UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended February 28,August 31, 2023

Commission File Number 000-56288

1410 Columbia910 7th Ave Castlegar, British Columbia,SW  Calgary, AB, Canada N1N 3K3T2P 3N8

(Address of principal executive offices) (Zip Code)

778-256-5730

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of AprilOctober 10, 2023, there were 70,040,00078,553,858 shares of common stock issued and outstanding.

TABLE OF CONTENTS

KARBON-X CORP.Contents

Index to Consolidated Financial Statements

February 28, 2023

KARBON-X CORP.

Consolidated Balance Sheets

The accompanying notes are an integral part of these consolidated financial statements

KARBON-X CORP.

Consolidated Statements of Operations

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements

KARBON-X CORP.

Consolidated StatementsStatement of Changes in Shareholders’ Equity

For the Three and Nine Months Ended February 28,August 31, 2023 and 2022

(Unaudited)

Three Months Ended February 28, 2023 

Nine Months Ended February 28, 2023 

Nine Months Ended February 28, 2022

Three Months Ended February 28, 2022

The accompanying notes are an integral part of these consolidated financial statements

KARBON-X CORP.

Consolidated Statements of Cash FlowsFlow

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements

KARBON-X CORP.

Notes to Consolidated Financial Statements

February 28,August 31, 2023

(Unaudited)

Note 1 - Basis of Presentation and Significant Accounting Policies

Karbon-X Corp. (“Karbon-X” or 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"Karbon-X Project"), and Karbon-X Project became the wholly owned subsidiary of the Company in a reverse mergeracquisition (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. 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 for as a recapitalization effected by a share exchange, wherein Karbon-X Project is considered the acquirer for accounting and financial reporting purposes. On the date of the reorganization, the assets and liabilities of Karbon-X Project have been brought forward at their book value and consolidated with Cocoluv, Inc.’s (the Company’s) assets, which comprised of cash and cash equivalents of $134 and liabilities which comprises due to related party of $99,902 (see Note 1 Basis of Presentation below). No goodwill has been recognized. Accordingly, the assets and liabilities and the historical operations that are reflected in the consolidated financial statements are those of Karbon-X and are recorded at the historical cost basis of Karbon-X.Karbon-X Project.

Going concern

To date the Company has generated minimal revenues from its business operations and has incurred operating losses since inception of $850,262.$2,542,138. The Company will require additional funding to meet its ongoing obligations and to fund anticipated operating losses. The ability of the Company to continue as a going concern is dependent on raising capital to fund its initial business plan and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company’s ability to continue as a going concern. The Company intends to continue to fund its business by way of private placements and advances from related parties as may be required. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements present the consolidated balance sheets, statements of operations, stockholders’ equity and cash flows of the Company. These consolidated financial statements are presented in the United States dollar and have been prepared in accordance with accounting principles generally accepted accounting principles for financial information and with the instructions to Form 10-Q.  They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements.  However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the consolidated financial statements for the fiscal year ended May 31, 2022, included in the Company’s year-end financial statements on Form 10-K filed with the Securities and Exchange Commission on September 13, 2022.  Certain amounts in the consolidated financial statements for the prior year have been reclassified to conform to the current year’s presentation. These reclassifications had no impact on net earnings, financial position, or cash flows.  The unaudited consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three and nine-months ended February 28, 2023 are not necessarily indicative of the results that may be expected for the year ending May 31, 2023. United States.

Use of Estimates and Assumptions

Preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Accordingly, actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.

Sales Tax Receivable

Sales tax receivable consists of the accumulated reclaimable GST paid by the Company on purchases made in Canada. 

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation..depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets which are all fivebetween three to seven years.

Costs of major additions and improvements are capitalized while expenditures for maintenance and repairs, which do not extend the life of the asset, are expensed. Upon sale or disposition of property and equipment, the cost and related accumulated depreciation and amortization are eliminated from the accounts and any resulting gain or loss is credited or charged to income. Long-lived assets held and used by us are reviewed based on market factors and operational considerations for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Inventory

Inventories are statedvalued at the lower of cost using weighted average of the cost of the goods on hand at the year end or net realizable value. The Company’s inventories are valued under the first in, first out (FIFO) method. Net realizable value is estimated based on current selling prices. Estimated provisions are established for slow-moving and obsolete inventory.  As of June 1, 2023, the Company changed its inventory policy from weighted average to FIFO, this had no significant impact on the current or prior consolidated financial statements. 

