Karbon-X Corp. (KARX)

Karbon-X Corp. operates in the voluntary carbon offset market, offering investors exposure to certified carbon credits used by individuals and corporations to achieve carbon neutral and net-zero goals ¹. The company is 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 ². Karbon-X provides customized transactional options for corporations to offset their carbon footprint and provides scalable access to the Verified Emissions Reduction markets ³. The industry is subject to intense and increasing competition, with many competitors having greater resources, longer operating histories, and greater capital resources and facilities ⁴. The company expects to face additional competition from existing licensees and new market entrants, which could lead to downward pricing pressure on products ⁵.

Karbon-X has identified several key competitors, including Indigo Carbon, Nori, TruCarbon by TruTerra, Bayer Carbon Initiative, Nutrien Ag, Carbon Streaming Corp, Base Carbon, and Climeworks ⁶. Indigo Carbon is recognized as a leader in the emerging industry with a proprietary software platform and well-known corporate buyers like The North Face, Blue Bottle Coffee, and JP Morgan Chase ⁷. Nori is a blockchain-enabled company powered by cryptocurrency, aiming to be a leading carbon marketplace ⁸. TruCarbon by TruTerra is a subsidiary of Land O’Lakes, the world’s largest farmer owned cooperative ⁹. Carbon Streaming Corp. makes upfront and ongoing delivery payments to project developers for future carbon credits under stream agreements ¹⁰. Base Carbon partners with corporations, sovereign entities, academic institutions, and carbon reduction project developers to produce and commercialize verified carbon credits ¹¹. Climeworks develops, builds, and operates direct air capture machines that capture carbon dioxide directly from the air ¹². The company's competitive position is challenged by these larger, more established players, and its lack of competitive advantage could have a negative effect on its business and financial condition ¹³.

Karbon-X generates revenue through three main streams: industrial sales, subscription-based sales through a mobile app, and carbon credit trading ¹⁴. The company purchases verified carbon credits from numerous vendors and resells these credits to both industry and the general public ¹⁵. For industrial sales, the company sells carbon offsets to mining, forestry, civil earthworks, transportation, and oil and gas servicing companies based on their total fossil fuel consumption for individual projects ¹⁶. When companies purchase carbon offsets directly, the credits are retired in the name of the customer, providing transparency ¹⁷. The general public can purchase carbon offsets through a subscription-based mobile app with multiple levels of investment for every budget ¹⁸. The company also engages in industrial carbon credit trading, which generated significant revenue during fiscal 2026 ¹⁹.

The company's industrial sales segment primarily operates in the voluntary carbon offset market, selling carbon offsets to companies in mining, forestry, civil earthworks, transportation, and oil and gas servicing based on their total fossil fuel consumption ²⁰. This platform offers companies a way to reach carbon neutrality goals while supporting CO2 reducing projects ²¹. The subscription-based sales segment allows the general public to offset their greenhouse gas emissions from daily life through a mobile app that is shareable on social media ²². The app was soft-launched in 2023 and was completed and made publicly available in March 2025 ²³. Depending on the subscription selected, subscribers are allocated verified carbon credits corresponding to approximately 200 to 400 kilograms of CO2 per month ²⁴. Subscription tiers include Totally Covered at $19.99/month or $199.99/year, permanently offsetting 400 kg of CO2 per month and 4800 kg per year; Exceptional Reduction at $14.99/month or $149.99/year, permanently offsetting 300 kg of CO2 per month and 3600 kg per year; and Doing Your Part at $9.99/month or $99.99/year, permanently offsetting 200 kg of CO2 per month and 2400 kg per year ²⁵. The app platform generated its first direct application sales during fiscal 2026, with immaterial amounts of approximately $6,300 ²⁶.

