, net |
|
|
|
|
|
| ||
Inventories, net |
|
|
|
|
|
| ||
Loan receivable, net of allowance of $ |
|
|
|
|
|
| ||
Convertible note receivable – related party (Note 21) |
|
|
|
|
|
| ||
Prepaid expenses |
|
|
|
|
|
| ||
Investments in equity securities |
|
|
|
|
|
| ||
Securities receivable |
|
|
|
|
|
| ||
Other current assets |
|
|
|
|
|
| ||
Total current assets |
|
|
|
|
|
| ||
Property and equipment, net |
|
|
|
|
|
| ||
Right of use asset, net |
|
|
|
|
|
| ||
Contract fulfillment assets |
|
|
|
|
|
| ||
Other assets |
|
|
|
|
|
| ||
Internally developed software, net |
|
|
|
|
|
| ||
Intangible assets, net |
|
|
|
|
|
| ||
Total assets |
| $ |
|
| $ |
| ||
| ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) |
| |||||||
Current liabilities |
| |||||||
Accounts payable |
| $ |
|
| $ |
| ||
Deferred revenue |
|
|
|
|
|
| ||
Convertible notes payable, net of discounts |
|
|
|
|
|
| ||
Convertible notes – interest payable |
|
|
|
|
|
| ||
Derivative liabilities |
|
|
|
|
|
| ||
Current portion of lease liabilities |
|
|
|
|
|
| ||
Receivables financing obligations |
|
|
|
|
|
| ||
Term loan payable |
|
|
|
|
|
| ||
Other current liabilities |
|
|
|
|
|
| ||
Total current liabilities |
|
|
|
|
|
| ||
Long-term debt |
|
|
|
|
|
| ||
Non-current portion of lease liabilities |
|
|
|
|
|
| ||
Convertible notes payable, non-current |
|
|
|
|
|
| ||
Total liabilities |
|
|
|
|
|
| ||
Commitments and contingencies (Note 23) |
|
|
|
|
|
| ||
Shareholders’ equity (deficit) |
| |||||||
Common stock, $ |
|
|
|
|
|
| ||
Additional paid-in capital |
|
|
|
|
|
| ||
Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
Accumulated other comprehensive gain (loss) |
|
|
|
|
|
| ||
Total shareholders’ equity (deficit) |
|
| ( | ) |
|
| ( | ) |
Total liabilities and shareholders’ equity (deficit) |
| $ |
|
| $ |
| ||
See notes to condensed consolidated financial statements.
| F-1 |
| Table of Contents |
KARBON-X CORP.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
|
| For the Three Months Ended |
|
| For the Three Months Ended |
| ||
|
| August 31, 2026 |
|
| August 31, 2025 |
| ||
Operations |
| |||||||
Total revenue |
| $ |
|
| $ |
| ||
Cost of revenue |
|
|
|
|
|
| ||
Gross profit |
|
|
|
|
|
| ||
| ||||||||
Marketing expenses |
|
|
|
|
|
| ||
Salaries and wages |
|
|
|
|
|
| ||
Professional fees |
|
|
|
|
|
| ||
Provision for credit losses |
|
|
|
|
|
| ||
Other operating expenses |
|
|
|
|
|
| ||
Total operating expenses |
|
|
|
|
|
| ||
Loss from operations |
|
| ( | ) |
|
| ( | ) |
| ||||||||
Interest income (expense) |
|
| ( | ) |
|
| ( | ) |
Gain (loss) on investment |
|
| ( | ) |
|
|
| |
Gain (loss) on change in fair value of derivative liabilities |
|
|
|
|
|
| ||
Other income (expenses) |
|
| ( | ) |
|
| ( | ) |
Net loss before income taxes |
|
| ( | ) |
|
| ( | ) |
Federal income tax expense |
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
| ||||||||
Other comprehensive income (loss) | ||||||||
Foreign currency translation gain (loss) |
|
|
|
|
|
| ||
Total comprehensive loss |
| $ | ( | ) |
| $ | ( | ) |
| ||||||||
Loss per share |
| |||||||
Weighted average basic and diluted shares outstanding |
|
|
|
|
|
| ||
Basic and diluted loss per share |
| $ | ( | ) |
| $ | ( | ) |
See notes to condensed consolidated financial statements.
| F-2 |
| Table of Contents |
KARBON-X CORP.
Condensed Consolidated Statements of Changes in Shareholders’ Equity (Deficit)
For the Three Months Ended August 31, 2026 and 2025
(Unaudited)
Three Months Ended August 31, 2025 | ||||||||||||||||||||||||
|
| Common stock |
|
| Additional paid-in |
|
| Accumulated |
|
| Accumulated other comprehensive |
|
| Total shareholders’ |
| |||||||||
|
| Shares |
|
| Amount |
|
| capital |
|
| deficit |
|
| gain (loss) |
|
| equity (deficit) |
| ||||||
Balance at May 31, 2025 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||
Issuance of shares as compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Issuance of shares upon conversion of notes payable and accrued interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Option compensation expense |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net loss |
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | |||
Foreign currency translation |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance at August 31, 2025 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) | ||||
Three Months Ended August 31, 2026 | ||||||||||||||||||||||||
|
| Common stock |
|
| Additional paid-in |
|
| Accumulated |
|
| Accumulated other comprehensive |
|
| Total shareholders’ |
| |||||||||
|
| Shares |
|
| Amount |
|
| capital |
|
| deficit |
|
| gain (loss) |
|
| equity (deficit) |
| ||||||
Balance at May 31, 2026 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) | ||||
Shares issued for cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Issuance of shares as compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Issuance of commitment shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Issuance of shares upon conversion of notes payable and accrued interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Option compensation expense |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Correction of a prior-year note conversion (Note 14) |
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | |||
Reclassification of warrants to derivative liabilities (Note 15) |
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | |||
Net loss |
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | |||
Foreign currency translation |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance at August 31, 2026 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) | ||||
See notes to condensed consolidated financial statements.
| F-3 |
| Table of Contents |
KARBON-X CORP.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| For the Three Months Ended |
|
| For the Three Months Ended |
| ||
|
| August 31, 2026 |
|
| August 31, 2025 |
| ||
Cash flows from operating activities |
|
| ||||||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash: |
| |||||||
Depreciation and amortization |
|
|
|
|
|
| ||
Amortization of right of use asset |
|
|
|
|
|
| ||
Amortization of debt discount |
|
|
|
|
|
| ||
(Gain) loss on change in fair value of derivative liabilities |
|
| ( | ) |
|
| ( | ) |
Accrued interest income on loan and note receivables |
|
| ( | ) |
|
|
| |
Provision for credit losses |
|
|
|
|
|
| ||
Equity-based compensation expense |
|
|
|
|
|
| ||
Costs incurred on contract fulfillment assets |
|
| ( | ) |
|
|
| |
Operating lease payments |
|
| ( | ) |
|
| ( | ) |
Unrealized loss on equity securities and the related securities receivable, net |
|
|
|
|
| ( | ) | |
Interest settled by application of prepaid interest |
|
|
|
|
|
| ||
Finance charges on receivables financing obligations |
|
|
|
|
|
| ||
Unrealized foreign exchange loss on loans |
|
|
|
|
|
| ||
Changes in operating assets and liabilities: |
| |||||||
Accounts receivable |
|
|
|
|
| ( | ) | |
Inventories |
|
| ( | ) |
|
| ( | ) |
Prepaid expenses |
|
|
|
|
|
| ||
Other current assets |
|
|
|
|
|
| ||
Accounts payable |
|
|
|
|
| ( | ) | |
Deferred revenue |
|
|
|
|
| ( | ) | |
Accrued interest payable |
|
|
|
|
|
| ||
Other current liabilities |
|
|
|
|
|
| ||
Other assets, net |
|
| ( | ) |
|
|
| |
Cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
| ||||||||
Cash flows from investing activities | ||||||||
Acquisition of property and equipment |
|
| ( | ) |
|
|
| |
Capitalized app development costs |
|
|
|
|
|
| ||
Acquisition of project pipeline |
|
|
|
|
| ( | ) | |
Cash provided by (used in) investing activities |
|
|
|
|
| ( | ) | |
| ||||||||
Cash flows from financing activities |
| |||||||
Proceeds from convertible notes payable |
|
|
|
|
|
| ||
Payments on convertible notes payable |
|
| ( | ) |
|
|
| |
Proceeds from term loan |
|
|
|
|
|
| ||
Repayments of term loan |
|
| ( | ) |
|
|
| |
Proceeds from (repayments of) receivables financing obligations, net |
|
| ( | ) |
|
|
| |
Proceeds from short-term advance (included in other current liabilities) |
|
|
|
|
|
| ||
Proceeds from related party loan |
|
|
|
|
|
| ||
Proceeds from sale of common stock |
|
|
|
|
|
| ||
Cash provided by financing activities |
|
|
|
|
|
| ||
| ||||||||
Effect of translation changes on cash |
|
| ( | ) |
|
|
| |
Change in cash and cash equivalents |
|
| ( | ) |
|
|
| |
Cash, beginning of period |
|
|
|
|
|
| ||
Cash, end of period |
| $ |
|
| $ |
| ||
| ||||||||
Non-cash investing and financing activities |
| |||||||
Conversion of notes payable and accrued interest to common stock |
| $ |
|
| $ |
| ||
Debt discount recognized at issuance – embedded derivative liabilities |
|
|
|
|
|
| ||
Shares issued in connection with note financings |
|
|
|
|
|
| ||
Settlement of securities receivable in equity securities |
|
|
|
|
|
| ||
Receivable and deferred rent converted into a convertible note receivable |
|
|
|
|
|
| ||
Correction of a prior-year note conversion (Note 14) |
|
|
|
|
|
| ||
Reclassification of warrants from equity to derivative liabilities (Note 15) |
|
|
|
|
|
| ||
Maintenance fees earned and settled against convertible notes payable and accrued interest |
|
|
|
|
|
| ||
| ||||||||
Supplemental disclosures |
| |||||||
Cash paid for interest |
| $ |
|
| $ |
| ||
Cash paid for income taxes |
| $ |
|
| $ |
| ||
See notes to condensed consolidated financial statements.
| F-4 |
| Table of Contents |
KARBON-X CORP.
Notes to the Condensed Consolidated Financial Statements
August 31, 2026
(Unaudited)
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”), which was accounted for as a recapitalization effected by a share exchange with Karbon-X as the accounting acquirer. As part of the Reverse Acquisition, on April 14, 2022 the Company changed its name to Karbon-X Corp.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended August 31, 2026 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2027. The condensed consolidated balance sheet at May 31, 2026 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by US GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2026, filed with the Securities and Exchange Commission on September 15, 2026 (the “2026 Form 10-K”).
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Karbon-X Project, Inc. (Canada), Karbon-X USA Corp. (Nevada), Karbon-X Trading Limited (Cyprus), Allcot Limited (Ireland), Karbon-X Iberia SL (Spain) and Allcot X Colombia S.A.S. (Colombia). All significant intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements are presented in United States dollars.
Going Concern
The Company has generated significant revenue from its business operations but has incurred an accumulated deficit of $
Use of Estimates and Assumptions
Preparation of the condensed consolidated financial statements in conformity with US GAAP 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, warrants and options, 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.
| F-5 |
| Table of Contents |
Significant Accounting Policies
There have been no material changes to the Company’s significant accounting policies from those described in Note 1 to the consolidated financial statements included in the 2026 Form 10-K, other than the adoption of the accounting standards described under Recently Issued Accounting Standards below. The policies applied to carbon credit inventory (accounted for by analogy to ASC 330 in the absence of then-effective authoritative guidance specific to environmental credits), receivables financing arrangements (secured borrowings under ASC 860, carried at net proceeds and accreted under ASC 835-30), costs to fulfill a contract (ASC 340-40), the acquired project pipeline (ASC 350-30), capitalized application development costs (ASC 350-40), the loan receivable (ASC 310-10 and ASC 326-20), consideration payable to a customer (ASC 606-10-32-25) and compensated absences (ASC 710) are unchanged.
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 carried at May 31, 2026 was settled in shares of DevvStream Holdings Inc. (“DEVS”) during the quarter (Note 16) and no securities receivable remains at August 31, 2026.
The Company measures certain financial instruments at fair value on a recurring basis in accordance with ASC 820, Fair Value Measurement. The conversion features embedded in certain of the Company’s convertible promissory notes require bifurcation and measurement at fair value as derivative liabilities under ASC 815-15. The valuation techniques applied at August 31, 2026 are those applied in the audited consolidated financial statements at May 31, 2026, with only the inputs updated to the measurement date: a conversion feature whose conversion price floats and whose 4.99% beneficial ownership limitation binds at the measurement date is measured by a path-dependent Monte Carlo simulation, and every other conversion feature is measured by a Cox-Ross-Rubinstein binomial lattice. At August 31, 2026 the beneficial ownership limitation binds only on the note issued under the Maintenance Agreement (Note 7), which is therefore measured by simulation; the Master Note tranches and the five notes issued during the quarter (Note 11) convert in full within the limitation and are measured on the lattice. The six-month conversion lockout and, for one note, the $0.15 minimum market price in the notes issued during the quarter are instrument terms entered as inputs and do not alter the technique. There was no change in valuation technique during the three months ended August 31, 2026.
The models incorporate significant unobservable inputs, including expected stock price volatility, risk-free interest rates, estimated time to maturity, the conversion price at the measurement date and, for the simulation, the assumed rate at which the holder can dispose of conversion shares. 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. The derivative liabilities also include the common stock purchase warrants described in Note 15, measured using the Black-Scholes model with the same volatility and risk-free inputs; because the exercise price is $0.001 per share, their fair value approximates the market value of the underlying shares. The significant inputs at August 31, 2026 were:
| F-6 |
| Table of Contents |
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 August 31, 2026 and May 31, 2026:
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
August 31, 2026 |
| |||||||||||||||
Investments in equity securities Level 1 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative liabilities – convertible note conversion features |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative liabilities – warrants (Note 15) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
May 31, 2026 | ||||||||||||||||
Investments in equity securities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative liabilities – convertible note conversion features |
|
|
|
|
|
|
|
|
|
|
|
| ||||
The following table summarizes the changes in Level 3 derivative liabilities measured at fair value on a recurring basis for the three months ended August 31, 2026 and the year ended May 31, 2026.
|
| Three months ended August 31, 2026 |
|
| Year ended May 31, 2026 |
| ||
Balance at beginning of period |
| $ |
|
| $ |
| ||
Recognized on issuance of convertible notes |
|
|
|
|
|
| ||
Released to equity on conversion |
|
| ( | ) |
|
| ( | ) |
Reclassification of warrants from equity (Note 15) |
|
|
|
|
|
| ||
Change in fair value recognized in earnings |
|
| ( | ) |
|
| ( | ) |
Balance at end of period |
| $ |
|
| $ |
| ||
The gain of $
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, as described in Note 1 to the 2026 Form 10-K. Revenue for the three months ended August 31, 2026 consisted substantially of carbon credit sales, subscription revenue from the mobile application and consulting and service revenue; the Company acted as principal for substantially all of its revenue. Consideration payable to a customer under the Maintenance Agreement is recognized as a reduction of the transaction price (Note 7). Technical advisory engagements whose deliverables are accepted by the customer on completion represent a single performance obligation that is satisfied at a point in time on delivery and acceptance of the deliverables; amounts invoiced in advance of delivery are recorded as contract liabilities within deferred revenue (Note 9). The following table disaggregates revenue by the jurisdiction of the contracting subsidiary:
|
| Three months ended August 31, 2026 |
|
| Three months ended August 31, 2025 |
| ||
United States |
| $ |
|
| $ |
| ||
Canada |
|
|
|
|
| |||
Cyprus |
|
|
|
|
| |||
Ireland |
|
|
|
|
| |||
Colombia |
|
|
|
|
| |||
Spain |
|
|
|
|
| |||
Total revenue |
| $ |
|
| $ |
| ||
| F-7 |
| Table of Contents |
Revenue above is disaggregated by the jurisdiction of the contracting subsidiary, which is not necessarily the location of the customer.
Foreign Currency Translation
The reporting currency of the Company is the United States dollar. 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. Assets and liabilities are translated at the closing exchange rate at the balance sheet date, income and expenses at the average rate for the period, and the resulting translation adjustments are included in accumulated other comprehensive income (loss). Realized and unrealized gains and losses on monetary balances denominated in currencies other than an entity’s functional currency are recognized in other income (expense).
Loss per Common Share
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 outstanding during the period. Diluted loss per share is calculated using the treasury stock and if-converted methods. For the three months ended August 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. As of August 31, 2026, potential dilutive securities of approximately
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. The measure of segment profit or loss reported below is consolidated net loss. 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.
|
| Three months ended August 31, 2026 |
|
| Three months ended August 31, 2025 |
| ||
Revenue |
| $ |
|
| $ |
| ||
Cost of revenue |
|
| ( | ) |
|
| ( | ) |
Salaries and wages, excluding stock compensation |
|
| ( | ) |
| ( | ) | |
Stock compensation |
|
| ( | ) |
| ( | ) | |
Marketing expenses |
|
| ( | ) |
|
| ( | ) |
Professional fees |
|
| ( | ) |
|
| ( | ) |
Travel and entertainment |
|
| ( | ) |
| ( | ) | |
Depreciation and amortization |
|
| ( | ) |
| ( | ) | |
Rent |
|
| ( | ) |
| ( | ) | |
Dues and subscriptions |
|
| ( | ) |
| ( | ) | |
Bank and transaction fees |
|
| ( | ) |
| ( | ) | |
Provision for credit losses |
|
| ( | ) |
|
|
| |
Other operating expenses |
|
| ( | ) |
| ( | ) | |
Total significant segment expenses |
|
| ( | ) |
|
| ( | ) |
Revenue less significant segment expenses |
|
| ( | ) |
|
| ( | ) |
Other segment items |
|
| ( | ) |
|
| ( | ) |
Net loss |
| $ | ( | ) |
| $ | ( | ) |
| F-8 |
| Table of Contents |
Stock compensation is option expense presented within salaries and wages; a further $
Reclassifications
Certain amounts in the comparative condensed consolidated statement of cash flows for the three months ended August 31, 2025 have been reclassified to conform to the presentation adopted in the 2026 Form 10-K: the changes in marketable securities and in the securities receivable previously presented separately are combined in “Unrealized loss on equity securities and the related securities receivable, net”; proceeds from and payments on receivables financing obligations are presented net; and the acquisition of the project pipeline is presented as an investing activity under its current caption. These reclassifications had no effect on the previously reported net loss, comprehensive loss, total assets, shareholders’ equity or the totals of cash flows from operating, investing and financing activities.
Recently Issued Accounting Standards
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, which permits 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 Company adopted the amendments prospectively on June 1, 2026. The adoption did not have a material effect on the condensed consolidated financial statements, as no allowance for credit losses is recognized on trade accounts receivable and those receivables are short-dated.
ASU 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, became effective for the Company on June 1, 2026. Conversions of convertible notes during the quarter were made under the original terms of the notes and no induced conversion occurred; adoption had no effect on the condensed consolidated financial statements.
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. 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. 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.
ASU 2024-03 and ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), are effective for the Company for the annual period beginning June 1, 2027 and interim periods beginning June 1, 2028. The updates affect disclosure only and are not expected to have a material effect. No other recently issued accounting standards are expected to have a material effect on the Company’s condensed consolidated financial statements.
| F-9 |
| Table of Contents |
Note 2 – Prepaid Expenses
As of August 31, 2026 and May 31, 2026, prepaid expenses consisted of the following. The prepaid biochar equipment deposit represents the 50% advance paid in February 2026 on equipment to be supplied to a related party project (Note 21); the remaining instalments, which fall due on dispatch and commissioning of the equipment, had not been invoiced as due at August 31, 2026 and are not recorded.
|
| August 31, 2026 |
|
| May 31, 2026 |
| ||
Prepaid sponsorship and marketing |
| $ |
|
| $ |
| ||
Prepaid biochar equipment deposit |
|
|
|
|
|
| ||
Other prepaids |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
Note 3 – Inventory
Inventory as of August 31, 2026 and May 31, 2026 consisted of the following:
|
| August 31, 2026 |
|
| May 31, 2026 |
| ||
Carbon credit inventory |
| $ |
|
| $ |
| ||
Total |
| $ |
|
| $ |
| ||
Carbon credit inventory represents carbon credits currently held for sale and is stated at the lower of cost or net realizable value. 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 to the 2026 Form 10-K. No project work in process is carried within inventory. The carbon credit inventory held by Karbon-X Project Inc., which agrees to a physical count of registry holdings at August 31, 2026, 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 August 31, 2026 and May 31, 2026 consisted of the following:
|
| August 31, 2026 |
|
| May 31, 2026 |
| ||
Furniture and fixtures |
| $ |
|
| $ |
| ||
Computer and equipment |
|
|
|
|
|
| ||
Total property cost |
| $ |
|
| $ |
| ||
Accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
Property and equipment, net |
| $ |
|
| $ |
| ||
Depreciation expense for the three months ended August 31, 2026 was $
Note 5 – Acquired Project Pipeline
On June 27, 2025 the Company completed the acquisition of specified assets, including intellectual property, a database, a project pipeline and contract rights, from Allcot AG. The acquisition was accounted for as an asset acquisition under ASC 805-50 and the acquired project pipeline is presented within intangible assets, as described in Note 5 to the 2026 Form 10-K. The acquired project pipeline comprised the following:
|
| August 31, 2026 |
|
| May 31, 2026 |
| ||
Acquired project pipeline, at cost |
| $ |
|
| $ |
| ||
Accumulated amortization |
|
| ( | ) |
|
| ( | ) |
Intangible assets, net |
| $ |
|
| $ |
| ||
| F-10 |
| Table of Contents |
Amortization is recognized on a straight-line basis over a weighted-average useful life of
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. Contract fulfillment assets represent costs incurred to fulfill the ABC Mangrove Senegal offtake contract with Woodside. 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.
|
| August 31, 2026 |
|
| May 31, 2026 |
| ||
ABC Mangrove Senegal – costs to fulfill the Woodside offtake contract |
| $ |
|
| $ |
| ||
Total |
| $ |
|
| $ |
| ||
Costs of $40,301 were capitalized during the three months ended August 31, 2026, with the remainder of the movement arising from translation. No amortization was recorded because deliveries under the contract have not commenced; amortization will begin when the first credits are delivered to the customer. The asset is assessed for impairment at each reporting date; no impairment was recognized. Development cost prepayments received from the customer under the same contract are presented within deferred revenue (Note 9).