Investments

The Company accounts for investments with a 20% to 50% ownership and a significant, but not controlling influence as equity method investments. Investments with a greater than 50% ownership and a controlling influence are accounted for using the consolidation method. The Company assesses the potential impairment of equity method investments when indicators such as a history of operating losses, negative earnings and cash flow outlook, and the financial condition and prospects for the investee’s business segment might indicate a loss in value. The Company has accounted for its investment in Silviculture Systems using the equity method and its investment in its subsidiary Karbon-X Project, Inc using the consolidation method.

Fair Value of Financial Instruments

he Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are defined as follows:

The carrying amount of the Company’s financial assets and liabilities approximate their fair values due to their short-term maturities.

Revenue Recognition

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. Since ASU 2014-09 was issued, several additional ASUs have been issued to clarify various elements of the guidance. These standards provide guidance on recognizing revenue, including a five-step model to determine when revenue recognition is appropriate. The standard requires that an entity recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Under ASC 606, the Company recognizes revenue from the commercial sales of carbon credits and consulting services by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. 

Rates for consulting services are typically per day, per hour, or a similar basis. Consulting revenue is recognized over the period in which the service is provided. 

Revenue for sales of carbon credits is recognized at a point in time when control of the credit transfers to the buyer. The Company acts as a principal in all revenue transactions.

For transactions in which the Company has received compensation for services or carbon credits and the performance obligations have not yet been met, the Company records the compensation as deferred revenue. 

Foreign Currency Translation

The functional currency of the Company is the Canadian Dollar (“CAD”). For financial statement purposes, the reporting currency is the United States Dollar (“USD”).

For financial reporting purposes, the consolidated financial statements are translated into the Company’s reporting currency, USD. Asset and liabilities are translated using the closing exchange rate in effect at the balance sheet date with the resulting translation adjustments included as a separate component of shareholder’s equity through other comprehensive income (loss) in the consolidated statement of operations.

Income and expenses are translated at the average yearly rates of exchange. The Company includes realized gains and losses from foreign currency transactions in other income (expense), net in the consolidated statement of operations.

Warrants

There is estimation uncertainty with respect to selecting inputs to the Black-Sholes model used to determine the fair value of the warrants (Note 6).  These inputs include the stock price ranging from $0.50 - $0.25, exercise price ranging from $0.75 - $0.50, time to maturity of two years, annual risk-free interest rate ranging from 2.66% - 4.92%, and annualized volatility ranging from 637.12 % - 25.93 %. 

The above estimates and assumptions are reviewed regularly. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Significant Estimates

Significant estimates applied in the preparation of these financial statements include the estimated useful lives of property and equipment, share volatility and estimated life of options and warrants in determining their fair value as well as the expected potential for the realization of deferred tax assets in determining the amount of the valuation allowance thereto.

Earnings per Common Share

The basic loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the year. The diluted loss per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. As of February 28,August 31, 2023, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per share.

Reclassifications

Certain amounts in the consolidated financial statements for the prior year have been reclassified to conform to the current year presentation. These reclassifications had no impact on net earnings, financial position, or cash flows.

Note 2 – Prepaid Expenses

As of August 31, 2023 and May 31, 2023, prepaid expenses consisted of the following:

Note 2 – Prepaid Expenses

As of February 28, 2023 and May 31, 2022, prepaid expenses consisted of the following:

Note 3 – Inventory

Inventory as of February 28,August 31, 2023 and May 31, 2022,2023, consisted of the following:

Carbon credit inventory represents carbon credits currently held for sale and are statedvalued at the lower of cost using the weighted average of the cost of the goods on hand at year end, or net realizable value. The Company’s inventories are valued under the first in, first out (FIFO) method.

Note 4 - Property and Equipment

The amount of property and equipment as of February 28,August 31, 2023 and May 31, 2022,2023, consisted of the following:

The Company made no purchases during the three months ended August 31, 2023 and purchased office chairs and desks on June 9, 2022during the year ended May 31, 2023 for $1,710 and a computer on July 23, 2022$6,607 The Company also purchased computers during the year ended May 31, 2023 for $1,529.$3,705. Depreciation expense for the ninethree months ended February 28,August 31, 2023 and 2022 was $824. $556 and $229, respectively.

