Financial Analysis

Note 23 Commitments and Contingencies Legal Proceedings In February 2024, the Company was notified of a former employee filing a lawsuit against the Company for wrongful termination. The Company has settled this suit. Operating Leases The Company has entered into an operating lease for office space in Calgary, Alberta commencing on July 1, 2025, with an early occupancy period beginning on February 1, 2025. The lease has a term of 5 years, expiring on June 30, 2030. Monthly payments, which are denominated in Canadian dollars and include the tenants proportionate share of occupancy costs, are CAD 13,070 to June 2026, CAD 14,179 to June 2027, CAD 14,733 to June 2029 and CAD 15,288 thereafter. The Company subleases part of the Calgary premises to a related party under common ownership. The sublease is a verbal arrangement running month to month at CAD $4,500 per month plus goods and services tax, against the head lease cost of CAD $14,179 per month. Because either party may terminate on one months notice without more than an insignificant penalty, the enforceable lease term is one month and the sublease is classified as an operating lease. The Company accounts for the head lease and the sublease separately; the right-of-use asset and the related lease liabilities remain recognized. Sublease income of $39,173 was recognized for the year ended May 31, 2026 within other income (expense) rather than within revenue. At May 31, 2026 sublease rent receivable was $41,132. Management asse …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

Year ended May 31, 2026 May 31, 2025 United States $ 1,415,055 $ - Canada 6,054,808 3,163,772 Cyprus 47,878,698 - Ireland 425,135 - Colombia 86,626 - Spain - - Total revenue $ 55,860,322 $ 3,163,772

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"Note 18 Stock Option Plan Description of the Plan The Company has adopted the 2024 Employees', Directors', Officers', and Consultants' Stock Option Plan (the ""Plan"") on May 16, 2024, which authorizes the issuance of options to purchase up to 5,000,000 shares of common stock. The Plan was amended to authorize the issuance of options to purchase up to 15,000,000 shares of common stock. The Plan is designed to attract, retain, and motivate employees, directors, officers, and consultants by providing them with an opportunity to acquire a proprietary interest in the Company. 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 10% of the Company's stock. 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 15,000,000 shares of common stock, as amended. Option Terms: Exercise Price: The exercise price of incentive stock options granted under the Plan must be at least 100% of the fair market value of the stock on the date …

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Note 19 Income Taxes The Company accounts for income taxes in accordance with ASC 740, Income Taxes. Deferred income taxes are recognized for temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards. A valuation allowance is established when, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Given the Companys history of operating losses and negative evidence outweighing positive evidence, the Company has recorded a full valuation allowance against its net deferred tax assets. Accordingly, no income tax expense (benefit) has been recognized for the years presented. Components of loss before income taxes were as follows: May 31, 2026 May 31, 2025 Domestic (6,866,480 ) (2,474,242 ) Foreign (6,723,066 ) (4,579,250 ) Total (13,589,546 ) (7,053,492 ) The provision for income taxes consisted of: May 31, 2026 May 31, 2025 Federal - - State - - Foreign - - Total income tax expense (benefit) - - May 31, 2026 May 31, 2025 Deferred tax assets: Net operating loss carryforwards 5,027,478 2,328,333 Accrued compensation and other 22,739 - Allowance for credit losses 131,921 - Valuation allowance (5,182,138 ) (2,328,333 ) Net deferred tax assets - - Deferred tax liabilities - - Net deferred tax asset (liability) - - As of May 31, 2026, the Company had net operating loss carryforwards in each of its t …

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Note 12 Long-Term Debt On November 24, 2025 the Company drew a note from a lender with a face amount of $5,000,000. The note bears interest at 18% per annum, has a five-year term and matures in November 2030. Cash of $4,788,155 was received and $211,845 was withheld at closing, comprising $134,762 recorded as a debt discount and $77,083 of prepaid interest recorded within prepaid expenses. Amortization of $15,722 was recognized in interest expense for the year ended May 31, 2026, leaving $119,040 of unamortized debt discount and issuance costs at that date. Long-term debt consisted of the following: The note is secured by a security interest in substantially all of the present and future assets of Karbon-X Corp., including a collection account into which specified receipts are deposited, and is supported by a limited-recourse personal guarantee from the Companys Chief Executive Officer (Note 21). The loan agreement restricts the Company from granting other liens on its assets, subject to permitted exceptions. See Note 13 for the carrying amount of the assets pledged as collateral. Description May 31, 2026 May 31, 2025 Term note face amount $ 5,000,000 $ - Unamortized debt discount and issuance costs (119,040 ) - Total long-term debt $ 4,880,960 $ - Principal amortizes at $833,333 per month beginning with payment 55. Scheduled principal maturities of the note are $nil in each of the fiscal years ending May 31, 2027, 2028, 2029 and 2030 and $5,000,000 in the fiscal year ending …