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. 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 $
Monthly fees earned under the agreement are applied against the outstanding balances of the Lender’s Master Note tranches rather than settled in cash. Fees earned during the three months ended August 31, 2026 were $
Other assets consisted of the following:
|
| August 31, 2026 |
|
| May 31, 2026 |
| ||
Consideration payable to a customer – Maintenance Agreement |
| $ |
|
| $ |
| ||
Deferred offering costs |
|
|
|
|
|
| ||
Long-term security deposits |
|
|
|
|
|
| ||
Due from related party (Note 21) |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
The current portion of the consideration payable to a customer, $
| F-11 |
| Table of Contents |
Note 8 – Loan Receivable
On February 9, 2026, the Company advanced CAD $
The stated maturity of the loan, as extended, was May 10, 2026. The loan had not been repaid at August 31, 2026 and remains past due; no payments of principal or interest have been received. At August 31, 2026 the gross carrying amount of the loan, comprising principal and accrued interest translated at the closing rate, was $
The Company applies the current expected credit loss model in ASC 326-20 to the loan receivable and evaluates it individually using a probability-weighted analysis of three recovery scenarios: repayment in full, a part payment followed by enforcement against the pledged shares, and recovery limited to the pledged shares. The analysis considers the quoted market value of the pledged shares (CAD $0.16 per share at August 31, 2026, approximately $
The convertible note receivable from a related party of $
In connection with the loan, the issuer of the pledged shares agreed on February 6, 2026 to issue share purchase warrants to the Company; the number of warrants and their exercise price have not been determined or agreed between the parties, no warrants had been issued at August 31, 2026 and no amount has been recognized in respect of them.
Note 9 – Deferred Revenue
The Company receives consideration in advance of delivering carbon credits and, in some cases, advisory services. Amounts received before the related credits or services are transferred to the customer are recorded as deferred revenue (contract liabilities) and recognized in revenue when control transfers to the customer. Deferred revenue consisted of the following:
|
| August 31, 2026 |
|
| May 31, 2026 |
| ||
Revenue deferred – credits not yet delivered |
| $ |
|
| $ |
| ||
Development cost prepayments received |
|
|
|
|
|
| ||
Other customer prepayments |
|
|
|
|
|
| ||
Contract liability – advisory services advance |
|
|
|
|
|
| ||
Deferred rent income – related party (Note 21) |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
Included in deferred revenue at August 31, 2026 is EUR 2,660,000 (USD $
| F-12 |
| Table of Contents |
Note 10 – Other Current Liabilities
Other current liabilities comprised the following:
|
| August 31, 2026 |
|
| May 31, 2026 |
| ||
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 $500,000 to Karbon-X Corp. The advance is unsecured, non-interest-bearing and repayable on November 20, 2026; it is remeasured at the closing rate and a foreign exchange gain of $
Note 11 – Convertible Notes
During the three months ended August 31, 2026 the Company issued five convertible promissory notes to five lenders with an aggregate face amount of $
The variable-price conversion features of the five notes were bifurcated as derivative liabilities under ASC 815-15 and measured at fair value at issuance in an aggregate amount of $
| F-13 |
| Table of Contents |
During the three months ended August 31, 2026 the holders of four notes converted principal and accrued interest into
Interest expense on the convertible notes for the three months ended August 31, 2026 included $
The notes outstanding at August 31, 2026 are convertible at discounts ranging from
|
| August 31, 2026 |
|
| May 31, 2026 |
| ||
Lender – Maintenance Note |
| $ |
|
| $ |
| ||
Lender – Master Note Tranche 1 |
|
|
|
|
|
| ||
Lender – Master Note Tranche 2 |
|
|
|
|
|
| ||
Note issued fiscal 2025 – one lender (non-current, converted July 2026) |
|
|
|
|
|
| ||
Notes issued fiscal 2026 – other lenders |
|
|
|
|
|
| ||
Debtfund L.P. – CPN #2 (August 2026) |
|
|
|
|
|
| ||
CFI Capital (July 2026) |
|
|
|
|
|
| ||
GW Capital (August 2026) |
|
|
|
|
|
| ||
Auctus Fund (August 2026) |
|
|
|
|
|
| ||
SilverCrest Hybrid Capital (August 2026) |
|
|
|
|
|
| ||
Total principal outstanding |
| $ |
|
| $ |
| ||
Less: unamortized debt discount |
|
| ( | ) |
|
| ( | ) |
Less: amounts classified as non-current |
|
|
|
|
| ( | ) | |
Convertible notes payable, current, net of discounts |
| $ |
|
| $ |
| ||
As of August 31, 2026, the Company had convertible note principal outstanding of $
Note 12 – Long-Term Debt
On November 24, 2025 the Company drew a note from a lender with a face amount of $
|
| August 31, 2026 |
|
| May 31, 2026 |
| ||
Term note – face amount |
| $ |
|
| $ |
| ||
Unamortized debt discount and issuance costs |
|
| ( | ) |
|
| ( | ) |
Total long-term debt |
| $ |
|
| $ |
| ||
| F-14 |
| Table of Contents |
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 assets pledged as collateral.
Note 13 – Receivables Financing Obligations and Term Loan
Karbon-X Project Inc. is party to receivables financing arrangements under which providers advance cash in exchange for a specified purchased amount of the Company’s future 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 condensed 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.
During the three months ended August 31, 2026 the
|
| August 31, 2026 |
|
| May 31, 2026 |
| ||
Provider A – merchant cash advance funded April 28, 2026 (repaid June 10, 2026) |
| $ |
|
| $ |
| ||
Provider B – merchant cash advance funded April 24, 2026 |
|
|
|
|
|
| ||
Term loan payable – Provider A affiliate, Loan Agreement dated June 26, 2026, funded July 2, 2026 |
|
|
|
|
|
| ||
Provider C – merchant cash advance funded July 22, 2026 |
|
|
|
|
|
| ||
Provider D – receivables purchase funded August 27, 2026 |
|
|
|
|
|
| ||
Total receivables financing obligations and term loan |
| $ |
|
| $ |
| ||
Less: term loan payable, presented separately |
| $ | ( | ) |
| $ |
| |
Receivables financing obligations |
| $ |
|
| $ |
| ||
The receivables financing obligations and the term loan 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). The Company entered into further receivables financing arrangements after the quarter end; see Note 24.
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. Assets of Karbon-X Corp. recognized in the condensed consolidated balance sheet at August 31, 2026, after elimination of intercompany balances, were $
| F-15 |
| Table of Contents |
Note 14 – Shareholders’ Equity
During the three months ended August 31, 2026, the Company issued
During the three months ended August 31, 2026, the Company issued
On August 12, 2026 the Company received $125,000 from an existing investor and issued
During the three months ended August 31, 2026, the Company recorded option compensation expense of $
At August 31, 2026 there were
Note 15 – Warrants
No warrants were issued, exercised, forfeited or expired during the three months ended August 31, 2026. The
| F-16 |
| Table of Contents |
Number | Weighted average exercise price | Weighted average remaining contractual life (years) | ||||||||||
Outstanding May 31, 2026 | ||||||||||||
Granted | - | - | ||||||||||
Exercised | - | - | ||||||||||
Expired | - | - | ||||||||||
Outstanding and exercisable August 31, 2026 | ||||||||||||
Note 16 – Investments and Securities Receivable
On October 24, 2024, Karbon-X Corp. entered into a Carbon Credit Purchase Agreement with DEVS with an aggregate value of $
On June 24, 2026 the Company and DEVS entered into a Share Cancellation Addendum under which the
At August 31, 2026 the shares were
|
| August 31, 2026 |
|
| May 31, 2026 |
| ||
Investments in equity securities |
| $ |
|
| $ |
| ||
Securities receivable |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
Note 17 – Internally Developed Software
The Company capitalizes the costs of developing its mobile applications as internal-use software under ASC 350-40, as described in Note 17 to the 2026 Form 10-K. As of August 31, 2026 and May 31, 2026, the Company had capitalized application development costs, net of accumulated amortization, of $
Note 18 – Stock Option Plan
The Company’s 2024 Employees’, Directors’, Officers’, and Consultants’ Stock Option Plan (the “Plan”), as amended, authorizes
| F-17 |
| Table of Contents |
On June 4, 2026 the Board of Directors approved grants of options to purchase
|
| Number of shares |
|
| Weighted average exercise price |
|
| Weighted average remaining life (years) |
| |||
Options authorized |
|
|
|
|
|
|
|
|
| |||
Outstanding at May 31, 2026 |
|
|
|
|
|
|
|
|
| |||
Granted |
|
|
|
|
|
|
|
|
| |||
Exercised |
|
| - |
|
|
|
|
|
|
|
|
|
Cancelled |
|
| ( | ) |
|
|
|
|
|
|
| |
Expired |
|
| ( | ) |
|
|
|
|
|
|
| |
Outstanding at August 31, 2026 |
|
|
|
|
|
|
|
|
| |||
Exercisable at August 31, 2026 |
|
|
|
|
|
|
|
| ||||
Unvested at August 31, 2026 |
|
|
|
|
|
|
| |||||
The weighted average exercise price of options granted during the quarter was $
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 three months ended August 31, 2026 used the following weighted-average assumptions: expected volatility of
Stock-Based Compensation Expense
For the three months ended August 31, 2026, the Company recognized stock-based compensation expense related to stock options of $
Note 19 – Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes. Given the Company’s history of operating losses and negative evidence outweighing positive evidence, the Company maintains a full valuation allowance against its net deferred tax assets in each of its tax jurisdictions. Accordingly, no income tax expense or benefit was recognized for the three months ended August 31, 2026 or 2025 and the effective tax rate for both periods was
| F-18 |
| 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 period, determined by weighting each issuance by the number of days it was outstanding, including the
The following potentially dilutive securities were excluded from the calculation of diluted loss per share:
|
| August 31, 2026 |
|
| May 31, 2026 |
| ||
Options outstanding |
|
|
|
|
|
| ||
Warrants outstanding |
|
|
|
|
|
| ||
Convertible notes, if converted |
|
|
|
|
|
| ||
Total |
|
|
|
|
|
| ||
Shares issuable on conversion of the notes outstanding at August 31, 2026 have been estimated using conversion prices of $
Note 21 – Related Party Transactions
Revive Terra Corp. (“Revive”) is an entity related to the Company through common ownership with members of management (ownership that does not constitute control). The Company subleases part of its Calgary premises to Revive at CAD $4,725 per month and recharges travel and related costs to Revive under a cost-sharing arrangement. On June 11, 2026 the sublease rent receivable from Revive at May 31, 2026 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 $
| F-19 |
| Table of Contents |
Note 22 – Concentrations
Revenue. For the three months ended August 31, 2026, $
Trade receivables. At August 31, 2026 one customer accounted for $
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. Long-lived assets, comprising property and equipment and right-of-use assets, were held in Canada and Colombia; the Company held no long-lived assets in the United States, its country of domicile.
Note 23 – Commitments and Contingencies
Legal Proceedings
On October 6, 2026 the Company issued a formal demand for repayment of the loan receivable described in Note 8 and has not received a response; the Company is evaluating enforcement proceedings. The conditions underlying the demand existed at August 31, 2026 and were considered in measuring the allowance for credit losses at that date. There were no other new litigation, claims or assessments during the quarter. See Note 24 regarding the Edmonton Oilers advertising and promotional agreement and the settlement of a carbon credit purchase agreement.
Operating Leases
The Company has entered into an operating lease for office space in Calgary, Alberta commencing
Future minimum lease payments under operating leases that have initial noncancelable lease terms in excess of one year at August 31, 2026, translated at the closing rate, were as follows:
Fiscal year ending May 31, |
| Total |
| |
2027 (remaining nine months) |
| $ |
| |
2028 |
|
|
| |
2029 |
|
|
| |
2030 |
|
|
| |
Thereafter |
|
|
| |
Total lease payments |
|
|
| |
Less: imputed interest |
|
| ( | ) |
Operating lease liabilities |
|
|
| |
Operating lease liability – current |
|
|
| |
Operating lease liability – non-current |
| $ |
| |
Weighted average discount rate |
|
| % | |
Weighted average remaining lease term (years) |
|
|
| |
Note 24 – Subsequent Events
The Company evaluated subsequent events through October 20, 2026, the date these condensed consolidated financial statements were originally issued, and identified the following non-recognized subsequent events. These condensed consolidated financial statements have not been updated for events occurring after that date.
| F-20 |
| Table of Contents |
Convertible notes
Between September 2 and September 25, 2026 the Company issued five promissory notes to institutional and individual investors with an aggregate face amount of $
Receivables financing
In September 2026 Karbon-X Project Inc. received CAD $
Repayments
Subsequent to August 31, 2026 the Company settled in full the remaining obligation to the holder of a convertible note that had been fully converted during the quarter, and repaid the receivables financing arrangement described above. No gain or loss arose on these settlements.
Conversions and share issuances
Subsequent to August 31, 2026, three investors converted convertible notes payable and accrued interest totaling $
Advisory and marketing services agreement
On September 16, 2026 the Board of Directors approved by unanimous written consent a six-month advisory and marketing services agreement with a United Kingdom advisory firm, under which the Company will pay a cash fee of $
Advertising and promotional agreement
Subsequent to August 31, 2026, Oilers Entertainment Group Canada Corp. (“OEG”) advised the Company that it would not proceed with the third contract year (July 1, 2026 to June 30, 2027) of the advertising and promotional agreement described in Note 23 to the 2026 Form 10-K and that it intends to demand payment of the outstanding instalments for the 2025–26 contract year. No invoice was issued and no advertising or promotional rights were received for the third contract year, and accordingly no cost has been recognized for it in the three months ended August 31, 2026.
Trade financing
On October 9, 2026 Karbon-X Project Inc.
| F-21 |
| Table of Contents |
Consulting agreements
In October 2026 the Company entered into four one-year consulting agreements for business development, market and shareholder relations services. As consideration, the Company issued the consultants unsecured convertible promissory notes with an aggregate principal amount of $
Carbon credit purchase agreement
Under an emissions reduction purchase agreement entered into in December 2025 for the purchase of
| F-22 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion pertains to the historical operations and financial statements of Karbon-X Corp. (“Karbon-X” or the “Company”) for the three months ended August 31, 2026 and 2025. This discussion should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2026, filed on September 15, 2026 (the “2026 Form 10-K”), which provides additional context and details on the Company’s financial condition and results of operations.
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 Quarterly 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 Quarterly 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 “Risk 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 Quarterly 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 upon Karbon-X Corp.’s unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q, 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 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., which became the wholly owned subsidiary of the Company in a reverse acquisition, and on April 14, 2022 the Company changed its name to Karbon-X Corp. The Company’s subsidiaries are Karbon-X Project, Inc. (Canada), Karbon-X USA Corp. (Nevada), Karbon-X Trading Limited (Cyprus), Allcot Limited (Ireland), Karbon-X Iberia SL (Spain) and Allcot X Colombia S.A.S. (Colombia), each of which reports quarterly financial information that is consolidated in this Quarterly Report.
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 versus industry with multiple forms of technology-based greenhouse gas reduction builds. Karbon-X allows the public to purchase carbon offsets from an app that is subscription-based, with multiple levels of investment for every budget. Each subscription supports clean energy projects such as solar or wind power, methane capture, or reforestation and reduces greenhouse gas emissions with provable, verifiable carbon credits. Through the subsidiaries established following the June 2025 acquisition of assets from Allcot AG, the Company also develops carbon-offset projects and trades industrial carbon credits.
Critical Accounting Policies
The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Our critical accounting policies and estimates — carbon credit inventory, the asset acquisition and acquired intangible assets, the fair value of financial instruments (including the Level 3 valuation of the conversion features embedded in our convertible notes) and revenue recognition — are described in Item 7 and Note 1 of the 2026 Form 10-K. There have been no material changes to those policies or estimates during the three months ended August 31, 2026. The valuation techniques used to measure the embedded conversion derivatives at August 31, 2026 are those applied at May 31, 2026; the inputs, including the disposal-rate assumption used in the path-dependent simulation for the note issued under the Maintenance Agreement, were updated to the measurement date as described in Note 1 to the condensed consolidated financial statements.
| 4 |
| Table of Contents |
Results of Operations
Unaudited Results for the Three Months Ended August 31, 2026 and 2025
|
| Three months ended August 31, 2026 |
|
| Three months ended August 31, 2025 |
|
| Change |
| |||
Total revenue |
| $ | 343,967 |
|
| $ | 35,658,933 |
|
| $ | (35,314,966 | ) |
Cost of revenue |
|
| 233,930 |
|
|
| 35,365,064 |
|
|
| (35,131,134 | ) |
Gross profit |
|
| 110,037 |
|
|
| 293,869 |
|
|
| (183,832 | ) |
Total operating expenses |
|
| 2,742,391 |
|
|
| 2,658,934 |
|
|
| 83,457 |
|
Loss from operations |
|
| (2,632,354 | ) |
|
| (2,365,065 | ) |
|
| (267,289 | ) |
Interest income (expense) |
|
| (1,062,285 | ) |
|
| (306,262 | ) |
|
| (756,023 | ) |
Gain (loss) on investment |
|
| (422,410 | ) |
|
| - |
|
|
| (422,410 | ) |
Gain on change in fair value of derivative liabilities |
|
| 207,733 |
|
|
| 95,835 |
|
|
| 111,898 |
|
Other income (expenses) |
|
| (45,721 | ) |
|
| (20,742 | ) |
|
| (24,979 | ) |
Net loss |
| $ | (3,955,038 | ) |
| $ | (2,596,234 | ) |
| $ | (1,358,804 | ) |
Sales and Revenue
For the three months ended August 31, 2026, the Company reported revenue of $343,967, a decrease of $35,314,966 compared to $35,658,933 in the same period of the prior year. Revenue in the prior-year quarter included industrial carbon credit trading conducted through Karbon-X Trading Limited, the Company’s Cyprus subsidiary, which accounted for substantially all of the revenue and cost of revenue in that period and did not recur in the current quarter. Revenue for the three months ended August 31, 2026 was earned principally in Canada from sales of carbon credits, consulting services and mobile application subscriptions. Industrial carbon credit trading volume in the quarter was also reduced by delays in the delivery of credits under an Output-Based Pricing System project; the credit transfers for the affected transactions were completed in October 2026 and the transactions will be reflected in the results of the second quarter. See Note 24 regarding the trade financing arranged in October 2026 to fund the purchase of German greenhouse gas reduction quotas for resale. Revenue excludes $105,954 (EUR 91,650) invoiced and collected during the quarter as the signing instalment under a technical advisory agreement, which has been deferred as a contract liability until the related deliverables are delivered and accepted (Note 9). Cost of revenue was $233,930 (2025: $35,365,064), producing gross profit of $110,037 and a gross margin of 32.0%, compared with gross profit of $293,869 and a gross margin of 0.8% in the prior-year quarter. The increase in gross margin reflects the absence of the high-volume, low-margin trading activity that dominated the prior-year revenue mix.
Operating Expenses
Operating expenses for the three months ended August 31, 2026 were $2,742,391, compared to $2,658,934 in the same period of the prior year, an increase of $83,457. The principal components were:
| · | Marketing expenses of $477,943, down from $628,540. The current quarter reflects the amortization of the Company’s Hockey Canada, Detroit Tigers, Detroit Red Wings and BK Dukes sponsorship agreements and one month of a corporate advertising arrangement that ended in June 2026. No cost was recognized for the third contract year of the Edmonton Oilers advertising and promotional agreement, which did not commence (see Note 24), whereas the prior-year quarter included three months of Edmonton Oilers cost. |
| · | Salaries and wages of $1,096,203, down from $1,598,649, reflecting lower headcount and subcontractor costs, and including stock option compensation expense of $89,586 (2025: $92,309). |
| · | Professional fees of $338,135, up from $107,447, reflecting legal, audit and advisory costs associated with the fiscal 2026 audit and annual report, the financings completed during the quarter and the Company’s international subsidiaries, including $153,707 of fees settled in shares of common stock. |
| · | A provision for credit losses of $489,274 (2025: $nil), being the increase in the allowance on the loan receivable described in Note 8, which principally reflects revised recovery-scenario weights following the borrower’s continued non-payment after formal demand. |
| · | Other operating expenses of $340,836, compared with $324,298, including depreciation and amortization of $53,953, project development costs of $99,215 (Sur del Meta REDD+ development costs expensed under the Company’s policy of not carrying project work in process), rent, travel, dues and subscriptions and office costs. |
| 5 |
| Table of Contents |
Loss from Operations
The loss from operations for the three months ended August 31, 2026 was $2,632,354, compared to $2,365,065 in the same period of the prior year, an increase of $267,289. Revenue declined substantially with the absence of trading activity and $105,954 of advisory fees collected in the quarter was deferred; the improvement in gross margin, the reduction in salaries and wages and the absence of Edmonton Oilers sponsorship cost were more than offset by the $489,274 provision for credit losses on the loan receivable.
Other Income and Expense
Interest expense, net, was $1,062,285 for the three months ended August 31, 2026, compared to $306,262 in the prior-year quarter. The increase reflects the debt incurred since the prior-year quarter: interest expense includes $472,728 of amortization of debt discounts on the convertible notes, the term note and the term loan drawn in July 2026 (2025: $102,182), $276,770 of finance charges on the receivables financing obligations, interest at 18% per annum on the $5,000,000 term note drawn in November 2025, and the coupon interest and conversion fees on the convertible notes, net of interest income of $52,956 accrued on the loan receivable and the related-party note receivable. The debt discounts arise principally from the bifurcation of the conversion features embedded in the convertible notes and from original issue discounts, commitment shares and issuance costs, and are amortized to interest expense over the terms of the notes.
The Company recognized a gain on the change in fair value of derivative liabilities of $207,733 for the three months ended August 31, 2026 (2025: $95,835). The gain comprises a $126,419 decrease in the fair value of the conversion features embedded in the Company’s convertible notes and a $125,200 decrease in the fair value of the warrants reclassified from equity to derivative liabilities during the quarter (Note 15), of which $113,768 relates to fiscal 2026, driven by the lower trading price of the common stock at August 31, 2026 ($0.1485, compared with $0.17 at May 29, 2026) and the shorter remaining terms of the notes, net of the change in fair value of the converted portions measured at each conversion date, and of a $43,886 loss recognized on the initial measurement of the conversion features embedded in two of the five notes issued during the quarter, for which the fair value of the conversion feature at issuance exceeded the proceeds remaining after original issue discount and issuance costs. See Notes 1 and 11 to the condensed consolidated financial statements.
The loss on investment of $422,410 represents the unrealized loss on the 4,641,621 shares of DevvStream Holdings Inc. received on June 24, 2026 in settlement of the securities receivable under the Carbon Credit Purchase Agreement, following the delisting of those shares from the Nasdaq Stock Market on the same date and the subsequent decline in their quoted price to USD $0.1530 per share at August 31, 2026 (Note 16). Because the price-floor protection under the agreement was settled by the June 2026 share issuance, changes in the fair value of the shares are now recognized in full in earnings. Other expenses of $45,721 (2025: $20,742) consist principally of a foreign exchange loss of $43,414 on the remeasurement of the Canadian-dollar loan receivable and the Canadian-dollar short-term advance.
Net Loss
Net loss for the three months ended August 31, 2026 was $3,955,038, compared with $2,596,234 in the same period of the prior year. Total comprehensive loss, including a foreign currency translation gain of $53,254 (2025: $148,311), was $3,901,784 (2025: $2,447,923). The increase in net loss is principally attributable to the increase in interest expense, the provision for credit losses on the loan receivable, the loss on investment described above and the lower gross profit, partly offset by the gain on derivative liabilities and lower marketing expenses and salaries and wages.