On June 27, 2025, the Company completed an asset acquisition from Allcot AG consisting of a portfolio of carbon-offset projects, together with intellectual property, database and contract rights ²⁷. The cost of the acquisition was $666,990 ²⁸. In connection with the acquisition, the Company established Karbon-X Trading Limited (Cyprus), Allcot Limited, Karbon-X Iberia SL, and Allcot X Colombia S.A.S., each consolidated from their inception date ²⁹. On August 13, 2025, the Company issued a $3,500,000 convertible note to Hedera Foundation SEZC, which together with $1,135,342 of accrued interest, was converted into common stock on May 29, 2026 ³⁰. During the year, the Company issued convertible notes to four other lenders with an aggregate face amount of $889,000 ³¹, and issued two tranches of $500,000 each under a Master Note facility with an institutional lender on January 8, 2026 and February 18, 2026 ³². On January 8, 2026, the Company issued a maintenance note to the Lender in the principal amount of $1,682,000 ³³. On November 24, 2025, the Company drew a $5,000,000 note from a lender, bearing interest at 18% per annum, with a five-year term ³⁴. On February 9, 2026, the Company advanced CAD $2,300,000 to a borrower under a secured loan agreement bearing interest at 12.00% per annum, secured by a first-priority interest in 2,666,666 common shares of a British Columbia company listed on the TSX Venture Exchange ³⁵. In April 2026, the Company entered into receivables financing arrangements with two financing providers, accounted for as secured borrowings ³⁶. During the year, the Company issued 380,000 shares for cash proceeds of $242,000 ³⁷, 1,842,061 shares as compensation valued at $681,069 ³⁸, 24,038 shares in settlement of a finder’s fee ³⁹, 88,000 commitment shares in connection with note financings ⁴⁰, and 10,558,072 shares upon the conversion of convertible notes payable and accrued interest ⁴¹. At May 31, 2026, the Company had 94,885,028 shares of common stock issued and outstanding ⁴².

For the fiscal year ended May 31, 2026, the Company generated $55,860,322 in revenue, an increase of $52,696,550 over the $3,163,772 generated in the prior year ⁴³. The increase is principally attributable to industrial carbon credit trading conducted through Karbon-X Trading Limited, a newly formed subsidiary, together with growth in the Company's existing carbon credit programs ⁴⁴. Cost of revenue was $55,000,480, producing gross profit of $859,842 and a gross margin of 1.5%, compared with gross profit of $801,467 and a gross margin of 25.3% in the prior year ⁴⁵. The decline in gross margin reflects the shift in the revenue mix towards high-volume, low-margin trading activity ⁴⁶. The Company incurred a net loss of $13,589,546 for the year, compared with $7,053,492 in the prior year ⁴⁷. Total comprehensive loss, including a foreign currency translation gain of $241,080, was $13,348,466 ⁴⁸. As of May 31, 2026, the Company had negative working capital of $(4,040,004) ⁴⁹.

The Company's plan of operations requires raising significant additional capital to fund its business plan and ultimately attain profitable operations ⁵⁰. If successful in raising capital through the sale of common shares, management believes the Company will have sufficient cash resources to fund its plan of operations through fiscal 2027 ⁵¹. The Company intends to use the net proceeds from offerings for research and development, operations, regulatory compliance, intellectual property, working capital, and general corporate purposes ⁵². There is no assurance that the Company will successfully obtain the required capital or revenues, or that amounts will be sufficient to fund ongoing operations ⁵³.

A major growth vector is the expansion of industrial carbon credit trading, which drove the significant revenue increase in fiscal 2026 ⁵⁴. The Company established Karbon-X Trading Limited (Cyprus) in connection with the Allcot asset acquisition, which has become a principal source of revenue ⁵⁵. The company is also focused on growing its existing carbon credit programs ⁵⁶. Another growth vector is the subscription-based mobile app, which was completed and made publicly available in March 2025 ⁵⁷. The app allows the general public to purchase carbon offsets with multiple levels of investment, supporting CO2 reducing projects such as direct air capture, green hydroelectric energy production, or reforestation ⁵⁸. 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 ⁵⁹.

