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Base Carbon Management Reports 2026
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BASE CARBON INC.
MANAGEMENT'S DISCUSSION & ANALYSIS
FOR THE YEARS ENDED
DECEMBER 31, 2025 AND 2024
(EXPRESSED IN UNITED STATES DOLLARS)
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
Introduction
This management's discussion and analysis ("MD&A") of the financial condition and results of the operations of Base Carbon Inc. (the "Company" or "Base Carbon") constitutes management's review of the factors that affected the Company's consolidated financial and operating performance for the year ended December 31, 2025. This MD&A should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2025 (the "consolidated financial statements"), and together with the notes thereto. Information in this MD&A is dated as of March 31, 2026, unless otherwise indicated.
Unless otherwise indicated and as hereinafter provided (see "Use of Non-IFRS Financial Measures" section below), all financial information contained in this MD&A, and the Company's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). Unless otherwise noted in this MD&A, all monetary amounts are expressed in thousands of United States dollars, and "we", "us" and "our" refer to the "Company" or "Base Carbon" including each of its subsidiaries.
Certain statements in this MD&A constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws. The "Caution Regarding Forward-looking Statements" section in this MD&A should be carefully reviewed and no undue reliance placed on any such forward-looking statements.
The Company exists under the Business Corporations Act (Ontario). Its registered and mailing office is located at 50 Carroll Street, Toronto, Ontario, M4M 3G3.
Use of Non-IFRS Financial Measures
This MD&A references certain financial measures that are not defined under IFRS but are provided to offer investors valuable supplemental insights into the Company's financial performance. These measures facilitate period-over-period comparisons by adjusting for items that may fluctuate independently of business performance and enhance transparency regarding key metrics used by management in operating the business. As these measures do not have standardized definitions under IFRS, they may not be comparable to similarly titled measures reported by other companies. They are intended to complement IFRS measures by offering additional perspective on the Company's operational results from management's viewpoint and should not be viewed in isolation or as a replacement for IFRS-reported financial information.
The non-IFRS measures presented are "Adjusted Comprehensive Income (Loss) for the Period, "Adjusted Comprehensive Income (Loss) on a per share basis" and "Adjusted Comprehensive Income (Loss) on a diluted per-share basis". For more information about this measure, why it is used by the Company, and a reconciliation to the most directly comparable measure under the IFRS Accounting Standards, refer to the section "Non-IFRS Financial Measures" of this document.
Caution Regarding Forward-Looking Statements
This MD&A contains forward-looking statements about the Company's objectives, plans, goals, aspirations, strategies, financial condition, results of operations, cash flows, performance, prospects, opportunities, and legal and regulatory matters. Specific forward-looking statements in this MD&A include, but are not limited to, statements with respect to the Company's anticipated future results, events, plans, strategic initiatives, future liquidity, planned capital investments, statements as to expectations for the Company's current carbon credit projects in development and future pipeline opportunities, including the steps involved to realize on such opportunities and the timeline in which such opportunities may be realized, as to the timing
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
and number of carbon credits expected to be generated by such carbon credit projects and the resulting financial performance, and under the headings "Project Updates and Details" and "Outlook".
Forward-looking statements are typically identified by words such as "expect", "anticipate", "believe", "foresee", "could", "estimate", "goal", "intend", "plan", "seek", "strive", "will", "may", "maintain", "achieve", "grow", "should" and similar expressions, as they relate to the Company and its management. Forward-looking statements reflect the Company's current estimates, beliefs and assumptions, which are based on management's perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. The Company's expectation of operating and financial performance in 2026 and beyond is based on certain assumptions including assumptions about operational growth, anticipated cost savings, operating efficiencies, anticipated benefits from strategic initiatives, future liquidity, and planned capital investments. The Company's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive, and other uncertainties and contingencies regarding future events and as such, are subject to change. There is no assurance that such estimates, beliefs and assumptions will prove to be correct.
In particular, and without limiting the generality of the foregoing, this MD&A contains forward-looking statements concerning:
- the implementation of the Company's current business plans and strategies and future changes thereto;
- expectations regarding carbon market trends, overall carbon market growth rates and future increase of prices for carbon credits, including with respect to the Carbon Offsetting and Reduction Scheme for International Aviation ("CORSIA") and the implementation of Article 6 of the Paris Agreement and the application of Article 6 Authorized labels;
- expectation of inclusion eligibility of the Company's carbon credits in compliance markets, such as CORSIA;
- expectations for the Company's current carbon removal and carbon reduction projects, including as to the timing for carbon credit issuances for such projects and the number of carbon credits expected to be generated by such projects;
- expectations with respect to future pipeline opportunities, including the steps involved to realize on such opportunities and the timeline in which such opportunities may be realized;
- future development activities, including acquiring interests in carbon projects and carbon credits and the development of software and technological applications to carbon credit projects and carbon credits;
- implementation of the Paris Agreement and the issuance of correspondingly adjusted carbon credits pursuant to government regulation and existing project agreements;
Although management believes that the anticipated future results, performance or achievements expressed or implied by the forward-looking information are based upon reasonable assumptions and expectations, readers should not place undue reliance on forward-looking information because it involves assumptions, known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking information.
The forward-looking statements made herein are subject to a variety of risks and uncertainties, many of which are beyond the Company's control, which could cause actual events or results to differ materially and adversely from those reflected in the forward-looking statements. These risks and other factors are described or referred to herein or described in the Company's Annual Information Form for the year ended December 31, 2025 (the "AIF") under the heading "Risk Factors", copies of which are available under the Company's profile on SEDAR on www.sedarplus.ca.
Investors and all readers are also cautioned that the factors and assumptions described above, in the AIF and this MD&A are not exhaustive. Readers are also cautioned that the assumptions used in the
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Should one or more of the risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially and adversely from those described in the forward-looking statements. The Company's actual results, programs and financial position could differ materially from those expressed in or implied by these forward-looking statements, and accordingly, no assurance can be given that the events anticipated by the forward-looking statements will transpire or occur, or that, if any of them do so, what benefits the Company will derive there from. The forward-looking statements contained in this MD&A are made as of the date of this MD&A unless otherwise stated and are expressly qualified by this cautionary statement. The Company does not undertake any obligation to publicly update or revise any forward-looking statements except as expressly required by applicable securities laws.
General Business Description
Base Carbon is a publicly traded entity which is listed on the Cboe Canada under the trading symbol "BCBN" and trading on the OTCQX Best Market under the symbol "BCBNF". Base Carbon runs general operations, including ownership of carbon removal and carbon reduction projects through its wholly owned subsidiary Base Carbon Capital Partners Corp. ("BCCPC").
Base Carbon, through BCCPC, provides capital, development expertise and management operating resources to projects involved in both the global voluntary and compliance carbon markets and broader environmental markets. The Company seeks to be the preferred carbon project partner in providing capital and developmental resources to carbon projects globally and, where appropriate, will endeavour to utilize technologies within the evolving carbon industry to enhance efficiencies, commercial credibility, and trading transparency.
The Company has monitored the continued evolution of the compliance carbon markets, such as CORSIA, and has worked with project developers to facilitate eligibility of the Company's carbon credits into various compliance markets. Base Carbon may consider developing additional compliance related projects in the future. The Company has, and is, investigating investments which, in addition to generating carbon credits, produce a commercial product.
Key Highlights
The financial discussions in this MD&A relate to results for the year ended December 31, 2025 ("year-ended 2025"), as compared to the same period in 2024. All financial amounts are stated in approximate thousands of US dollars, unless otherwise noted.
During the year-ended 2025, the Company experienced the following significant operational highlights:
- On September 22, 2025, Base Carbon received carbon credit registry Verra's approval to apply the CORSIA-compliant VM0050 methodology to all carbon credits generated from its Rwanda Cookstoves Project. During Q3, the project adopted this methodology. See "CORSIA Approved VM0050 Methodology" for more details.
- On July 7, 2025, Base Carbon received into inventory 192,810 Article 6 authorized labelled VMR0006 carbon credits from the Rwanda Cookstoves Project, subsequently re-quantified by the Company to 126,701 VM0050 carbon credits.