Liquidity and Capital Resources
The following table sets forth the major components of our condensed consolidated statements of cash flows for the periods presented.
|
| Three months ended August 31, 2026 |
|
| Three months ended August 31, 2025 |
| ||
Cash used in operating activities |
| $ | (1,198,464 | ) |
| $ | (2,679,849 | ) |
Cash provided by (used in) investing activities |
|
| 1,804 |
|
|
| (605,093 | ) |
Cash provided by financing activities |
|
| 390,451 |
|
|
| 3,791,543 |
|
Effect of exchange rate changes on cash |
|
| (13,635 | ) |
|
| 147,715 |
|
Change in cash during the period |
|
| (819,844 | ) |
|
| 654,316 |
|
Cash, beginning of period |
|
| 1,155,289 |
|
|
| 704,346 |
|
Cash, end of period |
| $ | 335,445 |
|
| $ | 1,358,662 |
|
| 6 |
| Table of Contents |
As of August 31, 2026, the Company had $4,086,857 in current assets and $11,384,754 in current liabilities, resulting in negative working capital of $(7,297,897), compared with negative working capital of $(4,040,004) at May 31, 2026. Cash decreased from $1,155,289 at May 31, 2026 to $335,445 at August 31, 2026. Total assets at August 31, 2026 were $7,669,184 (May 31, 2026: $9,617,713) and total liabilities were $16,612,907 (May 31, 2026: $15,601,815), including derivative liabilities of $1,147,967 and convertible notes payable, net of discounts, of $1,959,903.
Cash used in operating activities was $1,198,464 for the three months ended August 31, 2026, compared with $2,679,849 in the prior-year quarter. The net loss of $3,955,038 included non-cash charges of $472,728 for amortization of debt discounts, $489,274 for the provision for credit losses on the loan receivable, $276,770 for finance charges on receivables financing obligations, $422,410 for the unrealized loss on the DevvStream shares and $243,292 for equity-based compensation, and a non-cash gain of $207,733 on derivative liabilities. Changes in operating assets and liabilities provided $1,042,250 of cash, principally from increases in accounts payable and deferred revenue and the reversal of a prepaid equipment deposit and the related payable that were not yet due at August 31, 2026 (Note 2), partly offset by the increase in inventories.
Cash provided by investing activities was $1,804, compared with cash used of $605,093 in the prior-year quarter, which included the $605,093 acquisition of the Allcot project pipeline. Cash provided by financing activities was $390,451, comprising $670,500 of net proceeds from the five convertible notes issued during the quarter, $393,077 of net proceeds from the CAD $600,000 term loan drawn on July 2, 2026 and $125,000 from the issuance of common stock for cash, partly offset by $169,856 of principal repayments on convertible notes, $133,071 of instalments on the term loan and $495,199 of net repayments of receivables financing obligations. The net repayments of receivables financing obligations comprise remittances of approximately CAD $1.18 million during the quarter, including the June 10, 2026 payoff of a merchant cash advance and the weekly remittances on the other arrangements, less approximately CAD $0.50 million of new funding received under the $460,000 merchant cash advance and the $60,063 receivables purchase (Note 13). In the prior-year quarter financing activities provided $3,791,543, principally the $3,500,000 convertible note issued in August 2025.
To date, the Company has financed its operations through equity sales, convertible note issuances, long-term debt and receivables financing arrangements. During the three months ended August 31, 2026, holders of four convertible notes converted principal and accrued interest of $806,517 into 3,231,320 shares of common stock at conversion prices of $0.1106 to $0.75 per share. Subsequent to the quarter end the Company raised further financing through convertible notes, a bridge note and receivables financing arrangements, financed the purchase of carbon credits for resale with a 45-day trade finance loan of EUR 4,570,000, and issued convertible notes with an aggregate principal amount of $5,000,000 as consideration for consulting services, as described in Note 24 to the condensed consolidated financial statements.
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 or the issuance of notes, 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 of any financing for 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.
| 7 |
| Table of Contents |
Capital Expenditures
During the three months ended August 31, 2026 we had capital expenditures of $576 and no additions to capitalized application development costs.
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
The Company has incurred an accumulated deficit of $29,535,418 since inception. As of August 31, 2026, the Company had negative working capital of $(7,297,897) and cash of $335,445. 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 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 4. Controls and Procedures
Evaluation of 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 August 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, which had not been remediated as of August 31, 2026, our disclosure controls and procedures were not effective as of that date.
Material Weakness and Remediation
As disclosed in Item 9A of the 2026 Form 10-K, management identified a material weakness in 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 that year were not sufficient to ensure that those transactions and the year-end close were recorded and reviewed on a timely basis. 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.
| 8 |
| Table of Contents |
Remediation of the material weakness is in progress and the material weakness had not been remediated as of August 31, 2026. During the three months ended August 31, 2026 management continued to implement its remediation plan: a formal monthly and quarterly close checklist was adopted; roll-forward schedules with independent review were prepared for all significant accounts, including debt, embedded derivatives, equity, intangibles, leases, receivables and accruals; and the Chief Accounting Officer reviewed all non-routine journal entries and the consolidation. 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. Notwithstanding the material weakness, management believes that the condensed consolidated financial statements included in this Quarterly 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.
Changes in Internal Control over Financial Reporting
Other than the remediation activities described above, which management considers to have materially affected, or to be reasonably likely to materially affect, the Company’s internal control over financial reporting, there were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended August 31, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. This Quarterly Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.
| 9 |
| Table of Contents |
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
As of the date hereof the Company is not party to any material legal proceedings and is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties, other than the following: on October 6, 2026 the Company issued a formal demand for repayment of the loan receivable described in Note 8 to the condensed consolidated financial statements and is evaluating enforcement proceedings against the borrower.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item. There have been no material changes to the risk factors disclosed in the 2026 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended August 31, 2026, the Company issued 3,231,320 shares of common stock upon conversion of convertible notes payable and accrued interest of $806,517 at conversion prices ranging from $0.1106 to $0.75 per share; 831,909 shares of common stock as compensation for services valued at $153,707 at $0.159 to $0.20 per share; and 101,500 commitment shares in connection with a convertible note financing, to which $4,703 of the note proceeds was allocated. The Company also issued 250,000 shares of common stock at $0.50 per share to an accredited investor for cash of $125,000, effective August 12, 2026. During the quarter the Company issued five convertible promissory notes with an aggregate face amount of $773,500 as described in Note 11 to the condensed consolidated financial statements. The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Regulation D or Regulation S thereunder. No underwriters were involved and the Company did not receive cash proceeds from the conversions or the issuances for services.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the quarter ended August 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.
| 10 |
| Table of Contents |
Item 6. Exhibits
Exhibit No. |
| Description |
Convertible promissory note dated July 17, 2026 between Karbon-X Corp. and CFI Capital LLC | ||
Securities Purchase Agreement dated July 17, 2026 between Karbon-X Corp. and CFI Capital LLC | ||
Note Purchase Agreement dated August 13, 2026 between Karbon-X Corp. and Debtfund L.P. | ||
Convertible promissory note dated August 18, 2026 between Karbon-X Corp. and Auctus Fund LLC | ||
| Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer | |
| Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer | |
| ||
| ||
101.INS |
| Inline XBRL Instance 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 Label Linkbase Document |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
| Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| 11 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Karbon-X Corp. (Registrant)
Date: October 21, 2026 | By: | /s/ Chad Clovis |
|
|
| Chad Clovis |
|
|
| Chief Executive Officer and Director (Principal Executive Officer) |
|
Date: October 21, 2026 | By: | /s/ Adriana Ebell |
|
|
| Adriana Ebell |
|
|
| Chief Financial Officer (Principal Financial Officer) |
|
Date: October 21, 2026 | By: | /s/ Samuel Nelson |
|
|
| Samuel Nelson |
|
|
| Chief Accounting Officer (Principal Accounting Officer) |
|
| 12 |
EXHIBIT 10.11
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”)
US $180,000.00
KARBON-X CORP.
6% CONVERTIBLE REDEEMABLE NOTE
DUE JULY 17, 2027
FOR VALUE RECEIVED, KARBON-X CORP. (the “Company”) promises to pay to the order of CFI CAPITAL LLC and its authorized successors and Permitted Assigns, defined below, (the “Holder”), the aggregate principal face amount of One Hundred Eighty Thousand Dollars exactly (U.S. $180,000.00) on July 17, 2027 (the “Maturity Date”) and to pay interest on the principal amount outstanding hereunder at the rate of 6% per annum commencing on July 17, 2026 (the “Issuance Date”). The interest will be paid to the Holder in whose name this 6% Convertible Redeemable Note (this “Note”) is registered on the records of the Company regarding registration and transfers of this Note. This Note shall contain a $18,000.00 original issue discount, such that the purchase price shall be $162,000.00. The principal of, and interest on, this Note are payable at 2151 West Hillsboro Blvd, Suite 209, Deerfield Beach, FL 33442, initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of the outstanding principal hereunder and shall satisfy and discharge the liability for the principal on this Note to the extent of the sum represented by such a check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein. Permitted Assigns means any “qualified per-son”, “permitted assigns” or “prospective transferee” acquiring all or a portion of this Note accompanied by an Opinion of Counsel, all in accordance with the terms provided in Sections 2(f) and 5(g) of the Securities Purchase Agreement by and between the Holder and the Company dated as of July 17, 2026 (the “Securities Purchase Agreement”).
This Note is subject to the following additional provisions:
1. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration or transfer, or exchange, except that Holder shall pay any tax or other governmental charges payable in connection therewith and for the cost of any Opinion of Counsel as maybe required under Section 5(g) of the Securities Purchase Agreement. To the extent that Holder subsequently transfers, assigns, sells or exchanges any of the multiple lesser denomination notes, Holder acknowledges that it will provide the Company with an Opinion of Counsel as provided for in Sections 2(f) and 5(g) of the Securities Purchase Agreement (“Opinions of Counsel”).
| 1 |
2. The Company shall be entitled to withhold from all payments any amounts re-quired to be withheld under applicable laws.
3. This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”), applicable state securities laws and Sections 2(f) and 5(f) of the Securities Purchase Agreement. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company's records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prequalified prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date. All notices of conversion will be accompanied by an Opinion of Counsel of the Holder’s counsel, which the Company shall not reasonably reject.
4. (a) The Holder of this Note is entitled, at its option, at any time after the 6th monthly anniversary of this Note, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the “Common Stock”) at a price (“Conversion Price”) for each share of Common Stock equal to 60% of the lowest trading price of the Common Stock as reported on the OTC Markets on which the Company’s shares are then traded or any exchange upon which the Common Stock may be traded in the future (the “Exchange”), for the twenty prior trading days, (provided such Notice of Conversion is duly executed by the Holder and is delivered together with a duly executed Opinion of Counsel, by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). For purposes of the above calculations, a day shall not be considered a trading day if there was no trading volume for the Company’s Common Stock for that particular day. If the shares have not been de-livered within 2 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 2 business days of receipt by the Company of the Notice of Conversion. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law or to conduct a reverse split at a ratio determined by the Company’s board of directors. The Company agrees to honor all conversions submitted pending this increase or such stock split, as applicable. In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 50% instead of 60% while that “Chill” is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates, would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Holder to the Company).
(b) Interest on any unpaid principal balance of this Note shall be paid at the rate of 6% per annum. Interest shall be paid by the Company in Common Stock (“Interest Shares”). The Holder may, at any time, send in a Notice of Conversion to the Company for Interest Shares based on the formula pro-vided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| 2 |
(c) The Note may be prepaid or assigned with the following penalties/premiums:
| PREPAY DATE | PREPAY AMOUNT |
| ≤ 30 days | 105% of principal plus accrued interest |
| 30- 59 days | 115% of principal plus accrued interest |
| 60-89 days | 120% of principal plus accrued interest |
| 90-119 days | 130% of principal plus accrued interest |
| 120-149 days | 135% of principal plus accrued interest |
| 150-180 days | 140% of principal plus accrued interest |
Such redemption must be closed and funded within 3 days of giving notice of redemption of the right to redeem shall be null and void. Any partial prepayments will be made in accordance with the formula set forth in the chart above with respect to principal, premium, and interest.
(d) Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization (excluding an increase in authorized capital) or other change or exchange of outstanding shares of the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for the prepayment price set forth in Section 4(c), above, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.
(e) In the event the Company is not able to pay the payment section forth in Section 4(d), above, then in case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
5. No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The Company hereby expressly waives demand and presentment for payment, no-tice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The Company agrees to pay all costs and expenses, including reasonable attorneys' fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note.
| 3 |
8. If one or more of the following described “Events of Default” shall occur:
(a) The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company; or
(b) Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or the Securities Purchase Agreement under which this note was issued shall be false or misleading in any material respect; or
(c) The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of the Company under this Note or any other note issued to the Holder; or
(d) The Company shall (1) become insolvent (which does not include a “going concern opinion”); (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business;
(5) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or
(e) A trustee, liquidator, or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or
(g) One or more money judgments, writs or warrants of attachment, or similar process, in excess of two hundred fifty thousand dollars ($250,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or un-stayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or
(h) The Company has defaulted on or breached any term of any other purchase agreement or note or similar debt instrument into which the Company has entered and failed to cure such default within the appropriate grace period; or
(i) The Company shall have its Common Stock delisted from an exchange (including the OTC Markets) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days or ceases to file its reports under the Securities Exchange Act of 1934, as amended, with the SEC;
(j) The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 2 business days of its receipt of a Notice of Conversion which includes a duly executed Opinion of Counsel from a reputable lawyer or law firm expressing an opinion which supports the removal of a restrictive legend; or
| 4 |
(k) The Company shall not replenish the reserve set forth in Section 12, within 2 business days of the written request of the Holder.
(l) The Company shall be delinquent in its periodic report filings with the Securities and Exchange Commission (subject to applicable extensions); or
(m) The Company shall cause to lose the “bid” price for its stock in a market (including
the OTC marketplace or other exchange); or
(n) Terminate its existing transfer agent relationship without the prior written consent of the Holder.
Then, or at any time thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder's sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, any-thing herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate at the highest rate of interest permitted by law, and the Con-version Price shall be adjusted from 60% to 45% (the conversion price discount shall increase by 15%). In the event of a breach of Section 8(j) the penalty shall be $500 per day if the shares are not issued beginning on the 3rd day after the conversion notice was delivered to the Company. This penalty shall increase to $1,000 per day beginning on the 10th day. In the event of a breach of Section 8(h), the Holder may elect to utilize the same remedy available under the defaulted interest, and such remedy shall be incorporated by reference into the terms of this Note. Further, if a breach of Section 8(l) occurs or is continuing after the 6-month anniversary of the Note, then the Holder shall be entitled to use the lowest closing bid price during the delinquency period as a base price for the conversion. For example, if the lowest closing bid price during the delinquency period is $0.01 per share and the conversion discount is 50%, the Holder may elect to convert future conversions at $0.005 per share.
If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation, and prosecution of such action or proceeding.
9. In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby. Specifically, notwithstanding any provision to the contrary, the parties acknowledge and agree that the Company is a corporation and the loan evidenced by this Note is made solely for business and commercial purposes. Accordingly, pursuant to Florida Statutes § 687.031 and applicable Florida case law, the provisions of Florida usury law, including §§ 687.02 and 687.03, shall not apply to this transaction. The Holder and Company further acknowledge that no natural person is guaranteeing the obligations under this Note, and the proceeds are not intended for consumer or personal use. In entering into this Note, each party has independently evaluated the terms, including any conversion rights, and agrees that the structure and pricing reflect a bona fide commercial transaction outside the scope of Florida usury laws.
| 5 |
10. Neither this Note nor any term hereof may be amended, waived, discharged, or terminated other than by a written instrument signed by the Company and the Holder.
11. The Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously has been a “shell” issuer at least 12 months have passed since the Company has reported form 10 type information indicating it is no longer a “shell” issuer. Further. The Company will instruct its counsel to either (i) write a 144 opinion to allow for the salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. The Company shall issue irrevocable transfer agent instructions reserving 8,333,333 shares of its Common Stock for conversions under this Note (the “Share Reserve”). Upon full conversion of this Note, any shares remaining in the Share Reserve shall be canceled. The Holder may reasonably request increases from time to time to reserve such amounts to maintain such coverage five times, and the Company will be responsible for all fees associated with the increase in the Share Reserve. The Company will instruct its transfer agent to provide the outstanding share information to the Holder in connection with its conversions, along with shareholder information statements and other shareholder reservations that exist. The Holder shall be entitled to deduct up to $2,000 per conversion to adequately cover all transfer agent costs and legal fees associated with issuing and delivering the shares to the Holder. To the extent the Company is unable to maintain the Share Reserve at five times the discounted amount of the Note, it shall immediately begin to increase its authorized capital in an amount necessary to maintain all share reservations. All fees and expenses under this section 12 shall be deemed earned and paid as of the issuance date of this Note.
13. The Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
14. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable provision shall automatically be revised to equal the maximum rate of interest or other amount deemed interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any law that would prohibit or forgive the Company from paying all or a portion of the principal or interest on this Note.
| 6 |
15. This Note shall be governed by and construed in accordance with the laws of the State of Florida without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of Florida located in Miami, Florida or in the federal courts located in the state of Florida in the Southern District of Florida. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Company and Buyer waive the trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action, or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original.
[Signature page follows]
| 7 |
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated: Jul 17, 2026
| KARBON-X CORP. | |||
| By: | /s/ Chad James Clovis | ||
|
| Name: | Chad James Clovis | |
| Title: | CEO | ||
| 8 |
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Note)
The undersigned hereby irrevocably elects to convert *$_____________ of the above Note into _____________ Shares of Common Stock of KARBON-X CORP. (“Shares”) according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued in the name of a person other than the undersigned, the under-signed will pay all transfer and other taxes and charges payable with respect thereto.
| Date of Conversion: |
|
|
| Applicable Conversion Price: |
|
|
| Signature: |
|
|
| [Print Name of Holder and Title of Signer] |
| |
| Address: |
|
|
|
|
|
|
| SSN or EIN: |
|
| |
| Shares are to be registered in the following name: |
|
| |
| Name: |
|
|
| Address: |
|
|
| Tel: |
|
|
| Fax: |
|
|
| SSN or EIN: |
|
|
Shares are to be sent or delivered to the following account:
| Account Name: |
|
|
| Address: |
|
|
* consist of $_____________ in principal, $_____________ in interest and $_____________ in fees pursuant to section 12 of the Note
| 9 |
EXHIBIT 10.12
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of July 17, 2026, by and between KARBON-X CORP., a Nevada corporation, with headquarters located at 6575 West Loop South, Suite 500, Bellaire, TX 77401 (the “Company”), and CFI CAPITAL LLC, a Florida limited liability company, with its address at 2151 West Hillsboro Blvd., Suite 209, Deerfield Beach, FL 33442 (the “Buyer”).
WHEREAS:
A. The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”);
B. Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement a 6% convertible redeemable note of the Company, in the form attached hereto as Exhibit A, in the aggregate principal amount of $180,000.00 (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note. The Note shall contain an original issue discount of $18,000.00, such that the purchase price of the Note shall be $162,000.00.
C. The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth immediately below its name on the signature page hereto; and
NOW THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:
1. Purchase and Sale of the Note.
a. Purchase of the Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer, and the Buyer agrees to purchase from the Company such Note as is set forth immediately below the Buyer’s name on the signature pages hereto.
b. Form of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and (ii) the Company shall deliver such duly executed Note on behalf of the Company to the Buyer, against delivery of such Purchase Price.
c. Closing Date. The date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be on or about July 17, 2026, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.
| 1 |
2. Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company that:
a. Investment Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note, such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with the Note, the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to an effective registration statement with respect to such Securities or an exemption under the 1933 Act.
b. Accredited Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”). Any of Buyer’s transferees, assignees, or purchasers must be “accredited investors” in order to qualify as prospective transferees, permitted assignees in the case of Buyer’s or Holder’s transfer, assignment, or sale of the Note.
c. Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments, and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.
d. Information. The Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances, and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend, or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that may constitute a breach of any of the Company's representations and warranties made herein.
e. Governmental Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.
| 2 |
f. Transfer or Re-sale. The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion may be accepted by the Company in its reasonable discretion, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, or (d) the Securities are sold pursuant to Rule 144 or Regulation S under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion may be accepted by the Company in its reasonable discretion; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule 144 and further, if said Rule 144 is not applicable, any re-sale of such Securities under circumstances in which the selling Buyer (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case).
g. Legends. The Buyer understands that the Note and, until such time, if any, as the Conversion Shares have been registered under the 1933 Act may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that have been sold, the Conversion Shares shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against the transfer of the certificates for such Securities):
“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED HEREBY NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A FORM ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.”
The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance, and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company in its reasonable discretion so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any.
h. Authorization; Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.
i. Residency. The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.
| 3 |
3. Representations and Warranties of the Company. The Company represents and warrants to the Buyer that:
a. Organization and Qualification. The Company and each of its subsidiaries, if any, is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted, except for those jurisdictions in which failure to have such authority would not have a Material Adverse Effect.
b. Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement and the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and general principles of equity.
c. Issuance of Shares. The shares reserved for conversion of the Note shall be duly authorized and reserved for issuance as soon as practicable after the Company has increased its shares of authorized Common Stock in an amount equal to or greater than that permitting it to reserve such shares. Upon conversion of the Note in accordance with its respective terms, Conversion Shares will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.
d. Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this Agreement and the Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
| 4 |
e. No Conflicts. The execution, delivery and performance of this Agreement and the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). Except for applicable blue sky state notice filings, all consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the eligibility requirements of the OTC Markets Exchange (the “OTC Markets”) and does not reasonably anticipate that the Common Stock will be ineligible for quotation on the OTC MARKETS in the foreseeable future, nor are the Company’s securities “chilled” by DTC. The Company and its subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. For purposes of this Agreement, “Material Adverse Effect” means an event or combination of events, which individually or in the aggregate, would reasonably be expected to (a) adversely affect the legality, validity or enforceability of the Agreement or the Note, or (b) have or result in a material adverse effect on the results of operations, assets, or financial condition of the Company, taken as a whole.
f. Absence of Litigation. Except as disclosed to the Buyer or in the Company’s filings with the SEC, there is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its subsidiaries, threatened against or affecting the Company or any of its subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect.
g. Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’ purchase of the Securities.
h. No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer.
i. Title to Property. The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(i) or such as would not have a Material Adverse Effect. Any real property and facilities held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.
| 5 |
j. Bad Actor. No officer or director of the Company would be disqualified under Rule 506(d) of the Securities Act as amended on the basis of being a "bad actor" as that term is established in the September 19, 2013 Small Entity Compliance Guide published by the Securities and Exchange Commission.
k. Breach of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties set forth in this Section 3 in any material respect (subject to a 10-day cure period from the date that the Buyer notifies the Company in writing of such breach with reasonable detail), and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of Default under the Note.
