SKY QUARRY INC. - Form 10-Q SEC filing

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________.

Commission file number 001-42296

SKY QUARRY INC.

(Exact name of registrant as specified in its charter)

Delaware	84-1803091
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

707 W. 700 South, Suite 101
Woods Cross, UT	84087
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (424) 394-1090

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001	SKYQ	Nasdaq Capital Market

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the previous 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
(Do not check if a smaller reporting company)		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of August 11, 2025, there were 22,476,421 shares of common stock, $0.0001 par value, issued and outstanding.

SKY QUARRY INC.

FORM 10 -Q QUARTERLY REPORT

FOR THE QUARTER ENDED JUNE 30, 2025

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosure About Market Risks	41
Item 4.	Controls and Procedures	41

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43

SIGNATURES		44

PART I – FINANCIAL INFORMATION

This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading: “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.

Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.

ITEM 1 Financial Statements

Sky Quarry Inc.

Condensed Consolidated Balance Sheets

As of June 30, 2025 and December 31, 2024 (Unaudited)

	June 30, 2025	December 31, 2024

ASSETS

Current assets:
Cash	`$173,795`	`$385,116`
Accounts receivables	`622,521`	`1,123,897`
Prepaid expenses and other assets	`403,665`	`339,124`
Inventory	`1,999,351`	`3,149,236`
Total current assets	`3,199,332`	`4,997,373`

Property, plant, and equipment	`5,635,527`	`6,160,318`
Oil and gas properties	`8,887,940`	`8,534,967`
Restricted cash	`801,816`	`2,929,797`
Right-of-use asset	`1,066,943`	`1,115,785`
Goodwill	`3,209,003`	`3,209,003`

Total assets	`$22,800,561`	`$26,947,243`

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable and accrued expenses	`$4,245,605`	`$4,046,319`
Current portion of operating lease liability	`77,824`	`38,422`
Current portion of finance lease liability	`16,964`	`16,120`
Warrant liability	`358,441`	`459,067`
Lines of credit	`1,133,633`	`1,260,727`
Current maturities of notes payable	`5,890,981`	`6,578,017`
Total current liabilities	`11,723,448`	`12,398,672`

Notes payable, less current maturities, net of debt issuance costs	`2,244,970`	`2,000,560`
Operating lease liability, net of current portion	`-`	`77,824`
Finance lease Liability, net of current portion	`966,661`	`971,690`
Total Liabilities	`14,935,079`	`15,448,746`

Commitments and contingencies

Shareholders’ Equity:
Common stock $0.0001 par value: 100,000,000 shares authorized: 22,110,161 and 19,027,208 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively	`2,211`	`1,903`
Additional paid in capital	`37,585,087`	`35,674,391`
Accumulated other comprehensive loss	`(211,383)`	`(209,708)`
Accumulated deficit	`(29,510,433)`	`(23,968,089)`
Total shareholders’ equity	`7,865,482`	`11,498,497`

Total liabilities and shareholders’ equity	`$22,800,561`	`$26,947,243`

See accompanying Notes to Condensed Consolidated Financial Statements

Sky Quarry Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

For the Periods Ended June 30, 2025 and 2024

	Three Months Ended June 30, 2025	Three Months Ended June 30, 2024	Six Months Ended June30, 2025	Six Months Ended June 30, 2024
Net sales	`$4,541,472`	`$3,375,244`	`$10,874,439`	`$14,327,574`

Cost of goods sold	`4,658,440`	`3,860,833`	`11,717,499`	`14,243,714`
Gross margin	`(116,968)`	`(485,589)`	`(843,060)`	`83,860`

Operating expenses:
General and administrative	`1,620,696`	`971,378`	`3,554,426`	`2,579,262`
Depreciation and amortization	`2,916`	`1,473`	`4,944`	`2,945`
Total operating expenses	`1,623,612`	`972,851`	`3,559,370`	`2,582,207`

