KARX 10-K/A
Karbon-X Corp. (KARX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Amendment No. 1
(Mark One)
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the fiscal year ended
(Commission file number)
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
| (IRS Employer Identification No.) |
(Address and telephone number of principal executive offices)
910 7th Ave SW, Calgary, AB, Canada T2P 3N8
(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:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in the definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or amendment to Form 10-K. Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☐ | Smaller reporting company | ||
(Do not check if a smaller reporting company) | Emerging growth company | ||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The aggregate market value of the voting and non-voting common equity held by non-affiliates as of August 31, 2025 was $
At September 12, 2025, the registrant had
TABLE OF CONTENTS
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Explanatory Note
This Amendment No. 1 (the “Amendment”) to the Company’s Annual Report on Form 10-K for the year ended May 31, 2025, filed with the Securities and Exchange Commission on September 15, 2025 (the “Original Report”), is being filed solely to add exhibits that were inadvertently omitted from the Original Report, including the Company’s Inline XBRL exhibits.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION
This Annual Report on Form 10-K, the other reports, statements, and information that we have previously filed or that we may subsequently file with the Securities and Exchange Commission, or SEC, and public announcements that we have previously made or may subsequently make include, may include, incorporate by reference or may incorporate by reference certain statements that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are intended to enjoy the benefits of that act. Unless the context is otherwise, the forward-looking statements included or incorporated by reference in this Form 10-K and those reports, statements, information and announcements address activities, events or developments that Karbon-X Corp. (hereinafter referred to as “we,” “us,” “our,” “our Company” or “Karbon-X”) expects or anticipates, will or may occur in the future. Any statements in this document about expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “will continue,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” and similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties, which could cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this document. All forward-looking statements concerning economic conditions, rates of growth, rates of income or values as may be included in this document are based on information available to us on the dates noted, and we assume no obligation to update any such forward-looking statements. It is important to note that our actual results may differ materially from those in such forward-looking statements due to fluctuations in interest rates, inflation, government regulations, economic conditions and competitive product and pricing pressures in the geographic and business areas in which we conduct operations, including our plans, objectives, expectations and intentions and other factors discussed elsewhere in this Report.
Certain risk factors could materially and adversely affect our business, financial conditions and results of operations and cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us, and you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made and we do not undertake any obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. The risks and uncertainties we currently face are not the only ones we face. New factors emerge from time to time, and it is not possible for us to predict which will arise. There may be additional risks not presently known to us or that we currently believe are immaterial to our business. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. If any such risks occur, our business, operating results, liquidity and financial condition could be materially affected in an adverse manner. Under such circumstances, you may lose all or part of your investment.
The industry and market data contained in this report are based either on our management's own estimates or, where indicated, independent industry publications, reports by governmental agencies or market research firms or other published independent sources and, in each case, are believed by our management to be reasonable estimates. However, industry and market data is subject to change and cannot always be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey of market shares. We have not independently verified market and industry data from third-party sources. In addition, consumption patterns and customer preferences can and do change. As a result, you should be aware that market share, ranking and other similar data set forth herein, and estimates and beliefs based on such data, may not be verifiable or reliable.
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Item 1. Description of Business
Karbon-X Corp (or "Karbon-X" or "the Company") is a public Nevada corporation that offers investors exposure to certified carbon credits which are a key instrument used by both individuals and corporations to achieve their carbon neutral and net-zero carbon goals. The company is environmental, social and governance (ESG) principled and focuses on partnering with high-quality projects and/or companies that generate or are actively involved in the voluntary carbon credit market.
Karbon-X Corp is focused on customized transactional options for corporations to offset their carbon footprint and provides scalable access to the Verified Emissions Reduction markets. Karbon-X is changing the marketing framework of traditional carbon marketing by engaging with the public in order to fund multiple forms of technology-based greenhouse gas reduction builds.
Carbon Credit Generation
Karbon-X Corp has begun purchasing verified carbon credits from numerous vendors and intends to resell these credits to both industry and the general public. The Company has already begun funding projects in order to generate Karbon-X Corp carbon credits of its own. Once verified these projects will generate carbon credits that will be sold on its proprietary APP platform.
Developments
During the year ended May 31, 2025, the Company sold 1,926,742 shares at $.90 per share for total proceeds of $1,712,099.
On March 31, 2025, the Company converted a loan for $350,000 principal and $16,724 interest into 407,471 shares at a price of $.90 per share.
On March 31, 2025, the Company issued 57,875 shares at $2.04 per share for compensation of $118,007.
On May 22, 2025, the Company converted 360,000 options related to its stock option plan into 205,715 shares via a cashless exercise.
On May 15, 2025, 10,400 warrants were exercised in a cashless exercise for 7,429 shares.
On June 1, 2025, the Company entered into an Asset Purchase Agreement with Allcot AG to acquire specified assets (including certain subsidiary shares, intellectual property, database, project pipeline, and contract rights) for cash consideration of $350,000.
Historical Company Information
Karbon-X was incorporated in the State of Nevada on September 31, 2017 under the name Cocoluv, Inc. The articles provided for 200,000,000 authorized shares. At that time Reymund Guillermo was appointed as sole officer and director. On June 9, 2020, the Corporation filed a Certificate of Amendment with the State of Nevada effectuating a 50 for 1 forward stock split. On March 1, 2022, a change of control occurred when Mr. Guillermo resigned as director and all executive officer positions with the Company. Concurrent with Mr. Guillermo’s resignation, Mr. Chad Clovis was appointed as CEO, Director and President.
On February 21, 2022 Karbon-X Corp, formerly known as Cocoluv, Inc., a Nevada Corporation (“Karbon-X”) entered into a Reorganization and Stock Purchase Agreement (the “Reorganization Agreement”) to acquire 100% of the issued and outstanding equity of Karbon-X Project, Inc., a British Columbia company (“Karbon-X Project”). Effective March 21, 2022, the parties closed the Reorganization Agreement. As part of the transaction, the majority shareholder of Karbon-X delivered 64,897,000 shares of common stock to shareholders of Karbon-X Project and certain other designees.
The Company’s principal office is located at 6575 West Loop South, Suite 500, Bellaire, TX 77401. Our telephone number is 844-462-3637. The Company email is [email protected].
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Competition
Many of our competitors have greater resources that may enable them to compete more effectively than us in the carbon credit industry.
The industry in which we operate is subject to intense and increasing competition. Some of our competitors have a longer operating history and greater capital resources and facilities, which may enable them to compete more effectively in this market. We expect to face additional competition from existing licensees and new market entrants, who are not yet active in the industry. If a significant number of competitors develop, we may experience increased competition for market share and may experience downward pricing pressure on our products as new entrants increase production. Such competition may cause us to encounter difficulties in generating revenues and market share, and in positioning our products in the market. If we are unable to successfully compete with existing companies and new entrants to the market, our lack of competitive advantage will have a negative effect on our business and financial condition.
We have identified many of our key competitors including the following:
Indigo Carbon
As the name most recognized name in the farming community, Indigo Carbon has an impressive list of well known corporate buyers like The North Face, Blue Bottle Coffee, and JP Morgan Chase. While Indigo is touted as a leader in the emerging industry, it may not be the best option for all. Indigo carbon has a proprietary software platform that allows farmers to easily input data from enrolled fields. After enrolling, farmers have access to Indigo’s agronomists and support teams to help implement changes and answer questions. Farmers only get paid for adopting new practices (ie. cover cropping, no-till, reduced N fertilizer, etc.), so if a farmer has been cover cropping for years, they are unlikely to be eligible. Right now they only service specific states (Arkansas, Colorado, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Minnesota, Mississippi, Missouri, Nebraska, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, and Texas).
Nori
Nori is a blockchain-enabled company whose sole mission is to be a leading carbon marketplace. Unique to the carbon-removal industry, they are powered by cryptocurrency. Through this pioneering approach, they hope to create efficient and transparent carbon removal transactions. Companies can purchase NORI tokens (whose price depends on the market price of a carbon removal credit at time of purchase). Once it has a NORI token, the company can exchange it for an NRT (or Nori Removal Token). Farmers create NRTs when they sequester 1 ton of CO2. That NRT translates into a NORI token which is priced at market value and can be sold.
TruCarbon by TruTerra
TruTerra is a subsidiary of Land O’Lakes – the world’s largest farmer owned cooperative. The current state of the program is only available to farmers with data from 2016-2020. They have a tool called Truterra Insights Engine that allows farmers to aggregate data from the past five years in a format best suited to enroll in a carbon program. Enrollment is contingent upon committing to a 20 year reporting period using the Truterra Insights Engine (carbon reporting contracts are similar to conservation easements, meaning that they can be transferred in the case of transfer of property).
Bayer Carbon Initiative
Bayer’s recently announced Carbon Initiative is still in its beginning phases with very little public detail. That said, they (like many of the other carbon credit companies on this list), will only pay farmers for adopting new cover crop or no-till/strip till practices. Bayer is a hugely influential food and agriculture company in its own right, so they have the resources and expertise to roll out a strong program after this pilot season.
Nutrien Ag
Nutrien’s core businesses are creating seeds, fertilizers, herbicides, and software to optimize farm performance. In November 2020 they announced their involvement in the carbon marketplace. Nutrien has a deep bench of agronomists on staff to provide guidance for newly enrolled farmers, so entering the market may have additional benefits for farmers looking for guidance on how best to sequester carbon. As a global retailer they have plenty of connections to influential companies who might be interested in purchasing carbon credits once the program is officially launched.
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Carbon Streaming Corp
Under stream agreements, Carbon Streaming Corp. makes upfront and ongoing delivery payments to project developers for future carbon credits. This financing structure creates carbon credit projects that reduce emissions in a sustainable manner. Our streams and investments then provide us with a diversified portfolio of carbon credits with exposure to potential rising carbon prices.
Base Carbon
Base Carbon partners with corporations, sovereign entities, academic institutions and carbon reduction project developers to produce and commercialize verified carbon credits. Base Carbon differentiates itself through sourcing and underwriting and financing the maturation of nature and technology based carbon reduction credit projects. Base Carbon seeks to simplify the carbon credit economy and become a financier within the voluntary carbon markets.