4. COVENANTS.
a. Expenses. The Company agrees that Buyer can deduct $6,000.00 (Six Thousand Dollars) from the $162,000.00 payment due under the Note, at the time of cash funding, to be applied to the legal expenses of Buyer.
b. Listing. The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated quotation system, if necessary, upon which shares of Common Stock are then listed or quoted (subject to official notice of issuance) and, so long as the Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed or quoted, such listing or quotation of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the OTC MARKETS or any equivalent replacement market, the Nasdaq stock market (“Nasdaq”), or the New York Stock Exchange (“NYSE”), as applicable, and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of any notices it receives, if any, from the OTC MARKETS and any other markets on which the Common Stock is then listed regarding the continued eligibility of the Common Stock for listing on such markets.
c. Corporate Existence. So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger, consolidation, or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and
(ii) is a publicly traded corporation whose Common Stock is listed for trading on the OTC MARKETS, Nasdaq or NYSE.
d. No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.
e. 10Q Filing. The Company will disclose this transaction in its next 10Q or 10k filing (whichever is next) in a manner sufficient to specifically disclose the material contents of the transaction. The Company will not “lump” this Note with other similar instruments for purposes of disclosure but will specifically identify the parties to this transaction and all material terms.
| 6 |
f. Most Favored Nations. So long as any of the securities issued under this Agreement are outstanding, upon any issuance by the Company or any of its subsidiaries of any security, or amendment to a security that was originally issued before the Date of this Agreement, with any term that the Buyer reasonably believes is more favorable to the Buyer of such security or with a term in favor of the Buyer of such security that the Buyer reasonably believes was not similarly provided to the Buyer in this Note, then (i) the Company shall notify the Buyer of such additional or more favorable term within one (1) business day of the issuance and/or amendment (as applicable) of the respective security, and (ii) such term, at Buyer’s option, shall become a part of the transaction documents with the Buyer (regardless of whether the Company complied with the notification provision herein). The types of terms contained in another security that may be more favorable to the Buyer of such security include, but are not limited to, terms addressing prepayment rate, interest rates, and original issue discounts, conversion prices and pricing, commitment shares, etc.
g. Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4 (subject to a 5-day cure period from the date that the Buyer notifies the Company in writing of such breach with reasonable detail), and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under the Note.
5. Governing Law; Miscellaneous.
a. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of Florida located in Miami, Florida or in the federal courts located in the state of Florida in the Southern District of Florida. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Company and Buyer waive the trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action, or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
b. Counterparts; Signatures by Facsimile. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.
| 7 |
c. Headings. The headings of this Agreement are for the convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.
d. Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.
e. Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant, or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in the interest of the Buyer.
f. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, (iv) via electronic mail or (v) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received) or delivery via electronic mail, or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Company, to:
KARBON-X CORP.
6575 West Loop South, Suite 500
Bellaire, TX 77401
Attn: Chad James Clovis, CEO
If to the Buyer:
CFI CAPITAL LLC
2151 West Hillsboro Blvd.
Suite 209
Deerfield Beach, FL 33442
Attn: Ahron Fraiman, Manager
Each party shall provide notice to the other party of any change in address.
| 8 |
g. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any “qualified person”, any “permitted assigns”, or “prospective transferee” that acquires or purchases Conversion Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1933 Act, without the consent of the Company with Buyer’s opinion of counsel (from a reputable law firm) permitting the same. A qualified person is an “accredited investor” transferee, assignee, or purchaser of the Note who succeeds to the Holder’s right, title, and interest to all or a portion of the Note accompanied with an opinion of counsel as provided for in Section 2(f).
h. Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
i. Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees, and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties, and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement.
j. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments, and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
k. No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.
l. Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.
[Signature page follows]
| 9 |
IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.
| KARBON-X CORP. |
| |
|
|
|
|
|
|
|
|
| By: | /s/ Chad James Clovis |
|
| Name: | Chad James Clovis |
|
| Title: | CEO |
|
CFI CAPITAL LLC
| By: | /s/ Ahrom Fraiman |
|
| Name: | Ahron Fraiman |
|
| Title: | Manager |
|
AGGREGATE SUBSCRIPTION AMOUNT:
| Aggregate Principal Amount of the Note: |
| $ | 180,000.00 |
|
|
Aggregate Purchase Price:
Note: $180,000.00, less $18,000.00 in original issue discount, less $6,000.00 in legal fees.
| 10 |
EXHIBIT A
144 NOTE - $180,000.00
| 11 |
EXHIBIT 10.13
| THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”) |
US $115,500.00
KARBON-X CORP.
6% CONVERTIBLE REDEEMABLE NOTE DUE AUGUST 7, 2027
FOR VALUE RECEIVED, KARBON-X CORP. (the “Company”) promises to pay to the order of GW Capital Investments, LLC and its authorized successors and permitted assigns (“Holder”), the aggregate principal face amount of One Hundred Fifteen Thousand Five Hundred Dollars (U.S. $115,500.00) on August 7, 2027 (“Maturity Date”) and to pay interest on the principal amount outstanding hereunder at the rate of 6% per annum commencing on August 7, 2026 (“Issuance Date”). The interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. This Note shall contain a $10,500.00 original issue discount, such that the purchase price shall be $105,000.00. The principal of, and interest on, this Note are payable at 123 W NYE Lane, Suite 129, Carson City, NV 89706, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein. Permitted Assigns means any Holder assignment, transfer or sale of all or a portion of this Note accompanied by an Opinion of Counsel as provided for in Section 2(f) of the Securities Purchase Agreement.
| 1 |
This Note is subject to the following additional provisions:
1. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No ser-vice charge will be made for such registration, transfer, or exchange, except that Holder shall pay any tax or other governmental charges payable in connection therewith. To the extent that Holder subsequently transfers, assigns, sells, or exchanges any of the multiple lesser denomination notes, Holder acknowledges that it will provide the Company with Opinions of Counsel as provided for in Section 2(f) of the Securities Purchase Agreement.
2. The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”), applicable state securities laws and Sections 2(f) and 5(f) of the Securities Purchase Agreement. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company's records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prequalified prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date. All notices of conversion will be accompanied by an Opinion of Counsel.
4. (a) The Holder of this Note is entitled, at its option, at any time after the 6th monthly anniversary of this Note, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the “Common Stock”) at a price (the “Conversion Price”) for each share of Common Stock equal to 60% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Market-place exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future (“Exchange”), for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer agent (provided such Notice of Conversion is delivered by fax or other electronic method of communication to the Company or its transfer agent after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC “Chill” on its shares, the Conversion Price shall be decreased to 50% instead of 60% while that “Chill” is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates, would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Holder).
| 2 |
(b) Interest on any unpaid principal balance of this Note shall be paid at the rate of 6% per annum. Interest shall be paid by the Company in Common Stock (“Interest Shares”). The Holder may, at any time, send in a Notice of Conversion to the Company for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
(c) The Note may be prepaid or assigned with the following penalties/premiums:
| PREPAY DATE | PREPAY AMOUNT |
| ≤ 30 days | 105% of principal plus accrued interest |
| >30-<=60 days | 115% of principal plus accrued interest |
| >60-<=90 days | 120% of principal plus accrued interest |
| >90-<=120 days | 130% of principal plus accrued interest |
| >120-<=150 days | 135% of principal plus accrued interest |
| >150-<=180 days | 140% of principal plus accrued interest |
This Note may not be prepaid after the 180th day. Such redemption must be closed and funded within 3 days of giving notice of redemption of the right to redeem shall be null and void. Any partial prepayments will be made in accordance with the formula set forth in the chart above with respect to principal, premium, and interest.
(d) Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization (excluding an increase in authorized capital) or other change or exchange of out-standing shares of the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.
| 3 |
(e) In case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
5. No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The Company agrees to pay all costs and expenses, including reasonable attorneys' fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note in the event the Holder prevails in such claim.
8. If one or more of the following described “Events of Default” shall occur:
(a) The Company shall default in the payment of principal or interest on this Note, or any other note issued to the Holder by the Company; or
(b) Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or the Securities Purchase Agreement under which this note was issued shall be false or misleading in any material respect; or
(c) The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of the Company under this Note or any other note issued to the Holder and such failure is not cured within five (5) days of receipt of written notice from the Holder to the Company; or
(d) The Company shall (1) become insolvent (which does not include a “going concern opinion); (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or
(e) A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment; or
| 4 |
(f) Any governmental agency or any court of competent jurisdiction at the in-stance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or
(g) One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or
(h) Defaulted on or breached any term of any other purchase agreement or note or similar debt instrument into which the Company has entered and failed to cure such default within the appropriate grace period; or
(i) The Company shall have its Common Stock delisted from an exchange (including the OTC Markets exchange) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days or ceases to file its 1934 act reports with the SEC;
(j) [Intentionally omitted];
(k) The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business days of its receipt of a Notice of Conversion which includes an Opinion of Counsel expressing an opinion which supports the removal of a restrictive legend; or
(l) The Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder.
(m) The Company shall be delinquent in its periodic report filings with the Securities and Exchange Commission (subject to applicable extensions); or
(n) The Company shall cause to lose the “bid” price for its stock in a market (including the OTC marketplace or other exchange).
| 5 |
Then, or at any time thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder's sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 24% per annum, and the Conversion Price shall be adjusted from 60% to 45% (the conversion price discount shall increase by 15%). In the event of a breach of Section 8(k), the penalty shall be $500 per day the shares are not issued, beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall increase to $1,000 per day beginning on the 7th day. In an event of a breach of Section 8(h), the Holder may elect to utilize the same remedy available under the defaulted interest, and such remedy shall be incorporated by reference into the terms of this Note. Further, if a breach of Section 8(m) occurs or is continuing after the 6-month anniversary of the Note, then the Holder shall be entitled to use the lowest closing bid price during the delinquency period as a base price for the conversion. For example, if the lowest closing bid price during the delinquency period is $0.01 per share and the conversion discount is 50%, the Holder may elect to convert future conversions at $0.005 per share.
If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
9. In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
10. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and the Holder.
11. The Company represents that it is not a “shell” issuer and has never been a “shell” issuer, or that if it previously has been a “shell” issuer at least 12 months have passed since the Company has reported Form 10 type information indicating it is no longer a “shell” issuer. This Note is a “Rule 144 Note” and is not eligible for conversion until the six (6) month anniversary of the Issuance Date. The Company and the Holder acknowledge and agree that the Holder’s holding period in respect of the Conversion Shares is intended to tack back to the Issuance Date in accordance with Rule 144(d)(3)(ii) under the 1933 Act. The Company will instruct its counsel to either (i) write a 144 opinion to allow for the salability of the conversion shares or (ii) accept such opinion from the Holder’s counsel.
12. The Company shall issue irrevocable transfer agent instructions reserving 4,587,685 shares of its Common Stock for conversions under this Note (the “Share Reserve”). Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company shall pay all transfer agent costs and legal opinion fees associated with issuing and delivering the shares to the Holder. If the Holder must pay these amounts, the Holder may deduct $1,750 per conversion from the principal amount being converted to cover all Transfer Agent costs and legal fees for issuing and delivering the shares to the Holder. The Company should at all times reserve a minimum of four times the amount of shares required if the Note would be fully converted. The Holder may reasonably request increases from time to time to reserve such amounts, and the Company will be responsible for all fees associated with the increase in the Share Reserve. The Company will instruct its transfer agent to provide the outstanding share information to the Holder in connection with its conversions. All fees and expenses under this section 12 shall be deemed earned and paid as of the issuance date of this Note.
| 6 |
13. The Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations, etc. This notice shall be given to the Holder as soon as possible under law.
14. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable provision shall automatically be revised to equal the maximum rate of interest or other amount deemed interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any law that would prohibit or forgive the Company from paying all or a portion of the principal or interest on this Note.
15. This Note shall be governed by and construed in accordance with the laws of Nevada applicable to contracts made and wholly to be performed within the State of Nevada and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of Nevada or in the Federal courts sitting in the county or city of either Washoe County, Nevada or Clark County, Nevada. This Agreement may be executed in counter-parts, and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original.
| 7 |
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated: August 7, 2026
| KARBON-X CORP. | |||
| By: | /s/ Chad Clovis | ||
|
|
| Chad James Clovis | |
| Title: | CEO | ||
| 8 |
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Note)
The undersigned hereby irrevocably elects to convert $ of the above Note into Shares of Common Stock of KARBON-X CORP. (“Shares”) according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.
| Date of Conversion: |
|
|
| Applicable Conversion Price: |
|
|
| Signature: |
|
|
| [Print Name of Holder and Title of Signer] |
| |
| Address: |
|
|
|
|
|
|
| SSN or EIN: |
|
| |
| Shares are to be registered in the following name: |
|
| |
| Name: |
|
|
| Address: |
|
|
| Tel: |
|
|
| Fax: |
|
|
| SSN or EIN: |
|
|
Shares are to be sent or delivered to the following account:
| Account Name: |
|
|
| Address: |
|
|
* consist of $_____________ in principal, $_____________ in interest and $_____________ in fees pursuant to section 12 of the Note
| 9 |
EXHIBIT 10.14
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of August 7, 2026, by and between KARBON-X CORP., a Nevada corporation, with headquarters located at 6575 West Loop South, Suite 500, Bellaire, TX 77401 (the “Company”) and GW Capital Investments, LLC, a Nevada limited liability company, with its address at 123 W NYE Lane, Suite 129, Carson City, NV 89706 (the “Buyer”).
WHEREAS:
A. The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”);
B. Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement a 6% convertible note of the Company, in the form attached hereto as Exhibit A in the aggregate principal amount of $115,500.00 together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note. The Note shall contain an original issue discount of $10,500.00, such that the purchase price of the Note shall be $105,000.00. The Note shall be a “Rule 144 Note” and shall not be eligible for conversion until the six (6) month anniversary of the date of issuance of the Note.
C. The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth immediately below its name on the signature pages hereto; and
NOW THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:
1. Purchase and Sale of Note.
a. Purchase of Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer, and the Buyer agrees to purchase from the Company such Note as is set forth immediately below the Buyer’s name on the signature pages hereto.
| 1 |
b. Form of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal amount equal to the amount of $115,500.00 as is set forth immediately below the Buyer’s name on the signature pages hereto, and (ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase Price.
c. Closing Date. The date and time of the first issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be on or about August 7, 2026, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.
2. Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company that:
a. Investment Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note, such shares of Common Stock being collectively referred to herein as the “Conversion Shares”, and, collectively with the Note, the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.
b. Accredited Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”). Any of Buyer’s transferees, assignees, or purchasers must be “accredited investors” in order to qualify as prospective transferees, permitted assignees in the case of Buyer’s or Holder’s transfer, assignment or sale of the Note.
c. Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.
d. Information. The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that may constitute a breach of any of the Company's representations and warranties made herein.
| 2 |
e. Governmental Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Re-sale. The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) in the case of subparagraphs (c), (d) and (e) below, the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold, or transferred pursuant to an exemption from such registration, including the removal of any restrictive legend which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”); (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.
g. Legends. The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act, will be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities):
| 3 |
| “NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.” |
The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, and (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, and that legend removal is appropriate, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, within 2 business days, it will be considered an Event of Default under the Note; provided that such opinion is consistent with Rule 144.
h. Authorization; Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.
i. Residency. The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.
j. No Short Sales. Buyer/Holder, its successors and assigns, agree that so long as the Note remains outstanding, neither the Buyer/Holder nor any of its affiliates is subject to any restrictions allowing them to effect “short sales” of the Common Stock or hedging transaction which establishes a short position with respect to the Common Stock of the Company. The Company acknowledges and agrees that upon delivery of a Conversion Notice by the Buyer/Holder, the Buyer/Holder immediately owns the shares of Common Stock described in the Conversion Notice and any sale of those shares issuable under such Conversion Notice would not be considered short sales.
| 4 |
3. Representations and Warranties of the Company. The Company represents and warrants to the Buyer that:
a. Organization and Qualification. The Company and each of its subsidiaries, if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted.
b. Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.
c. Issuance of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.
d. Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
| 5 |
e. No Conflicts. The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the OTC Markets Exchange (the “OTC MARKETS”) and does not reasonably anticipate that the Common Stock will be delisted by the OTC MARKETS in the foreseeable future, nor are the Company’s securities “chilled” by FINRA. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.
f. Absence of Litigation. Except as disclosed in the Company’s Periodic Report filings with the SEC, there is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its subsidiaries, threatened against or affecting the Company or any of its subsidiaries, or their officers or directors in their capacity as such, that could have a material adverse effect. Schedule 3(f) contains a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its subsidiaries, without regard to whether it would have a material adverse effect. The Company and its subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.
g. Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’ purchase of the Securities. The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.
| 6 |
h. No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer.
i. Title to Property. The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(i) or such as would not have a material adverse effect. Any real property and facilities held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a material adverse effect.
j. Bad Actor. No officer or director of the Company would be disqualified under Rule 506(d) of the Securities Act as amended on the basis of being a “bad actor” as that term is established in the September 19, 2013 Small Entity Compliance Guide published by the Securities and Exchange Commission.
k. Breach of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of Default under the Note.
4. COVENANTS.
a. Expenses. At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection with the negotiation, preparation, execution, delivery and performance of this Agreement and the other agreements to be executed in connection herewith (“Documents”), including, without limitation, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, fees for stock quotation services, fees relating to any amendments or modifications of the Documents or any consents or waivers of provisions in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions contemplated by the Documents. When possible, the Company must pay these fees directly, otherwise the Company must make immediate payment for reimbursement to the Buyer for all fees and expenses immediately upon written notice by the Buyer or the submission of an invoice by the Buyer.
b. Listing. The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the Buyer owns any of the Note Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the OTC MARKETS or any equivalent replacement market, the Nasdaq stock market (“Nasdaq”), or the New York Stock Exchange (“NYSE”) and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of any notices it receives from the OTC MARKETS and any other markets on which the Common Stock is then listed regarding the continued eligibility of the Common Stock for listing on such markets.
| 7 |
c. Corporate Existence. So long as the Buyer beneficially owns the Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for trading on the OTC MARKETS, Nasdaq or NYSE.
d. No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.
e. Filings. The Company shall include the Securities in its next scheduled SEC filing, whether that shall be a 10Q or a 10K.
f. Most Favored Nations. So long as any of the Securities issued under this Agreement are outstanding, upon any issuance by the Company or any of its subsidiaries of any security, or amendment to a security with any term that the Buyer reasonably believes is more favorable to the Buyer of such security or with a term in favor of the Buyer of such security that the Buyer reasonably believes was not similarly provided to the Buyer in this Note, then (i) the Company shall notify the Buyer of such additional or more favorable term within one (1) business day of the issuance and/or amendment (as applicable) of the respective security, and (ii) such term, at Buyer’s option, shall become a part of the transaction documents with the Buyer (regardless of whether the Company complied with the notification provision herein). The types of terms contained in another security that may be more favorable to the Buyer of such security include, but are not limited to, terms addressing prepayment rate, interest rates, and original issue discounts, conversion prices and pricing, commitment shares, etc.
g. Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under the Note.
| 8 |
5. Governing Law; Miscellaneous.
a. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of Nevada or in the federal courts located in the state of Nevada and county or city of either Washoe County, Nevada, or Clark County, Nevada. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
b. Counterparts; Signatures by Facsimile. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.
c. Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.
d. Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.
| 9 |
e. Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.
f. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, (iv) via electronic mail or (v) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received) or delivery via electronic mail, or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Company, to:
KARBON-X CORP.
6575 West Loop South, Suite 500
Bellaire, TX 77401
Attn: Chad James Clovis, CEO
If to the Buyer:
GW Capital Investments, LLC
123 W NYE Lane, Suite 129
Carson City, NV 89706
Attn: Noah Weinstein, Manager
Each party shall provide notice to the other party of any change in address.
g. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any “qualified person”, any “permitted assigns”, or “prospective transferee” that acquires or purchases Note Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company with Buyer’s Opinion of Counsel. A qualified person is an “accredited investor” transferee, assignee, or purchaser of the Note who succeeds to the Holder’s right, title and interest to all or a portion of the Note accompanied with an Opinion of Counsel as provided for in Section 2(f).
| 10 |
h. Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
i. Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.
j. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
k. No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.
l. Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.
| 11 |
IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.
| KARBON-X CORP. |
| |
|
|
|
|
| By: | /s/ Chad James Clovis |
|
| Name: | Chad James Clovis |
|
| Title: | CEO |
|
|
|
|
|
| GW Capital Investments, LLC |
| |
|
|
|
|
| By: | /s/ Noah Weinstein |
|
| Name: | Noah Weinstein |
|
| Title: | Manager |
|
| AGGREGATE SUBSCRIPTION AMOUNT: |
| $ | 115,500.00 |
|
Aggregate Principal Amount of Note:
Aggregate Purchase Price:
Note: $115,500.00, less $10,500.00 in original issue discount, less $5,000.00 in legal fees.
| 12 |
EXHIBIT A
144 NOTE - $115,500.00
| 13 |
EXHIBIT 10.15
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT (this “Agreement”), dated as of August 13, 2026, is entered into by and between KARBON-X CORP., a Nevada corporation (“Company”), and DEBTFUND, L.P., a Delaware limited partnership, its successors and/or assigns (“Investor”).
A. Company and Investor are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded by the Securities Act of 1933, as amended (the “1933 Act”), and the rules and regulations promulgated thereunder by the United States Securities and Exchange Commission (the “SEC”).
B. On the terms and subject to the conditions set forth this Agreement, Investor desires to purchase and Company desires to issue and sell, a convertible promissory note, in the form attached hereto as Exhibit A, in the original principal amount of $203,000 (the “Note”).
C. The Note will be convertible into shares of common stock, par value $0.0001, of Company (the “Common Shares”) in accordance with the conversion terms set forth in the Notes (the Notes and conversion shares, collectively the “Securities”).
D. This Agreement, the Note, and all other certificates, documents, agreements, resolutions and instruments delivered to any party under or in connection with this Agreement, as the same may be amended from time to time, are collectively referred to herein as the “Transaction Documents”.
E. For purposes of this Agreement: “Conversion Shares” means all Common Shares issuable upon conversion of all or any portion of the Notes; and “Securities” means each Note and the respective Conversion Shares
NOW, THEREFORE, in consideration of the above recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Company and Investor hereby agree as follows:
1. Purchase and Sale of Note.
1.1 Note Issuance and Sale. On the date hereof on the terms and subject to the conditions set forth herein, at the Closing (as defined below), the Company shall issue and sell to Investor, and Investor shall purchase from the Company a Note in the principal amount of $203,000 (the “Note”). In consideration thereof, Investor shall pay the Purchase Price (as defined below) to Company.
1.2 Purchase Price. The Note carries an original issue discount of $28,000.00 (the “OID”). The OID will be included in the initial principal balance of the Note. The “Purchase Price”, therefore, shall be $175,000.00, computed as follows: $203,000.00 initial principal balance, less the OID. Accordingly, the aggregate principal amount of the Note purchased by the Purchaser and issued by the Company at the Closing shall be $203,000.
1.3 Closing; Delivery. The closing of the sale and purchase of the Note under this Agreement (the “Closing”) shall be the first Trading Day on which each of the conditions set forth in Section 6 below become satisfied, unless otherwise waived in writing by the Parties. The Closing of the transactions contemplated by this Agreement shall occur by means of the exchange of electronic signatures; however, the Closing shall be deemed for all purposes to have occurred at the offices of Scottsdale Capital Advisors Corp. in Scottsdale, Arizona. For purposes of this Agreement, “Trading Day” shall be any day on which OTC Market is open for trading. Notwithstanding the foregoing, Company shall deliver the original executed Transaction Documents to Investor within 5 days following the Closing.
1.4 Form of Payment. On the Closing, Investor shall pay the Purchase Price to Company via wire transfer of immediately available funds.
1.5 Incentive Shares. On the Closing, Company agrees to issue Investor 101,500 shares restricted common stock (the “Incentive Shares”). The Incentive Shares shall be deemed fully paid and earned as of the Closing Date.
| Page 1 of 15 |
2. [Deleted].]
