Karbon-X Corp. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion pertains to the historical operations and financial statements of Karbon-X Corp. ("Karbon-X" or the "Company") for the nine months ended February 28, 2025, and February 29 2024 . This discussion should be read in conjunction with the Company’s most recent Annual Report on Form 10-K for the year ended May 31, 2024, filed on September 13, 2024, which provides additional context and details on the Company's financial condition and results of operations. Forward-Looking Statements The following Management's Discussion and Analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this Quarterly Report. The Management's Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words "believe," "plan," "intend," "anticipate," "target," "estimate," "expect," and the like, and/or future-tense or conditional constructions ("will," "may," "could," "should," etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Quarterly Report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the heading "Risk Factors" in our various filings with the Securities and Exchange Commission. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report. The following discussion highlights the Company's results of operations and the principal factors that have affected its consolidated financial condition as well as its liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the Company's consolidated financial condition and results of operations presented herein. The following discussion and analysis are based upon Karbon-X Corp's unaudited financial statements contained in this Current Report on Form 10-Q, which have been prepared in accordance with generally accepted accounting principles in the United States. You should read the discussion and analysis together with such financial statements and the related notes thereto. Overview The Company 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 Project"), and Karbon-X Project became the wholly owned subsidiary of the Company in a reverse acquisition (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 Project becoming a wholly owned subsidiary of the Company and all debt owed to the related party of Cocoluv, Inc. (the Company) 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. 25 Table of Contents Karbon-X provides customized transactional options, tailored insights, and scalable access to the Verified Emissions Reduction markets. Karbon-X changes the marketing framework of traditional carbon marketing by engaging the public versus industry with multiple forms of technology-based greenhouse gas reduction builds. Karbon-X 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. Karbon-X is in development of NFTs to digitize and allow for the trading of tokenized carbon credits in order to bring transparency and liquidity to the global carbon offset market. The aim of the decentralized platform is to enable offset trading on existing tokenized exchanges and their own exchange, accepting all forms of payment, including crypto, fiat, or card. The NFT minting platform for carbon credits allows carbon credit owners to mint their credits into NFTs for a secure and efficient method of trading in a market that appears set to grow rapidly in the coming years. A trading platform will allow the owners of the NFTs to monitor their assets while tracking their value and trading history. This is done on the blockchain to mitigate many risks such as double trading and long-term record-keeping issues. By using a "side chain" of Ethereum, costs are kept to a minimum for users. References in this periodic report on Form 10-Q to "Karbon-X" or the "Company" may include references to the operations of our subsidiary Karbon-X Project. This entity is a 100% wholly owned subsidiary of Karbon-X and consequently reports quarterly financials up to a consolidated quarterly submission. Critical Accounting Policies The consolidated financial statements include the accounts of the Company and its subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. Note 1 discusses the company’s accounting policies. Results of Operations Unaudited Results for the Three Months Ended February 28, 2025, and February 29, 2024 Sales and Revenue For the three-month period ended February 28, 2025, the Company reported revenue of USD $238,528, a decrease of 4% compared to $247,222 in the same period in 2024. The slight decline in sales was primarily due to fluctuations in pricing. Operating Expenses Operating expenses for the three-month period ended February 28, 2025, were $1,821,772, compared to $394,863 in the same period in 2024, representing a 361% increase. The key factors driving this increase were: · Marketing Expenses: Investment in customer acquisition and brand-building efforts, including strategic partnerships like the Oilers initiative, resulted in marketing expenses of $528,150, up from $66,629 in the prior year. · Salaries and Wages: Increased headcount, subcontractor costs, and wage adjustments contributed to payroll expenses of $841,890, a significant rise from $149,533 in the prior year. · Professional Fees: Costs related to legal, advisory, and compliance efforts amounted to $184,068, compared to $51,188 in the prior year. · Other