- On the same day, the Company recognized a carbon credit revenue participation asset when an additional 371,272 Article 6 authorized labelled VMR0006 carbon credits were received by project partner DelAgua. These carbon credits were subsequently re-quantified to 243,973 VM0050 carbon credits.
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
- In June of 2025, the Company received $1.8 million in net cash proceeds from the monetization of carbon credits generated from the Vietnam Household Devices Project.
- Continually improved the Company's equity cost of capital by repurchasing and cancelling 3.46 million shares through the Company's normal course issuer bid ("NCIB"), as well as an additional 3.72 million shares through share purchase agreements.
In the year 2025, the Company reported financial results of:
- Net income and comprehensive income of $245.
- Current assets of $40.7 million which were primarily composed of $5,691 in cash, $923 in short term loan receivable, $1,455 in carbon credit revenue participation asset, $21.2 million in carbon credit inventory, and $11.0 million in current investments in carbon credit projects.
- Non-current assets of $68.3 million, represented almost exclusively by non-current investments in carbon credit projects of $68.1 million.
Subsequent to December 31, 2025 and as of the date of this MD&A, Base Carbon noted the following significant events:
- The Company's Rwanda Cookstoves Project received Verra's CORSIA – First Phase, 2024-2026 Eligible ("CORSIA-eligible") designation, allowing for immediate sale and delivery into global aviation carbon offsetting markets.
- Continually improved its equity cost of capital by repurchasing approximately 1,773,510 shares year-to-date at an average cost of $0.71 through the Company's normal course issuer bid ("NCIB").
Refer to Subsequent Events for further additional events as of the date of this MD&A.
Outlook
The broader carbon credit market continues to face scrutiny, and as a result has experienced recent commercial and perception-based headwinds. Base Carbon remains confident in the sector's long-term fundamentals, particularly within the specific end-markets where the Company maintains active and deliberate exposure. With the approval from carbon credit registry Verra for the application of methodology VM0050 to the Company's Rwanda Cookstoves Project, the Company continues to enhance the quality and compliance-market positioning of its portfolio. Management continues to maintain confidence in its disciplined execution, resilient asset base, and rigorous underwriting processes.
Project Summary
Base Carbon's three flagship projects are the Rwanda Cookstoves Project, the Vietnam Household Devices Project, and the India ARR Project, all of which have met or exceeded management's base case commercial expectations in 2025. Management is of the view that these projects will exceed the base case commercial expectations over their lifespans.
For a detailed and individualized overview of Base Carbon's key projects, refer to the "Project Updates and Details" section below.
CORSIA Approved VM0050 Methodology
In Q3 2025, Verra approved the application of CORSIA-compliant methodology VM0050 to the Company's Rwanda Cookstoves Project.
Verra's VM0050 standard has been applied by the Company to re-quantify previously issued carbon credits held in inventory and will be applied to future carbon credits anticipated to be generated from the Rwanda
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
Cookstoves Project. As of the date of this MD&A, the Rwanda Cookstoves Project carbon credits have been tagged CORSIA-eligible which allows for the immediate sale and delivery into global aviation carbon offsetting markets. This milestone positions Base Carbon's inventory as a premium, compliance-grade carbon credit balance, capable of achieving materially higher market values amid increasing demand and constrained global supply. Refer to Subsequent Events for further information. For a detailed analysis on how the methodology update impacts Base Carbon's projects, refer to the "Project Updates and Details" section below.
Monetization of Carbon Credit Inventories
As of the date of this MD&A, the Company, through BCCPC and subject to the revenue sharing arrangement, holds approximately 1,076,230 carbon credits in inventory, of which approximately 0.7 million have been tagged with Verra's Article 6 Authorized and CORSIA-eligible labels. Subsequent to year end, Rwanda Cookstoves Project partner DelAgua completed sales of 0.2 million carbon credits forming part of the Company's carbon credit revenue participation asset at year-end. DelAgua continues to maintain an inventory balance of 683,045 carbon credits which are subject to a revenue sharing arrangement with the Company. Monetization efforts through a combination of bilateral transactions and structured market processes remain ongoing. Refer to Subsequent Events for further information.
Organic Portfolio Expansion Opportunities
Within the existing portfolio, Base Carbon holds the right, but not the obligation, to expand its investment in the Vietnam Household Devices Project. In addition, the Company holds two options to expand the India ARR Project, each for 10 million trees (20 million trees total), as well as a right of first refusal relating to an extension or expansion of the initial project, including any additional future phases of the initial project beyond the expected 20-year project life. If exercised, these options could materially scale the projects' investment scope and resulting volume of carbon credit production. These rights represent compelling, risk-adjusted growth opportunities and are a key component of the Company's long-term strategic plan. All potential capital commitments are considered as a function of the Company's equity cost of capital and expected risk-adjusted returns. Given the operational successes to date, management's deep familiarity with each project, and established relationships with carbon credit buyers, any further capital commitments are viewed as highly attractive and value-accretive, subject to appropriate timing and balance sheet risk optimization.
Robust and Diversified Growth Pipeline of Carbon Reduction and Removal Projects
The Company continues to assess several high quality carbon reduction and removal projects, remaining focused on robust, diversified, and highly-strategic opportunities originating from three key channels: (i) organic portfolio expansion opportunities, as discussed prior, (ii) proprietary, thesis-driven internal research and (iii) market-based inbounds with project investment opportunities. Base Carbon continues to receive a significant flow of regular capital investment opportunities, leading to the evaluation of approximately 40 - 50 investment opportunities per year. During the year, the Company maintained strong conviction in its existing portfolio and continued to view the market as increasingly attractive with time and capital discipline. Leveraging a disciplined and robust underwriting framework, Base Carbon evaluates each opportunity with a focus on downside protection, while maintaining upside potential and strategic optionality, an approach which has underpinned Base Carbon's strong performance in its first few years of operations.
Market Positioning and Strategic Focus
As the carbon market continues to evolve, the Company has observed a structural shift in demand towards removal-based carbon credits including voluntary carbon credits eligible for emerging compliance markets (such as CORSIA) and country specific emissions trading schemes (ETS). In response, Base Carbon is prioritizing nature-based and technology-based carbon credit removals and actively investigating expansion into broader environmental industrials, as it identifies and evaluates its next round of project investments.
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
The Company has, and is, investigating opportunities which, in addition to generating carbon credits, produce a commercial product. These investments may include biochar, agroforestry, direct air capture or other projects.
Ongoing Common Share Buybacks
As of the date of this MD&A, Base Carbon's shares continue to trade at a significant discount to both book value and equity research estimates. As a result, the Company remains focused on delivering accretive value to shareholders and, should the current market valuation persist, the intention is to continue opportunistically repurchasing shares under the current NCIB program which was renewed on June 23, 2025. The Company is actively exploring complementary market mechanisms that achieve the dual end of (i) driving the best risk-adjusted shareholder accretion, and (ii) returning capital to shareholders as and when appropriate.
Project Updates and Details
Rwanda Cookstoves Project
In January 2022, the Company, through BCCPC, entered into a carbon reduction project agreement with DelAgua Health Rwanda (Voluntary) Limited ("DelAgua"), as in-country project developer, to supply cookstoves in Rwanda as part of an expansion of its existing carbon reduction project previously registered as a clean development mechanism (or CDM) project governed by the United Nations pursuant to the Kyoto Protocol. According to the terms of the agreement and the initial project methodology, BCCPC invested $8,825 to fund the manufacturing, distribution and monitoring of approximately 250,000 cookstoves across rural Rwanda in exchange for a revenue share arrangement applicable to the proceeds from the sale of the first 7.5 million carbon credits expected to be generated by the project.
The distribution of all 250,000 cookstoves to participating project households was completed in early 2023 and the project has been registered with Verra under project ID #4150, with the PDD (project design document) available on Verra's website. Also in 2023, the Company made its final investment into the project and because the project had not yet generated carbon credits, the cost approach was used to determine the fair value of the investment equal to the total disbursed investment payments of $8,825.
As announced during December 2023, the Government of Rwanda issued a letter of authorization (the "LOA") with respect to the Rwanda Cookstoves Project which resulted in Verra issuing its first ever Article 6 Authorized label for a carbon removal or reduction project. The Article 6 Authorized label is applied to carbon credits generated by a carbon removal or reduction project where the project host country agrees to apply to the corresponding adjustment concept with respect to such project. A corresponding adjustment is a concept included in Article 6 of the Paris Agreement and is intended to address the potential issue of double counting emission reductions. By applying a corresponding adjustment, the project host country agrees that the emission reductions from project under its jurisdiction will not count towards such country's national commitment (NDC under the Paris Agreement) to lower carbon emissions.