Climeworks
Climeworks develops, builds and operates direct air capture machines. Climeworks captures carbon dioxide directly from the air; removing CO₂ emissions. The air-captured carbon dioxide can either be recycled and used as a raw material, or completely removed from the air by safely storing it. Climework’s machines consist of modular CO₂ collectors that can be stacked to build machines of any size.
Sales
The Company’s main revenue streams include industrial sales and subscription-based sales through a mobile APP and carbon credit trading.
Industrial Sales
Karbon-X Corp primarily operates in the voluntary carbon offset market. The Company sells carbon offsets to mining, forestry, civic earthworks, transportation and oil and gas servicing companies based on their total fossil fuel consumption for individual projects. This simple platform offers companies a way to reach their carbon neutrality goals while supporting C02 reducing projects for years to come.
When companies purchase carbon offsets from Karbon-X Corp directly to offset their fossil fuel consumption the credits are retired in the name of the customer which provides transparency.
Subscription Based Sales
The general public is able purchase carbon offsets from a mobile APP that is subscription based, with multiple levels of investment for every budget. Each subscription will support C02 reducing projects such as direct air capture, green hydroelectric energy production, or reforestation and will reduce greenhouse gas emissions with provable, verifiable carbon credits. The APP was soft-launched in 2023 and was completed and made publicly available in March 2025.
Karbon-X Corp allows the general public to offset their greenhouse gas emissions from daily life with a subscriber-based APP which is shareable on social media.
Totally Covered |
| Exceptional Reduction |
| Doing Your Part |
Permanently offset 400 kg of CO2 /month, 4800 kg of CO2/,year |
| Permanently offset 300kg of CO2 /month, 3600KG of CO2/ year. |
| Permanently offset 200kg of CO2 /month, 2400kg of CO2 /year |
200 kg per year is 60 days of central heating in a home! |
| 600kg per year is 1,460 miles/2,350km driving in a car! |
| 360 kg per year is 13 month energy used for one light bulb! |
$19.99/month |
| $14.99/month |
| $9.99/month |
$199.99/year |
| $149.99/year |
| $99.99/Year |
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Marketing
The Company is working with a combination of outsource marketing and influencer firms, as well as, developing internal marketing resources to launch its APP globally.
APP Development
The Karbon-X APP was soft-launched in 2023 and was completed and made publicly available in March 2025.
Employees
As of the date of this filing on Form 10-K, the Company has twenty-five employees and is actively recruiting new team members at all levels of the organization. (See “Executive Compensation”). The Company believes that its relations with its employees are good.
Legal Proceedings
In February 2024, Karbon-X were notified of a former employee filing a lawsuit against the company for wrongful termination. The Company is currently counter-suing and is expecting to prevail.
As of the date hereof the Company is not party to any other material legal proceedings and is not aware of any material threatened litigation.
Item 1A. Risk Factors.
An investment in our securities involves a high degree of risk. Before making an investment decision, you should carefully consider the risks described below. Our business, financial condition, results of operations and cash flows could be materially adversely affected by any of these risks, and the market or trading price of our securities could decline due to any of these risks. In addition, please read "Disclosure Regarding Forward-Looking Statements" in this Annual Report, where we describe additional uncertainties associated with our business and the forward-looking statements included or incorporated by reference in this Annual Report. Please note that additional risks not presently known to us or that we currently deem immaterial may also impair our business and operations. In this Section, the terms the “Company,” “we”, “our” and “us” refer to Karbon-X Corp. as well as our subsidiary Karbon-X Project, Inc.
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Risks Related to Our Operations
We will incur losses and there is no guarantee that we will ever become profitable.
There is no guarantee that we will ever become profitable. The costs for research, product development, along with marketing and selling expenses, and the general and administrative expenses, will be principal causes of our costs and/or potential losses. We may never become profitable and if we do not become profitable your investment could be harmed or lost completely.
We may need additional capital in the future in order to continue our operations.
We obtained approximately $1.7 million in our recent private placements which we are using for development and operations. However, if in the future we do not turn profitable or generate cash from operations and additional capital is needed to support operations, economic and market conditions may make it difficult or impossible to raise additional funds through debt or equity financings. If funds are not sufficient to support operations, we may need to pursue additional financings or reduce expenditures to meet our cash requirements. If we do obtain such financing, we cannot assure that the amount or the terms of such financing will be as attractive as we may desire, and your equity interest in the company may be diluted considerably. If we are unable to obtain such financing when needed, or if the amount of such financing is not sufficient, it may be necessary for us to take significant cost saving measures or generate funding in ways that may negatively affect our business in the future. To reduce expenses, we may be forced to make personnel reductions or curtail or discontinue development programs. To generate funds, it may be necessary to monetize future royalty streams, sell intellectual property, divest of technology platforms or liquidate assets. However, there is no assurance that, if required, we will be able to generate sufficient funds or reduce spending to provide the required liquidity. Long-term capital requirements will depend on numerous factors, including, but not limited to, the status of collaborative arrangements, the progress of research and development programs and the receipt of revenues from sales of products. Our ability to achieve and/or sustain profitable operations depends on a number of factors, many of which are beyond our control.
We launched our products in 2023 and as a company, we have limited sales and marketing experience.
We soft-launched our APP in early 2023 and it was completed and made publicly available in March 2025, and although we have hired highly qualified personnel with specialized expertise, as a company, we have limited experience commercializing products on our own. In order to commercialize the app and our carbon credits business, we have to build our sales, marketing, distribution, managerial and other non-technical capabilities and make arrangements with third parties to perform these services when needed. We may have to hire sales representatives and district managers to fill sales territories. To the extent we rely on third parties to commercialize our business, we may receive less revenues or incur more expenses than if we had commercialized the products ourselves. In addition, we may have limited control over the sales efforts of any third parties involved in our commercialization efforts. If we are unable to successfully implement our commercial plans and drive adoption by patients and physicians of our products through our sales, marketing and commercialization efforts, or if our partners fail to successfully commercialize our products, then we may not be able to generate sustainable revenues from product sales which will have a material adverse effect on our business and future product opportunities. Similarly, we may not be successful in establishing the necessary commercial infrastructure, including sales representatives, wholesale distributors, legal and regulatory affairs teams. The establishment and development of commercialization capabilities to market our products has been and will continue to be expensive and time-consuming. As we continue to develop these capabilities, we will have to compete with other companies to recruit, hire, train and retain sales and marketing personnel. If we have underestimated the necessary sales and marketing capabilities or have not established the necessary infrastructure to support successful commercialization, or if our efforts to do so take more time and expense than anticipated, our ability to market and sell our products may be adversely affected.
Commercialization of our products will require significant resources, and if we do not achieve the sales expected, we may lose the substantial investment made in our products.
We are continuing to make substantial expenditures commercializing our products. We are devoting substantial resources to building our research and development. We have and expect to continue to devote substantial resources to establish and maintain a marketing capability for our products. If we are unsuccessful in our commercialization efforts and do not achieve the sales levels of our products that we expect, we may be unable to recover the large investment we have made in research, development, and marketing efforts, and our business and financial condition could be materially adversely affected.
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We rely on third parties to perform many necessary services for our products, including services related to the distribution and invoicing.
We have begun to retain and partner with third-party service providers to perform a variety of functions related to the sale and distribution of our products, key aspects of which are out of our direct control. If these third-party service providers fail to comply with applicable laws and regulations, fail to meet expected deadlines, or otherwise do not carry out their contractual duties to us, or encounter physical damage or natural disaster at their facilities, our ability to deliver product to meet commercial demand would be significantly impaired. In addition, we may utilize third parties to perform various other services for us relating to sample accountability and regulatory monitoring, including adverse event reporting, safety database management and other product maintenance services. If the quality or accuracy of the data maintained by these service providers is insufficient, our ability to continue to market our products could be jeopardized or we could be subject to regulatory sanctions. We do not currently have the internal capacity to perform these important commercial functions, and we may not be able to maintain commercial arrangements for these services on reasonable terms.
The failure of any of our third-party distributors to market, distribute and sell our products as planned may result in us not meeting revenue and profit targets.
If one or more of these distributors fail to pursue the development or marketing of the products as planned, our revenues and profits may not reach expectations or may decline. The success of the marketing organizations of our partners, as well as the level of priority assigned to the marketing of the products by these entities, which may differ from our priorities, may determine the success of the product sales. Competition in this market could also force us to reduce the prices of our products below currently planned levels, which could adversely affect our revenues and future profitability.
If we cannot develop and market our products as rapidly or cost-effectively as our competitors, we may never be able to achieve profitable operations.
Our success depends, in part, upon maintaining a competitive position in the development of products. If we cannot maintain competitive products and technologies, our current and potential distribution partners may choose to adopt the products of our competitors. Our competitors may develop products that are more effective or are less costly than our products.
Some of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, and marketing and distribution than we do.
Others may bring infringement claims against us, which could be time-consuming and expensive to defend.
Third parties may claim that the use or sale of our technologies infringe their patent rights. As with any litigation where claims may be asserted, we may have to seek licenses, defend infringement actions or challenge the validity of those patents in the patent office or the courts. If these are not resolved favorably, we may not be able to continue to develop and commercialize our product candidates. Even if we were able to obtain rights to a third party’s intellectual property, these rights may be non-exclusive, thereby giving our competitors potential access to the same intellectual property. If we are found liable for infringement or are not able to have these patents declared invalid or unenforceable, we may be liable for significant monetary damages, encounter significant delays in bringing products to market or be precluded from participating in the development, use or sale of products covered by patents of others. Any litigation could be costly and time-consuming and could divert the attention of our management and key personnel from our business operations. We may not have identified, or be able to identify in the future, U.S. or foreign patents that pose a risk of potential infringement claims. Ultimately, we may be unable to commercialize some of our product candidates as a result of patent infringement claims, which could potentially harm our business.
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Our business could be harmed if we fail to comply with regulatory requirements and, as a result, are subject to sanctions.
If we, or companies with whom we are developing technologies or products on our behalf, fail to comply with applicable regulatory requirements, the companies, and we, may be subject to sanctions, including the following:
| · | warning letters; |
| · | fines; |
| · | injunctions; |
| · | total or partial suspension of production; |
| · | criminal prosecutions. |
Risks Related to our Common Stock
Future conversions or exercises by holders of options could dilute our common stock.