Loss from operations	`(1,740,580)`	`(1,458,440)`	`(4,402,430)`	`(2,498,347)`

Other income (expense):
Interest expense	`(318,708)`	`(2,105,821)`	`(1,191,176)`	`(3,414,266)`
Gain (loss) on extinguishment of debt	`29,093`	`-`	`(56,660)`	`(108,887)`
Gain (loss) on warrant valuation	`(174,354)`	`-`	`100,626`	`-`
Other income (expense)	`(4,101)`	`26,858`	`3,376`	`21,552`
Gain (loss) on sale of assets	`-`	`(25,075)`	`3,920`	`(25,075)`
Other expense, net	`(468,070)`	`(2,104,038)`	`(1,139,914)`	`(3,526,676)`

Loss before provision for income taxes	`(2,208,650)`	`(3,562,478)`	`(5,542,344)`	`(6,025,023)`

Provision for income taxes	`-`	`-`	`-`	`-`

Net loss	`(2,208,650)`	`(3,562,478)`	`(5,542,344)`	`(6,025,023)`

Other comprehensive loss
Exchange loss on translation of foreign operations	`(2,097)`	`-`	`(1,675)`	`(8,134)`

Net loss and comprehensive loss	`$(2,210,747)`	`$(3,562,478)`	`$(5,544,019)`	`$(6,033,157)`

Loss per common share
Basic and diluted	`$(0.10)`	`$(0.22)`	`$(0.27)`	`$(0.37)`
Weighted average shares outstanding
Basic and diluted	`21,589,413`	`16,347,767`	`20,422,497`	`16,426,722`

See accompanying Notes to Condensed Consolidated Financial Statements.

Sky Quarry Inc.

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

For the Periods Ended June 30, 2025

	Common Stock Outstanding	Common Stock	Additional Paid-in-Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss	Total
Balance January 1, 2025	`19,027,208`	`$1,903`	`$35,674,391`	`$(23,968,089)`	`$(209,708)`	`$11,498,497`

Common shares issued for non-cash consideration	`2,125,382`	`212`	`1,186,384`	`-`	`-`	`1,186,596`
Debt converted to common shares	`108,334`	`11`	`92,073`	`-`	`-`	`92,084`
Share based compensation	`-`	`-`	`78,880`	`-`	`-`	`78,880`
Stock warrants issued	`-`	`-`	`56,660`	`-`	`-`	`56,660`
Other comprehensive income	`-`	`-`	`-`	`-`	`422`	`422`
Net loss	`-`	`-`	`-`	`(3,333,694)`	`-`	`(3,333,694)`
Balance March 31, 2025	`21,260,924`	`2,126`	`37,088,388`	`(27,301,783)`	`(209,286)`	`9,579,445`

Common shares issued for non-cash consideration	`809,237`	`81`	`143,922`	`-`	`-`	`144,003`
Debt converted to common shares	`40,000`	`4`	`100,485`	`-`	`-`	`100,489`
Share based compensation	`-`	`-`	`230,474`	`-`	`-`	`230,474`
Stock warrants issued	`-`	`-`	`21,818`	`-`	`-`	`21,818`
Other comprehensive loss	`-`	`-`	`-`	`-`	`(2,097)`	`(2,097)`
Net loss	`-`	`-`	`-`	`(2,208,650)`	`-`	`(2,208,650)`
Balance June 30, 2025	`22,110,161`	`$2,211`	`$37,585,087`	`$(29,510,433)`	`$(211,383)`	`$7,865,482`

See accompanying Notes to Condensed Consolidated Financial Statements

Sky Quarry Inc.