In April 2024, BCCPC and DelAgua executed an amended and restated project agreement to facilitate the implementation of the LOA. Pursuant to the LOA, a copy of which may be found on Verra's website under Project ID 4150, adjustments to Article 6 Authorized carbon credits generated by the Rwanda Cookstoves Project and associated sales thereof are as follows:
(i) 2% of any Article 6 Authorized carbon credits issued are to be immediately retired to help offset global emissions
(ii) 10% of any issued Article 6 Authorized carbon credits are to be transferred to the Government Rwanda to help achieve its NDC emission reduction targets
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
(iii) 5% of revenues generated from the initial sale of the remaining Article 6 Authorized carbon credits issued will be remitted to the Rwanda Green Fund ("RGF").
Under the terms of the revised project agreement, BCCPC will contribute $0.20 per carbon credit to RGF on the first 1,925,000 carbon credits generated and the parties will split the 5% RGF remittance attributable to sales revenue from remaining Article 6 Authorized carbon credits generated based upon each party's pro rata share of cashflows under the revenue sharing arrangement.
During 2024, 1.7 million Article 6 Authorized carbon credits were issued and delivered to the Company from the Rwanda Cookstoves Project, and a portion were sold to a third party. Transitioning the project from a development to production stage resulted in a project valuation update from a cost-based approach to an income-based approach utilizing a discounted cash flow ("DCF") model.
During 2024, the Company and DelAgua made the decision to update the project's methodology to Verra's VM0050 Energy Efficiency and Fuel-Switch Measures in Cookstoves, v1.0 to be potentially eligible for carbon credit sales into the Compliance Carbon Market through CORSIA.
The estimate of the number of carbon credits expected to be issued over the life of the project is now 4.6 million VM0050 carbon credits. This is comprised of 1.1 million pre-payment VM0050 carbon credits and a 0.2 million carbon credit revenue participation asset already issued, and anticipated future VM0050 carbon credit issuances in the amount of 3.3 million carbon credits.
The table below summarizes the changes in the Rwanda Cookstoves Project valuation as at December 31, 2025, and December 31, 2024:
| Rwanda Cookstoves Project (thousands of US dollars) | December 31, 2025 | December 31, 2024 |
|---|---|---|
| Balance, beginning of the period | 7,812 | 8,825 |
| Unrealized gains on investment in carbon credit projects (i) | 14,315 | 24,620 |
| Transfer to carbon credit revenue participation asset (ii) | (1,606) | - |
| Receipt of carbon credit inventory (iii) | (2,449) | (25,633) |
| Balance, end of the period | 18,072 | 7,812 |
i) Investment in Rwanda Cookstoves Project
During the year ended December 31, 2025, an unrealized gain of $14.3 million (2024 – $24.6 million loss) was recognized on the project. This was primarily driven by a lower discount rate in addition to the unwinding of the discount rate period-over-period. This unrealized gain was partially offset by a decrease in current carbon credit prices and an increase in insurance costs related to CORSIA eligible tagging.
The Company will continue to update its evaluation of the Rwanda Cookstoves Project on a quarterly basis, based on the project performance, market conditions, and various risk factors.
For more information regarding the transfer to carbon credit revenue participation asset and receipt of carbon credit inventory, refer to the "ii) Rwanda Cookstoves Project Carbon Credit Inventory" and "iii) Carbon credit revenue participation asset" sections below.
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
ii) Rwanda Cookstoves Project Carbon Credit Inventory
The table below summarizes the changes in the carbon credit inventory held as at December 31, 2025, and as at year ended December 31, 2024:
| Number of carbon credits held in inventory | December 31, 2025 | December 31, 2024 |
|---|---|---|
| Balance, beginning of the period | 1,712,193 | - |
| Receipt of VMR0006 carbon credit inventory | 192,810 | 1,732,193 |
| Subtotal VMR0006 Balance | 1,905,003 | 1,732,193 |
| Re-quantification of inventory to VM0050 (ii) | (828,773) | - |
| Sale of carbon credit inventory | - | (20,000) |
| Balance, end of the period VM0050 | 1,076,230 | - |
| Balance, end of the period VMR0006 | - | 1,712,193 |
| Carbon credit inventory value (thousands of US dollars) | December 31, 2025 | December 31, 2024 |
| --- | --- | --- |
| Balance, beginning of the period | 25,633 | - |
| Receipt of carbon credit inventory during the period | 2,448 | 25,902 |
| Loss on re-quantification of inventory to VM0050 (ii) | (2,932) | - |
| Write-down of inventory (i) and (iii) | (3,920) | - |
| Sale of carbon credit inventory | - | (269) |
| Balance, end of the period | 21,229 | 25,633 |
On September 22, 2025, carbon credit registry Verra approved and filed the application of new methodology VM0050 to the Company's Rwanda Cookstoves Project. In Q3 2025, the Company employed this change in methodology, moving from VMR0006 to VM0050 for all historical and future carbon credits issuances from the Rwanda Cookstoves Project.
The Company performed a detailed review of its inventory balances and identified three distinct and material write-downs for the year ended December 31, 2025: (i) write-down of VMR0006 inventory at September 30, 2025, (ii) loss on re-quantification of inventory to VM0050, and (iii) write-down of VM0050 inventory at December 31, 2025.
(i) Based on the prevailing decline in VMR0006 carbon credit pricing during 2025, the Company determined a write-down of certain vintages was required. The write-down of inventory was in the amount of $2,064 at September 30, 2025.
(ii) Based on the approval of the new VM0050 methodology described above, the Company updated its inventory quantity and prices to reflect eligibility under the CORSIA scheme. Upon re-quantification, this resulted in a higher carbon credit price of $21.45. However, the inventory quantity declined from 1,905,003 VMR0006 to 1,076,230 VM0050 carbon credits at September 30, 2025. This resulted in a total loss on re-quantification of inventory to VM0050 of $2,932 at September 30, 2025.
(iii) At December 31, 2025, the Company, with its internal pricing model, determined that the net realizable value of VM0050 carbon credits decreased to $19.73 per credit. As a result, a further write-down of inventory in the amount of $1,856 was recognized at December 31, 2025.
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
As at December 31, 2025, the total inventory of 1,076,230 VM0050 carbon credits was valued at $21.2 million, a decrease of $4,404 when compared to the previously held VMR0006 carbon credits in inventory valued at $25.6 million for 1,712,193 VMR0006 carbon credits at December 31, 2024.
iii) Carbon credit revenue participation asset
The table below summarizes the changes in the carbon credit revenue participation asset as at December 31, 2025, and as at year ended December 31, 2024:
| Number of carbon credit revenue participation asset | December 31, 2025 | December 31, 2024 |
|---|---|---|
| Balance, beginning of the period | - | - |
| Receipt - VMR0006 carbon credit revenue participation asset | 371,275 | - |
| Re-quantification of inventory to VM0050 | (127,302) | - |
| Balance, end of the period VM0050 | 243,973 | - |
| Carbon credit revenue participation asset (thousands of US dollars) | December 31, 2025 | December 31, 2024 |
| --- | --- | --- |
| Balance, beginning of the period | - | - |
| Receipt of carbon credit revenue participation asset | 1,606 | - |
| Gain on re-quantification to VM0050 | 235 | - |
| Unrealized loss on carbon credit revenue participation asset | (386) | - |
| Balance, end of the period | 1,455 | - |
The carbon credit revenue participation asset reflects the Company's ongoing financial interest in the issued carbon credits and will be measured at fair value going forward, with changes recognized through profit or loss. The reclassification ensures the carrying value aligns with the underlying rights and obligations following carbon credit issuance.
The carbon credits under the carbon credit revenue participation asset have been subject to a contracted sale, signed before the year-end but for which the carbon credits have not yet been delivered. Refer to Subsequent Events for further information.