Purchasers of our common stock will experience dilution of their investment upon exercise of the employee stock option and other stock options or issued common shares.
Sales of our common stock by our officers and directors may lower the market price of our common stock.
Our officers and directors beneficially own a significant aggregate of shares of our outstanding common stock. If our officers and directors, or other significant stockholders, sell a substantial amount of our common stock, it could cause the market price of our common stock to decrease.
We do not expect to pay dividends in the foreseeable future.
We intend to retain any earnings in the foreseeable future for our continued growth and, thus, do not expect to declare or pay any cash dividends in the foreseeable future.
Anti-takeover effects of certain certificate of incorporation and bylaw provisions could discourage, delay or prevent a change in control.
Our certificate of incorporation and bylaws could discourage, delay or prevent persons from acquiring or attempting to acquire us. Our certificate of incorporation authorizes our board of directors, without action of our stockholders, to designate and issue preferred stock in one or more series, with such rights, preferences and privileges as the board of directors shall determine. In addition, our bylaws grant our board of directors the authority to adopt, amend or repeal all or any of our bylaws, subject to the power of the stockholders to change or repeal the bylaws. In addition, our bylaws limit who may call meetings of our stockholders.
Dependence upon Management and Key Personnel
The Company is, and will be, heavily dependent on the skill, acumen and services of the management of the Company. The loss of the services of this individuals or any other key individuals, including specifically Chad Clovis, and certain others, for any substantial length of time would materially and adversely affect the Company’s results of operation and financial position. (See “Management”).
Item 1B. Unresolved Staff Comments
Not Applicable.
Item 1C. Cybersecurity Risk
We are committed to using technology to improve our competitive position. We depend on a variety of information systems and technologies (including cloud technologies) to manage the operations of our growing customer base. Our core business systems consist mostly of purchased and licensed software programs that integrate together and with our APP.
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We manage data security and privacy at the highest levels. Our Chief Executive Officer (CEO) is actively engaged in oversight of cybersecurity and IT infrastructure and works with
During the fiscal year ended May 31, 2025, the Company did
Given the limited nature of its operations and reliance on third-party service providers for professional services, the Company has concluded that it is not materially exposed to cybersecurity threats. To date, the Company has not experienced, nor does it anticipate, any cybersecurity incidents that would materially affect its business, financial condition, or results of operations.
The Board of Directors is
Item 2. Properties.
On September 11, 2025 the Company entered into a month to month lease for our headquarters address. This month to month lease is at a cost of $105 per month. Most Company activities are completed remotely.
The Company has entered into a operating lease for office space at 540 5th Ave SW Suite 5401720, Calgary, AB, Canada, T2P 0M2 commencing on July 1, 2025, with an early occupancy period beginning on February 1, 2025. The lease has a term of 5 years, expiring on June 30, 2030. During the early occupancy period (February 1, 2025 – June 30, 2025), no rent payments are required.
Lease right-of-use assets represent the right to use an underlying asset pursuant to the lease for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Lease right-of-use assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists. These assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using our estimated incremental borrowing rate generally applicable to the location of the lease right-of-use asset, unless an implicit rate is readily determinable. We combine lease and certain non-lease components in determining the lease payments subject to the initial present value calculation. Lease right-of-use assets include upfront lease payments and exclude lease incentives, if applicable. When lease terms include an option to extend the lease, we have not assumed the options will be exercised.
Lease expense for operating leases generally consist of both fixed and variable components. Expense related to fixed lease payments are recognized on a straight-line basis over the lease term. Variable lease payments are generally expensed as incurred, where applicable, and include agreed-upon changes in rent, certain non-lease components, such as maintenance and other services provided by the lessor, and other charges included in the lease. Leases with an initial term of twelve months or less are not recorded on the balance sheet. We recognized total lease expense of approximately $167,086 and $28,430 for the years ended May 31, 2025 and 2024, primarily related to operating lease costs paid to lessors from operating cash flows.
Item 3. Legal Proceedings.
In February 2024, we were notified of a former employee filing a lawsuit against the company for wrongful termination. We are currently counter-suing and are expecting to prevail.
We are not aware of any other legal proceedings contemplated by any governmental authority or any other party involving us or our properties.
As of the date of this report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. We are not aware of any other legal proceedings pending or that have been threatened against us or our properties.
From time to time the Company may be named in claims arising in the ordinary course of business. Currently, no legal proceedings or claims, other than those disclosed above, are pending against or involve the Company that, in the opinion of management, could reasonably be expected to have a material adverse effect on its business and financial condition.
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PART II
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is traded in United States markets by OTC Markets Group, Inc., under the symbol “KARX.” The stock currently listed for trading on the OTCQX Market maintained by OTC Markets Group, Inc. However, there is no assurance that the common stock will continue to be traded on the OTC Markets or that any liquidity exists for our shareholders.
Market Price
The Company recently began trading on the OTCQX market maintained by OTC Markets Group, Inc., but with the limited history it does not reflect the current operations of the Company. Consequentially, historical market price information is not material to the Company's operations.
As of May 31, 2025, the Company had 200,000,000 shares of common stock authorized with 81,992,857 shares issued and outstanding.
Penny Stock Regulations
Our common stock trades on the OTCQX maintained by OTC Markets Group, Inc., a privately owned company headquartered in New York City, under the symbol “KARX.” The sale price of our common stock has been less than $5.00 per share. As such, the Company's common stock is subject to provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), commonly referred to as the “penny stock rule.”
Section 15(g) sets forth certain requirements for transactions in penny stocks, and Rule 15g-9(d) incorporates the definition of “penny stock” that is found in Rule 3a51-1 of the Exchange Act. The SEC generally defines “penny stock” to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. As long as the Company's common stock is deemed to be a penny stock, trading in the shares will be subject to additional sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors.
Dividends
The Company has not issued any dividends on the common stock to date, and does not intend to issue any dividends on the common stock in the near future. We currently intend to use all profits to further the growth and development of the Company.
Holders
As of May 31, 2025, there were approximately 118 record holders of our common stock. This does not include the holders of our common stock who held their shares in street name as of that date.
Transfer Agent
Our registrar and transfer agent is VStock Transfer, LLC., 18 Lafayette Place, Woodmere, New York 11598
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| Table of Contents |
Recent Sales of Unregistered Securities
During the year ended May 31, 2025, Karbon-X Corp completed following private placement pursuant to Rule 506(c) of the Securities Exchange Act of 1934, as amended.
During the year ended May 31, 2025, the Company sold 1,926,742 shares at $.90 per share for total proceeds of $1,712,099.
On March 31, 2025, the Company converted a loan for $350,000 principal and $16,724 interest into 407,471 shares at a price of $.90 per share.
On March 31, 2025, the Company issued 57,875 shares at $2.04 per share for compensation of $118,007.
On May 22, 2025, the Company converted 360,000 options related to its stock option plan into 205,715 shares via a cashless exercise.
On May 15, 2025, 7,429 shares were issued upon exercise of 10,400 warrants in a cashless exercise.
Item 6. Selected Financial Data.
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion relates to the historical operations and financial statements of Karbon-X Corp. for the fiscal years ending May 31, 2025 and May 31, 2024.
Forward-Looking Statements
The following Management’s Discussion and Analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this Annual Report. The Management’s Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Annual Report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the heading “Risks Factors” in our various filings with the Securities and Exchange Commission. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report.
As a result of the Reorganization Agreement and the change in business and operations of the Company, a discussion of the financial results of the Company, formally known as Cocoluv, Inc., prior to February 21, 2022 is not pertinent, and, under generally accepted accounting principles in the United States the historical financial results of Karbon-X Project, Inc., the acquirer for accounting purposes, prior to the Reorganization Agreement are considered the historical financial results of the Company.
The following discussion highlights the Company’s results of operations and the principal factors that have affected its consolidated financial condition as well as its liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the Company’s consolidated financial condition and results of operations presented herein. The following discussion and analysis are based Karbon-X Corp’s audited and unaudited financial statements contained in this Current Report, which have been prepared in accordance with generally accepted accounting principles in the United States. You should read the discussion and analysis together with such financial statements and the related notes thereto.
Overview
Karbon-X Corp. was incorporated in the State of Nevada under the name Cocoluv, Inc. on September 13, 2017 and established a fiscal year end of May 31. On April 7, 2022 the Company changed its name to Karbon-X Corp.
| 13 |
| Table of Contents |
On February 21, 2022, pursuant to the terms of a Share Exchange Agreement, the Company acquired all of the issued and outstanding shares of common stock of Karbon-X Project Inc. ("Karbon-X"), and Karbon-X became the wholly owned subsidiary of the Company in a reverse merger (the "Reverse Acquisition"). Pursuant to the Reverse Acquisition, all of the issued and outstanding shares of Karbon-X common stock were converted, at an exchange ratio of 20,000-for-1, into an aggregate of 20,000,000 shares of the Company's common stock, resulting in Karbon-X becoming a wholly owned subsidiary of the Company and all debt owed to the related party of Cocoluv, Inc. was forgiven. The accompanying financial statements' share information has been retroactively adjusted to reflect the exchange ratio in the Reverse Acquisition.
Karbon-X provides customized transactional options, tailored insights, and scalable access to the Verified Emissions Reduction markets.
Karbon-X changes the marketing framework of traditional carbon marketing by engaging the public vs industry with multiple forms of technology based greenhouse gas reduction builds. Karbon-X will allow the public to purchase carbon offsets from an APP that is subscription based, with multiple levels of investment for every budget. Each subscription will support clean energy projects such as solar or wind power, methane capture, or reforestation and will reduce greenhouse gas emissions with provable, verifiable carbon credits.
Effects of COVID-19
In March 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak and the related adverse public health developments have adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. Management has determined that there has been no significant impact to the Company’s operations, however management continues to monitor the situation.
Critical Accounting Policies
The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Critical accounting policies and estimates are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The following policies involve significant judgments and estimates. Our significant accounting policies are described further in Note 1 to the consolidated financial statements.
