Sky Quarry Inc. (SKYQ) - Q1 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2026. Sky Quarry Inc. operates the Eagle Springs Refinery (Foreland Refining) producing diesel, asphalt, and other refined products, and is developing the PR Spring facility 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 effective March 15, 2026, and all share data is retroactively adjusted.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Net Sales | $383 | $6,332,967 |
| Cost of Goods Sold | $389,601 | $7,059,059 |
| Gross Margin | $(389,218) | $(726,092) |
| Net Loss | $(2,320,245) | $(3,333,694) |
| Loss Per Share (Basic/Diluted) | $(0.65) | $(1.25) |
| Cash and Restricted Cash | $838,586 | $1,011,851 |
| Total Current Liabilities | $16,396,683 | $15,120,773 |
| Accumulated Deficit | $(38,486,733) | $(27,301,783) |
Liquidity & Debt: The Company holds $66,828 in unrestricted cash and $771,758 in restricted cash. Total debt obligations include significant past-due amounts to private lenders (Libertas, Lendspark, Private Lender A) totaling over $6 million in principal. The Company has an accumulated deficit of approximately $38.5 million.
Material Changes vs. Prior Period
- Revenue Collapse: Net sales plummeted 99.99% to $383 from $6.33 million. This was caused by a complete shutdown of the Eagle Springs Refinery due to boiler repairs and feedstock procurement issues that began in late 2025 and continued through Q1 2026.
- Operating Expenses: General and administrative expenses decreased 37% to $1.21 million, driven by reduced executive compensation and professional fees (specifically advertising and business development).
- Debt & Warrant Liability: Warrant liabilities increased by $75,342 due to fair value revaluation. The Company incurred a $269,396 loss on the extinguishment of debt.
- Equity Activity: The Company issued 426,143 shares via its ATM program for net proceeds of $747,975 and converted $213,742 of debt into equity.
Outlook, Risks, and Contingencies
- Going Concern: The filing includes a substantial doubt disclosure 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.
- Operational Restart: Management expects the Eagle Springs Refinery to resume operations by the end of Q2 2026, pending feedstock procurement.
- Legal Proceedings:
- KF Business Ventures: Filed a lawsuit on March 4, 2026, seeking ~$2.2 million in principal plus interest and foreclosure on collateral.
- Former CFO Litigation: Darryl Delwo filed a complaint on March 24, 2026, alleging breach of contract and seeking damages of at least $875,012.
- Capital Raising: The Company updated its ATM program to $12.6 million and replaced its sales agent. Subsequent to the period end, the Company raised an additional ~$4.8 million via the ATM program.
- Controls: Management concluded that disclosure controls and procedures were not effective as of March 31, 2026.
Investor Verification Checklist
- Refinery Restart Date: Verify if the Eagle Springs Refinery has resumed commercial production as projected for Q2 2026.
- Debt Settlement: Monitor the status of the KF Business Ventures lawsuit and the Company's ability to refinance or settle the ~$6 million in past-due debt.
- Cash Burn Rate: Assess the sufficiency of recent ATM proceeds ($4.8M post-period) against the reported monthly burn rate of ~$196,000 and high interest obligations.
- Feedstock Costs: Evaluate the impact of rising crude oil prices (up 77% YoY to $101/barrel) on future gross margins once operations resume.
- Internal Controls: Review subsequent filings for remediation of the ineffective disclosure controls identified in this report.