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

For the Periods Ended June 30, 2024

	Preferred Stock Outstanding	Preferred Stock	Common Stock Outstanding	Common Stock	Additional Paid-in-Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss	Total
Balance January 1, 2024	`246,021`	`$246`	`16,323,091`	`$1,630`	`$22,527,264`	`$(9,239,578)`	`$(201,505)`	`$13,088,057`
Preferred share subscription, less offering costs	`79,000`	`79`	`-`	`-`	`156,547`	`-`	`-`	`156,626`
Common share subscription, less offering costs	`-`	`-`	`7,969`	`1`	`9,309`	`-`	`-`	`9,310`
Debt converted to common shares	`-`	`-`	`3,802`	`-`	`18,246`	`-`	`-`	`18,247`
Share based compensation	`-`	`-`	`-`	`-`	`270,176`	`-`	`-`	`270,176`
Other comprehensive loss	`-`	`-`	`-`	`-`	`-`	`-`	`(8,134)`	`(8,134)`
Net loss	`-`	`-`	`-`	`-`	`-`	`(2,462,545)`	`-`	`(2,462,545)`
Balance March 31, 2024	`325,021`	`325`	`16,334,862`	`1,631`	`22,981,542`	`(11,702,123)`	`(209,639)`	`11,071,737`
Preferred share subscription, less offering costs	`44,200`	`44`	`-`	`-`	`110,456`	`-`	`-`	`110,500`
Common share subscription, less offering costs	`-`	`-`	`51,929`	`5`	`122,520`	`-`	`-`	`122,525`
Share based compensation	`-`	`-`	`-`	`-`	`189,792`	`-`	`-`	`189,792`
Stock warrants issued	`-`	`-`	`-`	`-`	`1,261,739`	`-`	`-`	`1,261,739`
Common stock issued on warrant exercise	`-`	`-`	`225,400`	`23`	`693,423`	`-`	`-`	`693,446`
Other comprehensive loss	`-`	`-`	`-`	`-`	`-`	`-`	`-`	`-`
Net loss	`-`	`-`	`-`	`-`	`-`	`(3,562,478)`	`-`	`(3,562,478)`
Balance June 30, 2024	`369,221`	`$369`	`16,612,191`	`$1,659`	`$25,359,472`	`$(15,264,601)`	`$(209,639)`	`$9,887,261`

See accompanying Notes to Condensed Consolidated Financial Statements.

Sky Quarry Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the Six Months Ended June 30, 2025 and 2024


	2025	2024
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	`$(5,542,344)`	`$(6,025,023)`
Adjustments to reconcile net loss to cash used in operating activities:
Share based compensation	`309,354`	`459,968`
Depreciation and amortization	`557,454`	`369,521`
Amortization of debt issuance costs	`807,636`	`1,540,875`
Amortization of right-of-use asset	`48,842`	`34,528`
Gain on revaluation of warrant liabilities	`(100,626)`	`-`
Loss on extinguishment of debt	`56,660`	`108,887`
Loss (gain) on sale of assets	`(3,920)`	`25,075`

Changes in operating assets and liabilities:
Accounts receivable	`501,376`	`2,683,467`
Prepaid expenses and other assets	`(64,541)`	`(265,732)`
Inventory	`1,149,885`	`(771,672)`
Accounts payable and accrued expenses	`1,589,955`	`(728,797)`
Operating lease liability	`(39,132)`	`(33,472)`
Net cash used in operating activities	`(729,401)`	`(2,602,375)`

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of assets	`14,060`	`-`
Purchase of exploration and evaluation assets	`(352,973)`	`(656,964)`
Purchase of property, plant, and equipment	`(42,383)`	`(714,752)`
Net cash used in investing activities	`(381,296)`	`(1,371,716)`

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds on lines of credit	`8,338,455`	`16,377,043`
Payments on lines of credit	`(8,465,550)`	`(18,426,517)`
Proceeds from note payable	`574,380`	`15,054,104`
Payments on note payable	`(1,670,741)`	`(8,847,174)`
Payment of debt issuance costs	`-`	`(1,043,187)`
Payments on finance lease	`(3,474)`	`-`
Proceeds on issuance of preferred Stock	`-`	`307,921`
Preferred stock offering costs		`(40,874)`
Proceeds on issuance of common stock	`-`	`1,138,077`
Common stock offering costs	`-`	`(340,885)`
Net cash provided by (used in) financing activities	`(1,226,930)`	`4,178,508`

Effect of exchange rate on cash	`(1,675)`	`(8,134)`

Increase (decrease) in cash and restricted cash	`(2,339,302)`	`196,283`
Cash and restricted cash, beginning of the period	`3,314,913`	`4,680,836`

SEC Form 10-Q filed by Sky Quarry Inc.