Executive Summary / Key Takeaways

• Karbon-X Corp. (OTCQX:KARX) is emerging as a vertically integrated climate solutions provider, leveraging a proprietary mobile application (APP) and strategic project funding to engage both industrial clients and the general public in the voluntary carbon credit market.
• The company demonstrated significant revenue growth, from $412,057 in fiscal year 2024 to $3.16 million in fiscal year 2025, reflecting early success in its commercialization efforts, though it continues to incur substantial net losses.
• Strategic acquisitions, such as ALLCOT Group, and partnerships with entities like DevvStream Holdings Inc. and Global Frontier Advisors, are expanding Karbon-X's global footprint, enhancing its climate policy expertise, and strengthening its position in both voluntary and compliance carbon markets.
• Despite growth initiatives, Karbon-X faces significant liquidity challenges, having incurred $11.99 million in operating losses since inception, necessitating substantial additional capital to fund operations and achieve profitability, which raises a going concern doubt.
• The competitive landscape is intense, with Karbon-X differentiating through its direct-to-consumer APP and diverse project portfolio, but it contends with larger, more established players and faces risks related to market dependency, internal control weaknesses, and the need for continuous technological innovation.

Karbon-X's Mission in a Growing Carbon Economy

Karbon-X Corp. (OTCQX:KARX) is positioning itself as a pivotal player in the burgeoning global effort to achieve carbon neutrality and net-zero emissions. As a public Nevada corporation, Karbon-X offers investors direct exposure to certified carbon credits, a crucial instrument for both individuals and corporations seeking to offset their environmental footprint. The company operates with strong environmental, social, and governance (ESG) principles, focusing on high-quality projects and partnerships within the voluntary carbon credit market. Its overarching strategy is to provide customized transactional options for corporations and scalable access to Verified Emissions Reduction markets, fundamentally altering traditional carbon marketing by actively engaging the public in funding technology-based greenhouse gas reduction initiatives.

The carbon credit industry is characterized by intense and increasing competition, with many established players possessing greater resources and longer operating histories. Karbon-X distinguishes itself through a multi-pronged approach, targeting both large industrial clients and individual consumers. Its strategic initiatives, including a proprietary mobile application and recent acquisitions, aim to carve out a unique and defensible position in this dynamic market.

Technological Edge and Operational Scale

Karbon-X's core technological differentiator lies in its proprietary mobile application (APP) and its integrated approach to carbon credit generation and distribution. The APP, soft-launched in 2023 and made publicly available in March 2025, represents a direct-to-consumer channel, allowing the general public to purchase carbon offsets through a subscription-based model. This platform offers multiple investment levels, enabling individuals to mitigate their daily greenhouse gas emissions by supporting verifiable CO2 reducing projects such as direct air capture, green hydroelectric energy production, or reforestation. This direct engagement model provides a tangible benefit by democratizing access to climate action and fostering a broader participant base for carbon reduction efforts.

Beyond its consumer-facing technology, Karbon-X is actively funding projects to generate its own certified carbon credits. These projects, once verified, will be sold on its proprietary APP platform, ensuring a vertically integrated supply chain for its offerings. The company's involvement in "technology-based greenhouse gas reduction builds" underscores its commitment to innovative solutions. While specific quantifiable performance metrics for Karbon-X's direct air capture or other project technologies are not detailed, the strategic intent is to provide provable, verifiable carbon credits, which is critical for market integrity and investor confidence.

A significant operational and technological enhancement occurred on June 1, 2025, with the acquisition of specified assets from ALLCOT AG for $350,000 in cash. This acquisition is expected to expand Karbon-X's global footprint and integrate world-class expertise, uniting "climate policy expertise and emissions strategy with digital infrastructure and delivery at scale." This move is designed to accelerate trusted, measurable climate action worldwide, suggesting a strategic focus on leveraging digital platforms and specialized knowledge to enhance efficiency and reach in carbon credit markets. The company also capitalizes internally developed software for its mobile application, which completed its development stage as of March 1, 2025, and is being amortized over an estimated useful life of three years. This ongoing investment in technology is foundational to its strategy of scalable access and efficient market engagement.

