Note 13 – Receivables Financing Obligations and Term Loan

Karbon-X Project Inc. is party to receivables financing arrangements under which providers advance cash in exchange for a specified purchased amount of the Company’s future receivables. Because the Company has not surrendered control over the receivables, the arrangements do not meet the conditions for derecognition under ASC 860 and are accounted for as secured borrowings: the receivables remain on the condensed consolidated balance sheet and the obligations are carried at the net proceeds received, accreted to the purchased amount using the effective interest method under ASC 835-30, with the accretion recorded in interest expense.

During the three months ended August 31, 2026 the Company repaid in full the merchant cash advance funded on April 28, 2026, remitting CAD $598,582 on June 10, 2026 after a CAD $50,000 early payoff discount, with the difference between the amount remitted and the carrying value recognized in interest expense; drew a CAD $600,000 term loan on July 2, 2026 from an affiliate of the same provider under a loan agreement dated June 26, 2026, bearing interest at a fixed rate, with CAD $49,000 of underwriting and documentation fees withheld at funding and recorded as a discount, repayable in 36 weekly instalments of CAD $23,316.67 to March 15, 2027 and guaranteed by the Company, two other subsidiaries and the Chief Executive Officer; the term loan is a borrowing rather than a sale of receivables and is presented separately as term loan payable, carried at amortized cost with its discount accreted to interest expense using the effective interest method; received $460,000 on July 22, 2026 under a new merchant cash advance against a purchased amount of $644,000, repayable in 36 weekly pre-authorized debits of $17,888.89 ; and received $60,063, net of underwriting fees, on August 27, 2026 under a purchase and sale of receivables agreement with a purchase price of $70,058 against purchased receivables of $105,018 . The arrangement funded on April 24, 2026 continued to self-liquidate through weekly remittances. Finance charges of $276,770 on the receivables financing arrangements and accretion of $62,579 on the term loan (presented within amortization of debt discount in the statement of cash flows) were recognized in interest expense for the quarter. Receivables financing obligations and the term loan consisted of the following:

The receivables financing obligations and the term loan are secured by a general security interest in the present and after-acquired personal property of Karbon-X Project Inc., including its accounts receivable, inventory and equipment, and one of the arrangements is personally guaranteed by the Company’s Chief Executive Officer (Note 21). The Company entered into further receivables financing arrangements after the quarter end; see Note 24.

Assets pledged as collateral

The term note described in Note 12 is secured by a security interest in substantially all of the present and future assets of Karbon-X Corp., the parent company, including its equity interests in and intercompany claims against its subsidiaries. Assets of Karbon-X Corp. recognized in the condensed consolidated balance sheet at August 31, 2026, after elimination of intercompany balances, were $2,466,129, comprising principally cash, the loan receivable and the consideration payable to a customer. The receivables financing obligations are secured by the personal property of Karbon-X Project Inc., whose assets recognized in the condensed consolidated balance sheet at that date, after elimination of intercompany balances, were $2,897,410, of which accounts receivable, inventories of $721,012 and property and equipment are the principal components. The financing providers do not have the right to sell or repledge the collateral. The convertible notes described in Note 11 are unsecured.