CONVERTIBLE PROMISSORY NOTES

6 Months Ended

Nov. 30, 2024

CONVERTIBLE PROMISSORY NOTES

CONVERTIBLE PROMISSORY NOTES

NOTE 5 – CONVERTIBLE PROMISSORY NOTES

On October 15, 2024, Karbon-X Corp. issued convertible promissory notes totaling USD $1,009,803 to three investors as part of its capital-raising efforts. The notes bear simple interest at a rate of 10% per annum, and mature on October 15, 2026, for two investors, and October 16, 2026, for one investor. One investors note was issued for CAD $500,000, which was equivalent to USD $359,803 on the date of issuance. The principal amount of the investor’s note is fixed in Canadian dollars and requires repayment in U.S. dollars, exposing the Company to foreign currency risk.

The notes include a conversion feature, allowing the holders to convert the principal and accrued interest into the Company's common stock. Conversion is permitted at the option of the lender at any time after the earlier of:

1.	Twenty-four months from the date of issuance, or
2.	The Company’s listing on OTCQX, Nasdaq, or NYSE.

The conversion price is the lesser of:

1.	80% of the twenty-day weighted average closing price of the Company’s common stock preceding the conversion (but not less than $0.50 per share), or
2.	$0.50 per share.

Conversion is further restricted to ensure that no lender converts an amount of the note that would result in owning more than 9.9% of the outstanding common stock at any time.

The Borrower may prepay the principal amount and any unpaid interest or any portion thereof at any time without notice, further interest, bonus, or penalty, provided that a minimum of six months’ interest shall be payable regardless of the prepayment date.

The issuance of these convertible promissory notes provided the Company with necessary capital to support its operations and strategic initiatives while offering investors the potential for equity participation in the Company's future growth.

As of November 30, 2024, the principal amount of the convertible promissory notes totaled USD $1,009,803, For the quarter ended November 30, 2024, the Company recognized interest expense of USD $13,118, calculated based on the stated 10% simple interest rate.

Prepayment Option

The Company may prepay the notes at any time without penalty, provided that a minimum of six months’ interest is payable. This provision ensures lenders are compensated regardless of the prepayment date.