The Company's gross margin declined significantly from 25.3% in fiscal 2025 to 1.5% in fiscal 2026, reflecting a shift in revenue mix towards high-volume, low-margin trading activity ⁶⁰. Operating expenses increased to $11,925,399 in fiscal 2026 from $7,449,148 in the prior year, reflecting the cost of newly established subsidiaries and the expansion of trading and corporate functions ⁶¹. The Company expects to continue making substantial expenditures commercializing its products and devoting substantial resources to building its research and development and marketing capabilities ⁶². If the Company does not achieve expected sales levels, it may be unable to recover the large investment made in research, development, and marketing efforts ⁶³.

The Company has 43 employees as of the date of the filing and is actively recruiting new team members at all levels of the organization ⁶⁴. The Company has entered into an operating lease for office space in Calgary, Alberta, with a term of 5 years, expiring on June 30, 2030 ⁶⁵. Monthly lease payments are denominated in Canadian dollars and range from CAD 13,070 to CAD 15,288 (approximately $9,472 to $11,080 at the May 31, 2026 exchange rate) ⁶⁶. The Company's principal executive offices are located in Bellaire, Texas, occupied under a month-to-month sublease from Cutler Law Group, P.C., the Company's securities counsel ⁶⁷. The Company relies on third-party service providers for distribution and invoicing, and does not currently have the internal capacity to perform these important commercial functions ⁶⁸.

During fiscal 2026, the Company raised approximately $5.4 million from convertible note issuances, $4.8 million from long-term debt, $0.6 million from receivables financing arrangements, and $0.2 million from sales of common stock ⁶⁹. The Company received $5,370,145 of cash proceeds from convertible notes payable, $4,788,155 from long-term debt, $591,080 from receivables financing obligations, and $242,000 from the sale of common stock during the year ⁷⁰. As of May 31, 2026, the Company had capital expenditures of $4,341 and capitalized app development costs of $82,146 ⁷¹. The Company does not expect to declare or pay any cash dividends in the foreseeable future, intending to retain any earnings for continued growth ⁷².

The Company faces significant headwinds, including a material weakness in internal control over financial reporting, which could lead to material misstatements in financial statements and failure to meet reporting obligations ⁷³. There is substantial doubt about the Company's ability to continue as a going concern, given recurring losses, negative working capital of $(4,040,004), and an accumulated deficit of $25,580,380 at May 31, 2026 ⁷⁴. The Company depends on a small number of customers and counterparties, with one customer accounting for approximately 86% of consolidated revenue for the year ended May 31, 2026, and a single trade receivable representing 69% of accounts receivable at that date ⁷⁵. During the year, the Company invoiced its largest customer EUR 6,457,500 for credits not yet delivered, of which EUR 3,797,500 remained unpaid at May 31, 2026 and has not been recognized as a receivable ⁷⁶. The loss of, or a dispute with, a significant customer or trading counterparty could materially reduce revenue and cash flows ⁷⁷.

The Company operates in multiple countries and currencies, which exposes it to foreign exchange, regulatory, and tax risks ⁷⁸. Fluctuations in exchange rates affect reported results and the U.S. dollar value of foreign-currency receivables, payables, and financing obligations ⁷⁹. The value of DevvStream securities held and entitled to receive is uncertain following the delisting of those shares from the Nasdaq Stock Market on June 24, 2026, which may materially reduce their liquidity and value ⁸⁰. The Company's ability to achieve and/or sustain profitable operations depends on a number of factors, many of which are beyond its control ⁸¹.

Management's message emphasizes the significant expansion of the Company's operations during fiscal 2026, particularly through the Allcot asset acquisition and the establishment of new subsidiaries, which drove a substantial increase in revenue ⁸⁸. The Company generated $55,860,322 in revenue for the year ended May 31, 2026, compared with $3,163,772 in the prior year ⁸⁹. Management highlights the shift in revenue mix towards high-volume, low-margin trading activity, which reduced gross margin to 1.5% ⁹⁰. The Company continues to focus on its plan of operations, which requires raising significant additional capital to fund its business plan and ultimately attain profitable operations ⁹¹. Management believes that if successful in raising capital through the sale of common shares, the Company will have sufficient cash resources to fund its plan of operations through fiscal 2027 ⁹². The strategic priorities emphasized include expanding industrial carbon credit trading, growing the subscription-based mobile app business, and building out the Company's sales, marketing, and commercialization capabilities ⁹³.