3. Investor’s Representations and Warranties. Investor represents and warrants to Company that as of the Closing Date:
(a) This Agreement has been duly and validly authorized by Investor;
(b) This Agreement constitutes a valid and binding agreement of Investor enforceable in accordance with its terms; and
(c) Investor is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D of the 1933 Act.
4. Company’s Representations and Warranties. Company represents and warrants to Investor that as of the Closing Date:
(a) Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has the requisite corporate power to own its properties and to carry on its business as now being conducted;
(b) Company is duly qualified to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary;
(c) Company has registered its Common Shares under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and is obligated to file reports pursuant to Section 13 or Section 15(d) of the 1934 Act;
(d) Each of the Transaction Documents and the transactions contemplated hereby and thereby, have been duly and validly authorized by Company and all necessary actions have been taken;
(e) The Transaction Documents have been duly executed and delivered by Company and constitute the valid and binding obligations of Company enforceable in accordance with their terms;
(f) The execution and delivery of the Transaction Documents by Company, the issuance of the Securities in accordance with the terms hereof, and the consummation by Company of the other transactions contemplated by the Transaction Documents do not and will not conflict with or result in a breach by Company of any of the terms or provisions of, or constitute a default under: (i) Company’s formation documents, as currently in effect, or other applicable organizational documents: (ii) any indenture, mortgage, deed of trust, or other material agreement or instrument to which Company is a party or by which it or any of its properties or assets are bound, including, without limitation, any listing agreement for the Common Shares: or (iii) any existing applicable law, rule, or regulation or any applicable decree, judgment, or order of any court, United States federal, state or foreign regulatory body, administrative agency, or other governmental body having jurisdiction over Company or any of Company’s properties or assets;
(g) No further authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders or any lender of Company is required to be obtained by Company for the issuance of the Securities to Investor or the entering into of the Transaction Documents;
(h) None of Company’s filings with the SEC contained, at the time they were filed, any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading;
(i) Company has filed all reports, schedules, forms, statements and other documents required to be filed by Company with the SEC under the 1934 Act on a timely basis or has received a valid extension of such time of filing and has filed any such report, schedule, form, statement or other document prior to the expiration of any such extension;
(j) There is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of Company, threatened against or affecting Company before or by any governmental authority or non-governmental department, commission, board, bureau, agency or instrumentality or any other person;
(k) Other than as set forth in Schedule 4(k), Company has not consummated any financing transaction that has not been disclosed in a periodic filing or current report with the SEC under the 1934 Act;
(l) With respect to any commissions, placement agent or finder’s fees or similar payments that will or would become due and owing by Company to any person or entity as a result of this Agreement or the transactions contemplated hereby (“Broker Fees”), any such Broker Fees will be made in full compliance with all applicable laws and regulations and only to a person or entity that is a registered investment adviser or registered broker-dealer;
| Page 2 of 15 |
(m) Investor shall have no obligation with respect to any Broker Fees or with respect to any claims made by or on behalf of other persons for fees of a type contemplated in this subsection that may be due in connection with the transactions contemplated hereby and Company shall indemnify and hold harmless each of Investor, Investor’s employees, officers, directors, stockholders, members, managers, agents, and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorneys’ fees) and expenses suffered in respect of any such claimed Broker Fees;
(n) Neither Investor nor any of its officers, directors, stockholders, members, managers, employees, agents or representatives has made any representations or warranties to Company or any of its officers, directors, employees, agents or representatives except as expressly set forth in the Transaction Documents and, in making its decision to enter into the transactions contemplated by the Transaction Documents, Company is not relying on any representation, warranty, covenant or promise of Investor or its officers, directors, members, managers, employees, agents or representatives other than as set forth in the Transaction Documents;
(o) Company has approximately 200,000,000 Common Shares authorized and 96,268,668 issued; and
(p) Company has performed due diligence and background research on Investor and its affiliates and Investor has provided Company due diligence information that has been reasonably requested.
5. Company Covenants. Until all of Company’s obligations under all of the Transaction Documents are paid and performed in full, or within the timeframes otherwise specifically set forth below, Company will at all times comply with the following covenants:
(a) So long as Investor beneficially owns any of the Securities and for at least twenty (20) Business Days thereafter, Company will timely file on the applicable deadline all reports required to be filed with the SEC pursuant to Sections 13 or 15(d) of the 1934 Act, and will take all reasonable action under its control to ensure that adequate current public information with respect to Company, as required in accordance with Rule 144 of the 1933 Act, is publicly available, and will not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would permit such termination.
(b) When issued, the Conversion Shares will be duly authorized, validly issued, fully paid and non-assessable, and free and clear of all liens, claims, charges and encumbrances;
(c) The Common Shares shall be eligible for trading quotations under SEC Rule 15c2-11 on the OTCQX maintained by OTC Markets Group (the “OTC Market”);
(d) Trading in Company’s Common Shares will not be suspended, halted, chilled, frozen, reach zero bid or otherwise cease trading on the OTC Market (including being designated as Expert Market by OTC Markets Group).
(e) Company will not enter into any agreement or otherwise agree to any covenant, condition, or obligation that locks up, restricts in any way or otherwise prohibits Company: (i) from entering into a variable rate transaction with Investor or any affiliate of Investor, or (ii) from issuing Common Shares, preferred stock, warrants, convertible notes, other debt securities, or any other Company securities to Investor or any affiliate of Investor.
(f) Company will not make any payments to any affiliate debtholders with respect any debt obligations owed by Company to such persons.
| Page 3 of 15 |
6. Conditions to Closing.
6.1 Conditions to Company’s Obligation to Sell. The obligation of Company hereunder to issue and sell the Securities to Investor at the Closing is subject to the satisfaction, on or before the Closing Date, of each of the following conditions:
(a) Investor shall have executed this Agreement and delivered the same to Company.
(b) Investor shall have delivered the Purchase Price to Company in accordance with Section 1.2 above.
6.2 Conditions to Investor’s Obligation to Purchase. The obligation of Investor hereunder to purchase the Securities at the Closing is subject to the satisfaction, on or before the Closing Date, of each of the following conditions, provided that these conditions are for Investor’s sole benefit and may be waived by Investor at any time in its sole discretion:
(a) Company shall have executed this Agreement and the Note and delivered the same to Investor.
(b) Company shall have delivered to Investor a fully executed Irrevocable Letter of Instructions to Transfer Agent (the “TA Letter”) substantially in the form attached hereto as Exhibit B acknowledged and agreed to in writing by Company’s transfer agent (the “Transfer Agent”).
(c) Company shall have delivered to Investor a fully executed Officer’s Certificate substantially in the form attached hereto as Exhibit C,evidencing Company’s approval of the Transaction Documents.
7. Reservation of Shares.
7.1 On the Closing Date, Company will reserve 2,233,000 Common Shares from its authorized and unissued Common Shares to provide for all issuances of Common Shares under the Note (the “Share Reserve”). Company further agrees to add additional Common Shares to the Share Reserve in increments of 2,000,000 shares as and when requested by Investor if as of the date of any such request the number of shares being held in the Share Reserve is less than three (3) times the number of Common Shares obtained by dividing the Outstanding Balance as of the date of the request by the Conversion Price (as defined in the Note).
7.2 Company shall further require the Transfer Agent to hold the Common Shares reserved pursuant to the Share Reserve exclusively for the benefit of Investor and to issue such shares to Investor promptly upon Investor’s delivery of a Conversion Notice (as defined in the Note) under the Note. Finally, Company shall require the Transfer Agent to issue Common Shares pursuant to the Note to Investor out of its authorized and unissued shares, and not the Share Reserve, to the extent Common Shares have been authorized, but not issued, and are not included in the Share Reserve. The Transfer Agent shall only issue shares out of the Share Reserve to the extent there are no other authorized shares available for issuance and then only with Investor’s written consent.
7.3 The Company agrees not to change the Transfer Agent without first (a) providing Investor with at least 30-days’ written notice of such proposed change, and (b) obtaining Investor’s written consent to such proposed change. Any such consent is conditioned upon the new transfer agent executing an irrevocable letter of instructions substantially similar to TA Letter in Exhibit B hereto so that such transfer agent is bound by the same terms set forth therein.
8. [Deleted].
9. Notices. Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively given on the earliest of: (i) the date delivered, if delivered by personal delivery as against written receipt therefor or by email to an executive officer named below or such officer’s successor, or by facsimile (with successful transmission confirmation which is kept by sending party), (ii) the earlier of the date delivered or the third Trading Day after deposit, postage prepaid, in the United States Postal Service by certified mail or with an international courier, or (iii) the earlier of the date delivered or the third Trading Day after mailing by express courier, with delivery costs and fees prepaid, in each case, addressed to each of the other parties thereunto entitled at the following addresses (or at such other addresses as such party may designate by five (5) calendar days’ advance written notice similarly given to each of the other parties hereto):
If to Company:
Karbon-X Corp.
Attn: Chad J. Clovis, CEO
6575 West Loop South, Ste. 500
Bellaire, TX 77401
Email: cc@karbon-x.com
Tel.: 561-271-8275
| Page 4 of 15 |
If to Investor:
Debtfund L.P.
c/o Scottsdale Capital Advisors Corp.
Attn: James Hurry
7170 E. McDonald Dr., Suite 6
Scottsdale, AZ 85253
Email: james@scottsdalecapital.com
Tel. 480-714-3776
With a copy to (which copy shall not constitute notice):
SCA Holding & Clearing Group
Attn: Mike Cruz, General Counsel
7170 e. McDonald Dr., Suite 7A
Scottsdale, AZ 85352
Email: mike@scalawyer.com
Tel.: 480-603-4929
10. Miscellaneous. The provisions set forth in this Section 10 shall apply to this Agreement, as well as all other Transaction Documents as if these terms were fully set forth therein; provided, however, that in the event there is a conflict between any provision set forth in this Section 10 and any provision in any other Transaction Document, the provision in such other Transaction Document shall govern.
10.2 Governing Law; Venue. This Agreement shall be construed as to both validity and performance and enforced in accordance with and governed by the laws of the State of Arizona, without giving effect to the conflicts of law principles thereof. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state or federal courts located in the County of Maricopa of the State of Arizona.
10.3 Specific Performance. Company acknowledges and agrees that Investor may suffer irreparable harm in the event that Company fails to perform any material provision of this Agreement or any of the other Transaction Documents in accordance with its specific terms. It is accordingly agreed that Investor shall be entitled to one or more injunctions to prevent or cure breaches of the provisions of this Agreement or such other Transaction Document and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which Investor may be entitled under the Transaction Documents, at law or in equity.
10.4 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, (e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
10.5 Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.
10.6 Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform to such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.
| Page 5 of 15 |
10.7 Entire Agreement. This Agreement, together with the other Transaction Documents, contains the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither Company nor Investor makes any representation, warranty, covenant or undertaking with respect to such matters. For the avoidance of doubt, all prior term sheets or other documents between Company and Investor, or any affiliate thereof, related to the transactions contemplated by the Transaction Documents (collectively, “Prior Agreements”), that may have been entered into between Company and Investor, or any affiliate thereof, are hereby null and void and deemed to be replaced in their entirety by the Transaction Documents. To the extent there is a conflict between any term set forth in any Prior Agreement and the term(s) of the Transaction Documents, the Transaction Documents shall govern.
10.8 Amendments. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by both parties hereto.
10.10 Successors and Assigns. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by Investor hereunder may be assigned by Investor to a third party, including its affiliates, in whole or in part, without the need to obtain Company’s consent thereto. Company may not assign its rights or obligations under this Agreement or delegate its duties hereunder, whether directly or indirectly, without the prior written consent of Investor, and any such attempted assignment or delegation shall be null and void.
10.11 Survival. The representations and warranties of Company and the agreements and covenants set forth in this Agreement shall survive the Closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of Investor. Company agrees to indemnify and hold harmless Investor and all its officers, directors, employees, attorneys, and agents for loss or damage arising as a result of or related to any breach or alleged breach by Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.
10.12 Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
10.13 Investor’s Rights and Remedies Cumulative. All rights, remedies, and powers conferred in this Agreement and the Transaction Documents are cumulative and not exclusive of any other rights or remedies, and shall be in addition to every other right, power, and remedy that Investor may have, whether specifically granted in this Agreement or any other Transaction Document, or existing at law, in equity, or by statute, and any and all such rights and remedies may be exercised from time to time and as often and in such order as Investor may deem expedient.
10.14 Attorneys’ Fees and Cost of Collection. In the event any suit or action is filed by either party against the other to interpret or enforce any of the Transaction Documents, the unsuccessful party to such action agrees to pay to the prevailing party all costs and expenses, including reasonable attorneys’ fees incurred therein, including the same with respect to an appeal. The “prevailing party” shall be the party in whose favor a judgment is entered, regardless of whether judgment is entered on all claims asserted by such party and regardless of the amount of the judgment; or where, due to the assertion of counterclaims, judgments are entered in favor of and against both parties, then the court shall determine the “prevailing party” by taking into account the relative dollar amounts of the judgments or, if the judgments involve nonmonetary relief, the relative importance and value of such relief. Nothing herein shall restrict or impair a court’s power to award fees and expenses for frivolous or bad faith pleading. If (i) the Note is placed in the hands of an attorney for collection or enforcement prior to commencing legal proceedings, or is collected or enforced through any legal proceeding, or Investor otherwise takes action to collect amounts due under the Note or to enforce the provisions of the Note, or (ii) there occurs any bankruptcy, reorganization, receivership of Company or other proceedings affecting Company’s creditors’ rights and involving a claim under the Note; then Company shall pay the costs incurred by Investor for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, reasonable attorneys’ fees, expenses, deposition costs, and disbursements.
| Page 6 of 15 |
10.15 Waiver. No waiver of any provision of this Agreement shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.
10.16 Time is of the Essence. Time is expressly made of the essence with respect to each and every provision of this Agreement and the other Transaction Documents.
10.17 Voluntary Agreement. Company has carefully read this Agreement and each of the other Transaction Documents and has asked any questions needed for Company to understand the terms, consequences and binding effect of this Agreement and each of the other Transaction Documents and fully understand them. Company has had the opportunity to seek the advice of an attorney of Company’s choosing, or has waived the right to do so, and is executing this Agreement and each of the other Transaction Documents voluntarily and without any duress or undue influence by Investor or anyone else.
10.18 Document Imaging. Investor shall be entitled, in its sole discretion, to image or make copies of all or any selection of the agreements, instruments, documents, and items and records governing, arising from or relating to any of Company’s loans, including, without limitation, this Agreement and the other Transaction Documents, and Investor may destroy or archive the paper originals. The parties hereto (i) waive any right to insist or require that Investor produce paper originals, (ii) agree that such images shall be accorded the same force and effect as the paper originals, (iii) agree that Investor is entitled to use such images in lieu of destroyed or archived originals for any purpose, including as admissible evidence in any demand, presentment or other proceedings, and (iv) further agree that any executed facsimile (faxed), scanned, emailed, or other imaged copy of this Agreement or any other Transaction Document shall be deemed to be of the same force and effect as the original manually executed document.
[Remainder of page intentionally left blank; signature page follows]
| Page 7 of 15 |
IN WITNESS WHEREOF, the undersigned Investor and Company have caused this Agreement to be duly executed as of the date first above written.
|
| INVESTOR: |
| |
|
|
|
|
|
|
| DEBTFUND L.P. |
| |
|
|
|
|
|
|
| By: | /s/ James Hurry |
|
|
|
| James Hurry, Authorized Signer |
|
|
|
| Scottsdale Capital Advisors Corp., General Partner |
|
|
|
|
|
|
|
| COMPANY: |
| |
|
|
|
|
|
|
| KARBON X-CORP. |
| |
|
|
|
|
|
|
| By: | /s/ Chad James Clovis |
|
|
|
| Chad James Clovis, Chief Executive Officer |
|
[Signature Page to Securities Purchase Agreement]
ATTACHED EXHIBITS:
| Exhibit A | Note |
| Exhibit B | Transfer Agent Letter |
| Exhibit C | Officer’s Certificate |
| Page 8 of 15 |
EXHIBIT A
CONVERTIBLE PROMISSORY NOTE
| Principal Amount: |
| $ | 203,000.00 |
|
| Effective Date: |
| August 13, 2026 |
| Original Issue Discount: |
| $ | 28,000.00 |
|
| Maturity Date: |
| August 13, 2027 |
| Purchase Price: |
| $ | 175,000.00 |
|
|
|
|
|
FOR VALUE RECEIVED, KARBON-X CORP., a Nevada corporation (“Borrower”), promises to pay to DEBTFUND L.P., a Delaware limited partnership, or its successors or assigns (“Lender”), the principal sum of $203,000.00 USD, together with any accrued interest, fees, charges, and late fees on August 13, 2027 (the “Maturity Date”), if not sooner paid, in accordance with the terms set forth herein. This Convertible Promissory Note (this “Note”) is issued and made effective as of August 13, 2026 (the “Effective Date”). Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Note Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the "Purchase Agreement").
This Note carries an original issue discount of $28,000.00 (the “OID”). The OID is included in the initial principal balance of this Note and is deemed fully earned and non-refundable as of the Effective Date. The purchase price for this Note shall be $175,000.00 (the “Purchase Price”). The Purchase Price shall be payable by Lender by wire transfer of immediately available funds. For purposes hereof, the term “Outstanding Balance” means the Principal Amount, as reduced or increased, as the case may be, pursuant to the terms hereof for conversion, breach hereof or otherwise, plus any accrued but unpaid interest, collection and enforcements costs, and any other fees, penalties, damages or charges incurred under this Note.
1. Payment; Prepayment; Registration Statement; Exchange Cap.
1.1 Contract Rate. This Note shall bear interest at the rate of ten (10%) percent per annum on any outstanding and non-converted Principal Amount. All computations of interest shall be made on the basis of a 365-day year for the actual number of days occurring in the period for which such interest is payable. Payments of Principal and Interest shall be made as set forth below.
1.2. Payments. Unless otherwise earlier converted pursuant to Section 3, Borrower shall make twelve (12) equal payments of $18,608, consisting of principal and accrued interest, as set forth in the payment schedule below:
| Payment Period | Payment Date | Payment Amount |
| 0 | August 13, 2026 | $0 |
| 1 | September 13, 2026 | $18,608 |
| 2 | October 13, 2026 | $18,608 |
| 3 | November 13, 2026 | $18,608 |
| 4 | December 13, 2026 | $18,608 |
| 5 | January 13, 2027 | $18,608 |
| 6 | February 13, 2027 | $18,608 |
| 7 | March 13, 2027 | $18,608 |
| 8 | April 13, 2027 | $18,608 |
| 9 | May 13, 2027 | $18,608 |
| 10 | June 13, 2027 | $18,608 |
| 11 | July 13, 2027 | $18,608 |
| 12 | August 13, 2027 | $18,608 |
| Page 9 of 15 |
The above payment schedule assumes no Conversions (as defined below) occur during the nine-month term. If Conversions occur, the note balance and payment due will be adjusted to reflect the Conversion Amount. If Closing Date is delayed for any reason, Payment Dates will correspond to period one month after Note is funded by Lender.
All cash payments owing hereunder shall be in lawful money of the United States of America, as provided for herein, and delivered to Lender at the bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.
1.2. Prepayment. Notwithstanding the foregoing, with five (5) Trading Days’ prior written notice Borrower may prepay all or any portion of the Outstanding Balance (less such portion of the Outstanding Balance for which Borrower has received a Conversion Notice (as defined below) from Lender where the applicable Conversion Shares (as defined below) have not yet been delivered). During the five (5) Trading Day prepayment notice period Lender shall retain the right to submit Conversion Notices, if applicable.
2. [Deleted].
3. Conversion Rights.
3.1. Lender has the right, not the obligation, at any time following six (6) months following the Effective Date of this Note, until the Outstanding Balance has been paid in full, at its election, to exchange (each instance of exchange is referred to herein as an “Conversion”) all or any part of the Outstanding Balance into Conversion Shares of fully paid and non-assessable Common Shares of Borrower as per the following conversion formula: the number of Conversion Shares equals the Outstanding Balance amount being exchanged (the “Conversion Amount”) divided by the product of seventy five percent (75%) and the Market Price (such product, the “Conversion Price”).
For example, on Day1 Lender seeks to exchange $15,000 of Outstanding Balance (the Conversion Amount) and on Day1 the Market Price (as determined in Section 3.2 below) is 0.05 per share. The Exchange Price is 0.0375 (i.e., .75 x 0.05). The number of Conversion Shares delivered to Lender equals 400,000 shares (i.e.,
$15,000/0.0375).
Each Conversion shall be evidenced by the conversion notice in the form attached hereto as Exhibit A (the “Conversion Notice”) and the Conversion Shares shall be Delivered (as defined below in Section 3.2) on or before three business days following delivery of the Conversion Notice to Borrower. The Conversion Notice may be effectively delivered to Borrower by any method of Lender’s choice (including but not limited to facsimile, email, mail, overnight courier, or personal delivery), and all Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 4 below.
3.2. The “Market Price” means the lowest volume-weighted average price (VWAP) as reported by a reliable reporting service (“Reporting Service”) designated by the Lender (i.e., OTC Markets, Yahoo Finance, Bloomberg, etc.) during the five (5) consecutive Trading Days prior to the Conversion Date. Notwithstanding the foregoing, the Market Price shall not be less than $0.15 per share (the “Minimum Market Price”).
3.3. If the Company completes a Financing Transaction (as defined below) the Conversion Price will be subject to adjustment on a most favored nation basis relative to the terms provided to any other investor or creditor of Company so that the terms of before the payment or conversion of the entire balance under the Note (the “Most Favorable Price”). The term “Finance Transaction” means any activity by Company to raise capital in form debt, equity, debt convertible into equity, equity linked securities, a business combination or any combination of the foregoing.
4. Conversion Share Delivery. On or before the close of business on the third (3rd) Trading Day following the date of delivery of a Conversion Notice (the “Delivery Date”), Borrower shall, provided it is DWAC/DRS Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC/DRS to the account designated by Lender in the applicable Conversion Notice. If Borrower is not DWAC/DRS Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), via reputable overnight courier, a certificate representing the number of Common Shares equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee. For the avoidance of doubt, Borrower has not met its obligation to deliver Conversion Shares by the Delivery Date unless the Conversion Shares are deemed “Delivered” as defined below. Delivered” shall mean the date the shares clear deposit into Lender’s brokerage account, which shall be the date Lender is able to trade the Conversion Shares free from restrictions of any kind including by the Lender’s brokerage firm, DTC, or Borrower’s Transfer Agent. The Borrower shall be responsible for the fees of its transfer agent and all DTC fees associated with any such issuance.
| Page 10 of 15 |
4.1. In the event the Conversion Shares are not delivered on the Delivery Date, the Pricing Period will be extended to the date the Conversion Shares are “Delivered” (the “Extended Pricing Period”). “Extending the pricing period will not adjust the number of shares delivered but will adjust the, market price, conversion price and the amount the note is reduced as a result of the conversion, and will be memorialized by and Amended Conversion Notice, which will be submitted to the Issuer by the Holder, if applicable. Further, if Conversion Shares are not delivered on the Delivery Date, Lender may also rescind in whole or in part such Conversion, with a corresponding increase to the Outstanding Balance and any returned amount will tack back to the Effective Date for purposes of determining the holding period under Rule 144.