Note 5 – Shareholders’ Equity

During the ninethree months ended February 28, 2023,August 31, 2022, 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 720,000 units at $0.25 per unit for total proceeds of $180,000. Each unit consisted of share of common stock and warrant to purchase a share of common stock for $0.75 per share for a period of two years.

During the nine monthsyear ended February 28,May 31, 2023, the Company executed an agreement to issue shares of Karbon-X Corp for the purchase of up to 80% of Silviculture Systems to be issued in tranches based on completion of milestones. During the three months ended August 31, 2023, the Company issued 1,500,000 shares of Karbon-X Corp for the purchase of an additional 8% of Silviculture Systems shown as shares to be issued at a value of $375,000. As of February 28,August 31, 2023, the Company has purchased 24%32% of Silviculture Systems for 4,500,0006,000,000 shares of Karbon-X Corp shown as shares to be issued for a value of $1,125,000.$1,500,000.

During the three months ended February 28,August 31, 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 1,000,0003,274,858 shares of common stock at $0.50 per share for totalgross proceeds of $500,000. $ 1,637,429, net of expenses related to issuances of $83,993.

Note 6 – Warrants

During the ninethree months ended February 28,August 31, 2023, the Company issued 720,00010,400 warrants in connection with one private placement. Each warrant entitles the holder to acquire one common share of the Corporation at an exercise price of $0.75$0.50 with a two year term. The 720,00010,400 units of warrants and shares were issued in exchange for $180,000.as a commission fee valued at $2,236.

A detail of warrant activity for the ninethree months ended February 28,August 31, 2023 is as follows:

Note 7 – Investments

On November 15, 2022,May 31, 2023, the Company executed aan amended share exchange agreement to buy up to 80% of Silviculture Systems in exchange for cash and shares of Karbon-X Corp valued at $3,750,000.$7,250,000. $3,250,000 paid for in shares and the remaining $3,500,000 paid for in cash over the next three years. The issuance of shares will occur in tranches upon the completion of milestones. As of February 28,August 31, 2023, the Company has paid $999,783 in cash, has a 24%32% ownership in Silviculture Systems and has a significant, but not controlling interest in Silviculture Systems. The shares related to the 24%32% ownership are shown as shares to be issued and have been valued at the most recent stock purchase price, at the time of signing, of $0.25 per share. This investment has been accounted for as an equity method investment and its respective gain/loss for the period has been recorded in the statement of operations. For the three and nine months ended February 28,August 31, 2023, the Company recorded a gainloss on equity method investment of $13,636 and $13,391, respectively.

On November 15, 2022, the Company entered into a joint venture agreement with Silviculture Systems with 80% ownership in the joint venture.  Pursuant to the agreement, the Company will contribute $3,500,000 over the next 36 months to the joint venture.  The contributions will occur in tranches upon the completion of milestones.  As of February 28, 2023, the Company has contributed $147,133 to the joint venture and has a controlling 80% interest in the joint venture.  There has been no activity in the joint venture as of February 28, 2023, the joint venture has been consolidated and all intercompany transactions have been eliminated. $27,687.

Note 8 – Internally Developed Software

In accordance with ASC 350-40, the Company has capitalized internally developed software for its development of a mobile application. The software is currently in its application development stage and all related costs are being capitalized as incurred. Once the software is ready for implementation, the Company will begin amortizing the software over its estimated useful life. As of February 28,August 31, 2023 and May 31, 2022,2023, the Company has capitalized internally developed software of $456,946$524,871 and $176,777,$522,771, respectively.

Note 9 – Short Term Note

On January 13, 2023, the Company obtained a short term loan of $100,000 from a third party. Pursuant to a security agreement, the Company’s assets act as collateral against the loan.  This loan hashad an interest rate of 8% per annum and iswas due in full on July 10, 2023. The note was converted into 200,000 shares at a price of $0.50 per share on June 6, 2023.  

Note 10 – Subsequent EventsCommitments and Contingencies

On MarchOperating Leases

The Company leases office space from a third party under an operating lease agreement over 40 months which expires in July 2026. The lease also includes the payment of executory costs.

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 lease, we have not assumed the options will be exercised.

Lease expense for operating leases generally consist of both fixed and variable components. Expense related to fixed lease payments are recognized on a straight-line basis over the lease term. Variable lease payments are generally expensed as incurred, where applicable, and include agreed-upon changes in rent, certain non-lease components, such as maintenance and other services provided by the lessor, and other charges included in the lease. Leases with an initial term of twelve months or less are not recorded on the balance sheet. We recognized total lease expense of approximately $6,583 and $4,809 for the three months ended August 31, 2023 the Company terminated their currentand 2022, primarily related to operating lease agreement. costs paid to lessors from operating cash flows. We entered into our operating lease in April 2023 with a term of three years.