Vietnam Household Devices Project
In May 2022, the Company, through BCCPC, entered into transaction documents to facilitate the development of a household devices carbon project in Vietnam, with Sustainability Investment Promotion and Development Joint Stock Company ("SIPCO") as in-country project developer. Citigroup was the carbon credit off-taker to SIPCO for the first phase of the Vietnam Household Devices Project.
BCCPC has fully funded its capital commitment of $20.8 million used to fund the manufacturing, distribution and monitoring of approximately 850,000 cookstoves and 364,000 water purifiers across several provinces of Vietnam which were fully distributed in early 2023. BCCPC has the option to expand the project up to an aggregate total of 1,200,000 cookstoves and 600,000 water purifiers for an additional prepayment. Other than with respect to the expansion option prepayment, BCCPC has no further capital expenditure obligations.
Project documentation also provides BCCPC with monitoring rights through all stages of the project and broad rights, including with respect to the project's carbon credit registry account, to step in and perform the obligations and functions of SIPCO in the event of a failure to perform by SIPCO.
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
During the first phase ("Phase 1") of the project which was completed in June 2025, SIPCO sold and transferred to BCCPC, and SIPCO purchased back from BCCPC for offtake by Citigroup pursuant to a fixed price off-take arrangement, the first 7.4 million carbon credits generated by the project.
During the second phase ("Phase 2") and remaining life of the project, BCCPC has the option to purchase all further carbon credits generated by the project on a yearly basis for $5 per carbon credit.
As noted herein, Verra, the project registry, has published an updated methodology for cookstove projects, VM0050, and transition to this methodology would require a re-quantification of future carbon credit issuances from this project. During Q2 2025, BCCPC and SIPCO elected to begin work to apply Verra's new methodology to the Vietnam Household Devices Project and BCCPC provided SIPCO with an operational loan in the amount of up to $200 to used by SIPCO for costs related to the methodology change. As at December 31, 2025, the methodology for cookstoves projects update and re-quantification is in progress.
Based on the implementation of this updated methodology, the estimate of the carbon credits expected to be issued over the life of the project is now 15.0 million carbon credits (7.4 million VMR0006 cookstove and AMS-III.AV water purifier carbon credits previously issued under Phase 1, and 7.6 million VM0050 cookstove and AMS-III.AV water purifier carbon credits in Phase 2). Under the expansion option, the Company anticipates an additional 4.7 million VM0050 and AMS-III.AV carbon credits could be generated.
The Company will continue to update its evaluation of the Vietnam Household Devices Project on a quarterly basis, based on the project performance, market conditions, and various risk factors.
i) Investment in Vietnam Household Devices Project
The table below summarizes the changes in the Vietnam Household Devices Project valuation during the year ended December 31, 2025, and the year ended December 31, 2024:
| Vietnam Household Devices Project (thousands of US dollars) | December 31, 2025 | December 31, 2024 |
|---|---|---|
| Balance, beginning of the period | 55,972 | 123,861 |
| Capital deployed in the project during the period | - | 1,652 |
| Unrealized gain (loss) on investment in carbon credit projects | (3,015) | (69,541) |
| Realized cash settled gains on investment in carbon credit projects | 1,811 | 28,027 |
| Settlements of investment in carbon credit projects | (1,811) | (28,027) |
| Balance, end of the period | 52,957 | 55,972 |
During the year ended December 31, 2025, BCCPC received $1.8 million in cash payments from the delivery and monetization of carbon credits from the Vietnam project, representing both a realized gain, as well as an amount derecognized from the financial asset balance of the investment during the year ended December 31, 2025. During the year ended December 31, 2025, an unrealized loss of $3,015 was recognized on the project due to lower crediting profile and the addition of insurance costs related to the Article 6 Authorized carbon credits. This is partially offset by unwinding of discount rate and the future increase in carbon credit prices expected.
As at December 31, 2025, SIPCO had delivered an aggregate total of 7.4 million carbon credits to BCCPC, which completed Phase 1 of the Vietnam Household Devices Project. The project now enters Phase 2, where BCCPC has the option to purchase all further carbon credits generated by the project on a yearly basis for $5 per carbon credit.
Since the establishment of the Vietnam project and as of December 31, 2025, the Company has received aggregate cash payments of approximately $36.3 million from the sale of carbon credits generated by the
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
project at a total cost of $20.8 million resulting in a full repayment of capital invested and a cash gain of approximately $15.5 million.
India Afforestation, Reforestation, and Revegetation (ARR) Project
As announced on August 8, 2023, the Company, through BCCPC, entered into an agreement to facilitate the development of a nature-based carbon removal project, focused on the reforestation of degraded rural farmlands in the northern Indian state of Uttar Pradesh. Value Network Ventures Pte Ltd. ("VNV") is the Company's project development partner.
The project's aim was to facilitate the planting of approximately 6,500,000 trees on rural farmlands and deserted lands in northern India. The planting of all project trees was completed during the year ended December 31, 2024. During 2025, pursuant to the project agreement with VNV, VNV planted an additional 400,000 trees in specific areas of operations due changes in landholder participation. Mortalities on initial tree planting is an expected event in projects of this nature. The experienced tree mortalities is approximate to the high end of the expected range of mortalities, however, VNV continues to be contractually obligated to replace any trees lost to ensure a maintained standing stock of at least 6,500,000 trees.
During Q2 2025, the India ARR Project was submitted for validation and in Q4 2025, BCCPC and VNV agreed to transition to new Verra methodology VM0047 and applied for the ABACUS label. Work is currently underway for validation and verification under VM0047. Based on current project plans and subject to successful implementation and approval of the revised methodology, Management anticipates the potential issuance of approximately 1.2 million carbon credits over the applicable crediting period.
In December 2025, BCCPC and VNV amended the project agreement including capital payment schedules up to 2027, to better align with the agreed upon transition to Verra methodology VM0047. BCCPC agreed to an incremental $108 in payments to help facilitate the transition work to VM0047. Other than this, the quantum of payments was not changed, only the timing of payments.
Per the terms of the agreement and assuming all condition precedents are met, BCCPC will invest aggregate capital of approximately $13.7 million into the project, of which BCCPC has invested $8,158 as of December 31, 2025. An estimated $6,000 of the total capital commitment is considered maintenance capital of which approximately $4,000 is expected to be funded through the sale of carbon credits generated by the project.
Following first carbon credit production, the India ARR Project will be the third project delivered by the Company, an achievement made under particularly challenging market conditions. The India ARR Project is expected to expand the Company's carbon credit production into the nature-based carbon removals category, where the majority of market liquidity and demand has been evolving in recent years. Base Carbon believes that demand for high-quality carbon removals projects will continue to accelerate, further validating its strategic focus in this area.
i) Investment in India ARR Project
The table below summarizes the changes in the India ARR Project during the year ended December 31, 2025, and the year ended December 31, 2024:
| India ARR Project (thousands of US dollars) | December 31, 2025 | December 31, 2024 |
|---|---|---|
| Balance, beginning of the period | 6,100 | 4,400 |
| Capital deployed in the project during the period | 2,058 | 1,700 |
| Balance, end of the period | 8,158 | 6,100 |
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
During the year ended December 31, 2025, the Company deployed $2,058 in capital towards the India ARR Project, inclusive of $108 which was not part of the original agreement, and as such, does not form part of the remaining commitment below:
| India ARR Project Capital Deployment (thousands of US dollars) | Amount |
|---|---|
| Committed capital deployment | 13,621 |
| Capital deployed in 2023 | (4,400) |
| Capital deployed in 2024 | (1,700) |
| Capital deployed in 2025 | (1,950) |
| Remaining capital deployment | 5,571 |
As at December 31, 2025, the India ARR Project remains in the developmental stage, and no carbon credits have been issued. Therefore, the project's accounting methodology remained unchanged from the prior period, with fair value approximated by its cost basis as at December 31, 2025.
