Karbon-X Corp.

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 cautionary statement regarding forward-looking statements included or incorporated by reference in at the beginning of 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 subsidiaries Karbon-X Project, Inc. 7 Inc, Karbon-X USA Corp, Karbon-X Trading, Allcot Limited, Karbon-X Iberia SL and Allcot X Colombia S.A.S.

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 During the year ended May 31, 2026 we raised approximately $1.7 $5.4 million in our recent private placements 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, 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 have identified a material weakness in our internal control over financial reporting, and if we fail to remediate it our financial statements may contain errors and investor confidence may be adversely affected.

As described in Item 9A, management concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective as of May 31, 2026 because of a material weakness in our period-end financial reporting process. During fiscal 2026 our operations expanded significantly and we entered into a number of complex, non-routine transactions, and the accounting resources and review procedures in place for most of the year were not sufficient to ensure that those transactions and the year-end close were recorded and reviewed on a timely basis. We appointed a Chief Accounting Officer in February 2026 and have implemented additional close and review controls, but remediation is in progress and will require those controls to operate for a sufficient period before we can conclude that the material weakness has been remediated. If we are unable to remediate the material weakness, or if we identify additional material weaknesses, our financial statements could contain material misstatements, we could fail to meet our reporting obligations on a timely basis, and the market price of our common stock could be adversely affected.

There is substantial doubt about our ability to continue as a going concern.

Our consolidated financial statements have been prepared assuming that we will continue as a going concern. We have incurred recurring losses, had negative working capital of $(4,040,004) and a stockholders deficit of $(5,984,102) at May 31, 2026, and have an accumulated deficit of $25,580,380. These conditions raise substantial doubt about our ability to continue as a going concern, as described in Note 1 to the consolidated financial statements. Our ability to continue depends on raising additional capital and ultimately achieving profitable operations, and there is no assurance that we will be able to do so on acceptable terms or at all. If we cannot, we may be forced to curtail or cease operations, and investors could lose their entire investment.

We depend on a small number of customers and counterparties, and our largest customer has not paid amounts invoiced.

One customer accounted for approximately 86% of our consolidated revenue for the year ended May 31, 2026, and a single trade receivable represented 69% of accounts receivable at that date. During the year we invoiced our 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; we have made a written demand for payment. The loss of, or a dispute with, a significant customer or trading counterparty, or the failure of a counterparty to pay or to deliver credits, could materially reduce our revenue and cash flows.

Conversion of our outstanding convertible notes at floating prices could substantially dilute existing stockholders.

Substantially all of our convertible notes are convertible at discounts to the market price of our common stock, with conversion prices that reset by reference to recent trading prices. At May 31, 2026 we estimated that approximately 23.9 million shares were issuable on conversion of notes then outstanding, and we have issued further notes since the year end. Declines in our stock price increase the number of shares issuable and the dilution to existing holders, and sales of shares received on conversion could depress the market price of our common stock. Beneficial ownership limitations in the notes restrict the number of shares any holder may hold at one time but do not limit the aggregate number of shares issuable over time.

We operate in multiple countries and currencies, which exposes us to foreign exchange, regulatory and tax risks.

We conduct business through subsidiaries in Canada, Cyprus, Ireland, Spain and Colombia and transact in Canadian dollars, euros and Colombian pesos as well as U.S. dollars. Fluctuations in exchange rates affect our reported results and the U.S. dollar value of our foreign-currency receivables, payables and financing obligations. Operating in multiple jurisdictions also subjects us to differing carbon-market, tax, employment and regulatory regimes, and to the cost and complexity of maintaining compliance and internal controls across those jurisdictions.

The value of the DevvStream securities we hold and are entitled to receive is uncertain following the delisting of those shares.

We hold common shares of DevvStream Holdings Inc. and are entitled to receive additional shares under our agreements with that company. Those shares were delisted from the Nasdaq Stock Market on June 24, 2026, which may materially reduce their liquidity and value. Although the agreements provide a price-based true-up, the value we ultimately realize depends on the counterpartys ability to deliver shares and on the market for those shares, and we may be unable to realize the carrying value of the securities and the related receivable.

We launched our products in 2023 and as a company, we have limited sales and marketing experience.

We soft-launched our APP 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 by customers 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.

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 partys 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. 9 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:

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 options, note conversions 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 these 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 Companys results of operation and financial position.