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The Financial Accounting Standards Board (FASB) has issued several updates relevant to the Company: Update 2025-01: Income StatementReporting Comprehensive IncomeExpense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date Effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the disclosure impact; the update does not affect recognition or measurement and is not expected to have a material effect. Update 2023-09: Income Taxes (Topic 740): Improvements to Income Tax Disclosures. Effective for public business entities for annual periods beginning after December 15, 2024. Adopted for the year ended May 31, 2026; the expanded rate reconciliation categories and income taxes paid disclosures are reflected in Note 19 and did not affect recognition or measurement. Update 2024-04 : DebtDebt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. Effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual periods. Early adoption is permitted. Not yet adopted; the Company is evaluating the update and does not expect a material effect. Update 2024-03 : Income StatementReporting Comprehensive IncomeExpense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. Effective …

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Note 21 Related Party Transactions During the year ended May 31, 2026 the Company drew a note of $80,000 from C. Clovis, a director and officer of the Company. The note was non-interest bearing, was drawn on July 9, 2025 and was repaid on December 1, 2025. No amount remained outstanding at May 31, 2026. At May 31, 2026 the Company had a receivable of $29,253 due from an entity related to the Company through common ownership with members of management (ownership that does not constitute control), recorded within other assets, representing travel and related costs incurred by the Company and recharged under a cost-sharing arrangement. The Company also subleases part of its Calgary premises to the same related party and had sublease rent receivable of $41,132 at that date. See Note 23. The Company is party to an employment contract with Chad Clovis, Chief Executive Officer, President and Director, under which Mr. Clovis is paid an annual salary of $450,000. Mr. Clovis has provided a limited-recourse personal guarantee of the term note described in Note 12 and a personal guarantee of one of the receivables financing arrangements described in Note 13. No consideration was paid to Mr. Clovis for these guarantees and no amount has been recognized in respect of them. …

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Note 7 Other Assets, Maintenance Agreement and Consideration Payable to a Customer On January 8, 2026, the Company entered into a Maintenance Agreement with an institutional lender that also holds convertible notes of the Company (the Lender) to provide property maintenance and related services at a commercial facility in Corsicana, Texas through October 2035. Fees are payable monthly and are calculated as gross rental income from the facility, less specified operating costs and a maintenance reserve. As consideration for the Lenders execution of the agreement, the Company issued the Lender a convertible promissory note with an original principal amount of $1,682,000 and received no cash proceeds (see Note 11). The Company accounts for the $1,682,000 as consideration payable to a customer and a reduction of the transaction price under ASC 606-10-32-25. Under ASC 606-10-32-27, the reduction is recognized at the later of the date the related revenue is recognized or the date the consideration is promised. The Company began performing services under the agreement in January 2026. Monthly fees earned have been applied against the outstanding balances of the Lenders Master Note Tranche 1 and Tranche 2 rather than settled in cash. Fees earned from January through May 2026 were $61,431, representing five months of variable fees. Because the consideration payable to the customer is unwound at 100% of the fees recognized, the fees are offset in full by the reduction in the transaction …

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"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 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. As part of the Reverse Acquisition, on April 14, 2022 the Company changed its name to Karbon-X Corp. 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 da …