Selected Annual Financial Information
The following are selected annual financial information for the three most recently completed financial years. Additional financial discussions can be found below in "Results of Operations".
| Results for the years ended December 31, (thousands of US dollars) | 2025 | 2024 | 2023 |
|---|---|---|---|
| Realized Cash Settled gains on investments in carbon credit projects | 1,811 | 28,027 | 6,418 |
| Gross loss on carbon credit sales | - | (79) | - |
| Total operating expenses | 10,168 | 7,706 | 6,860 |
| Operating (loss) income | (8,357) | 20,242 | (442) |
| Unrealized gains (losses) on investments in carbon credit projects | 11,299 | (45,014) | 104,684 |
| (Loss) on re-quantification of inventory | (2,932) | - | - |
| (Loss) gain on investments at fair value | - | (2,041) | - |
| Other income | 514 | 113 | 24 |
| Income tax expense | (279) | (2,206) | (5,993) |
| Comprehensive income (loss) for the Period | 245 | (28,905) | 98,274 |
| On a per-share basis | - | (0.25) | 0.82 |
| On a diluted per-share basis | - | (0.25) | 0.81 |
| Adjusted Comprehensive (loss) income for the Period^{1} | (11,054) | 18,150 | (6,202) |
| Adjusted on a per-share basis^{(1)} | (0.10) | 0.16 | (0.05) |
| Adjusted on a diluted per-share basis^{(1)} | (0.10) | 0.16 | (0.05) |
| Total assets | 108,936 | 112,068 | 141,243 |
| Total liabilities | 8,445 | 9,059 | 6,555 |
| Total shareholders’ equity | 100,491 | 103,008 | 134,689 |
(1) "Adjusted Comprehensive (loss) Income for the Period", including on per-share amounts, is a non-IFRS metric. For more information about this measure, why it is used by the Company, and a reconciliation to the most directly comparable measure under the IFRS Accounting Standards, please refer to the section "Non-IFRS Account Standards Measures" of this document.
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
Results of Operations
The following are the consolidated results from operations, for the year ended December 31, 2025 ("2025"), with comparison to the year ended December 31, 2024 ("2024").
Consolidated Financial Results
| Results for the year ended December 31, (thousands of US dollars) | 2025 | 2024 | $ Change | % Change |
|---|---|---|---|---|
| Realized cash settled gains on investments in carbon credit projects | 1,811 | 28,027 | (26,216) | (94%) |
| Gross profit (loss) on carbon credit sales | - | (79) | 79 | (100%) |
| Total operating expenses | 10,168 | 7,706 | 2,462 | 32% |
| Unrealized gains (losses) on investments in carbon credit projects | 11,299 | (45,014) | 56,313 | 125% |
| Loss on re-quantification of inventory | (2,932) | - | (2,932) | - |
| Unrealized loss on carbon credit revenue participation asset | (150) | - | (150) | - |
| Loss on investments at fair value | - | (2,041) | 2,041 | 100% |
| Other income | 400 | - | 400 | - |
| Income tax recovery (expense) | (279) | (2,205) | 1,927 | 87% |
| Net and comprehensive income (loss) | 245 | (28,905) | 29,150 | 101% |
Gains and losses on investments in carbon credit projects
For the year ended December 31, 2025, the Company generated $1,811 (2024 - $28,027) in realized gains, and $11,299 (2024 - $45,014 loss) in unrealized gains from investment in carbon credit projects. This resulted in a net gain from investments in carbon credit projects of $13.1 million (2024 - $17.0 million loss).
Refer to "Project Updates and Details" for more information on the gains and losses on investments in carbon credit projects.
Operating Expenses
The following notable operating expenses increased during the year ended December 31, 2025 in comparison to the same period in 2024:
- Write down of inventory by $3,920 (100% increase)
- Salaries by $159 (6% increase)
The following operating expenses decreased during the year ended December 31, 2025 in comparison to the same period in 2024:
- Royalty license fee by $661 (94% decrease)
- General and administrative by $758 (53% decrease)
Loss on re-quantification of inventory
For the year ended December 31, 2025, the Company recorded a $2,932 (2024 - $nil) loss on the re-quantification of inventory. This was due to the previously described re-quantification of the Company's inventory in Q3 from VMR0006 to VM0050 carbon credits.
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
Net income (loss)
Base Carbon generated net income of $245 (2024 - $28.9 million loss) during the year ended December 31, 2025.
Basic and diluted earnings (loss) per share
As at December 31, 2025, the Company recorded basic and diluted earnings (loss) per share of $0.00 (2024 - $0.25 loss). The basic and diluted weighted average number of common shares outstanding were 105,373,241, and 106,615,828 (2024 – 114,879,977 and 114,879,977) respectively. Diluted earnings per share includes the effect of stock options that are in-the-money.
The Company also provides to investors valuable supplemental insights into the Company's financial performance in the form of basic and diluted adjusted comprehensive income (loss) per share. Refer to - Non-IFRS Financial Measures below for more information.
Quarterly Consolidated Financial Results
The following are the consolidated quarterly results from operations, for the three months ended December 31, 2025 ("Q4 2025"), with comparison to the three months ended December 31, 2024 ("Q4 2024").
| Quarterly results for the three months ended December 31, (thousands of US dollars) | Q4 2025 | Q4 2024 | $ Change | % Change |
|---|---|---|---|---|
| Realized cash settled gains on investments in carbon credit projects | - | 4,482 | (4,481) | (100%) |
| Total operating expenses | 3,380 | 1,623 | 1,757 | 108% |
| Unrealized gains (losses) on investments in carbon credit projects | 1,138 | (15,419) | 16,557 | (107%) |
| Unrealized loss on carbon credit revenue participation asset | (385) | - | (385) | - |
| Other income | 250 | - | 250 | - |
| Income tax recovery (expense) | 227 | (2,613) | 2,840 | 109% |
| Net and comprehensive (loss) | (2,123) | (16,599) | 14,476 | (87%) |
During Q4 2025, the Company reported a net and comprehensive loss of $2,123, an improvement of $14,476 over Q4 2024. This is primarily driven by favorable movements in the unrealized gains (losses) on investments in carbon credit projects. No carbon credit sales occurred during Q4 2025, compared to $4,482 in the prior year quarter. Operating expenses increased to $3,380 from $1,623 due to the previously described inventory write-down to NRV in Q4 2025 of $1,856 that was not present in the prior year quarter.
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
Summary of Quarterly Results
(in thousands of US dollars, except per share amounts)
| 2025 | 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |
| Realized cash settled gains on investments in carbon credit projects | - | - | 1,021 | 790 | 4,482 | 11,037 | 12,508 | - |
| Gross profit (loss) on carbon credit sales | - | - | - | - | - | (79) | - | - |
| Total operating expenses | 3,380 | 3,223 | 1,765 | 1,800 | 1,623 | 1,783 | 2,538 | 1,762 |
| Operating (loss) income | (3,380) | (3,223) | (744) | (1,010) | 2,859 | 9,175 | 9,970 | (1,762) |
| Unrealized gains (losses) on investments in carbon credit projects | 1,138 | 7,399 | 1,181 | 1,580 | (15,419) | (8,876) | (1,838) | (18,881) |
| Loss on Investments at fair value | - | - | - | - | (1,441) | - | (350) | (250) |
| Income tax (expense) recovery | 227 | (13) | (288) | (205) | (2,613) | (299) | (332) | 1,038 |
| Net income (loss) | (2,123) | 1,612 | 239 | 518 | (16,599) | 33 | 7,470 | (18,918) |
| Basic income (loss) per share | (0.02) | 0.02 | 0.00 | 0.00 | (0.15) | 0.00 | 0.06 | (0.17) |
| Diluted income (loss) per share | (0.02) | 0.02 | 0.00 | 0.00 | (0.15) | 0.00 | 0.06 | (0.17) |
| Adjusted Comprehensive income (loss) for the period1 | (3,261) | (5,787) | (667) | (1,063) | 261 | 8,937 | 9,658 | (706) |
| Adjusted basic income (loss) per share1 | (0.03) | (0.06) | (0.01) | (0.01) | 0.00 | 0.08 | 0.08 | (0.01) |
| Adjusted diluted income (loss) per share1 | (0.03) | (0.05) | (0.01) | (0.01) | 0.00 | 0.08 | 0.08 | (0.01) |
(1) "Adjusted Comprehensive Income (Loss) for the Period", including on per-share amounts, is a non-IFRS metric. For more information about this measure, why it is used by the Company, and a reconciliation to the most directly comparable measure under the IFRS Accounting Standards, refer to the section "Non-IFRS Financial Measures" of this document.
The Company has reported mixed results over the past eight quarters, with net losses recorded in three of the periods. These fluctuations reflect the variable nature and timing of carbon credit monetization. The Company received cash settlements from credit sales in five of the eight quarters.