On March 6,Future minimum lease payments under operating leases that have initial noncancelable lease terms in excess of one year at August 31, 2023 the Company signed a new lease agreement to rent office space expiring on July 31, 2026.  This lease will fall under the ASC 842 leasing standard and the Company will record a lease liability and corresponding right of use assetwere as of the start of the lease.   follows:

Note 11 – Subsequent Events

Subsequent events have been evaluated through April 14,October 23, 2023, the date these financial statements were available to be released and noted no other events requiring disclosure.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion relates to the historical operations and financial statements of Karbon-X Corp.(“Karbon-X” or the “Company”) for the three and nine months ending February 28,August 31, 2023 and 2022.

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 Annual 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 “Risks 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 Annual 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"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.

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 vs 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 of all forms of payment, crypto, fiat or card.

NFT minting platform for carbon credits truly 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 NFT 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 consequentially reports quarterly financials up to a consolidated quarterly submission.

Effects of COVID-19

In March 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak and the related adverse public health developments have adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. Management has determined that there has been no significant impact to the Company’s operations, however management continues to monitor the situation.

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.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for financial information and with the instructions to Form 10-Q. They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the financial statements for the fiscal year ended May 31, 2022,2023, included in the Company’s year-end financial statements on Form 10-K filed with the Securities and Exchange Commission on September 13, 2022.2023 . Certain amounts in the consolidated financial statements for the prior year have been reclassified to conform to the current year’s presentation. The unaudited financial statements should be read in conjunction with those financial statements included in the Form 10-K. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three and nine-monthsmonths ended February 28,August 31, 2023 are not necessarily indicative of the results that may be expected for the year ending May 31, 2023. 2024 .

Use of Estimates and Assumptions

Preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Accordingly, actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.

Sales Tax Receivable

Sales tax receivable consists of the accumulated reclaimable GST paid by the Company on purchases made in Canada.

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets which are all five years.

Costs of major additions and improvements are capitalized while expenditures for maintenance and repairs, which do not extend the life of the asset, are expensed. Upon sale or disposition of property and equipment, the cost and related accumulated depreciation and amortization are eliminated from the accounts and any resulting gain or loss is credited or charged to income. Long-lived assets held and used by us are reviewed based on market factors and operational considerations for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Inventory

Inventories are statedvalued at the lower of cost using weighted average of the cost of the goods on hand at the year end or net realizable value. The Company’s inventories are valued under the first in, first out (FIFO) method. Net realizable value is estimated based on current selling prices. Estimated provisions are established for slow-moving and obsolete inventory. As of June 1, 2023, the Company changed its inventory policy from weighted average to FIFO, this had no impact on the current or prior consolidated financial statements.

Fair Value of Financial Instruments

The carrying amount of the Company’s financial assets and liabilities approximate their fair values due to their short-term maturities.

Foreign Currency Translation

The functional currency of the Company is the Canadian Dollar (“CAD”). For financial statement purposes, the reporting currency is the United States Dollar (“USD”).

For financial reporting purposes, the consolidated financial statements are translated into the Company’s reporting currency, USD. Asset and liabilities are translated using the closing exchange rate in effect at the balance sheet date with the resulting translation adjustments included as a separate component of shareholder’s equity through other comprehensive income (loss) in the consolidated statement of operations. 

Income and expenses are translated at the average yearly rates of exchange.  The Company includes realized gains and losses from foreign currency transactions in other income (expense), net in the consolidated statement of operations.

Warrants

There is estimation uncertainty with respect to selecting inputs to the Black-Sholes model used to determine the fair value of the warrants (Note 6).

The above estimates and assumptions are reviewed regularly. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Earnings per Common Share

The basic loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the year. The diluted loss per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. As of February 28,August 31, 2023, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per share.

