Mr. Christopher Angeconeb reports

BIG TREE PROVIDES UPDATE

Big Tree Carbon Inc. is wishing to provide an update to the market with respect to its continued listing requirement deficiencies and advances to the company from related parties and arm's-length parties.

Continued listing requirements

The company wishes to advise that, at the time of this news release, it does not meet certain continued listing requirements (CLR) for a Tier 2 mining issuer on the TSX Venture Exchange. The company continues to hold gold-focused mineral exploration properties and property interests, including the company's principal asset -- the Richardson Lake gold property. However, the company acknowledges that it has not incurred any exploration expenditures on the Richardson property for the company's two most recently completed financial years being Dec. 31, 2025, and Dec. 31, 2024. The company's working capital deficit as at March 31, 2026, was $754,416. The company did not have working capital of the greater of $50,000 and the amount of money required in order to maintain operations and cover general and administrative expenses for a period of six months. The working capital deficit has been addressed as noted below. The company has been placed on a notice to transfer to NEX since March 4, 2025, due to CLR deficiencies in the working capital and activity criteria, pursuant to exchange Policy 2.5. Failure to remedy the current CLR deficiencies by the final deadline of Sept. 30, 2026, may result in the company's transfer to NEX.

Plan to address working capital deficiency and activity requirements of the exchange

As announced in the press release dated Aug. 17, 2026, the company has entered into postponement agreements with four creditors of the company with respect to an aggregate of $1,130,284.61 of debt owed to two officers of the company, a law firm of which an officer and director of the company is a partner and a former director of the company. In consideration for the payment of $62,324.68, being approximately 5.5 per cent of the debt, the repayment of the amount of $1,067,959.93 has been postponed until Aug. 17, 2028. The postponement of debt has been conditionally approved by the exchange subject to filing final materials with the exchange. This has converted the postponed debt to a long-term liability that will not affect current working capital. As a result of the funds received from the settlement of the ADLP promissory note (see press release dated May 20, 2026) and the conversion of the postponed debt to a long-term liability, along with the reclassification of some historical third party liabilities to long term, the company has a positive working capital position. The company plans to announce a working capital financing and a flow-through financing, on terms to be negotiated, to arrange the necessary financing and develop its exploration programs over the forthcoming month. The resulting deferral of the postponed debt and the proposed equity financings will result in the company satisfying the working capital and activity requirements of Section 2.1 of exchange Policy 2.5. Any financings will be subject to exchange acceptance.

Advances to the company by related parties

The company received a total of $24,061 in advances from related parties. Richard Nemis, a former director of the company, advanced $8,000 in 2015 pursuant to a demand promissory note bearing interest at 10 per cent per year. Between July, 2022, and 2023, Ian Brodie Brown, a former director of the company, advanced a total of $19,541 in 2022, of which $5,000 was repaid in 2023. Poplar Properties Inc., a company controlled by William R. Johnstone, a director of the company, advanced $1,520 in 2019. No interest has been accrued in respect of the related party advances. The company did not provide proper notices to the exchange of the loans nor issue press releases with respect to these loans when received contrary to the policies of the exchange. The company has repaid the estate of Richard Nemis for the Nemis promissory note and the $1,520 owed to Poplar.

Advances to the company by arm's-length parties

The company received an aggregate of $91,506.03 from arm's-length creditors by way of loans between October, 2023, and January, 2026. These loans were unsecured and non-interest-bearing (except for $209.32 of accrued interest paid in respect of one loan). The company did not provide proper notices to the exchange of the loans nor issue press releases with respect to these loans when received contrary to the policies of the exchange. Two creditors were repaid an aggregate of $10,000 in May of 2024 and the remaining creditors have been repaid the balance of $81,506.03.

Forest carbon sequestration opportunity

On Aug. 19, 2019, the company announced that it had signed a carbon development and marketing agreement (CDMA) dated Aug. 15, 2019, with Blue Source Canada ULC. The CDMA set forth the terms and conditions by which the company and Bluesource would collaborate to develop carbon sequestration opportunities and market the resulting carbon offsets alongside first nations pursuing their inherent stewardship role both on reserve and within their traditional territories. The CDMA provided that specific forestry projects with first nations would be incorporated into the CDMA through the execution of an adoption agreement allowing Bluesource to provide its services to develop and market emission reduction benefits (ERBs), being environmental and financial benefits associated with the carbon sequestration from enhanced management of the forest resource.