Under the structured nature of Phase 1 of the Vietnam project and the fixed price off-take arrangement through SIPCO, carbon credit monetization is not guaranteed on a quarterly basis but rather based on timing of carbon credit issuances. When that occurred, the Company's Non-IFRS adjusted comprehensive income (loss) for the period was either in an income position or closer to a break-even position. Refer to "Project Updates and Details" for more information on the gains and losses on investments in carbon credit projects.
The adjusted comprehensive income over the eight quarters in aggregate was $7.1 million, showing strong performance for the Company, particularly in a developing industry.
Liquidity and Financial Position
As at December 31, 2025, the Company had working capital of $39.9 million, including cash of $5.7 million (as at December 31, 2024 – working capital of $49.1 million including cash of $14.8 million).
In the year ended December 31, 2025, cash decreased by $9.2 million. The decrease in cash as at December 31, 2025 was primarily due to $5.3 million in cash spent on operating activities, $0.9 million in cash invested in the Secured Debenture and the SIPCO operational support agreement, and $3.0 million in cash used for the repurchase of shares under the NCIB.
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
The Company's ability to meet its obligations and execute its business strategy depends on its ability to generate cash flow from the delivery and sale of carbon credits. Based on current cash balances, the Company believes it has access to sufficient resources to satisfy its commitments.
The Company has maintained operations without debt or alternative funding. However, there is no assurance that the Company will be able to access debt, equity or alternative funding at the times and in the amounts required to meet the Company's obligations and to fund activities.
While there has been action to encourage optimism about the state of the both the voluntary and compliance carbon markets, such as the recent CORSIA announcements and auctions, there continue to be a number of geo-political threats and aggressions which cause the tempering of that optimism. Additionally, there is some uncertainty regarding global economic conditions, all of which impact the ability to finance operations if there are any liquidity issues.
Capital Resources
The Company's liquidity primarily consists of $5.7 million in cash and cash equivalents. The Company believes its net working capital balance, in addition to cash receipts from monetization of current carbon credit inventories are sufficient to fund current commitments for the next 12 months. These include investment in its revenue model, marketing expenditures to promote the growth of the business and exploring additional opportunities to create shareholder value. The Company may require additional funds for new commitments such as new carbon credit projects, for which the Company may raise funds through equity or debt financing. The Company has no long-term debt or material contractual payment obligations notwithstanding the India ARR Project capital commitments. The Company's working capital will be used for further business development.
Off-Balance Sheet Arrangements
There are currently no off-balance sheet arrangements which could influence current or future results or operations, or the financial condition of the Company.
Critical Accounting Estimates
The preparation of the consolidated financial statements requires management to make certain judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Actual outcomes could differ from these estimates.
The consolidated financial statements include estimates that, by their nature, are uncertain. The impact of these estimates is pervasive throughout the consolidated financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. These estimates are based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Judgements made in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements are included in the following notes:
- Accounting for investments in carbon credit projects – management assessed the contractual agreements to determine whether the investments in carbon credit projects are financial instruments and their classification and measurement
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
- Accounting for carbon credit inventory – management assessed that the carbon credits from the Rwanda Cookstoves Project are to be valued at the lower of cost and net realizable value (“NRV”), as the Company is not a commodity broker trader. Management also applied judgment in determining the cost basis on receipt of carbon credits from investments in carbon credit projects and in determining that revenue share obligations are excluded from NRV.
- Accounting for carbon credit revenue participation asset – management applied judgment in assessing the derecognition of the original investment and recognition of the carbon credit revenue participation asset as a financial asset measured at fair value, including the determination of fair value in accordance with IFRS 13 based on the Company’s contractual entitlement to future cash flows.
- Classification of investments in carbon credit projects as current or non-current – management applies judgment in determining whether investments in carbon credit projects are expected to be realized within twelve months of the reporting date. This assessment is based on the project's expected carbon credit issuance schedule, which is informed by the Project Design Document, approved monitoring reports, and subsequent updates to projected issuance timing. Where management expects carbon credits to be received and realized within twelve months, the investment is classified as current. Management reviews this assessment at each reporting date.
Information about assumptions and estimate uncertainties that have a significant risk of resulting in a material adjustment in the consolidated financial statements is included in the following notes:
- Fair values of investments in carbon credit projects – management estimates the fair value using the cost approach or income approach depending on the stage of the investment in carbon credit project, with such carbon credit investment classified as a financial instrument, the fair value determined by either the cost or income approach is presented through profit or loss (“FVTPL”)
The cost approach is a valuation technique where fair value approximates the cumulative cash spend at the period end and assessing that the cost per carbon credit has not fallen below the carbon credit price. Projects valued using the cost approach involve significant subjectivity and estimation uncertainty, including the carbon credit price assumption.
The income approach uses a discounted cash flow model, summing the future discounted after-tax cashflows generated over the life of the project to a current net present value. The model reflects market expectations based on key inputs and assumptions, namely the carbon credit price, carbon credit volume, and discount rates. Projects valued using the income approach involve significant subjectivity and estimation uncertainty, including assumptions related to the carbon credit price, carbon credit volume, and discount rates.
As part of the operational stage of a carbon project, the Company emphasizes the implementation of project management or oversight standards relating to measurement, reporting, verification and auditing to enhance the efficiencies and credibility of carbon credits.
With the exception of carbon credit market pricing inputs attained from a third-party pricing source, the valuation of the Company’s projects is performed internally, with the India ARR Project using the cost approach, and the Vietnam Household Devices and Rwanda Cookstoves Projects valued by the income approach utilizing a “discounted cash flow” analysis.
Initial valuation is performed by the Company’s Corporate Development Department, with subsequent assessment and review by the Company’s Finance Department. Further review is performed by the Company executives, namely: The Company CEO, President and CFO. Personnel at each stage all possess the requisite qualifications and expertise. The Company believes it has all the necessary internal expertise to coordinate and perform the valuation.
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
Further oversight is provided by both the Audit Committee and Board of Directors, to whom details of projects are presented for review, and in the case of the Board of Directors, approval.
Regarding third-party involvement, the Company uses a third party to provide data to determine the carbon credit price assumption. The Finance Department reviews documentation provided by that third party to confirm that the pricing source is appropriate for use in the valuation of investments in carbon credit projects.
- Carbon credit inventory – management determines the lower of cost and NRV of carbon credit inventory. Cost is established at the per-unit market price on the date of receipt. NRV is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale (IAS 2.6). Where NRV falls below cost, an appropriate write-down is made. If there is a subsequent increase in NRV, reversals of previous write-downs are made. The selling price used in the NRV assessment is determined based on pricing inputs provided by a third-party pricing source. The revenue share arrangement costs under project agreements are excluded from NRV as management has determined that these represent a distribution of sale proceeds rather than a cost necessary to make the sale.
Non-IFRS Financial Measures
Adjusted Comprehensive Income (Loss) and Adjusted Basic and Diluted Income (Loss) per Share
The term "Adjusted comprehensive income (loss) for the period", including per share amounts, in this MD&A is not a standardized financial measure under IFRS and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. These non-IFRS financial measures should not be considered in isolation or as a substitute for measures of performance, cash flows and financial position as prepared in accordance with IFRS. Management believes that these non-IFRS financial measures, together with performance measures and measures prepared in accordance with IFRS financial measures, provide useful information to investors and shareholders in assessing the Company's liquidity and overall performance.
Under IFRS 13 Fair Value Measurement, Base Carbon's investments in carbon credit projects are classified as financial instruments and, as such, are revalued quarterly using a DCF methodology. This approach estimates the present value of future projected cash flows, based on key assumptions including carbon credit generation volumes, market pricing, and discount rates. These inputs are reviewed and updated on a quarterly basis, resulting in regular valuation changes. Such changes are reflected as unrealized gains or losses in the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss), as well as in the Consolidated Statements of Cash Flow.
Unrealized gain or loss adjustments are non-cash and reflect changes in valuation assumptions such as carbon credit volume and price forecasts, project timelines, and discount rates. They do not represent objective business performance or realized financial gains or losses. Accordingly, Base Carbon believes that an Adjusted comprehensive income (loss) for the period provides a more accurate reflection of underlying operational performance for the period.