Financial Condition and Results of Operations

To date the Company has generated minimaljust recently commenced to generate revenues from its business operations and has incurred operating losses since inception of $850,262.$2,542,138.  The Company will require additional funding to meet its ongoing obligations and to fund anticipated operating losses.  The ability of the Company to continue as a going concern is dependent on raising capital to fund its initial business plan and ultimately to attain profitable operations.  Accordingly, these factors raise substantial doubt as to the Company’s ability to continue as a going concern.  The Company intends to continue to fund its business by way of private placements and advances from related parties as may be required. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

Results of Operations

Unaudited Results for the Three Months Ended February 28,August 31, 2023 and 2022

To date the Company has generated minimal revenues from its business operations and has incurred operating losses since inception of $850,262.  As of February 28, 2023, the Company has negative working capital of $40,122.  The Company will require additional funding to meet its ongoing obligations and to fund anticipated operating losses.  The ability of the Company to continue as a going concern is dependent on raising capital to fund its initial business plan and ultimately to attain profitable operations.  Accordingly, these factors raise substantial doubt as to the Company’s ability to continue as a going concern.  The Company intends to continue to fund its business by way of private placements and advances from related parties as may be required. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

Sales and Revenue

For the three-month period ended February 28,August 31, 2023 we had revenue of $7,823$3,758 compared to $0 for the three month period ended February 28,August 31, 2022. We are just at the beginning of our operations which we expect to improve during the current fiscal year. We anticipate increased revenues upon completion of our App as well as through our acquisition of Silviculture Systems and other potential partners.

Operating Expenses

Operating expenses for the three-month period ended February 28,August 31, 2023 totaled $391,898,$325,474, compared to $1,865$195,868 for the three month period ended February 28, 2022. The increase was related to operating expenses included office and general expenses, professional fees, development expenses for our app and expenses relating to a project to plant Dipteryx Alata (Baru Nut Trees) through one of our partners.

Net Loss

Net loss from operations after income taxes was $371,789 during the three months ended February 28, 2023 compared to $1,865 for the three month period ended February 28, 2022.  Again this was as a result of office and general expenses, app development expense and tree planting expense.

Unaudited Results for the Nine Months Ended February 28, 2023 and 2022

Sales and Revenue

For the nine-month period ended February 28, 2023 we had revenue of $7,823 compared to $0 for the nine month period ended February 28, 2022. We are just at the beginning of our operations which we expect to improve during the current fiscal year.

Operating Expenses

Operating expenses for the nine-month period ended February 28, 2023 totaled $666,636 compared to $34,781 for the nine month period ended February 28,August 31, 2022. The increase was related to operating expenses included office and general expenses, professional fees, development expenses for our app and expenses relating to a project to plant Dipteryx Alata (Baru Nut Trees) through one of our partners.

Net Loss

Net loss from operations after income taxes was $646,034$350,032 during the ninethree months ended February 28,August 31, 2023 compared to $34,781$195,868 for the ninethree month period ended February 28,August 31, 2022. Again this was as a result of office and general expenses, app development expense and tree planting expense.

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.

As of February 28,August 31, 2023, the Company had $134,152$1,056,361  in current assets.assets and working capital of $784,193.

To date, the Company has financed its operations through equity sales and one note transaction. 

On March 7, 2022 the Company commenced a private placement pursuant to Rule 506(c) promulgated under Regulation D of the Securities Exchange Act of 1934, as amended. The private placement is ongoing. The private placement sought to raise $1,000,000 through the sale of Units at $0.25 per Unit, each consisting of one share of common stock and one warrant to purchase one share of common stock for two years at an exercise price of $0.50 per share. WeAs of September 1, 2022 we have obtained $1,040,000$955,000 in gross proceeds from this offering.

OnFrom November 23, 2022 the Company commencedthrough August 10, 2023, Karbon-X Corp. completed a private placement pursuant to Rule 506(c) of the Securities Exchange Act of 1934, as amended. AsIn that private placement the company sold 4,632,297 shares of February 28, 2023 incommon stock for total gross proceeds of $2,316,486.

During the three months ended August 31, 2022, 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 720,000 units at $0.25 per unit for total proceeds of $180,000. Each unit consisted of share of common stock and warrant to purchase a share of common stock for $0.75 per share for a period of two years.

During the nine monthsyear ended February 28,May 31, 2023, the Company executed an agreement to issue shares of Karbon-X Corp for the purchase of up to 80% of Silviculture Systems.Systems to be issued in tranches based on completion of milestones. During the three months ended August 31, 2023, the Company issued 1,500,000 shares of Karbon-X Corp for the purchase of an additional 8% of Silviculture Systems shown as shares to be issued at a value of $375,000. As of February 28,August 31, 2023, the Company has purchased 24%32% of Silviculture Systems for 4,500,0006,000,000 shares of Karbon-X Corp shown as shares to be issued for a value of $1,125,000.$1,500,000.