4.2. Moreover, and notwithstanding anything to the contrary herein or in any other Transaction Document, in the event Borrower or its transfer agent refuses to deliver any Conversion Shares to Lender on grounds that such issuance is in violation of Rule 144, Borrower shall deliver or cause its transfer agent to deliver the applicable Conversion Shares to Lender with a restricted securities legend, but otherwise in accordance with the provisions of this Section 4. In conjunction therewith, Borrower will also deliver to Lender a written opinion from its counsel or its transfer agent’s counsel opining as to why the issuance of the applicable Conversion Shares violates Rule 144.
4.3. The Borrower agrees that the conversion rights in this Note are valuable to Lender. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to quantify. Accordingly, the parties acknowledge that the liquidated damages provisions concerning the Fail to Deliver Fee are justified.
5. Defaults and Remedies.
5.1. Events of Default. The occurrence of any of the following events set forth below shall be an “Event of Default”:
(a) Failure to Pay Principal, Interest or Other Fees. Borrower fails to pay principal, interest or other fees hereon and such failure shall continue for a period of five (5) days following the date upon which any such payment was due.
(b) Breach of Covenant. Borrower breaches any covenant or other term or condition of this Note and the Purchase Agreement in any material respect and such breach, if subject to cure, continues for a period of five (5) days after the occurrence thereof.
(c) Breach of Representations and Warranties. Any representation or warranty of Borrower made herein and in the Purchase Agreement shall be false or misleading in any material respect.
(d) SEC Filings. Borrower fails to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act (the filing of a Form 15 with the SEC is an immediate Event of Default).
(e) Stop Trade. An SEC stop trade order or Principal Market trading suspension of the Common Stock shall be in effect for five (5) consecutive days or five (5) days during a period of 10 consecutive days, provided that Borrower shall not have been able to cure such trading suspension within 30 days of the notice thereof or list the Common Stock on another Principal Market within 60 days of such notice. The “Principal Market” for the Common Stock shall include the OTCQX, OTCQB, OTCID, NASDAQ Capital Market, NASDAQ Global Market, NYSE Amex, or New York Stock Exchange (whichever of the foregoing is at the time the principal trading exchange or market for the Common Stock), or any securities exchange or other securities market on which the Common Stock is then being listed or traded.
(f) Receiver or Trustee. Each of the Borrower or its subsidiaries, if any, (“Subsidiaries”) shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed; or shall become insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any
(g) Judgments. Any money judgment, writ or similar final process shall be entered or filed against the Borrower or any of its Subsidiaries or any of their respective property or other assets for more than $150,000 in the aggregate for Borrower, and shall remain unvacated, unbonded or unstayed for a period of thirty (30) days.
| Page 11 of 15 |
(h) Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any of its Subsidiaries (Federal law or applicable state law).
(i) Failure to Deliver Conversion Shares. Except in the event Borrower does not have a sufficient number of shares of Common Stock authorized but unissued upon a conversion hereunder, Borrower’s failure to timely deliver Conversion Shares to the Holder pursuant to and in the form required by this Note, if such failure to timely deliver Conversion Shares shall not be cured within five (5) days.
(j) Reservation of Shares. The Borrower shall not fulfill its obligations under this Note or the Transaction Documents entered into in connection herewith in regard to the reserving of shares.
(k) Transfer Agent Fees. Failure of the Borrower to pay any of its Transfer Agent fees in excess of $1,000 or to maintain a Transfer Agent of record.
(l) Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower's ability to continue as a "going concern" shall not be an admission that the Borrower cannot pay its debts as they become due.
(m) Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC markets (which specifically includes the quotation platforms maintained by the OTC Markets Group) or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the Chicago Board Options Exchange, or the New York Stock Exchange.
5.2. Default Remedies. Upon the occurrence and during the continuation of any Event of Default, the Note shall become immediately due and payable and the Borrower shall pay to the Lender, in full satisfaction of its obligations hereunder, an amount equal to the Default Amount (as defined herein). Upon the occurrence of an Event of Default. Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the sum of (i) 135% times the then outstanding principal amount of this Note; (ii) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment; and (iii) Default Interest, if any, all such amounts collectively shall be known as the "Default Amount" and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Lender shall be entitled to exercise all other rights and remedies available at law or in equity.
5.3. Default Interest. In the event that any Event of Default remains in effect without being cured by Borrower for a period of 60 days, the Contract Interest on the Outstanding Balance shall automatically be reinstated at the Default Interest rate of 0.75% per day, compounded daily (“Default Interest) and applied retroactively to date on which the such Event of Default occurred.
5.4. Default Conversion Price. Notwithstanding Section 3.1, at any time following an Event of Default until such time as the Outstanding Balance is paid in full, Lender shall have the right to conduct a Conversion(s) at the Default Conversion Price (defined below). In the event that any Event of Default remains in effect without being cured by Borrower for a period of five (5) Trading Days, the Conversion Price shall be reinstated to equal twenty percent (20%) of the Volume-Weighted Average Price (VWAP)reported during the prior ten (10) Trading Days of the applicable Conversion Notice date or the Most Favorable Price, whichever lower (“Default Conversion Price”). The Minimum Market Price provision in Section 3.2 shall not apply while an Event of Default is in effect.
5.5. Default Ownership Limitation. In the event that an Event of Default remains in effect without being cured by Borrower for a period of 60 days, the Maximum Percentage (defined below) shall be increased to 9.99% for Debtfund, L.P. only (excluding its affiliate and assigns). e. In such case where Borrower conducts a Conversion that causes the ownership to equal or exceed 10% of the issued and outstanding Common Shares, Borrower shall issue Conversion Shares with a restrictive legend.
5.6. Cumulative Remedies. The remedies under this Note shall be cumulative. Lender need not provide, and Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and Lender may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law.
| Page 12 of 15 |
6. Ownership Limitation. Except as otherwise provided in Section 5.5, Borrower shall not affect any Conversion of this Note to the extent that after giving effect to such Conversion would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of Common Shares outstanding on such date (including for such purpose the Common Shares issuable upon such issuance) (the “Maximum Percentage”). For purposes of this section, beneficial ownership of Common Shares will be determined pursuant to Section 13(d) of the 1934 Act.
7. Other Provisions.
7.1. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note.
7.2. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.
7.3. Payment of Collection Costs. If this Note is placed in the hands of an attorney for collection or enforcement prior to commencing arbitration or legal proceedings, or is collected or enforced through any arbitration or legal proceeding, or Lender otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note, then Borrower shall pay the costs incurred by Lender for such collection, enforcement or action including, without limitation, reasonable attorneys’ fees and disbursements. Borrower also agrees to pay for any costs, fees or charges of its transfer agent that are charged to Lender pursuant to any Conversion or issuance of shares pursuant to this Note.
7.4. Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender has the right to have any such opinion provided by its counsel. Lender also has the right to have any such opinion provided by Borrower’s counsel.
7.5. Governing Law; Venue. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Arizona, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Arizona or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Arizona. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.
7.6. Cancellation. After repayment or Conversion of the entire Outstanding Balance, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.
7.7. Amendments. The prior written consent of both parties hereto shall be required for any change or amendment to this Note.
7.8 Assignments. Borrower may not assign this Note without the prior written consent of Lender. This Note and any Conversion Shares may be offered, sold, assigned or transferred by Lender without the consent of Borrower.
7.9 Time is of the Essence. Time is expressly made of the essence with respect to each and every provision of this Note and the documents and instruments entered into in connection herewith.
7.10. Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with the subsection of the Purchase Agreement titled “Notices.”
| Page 13 of 15 |
7.11. Liquidated Damages. Lender and Borrower agree that in the event Borrower fails to comply with any of the terms or provisions of this Note, Lender’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates, future share prices, future trading volumes and other relevant factors. Accordingly, Lender and Borrower agree that any fees, balance adjustments, Default Interest or other charges assessed under this Note are not penalties but instead are intended by the parties to be, and shall be deemed, liquidated damages (under Lender’s and Borrower’s expectations that any such liquidated damages will tack back to the Purchase Price Date for purposes of determining the holding period under Rule 144).
7.12. Voluntary Agreement. Borrower has carefully read this Note and has asked any questions needed for Borrower to understand the terms, consequences and binding effect of this Note and fully understand them. Borrower has had the opportunity to seek the advice of an attorney of Borrower’s choosing, or has waived the right to do so, and is executing this Note voluntarily and without any duress or undue influence by Lender or anyone else.
7.13. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.
[Remainder of page intentionally left blank; signature page follows]
| Page 14 of 15 |
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the Effective Date.
|
| BORROWER: |
| |
|
|
|
|
|
|
| KARBON-X CORP. |
| |
|
|
|
|
|
|
| By: | /s/ Chad James |
|
|
|
| Chad James, Chief Executive Officer |
|
| ACKNOWLEDGED, ACCEPTED AND AGREED: |
| |
|
|
|
|
| LENDER: |
| |
|
|
|
|
| DEBTFUND L.P. |
| |
|
|
|
|
| By: | /s/ James Hurry |
|
|
| James Hurry, Authorized Signer |
|
|
| Scottsdale Capital Advisors Corp., General Partner |
|
[Signature Page to Convertible Promissory Note]
| Page 15 of 15 |
EXHIBIT A
Debtfund L.P.
c/o Scottsdale Capital Advisors
7170 E. McDonald Dr, Suite 6
Scottsdale, AZ 85253
|
| Karbon-X Corp. | Date: |
|
|
| Attn: Chad Clovis, CEO |
|
|
|
| 6575 West Loop South, Suite 500 |
|
|
|
| Bellaire, TX 77401 |
|
|
CONVERSION NOTICE
The above-captioned Lender hereby gives notice to Karbon-X Corp., a Nevada corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on August 13, 2026 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable Common Shares of Borrower as of the date of conversion specified below. Said conversion shall be based on the Conversion Price set forth below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Conversion Notice to conform to the Note.
Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.
A. Date of Conversion:
B. Conversion #:
C. Conversion Amount:
D. Conversion Price:
E. Conversion Shares: (C divided by D)
F. Remaining Outstanding Balance of Note: *
* Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Conversion Notice and such Transaction Documents.
Please transfer the Conversion Shares electronically (via DWAC) to the following account:
| Broker: |
| Address: |
|
| DTC#: |
|
|
|
| Account #: |
|
|
|
| Account Name: |
|
|
|
Sincerely,
Debtfund L.P.
|
| By: |
|
|
|
|
| James Hurry, Authorized Signer |
|
|
|
| Scottsdale Capital Advisors Corp., General Partner |
|
| A-1 |
EXHIBIT B
Karbon-X Corp.
August 13, 2026
Vstock Transfer
18 Lafayette Place
Woodmere, NY 11598
Ladies and Gentlemen:
Karbon-X Corp., a Nevada corporation (the “Company”), and Debtfund L.P., a Delaware limited partnership, its successors and/or assigns (the “Investor”) have entered into a Note Purchase Agreement dated as of August 13, 2026 (the “Purchase Agreement”) providing for the issuance of the Convertible Promissory Note in the principal amount of $203,000.00 (as the same may be amended or exchanged from time to time, the “Convertible Note”). Under certain terms and conduction under the Convertible Note, Investor has the right to convert the outstanding balance into shares of the Company’s common stock (the “Conversion Shares”).
This letter serves as the Company’s irrevocable authorization and instruction to VStock Transfer (the “Transfer Agent” or “You”) to reserve 2,233,000 shares of the Company's common stock to fully satisfy the conversions contemplated under the Agreement, and to promptly issue shares upon receipt of duly completed Notices of Conversion from Investor. The Investor shall submit Notices of Conversion directly to the Transfer Agent, accompanied by:
|
| 1. | A completed Notice of Conversion (in the form attached hereto) executed by Investor; |
|
|
|
|
|
| 2. | Appropriate DWAC transfer instructions as provided by Purchaser; |
|
|
|
|
|
| 3. | A valid opinion of counsel confirming compliance with applicable securities laws and the exemption under Section 3(a)(9) of the Securities Act of 1933 and exemption relied upon for resale; |
|
|
|
|
|
| 4. | Any additional customary documentation reasonably required by Transfer Agent to ensure regulatory compliance. |
Upon receipt of these items, the Transfer Agent is authorized and instructed, provided no single issuance is greater than 4.99% of the issued and outstanding shares of the Company, to issue and electronically deliver (via DWAC or DRS) the specified Conversion Shares within one (1) trading day, directly to Investor’s designated brokerage account as indicated in each Notice of Conversion.
The ability to convert the Convertible Note in a timely manner is a material obligation of the Company pursuant to the Note. You understand that a delay in the delivery of shares hereunder could result in economic loss to Investor and that time is of the essence in your processing of each Conversion Notice. The Company agrees not to change you as its transfer agent without first (a) providing Investor with at least 30-days’ written notice of such proposed change, and (b) obtaining Investor’s written consent to such proposed change.
The Company shall indemnify you and your officers, directors, principals, partners, agents and representatives, and hold each of them harmless from and against any and all loss, liability, damage, claim or expense (including the reasonable fees and disbursements of its attorneys) incurred by or asserted against you or any of them arising out of or in connection with the instructions set forth herein, the performance of your duties hereunder and otherwise in respect hereof, including the costs and expenses of defending yourself or themselves against any claim or liability including any claim which may be made or asserted by the Company, except that the Company shall not be liable hereunder as to matters in respect of which it is determined that you have acted with gross negligence or in bad faith.
| B-1 |
This instruction letter cannot be modified or revoked without the written consent of the Investor. The Investor is a beneficiary of this instruction and may rely upon its terms.
Thank you for your cooperation.
|
| Very truly yours, |
| |
|
|
|
|
|
|
| KARBON-X CORP. |
| |
|
|
|
|
|
|
| By: | /s/ Chad James Clovis |
|
|
|
| Chad James Clovis, CEO |
|
ACKNOWLEDGED AND AGREED:
INVESTOR:
DEBTFUND L.P.
| By: | /s/ James Hurry |
|
|
| James Hurry, Authorized Signer |
|
|
| Scottsdale Capital Advisors Corp., General Partner |
|
TRANSFER AGENT:
VSTOCK TRANSFER, LLC
| By: |
| |
| Name: |
| |
| Title: |
|
|
Attachments:
| Exhibit | A Form of Conversion Notice |
| B-2 |
EXHIBIT C
KARBON-X CORP.
OFFICER’S CERTIFICATE
I hereby certify that I am the duly elected, qualified and acting Chief Executive Officer of Karbon-X Corp., a Nevada corporation (“Company”), and I am authorized to execute this Officer’s Certificate (this “Certificate”) on behalf of Company. This Certificate is delivered in connection with that certain Note Purchase Agreement dated August 13, 2026 (the “Purchase Agreement”), by and between Company and Debtfund L.P., a Delaware limited partnership.
Solely in my capacity as Chief Executive Officer, I certify that Schedule 1 attached hereto is a true, accurate and complete copy of all of the resolutions adopted by the Board of Directors of Company (the “Resolutions”) approving and authorizing the execution, delivery and performance of the Purchase Agreement and related documents to which Company is a party on the date hereof, and the transactions contemplated thereby. Such Resolutions have not been amended, rescinded or modified since their adoption and remain in effect as of the date hereof.
IN WITNESS WHEREOF, I have made this Officer’s Certificate effective as of August 13, 2026.
|
| Karbon-X Corp. |
| |
|
|
|
|
|
|
| By: | /s/ Chad James Clovis, CEO |
|
|
|
| Chad James Clovis, CEO |
|
| C-1 |
Schedule 1
BOARD RESOLUTIONS
[attached]
| C-2 |
KARBON-X CORP.
UNANIMOUS WRITTEN CONSENT
OF THE
BOARD OF DIRECTORS
_________________________
Effective August 13, 2026
__________________________
APPROVAL OF FINANCING
WHEREAS, the Board of Directors (the “Board”) of Karbon-X Corp., a Nevada corporation (“Company”), based on the recommendation and advice of the officers of Company, has determined that it is in the best interests of Company to seek financing for its business operations;
WHEREAS, the Company seeks financing with Debtfund L.P., a Delaware limited partnership (“Investor”), and has negotiated financing with Investor in the form of a Convertible Promissory Note (the “Financing”);
WHEREAS, the terms of the Financing are reflected in a Securities Purchase Agreement substantially in the form attached hereto as Exhibit A (the “Purchase Agreement”) and a Convertible Promissory Note issued by Company to Investor in the original principal amount of $203,000.00 substantially in the form attached hereto as Exhibit B (the “Note”), a Transfer Agent Letter substantially in the form attached hereto as Exhibit C (the “TA Letter”), and all other agreements, certificates, instruments and documents being or to be executed and delivered under or in connection with the Financing (collectively, the “Financing Documents”); and
WHEREAS, the officers of Company believe that it is in the best interests of Company to approve and enter into the Financing and the Financing Documents with Investor and has recommended such approval to the Board.
NOW, THEREFORE, BE IT:
RESOLVED, based on the aforesaid recommendation and advice by the officers of Company, the Board hereby authorizes and approves the Financing and directs management of Company to execute and deliver the applicable Financing Documents to Investor;
RESOLVED FURTHER, that the Note shall be duly and validly issued upon the issuance and delivery thereof in accordance with the Purchase Agreement;
RESOLVED FURTHER, that each of the officers of Company be, and each of them hereby is, authorized to execute and deliver in the name of and on behalf of Company, each of the Financing Documents and any other related agreements (with such additions to, modifications to, or deletions from such documents as the officer approves, such approval to be conclusively evidenced by such execution and delivery), to conform Company’s minute books and other records to the matters set forth in these resolutions, and to take all other actions on behalf of Company as any of them deem necessary, required, or advisable with respect to the matters set forth in these resolutions;
SHARE ISSUANCE RESOLUTIONS
RESOLVED, that Vstock Transfer, as transfer agent (including any successor transfer agent, the “Transfer Agent”) of shares of Company’s common stock, $0.0001 par value per share (“Common Stock”), is authorized to rely upon a Conversion Notice substantially in the form of Exhibit A attached to the Note, whether an original or a copy (the “Conversion Notice”), in each case without any further inquiry, to be delivered to the Transfer Agent from time to time either by Company or Investor.
| C-3 |
RESOLVED FURTHER, that the Transfer Agent is authorized to issue the number of:
(i) “Conversion Shares” (representing shares of Common Stock) set forth in each Conversion Notice delivered to the Transfer Agent, and
(ii) all additional shares of Common Stock Company may subsequently instruct the Transfer Agent to issue in connection with any of the foregoing or otherwise under the Note,
with such shares to be issued in the name of Investor, or its successors, transferees, or designees, free of any restricted security legend, as permitted by the Note.
RESOLVED FURTHER, that consistent with the terms of the Purchase Agreement, the Transfer Agent is authorized and directed to immediately create a share reserve equal to 2,233,000 shares for the benefit of Investor (the “Share Reserve”); provided that the Share Reserve may increase in increments of 2,000,000 shares from time to time by written instructions provided to the Transfer Agent by Company or Investor as required by the Purchase Agreement and as contemplated by the Board Resolutions.
RESOLVED FURTHER, that Investor and the Transfer Agent may rely upon the more general approvals and authorizations set forth in the Board Resolutions, and the Transfer Agent is hereby authorized and directed to take those further actions approved under the Board Resolutions.
RESOLVED FURTHER, that Investor must consent in writing to any reduction of the Share Reserve held by the transfer agent; provided, however, that upon full conversion and/or full repayment of the Note, the Share Reserve will terminate thirty (30) days thereafter.
RESOLVED FURTHER, that Company shall indemnify the Transfer Agent and its employees against any and all loss, liability, damage, claim or expenses incurred by or asserted against the Transfer Agent arising from any action taken by the Transfer Agent in reliance upon this Share Issuance Resolution.
This Unanimous Written Consent may be executed in one or more counterparts, including with signatures on separate copies, all of which shall constitute the same instrument.
******************
EXHIBITS ATTACHED TO BOARD RESOLUTIONS:
| Exhibit A | PURCHASE AGREEMENT |
| Exhibit B | NOTE |
| Exhibit C | TA LETTER |
[Remainder of page intentionally left blank]
| C-4 |
IN WITNESS WHEREOF, the undersigned, constituting all of the members of the Board of Company, have executed this Unanimous Written Consent as of the date first written above.
|
| ||
|
| Justine Bourque |
|
|
|
|
|
|
| /s/ Chad Clovis |
|
|
| Chad Clovis |
|
|
|
|
|
|
| Brett Hull |
|
| C-5 |
EXHIBIT 10.16
18EITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE PURCHASE AGREEMENT)), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A OR REGULATION S UNDER SAID ACT OR OTHER APPLICABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
| Principal Amount: $150,000.00 | Issue Date: August 18, 2026 |
| Actual Amount of Purchase Price: $135,000.00 |
|
PROMISSORY NOTE
FOR VALUE RECEIVED, KARBON-X CORP., a Nevada corporation (hereinafter called the “Borrower” or the “Company”) (Trading Symbol: KARX), hereby promises to pay to the order of AUCTUS FUND, LLC, a Delaware limited liability company, or registered assigns (the “Holder”), in the form of lawful money of the United States of America, the principal sum of $150,000.00 (the “Principal Amount”) (subject to adjustment herein), of which
$135,000.00 (the “Purchase Price”) is the actual amount of the purchase price hereof plus an original issue discount in the amount of $15,000.00 (the “OID”), and to pay interest on the unpaid Principal Amount hereof at the rate of six percent (6%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise, as further provided herein. The maturity date shall be twelve (12) months from the Issue Date (the “Maturity Date”), and is the date upon which the Principal Amount (which includes the OID) and any accrued and unpaid interest and other fees, shall be due and payable.
This Note may not be prepaid or repaid in whole or in part except as otherwise explicitly set forth herein.
Any Principal Amount or interest on this Note which is not paid when due shall bear interest at the rate of the lesser of (i) twenty-four percent (24%) per annum and (ii) the maximum amount permitted by law from the due date thereof until the same is paid (“Default Interest”). Interest and Default Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed.
All payments due hereunder (to the extent not converted into shares of common stock, $0.001 par value per share, of the Borrower (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day.
Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement, dated as of the Issue Date, pursuant to which this Note was originally issued (the “Purchase Agreement”). As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. As used herein, the term “Trading Day” means any day that shares of Common Stock are listed for trading or quotation on the Principal Market (as defined in the Purchase Agreement), provided, however, that if the Common Stock is not then listed or quoted on any Principal Market, then any calendar day.