Operating Expenses: These totaled $267,664, up from $127,513, reflecting the Company’s operational scale-up. 26 Table of Contents Net Loss from Operations The operating loss for the three-month period ended February 28, 2025, was $(1,681,096), compared to $(371,399) in the same period in 2024. While revenue was stable, increased operating expenses offset these gains, as the Company continues to invest heavily in marketing, payroll, and compliance to drive long-term growth. Unaudited Results for the Nine Months Ended February 28, 2025 and February 29, 2024 Sales and Revenue For the nine-month period ended February 28, 2025, the Company reported revenue of USD $1,530,349, a significant increase of 433% compared to USD $287,062 during the same period in 2024. This remarkable growth was driven by the successful launch of the Devvstream contract, which contributed substantially to the Company's revenue base and is expected to generate ongoing deferred revenue streams in future quarters. Additionally, app subscription sales showed steady growth, driven by increased customer adoption, while revenue from carbon credit sales gained momentum during the period. Moving forward, the Company anticipates further revenue growth from the expansion of its app and new partnerships under development. Operating Expenses Operating expenses for the nine-month period ended February 28, 2025, totaled $4,412,366, compared to $1,023,694 in the same period in 2024, marking a 361% increase. The significant increase in operating expenses reflects the Company’s continued investment in scaling operations and market presence. Key factors include: · Marketing Expenses: Increased by 859% to $915,494, reflecting strategic investments in customer acquisition campaigns, including partnerships such as the Oilers initiative. · Salaries and Wages: Rose to $2,176,431, a 369% increase, driven by expanded headcount, higher subcontractor expenses, and wage growth to support operational scale. · Professional Fees: Increased by 241% to $688,634, reflecting higher legal, advisory, and compliance costs associated with business growth and contractual obligations. · Other Operating Expenses: Grew by 141% to $631,807, reflecting higher costs related to ongoing operations and compliance requirements. Net Loss from Operations For the nine-month period ended February 28, 2025, the Company recorded an operating loss of $(3,652,837) compared to $(2,163,366) for the same period in 2024, representing a 69% increase. Despite the significant growth in revenue, the increase in operating expenses driven by marketing, payroll, and professional services contributed to the expansion of operating losses. However, these investments are viewed as essential for establishing the infrastructure and market positioning necessary for future profitability. 27 Table of Contents 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. Nine months ended February 28, 2025 Nine months ended February 29, 2024 Cash used in operating activities (4,496,214 ) (1,038,148 ) Cash used in investing activities - (727,409 ) Cash from financing activities 2,917,414 1,803,482 Change in cash during the period (1,578,801 ) 37,925 Effect of exchange rate change (165,727 ) (32,605 ) Cash, beginning of period 2,675,400 206,820 Cash, end of period 930,873 212,140 As of February 28, 2025, the Company had USD $6,308,450 in current assets To date, the Company has financed its operations through equity sales. During July – September 2023, Karbon-X Corp. completed a private placement pursuant to Rule 506(c) of the Securities Exchange Act of 1934, as amended. In that private placement the company sold 3,274,858 shares of common stock at $0.50 per share for gross proceeds of $ 1,637,429, net of expenses related to issuances of $83,993. Further the Company converted a loan for $100,000 into 200,000 shares at price of $0.50 per share. During November 2023, the Company sold 50,000 common stock at $2 per unit for total proceeds of $100,000. Recent Developments During the nine months ended February 28, 2025, the Company strengthened its executive leadership team with the appointment of key hires. Christopher Mulgrew, a seasoned financial executive with over 24 years of experience, joined the Company as Chief Financial Officer (CFO). In this role, he will oversee the Company’s financial strategy, reporting, and compliance functions, contributing to enhanced financial management and planning as the Company continues its growth trajectory. This appointment reflect our commitment to building a strong leadership team as we continue to execute on our strategic priorities and drive value for shareholders. Future Financing In connection with its proposed business plan and currently ongoing and proposed 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 completing such financings. 28 Table of Contents 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 convertible notes or 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 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 February 28, 2025, we had no capital expenditures. 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. 29 Table of Contents Item 3. Quantitative and Qualitative Disclosures about Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.