During the three months ended February 28,August 31, 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 1,000,0003,274,858 shares of common stock at $0.50 per share for totalgross proceeds of $500,000. $ 1,637,429, net of expenses related to issuances of $83,993.

During the three months ended August 31, 2023, the Company converted a loan for $100,000 into 200,000 shares at price of $0.50 per share.

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 completion of such financings.

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 2023.2024 . 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,August 31, 2023 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.

Going Concern

To date the Company has generated noonly recently begun generating revenues from its business operations and has incurred operating losses since inception of $850,262.$2,542,138.  The Company will require additional funding to meet its ongoing obligations and to fund anticipated operating losses.  The ability of the Company to continue as a going concern is dependent on raising capital to fund its initial business plan and ultimately to attain profitable operations.  Accordingly, these factors raise substantial doubt as to the Company’s ability to continue as a going concern.  The Company intends to continue to fund its business by way of private placements and advances from related parties as may be required. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

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.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

Our management evaluated the effectiveness of the Company’s internal control over financial reporting as of February 28,August 31, 2023. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on this evaluation, our management concluded that, as of February 28,August 31, 2023, our internal control over financial reporting was not effective. Because of limitations in our financial operations we had limited resources. These adjustments indicate material weaknesses in certain cycles, including but not limited to inventory and costing, and financial reporting.

In order to address this material weakness, theThe Company has entered into an agreement forhired a Chief Financial Officer who can act as a second control person relative to the Company’s financial operations.

This quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permits us to provide only management’s report in this quarterly report.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties other than the following:

As of the date of this report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. We are not aware of any other legal proceedings pending or that have been threatened against us or our properties.

From time to time the Company may be named in claims arising in the ordinary course of business. Currently, no legal proceedings or claims, other than those disclosed above, are pending against or involve the Company that, in the opinion of management, could reasonably be expected to have a material adverse effect on its business and financial condition.

Item 1A. Risk Factors.

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.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

OnSubsequent to March 7,31, 2022 the Company commenced a private placement pursuant to Rule 506(c) promulgated under Regulation D of the Securities Exchange Act of 1934, as amended. The private placement is ongoing. The private placement sought to raise $1,000,000and through the sale of Units at $0.25 per Unit, each consisting of one share of common stock and one warrant to purchase one share of common stock for two years at an exercise price of $0.50 per share.  We obtained $1,040,000 in gross proceeds from this offering.

On November 23,June 1, 2022, the Company commencedKarbon-X Corp. completed a private placement pursuant to Rule 506(c) of the Securities Exchange Act of 1934, as amended. AsIn that private placement the company sold 3,820,000 units at $0.25 per unit for total gross proceeds of February 28,$955,000. Each unit consisted of one share of common stock and one warrant to purchase a share of common stock for $0.75 per share for a period of two years.

From November 2022 through August 10, 2023, inKarbon-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 4,632,297 shares of common stock for total gross proceeds of $2,316,486.

During the three months ended August 31, 2022, 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 720,000 units at $0.25 per unit for total proceeds of $180,000. Each unit consisted of share of common stock and warrant to purchase a share of common stock for $0.75 per share for a period of two years.

During the nine monthsyear ended February 28,May 31, 2023, the Company executed an agreement to issue shares of Karbon-X Corp for the purchase of up to 80% of Silviculture Systems.Systems to be issued in tranches based on completion of milestones. During the three months ended August 31, 2023, the Company issued 1,500,000 shares of Karbon-X Corp for the purchase of an additional 8% of Silviculture Systems shown as shares to be issued at a value of $375,000. As of February 28,August 31, 2023, the Company has purchased 24%32% of Silviculture Systems for 4,500,0006,000,000 shares of Karbon-X Corp shown as shares to be issued for a value of $1,125,000.$1,500,000.

During the three months ended February 28,August 31, 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 1,000,0003,274,858 shares of common stock at $0.50 per share for totalgross proceeds of $500,000. $ 1,637,429, net of expenses related to issuances of $83,993.

During the three months ended August 31, 2023, the Company converted a loan for $100,000 into 200,000 shares at price of $0.50 per share.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information.

Not applicable

Item 6. Exhibits.

SIGNATURES*

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.