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The following terms shall also apply to this Note:
| 1 |
ARTICLE I. CONVERSION RIGHTS
1.1 Conversion Right. The Holder shall have the right, on any calendar day, at any time on or following the date that is six (6) calendar months after the Issue Date, to convert all or any portion of the then outstanding and unpaid Principal Amount and interest (including any Default Interest) into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified, at the Conversion Price (as defined below) determined as provided herein (a “Conversion”), by submitting to the Borrower or Borrower’s transfer agent a Notice of Conversion (as defined in this Note) by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date (as defined in this Note) prior to 11:59 p.m., New York, New York time; provided, however, that notwithstanding anything to the contrary contained herein, the Holder shall not have the right to convert any portion of this Note, pursuant to Section 1 or otherwise, to the extent that after giving effect to such issuance after conversion as set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s affiliates (the “Affiliates”), and any other Persons (as defined below) acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 1.1, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”) and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Holder is solely responsible for any schedules required to be filed in accordance therewith. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder. For purposes of this Section 1.1, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of the Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding at the time of the respective calculation hereunder, provided, however, that the Holder may from time to time increase or decrease the Beneficial Ownership Limitation to any other percentage not in excess of 9.99% by delivering written notice of such to the Company, with such increase or decrease not effective until the sixty-first (61st) day after delivery of such written notice. “Person” and “Persons” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any governmental entity or any department or agency thereof. The limitations contained in this paragraph shall apply to a successor holder of this Note. The number of Conversion Shares (as defined in the Purchase Agreement) (the “Conversion Shares”) to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower or Borrower’s transfer agent by the Holder in accordance with the terms of this Note; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower or Borrower’s transfer agent before 11:59 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the Principal Amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such Principal Amount at the Interest Rate to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2).
| 2 |
1.2 Conversion Price.
(a) Calculation of Conversion Price. The per share conversion price into which Principal Amount and interest (including any Default Interest) under this Note shall be convertible into shares of Common Stock hereunder as further described in this Note (the “Conversion Price”) shall equal the Market Price (as defined in this Note), subject to adjustment as provided in this Note. “Market Price” shall mean 60% of the lowest traded price of the Common Stock on the Principal Market during the twenty (20) Trading Day period immediately preceding the respective Conversion Date. If at any time the Conversion Price as determined hereunder for any conversion would be less than the par value of the Common Stock, then at the sole discretion of the Holder, the Conversion Price hereunder may equal such par value for such conversion and the Conversion Amount for such conversion may be increased to include Additional Principal, where “Additional Principal” means such additional amount to be added to the Conversion Amount to the extent necessary to cause the number of conversion shares issuable upon such conversion to equal the same number of conversion shares as would have been issued had the Conversion Price not been adjusted by the Holder to the par value price. The Company shall pay all transfer agent costs and legal opinion fees associated with issuing and delivering the shares to the Holder. If the Holder must pay these amounts, the Holder may deduct $1,750 per conversion from the amount being converted to cover all Transfer Agent costs and legal fees for issuing and delivering the shares to the Holder. All such Conversion Price determinations are to be appropriately adjusted for any stock dividend, stock split, stock combination, rights offerings, reclassification or similar transaction that proportionately decreases or increases the Common Stock. If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to the immediately preceding sentence shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. “Common Stock Equivalents” means any securities of the Company or the Company’s Subsidiaries (as defined in the Purchase Agreement) which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
(b) Voluntary Adjustment By Company. Subject to the rules and regulations of the Principal Market, the Company may at any time while this Note is outstanding, with the prior written consent of the Holder, reduce the then applicable Conversion Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company. For the avoidance of doubt, the Holder shall not be required to effectuate such conversion in the event of any reduction in Conversion Price by the Company.
1.3 Authorized and Reserved Shares. The Borrower covenants that at all times beginning on the Issue Date and continuing until the Note is extinguished in the entirety, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of a number of Conversion Shares equal to the greater of: (a) 5,000,000 shares of Common Stock or (b) the sum of (i) the number of Conversion Shares issuable upon the full conversion of this Note at a conversion price equal to the Conversion Price (assuming no payment of Principal Amount or interest) multiplied by (ii) three (3) (the “Reserved Amount”). The Borrower represents that upon issuance, the Conversion Shares will be duly and validly issued, fully paid and non-assessable. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Conversion Shares or instructions to have the Conversion Shares issued as contemplated by Section 1.4(e) hereof, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates or cause the Company to electronically issue shares of Common Stock to execute and issue the necessary certificates for the Conversion Shares or cause the Conversion Shares to be issued as contemplated by Section 1.4(e) hereof in accordance with the terms and conditions of this Note.
1.4 Method of Conversion.
(a) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid Principal Amount is so converted. The Holder and the Borrower shall maintain records showing the Principal Amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Holder shall, prima facie, be controlling and determinative in the absence of manifest error.
| 3 |
(b) Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.
(c) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower or Borrower’s transfer agent from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Conversion Shares (or cause the electronic delivery of the Conversion Shares as contemplated by Section 1.4(e) hereof) within one (1) Trading Day after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid Principal Amount and interest (including any Default Interest) under this Note, surrender of this Note). If the Company shall fail for any reason or for no reason to issue to the Holder on or prior to the Deadline a certificate for the number of Conversion Shares or to which the Holder is entitled hereunder and register such Conversion Shares on the Company’s share register or to credit the Holder’s balance account with DTC (as defined below) for such number of Conversion Shares to which the Holder is entitled upon the Holder’s conversion of this Note (a “Conversion Failure”), then, in addition to all other remedies available to the Holder, (i) the Company shall pay in cash to the Holder on each day after the Deadline and during such Conversion Failure an amount equal to 2.0% of the product of (A) the sum of the number of Conversion Shares not issued to the Holder on or prior to the Deadline and to which the Holder is entitled and (B) the closing sale price of the Common Stock on the Trading Day immediately preceding the last possible date which the Company could have issued such Conversion Shares to the Holder without violating this Section 1.4(c); and (ii) the Holder, upon written notice to the Company, may void all or any portion of such Notice of Conversion; provided that the voiding of all or any portion of a Notice of Conversion shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice. In addition to the foregoing, if on or prior to the Deadline the Company shall fail to issue and deliver a certificate to the Holder and register such Conversion Shares on the Company’s share register or credit the Holder’s balance account with DTC for the number of Conversion Shares to which the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below, and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon such exercise that the Holder anticipated receiving from the Company, then the Company shall, within two (2) Trading Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other reasonable and customary out-of-pocket expenses, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate (and to issue such Conversion Shares) or credit such Holder’s balance account with DTC for such Conversion Shares shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Conversion Shares or credit such Holder’s balance account with DTC and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the closing sales price of the Common Stock on the date of exercise. Nothing shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing the Conversion Shares (or to electronically deliver such Conversion Shares) upon the conversion of this Note as required pursuant to the terms hereof.
| 4 |
(d) Obligation of Borrower to Deliver Common Stock. At the time that the Holder submits the Notice of Conversion to the Borrower or Borrower’s transfer agent, the Holder shall be deemed to be the holder of record of the Conversion Shares issuable upon such conversion, the outstanding Principal Amount and the amount of accrued and unpaid interest (including any Default Interest) under this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for the Conversion Shares (or cause the electronic delivery of the Conversion Shares as contemplated by Section 1.4(e) hereof) shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is sent to the Borrower or Borrower’s transfer agent before 11:59 p.m., New York, New York time, on such date.
(e) Delivery of Conversion Shares by Electronic Transfer. In lieu of delivering physical certificates representing the Conversion Shares issuable upon conversion hereof, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer or Deposit/Withdrawal at Custodian programs, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Conversion Shares issuable upon conversion hereof to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.
1.5 Concerning the Shares. The Conversion Shares issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the 1933 Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be the Legal Counsel Opinion (as defined in the Purchase Agreement)) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption, or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the Conversion Shares have been registered under the 1933 Act or otherwise may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for the Conversion Shares that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:
| “NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE PURCHASE AGREEMENT)), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A, REGULATION S UNDER SAID ACT, OR OTHER APPLICABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.” |
| 5 |
The legend set forth above shall be removed and the Company shall issue to the Holder a certificate for the applicable Conversion Shares without such legend upon which it is stamped or (as requested by the Holder) issue the applicable Conversion Shares by electronic delivery by crediting the account of such holder’s broker with DTC, if, unless otherwise required by applicable state securities laws: (a) such Conversion Shares are registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) the Company or the Holder provides the Legal Counsel Opinion (as contemplated by and in accordance with Section 4(l) of the Purchase Agreement) to the effect that a public sale or transfer of such Conversion Shares may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Company shall be responsible for the fees of its transfer agent and all DTC fees associated with any such issuance. The Holder agrees to sell all Conversion Shares, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Holder with respect to the transfer of Conversion Shares pursuant to an exemption from registration, such as Rule 144, Rule 144A, Regulation S, or other applicable exemption, at the Deadline, notwithstanding that the conditions of Rule 144, Rule 144A, Regulation S, or other applicable exemption, as applicable, have been met, it will be considered an Event of Default under this Note.
1.6 Effect of Certain Events.
(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in this Note) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.
(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of this Note, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower (each a “Fundamental Transaction”), then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not effectuate any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, at least thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note), (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b), and (c) the Borrower obtains written consent from the Holder to effectuate the respective Fundamental Transaction. The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
(c) Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.
(d) Purchase Rights. If, at any time when all or any portion of this Note is issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
| 6 |
(e) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in Section 1.6 of this Note, the Borrower shall, at its expense and within two (2) Trading Days after the occurrence of each respective adjustment or readjustment of the Conversion Price, compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth (i) the Conversion Price in effect at such time, (ii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note, (iii) the detailed facts upon which such adjustment or readjustment is based, and (iv) copies of the documentation (including but not limited to relevant transaction documents) that evidences the adjustment or readjustment. For the avoidance of doubt, each adjustment or readjustment of the Conversion Price as a result of the events described in Section 1.6 of this Note shall occur without any action by the Holder and regardless of whether the Borrower complied with the notification provisions in Section 1.6 of this Note.
1.7 Status as Shareholder. Upon submission of a Notice of Conversion by the Holder, (i) the Conversion Shares covered thereby shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as the Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if the Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies for the Borrower’s failure to convert this Note.
1.8 Prepayment. At any time prior to the 181st calendar day following the Issue Date, the Borrower shall have the right, exercisable on three (3) Trading Days prior written notice to the Holder of the Note, to prepay the outstanding Principal Amount and interest then due under this Note in accordance with this Section 1.8. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be three (3) Trading Days from the date of the Optional Prepayment Notice (the “Optional Prepayment Date”). The Holder shall have the right, during the period beginning on the date of Holder’s receipt of the Optional Prepayment Notice and until the Holder’s actual receipt of the full prepayment amount on the Optional Prepayment Date, to instead convert all or any portion of the Note pursuant to the terms of this Note, including the amount of this Note to be prepaid by the Borrower in accordance with this Section 1.8, even if the Note is not yet convertible into Common Stock by the Holder under Section 1.1 of this Note. On the Optional Prepayment Date, the Borrower shall make payment of the amounts designated below to or upon the order of the Holder as specified by the Holder in writing to the Borrower. If the Borrower exercises its right to prepay the Note in accordance with this Section 1.8, the Borrower shall make payment to the Holder of an amount in cash equal to the sum of: (w) the prepayment percentage set forth in the table immediately following this paragraph for the applicable prepayment period set forth in the table immediately following this paragraph (“Prepayment Percentage”) multiplied by the Principal Amount then outstanding plus (x) the Prepayment Percentage multiplied by the accrued and unpaid interest on the Principal Amount to the Optional Prepayment Date. If the Borrower delivers an Optional Prepayment Notice and fails to pay the applicable prepayment amount due to the Holder of the Note as provided in this Section 1.8, then the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.8.
| 7 |
| Prepayment Period | Prepayment Percentage |
| 1. The period beginning on the Issue Date and ending on the date which is twenty-nine (29) calendar days following the Issue Date. | 105% |
| 2. The period beginning on the date that is thirty (30) calendar days from the Issue Date and ending fifty-nine (59) calendar days following the Issue Date. | 115% |
| 3. The period beginning on the date that is sixty (60) calendar days from the Issue Date and ending eighty-nine (89) calendar days following the Issue Date. | 120% |
| 4. The period beginning on the date that is ninety (90) calendar days from the Issue Date and ending one hundred nineteen (119) calendar days following the Issue Date. | 130% |
| 5. The period beginning on the date that is one hundred twenty (120) calendar days from the Issue Date and ending one hundred forty-nine (149) calendar days following the Issue Date. | 135% |
| 6. The period beginning on the date that is one hundred fifty (150) calendar days from the Issue Date and ending one hundred eighty (180) calendar days following the Issue Date. | 140% |
ARTICLE II. RANKING AND CERTAIN COVENANTS
2.1 Ranking. This Note shall be an unsecured obligation of the Borrower. “Indebtedness” shall mean all indebtedness, including but not limited to (a) all indebtedness of the Borrower or Subsidiaries for the deferred purchase price of property or services, including any type of letters of credit, (b) all liabilities, obligations and indebtedness for borrowed money including, but not limited to, all obligations of the Borrower or Subsidiaries evidenced by notes, bonds, debentures or other similar instruments, (c) purchase money indebtedness hereafter incurred by the Borrower or Subsidiaries to finance the purchase of fixed or capital assets, including all capital lease obligations of the Borrower which do not exceed the purchase price of the assets funded, (d) all guaranties, endorsements and other contingent obligations in respect of indebtedness of Borrower, Subsidiaries or others, whether or not the same are or should be reflected in the Borrower’s or Subsidiaries’ consolidated balance sheet (or the notes thereto), (e) all guarantee obligations of the Borrower or Subsidiaries in respect of obligations of the kind referred to in clauses (a) through (d) above that the Borrower or Subsidiaries would not be permitted to incur or enter into, and (f) all obligations of the kind referred to in clauses (a) through (e) above that the Borrower or Subsidiaries is not permitted to incur or enter into that are secured and/or unsecured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured and/or unsecured by) any lien or encumbrance on property (including accounts and contract rights) owned by the Borrower or Subsidiaries, whether or not the Borrower or Subsidiaries has assumed or become liable for the payment of such obligation
2.2 [Intentionally Omitted].
2.3 Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.
| 8 |
2.4 Sale of Assets. So long as the Borrower shall have any obligation under this Note, neither the Borrower nor any of the Borrower’s Subsidiaries shall, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent by the Holder to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.
2.5 Advances and Loans; Affiliate Transactions. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit, make advances to or enter into any similar transaction with any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the Issue Date and which the Borrower has informed Holder in writing prior to the Issue Date, (b) in regard to transactions with unaffiliated third parties, made in the ordinary course of business or (c) in regard to transactions with unaffiliated third parties, not in excess of $100,000. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, repay any affiliate (as defined in Rule 144) of the Borrower in connection with any indebtedness or accrued amounts owed to any such party.
2.6 Section 3(a)(9) or 3(a)(10) Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities Act (a “3(a)(9) Transaction”) or Section 3(a)(10) of the Securities Act (a “3(a)(10) Transaction”). In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(10) Transaction while this note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than $25,000, will be assessed and will become immediately due and payable to the Holder at its election in the form of a cash payment or added to the balance of this Note (under Holder's and Borrower's expectation that this amount will tack back to the Issue Date), in addition to all other available remedies at law or in equity.
2.7 Preservation of Business and Existence, etc. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, (a) change the nature of its business; or (b) sell, divest, change the structure of any material assets other than in the ordinary course of business. In addition, so long as the Borrower shall have any obligation under this Note, the Borrower shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries (other than dormant Subsidiaries that have no or minimum assets) to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.
2.8 Noncircumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate or Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.
2.9 Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note.
ARTICLE III. EVENTS OF DEFAULT
It shall be considered an event of default if any of the following events listed in this Article III (each, an “Event of Default”) shall occur on or after the Issue Date:
3.1 Failure to Pay Principal or Interest. The Borrower fails to pay the Principal Amount hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise, or fails to fully comply with Section 1.10 of this Note.
| 9 |
3.2 Conversion and the Shares. The Borrower (i) fails to issue Conversion Shares to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, (ii) fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for the Conversion Shares issuable to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, (iii) fails to reserve the Reserved Amount at all times, (iv) the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for the Conversion Shares issuable to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for two (2) Trading Days after the Holder shall have delivered a Notice of Conversion, and/or (v) fails to remain current in its obligations to its transfer agent (including but not limited to payment obligations to its transfer agent). It shall be an Event of Default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be added to the principal balance of the Note.
3.3 Breach of Agreements and Covenants. The Borrower breaches any material covenant, agreement, or other term or condition contained in the Purchase Agreement, this Note, Irrevocable Transfer Agent Instructions, or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith.
3.4 Breach of Representations and Warranties. Any representation or warranty of the Borrower made in the Purchase Agreement, this Note, Irrevocable Transfer Agent Instructions, or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith shall be false or misleading in any material respect when made.
3.5 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
3.6 Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $100,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
3.7 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.
3.8 Failure to Comply with the 1934 Act. At any time on or after the Issue Date, the Borrower shall fail to comply with the reporting requirements of the 1934 Act in any material aspect and/or the Borrower shall cease to be subject to the reporting requirements of the 1934 Act.
3.9 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
3.10 Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.11 Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).
3.12 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding.
| 10 |
3.13 Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.
3.14 Inside Information. Any attempt by the Borrower or its officers, directors, and/or affiliates to transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, and/or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same date.
3.15 Unavailability of Rule 144. If, at any time on or after the date that is six (6) calendar months after the Issue Date, the Holder is unable to (i) obtain a standard “144 legal opinion letter” from an attorney reasonably acceptable to the Holder, the Holder’s brokerage firm (and respective clearing firm), and the Borrower’s transfer agent in order to facilitate the Holder’s conversion of any portion of the Note into free trading shares of the Borrower’s Common Stock pursuant to Rule 144, and/or (ii) thereupon deposit such shares into the Holder’s brokerage account.
3.16 Delisting, Suspension, or Quotation of Trading of Common Stock. If, at any time on or after the Issue Date, the Borrower’s Common Stock (i) is suspended from trading, (ii) halted from trading, and/or (iii) fails to be quoted or listed on a Principal Market.
3.17 Rights and Remedies Upon an Event of Default. Upon the occurrence of any Event of Default specified in this Article III, this Note shall become immediately due and payable, and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Principal Amount then outstanding plus accrued interest (including any Default Interest) through the date of full repayment multiplied by 150% (collectively the “Default Amount”), as well as all costs, including, without limitation, legal fees and expenses, of collection, all without demand, presentment or notice, all of which hereby are expressly waived by the Borrower. In addition, the principal balance of the Note shall increase by $1,000.00 on the 1st of each calendar month after the date of the occurrence of an Event of Default until the Note is repaid in the entirety. Holder may, in Holder’s sole discretion, convert all or any portion of this Note (including the Default Amount) into Common Stock pursuant to the terms of this Note (for the avoidance of doubt, this shall apply even if such conversion occurs after the Maturity Date). The Holder shall be entitled to exercise all other rights and remedies available at law or in equity.
ARTICLE IV. MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies of the Holder existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, e-mail or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by e-mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
| 11 |
If to the Borrower, to:
KARBON-X CORP.
6575 West Loop South, Suite 500
Bellaire, TX 77401
Attention: Chad Clovis
e-mail: cc@karbon-x.com
If to the Holder:
AUCTUS FUND, LLC
361 Newbury Street, 5th Floor
Boston, MA 02115
4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.
4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. The Borrower shall not assign this Note or any rights or obligations hereunder without the prior written consent of the Holder. The Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Holder or to any of its “affiliates”, as that term is defined under the 1934 Act, without the consent of the Borrower. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.
| 12 |
4.6 Arbitration of Claims; Governing Law; Venue; Attorney’s Fees. The Company and Holder shall submit all Claims (as defined in Exhibit B of the Purchase Agreement) (the “Claims”) arising under this Note or any other agreement between the parties and their affiliates or any Claim relating to the relationship of the parties to binding arbitration pursuant to the arbitration provisions set forth in Exhibit B of the Purchase Agreement (the “Arbitration Provisions”). The Company and Holder hereby acknowledge and agree that the Arbitration Provisions are unconditionally binding on the Company and Holder hereto and are severable from all other provisions of this Note. By executing this Note, Company represents, warrants and covenants that Company has reviewed the Arbitration Provisions carefully, consulted with legal counsel about such provisions (or waived its right to do so), understands that the Arbitration Provisions are intended to allow for the expeditious and efficient resolution of any dispute hereunder, agrees to the terms and limitations set forth in the Arbitration Provisions, and that Company will not take a position contrary to the foregoing representations. The Company acknowledges and agrees that Holder may rely upon the foregoing representations and covenants of the Company regarding the Arbitration Provisions. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Nevada, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Nevada or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Nevada. The Company and Holder consent to and expressly agree that the exclusive venue for arbitration of any Claims arising under this Note or any other agreement between the Company and Holder or their respective affiliates (including but not limited to the Transaction Documents) or any Claim relating to the relationship of the Company and Holder or their respective affiliates shall be in the Commonwealth of Massachusetts. Without modifying the Company’s and Holder’s obligations to resolve disputes hereunder pursuant to the Arbitration Provisions, for any litigation arising in connection with any of the Transaction Documents (and notwithstanding the terms (specifically including any governing law and venue terms) of any transfer agent services agreement or other agreement between the Company’s transfer agent and the Company, such litigation specifically includes, without limitation any action between or involving Company and the Company’s transfer agent under the Irrevocable Transfer Agent Instructions (as defined in the Purchase Agreement) or otherwise related to Holder in any way (specifically including, without limitation, any action where Company seeks to obtain an injunction, temporary restraining order, or otherwise prohibit the Company’s transfer agent from issuing shares of Common Stock to Holder for any reason)), each party hereto hereby (i) consents to and expressly submits to the exclusive personal jurisdiction of any state or federal court sitting in the Commonwealth of Massachusetts, (ii) expressly submits to the exclusive venue of any such court for the purposes hereof, (iii) agrees to not bring any such action (specifically including, without limitation, any action where Company seeks to obtain an injunction, temporary restraining order, or otherwise prohibit the Company’s transfer agent from issuing shares of Common Stock to Holder for any reason) outside of any state or federal court sitting in the Commonwealth of Massachusetts, and (iv) waives any claim of improper venue and any claim or objection that such courts are an inconvenient forum or any other claim, defense or objection to the bringing of any such proceeding in such jurisdiction or to any claim that such venue of the suit, action or proceeding is improper. Notwithstanding anything in the foregoing to the contrary, nothing herein (i) shall limit, or shall be deemed or construed to limit, the ability of the Holder to realize on any collateral or any other security, or to enforce a judgment or other court ruling in favor of the Holder, including through a legal action in any court of competent jurisdiction, or (ii) shall limit, or shall be deemed or construed to limit, any provision of Section 4.15 of this Note. The Company hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any objection to jurisdiction and venue of any action instituted hereunder, any claim that it is not personally subject to the jurisdiction of any such court, and any claim that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper (including but not limited to based upon forum non conveniens). THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTIONS CONTEMPLATED HEREBY. The Company irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note or any other agreement, certificate, instrument or document contemplated hereby or thereby by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to Company at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. The prevailing party in any action or dispute brought in connection with this Note or any other agreement, certificate, instrument or document contemplated hereby or thereby shall be entitled to recover from the other party its reasonable attorney’s fees and costs. If any provision of this Note shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Note in that jurisdiction or the validity or enforceability of any provision of this Note in any other jurisdiction.
| 13 |
4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding Principal Amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.
4.8 Purchase Agreement. The Company and the Holder shall be bound by the applicable terms of the Purchase Agreement and the Transaction Documents entered into in connection herewith and therewith.
4.9 Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any change in control or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least five (5) days prior to the record date specified therein, of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.
| 14 |
4.10 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
4.11 Construction; Headings. This Note shall be deemed to be jointly drafted by the Company and all the Holder and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.