Adjusted comprehensive income (loss) for the period, including per share amounts, is calculated as comprehensive income (loss) for the period adjusted for (i) the unrealized gains (losses) on investments in carbon credit projects, and (ii) loss on investments at fair value. Adjusted comprehensive (loss) income for the period is used by the company to monitor its results from operations for the period.
Basic and diluted adjusted comprehensive income (loss) per share have been calculated based on the adjusted comprehensive income (loss) attributable to common shareholders and the weighted average number of common shares outstanding. Diluted loss per share calculations do not consider the effect of
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
stock options as their inclusion would be anti-dilutive. Diluted income per share calculations includes the effect of stock options that are in-the-money.
The following table reconciles comprehensive gain (loss) to adjusted comprehensive income (loss).
| Adjusted comprehensive income (loss) (thousands of US dollars, except per share amounts) | Year ended December 31, 2025 | Three months ended December 31, 2025 | Year ended December 31, 2024 | Three months ended December 31, 2024 |
|---|---|---|---|---|
| Comprehensive income (loss) for the period | 245 | (2,123) | (28,905) | (16,599) |
| (-) Unrealized gains (losses) on investments in carbon credit projects | 11,299 | 1,138 | (45,014) | (15,419) |
| (-) Loss on investments at fair value | - | - | (2,041) | (1,441) |
| Adjusted comprehensive income (loss) for the period | (11,054) | (3,261) | 18,150 | 261 |
| -Adjusted on a basic per-share basis | (0.10) | (0.03) | 0.16 | 0.00 |
| -Adjusted on a diluted per-share basis | (0.10) | (0.03) | 0.16 | 0.00 |
For the period ending December 31, 2025, the Company recorded an adjusted comprehensive loss of $11.1 million (2024 - $18.2 comprehensive gain), representing a $29.2 million increase year-over-year.
For the period ending December 31, 2025, the Company recorded an adjusted basic and diluted loss per share of $0.10 and $0.10 (2024 – income $0.16 and $0.16), respectively. The basic and diluted weighted average number of common shares outstanding were 105,373,241 and 106,615,828 (2024 – 114,879,977 and 114,879,977), respectively.
Capital Management
The Company manages its capital with the following objectives:
- to ensure sufficient financial flexibility to achieve the ongoing business objectives including funding of future growth opportunities, and pursuit of accretive acquisitions; and
- to maximize shareholder return through enhancing the share value.
The Company monitors its capital structure and adjusts according to market conditions in an effort to meet its objectives given the current outlook of the business and industry in general. The Company may manage its capital structure by issuing new shares, repurchasing outstanding shares, adjusting capital spending, or disposing of assets. The capital structure is reviewed by the Company's management and the Board of Directors on an ongoing basis.
The Company considers its capital to be shareholders' equity, being comprised of share capital, contributed surplus, and retained earnings, which as at December 31, 2025, totaled $100.5 million (2024 - $103.0 million).
The Company manages capital through its financial and operational forecasting processes. The Company reviews its working capital and forecasts its future cash flows based on operating expenditures, and other investing and financing activities. There were no changes in the Company's approach to capital risk management during the year ended December 31, 2025, and the Company is not subject to any externally imposed capital requirements.
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
Financial Risk Factors
Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are categorized into levels within a fair value hierarchy based on the nature of valuation inputs (Level 1, 2 or 3).
The fair value hierarchy has the following levels:
- Level 1 – quoted prices represent unadjusted quoted prices for identical instruments exchanged in active markets.
- Level 2 – significant other observable inputs includes directly or indirectly observable inputs, other than quoted prices for identical instruments exchanged in active markets.
- Level 3 – significant unobservable inputs include inputs that are not based on observable market data.
The fair value of financial assets and financial liabilities are considered to be their carrying value when they are of short duration or when the instrument's interest rate approximates current observable market rates. The fair value of cash and cash equivalents, short term investment, related party receivable and other receivables approximate their carrying amounts due to the relatively short period to maturity.
Where other financial assets and financial liabilities are of longer duration, then fair value is determined using the discounted cash flow method using discount rates based on adjusted observable market rates.
The following table illustrates the classification of the Company's consolidated financial instruments within the fair value hierarchy as at December 31, 2025, according to the significance and reliability of the inputs used in determining fair value measurements. There were no transfers of assets between Level 1, Level 2 and Level 3 during the year. During the year ended December 31, 2025, the Company received carbon credits from the Vietnam Household Devices Project and the Rwanda Cookstoves Project, resulting in a partial settlement of the Level 3 financial assets.
| As at December 31, 2025 (thousands of US dollars) | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Cash and cash equivalents | 5,691 | - | - | 5,691 |
| Short term investments | 40 | - | - | 40 |
| Related party receivable | - | - | - | - |
| Other receivables | 216 | - | - | 216 |
| Short term loan receivable | - | 923 | - | 923 |
| Investments at fair value | - | - | 85 | 85 |
| Current investments in carbon credit projects | - | - | 11,041 | 11,041 |
| Carbon credit revenue participation asset | - | - | 1,455 | 1,455 |
| Non-current investments in carbon credit projects | - | - | 68,146 | 68,146 |
| Accounts payable and accrued liabilities | (780) | - | - | (780) |
| 5,167 | 923 | 80,727 | 86,817 |
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counter party to a financial instrument fails to meet its contractual obligations.
The Company's credit risk is attributable to cash and cash equivalents, short term investment, other receivables, prepaid and other assets, related party receivable, and investments in carbon credit projects. Cash and cash equivalents and short-term investments are on deposit with a Canadian chartered bank, from which management believes the risk of loss is remote. Other receivables are due from Canada Revenue Agency, from which management believes the risk of loss to be remote. The Company's maximum exposure to credit risk as at December 31, 2025 is the sum of the carrying value of the aforementioned asset accounts.
The Company manages credit risk of the aforementioned asset accounts by:
- assessing credit profile and worthiness of, and completing due diligence on counterparties prior to agreements;
- structuring agreements with defined services or benefits, terms, and remuneration, enforcing the Company's rights from such agreements; and
- conducting post disbursement monitoring and executing dispute resolution processes.
Liquidity Risk
The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due, including commitments arising from investments in carbon credit projects. As at December 31, 2025, the Company had cash and cash equivalents balance of $5,691, short term receivable of $923, and other receivables of $216 for a total of $6,830 of liquid current assets to settle current liabilities of $813. The ability of the Company to receive cash from current investments in carbon credit projects is dependent on the timing of estimated carbon credit issuances and sales. All the Company's current financial liabilities have contractual maturities of less than 90 days and are subject to normal trade terms.
Market Risk
Market risk is the risk of loss that may arise from changes in market forces including, but not limited to, interest rates, equity prices, carbon credit prices, and foreign exchange.
Foreign Currency Risk
As at December 31, 2025, the Company is exposed to foreign currency risk with respect to Canadian and Barbadian dollar assets with a total balance of $321 (2024 - $204). The Company is also exposed to predominantly Canadian and Barbadian dollar liabilities with a total balance of $7,876 (2024 - $8,647). Most of this exposure relates to the deferred tax liability amount totalling $7,612 (2024 - $7,253), which is the estimate income tax on future proceeds from the sale of carbon credits.
Sensitivity Analysis
The Company is exposed to foreign currency risk on fluctuations of financial instruments related to cash and cash equivalents, short term investments, other receivables, and accounts payable and accrued liabilities, and current and deferred tax liabilities.
As at December 31, 2025, the net income would have decreased by $37 had the United States and Barbados dollar strengthened by 5%. Had the US and Barbados dollar weakened by 5% at December 31, 2025, the net income would have increased by $37.
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
These changes are based on the results of foreign exchange gains/losses on translation of financial instruments related to cash and cash equivalents, investments, and accounts payable and accrued liabilities.
Related Party Transactions
Related parties of the Company include the Board of Directors, senior management, close family members and enterprises that have significant ownership of the Company or that are controlled by these individuals as well as certain persons performing similar functions. Senior management is defined as those with authority and responsibility for planning, directing, and controlling activities of the Company, including directors and the executive team.
Related party transactions conducted in the normal course of operations are measured at exchange value.
