Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

References to the "Company," "our," "us" or "we" refer to Karbon Capital Partners Corp. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the audited financial statements and the notes related thereto which are included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under "Cautionary Note Regarding Forward-Looking Statements and Risk Factor Summary," "Item 1.A. Risk Factors" and elsewhere in this Annual Report on Form 10-K.

Cautionary Note Regarding Forward-Looking Statements

All statements other than statements of historical fact included in this Annual Report on Form 10-K including, without limitation, statements under this Item regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Annual Report on Form 10-K, words such as "anticipate," "believe," "estimate," "expect," "intend" and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Annual Report on Form 10-K.

Overview

We are a blank check company incorporated as a Cayman Islands exempted company on September 12, 2025. The Company was incorporated for the purpose of effecting a Business Combination. While we may pursue an initial Business Combination target in any industry or geographic location, we intend to focus our search for a target business in the power generation, energy infrastructure and energy technology and security sectors. We intend to utilize cash derived from the proceeds of our IPO, and the sale of the Private Placement Units, our shares, debt or a combination of cash, shares and debt, in effecting a Business Combination. Our Sponsor is Karbon Capital Partners Core Holdings, LLC, a Delaware limited liability company. We have not yet selected a business combination target.

Our registration statement for our IPO was declared effective on December 10, 2025. On December 12, 2025, we consummated our IPO of 34,500,000 Units, which includes the full exercise by the underwriters of their over-allotment option in the amount of 4,500,000 Over-Allotment Units, at $10.00 per Unit, generating gross proceeds of $345,000,000. Each Unit consists of one Class A ordinary share of the Company, par value $0.0001, and one-fourth of one redeemable warrant of the Company, with each whole Public Warrant entitling the holder thereof to purchase one Public Share for $11.50 per share. Transaction costs through the closing of the IPO amounted to $20,186,929, consisting of $6,900,000 of cash underwriting fee, $12,075,000 of deferred underwriting fee, and $1,211,929 of other offering costs.

Simultaneously with the closing of the IPO, the Company consummated the sale of 890,000 Private Placement Units at a price of $10.00 per Private Placement Unit, in the Private Placement to our Sponsor, generating gross proceeds of $8,900,000. Each Private Placement Unit consists of one Class A ordinary share and one-fourth of one redeemable warrant. Each whole Warrant entitles the holder to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment.

The net proceeds from the IPO, together with certain of the proceeds from the Private Placement, totaling $345,000,000 in the aggregate, were placed in the Trust Account established for the benefit of the Company's public shareholders and the underwriter of the IPO with Continental Stock Transfer & Trust Company acting as trustee. The Company will not be permitted to withdraw any of the principal or interest held in the trust account, except with respect to amounts withdrawn or eligible to be withdrawn to pay the Company's taxes (and such withdrawals can only be made from interest and not from the principal held in the trust account) and up to $100,000 to pay dissolution expenses, as applicable, if any, until the earliest of (i) the completion of an initial Business Combination, (ii) the redemption of the Company's Public Shares if the Company is unable to complete an initial Business Combination within the completion window, subject to applicable law, and (iii) the redemption of the Company's Public Shares properly submitted in connection with a shareholder vote to approve an amendment to the Company's amended and restated memorandum and articles of association (A) to modify the substance or timing of the Company's obligation to provide holders of the Public Shares the right to have their shares redeemed or repurchased in connection with an initial Business Combination or to redeem 100% of the Company's Public Shares if the Company does not complete an initial Business Combination within 24 months (or 27 months if the Company has entered into a letter of intent for an initial business combination) from the closing of the IPO or (B) with respect to any other provision relating to the rights of holders of Public Shares or pre-initial business combination activity.

Our management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of Private Placement Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net assets held in the Trust Account (excluding the amount of deferred underwriting commissions and taxes payable on the interest earned on the Trust Account) at the time of the signing of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.