Fair Value of Financial Instruments
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are defined as follows:
| ● | Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; |
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| ● | Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and |
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| ● | Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions. |
Other than the derivative liabilities presented below, the carrying amount of the Company’s financial assets and liabilities approximate their fair values.
The Company measures certain financial instruments at fair value on a recurring basis in accordance with ASC 820, Fair Value Measurement. As of May 31, 2025, the Company evaluated the conversion features embedded in certain convertible promissory notes and determined that they represent derivative liabilities requiring bifurcation under ASC 815-15.
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The Company uses valuation methods to estimate the fair value of the derivative liabilities associated with its convertible notes. The model incorporates significant unobservable inputs, including:
| · | Expected stock price volatility |
| · | Risk-free interest rates |
| · | Estimated time to maturity |
| · | Probability of uplisting |
| · | Expected trading volumes |
Because these inputs are unobservable and require significant management judgment, the Company has classified the derivative liabilities as Level 3 in the fair value hierarchy.
The following table summarizes the fair value hierarchy of the Company’s financial liabilities measured at fair value on a recurring basis as of May 31, 2025:
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| Level 1 |
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| Level 2 |
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| Level 3 |
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| Total |
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Derivative liabilities – convertible notes |
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| - |
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| - |
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| $ | 168,358 |
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| $ | 168,358 |
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Other financial instruments |
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| - |
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| - |
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| - |
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| - |
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Total Embedded Derivatives |
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| - |
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| - |
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| $ | 168,358 |
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| $ | 168,358 |
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The following table summarizes the changes in Level 3 derivative liabilities measured at fair value on a recurring basis.
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| May 31, 2025 |
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Balance at beginning of period |
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| - |
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Purchases / issuances |
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| 275,419 |
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Total (gains) losses recognized in earnings |
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| 54,831 |
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Settlements (net) |
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| (179,666 | ) |
Change in unrealized (gains) losses included in earnings for instruments still held at period end |
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| 18,116 |
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Balance at end of period |
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| 168,358 |
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| Table of Contents |
Revenue Recognition
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. Since ASU 2014-09 was issued, several additional ASUs have been issued to clarify various elements of the guidance. These standards provide guidance on recognizing revenue, including a five-step model to determine when revenue recognition is appropriate. The standard requires that an entity recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Under ASC 606, the Company recognizes revenue from the commercial sales of carbon credits and consulting services by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
Rates for consulting services are typically per day, per hour, or a similar basis. Consulting revenue is recognized over the period in which the service is provided.
Revenue for sales of carbon credits is recognized at a point in time when control of the credit transfers to the buyer. The Company act as a principal in all revenue transactions.
Financial Condition and Results of Operations
Fiscal year ended May 31, 2024
For the Fiscal Year ended May 31, 2024 the Company generated $412,057 in revenue from its business operations and incurred a net loss of $2,744,583. As of May 31, 2024, the Company had working capital of $2,273,655.
Sales and Revenue
For the Fiscal Year ended May 31, 2024 the Company generated $412,057 in revenue. We are just at the beginning of our commercialization efforts which we expect to improve during the current fiscal year.
Operating Expenses
Operating expenses for the Fiscal Year ended May 31, 2025 totaled $1,602,897. Operating expenses included marketing expenses of $176,476, office and general expenses, professional fees, development expenses for our app and expenses relating to a project feasibility studies. The majority of marketing expenses a one-time expense paid in Company equity.
Net Loss
Net loss from operations after income taxes and foreign currency translation loss was $2,733,200 during the Fiscal Year ended May 31, 2024. Again, this was as a result principally of marketing expenses but also for office and general expenses, app development expense and project feasibility costs.
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Fiscal year ended May 31, 2025
For the Fiscal Year ended May 31, 2025 the Company generated $3,163,772 in revenue from its business operations and incurred a net loss of $7,053,491. As of May 31, 2025, the Company had working capital of $(1,902,607).
Sales and Revenue
For the Fiscal Year ended May 31, 2025 the Company generated $3,163,772 in revenue. We are just at the beginning of our commercialization efforts which we expect to improve during the current fiscal year.
Operating Expenses
Operating expenses for the Fiscal Year ended May 31, 2025 totaled $7,449,147. Operating expenses included salary expenses of $3,774,033, professional fees of $859,088 marketing expenses of $2,044,903, and office and general expenses, development expenses for our app and expenses relating to a project feasibility studies.
Net Loss
Net loss from operations after income taxes and foreign currency translation loss was $7,084,463 during the Fiscal Year ended May 31, 2025. Again, this was as a result principally of the loss of investment related to Silviculture.
Liquidity and Capital Resources
The following table sets forth the major components of our statements and consolidated statements of cash flows for the periods presented.
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| Fiscal Year Ended May 31, 2025 |
| |
Cash used in operating activities |
| $ | (6,498,943 | ) |
Cash from financing activities |
| $ | 4,561,300 |
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Cash from (used in) investing activities |
| $ | (2,543 | ) |
Change in cash during the period |
| $ | (1,940,186 | ) |
Effect of exchange rate change |
| $ | 30,868 |
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Cash, beginning of period |
| $ | 2,675,400 |
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Cash, end of period |
| $ | 704,346 |
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| 17 |
| Table of Contents |
As of May 31, 2025, the Company had $7,325,111 in current assets.
To date, the Company has financed its operations through equity sales.
During the year ended May 31, 2025, the Company sold 1,926,742 shares at $.90 per share for total proceeds of $1,712,099.
Future Financing
In connection with its proposed business plan and possible acquisitions, in addition to the possible proceeds from this offering the Company will be required to complete substantial and significant additional capital formation. Such formation could be through additional equity offerings, debt, bank financings or a combination of any source of financing. There can be no assurance that the Company will be successful in completion of such financings.
Plan of Operations
As noted above, the continuation of our current plan of operations requires us to raise significant additional capital. If we are successful in raising capital through the sale of common shares, we believe that we will have sufficient cash resources to fund our plan of operations through 2025. If we are unable to do so, we may have to curtail and possibly cease some operations. We intend to use the net proceeds from the offering for research and development, operations, regulatory compliance, intellectual property, working capital and general corporate purposes.
We continually evaluate our plan of operations to determine the manner in which we can most effectively utilize our limited cash resources. The timing of completion of any aspect of our plan of operations is highly dependent upon the availability of cash to implement that aspect of the plan and other factors beyond our control. There is no assurance that we will successfully obtain the required capital or revenues, or, if obtained, that the amounts will be sufficient to fund our ongoing operations.
Capital Expenditures
As of May 31, 2025 we had capital expenditures of $2,543.
Commitments and Contractual Obligations
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
Off-balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Going Concern
To date the Company has generated $3,575,829 in revenues from its business operations and has incurred operating losses since inception of $11,990,834. As of May 31, 2025, the Company has working capital of ($(1,902,607). 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 initial 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 Company intends to continue to fund its business by way of private placements and advances from related parties as may be required. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.
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.
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Item 8. Financial Statements and Supplementary Data.
Contents
Part 1 | FINANCIAL INFORMATION |
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| F-1 |
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| Consolidated Balance Sheets as of May 31, 2025 and May 31, 2024 |
| F-2 |
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| Consolidated Statements of Cash Flows for the Years Ended May 31, 2025 and 2024 |
| F-5 |
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| F-6 |
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| 19 |
| Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Karbon-X Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Karbon-X Corp. (“the Company”) as of May 31, 2025 and 2024, and the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended May 31, 2025, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended May 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has generated minimal revenues from its business operations and has incurred operating losses since inception. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.
We have served as the Company’s auditor since 2022.
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September 15, 2025 |
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| F-1 |
| Table of Contents |
KARBON-X CORP.
Consolidated Balance Sheets
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| May 31, 2025 |
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ASSETS |
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Current assets |
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Investments in equity securities |
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Total current assets |
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Internally developed software, net |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Short term loan |
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Stock payable |
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Embedded Derivative |
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The accompanying notes are an integral part of these consolidated financial statements
| F-2 |
| Table of Contents |
KARBON-X CORP.
Consolidated Statements of Operations and Comprehensive Income (Loss)
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Basic and fully diluted loss per share |
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The accompanying notes are an integral part of these consolidated financial statements
| F-3 |
| Table of Contents |
KARBON-X CORP.
Consolidated Statement of Changes in Shareholders’ Equity
For the Years Ended May 31, 2025 and 2024
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Issuance of share upon convertible loan |
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Offering expenses |
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Write off investment in Silviculture |
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| ( | ) |
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Net income (loss) |
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| - |
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| ( | ) |
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| ( | ) | |||
Foreign currency translation |
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| - |
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| ( | ) |
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Balance at May 31, 2024 |
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Issuance of shares for cash, net |
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Issuance of shares for warrants |
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| ( | ) |
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Issuance of shares as compensation |
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Issuance of share upon convertible loan |
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Option compensation expense |
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Cancelled shares |
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| ( | ) |
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Net income (loss) |
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| $ | ( | ) |
| $ |
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| $ | ( | ) | |
Foreign currency translation |
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| $ | ( | ) | |
Balance at May 31, 2025 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ | (1,369,073 | ) | ||||
The accompanying notes are an integral part of these consolidated financial statements
| F-4 |
| Table of Contents |
KARBON-X CORP.
Consolidated Statements of Cash Flow
|
| For the Year Ended |
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| For the Year Ended |
| ||
|
| May 31, 2025 |
|
| May 31, 2024 |
| ||
Cash flows from operating activities |
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Net (loss) income |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash: |
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Depreciation expense |
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Loss on investment |
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Gain on change in fair value of derivative |
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Amortization of Right of Use Asset |
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Stock based compensation |
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Changes in operating assets and liabilities: |
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Sales tax receivable |
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Accounts receivable |
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| ( | ) | |
Marketable securities |
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| ( | ) |
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Stock payable |
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Securities receivable |
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Accounts payable |
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Deferred revenue |
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Other current liabilities |
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Inventory |
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| ( | ) | |
Prepaid expenses |
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| ( | ) |
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| |
Payments made on operating lease |
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Other current assets |
|
| ( | ) |
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| ( | ) ) |
Cash used in operating activities |
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Cash flows from investing activities |
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Acquisition of property and equipment |
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| ( | ) |
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Cash paid for equity method investment |
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| ( | ) | ||
Cash paid for software development |
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Cash used in investing activities |
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Cash flows from financing activities |
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Proceeds from short term loan |
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Proceeds from convertible notes |
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Debt discount on convertible notes |
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| ( | ) |
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Proceeds from issuance of shares and warrants |
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Cash provided by financing activities |
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Effect of translation changes on cash |
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Change in cash and cash equivalents |
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| ( | ) |
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| |
Cash, beginning of period |
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Cash, end of period |
| $ |
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| $ |
| ||
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Non cash investing and financing activities |
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Write off of Investment in Silviculture investment |
| $ |
|
| $ | ( | ) | |
Issuance of shares upon convertible loan |
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| |
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Supplemental disclosures |
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Cash paid for interest |
| $ |
|
| $ |
| ||
Cash paid for income taxes |
| $ |
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| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements
| F-5 |
| Table of Contents |
KARBON-X CORP.