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Note 14 Shareholders Equity During the year ended May 31, 2026, Karbon-X Corp. completed the following issuances of common stock. During the year ended May 31, 2026, the Company sold 380,000 shares of common stock for total cash proceeds of $242,000. During the year ended May 31, 2026, the Company issued 1,842,061 shares of common stock as compensation with a recorded value of $681,069, 24,038 shares in settlement of a finders fee with a recorded value of $12,980, and 88,000 commitment shares in connection with note financings with a recorded value of $54,040. During the year ended May 31, 2026, the Company issued 10,558,072 shares of common stock upon conversion of convertible notes payable and accrued interest totaling $7,008,995, which is presented in the consolidated statements of changes in shareholders equity and of cash flows net of $15,020 of costs applied against one conversion, or $6,993,975. During the year ended May 31, 2026, the Company recorded option compensation expense of $582,551 and recognized $166,822 in additional paid-in capital on the issuance of warrants, representing the allocation of note proceeds to the detachable warrants on a relative fair value basis under ASC 470-20-25-2. At May 31, 2026 there were 94,885,028 shares of common stock issued and outstanding. …

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"Note 24 Subsequent Events The Company evaluated subsequent events through the date these consolidated financial statements were issued. On July 7, 2026 the Company and DevvStream Holdings, Inc. (""DEVS"") executed a Mutual Termination Agreement, effective May 29, 2026, terminating the Carbon Credit Forward Purchase Agreement dated October 28, 2024 in its entirety with a full mutual release, expressly including the Companys obligation to deliver carbon credits and DEVSs obligation to issue the consideration shares. Neither party had performed under the forward. The termination was effective before the balance sheet date and the securities receivable and deferred revenue previously carried in respect of the forward were derecognized at May 31, 2026 with no effect on net loss; see Note 16. On June 24, 2026 the Company and DEVS entered into a Share Cancellation Addendum under which the 17,495 shares held by the Company were cancelled and 4,641,621 additional shares were issued, based on the 20-day volume weighted average price of $0.2450 at May 5, 2026. The shares are held and measured at fair value at May 31, 2026 and the subsequent cancellation and exchange are disclosed rather than recorded. The exchange settles the remaining securities receivable under the Carbon Credit Purchase Agreement in shares: the cancelled shares and the related securities receivable together become 4,641,621 shares, with no change in the aggregate carrying value of the position. Also on June 24, 2026 …

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Note 14 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 settled this lawsuit in 2026. 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. 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 …

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Note 5 Convertible Notes The Company has issued convertible promissory notes to multiple investors. The notes bear simple interest at 10% per annum or 10% per quarter and mature within one to three years from issuance. As of February 28, 2026, aggregate original principal issued was $7,046,000 and the net carrying value was $5,397,219 , net of unamortized debt discounts. Accrued interest payable on the convertible notes was $868,975. Embedded derivative liabilities related to variable-price conversion features had an aggregate fair value of $1,207,265. The Mast Hill Fund Master Note tranches were each issued together with detachable common stock purchase warrants; those warrants are described in Note 12. The Mast Hill Maintenance Agreement note ($1,682,000) was issued in exchange for securing a maintenance arrangement and did not result in cash proceeds to the Company. The following table summarizes the outstanding convertible notes as of February 28, 2026: Lender Issue Date Maturity Original Principal Net Carrying Value Classification Mast Hill Tranche 1 1/8/2026 1/9/2027 $ 500,000 $ 186,361 Current Mast Hill Tranche 2 2/18/2026 2/18/2027 $ 500,000 $ 147,911 Current Maintenance Agreement 1/9/2026 1/9/2027 $ 1,682,000 $ 1,095,987 Current FirstFire Global Opportunities 10/31/2025 10/31/2026 $ 275,000 $ 166,583 Current Jefferson Street Capital 10/30/2025 10/30/2026 $ 165,000 $ 107,100 Current Debtfund L.P. 11/14/2025 8/14/2026 $ 174,000 $ 62,773 Current Hedera Foundation SECZ 8 …

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"Note 13 - 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 the issuance of options to purchase up to 5,000,000 shares of common stock. The Plan was amended to authorize the issuance of options to purchase up to 15,000,000 shares of common stock. The Plan is designed to attract, retain, and motivate employees, directors, officers, and consultants by providing them with an opportunity to acquire a proprietary interest in the Company. 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 10% of the Company's stock. 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 5,000,000 shares of common stock. 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 …

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The Financial Accounting Standards Board (FASB) has issued several updates relevant to the Company: Update 2025-01: Income StatementReporting Comprehensive IncomeExpense 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 2025-05: Financial InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. Effective for fiscal years beginning after December 15, 2025. Early adoption is permitted. Update 2024-04 : DebtDebt 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 StatementReporting Comprehensive IncomeExpense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. Effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the impact of the above provisions on its consolidated financial statements Update 2024-02 : Codification ImprovementsAmendments to Remove References to the Concepts Statements. Effective and adopted for p …