A Journey of Transformation and Expansion

Karbon-X's journey began with its incorporation as Cocoluv, Inc. in 2017, undergoing a significant transformation in 2022 with a change of control and the appointment of Chad Clovis as CEO, Director, and President. This period marked a reverse merger with Karbon-X Project, Inc., solidifying the company's pivot towards climate solutions. The company officially rebranded as Karbon-X Corp. in April 2022, setting the stage for its current strategic direction.

The fiscal year ended May 31, 2025, and subsequent months have been marked by aggressive strategic expansion. On October 24, 2024, Karbon-X entered a Carbon Credit Purchase Agreement with DevvStream Holdings Inc. (DEVS), receiving 174,953 common shares of New Pubco. This was followed by a Carbon Credit Forward Purchase Agreement on October 28, 2024, to sell C-Sink Credits for $2.89 million, payable in 444,923 common shares of New Pubco. A "true-up provision" in these agreements mitigates investment risk, ensuring Karbon-X is compensated if the market value of the shares falls below the contracted value during the adjustment period.

Further broadening its reach, Karbon-X officially opened EU trading accounts and commenced operations within the European Union Emissions Trading System (EU ETS) on June 18, 2025. This expansion enables direct access to EU Allowances (EUAs) for regulated entities, significantly strengthening its compliance market capabilities. Strategic partnerships, such as with Global Frontier Advisors L.P. in July 2025, aim to advance carbon credit development in emerging markets. Domestically, a collaboration with Directions Group Inc. in June 2025 focuses on a residential solar carbon project aligned with Alberta's Technology Innovation and Emissions Reduction (TIER) regulation, one of Canada's robust compliance carbon pricing systems. The company has also maintained a three-year partnership with the Banff Half Marathon, facilitating verified climate contributions for the event and its participants.

Financial Performance and Liquidity Challenges

Karbon-X has demonstrated notable revenue growth, a critical indicator of its commercialization efforts gaining traction. For the fiscal year ended May 31, 2025, the company generated $3.16 million in revenue, a substantial increase from $412,057 in the prior fiscal year. This growth is attributed to the nascent stages of its commercialization, which management expects to improve further. However, this growth has been accompanied by significant operating losses. The net loss for the fiscal year ended May 31, 2025, was $7.08 million, compared to a net loss of $2.74 million in the fiscal year ended May 31, 2024. The increased loss in 2025 was primarily due to a $1.06 million loss on investment related to Silviculture in the prior year, and higher operating expenses including $3.77 million in salaries and wages, $859,088 in professional fees, and $2.04 million in marketing expenses in 2025.

As of May 31, 2025, Karbon-X reported cash and cash equivalents of $704,346, down from $2.68 million in the prior year. The company's working capital stood at $1.90 million. Since inception, Karbon-X has accumulated operating losses totaling $11.99 million. These factors raise substantial doubt about the company's ability to continue as a going concern, as explicitly stated by management. The company's ability to meet its ongoing obligations and fund anticipated operating losses is dependent on raising additional capital.

Karbon-X intends to secure future financing through private placements and advances from related parties. In August 2025, the company converted $2.19 million in principal and $117,329 in accrued interest from convertible notes into 4.75 million shares, and issued a new $3.50 million unsecured convertible note to Hedera Foundation SECZ. These financing activities highlight the continuous need for capital to sustain operations and growth initiatives. A recent operational challenge saw $1.28 million in deferred revenue refunded to a customer in August 2025 due to a supplier issue, though negotiations are ongoing to recommence the contract.

Competitive Arena: Carving a Niche

The carbon credit industry is fiercely competitive, with Karbon-X facing a diverse array of rivals ranging from established agricultural carbon programs to innovative direct air capture companies and large energy players. Many competitors possess greater resources, longer operating histories, and more extensive capital facilities.

In the agricultural carbon space, Karbon-X competes with entities like Indigo Carbon, recognized for its proprietary software and corporate buyers such as The North Face (VFC) and JP Morgan Chase (JPM). TruCarbon by TruTerra, a subsidiary of Land O'Lakes, and Bayer Carbon Initiative (BAYRY) also target farmers with incentives for adopting sustainable practices. Nutrien Ag (NTR) leverages its deep bench of agronomists and extensive industry connections to enter this market. These competitors often focus on specific farming practices and geographic regions, potentially offering more localized or specialized solutions.