Notes to Consolidated Financial Statements
May 31, 2025
Note 1 - Basis of Presentation and Significant Accounting Policies
Karbon-X Corp. was incorporated in the State of Nevada under the name Cocoluv, Inc. on September 13, 2017 and established a fiscal year end of May 31.
On February 21, 2022, pursuant to the terms of a Share Exchange Agreement, the Company acquired all of the issued and outstanding shares of common stock of Karbon-X Project Inc. ("Karbon-X"), and Karbon-X became the wholly owned subsidiary of the Company in a reverse merger (the "Reverse Acquisition"). Pursuant to the Reverse Acquisition, all of the issued and outstanding shares of Karbon-X common stock were converted, at an exchange ratio of
Under generally accepted accounting principles in the United States ("US GAAP"), because the combined entity will be dependent on Karbon-X's senior management, the Reverse Acquisition was accounted for as a recapitalization effected by a share exchange, wherein Karbon-X is considered the acquirer for accounting and financial reporting purposes. On the date of the reorganization, the assets and liabilities of Karbon-X have been brought forward at their book value and consolidated with Cocoluv, Inc.’s assets, which comprised of cash and cash equivalents of $
Going concern
The Company has recently began significant revenue generation from its business operations and has incurred operating losses since inception of $
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
The consolidated financial statements present the consolidated balance sheet, statements of operations, stockholders’ equity and cash flows of the Company. These consolidated financial statements are presented in the United States dollar and have been prepared in accordance with accounting principles generally accepted in the United States.
Use of Estimates and Assumptions
Preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Accordingly, actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.
| F-6 |
| Table of Contents |
Accounts Receivable
Accounts receivable represent amounts due from customers for goods or services provided by the Company. Accounts receivable are recorded at the invoiced amount, net of allowance of $
In accordance with Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326), also known as the Current Expected Credit Loss (CECL) model, the Company now utilizes a forward-looking approach to estimate expected credit losses over the lifetime of the receivables. This model considers historical loss experience, current conditions, and reasonable and supportable forecasts to assess credit risk.
Sales Tax Receivable
Sales tax receivable consists of the accumulated reclaimable GST paid by the Company on purchases made in Canada.
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets which are between three to seven years.
Costs of major additions and improvements are capitalized while expenditures for maintenance and repairs, which do not extend the life of the asset, are expensed. Upon sale or disposition of property and equipment, the cost and related accumulated depreciation and amortization are eliminated from the accounts and any resulting gain or loss is credited or charged to income. Long-lived assets held and used by us are reviewed based on market factors and operational considerations for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Inventory
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the weighted average method. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. The Company periodically reviews inventories for obsolescence and any inventories identified as obsolete are written down or written off.
Investments
The Company accounts for investments with a
During November 2023, the Company abandoned the silviculture investment deal and decided to write off the carrying value of the Equity Investment in Silviculture. Accordingly, amidst ongoing disputes which we are currently discussing, the Company has written off the carrying value of Investment of $
| F-7 |
| Table of Contents |
Fair Value of Financial Instruments
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are defined as follows:
| ● | Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; |
|
|
|
| ● | Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and |
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|
|
| ● | Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions. |
Other than the derivative liabilities presented below, the carrying amount of the Company’s financial assets and liabilities approximate their fair values.
The Company measures certain financial instruments at fair value on a recurring basis in accordance with ASC 820, Fair Value Measurement. As of May 31, 2025, the Company evaluated the conversion features embedded in certain convertible promissory notes and determined that they represent derivative liabilities requiring bifurcation under ASC 815-15.
The Company uses valuation methods to estimate the fair value of the derivative liabilities associated with its convertible notes. The model incorporates significant unobservable inputs, including:
| · | Expected stock price volatility |
| · | Risk-free interest rates |
| · | Estimated time to maturity |
| · | Probability of uplisting |
| · | Expected trading volumes |
Because these inputs are unobservable and require significant management judgment, the Company has classified the derivative liabilities as Level 3 in the fair value hierarchy.
The following table summarizes the fair value hierarchy of the Company’s financial liabilities measured at fair value on a recurring basis as of May 31, 2025:
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Derivative liabilities – convertible notes |
|
|
|
|
|
|
| $ |
|
| $ |
| ||||
Other financial instruments |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Embedded Derivatives |
|
|
|
|
|
|
| $ |
|
| $ |
| ||||
The following table summarizes the changes in Level 3 derivative liabilities measured at fair value on a recurring basis.
|
| May 31, 2025 |
| |
Balance at beginning of period |
|
|
| |
Purchases / issuances |
|
|
| |
Total (gains) losses recognized in earnings |
|
|
| |
Settlements (net) |
|
| ( | ) |
Change in unrealized (gains) losses included in earnings for instruments still held at period end |
|
|
| |
Balance at end of period |
|
|
| |
| F-8 |
| Table of Contents |
Revenue Recognition
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. Since ASU 2014-09 was issued, several additional ASUs have been issued to clarify various elements of the guidance. These standards provide guidance on recognizing revenue, including a five-step model to determine when revenue recognition is appropriate. The standard requires that an entity recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Under ASC 606, the Company recognizes revenue from the commercial sales of carbon credits and consulting services by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
Rates for consulting services are typically per day, per hour, or a similar basis. Consulting revenue is recognized over the period in which the service is provided.
Revenue for sales of carbon credits is recognized at a point in time when control of the credit transfers to the buyer. The Company act as a principal in all revenue transactions.
Foreign Currency Translation
The functional currency of the Company is the Canadian Dollar (“CAD”). For financial statement purposes, the reporting currency is the United States Dollar (“USD”).
For financial reporting purposes, the consolidated financial statements are translated into the Company’s reporting currency, USD. Asset and liabilities are translated using the closing exchange rate in effect at the balance sheet date with the resulting translation adjustments included as a separate component of shareholder’s equity through other comprehensive income (loss) in the consolidated statement of operations.
Income and expenses are translated at the average yearly rates of exchange. The Company includes realized gains and losses from foreign currency transactions in other income (expense), net in the consolidated statement of operations.
Warrants and Options
There is estimation uncertainty with respect to selecting inputs to the Black-Sholes model used to determine the fair value of warrants (Note 7) and options (Note 10). These inputs include the stock price of $
The above estimates and assumptions are reviewed regularly. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Significant Estimates
Significant estimates applied in the preparation of these financial statements include the estimated useful lives of property and equipment, the inputs used in the valuation of embedded derivatives on convertible notes. share volatility and estimated life of options and warrants in determining their fair value as well as the expected potential for the realization of deferred tax assets in determining the amount of the valuation allowance thereto.
Earnings per Common Share
The basic loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the year. The diluted loss per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. As of May 31, 2025, potential dilutive securities of approximately
| F-9 |
| Table of Contents |
Segment Reporting
ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Our Chief Operating Decision Maker, Chad Clovis, Chief Executive Officer, President, and Director, reviews financial information and allocates resources on a consolidated basis. The Company operates as a single segment and will evaluate additional segment disclosure requirements as it expands its operations.
Reclassifications
Certain amounts in the consolidated financial statements for the prior year have been reclassified to conform to the current year presentation. These reclassifications had no impact on net earnings, financial position, or cash flows.
Recently Issued Accounting Standards
The Financial Accounting Standards Board (FASB) has issued several updates relevant to the Company:
Update 2025-01: Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date Effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. | |
|
|
Update 2024-04: Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. Effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual periods. Early adoption is permitted. | |
|
|
Update 2024-03: Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. Effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. | |
|
|
| Update 2024-02: Codification Improvements—Amendments to Remove References to the Concepts Statements. Effective for public business entities for fiscal years beginning after December 15, 2024. For all other entities, effective for fiscal years beginning after December 15, 2025. Early application is permitted. |
|
|
| Update 2024-01: Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards. Effective for public business entities for annual periods beginning after December 15, 2024, and interim periods within those annual periods. For all other entities, effective for annual periods beginning after December 15, 2025, and interim periods within those annual periods. Early adoption is permitted. |
|
|
The Company is in the process of evaluating the impact these recently issued accounting standards will have on the Company’s financial statements.
| F-10 |
| Table of Contents |
Note 2 – Prepaid Expenses
As of May 31, 2025 and May 31, 2024, prepaid expenses consisted of the following:
Description |
| May 31, 2025 |
|
| May 31, 2024 |
| ||
Advertising & Promotional Agreement |
| $ |
|
| $ |
| ||
Prepaid inventory |
|
|
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|
| ||
Other Prepaids |
|
|
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|
| ||
Total |
| $ |
|
| $ |
| ||
Note 3 – Inventory
Inventory as of May 31, 2025 and May 31, 2024, consisted of the following:
Description |
| May 31, 2025 |
|
| May 31, 2024 |
| ||
Carbon Credit Inventory |
| $ |
|
| $ |
| ||
Total |
| $ |
|
| $ |
| ||
Carbon credit inventory represents carbon credits currently held for sale and are stated at the lower of cost or market.
