Sky Quarry Inc. (SKYQ) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2026. Sky Quarry Inc. operates the Eagle Springs Refinery in Nevada and is developing the PR Springs facility in Utah for oil sands remediation and asphalt shingle recycling. The Company is classified as a smaller reporting company and an emerging growth company. A 1-for-8 reverse stock split was effected on March 15, 2026, and all share data is retroactively adjusted.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|
| Net Sales | $0 | $383 | $10,874,439 |
| Net Loss | $(4,055,376) | $(6,375,621) | $(5,542,344) |
| Loss Per Share (Basic/Diluted) | $(0.77) | $(1.44) | $(2.17) |
| Cash and Restricted Cash | $7,995,493 (End of Period) | Increased $7.2M from Dec 31, 2025 | |
| Operating Cash Flow | $(5,413,699) (YTD) | Negative | |
| Total Debt (Current + Long Term) | $10,086,769 | Includes $7.97M current notes payable | |
| Accumulated Deficit | $(42,542,109) | As of June 30, 2026 |
Material Changes vs. Prior Period
- Revenue Collapse: Net sales dropped to effectively zero ($383 YTD 2026 vs. $10.9M YTD 2025) due to a prolonged shutdown of the Eagle Springs Refinery for boiler repairs and maintenance. Operations were non-operational for the first half of 2026.
- Capital Raise: Cash balances increased significantly from $35,370 (Dec 31, 2025) to $7.2M (June 30, 2026) driven by an At-The-Market (ATM) equity offering. The Company raised approximately $12.5M in net proceeds from stock sales during the six-month period.
- Debt Restructuring: The Company converted $3.985M of high-interest merchant cash advance obligations (Libertas) into a new promissory note. However, the Company recorded a $1.28M loss on extinguishment of debt YTD 2026.
- Expense Trends: General and administrative expenses increased 16% QoQ (3-month comparison) primarily due to higher executive compensation and legal fees related to ongoing litigation.
Outlook, Risks, and Contingencies
- Going Concern: The filing includes a substantial doubt regarding the Company's ability to continue as a going concern. Management states that without additional financing, the Company cannot meet obligations as they mature. The refinery is expected to resume operations by the end of Q3 2026.
- Litigation:
- KF Business Ventures: Filed a lawsuit seeking ~$2.2M in principal plus interest and foreclosure on collateral. The notes matured Nov 24, 2025, and remain unpaid.
- Former CFO (Delwo): Sued for breach of contract and unpaid compensation, seeking damages of at least $875,012.
- Former CEO (Sealock): Filed a whistleblower retaliation complaint with OSHA.
- Defaults: The Company disclosed defaults on senior securities totaling approximately $2.2M owed to KF Business Ventures, exceeding 5% of total assets.
- Internal Controls: Management concluded that disclosure controls and procedures were not effective as of June 30, 2026.
Investor Verification Checklist
- Refinery Restart Timeline: Verify the specific date of operational restart for the Eagle Springs Refinery and the timeline for generating meaningful revenue.
- Liquidity Runway: Assess if the current $7.2M cash balance is sufficient to cover operating losses and debt service until the refinery generates positive cash flow.
- Debt Default Status: Confirm the current status of the $2.2M debt owed to KF Business Ventures and the risk of asset foreclosure.
- Equity Dilution: Review the remaining capacity under the ATM program and the impact of recent share issuances on existing shareholder ownership.
- Legal Exposure: Monitor the progression of the KF Business Ventures and Delwo lawsuits for potential judgments or settlement costs.