Total revenue for the fiscal year ended May 31, 2026 was $55,860,322, compared to $3,163,772 for the year ended May 31, 2025 ⁹⁴. Net loss was $13,589,546 for fiscal 2026, compared to $7,053,492 for fiscal 2025 ⁹⁵. Basic and fully diluted loss per share was $(0.16) for fiscal 2026, compared to $(0.08) for fiscal 2025 ⁹⁶. Cost of revenue was $55,000,480 in fiscal 2026, compared to $2,362,305 in fiscal 2025, resulting in gross profit of $859,842 and a gross margin of 1.5%, versus gross profit of $801,467 and a gross margin of 25.3% in the prior year ⁹⁷. Loss from operations was $11,065,557 in fiscal 2026, compared to $6,647,681 in fiscal 2025 ⁹⁸. Interest expense was $3,321,168 in fiscal 2026, which includes $1,003,557 of debt discount amortization, $125,570 of debt discount written off on conversion, and $19,518 written off on the non-cash settlement of maintenance fees ⁹⁹. The Company recorded a gain on change in fair value of derivative liabilities of $845,280 in fiscal 2026, compared to a loss of $72,927 in fiscal 2025 ¹⁰⁰. Cash used in operating activities was $7,861,240 in fiscal 2026, compared to $6,498,943 in fiscal 2025 ¹⁰¹. Cash provided by financing activities was $10,503,188 in fiscal 2026, compared to $4,561,300 in fiscal 2025 ¹⁰². Cash used in investing activities was $2,433,113 in fiscal 2026, compared to $2,543 in fiscal 2025 ¹⁰³. Cash and cash equivalents at May 31, 2026 were $1,155,289, compared to $704,346 at May 31, 2025 ¹⁰⁴. Total assets at May 31, 2026 were $9,617,713, compared to $6,779,972 at May 31, 2025 ¹⁰⁵. Total liabilities at May 31, 2026 were $15,601,815, compared to $8,149,045 at May 31, 2025 ¹⁰⁶. The Company had negative working capital of $(4,040,004) and a stockholders’ deficit of $(5,984,102) at May 31, 2026 ¹⁰⁷. The accumulated deficit was $25,580,380 at May 31, 2026 ¹⁰⁸. The Company recorded a provision for credit losses on the loan receivable of $628,196 during fiscal 2026 ¹⁰⁹. The Company also recognized a gain of $845,280 in the consolidated statements of operations for the year ended May 31, 2026, comprising the $856,389 change in fair value of derivative liabilities, net of $11,109 recognized on the initial measurement of derivatives issued during the year ¹¹⁰. The Company's largest customer accounted for approximately 86% of consolidated revenue for the year ended May 31, 2026 ¹¹¹.

The Company faces substantial doubt about its ability to continue as a going concern, with negative working capital of $(4,040,004) and an accumulated deficit of $25,580,380 at May 31, 2026 ⁸². The Company depends on a small number of customers, with one customer accounting for approximately 86% of consolidated revenue for the year ended May 31, 2026, and a single trade receivable representing 69% of accounts receivable at that date ⁸³. During the year, the Company invoiced its largest customer EUR 6,457,500 for credits not yet delivered, of which EUR 3,797,500 remained unpaid at May 31, 2026 and has not been recognized as a receivable ⁸⁴. The conversion of outstanding convertible notes at floating prices could substantially dilute existing stockholders, with approximately 23.9 million shares issuable on conversion of notes then outstanding at May 31, 2026 ⁸⁵. The value of DevvStream securities held and entitled to receive is uncertain following the delisting of those shares from the Nasdaq Stock Market on June 24, 2026, which may materially reduce their liquidity and value ⁸⁶. The Company has identified a material weakness in internal control over financial reporting, which could result in material misstatements in financial statements and failure to meet reporting obligations ⁸⁷.