Note 4 - Property and Equipment
The amount of property and equipment as of May 31, 2025 and May 31, 2024, consisted of the following:
Description |
| May 31, 2025 |
|
| May 31, 2024 |
| ||
Furniture and fixtures |
| $ |
|
| $ |
| ||
Computer and equipment |
|
|
|
|
|
| ||
Total property cost |
| $ |
|
| $ |
| ||
Accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
Property and equipment, net |
| $ |
|
| $ |
| ||
The Company did not purchase significant property, plant and equipment for the year ended May 31, 2025. Depreciation expense for the year ended May 31, 2025 was $
Note 5 – Convertible Notes
As of May 31, 2025, Karbon-X Corp. issued convertible promissory notes totaling USD $
During the year ended, May 31, 2025, two notes of principal $
The Company recorded discounts of $
The notes include a conversion feature, allowing the holders to convert the principal and accrued interest into the Company's common stock. Conversion is permitted at the option of the lender at any time after the earlier of:
| 1. | Twenty-four months from the date of issuance, or | |
|
| ||
| 2. | The Company’s listing on OTCQX, Nasdaq, or NYSE. | |
The conversion price is the lesser of:
| 1. | |
|
|
|
| 2. | The notes range from $ |
| F-11 |
| Table of Contents |
Conversion is further restricted to ensure that no lender converts an amount of the note that would result in owning more than
The Borrower may prepay the principal amount and any unpaid interest or any portion thereof at any time without notice, further interest, bonus, or penalty, provided that a minimum of six months’ interest shall be payable regardless of the prepayment date.
The issuance of these convertible promissory notes provided the Company with necessary capital to support its operations and strategic initiatives while offering investors the potential for equity participation in the Company's future growth.
Prepayment Option
The Company may prepay the notes at any time without penalty, provided that a minimum of six months’ interest is payable. This provision ensures lenders are compensated regardless of the prepayment date.
As of May 31, 2025, the Company owed principal of $
Note 6 – Shareholders’ Equity
During the year ended May 31, 2025, Karbon-X Corp completed following private placement pursuant to Rule 506(c) of the Securities Exchange Act of 1934, as amended.
During the year ended May 31, 2025, the Company sold
On March 31, 2025, the Company converted a loan for $
On March 31, 2025, the Company issued
On May 22, 2025, the Company converted
On May 15, 2025,
Note 7 – Warrants
During the year ended May 31, 2024, the Company issued
A detail of warrant activity for the year ended May 31, 2025 is as follows:
Description |
| Number |
|
| Weighted average exercise price |
|
| Weighted average remaining contractual life (in years) |
| |||
Outstanding May 31, 2023 |
|
|
|
| $ |
|
|
|
| |||
Exercised |
|
| ( | ) |
|
|
|
|
| - |
| |
Granted |
|
|
|
|
|
|
|
|
| |||
Expired |
|
| ( | ) |
|
|
|
|
| - |
| |
Cancelled |
|
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|
|
Outstanding May 31, 2024 |
|
|
|
| $ |
|
|
|
| |||
Exercised |
|
| ( | ) |
|
|
|
|
| - |
| |
Granted |
|
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Expired |
|
| ( | ) |
|
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Cancelled |
|
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Outstanding May 31, 2025 |
|
| - |
|
|
| - |
|
|
|
| |
| F-12 |
| Table of Contents |
Note 8 – Investments
On October 24, 2024, Karbon-X Corp. entered into a Carbon Credit Purchase Agreement with DevvStream Holdings Inc. As part of this agreement, Karbon-X Corp. received 174,953 common shares of New Pubco, a company formed from the merger of DevvStream Holdings Inc. and Focus Impact Acquisition Corp., a special purpose acquisition company (SPAC) listed on the Nasdaq Stock Exchange. The shares were issued at a deemed price of $
On October 28, 2024, Karbon-X Corp. entered into a Carbon Credit Forward Purchase Agreement with DevvStream Holdings Inc., under which Karbon-X Corp. will sell verified greenhouse gas offset or carbon credits, specifically C-Sink Credits, to DevvStream Holdings Inc. The purchase price for these credits is USD $
Initial Recognition and Measurement
At initial recognition, the common shares of New Pubco received under the agreements are classified as equity securities and measured at fair value upon initial recognition in accordance with ASC 321, "Investments—Equity Securities". The Company recorded an initial fair value of the securities based on observable market prices at the time of execution, consistent with a Level 1 fair value measurement, as the shares were actively traded on the Nasdaq Stock Exchange.
| · | For the Carbon Credit Purchase Agreement, the fair value of the |
|
|
|
| · | For the Carbon Credit Forward Purchase Agreement, the |
Upon entering into the forward purchase agreement, Karbon-X Corp. also recognized a deferred revenue liability of $
Subsequent Measurement and True-Up Provision
Subsequent to initial recognition, the equity securities are measured at fair value in accordance with ASC 321, "Investments—Equity Securities". Additionally, as the securities are denominated in a foreign currency, a currency translation adjustment (CTA) is recorded to reflect the impact of exchange rate fluctuations. The CTA is included in other comprehensive income (OCI) in accordance with ASC 830, "Foreign Currency Matters".
As of May 31, 2025, the fair market value (FMV) of New Pubco shares was USD $
| · | The fair value of investments was at the current market price of $ |
|
|
|
| · | To address the difference between the contractual price and the current market price, Karbon-X recorded a securities receivable for the true-up portion guaranteed under the agreements. The true-up provision ensures that the Company will be made whole if the market value of the shares remains below the contracted value during the adjustment period. As of May 31, 2025, no additional shares have been issued under these provisions. |
| F-13 |
| Table of Contents |
As of May 31, 2025, the balances were as follows:
Description |
| Balance (USD) |
| |
Investments in Equity Securities |
| $ |
| |
Securities Receivable |
| $ |
| |
Total Value |
| $ |
| |
Fair Value Hierarchy
The equity securities of New Pubco are measured using Level 1 inputs, as the shares are actively traded on the Nasdaq Stock Exchange.
The Company's exposure to impairment is mitigated by the true-up provision, which ensures no loss is ultimately recognized. While the securities are remeasured to fair market value quarterly, the receivable reflects the guaranteed recovery under the agreement.
Note 9 – Internally Developed Software
In accordance with ASC 350-40, the Company has capitalized internally developed software for its development of a mobile application. The software completed its application development stage and all related costs as of March 1, 2025 and any additional costs since then are being expensed as incurred. The software has been completed and placed into service; the Company began amortizing the software over its estimated useful life of three years on March 1, 2025.
As of May 31, 2025 and May 31, 2024, the Company has capitalized internally developed software of $
Note 10 - Stock Option Plan
Description of the Plan
The Company has adopted the 2024 Employees', Directors', Officers', and Consultants' Stock Option Plan (the "Plan") on May 16, 2024, which authorizes
Types of Options
The Plan provides for the issuance of both Incentive Stock Options (ISOs) and Nonstatutory Stock Options (NSOs). ISOs are intended to qualify under Section 422 of the Internal Revenue Code, while NSOs do not qualify under Section 422.
Eligibility
Options may be granted to employees, directors, officers, and consultants of the Company. Special provisions apply to individuals owning more than
Administration
The Plan is administered by the Compensation Committee of the Board of Directors, which has the authority to determine the terms and conditions of each option grant.
Shares Available
The maximum number of shares that may be issued under the Plan is
| F-14 |
| Table of Contents |
Option Terms:
| · | Exercise Price: The exercise price of options granted under the Plan must be at least 100% of the fair market value of the stock on the date of grant. |
| · | Term: Options granted under the Plan have a maximum term of ten years from the date of grant. |
| · | Vesting: The vesting schedule for options is determined by the Compensation Committee at the time of grant. |
Payment for Shares
Upon exercise of an option, the optionee may pay the exercise price in cash or cashless exercise, with the consent of the Compensation Committee, by tendering shares of common stock.
Adjustments
In the event of a stock split, merger, or other corporate event, the number of shares subject to the Plan and the exercise price of outstanding options will be adjusted as determined by the Compensation Committee.
Transferability
Options granted under the Plan are generally non-transferable, except under specific conditions as outlined in the Plan.
Termination of Employment
The Plan provides specific rules for the exercise of options upon termination of employment, including termination for cause, disability, or death.
Legal Compliance
The issuance of shares under the Plan is subject to compliance with federal and state securities laws.
Plan Duration
The Plan became effective upon adoption by the Board of Directors and options may not be granted after December 31, 2026.
Activity Under the Plan
As of May 31, 2025, the following activity has occurred under the Plan, which started in second quarter of this fiscal year :
Description |
| Number of Shares |
|
| Weighted Average Exercise Price |
|
| Weighted average remaining life (in years) |
| |||
Options Authorized |
|
|
|
|
|
|
|
|
| |||
Options Granted |
|
|
|
| $ |
|
|
|
| |||
Options Exercised |
|
|
|
| $ |
|
|
|
|
| ||
Options Forfeited |
|
| ( | ) |
| $ |
|
|
|
|
| |
Options Outstanding |
|
|
|
| $ |
|
|
|
| |||
Options Vested |
|
|
|
| $ |
|
|
|
| |||
Options Unvested |
|
|
|
| $ |
|
|
|
| |||
As of May 31, 2025, the intrinsic value of the
| F-15 |
| Table of Contents |
Fair Value of Options
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:
| · | Expected Volatility: |
| ○ | The Company determined expected volatility based on an analysis of comparable publicly traded companies in the same or similar industry. As a startup in a new industry, Karbon-X lacks sufficient historical trading data. The analysis considered market trends and the high-growth, high-risk nature of the carbon management and sustainability sector. The selected volatility reflects industry patterns of startups in comparable markets, ensuring reasonability and alignment with peer data. |
| · | Expected Life: |
| ○ | Based on the vesting schedule and anticipated exercise behavior of option holders. |
| · | Risk-Free Interest Rate: |
| ○ | The rate reflects the yield on U.S. Treasury securities with a term consistent with the expected life of the options. Given the current interest rate environment, a 5% rate is appropriate for options granted during Q3 FY2025. This aligns with the Federal Reserve’s policy rates and prevailing market conditions. |
| · | Expected Dividends: |
| ○ | The Company does not currently pay dividends, consistent with its growth-oriented business strategy. |
Stock-Based Compensation Expense
For the year ended May 31, 2025, the Company recognized stock-based compensation expense of USD $
Note 11 – Income Taxes
The Company accounts for income taxes in accordance with ASC 740, “Income Taxes.” Deferred income taxes are recognized for temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards. A valuation allowance is established when, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
Given the Company’s history of operating losses and negative evidence outweighing positive evidence, the Company has recorded a full valuation allowance against its net deferred tax assets. Accordingly, no income tax expense (benefit) has been recognized for the years presented.