4.12 Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by the Holder in order to enforce any right or remedy under this Note. Notwithstanding any provision to the contrary contained in this Note, it is expressly agreed and provided that the total liability of the Company under this Note for payments which under the applicable law are in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums which under the applicable law in the nature of interest that the Company may be obligated to pay under this Note exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by applicable law and applicable to this Note is increased or decreased by statute or any official governmental action subsequent to the Issue Date, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to this Note from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to the Holder with respect to indebtedness evidenced by this the Note, such excess shall be applied by the Holder to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at the Holder’s election.
4.13 Severability. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law (including any judicial ruling), then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note.
4.14 Terms of Future Financings. So long as this Note is outstanding, upon any issuance by the Borrower or any of its Subsidiaries of any security, or amendment to a security that was originally issued before the Issue Date, with any term that the Holder reasonably believes is more favorable to the holder of such security or with a term in favor of the holder of such security that the Holder reasonably believes was not similarly provided to the Holder in this Note (even if the holder of such other security does not receive the benefit of such more favorable term until a default occurs under such other security), then (i) the Borrower shall notify the Holder of such additional or more favorable term within one (1) business day of the issuance and/or amendment (as applicable) of the respective security, and (ii) such term, at Holder’s option, shall become a part of the transaction documents with the Holder (regardless of whether the Borrower complied with the notification provision of this Section 4.14). The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing prepayment rate, interest rates, and original issue discounts.
4.15 Dispute Resolution.
(a) In the case of a dispute relating to the Conversion Price, Conversion Amount, any prepayment amount or Default Amount, Issue Date, Closing Date, Maturity Date, the closing bid price, or fair market value (as the case may be) (including, without limitation, a dispute relating to the determination of any of the foregoing) (the “Note Calculations”), the Company or the Holder (as the case may be) shall submit the dispute to the other party via electronic mail (A) if by the Company, within two (2) Trading Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Company are unable to agree upon such determination or calculation within two (2) Trading Days following such initial notice by the Company or the Holder (as the case may be) of such dispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, submit the dispute to an independent, reputable investment bank or independent, outside accountant selected by the Holder (the “Independent Third Party”), and the Company shall pay all expenses of such Independent Third Party.
| 15 |
(b) The Holder and the Company shall each deliver to such Independent Third Party (A) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 4.15(a) and (B) written documentation supporting its position with respect to such dispute, in each case, no later than 5:00 p.m. (New York time) by second (2nd) Business Day immediately following the date on which the Holder selected such Independent Third Party (the “Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the “Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required Dispute Documentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such Independent Third Party with respect to such dispute and such Independent Third Party shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such Independent Third Party prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested by such Independent Third Party, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to such Independent Third Party in connection with such dispute, other than the Required Dispute Documentation.
(c) The Company and the Holder shall cause such Independent Third Party to determine the resolution of such dispute and notify the Company and the Holder of such resolution no later than five (5) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of such Independent Third Party shall be borne solely by the Company, and such Independent Third Party’s resolution of such dispute shall be final and binding upon all parties absent manifest error.
(d) The Company expressly acknowledges and agrees that (i) this Section 4.15 constitutes an agreement to arbitrate between the Company and the Holder (and constitutes an arbitration agreement) under the rules then in effect under the Nevada Rules of Civil Procedure (“NRCP”) and that the Holder is authorized to apply for an order to compel arbitration pursuant to the NRCP in order to compel compliance with this Section 4.15, (ii) a dispute relating to the Note Calculations includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stock occurred under Section 1.6 of this Note, (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale, (D) whether an agreement, instrument, security or the like constitutes a Common Stock Equivalent and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Note and each other applicable Transaction Document shall serve as the basis for the selected Independent Third Party’s resolution of the applicable dispute, such Independent Third Party shall be entitled (and is hereby expressly authorized) to make all findings, determinations and the like that such Independent Third Party determines are required to be made by such Independent Third Party in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance or sale of Common Stock occurred under Section 1.6 of this Note, (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale, (D) whether an agreement, instrument, security or the like constitutes a Common Stock Equivalent and (E) whether a Dilutive Issuance occurred) and in resolving such dispute such Independent Third Party shall apply such findings, determinations and the like to the terms of this Note and any other applicable Transaction Documents, and (iv) nothing in this Section 4.15 shall limit the Holder from obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 4.15).
[signature page follows]
| 16 |
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer on August 18, 2026.
KARBON-X CORP.
| By: | /s/ Chad Clovis |
|
| Name: | Chad Clovis |
|
| Title: | Chief Executive Officer |
|
| 17 |
EXHIBIT A -- NOTICE OF CONVERSION
The undersigned hereby elects to convert $principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of KARBON-X CORP., a Nevada corporation (the “Borrower”), according to the conditions of the promissory note of the Borrower dated as of August 18, 2026 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable instructions:
|
| ☐ | The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”). |
|
|
|
|
|
|
| Name of DTC Prime Broker: |
|
|
| Account Number: |
|
|
|
|
|
| ☐ | The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto: |
|
| Date of Conversion: |
|
|
| |
|
| Applicable Conversion Price: |
| $ |
| |
|
| Number of Shares of Common Stock to be Issued Pursuant to Conversion of the Note: |
|
|
|
|
|
| Amount of Principal Balance Due remaining Under the Note after this conversion: |
|
|
|
|
|
| By: |
|
| Name: |
|
| Title: |
|
| Date: |
| 18 |
EXHIBIT 10.17
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT”)
US $125,000.00
KARBON-X CORP.
12% CONVERTIBLE REDEEMABLE NOTE
DUE AUGUST 28, 2027
FOR VALUE RECEIVED, Karbon-X Corp. (the “Company”) promises to pay to the order of Silvercrest Hybrid Capital LLC and its authorized successors and permitted assigns (the "Holder"), the aggregate principal face amount of One Hundred Twenty Five Thousand Dollars (U.S. $125,000.00) on August 28, 2027 (the "Maturity Date") and to pay interest on the principal amount outstanding hereunder at the rate of 12% per annum commencing on August 28, 2026 (the “Issuance Date”). The interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. This Note shall contain a $12,500.00 original issue discount, such that the purchase price shall be $112,500.00. The principal of, and interest on, this Note are payable at 1325 Airmotive Way, Suite 202, Reno, NV 89502, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such a check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein. Permitted Assigns means any Holder assignment, transfer or sale of all or a portion of this Note accompanied by an Opinion of Counsel as provided for in Section 2(f) of the Securities Purchase Agreement.
| 1 |
This Note is subject to the following additional provisions:
1. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration, transfer, or exchange, except that Holder shall pay any tax or other governmental charges payable in connection therewith. To the extent that Holder subsequently transfers, assigns, sells, or exchanges any of the multiple lesser denomination notes, Holder acknowledges that it will provide the Company with Opinions of Counsel as provided for in Section 2(f) of the Securities Purchase Agreement.
2. The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended ("Act"), applicable state securities laws and Sections 2(f) and 5(f) of the Securities Purchase Agreement. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company's records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prequalified prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted ("Notice of Conversion") in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date. All notices of conversion will be accompanied by an Opinion of Counsel.
4. (a) The Holder of this Note is entitled, at its option, at any time after cash payment and the 6th monthly anniversary of the Note, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price (the “Conversion Price”) for each share of Common Stock equal to 60% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer agent (provided such Notice of Conversion is delivered by fax or other electronic method of communication to the Company or its transfer agent after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC “Chill” on its shares, the Conversion Price shall be decreased to 50% instead of 60% while that “Chill” is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates, would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Holder).
| 2 |
(b) Interest on any unpaid principal balance of this Note shall be paid at the rate of 12% per annum. Interest may be paid by the Company in Common Stock ("Interest Shares"). The Holder may, at any time, send in a Notice of Conversion to the Company for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
(c) The Note may be prepaid or assigned with the following penalties/premiums:
| PREPAY DATE | PREPAY AMOUNT |
| ≤ 30 days | 105% of principal plus accrued interest |
| >30-<=60 days | 110% of principal plus accrued interest |
| >60-<=90 days | 120% of principal plus accrued interest |
| >90-<=120 days | 130% of principal plus accrued interest |
| >120-<=150 days | 135% of principal plus accrued interest |
| >150-<=180 days | 140% of principal plus accrued interest |
This Note may not be prepaid after the 180th day. Such redemption must be closed and funded within 3 days of giving notice of redemption of the right to redeem shall be null and void. Any partial prepayments will be made in accordance with the formula set forth in the chart above with respect to principal, premium, and interest.
(d) Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization (excluding an increase in authorized capital) or other change or exchange of outstanding shares of the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a "Sale Event"), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.
| 3 |
(e) In case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
5. No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The Company agrees to pay all costs and expenses, including reasonable attorneys' fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note in the event the Holder prevails in such claim.
8. If one or more of the following described "Events of Default" shall occur:
(a) The Company shall default in the payment of principal or interest on this Note, or any other note issued to the Holder by the Company; or
(b) Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c) The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of the Company under this Note or any other note issued to the Holder and such failure is not cured within five (5) days of receipt of written notice from the Holder to the Company; or
(d) The Company shall (1) become insolvent (which does not include a “going concern opinion); (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or
| 4 |
(e) A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or
(g) One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or
(h) Defaulted on or breached any term of any other purchase agreement or note or similar debt instrument into which the Company has entered and failed to cure such default within the appropriate grace period; or
(i) The Company shall have its Common Stock delisted from an exchange (including the OTC Markets exchange) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days or ceases to file its 1934 act reports with the SEC;
(j) [Intentionally omitted];
(k) The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business days of its receipt of a Notice of Conversion which includes an Opinion of Counsel expressing an opinion which supports the removal of a restrictive legend; or
(l) The Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder.
(m) The Company shall be delinquent in its periodic report filings with the Securities and Exchange Commission (subject to applicable extensions); or
(n) The Company shall cause to lose the “bid” price for its stock in a market (including the OTC marketplace or other exchange).
| 5 |
Then, or at any time thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder's sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 24% per annum, and the Conversion Price shall be adjusted from 60% to 45% (the conversion price discount shall increase by 15%). In the event of a breach of Section 8(k), the penalty shall be $500 per day the shares are not issued, beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall increase to $1,000 per day beginning on the 7th day. In an event of a breach of Section 8(h), the Holder may elect to utilize the same remedy available under the defaulted interest, and such remedy shall be incorporated by reference into the terms of this Note. The penalty for a breach of Section 8(n) shall be an increase of the outstanding principal amounts by 20%. Further, if a breach of Section 8(m) occurs or is continuing after the 6-month anniversary of the Note, then the Holder shall be entitled to use the lowest closing bid price during the delinquency period as a base price for the conversion. For example, if the lowest closing bid price during the delinquency period is $0.01 per share and the conversion discount is 50%, the Holder may elect to convert future conversions at $0.005 per share.
If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
Any representation or warranty of the Company made in the Securities Purchase Agreement, this Note, Irrevocable Transfer Agent Instructions, or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith shall be false or misleading in any material respect when made.
9. In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
10. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and the Holder.
11. The Company represents that it is not a “shell” issuer and that if it previously has been a “shell” issuer that on the 180-day anniversary of the date of this Note at least 12 months would have passed since the Company has reported Form 10 type information indicating it is no longer a “shell” issuer.
| 6 |
12. The Company shall issue irrevocable transfer agent instructions reserving 7,159,221 shares of its Common Stock for conversions under this Note (the “Share Reserve”). Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company should at all times reserve a minimum of five times the amount of shares required if the Note would be fully converted. The Holder may reasonably request increases from time to time to reserve such amounts to maintain such coverage five times, and the Company will be responsible for all fees associated with the increase in the Share Reserve. The Company will instruct its transfer agent to provide the outstanding share information to the Holder in connection with its conversions, along with shareholder information statements and other shareholder reservations that exist. The Holder shall be entitled to deduct $1,750 per conversion to adequately cover all transfer agent costs and legal fees associated with issuing and delivering the shares to the Holder. To the extent the Company is unable to maintain the Share Reserve at five times the discounted amount of the Note, it shall immediately begin to increase its authorized capital in an amount necessary to maintain all share reservations. All fees and expenses under this section 12 shall be deemed earned and paid as of the issuance date of this Note.
13. The Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
14. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable provision shall automatically be revised to equal the maximum rate of interest or other amount deemed interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any law that would prohibit or forgive the Company from paying all or a portion of the principal or interest on this Note.
15. This Note shall be governed by and construed in accordance with the laws of Nevada applicable to contracts made and wholly to be performed within the State of Nevada and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of Nevada or in the Federal courts sitting in the county or city of either Washoe County, Nevada or Clark County, Nevada. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original.
| 7 |
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated: August 28, 2026
| KARBON-X CORP. | |||
| By: | /s/ Chad James Clovis | ||
|
|
| Chad James Clovis | |
| Name: Chad James Clovis | |||
|
|
| Title: CEO |
|
| 8 |
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Note)
The undersigned hereby irrevocably elects to convert $___________ of the above Note into _________ Shares of Common Stock of KARBON-X CORP. (“Shares”) according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.
| Date of Conversion: __________________________________________ |
|
| Applicable Conversion Price: ___________________________________ |
|
| Signature: _________________________________________________ |
|
| [Print Name of Holder and Title of Signer] |
|
| Address: __________________________________________________ |
|
| __________________________________________________ |
|
|
| |
| SSN or EIN: ________________________________________________ |
|
| Shares are to be registered in the following name: ____________________ |
|
Name: ____________________________________________________
Address: __________________________________________________
Tel: __________________________________
Fax: __________________________________
SSN or EIN: ____________________________
Shares are to be sent or delivered to the following account:
Account Name: ______________________________________________
Address: ___________________________________________________
| 9 |
EXHIBIT 10.18
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of August 28, 2026, by and between Karbon-X Corp., a Nevada corporation, with headquarters located at 6575 West Loop South, Suite 500, Bellaire, TX 77401 (the “Company”) and Silvercrest Hybrid Capital LLC, a Nevada limited liability company, with its address at 1325 Airmotive Way, Suite 202, Reno, NV 89502 (the “Buyer”).
WHEREAS:
A. The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”);
B. Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement a 12% convertible note of the Company, in the form attached hereto as Exhibit A in the aggregate principal amount of $125,000.00 together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note. The Note shall contain an original issue discount of $12,500.00, such that the purchase price of the Note shall be $112,500.00.
C. The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth immediately below its name on the signature pages hereto; and
NOW THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:
1. Purchase and Sale of Note.
a. Purchase of Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer, and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages hereto.
| 1 |
b. Form of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal amount equal to the $125,000 as is set forth immediately below the Buyer’s name on the signature pages hereto, and (ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase Price.
c. Closing Date. The date and time of the first issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be on or about August 28, 2026, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.
2. Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company that:
a. Investment Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note, such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with the Note, the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.
b. Accredited Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”). Any of Buyer’s transferees, assignees, or purchasers must be “accredited investors” in order to qualify as prospective transferees, permitted assignees in the case of Buyer’s or Holder’s transfer, assignment or sale of the Note.
c. Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.
| 2 |
d. Information. The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that may constitute a breach of any of the Company's representations and warranties made herein.
e. Governmental Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Re-sale. The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) in the case of subparagraphs (c), (d) and (e) below, the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold, or transferred pursuant to an exemption from such registration, including the removal of any restrictive legend which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”); (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.
g. Legends. The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act, will be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities):
|
| “NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.” |
|
| 3 |
The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, and (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, and that legend removal is appropriate, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, within 2 business days, it will be considered an Event of Default under the Note; provided that such opinion is consistent with Rule 144.
h. Authorization; Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.
i. Residency. The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.
j. No Short Sales. Buyer/Holder, its successors and assigns, agree that so long as the Note remains outstanding, neither the Buyer/Holder nor any of its affiliates is subject to any restrictions allowing them to effect “short sales” of the Common Stock or hedging transaction which establishes a short position with respect to the Common Stock of the Company. The Company acknowledges and agrees that upon delivery of a Conversion Notice by the Buyer/Holder, the Buyer/Holder immediately owns the shares of Common Stock described in the Conversion Notice and any sale of those shares issuable under such Conversion Notice would not be considered short sales.
| 4 |
3. Representations and Warranties of the Company. The Company represents and warrants to the Buyer that:
a. Organization and Qualification. The Company and each of its subsidiaries, if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted.
b. Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.
c. Issuance of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.
d. Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
| 5 |
e. No Conflicts. The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the OTC Markets Exchange (the “OTC MARKETS”) and does not reasonably anticipate that the Common Stock will be delisted by the OTC MARKETS in the foreseeable future, nor are the Company’s securities “chilled” by FINRA. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.
f. Absence of Litigation. Except as disclosed in the Company’s Periodic Report filings with the SEC, there is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its subsidiaries, threatened against or affecting the Company or any of its subsidiaries, or their officers or directors in their capacity as such, that could have a material adverse effect. Schedule 3(f) contains a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its subsidiaries, without regard to whether it would have a material adverse effect. The Company and its subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.
g. Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’ purchase of the Securities. The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.
| 6 |
h. No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer.
i. Title to Property. The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(i) or such as would not have a material adverse effect. Any real property and facilities held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a material adverse effect.
j. Bad Actor. No officer or director of the Company would be disqualified under Rule 506(d) of the Securities Act as amended on the basis of being a "bad actor" as that term is established in the September 19, 2013 Small Entity Compliance Guide published by the Securities and Exchange Commission.
k. Breach of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of Default under the Note.
4. COVENANTS.
a. Expenses. At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection with the negotiation, preparation, execution, delivery and performance of this Agreement and the other agreements to be executed in connection herewith (“Documents”), including, without limitation, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, fees for stock quotation services, fees relating to any amendments or modifications of the Documents or any consents or waivers of provisions in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions contemplated by the Documents. When possible, the Company must pay these fees directly, otherwise the Company must make immediate payment for reimbursement to the Buyer for all fees and expenses immediately upon written notice by the Buyer or the submission of an invoice by the Buyer.
| 7 |
b. Listing. The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the Buyer owns any of the Note Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the OTC MARKETS or any equivalent replacement market, the Nasdaq stock market (“Nasdaq”), or the New York Stock Exchange (“NYSE”) and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of any notices it receives from the OTC MARKETS and any other markets on which the Common Stock is then listed regarding the continued eligibility of the Common Stock for listing on such markets.
c. Corporate Existence. So long as the Buyer beneficially owns the Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for trading on the OTC MARKETS, Nasdaq or NYSE.
d. No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.
e. Filings. The Company shall include the Securities in its next scheduled SEC filing, whether that shall be a 10Q or a10K.
f. Most Favored Nations. So long as any of the Securities issued under this Agreement are outstanding, upon any issuance by the Company or any of its subsidiaries of any security, or amendment to a security that was originally issued before the Date of this Agreement, with any term that the Buyer reasonably believes is more favorable to the Buyer of such security or with a term in favor of the Buyer of such security that the Buyer reasonably believes was not similarly provided to the Buyer in this Note, then (i) the Company shall notify the Buyer of such additional or more favorable term within one (1) business day of the issuance and/or amendment (as applicable) of the respective security, and (ii) such term, at Buyer’s option, shall become a part of the transaction documents with the Buyer (regardless of whether the Company complied with the notification provision herein). The types of terms contained in another security that may be more favorable to the Buyer of such security include, but are not limited to, terms addressing prepayment rate, interest rates, and original issue discounts, conversion prices and pricing, commitment shares, etc.
| 8 |
g. Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under the Note.
5. Governing Law; Miscellaneous.
a. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of Nevada or in the federal courts located in the state of Nevada and county or city of either Washoe County, Nevada, or Clark County, Nevada. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
b. Counterparts; Signatures by Facsimile. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.
c. Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.
d. Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.
| 9 |
e. Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.
f. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, (iv) via electronic mail or (v) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received) or delivery via electronic mail, or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Company, to:
Karbon-X Corp
6575 West Loop South, Suite 500
Bellaire, TX 77401
Attn: Chad James Clovis, CEO
If to the Buyer:
Silvercrest Hybrid Capital LLC
1325 Airmotive Way, Suite 202
Reno, NV 89502
Attn: Ron Meiri, Manager
Each party shall provide notice to the other party of any change in address.
g. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any “qualified person”, any “permitted assigns”, or “prospective transferee” that acquires or purchases Note Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company with Buyer’s Opinion of Counsel. A qualified person is an “accredited investor” transferee, assignee, or purchaser of the Note who succeeds to the Holder’s right, title and interest to all or a portion of the Note accompanied with an Opinion of Counsel as provided for in Section 2(f).
| 10 |
h. Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
i. Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.
j. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
k. No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.
l. Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.
| 11 |
IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.
Karbon-X Corp.
| By: | /s/ Chad James Clovis |
|
| Name: | Chad James Clovis |
|
| Title: | CEO |
|
Silvercrest Hybrid Capital LLC
| By: |
|
|
| Name: | Ron Meiri |
|
| Title: | Manager |
|
| AGGREGATE SUBSCRIPTION AMOUNT: | $125,000.00 |
|
|
|
| Aggregate Principal Amount of Note: |
|
|
|
|
| Aggregate Purchase Price: |
|
Note: $125,000.00, less $12,500.00 in original issue discount, less $5,000.00 in legal fees.
| 12 |
EXHIBIT A
144 NOTE - $125,000.00
| 13 |
EXHIBIT 31.1
CERTIFICATIONS
I, Chad Clovis, principal executive officer, certify that:
|
| 1. | I have reviewed this Amendment No. 1 to the quarterly report on Form 10-Q of Karbon-X Corp.; |
|
|
|
|
|
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
|
|
|
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
|
|
|
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
|
|
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
|
|
|
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
|
|
|
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
|
|
|
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: October 21, 2026 | By: | /s/ Chad Clovis |
|
|
|
| Chad Clovis |
|
|
|
| Chief Executive Officer and Director (Principal Executive Officer) |
|
EXHIBIT 31.2
CERTIFICATIONS
I, Adriana Ebell, principal financial officer, certify that:
|
| 1. | I have reviewed this Amendment No. 1 to the quarterly report on Form 10-Q of Karbon-X Corp.; |
|
|
|
|
|
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
|
|
|
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
|
|
|
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
|
|
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
|
|
|
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
|
|
|
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
|
|
|
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: October 21, 2026 | By: | /s/ Adriana Ebell |
|
|
|
| Adriana Ebell |
|
|
|
| Chief Financial Officer (Principal Financial Officer) |
|
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with Amendment No. 1 to the Quarterly Report on Form 10-Q for the period ended August 31, 2026 of Karbon-X Corp., a Nevada corporation (the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Quarterly Report”), I, Chad Clovis, Chief Executive Officer and Director of the Company, certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
|
| 1. | The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
|
|
|
|
|
| 2. | The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: October 21, 2026 | By: | /s/ Chad Clovis |
|
|
|
| Chad Clovis |
|
|
|
| Chief Executive Officer and Director (Principal Executive Officer) |
|
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with Amendment No. 1 to the Quarterly Report on Form 10-Q for the period ended August 31, 2026 of Karbon-X Corp., a Nevada corporation (the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Quarterly Report”), I, Adriana Ebell, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
|
| 1. | The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
|
|
|
|
|
| 2. | The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: October 21, 2026 | By: | /s/ Adriana Ebell |
|
|
|
| Adriana Ebell |
|
|
|
| Chief Financial Officer (Principal Financial Officer) |
|