In the broader carbon market, Nori stands out as a blockchain-enabled marketplace, utilizing cryptocurrency for transparent carbon removal transactions. This technological approach offers a different value proposition compared to Karbon-X's APP-based subscription model. Companies like Carbon Streaming Corp (CARBN) and Base Carbon (BCBNF) focus on financing carbon credit projects through stream agreements and partnerships, providing diversified portfolios and exposure to rising carbon prices. These firms often operate at a larger scale in project development and financing. Climeworks represents a direct air capture specialist, developing and operating modular CO2 collectors. While Karbon-X supports direct air capture projects, Climeworks' direct operational involvement signifies a deeper technological specialization in this area.

Broader energy players like Bloom Energy (BE) and Plug Power (PLUG), focused on fuel cell and hydrogen technologies, and NextEra Energy (NEE), a leader in renewable energy generation, represent indirect competition by offering alternative clean energy solutions that reduce emissions directly. Occidental Petroleum (OXY), with its carbon capture and storage initiatives, also operates in an overlapping space. These companies often have significantly larger financial resources, established infrastructure, and broader market reach.

Karbon-X's competitive advantages stem from its unique blend of public engagement through its APP, its focus on funding and generating its own verified carbon credits, and its strategic acquisitions like ALLCOT, which enhance its climate policy expertise and digital delivery capabilities. Its diversified project portfolio, spanning direct air capture, green hydroelectric energy, and reforestation, offers adaptability. However, Karbon-X's smaller scale compared to many rivals could lead to higher per-project costs and limit its ability to compete on price or volume. Its financial health is also more exposed to the volatility of carbon markets and regulatory shifts. The company's reliance on third parties for distribution and invoicing, coupled with identified material weaknesses in internal controls, presents operational vulnerabilities.

Outlook and Risks: Charting a Sustainable Path

Karbon-X's outlook hinges on the successful execution of its commercialization strategy and its ability to secure additional capital. Management anticipates that commercialization efforts will improve during the current fiscal year, driven by the full public launch of its APP and the integration of recent acquisitions and partnerships. The expansion into the EU ETS and collaborations in emerging markets signal a clear intent for global growth and diversification across both voluntary and compliance carbon markets. The "true-up provision" in the DevvStream agreements also provides a layer of financial protection for its carbon credit investments.

However, significant risks accompany this growth trajectory. The most pressing is the company's "going concern" status, underscored by its accumulated operating losses and continuous need for substantial additional funding. There is no guarantee of achieving profitability, and future financings could lead to significant equity dilution. The company's "limited sales and marketing experience" and reliance on third-party service providers for critical functions pose operational challenges that could impede revenue targets. Intense competition could exert downward pressure on pricing and market share. Furthermore, the company faces risks related to intellectual property infringement claims and is heavily dependent on its key management personnel, particularly CEO Chad Clovis. The identified material weaknesses in internal controls over financial reporting, stemming from limited accounting personnel, also present a notable risk that could affect financial reporting reliability. The recent refund of deferred revenue due to a supplier issue highlights the operational complexities and potential for revenue volatility.

Conclusion

Karbon-X Corp. is an ambitious player in the rapidly expanding climate solutions sector, strategically positioning itself to capitalize on the growing demand for carbon credits from both industrial and individual consumers. Its innovative mobile application, coupled with a vertically integrated approach to carbon credit generation and a series of strategic acquisitions and partnerships, forms the bedrock of its investment thesis. The notable revenue growth in fiscal year 2025 demonstrates early traction in its commercialization efforts, suggesting a strong market appetite for its offerings.

However, the company's journey is not without considerable challenges. The substantial operating losses and the explicit "going concern" warning underscore the critical need for sustained capital infusion and a clear path to profitability. While Karbon-X's technological differentiators and diverse project portfolio offer a competitive edge in specific niches, it operates within an intensely competitive landscape dominated by larger, more financially robust entities. For investors, Karbon-X represents a high-growth, high-risk opportunity, where the successful execution of its commercialization strategy, the ability to secure necessary funding, and the effective management of operational and competitive pressures will be paramount to realizing its long-term potential. The company's ability to leverage its technological leadership and strategic alliances to overcome its current financial vulnerabilities will ultimately determine its success in charting a sustainable and profitable future.