| F-16 |
| Table of Contents |
Components of loss before income taxes were as follows:
|
| May 31, 2025 |
|
| May 31, 2024 |
| ||
Domestic |
|
| ( | ) |
|
| ( | ) |
Foreign |
|
| ( | ) |
|
| ( | ) |
Total |
|
| ( | ) |
|
| ( | ) |
The provision for income taxes consisted of:
|
| May 31, 2025 |
|
| May 31, 2024 |
| ||
Federal |
|
|
|
|
|
| ||
State |
|
|
|
|
|
| ||
Foreign |
|
|
|
|
|
| ||
Total income tax expense (benefit) |
|
|
|
|
|
| ||
|
| May 31, 2025 |
|
| May 31, 2024 |
| ||
Deferred tax assets: |
|
|
|
|
|
| ||
Net operating loss carryforwards |
|
| ( | ) |
|
| ( | ) |
Valuation allowance |
|
| ( | ) |
|
| ( | ) |
Net deferred tax assets |
|
|
|
|
|
| ||
Deferred tax liabilities |
|
|
|
|
|
| ||
Net deferred tax asset (liability) recognized |
|
|
|
|
|
| ||
As of May 31, 2025, the Company had U.S. federal and state net operating loss (“NOL”) carryforwards of approximately $
Note 12 – Commitments and Contingencies
Legal Proceedings
In February 2024, Karbon-X were notified of a former employee filing a lawsuit against the company for wrongful termination. The Company is currently counter-suing and is expecting to prevail.
Operating Leases
The Company has entered into a operating lease for office space commencing on July 1, 2025, with an early occupancy period beginning on February 1, 2025.
Lease right-of-use assets represent the right to use an underlying asset pursuant to the lease for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Lease right-of-use assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists. These assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using our estimated incremental borrowing rate generally applicable to the location of the lease right-of-use asset, unless an implicit rate is readily determinable. We combine lease and certain non-lease components in determining the lease payments subject to the initial present value calculation. Lease right-of-use assets include upfront lease payments and exclude lease incentives, if applicable. When lease terms include an option to extend the lease, we have not assumed the options will be exercised.
Lease expense for operating leases generally consist of both fixed and variable components. Expense related to fixed lease payments are recognized on a straight-line basis over the lease term. Variable lease payments are generally expensed as incurred, where applicable, and include agreed-upon changes in rent, certain non-lease components, such as maintenance and other services provided by the lessor, and other charges included in the lease. Leases with an initial term of twelve months or less are not recorded on the balance sheet. We recognized total lease expense of approximately $
| F-17 |
| Table of Contents |
Future minimum lease payments under operating leases that have initial noncancelable lease terms in excess of one year at May 31, 2025 were as follows:
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS UNDER OPERATING LEASES |
| Total |
| |
Calendar Year Ended |
|
|
| |
2025 |
| $ |
| |
2026 |
|
|
| |
2027 |
|
|
| |
2028 |
|
|
| |
2029 |
|
|
| |
Thereafter |
|
|
| |
Total lease payment |
|
|
| |
Less: Imputed interest |
|
| ( | ) |
Operating lease liabilities |
|
|
| |
|
|
|
|
|
Operating lease liability - current |
|
|
| |
Operating lease liability - non-current |
| $ |
| |
SCHEDULE OF OTHER SUPPLEMENTAL INFORMATION UNDER OPERATING LEASE |
|
|
| |
Weighted average discount rate |
|
| % | |
Weighted average remaining lease term (years) |
|
|
| |
Note 13 – Subsequent Events
On June 1, 2025, the Company entered into an Asset Purchase Agreement with Allcot AG to acquire specified assets (including certain subsidiary shares, intellectual property, database, project pipeline, and contract rights) for cash consideration of $
The Company converted four convertible notes in August 2025 of principal $
On August 5, 2025, the Company issued a $
In July 2025, the Company issued a $
In August 2025, due to a supplier issue, $
Effective July 29, 2025, Christopher Mulgrew is no longer Chief Financial Officer of the Company and Adriana Ebell was appointed Acting Chief Financial Officer.
The Company evaluated subsequent events through September 15, 2025 and identified no other events requiring recognition or additional disclosure.
| F-18 |
| Table of Contents |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
See “Item 14. Principal Accounting Fees and Services.”
Item 9A. Controls and Procedures
Disclosure Controls and Procedures.
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. With the participation of our Chief Executive Officer and Chief Financial Officer, management evaluated the effectiveness of the Company’s disclosure controls and procedures as of May 31, 2025 under Rules 13a-15(e) and 15d-15(e).
Management’s Annual Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
Our management evaluated the effectiveness of the Company’s internal control over financial reporting as of May 31, 2025. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 Internal Control — Integrated Framework. Based on this evaluation, our management concluded that, as of May 31, 2025, our internal controls over financial reporting were not effective due to material weaknesses arising from limited accounting personnel, which results in insufficient segregation of duties and inadequate review controls over complex and non-routine transactions.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permits us to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting.
There were no changes in our internal control over financial reporting that occurred during the fiscal year ended May 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
Item 10. Directors, Executive Officers and Corporate Governance
The table below reflects the Company's executive officers and directors. There is no agreement or understanding between the Company and each current or proposed director or executive officer pursuant to which he was selected as an officer or director. The address for each such officer and director is 6575 West Loop South, Suite 500, Bellaire, TX 77401.
Name |
| Age |
| Positions and Offices |
|
|
|
|
|
Chad Clovis |
| 46 |
| Chief Executive Officer, President and Director |
Brett Hull |
| 61 |
| Director |
Justin Bourque |
| 44 |
| Director |
The Directors and Officers named above will serve until the next annual meeting of the stockholders or until their respective resignation or removal from office. Thereafter, Directors are anticipated to be elected for one-year terms at the annual stockholders’ meeting. Officers will hold their positions at the pleasure of the Board of Directors.
| 20 |
| Table of Contents |
Chad Clovis, Chief Executive Officer, President and Director
Chad Clovis is the Chief Executive Officer of Karbon-X Corp. which he founded in 2022. Mr. Clovis has been the CEO of Chenn Holdings since 2013 performing business development and business expansion services for multiple businesses in the dirt works and oilfield transportation space. In 2014 he was the founder and Operations Manager of CCV Ltd a full-service oilfield trucking company which was successfully sold to Petrogas Logistics in 2016 where Mr.Clovis became the Manager of Northern Operations. After founding Karbon-X in early 2022 Mr.Clovis completed a reverse take over of Cocoluv, Inc., an OTC listed company, and raised substantial funds to operate the business through its growth period. Chad Clovis is 44 years old.
Chad Clovis is a professional operator with more then 80,000 hours operating various pieces of oilfield equipment including high pressure chemical pumpers, sour sealed tank units, high pressure water blast units and hydro vac units of various configurations. Mr. Clovis attended BCIT in 2011 to obtain the National Safety Officer designation, Leadership in Business Excellence designation and Janus Mentor Training designation which he graduated with honors.
Brett Hull, Director
Brett Andrew Hull is a Canadian–American former ice hockey player and general manager, and currently an executive vice president of the St. Louis Blues of the National Hockey League (NHL). He played for the Calgary Flames, St. Louis Blues, Dallas Stars, Detroit Red Wings, and Phoenix Coyotes between 1986 and 2005. His career total of 741 goals is fifth highest in NHL history, and he is one of five players to score 50 goals in 50 games. He was a member of two Stanley Cup winning teams — 1999 with the Dallas Stars and 2002 with the Detroit Red Wings. In 2017 Hull was named one of the 100 Greatest NHL Players in history.
Known as one of the game's greatest snipers, Hull was an elite scorer at all levels of the game. He played college hockey for the University of Minnesota-Duluth Bulldogs, where he scored 52 goals in 1985–86. He scored 50 the following year with the Moncton Golden Flames of the American Hockey League (AHL) and had five consecutive NHL seasons of at least 50 goals. His 86 goals in 1990–91 is the third-highest single-season total in NHL history, with the first two being the same person, Wayne Gretzky. Hull won the Hart Memorial Trophy and Lester B. Pearson Award that year as the league's most valuable player. He was named a first team all-star on three occasions and played in eight NHL All-Star Games.
Justin Bourque, Director
Justin Bourque is an experienced and passionate leader with 27 years of diverse Industry and Indigenous Community development experience.
Presently, Justin is the Founder and President of Asokan Generational Developments, a consulting firm providing strategic advisory services focused on bridging the gap between Industry and Indigenous Communities.
As a passionate Indigenous leader, Justin is deeply committed to enhancing the relationships between corporations and Indigenous Communities. with extensive experience in both, he sees the value in mutually beneficial relationships. Building Indigenous resilience, economic sovereignty and shareholder value through development and management of meaningful partnerships between Indigenous Communities and Industry. He has been at the forefront of ideating, developing and successfully executing a number of major projects, both greenfield and brownfield, representing Indigenous Communities as well as corporate clients. These projects included a number of complex Indigenous equity ownership transactions, where he has served in diverse roles, including as an advisor, management committee representative, project lead, lead negotiator, Indigenous Community leader, President and Director of the Board post-closing. Most recently, Justin has played an integral role in three major Indigenous equity transactions worth approximately $2.6 billion and involving more than 35 unique Indigenous Communities throughout Alberta. As part of executing these transactions, Justin supported the raise of nearly $0.5 billion in capital.
