Business Context and Reporting Period
Company: Sky Quarry Inc. (SKYQ)
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2025
Business Overview: Sky Quarry operates the Eagle Springs Refinery in Nevada, producing diesel, vacuum gas oil (VGO), naphtha, and liquid paving asphalt. The company also holds a development-stage division (PR Spring Facility) in Utah focused on recycling waste asphalt shingles and remediating oil sands using proprietary ECOSolv technology. The company is classified as an Emerging Growth Company and a Smaller Reporting Company.
Key Financial Metrics (Year Ended Dec 31, 2025)
| Metric | 2025 | 2024 |
|---|---|---|
| Net Sales | $12,491,089 | $23,364,188 |
| Gross Loss | $(3,098,548) | $(1,395,342) |
| Net Loss | $(12,198,399) | $(14,728,511) |
| Operating Cash Flow | $(3,272,777) | $(7,491,578) |
| Cash and Restricted Cash (End of Period) | $805,705 | $3,314,913 |
| Total Debt (Principal) | $10,406,976 | $10,375,264 |
| Past Due Debt | ~$7.62 million | N/A |
| Accumulated Deficit | $(36,166,488) | $(23,968,089) |
Note: The filing text does not provide a clear value for "Total Debt" as a single line item; the figure above is an aggregate of Lines of Credit, Notes Payable, and Mandatorily Redeemable Preferred Stock found in the notes.
Material Changes vs. Prior Period
- Revenue Decline: Net sales decreased by 47% ($10.9 million) primarily due to refinery shutdowns for boiler repairs in Q4 2025 and reduced production volumes (77,619 fewer barrels). Lower WTI pricing also reduced revenue by approximately $2.3 million.
- Gross Margin Deterioration: Gross loss increased by 122% to $3.1 million. Cost of goods sold decreased by 37%, but not at the same rate as revenue due to fixed overhead costs.
- Interest Expense Reduction: Interest expense decreased significantly from $6.5 million in 2024 to $3.2 million in 2025, largely due to the conversion of existing debt to equity.
- Stock Split: A 1-for-8 reverse stock split was effected on March 15, 2026, to regain compliance with Nasdaq minimum bid price requirements.
Guidance, Outlook, Risks, and Contingencies
Going Concern Warning
The company has incurred recurring losses and negative cash flows, raising substantial doubt about its ability to continue as a going concern. The audited financial statements include an explanatory paragraph regarding this uncertainty. The company requires additional funding to finance operations and complete the PR Spring Facility retrofit.
Outlook and Guidance
- Refinery Operations: The Eagle Springs Refinery is expected to be fully operational by the end of Q2 2026 following boiler repairs. Management anticipates operating at approximately 45,000 barrels per month in 2026.
- PR Spring Facility: Retrofitting to utilize ECOSolv technology requires an estimated $3.5 million to $4.0 million in capital funding. Completion is anticipated within 12 months of obtaining funding.
- Capital Raising: The company entered an At-The-Market (ATM) offering agreement with Cantor Fitzgerald for up to $4.7 million. As of March 31, 2026, $1.3 million in net proceeds were generated.
Material Risks and Contingencies
- Debt Default: Approximately $7.6 million of outstanding debt is past due. Lenders (Libertas Funding, LendSpark, KF Business Ventures) could declare default and foreclose on assets, which would materially impact operations.
- Legal Proceedings: On March 4, 2026, KF Business Ventures filed a lawsuit seeking repayment of ~$2.2 million in principal plus interest and foreclosure on collateral.
- Nasdaq Compliance: The company received a delisting notice in March 2026 for failing to maintain a $1.00 minimum bid price. Compliance was regained via the reverse stock split, but future delisting remains a risk.
- Technology Risk: The ECOSolv technology for asphalt shingle recycling has not been proven on a commercial scale.
Investor Verification Checklist
- Debt Status: Verify the current status of negotiations with past-due lenders (Libertas, LendSpark, KF Business) and the likelihood of foreclosure.
- Refinery Restart: Confirm the timeline for the Eagle Springs Refinery to resume full production and the availability of crude oil feedstock.
- Capital Sufficiency: Assess whether the $1.3 million raised via ATM and existing cash ($35k unrestricted) are sufficient to cover the monthly burn rate (~$273k) until the PR Spring retrofit is funded.
- Legal Outcome: Monitor the progress of the KF Business Ventures lawsuit filed in March 2026.
- Stock Liquidity: Monitor the post-split trading volume and price stability to ensure continued Nasdaq compliance.