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Note 10 Contract Asset Maintenance Agreement The Company capitalizes costs incurred to fulfill a contract with a customer in accordance with ASC 340-40-25-5 when such costs (i) relate directly to an identified contract, (ii) generate or enhance resources that will be used to satisfy performance obligations under the contract, and (iii) are expected to be recovered through future contract revenues. Capitalized fulfillment costs are amortized on a straight-line basis over the expected period of benefit as the related performance obligations are satisfied. Maintenance Agreement In connection with the issuance of the Maintenance Note in the principal amount of $1,682,000, the Company entered into a Maintenance Agreement pursuant to which it will provide property maintenance services on a residential rental property. The note consideration issued represents the Company's cost to obtain and establish this service arrangement and has been capitalized as a contract asset in accordance with ASC 340-40-25-5. The asset will be amortized on a straight-line basis over the expected service term of approximately 9.73 years as performance obligations are satisfied and revenues are recognized. As of February 28, 2026, no amortization has been recorded as the Company has not yet commenced delivery of maintenance services. Operations are in the process of being established. …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

"Note 1 Background, Basis Of Presentation And Significant Accounting Policies Business Operations 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 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. Karbon-X Project Inc. was incorporated in British Columbia on February 11, 2022 and established a fiscal year end of May 31. The accompanying financial statements' share information has been retroactively adjusted to reflect the exchange ratio in the Reverse Acquisition. As part of the Reverse Acquisition, on April 14, 2022 the Company changed its name to Karbon-X Corp. 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 f …

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Note 9 Stockholders Equity During the nine months ended February 28, 2026, the Company issued 130,000 shares of common stock for cash proceeds of $117,000 at $0.90 per share. During the nine months ended February 28, 2026, the Company converted notes with aggregate principal of $2,193,195 and accrued interest of $90,954 into 4,870,291 shares of common stock at conversion prices ranging from $0.45 to $0.90 per share. In addition, on February 12, 2026, the Company converted $8,612 of principal and $4,658 of accrued interest under the Mast Hill Tranche 1 into 45,600 shares at $0.329375 per share (see Note 5). During the nine months ended February 28, 2026, the Company issued 1,266,099 shares of common stock for compensation valued at $586,069, at prices ranging from $0.37 to $0.90 per share. In addition, the Company recognized stock-based compensation expense of $462,697 related to stock option grants during the period. During the nine months ended February 28, 2026, the Company issued 88,000 commitment shares valued at $54,040, at prices ranging from $0.52 to $0.70 per share, to three note holders in connection with the issuance of their respective convertible notes. The fair value of the commitment shares is reflected in additional paid-in capital and as a debt discount against the respective notes (see Note 5). During the nine months ended February 28, 2026, the Company issued warrants to purchase 508,064 shares of common stock in connection with the Mast Hill Fund Master Not …

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Note 15 Subsequent Events The Company has evaluated subsequent events through the date these financial statements were issued and has identified the following events requiring disclosure. Share Issuances Subsequent to February 28, 2026, the Company issued an aggregate of 775,300 shares of common stock in connection with the following transactions: The Company issued 250,000 shares of common stock as compensation for legal services rendered, consisting of 200,000 shares on March 3, 2026 at $0.30 per share and 50,000 shares on March 31, 2026 at $0.20 per share, for aggregate compensation of $70,000. The Company issued 275,300 shares of common stock pursuant to three partial conversions of the Mast Hill Fund Tranche 1 (see Note 5): 82,700 shares on March 13, 2026 at a conversion price of $0.18 per share, 96,200 shares on March 30, 2026 at a conversion price of $0.16 per share and 96,400 shares on April 13, 2026 at a conversion price of $0.16, representing aggregate principal converted of approximately $45,278. The conversion prices reflect 85% of the applicable 10-day low volume-weighted average price as required under the note. The Company received $125,000 in cash from an existing investor, pursuant to a subscription agreement in March 2026, in exchange for 250,000 shares of common stock at $0.50 per share. Following the above issuances, the Company had approximately 89,168,144 shares of common stock issued and outstanding. …

SubsequentEventsTextBlock · excerpt; the full note is in the filing