In recognition of his exemplary leadership and invaluable contributions to Indigenous Communities, in December 2022, Justin was awarded Queen Elizabeth II’s Platinum Jubilee Medal. In November 2023, Asokan was added to the Indigenomics Institute 10 To Watch List for demonstrating excellence and leadership in the emerging $100 billion Indigenous economy. Justin was also named one of Canada’s Top 20 Dynamic CEOs by The CEO Publication; One of 10 Most Innovative Business Leaders to Follow in 2022 by CIO Views; and Top 50 Under 50 by YMM. Justin has also been awarded the JA Northern Alberta Business Hall of Fame "Innovator" Award for his forward-thinking leadership and innovative spirit during his tenure as CEO of Willow Lake Métis Nation in Anzac, Alberta. During his time as CEO, Justin built the Nation’s innovative governance and ESG frameworks, and forged several strategic partnerships to create revenue and job opportunities, spur community development, and secure the Nation’s future. Under his leadership, Willow Lake Métis became a self-governing Nation. In addition, through the Sohkastwawin initiative, which in Cree means “the act of being resilient”, the previously landless Nation purchased 205 acres of land that it plans to reclaim and develop in a sustainable way, providing their community a home for the first time.
| 21 |
| Table of Contents |
Involvement in Certain Legal Proceedings
No director, executive officer, promoter or control person of Karbon-X has, during the last ten years: (i) been convicted in or is currently subject to a pending a criminal proceeding (excluding traffic violations and other minor offenses); (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to any federal or state securities or banking or commodities laws including, without limitation, in any way limiting involvement in any business activity, or finding any violation with respect to such law, nor (iii) any bankruptcy petition been filed by or against the business of which such person was an executive officer or a general partner, whether at the time of the bankruptcy or for the two years prior thereto.
Committees of the Board
Decisions of the Board of Directors are generally taken by written unanimous resolutions. The current Board comprises two members and is intending to hold regularly scheduled meetings. The entire board provides the functions of Audit, Compensation and Governance committees until such time as charters for these committees can be adopted and they can be populated by independent directors.
Family Relationships
None
Compliance with Section 16(A) of The Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that our directors and executive officers and persons who beneficially own more than 10% of our common stock (referred to herein as the “reporting persons”) file with the SEC various reports as to their ownership of and activities relating to our common stock. Such reporting persons are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based solely upon a review of copies of Section 16(a) reports and representations received by us from reporting persons, and without conducting any independent investigation of our own during the fiscal year ended May 31, 2024, all forms required, if any, were filed with the SEC by such reporting persons.
Changes in Nominating Procedures
None
Item 11. Executive Compensation
Summary Compensation Table
Compensation Discussion and Analysis
Executive Officer and Director Compensation of the Company
Summary Compensation Table
The following table sets forth the total compensation paid to, or accrued by, the Named Executive Officers and any other employees earning over $100,000 per year for May 31, 2024 and May 31, 2025. No restricted stock awards, long-term incentive plan payout or other types of compensation were paid to these executive officers during that period.
Name |
| Year |
| Fees Earned or paid in cash ($) |
|
| Stock awards ($) |
|
| Option Awards ($) |
|
| Non-equity incentive plan compensation ($) |
|
| Change in pension value and nonqualified deferred compensation earnings |
|
| All other compensation ($) |
|
| Total ($) |
| |||||||
Chad Clovis |
| 2024 |
| $ | 180,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 180,250 |
| |||||
|
| 2025 |
| $ | 396,076 |
|
|
| 70,751 |
|
|
|
|
|
|
|
|
|
|
|
| 72,750 |
|
|
| 539,577 |
| |||
Christopher Mulgrew |
| 2024 |
| $ | - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2025 |
| $ | 282,077 |
|
|
| 47,312 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 49,312 |
|
|
| 378,701 |
|
| 22 |
| Table of Contents |
Employment Agreements
On September 16, 2024 the Company entered into an employment contract with Chad Clovis as President of Karbon-X Project. Pursuant to the contract Mr. Clovis is paid an annual salary of $450,000.
Equity Compensation Plans
On June 24, 2024 the Company adopted the 2024 Employees’ Directors’ Officers’ and Consultants’ Stock Option Plan. Which authorizes the Company to issue up to 5,000,000 options to purchase common stock at a price, term and vesting as determined by the Board of Directors. The plan was amended to authorize the issuance of up to 15,000,000 options to purchase common stock. Also on June 24, 2024 the Company issued 2,105,000 options to employees and officers exercisable for five years at an exercise price of $0.75 per share.
The Board may grant incentive bonuses to our executive officers and/or future executive officers in its sole discretion. Bonuses will be granted if the Board believes such bonuses are in the Company’s best interest, after analyzing our current business objectives and growth, if any, and the amount of revenue we are able to generate each month, which revenue is a direct result of the actions and ability of such executives. Other than our bonus plan we have no current equity compensation plans.
All compensation and stock option plans for executives and employees will be governed by the Compensation and Governance Committee.
Expense Reimbursement
We will reimburse our officers and directors for reasonable expenses incurred during the course of their performance.
Retirement Plans and Benefits.
None.
Director Compensation
We do not have a standard compensation arrangement for directors. The Company intends to form a Compensation and Governance Committee to make such determinations, with approval by both the Board of Directors and the Audit Committee.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth the number of shares of common stock beneficially owned by (i) those persons or groups known to beneficially own more than 5% of the Company's common stock, (ii) each current director and executive officer of the Company, and (iii) all the current executive officers and directors as a group. The information is set forth as of the time immediately after closing the reorganization.
Pursuant to Rule 13d-3 under the Exchange Act, a beneficial owner of securities is a person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has, or shares, voting power and/or investment power with respect to the securities, and any person who has the right to acquire beneficial ownership of the security within 60 days through any means, including the exercise of any option, warrant or right or the conversion of a security. Any shares that are not outstanding that a person has the right to acquire are deemed to be outstanding for the purpose of calculating the percentage of beneficial ownership of such person, but are not deemed to be outstanding for the purpose of calculating the percentage of beneficial ownership of any other person.
| 23 |
| Table of Contents |
After the acquisition of Karbon-X Project, the following table represents a list of the principal stockholders:
Title of Class |
| Name of Beneficial Owner |
| Amount of Beneficial Ownership |
|
| Percentage of Stock |
| ||
|
|
|
|
|
|
|
|
| ||
Common Stock |
| Chad Clovis, Chief Executive Officer, President and Director (1) |
|
| 16,500,000 |
|
|
| 20.4 | % |
Common Stock |
| CM Equity AG |
|
| 5,000,000 |
|
|
| 6.21 | % |
Common Stock |
| Morsevo Trading, Inc |
|
| 4,662,125 |
|
|
| 5.8 | % |
Common Stock |
| Hummingbird Trust |
|
| 4,225,000 |
|
|
| 5.2 | % |
Common Stock |
| Tyler Skinner |
|
| 4,708,334 |
|
|
| 5.8 | % |
Common Stock |
| CBKT Ventures |
|
| 4,074,250 |
|
|
| 5.0 | % |
Common Stock |
| Brett Hull, Director |
|
| 152,777 |
|
|
| 0.2 | % |
Common Stock |
| Justin Bourque, Director |
|
| 111,110 |
|
|
| 0.1 | % |
Common Stock |
| All directors and officers as a group (4 persons) |
|
| 16,763,887 |
|
|
| 20.8 | % |
(1) | Consists of 14,500,000 shares held directly by Mr. Clovis and 2,000,000 shares held by Jennifer Clovis, who is the spouse of Mr. Clovis. |
| 24 |
| Table of Contents |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
Director Independence
The Company is not currently listed on any national exchange, or quoted on any inter-dealer quotation service, that imposes independence requirements on any committee of the Company’s directors, such as an audit, nominating or compensation committee. The Company currently does not currently have any independent directors on its Board.
Item 14. Principal Accounting Fees and Services
Audit Fees
The aggregate fees billed for the fiscal year ended May 31, 2025 and 2024, for professional services rendered by the principal accountants for the audit of the registrant's annual financial statements and review of financial statements included in the registrant's Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were: $67,099 and $46.700, respectively.
Audit Related Fees
Consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the SEC and other accounting consulting. These fees amounted to $0 for May 31, 2025 and 2024, respectively.
Tax Fees
Consists of all services performed by a principal accountant’s tax division except those related to the audit. Typical services include tax compliance, tax planning, and tax advice. Tax compliance services generally include preparation of original and amended tax returns as well as claims for tax refunds. Tax planning and tax advice services would include, but are not limited to, assistance with tax audits and appeals, requests for tax rulings, and tax planning related to mergers and acquisitions. These fees amounted to $0 for May 31, 2025 and 2024, respectively.
All Other Fees
Other than the services reported above, no other fees billed for professional services provided by the principal accountant.
Audit Committee Pre-Approval Policies
Our Board of Directors performing as the Audit Committee by their Chair has approved the principal accountant's performance of services for the audit of the registrant's annual financial statements and review of financial statements included in our Report on Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal year ending May 31, 2025. Audit-related fees and all other fees, if any, were approved by the Board of Directors.
| 25 |
| Table of Contents |
Item 15. Exhibits, Financial Statement Schedules
The following exhibits are filed as part of this Annual Report.
The following Exhibits are included herein:
Exhibit No. |
| Description |
| Articles of lncorporation of Cocoluv, Inc. dated September 13, 2017. | |
| ||
| ||
| ||
| ||
| ||
| ||
| Karbon-X Corp. 2024 Employees, Officers’, Directors’ and Consultants’ Stock Option Plan, as amended | |
| ||
| ||
| ||
| ||
| ||
| ||
| Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Executive Officer | |
| Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Financial Officer | |
| ||
| ||
101.INS* |
| Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |
101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document. |
101.CA* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB* |
| Inline XBRL Taxonomy Extension Labels Linkbase Document. |
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
*Filed herewith
| 26 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment No 1 to the Company’s Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
| Karbon-X Corp. |
| |
|
|
|
|
Date: September 16, 2025 | By: | /s/ Chad Clovis |
|
|
| Chad Clovis |
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| Chief Executive Officer (principal executive officer and principal financial officer) |
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: September 16, 2025 |
| /s/ Chad Clovis | |
| Chad Clovis, Director | ||
| and Chief Executive Officer | ||
| |||
Date: September 16, 2025 |
| /s/ Adriana Ebell | |
| Adriana Ebell Acting Chief Financial Officer | ||
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Date: September 16, 2025 |
| /s/ Brett Hull |
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| Brett Hull, Director |
| |
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Date: September 16, 2025 |
| /s/ Justin Bourque |
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| Justin Bourque, Director |
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| 27 |