As announced by the company on May 27, 2019, three groups -- Lac Seul First Nation, located in Northwestern Ontario, the company and Bluesource -- would work together to assess the potential of forests to capture and sequester carbon dioxide within the first nation's traditional territory for the development of greenhouse gas (GHG) offsets and other potential environmental attributes, and to explore the monetization of these offsets and attributes for the benefit of the first nation and its business partners.

On Dec. 13, 2019, the company announced that it had signed an emissions reduction benefits management agreement (ERBMA) with Lac Seul to develop forest carbon sequestration opportunities in the first nation's traditional territory in Northwestern Ontario.

On April 7, 2020, the CDMA was amended with respect to the proposed revenue split between the company and Blue Source.

On May 11, 2020, the company announced that an adoption agreement dated May 8, 2020, had been signed by the company, the Lac Seul and Blue Source to develop a forest carbon project on the forested lands on the Lac Seul reserve northwest of Sioux Lookout, Ont.

On May 15, 2020, the company announced that it had signed a purchase agreement and a gross revenue royalty agreement dated May 15, 2020, with Star Royalties Ltd. to sell a 16-per-cent gross revenues royalty to Star Royalties. The company was paid $155,000 by Star Royalties pursuant to the purchase agreement whereby Star Royalties acquired the right to the royalty on all funds received by the company arising from the monetization of carbon offsets derived from a forest-based GHG emission sequestration project referred to in the company's press release dated May 11, 2020. The royalty is governed by a gross revenue royalty agreement which also contemplates a right of first refusal for Star Royalties to acquire an interest in the company's annual revenue share from any carbon sequestration project within the overall Lac Seul forest management unit.

The CDMA, the ERBMA, the adoption agreement and the agreements with Star Royalties were not filed with and accepted by the exchange at the time of their execution. The aforementioned agreements have not been formally terminated and remain legally active. These agreements were not accepted by the Exchange and the company is required to formally terminate these agreements by Sept. 30, 2026.

The Lac Seul project did not proceed. The adoption agreement, although technically not terminated, is not active. Bluesource abandoned pursuit of developing a carbon capture project, following their completion of a baseline modelling scenario based upon all data supplied by the Lac Seul's Obishikokaang Resources Corp. (ORC). In order to demonstrate a viable project and to maximize the return of the project, Bluesource modelled the clear cutting of the reserve forests with sale of harvested timber to the nearest mill at Dryden, Ont., in the form of chipped pulp. This was not supported by ORC (who had been delegated project authority by the first nation).

Bluesource indicated that they would not be able to defend their baseline model without either a paper copy of an old forest management plan for the reserve (which is no longer in existence) or firm support for a harvesting program of the reserve lands. ORC took the position that such a program would never come to be, nor would they recommend anything of the sort to chief and council or the membership.

Given the shift in market sentiment for carbon offsets, this project has been allowed to wither on the vine. In any event it cannot proceed without the full co-operation and involvement of Lac Seul. Lac Seul has indicated that there would be no pursuit of a carbon capture project by Lac Seul.

Purchase agreement and gross revenue royalty agreement with Star Royalties

Further to the company's press release dated May 15, 2020, relating to the purchase agreement and gross revenue royalty agreement dated May 15, 2020, with Star Royalties Ltd. to sell a 16-per-cent gross revenue royalty to Star Royalties, the $155,000 paid by Star Royalties was originally treated as an unearned deposit (liability) for future work. However, the company determined this accounting treatment was incorrect. The $155,000 payment was actually a one-time sale of a 16-per-cent gross revenue royalty and the company did not owe further services to earn the payment. Therefore, the $155,000 was restated from a liability to "other income" in the 2024 audited financial statements.

Related party transactions

The loans from related parties aggregating $24,061 are exempt from the valuation and minority shareholder approval requirements of Multilateral Instrument 61-101 by virtue of the exemptions contained in sections 5.5(a) and 5.7(1) (a) of MI 61-101 in that the fair market value of the consideration received by the company did not exceed 25 per cent of its market capitalization.

About Big Tree Carbon Inc.

Big Tree Carbon is an indigenous-led publicly traded mineral resource company based in Ontario, Canada.

We seek Safe Harbor.