Management and Directors Compensation
During the year ended December 31, 2025, key management and directors received $2,211 in cash compensation, and $78 in share-based compensation from the Company. In the same period, 200,000 stock options were granted to a director.
During the year ended December 31, 2024, key management and directors received $2,047 in cash compensation, and $185 in share-based compensation from the Company. In the same period, 3,250,000 stock options were granted to senior management and directors.
Extension of the Expiry of Certain Outstanding Options
The Company extended the expiry dates for certain outstanding stock options held by directors and officers during the year. The modifications did not result in material incremental compensation expense.
Transactions with Abaxx Technologies Inc.
Abaxx Technologies Inc. ("Abaxx"), a related party to the Company, owned approximately 19.7% of the Company's outstanding shares as at December 31, 2025. Abaxx and the Company also have two common board of director members.
Abaxx Royalties
In September 2021, a technology, IP and royalty agreement was executed between Abaxx and the Company, whereby the Company would owe a 2.5% royalty fee payment to Abaxx on Company revenue, including realized cash settled gains on investments in carbon credit projects.
During the year ended December 31, 2025, the Company was invoiced and settled by offset approximately $45 (2024 - $706) in royalty license fee for the realized cash settled gains on investments in carbon credit projects.
As at December 31, 2025, Abaxx fully settled its obligations to the Company.
Abaxx Marketing, Promotional and Consulting Services
During the year ended December 31, 2025, Base Carbon incurred expenses of approximately $321 (2024 - $262) from Abaxx for marketing, promotional and consulting services provided to the Company. Of the current year balance, the Company offset $45 with the Abaxx loan, settled in cash $159 and accrued $66 of Abaxx services.
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
Abaxx Loan
In September 2024, the Company issued an additional $1,000 unsecured loan to Abaxx. The loan originally matured on September 16, 2025, bearing an annualized interest rate of 9%, compounded monthly. Subsequent to maturity on September 16, 2025, the annualized interest rate increased to 15% on the amount of principal and interest outstanding.
Abaxx fully settled its obligations to the Company by offsetting $96 of marketing, promotional and consulting services and $45 royalty invoices described above. The remaining balance of $841 was settled in cash.
Loan interest income of $68 (2024 - $30) was recognized during the year ended December 31, 2025.
Abaxx Share Purchase Agreement
In December 2024, the Company and Abaxx entered into a share purchase and sale agreement whereby the Company agreed to purchase such number of common shares of the Company owned by Abaxx equal to the aggregate purchase price of $550 divided by the per share market value on closing, which was expected to occur in January 2025. The purchase price was paid to Abaxx in advance of closing during December 2024.
In January 2025, the Company and Abaxx amended the share purchase and sale agreement, whereby the Company agreed to purchase such number of common shares of the Company owned by Abaxx equal to the aggregate purchase price of $1,550 (inclusive of $550 from the December 2024 original agreement) divided by the per share market value on closing which was expected to occur in March 2025. The additional $1,000 purchase price was paid to Abaxx in advance of closing and the aggregate purchase price of $1,550 was subsequently returned to the Company in connection with the termination of the transaction by Abaxx in January 2025.
In connection with an extension of the termination provisions of the amended share purchase agreement, an extension fee of $75 was charged to Abaxx, which Abaxx paid upon termination of the agreement and the return of the $1,550 purchase price.
Abaxx Share Purchase and Sale Transaction
In April 2025, the Company and Abaxx entered into and completed a share purchase and sale transaction whereby the Company purchased 3,700,000 of the Company's common shares owned by Abaxx for $1,123.
Commitments and Contractual Obligations
The following table summarizes commitments and contractual obligations for each of the next five years and thereafter:
| Payments Due as at December 31, 2025 - by Period (thousands of US dollars) | |||||
|---|---|---|---|---|---|
| Contractual Obligations | < 1 year | 1 - 3 years | 4 - 5 years | After 5 years | Total |
| India ARR Project | 2,383 | 2,301 | 817 | 70 | 5,571 |
| Total Contractual Obligations | 2,383 | 2,301 | 817 | 70 | 5,571 |
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
India ARR Project Payments
With respect to the India ARR Project, BCCPC has, subject to conditions and achievement of project milestones, contractual commitments to make aggregate payments totalling $13.7 million in various tranches over the life of the project. As at December 31, 2025, the remaining contractual commitments are $5,571. These payments are anticipated to be due by October 2032, staged, partially funded by anticipated future carbon credit sales proceeds, and based on various conditions precedent / project milestones.
The Company had no other material contractual payment commitments as at December 31, 2025.
Subsequent Events
Ongoing Carbon Project Capital Commitments
Subsequent to December 31, 2025, the Company made payments of $350 on January 29, 2026, and $833 on March 2, 2026, in relation to the India ARR Project. These payments were made in accordance with specific project milestones and subject to certain conditions being met by the Company's in-country development partner.
Application of CORSIA-Eligible Label and Sale of Rwanda Cookstoves Project Carbon Credits by Project Partner, DelAgua
Subsequent to December 31, 2025, certain carbon credits previously issue by the Rwanda Cookstoves Project and held by BCCPC and project partner, DelAgua, were designated with the Verra's CORSIA – First Phase, 2024-2026 Eligible label. Also subsequent to December 31, 2025, DelAgua sold 200,000 carbon credits and remitted $673 of proceeds to BCCPC. These proceeds were net of the revenue sharing arrangement and the Company's share of insurance premiums on all carbon credits tagged CORSIA-eligible which are currently held in inventory by both BCCPC and DelAgua.
Receipt of carbon credit revenue participation asset relating to the Rwanda Cookstoves Project
Subsequent to December 31, 2025, an additional 639,609 carbon credits were generated by the Rwanda Cookstove Project and issued to DelAgua. Under the related revenue share arrangement, BCCPC participates in the proceeds from the sale of these carbon credits through its carbon credit revenue participation asset.
Partial Repayment and Amendments to Secured Debenture
In February 2025, BCCPC made an investment in, and was issued a secured debenture by a Canadian company ("Secured Debenture"). On January 1, 2026, an extension fee of $103 was charged by BCCPC on the Secured Debenture. On February 15, 2026, the maturity of the Secured Debenture was extended until March 16, 2026 in exchange for a partial repayment of $200 of the outstanding amounts owed pursuant to the Secured Debenture.
On March 16, 2026, the maturity of Secured Debenture was extended until September 16, 2026 in exchange for an extension fee of $50, payment of BCCPC's legal costs and a partial repayment of $200 of the outstanding amounts owed pursuant to the Secured Debenture.
Subsequent Common Share Buybacks
Subsequent to December 31, 2025, an additional 1,773,510 shares were purchased and cancelled through the Company's NCIB at an average cost of $0.71.
Base Carbon Inc.
Management's Discussion and Analysis
For the year ended December 31, 2025
(Thousands of US Dollars, except as otherwise noted)
base carbon
Subsequent Extension of the Expiry of Certain Outstanding Options
Subsequent to December 31, 2025, the Company extended the expiry dates of 2.2 million stock options held by certain directors, officers, employees, and consultants of the Company.
Outstanding Share Capital Data
As of the date of this MD&A, the Company had 100,951,488 common shares issued and outstanding, and 9,110,000 options outstanding, each option exercisable for the purchase of one common share.
Disclosure Controls and Procedures
The Company's disclosure controls and procedures are designed to provide reasonable assurance that information is accumulated and communicated to the Company's management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of December 31, 2025, the Company's management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of its disclosure controls and procedures, as defined by the Canadian securities regulatory authorities, and have concluded that the Company's control environment is effective.
Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. These controls include policies and procedures that:
- pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
- provide reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and that receipts and expenditures are being made only in accordance with authorizations of management and directors of the Company; and
- provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the consolidated financial statements.
All control systems contain inherent limitations, no matter how well designed. As a result, the Company's management acknowledges that its internal control over financial reporting will not prevent or detect all misstatements due to error or fraud. In addition, management's evaluation of controls can provide only reasonable, not absolute, assurance that all control issues that may result in material misstatements, if any, have been detected.
Refer to the Critical Accounting Estimates for further discussion on Internal Controls relating to valuation.
There have been no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting during the period ended December 31, 2025.
Additional Information
Additional information relating to the Company can be found on SEDAR at www.sedarplus.ca.