We will provide the Public Shareholders, with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether we will seek shareholder approval of a Business Combination or conduct a tender offer will be made by us, solely in our discretion. The Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then held in the Trust Account (initially invested at $10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account (net of taxes payable) and not previously released to the Company for to pay the Company's taxes, if any, divided by the number of the then-outstanding Public Shares, subject to certain limitations. The per-share amount to be distributed to Public Shareholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. In addition, the amount of the deferred underwriting compensation payable to the underwriter will not be adjusted for any shares that are redeemed in connection with an initial Business Combination.

If we have not completed a Business Combination within the Combination Period, we will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account (net of taxes payable and up to $100,000 of interest to pay dissolution expenses) and not previously released to for Permitted Withdrawals, divided by the number of the then-outstanding Public Shares, which redemption will completely extinguish Public Shareholders' rights as shareholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii) to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we do not consummate an initial Business Combination within the Combination Period.

We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.

Results of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities from September 12, 2025 (inception) through December 31, 2025 were organizational activities and those necessary to prepare for the IPO, described below, and, after our IPO, identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. Subsequent to the IPO, we generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the period from September 12, 2025 (inception) through December 31, 2025, we had a net income of $357,006, which consisted of interest earned on marketable securities held in Trust Account of $597,290, offset by general and administrative costs of $240,284.

Liquidity and Capital Resources

Until the consummation of the IPO, our only source of liquidity was an initial purchase of shares of Class B ordinary shares, par value $0.0001 per share, by the Sponsor, and loans from the Sponsor, which were repaid at the closing of the IPO. As of December 31, 2025, we had $834,527 cash and working capital surplus of $815,086.

On December 12, 2025, the Company consummated the IPO of 34,500,000 Units, which includes the full exercise by the underwriters of their over-allotment option in the amount of 4,500,000 Units, at $10.00 per Unit, generating gross proceeds of $345,000,000. Simultaneously with the closing of the IPO, the Company consummated the sale of 890,000 Private Placement Units at a price of $10.00 per Private Placement Unit, in a private placement to the Sponsor, generating gross proceeds of $8,900,000.

For the period from September 12, 2025 (inception) through December 31, 2025, net cash used in operating activities was $251,445. Net income of $357,006 was offset by interest earned on marketable securities of $597,290, payment of formation costs through issuance of Class B ordinary shares of $13,779, and payment of general and administrative costs through promissory note - related party of $38,686. Changes in operating assets and liabilities, which used $63,626 of cash from operating activities.

Following the closing of the IPO and the Private Placement, a total of $345,000,000 was placed in the Trust Account. The proceeds held in the Trust Account will be invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations, until the earlier of (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account. To mitigate the risk that the Company might be deemed to be an investment company for purposes of the Investment Company Act, which risk increases the longer that it holds investments in the Trust Account, the Company may, at any time (based on the management team's ongoing assessment of all factors related to the potential status under the Investment Company Act), instruct the trustee to liquidate the investments held in the Trust Account and instead to hold the funds in the Trust Account in cash or in an interest bearing demand deposit account at a bank. We incurred $20,186,929 of transaction costs through the closing of the IPO, consisting of $6,900,000 of cash underwriting fee, $12,075,000 of deferred underwriting fee, and $1,211,929 of other offering costs.

The remaining proceeds from the IPO and the Private Placement are held outside the Trust Account, in the cash operating account amounting to $834,527 as of December 31, 2025. Such funds are being used primarily to enable us to identify a target and to negotiate and consummate our initial Business Combination.

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (which interest shall be net of any permitted withdrawals and excluding deferred underwriting commissions), to complete our Business Combination. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.

In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company's officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such working capital loans may be convertible into private placement units of the post-Business Combination entity at a price of $10.00 per unit. The private placement units issued upon conversion of any such loans would be identical to the Private Placement Units sold in the Private Placement concurrently with the IPO.

We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination.

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2025.

Contractual Obligations

Underwriting Agreement

Pursuant to the underwriting agreement in connection with the IPO, the underwriters were entitled to a deferred fee of $0.35 per Unit, or $12,075,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account upon the completion of the Company's initial Business Combination, subject to the terms of the underwriting agreement.

Critical Accounting Estimates

The preparation of the financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Making estimates requires management to exercise significant judgement. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could materially differ from those estimates. As of December 31, 2025, we did not have any critical accounting estimates to be disclosed.