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Sky Quarry Announces Publication of Zacks Small-Cap Research Report:
GlobeNewswire News Room· 2024-12-03 10:30
WOODS CROSS, Utah, Dec. 03, 2024 (GLOBE NEWSWIRE) -- Sky Quarry Inc. (NASDAQ: SKYQ) ("Sky Quarry" or "the Company"), an integrated energy solutions company committed to revolutionizing the waste asphalt shingle recycling industry, has partnered with Zacks Small-Cap Research to release a new research report titled Developing a New Approach to Recycling Waste Asphalt Shingles. This partnership with Zacks marks a key step in expanding awareness of Sky Quarry’s business and advancing its mission to transform th ...
Sky Quarry Provides Third Quarter 2024 Corporate Update and Financial Results
GlobeNewswire News Room· 2024-11-15 12:30
Core Insights - Sky Quarry Inc. has begun trading on NASDAQ under the ticker symbol "SKYQ" and closed a public offering of $6.7 million to support its strategy in the waste asphalt shingle recycling industry [1][2][3]. Financial Performance - For Q3 2024, Sky Quarry reported revenues of $4.8 million, a significant decrease of 66% compared to $14.4 million in Q3 2023. For the nine months ended September 30, 2024, revenues totaled $19.2 million, down 51% from $39.1 million in the prior year [2][8]. - Gross profit for Q3 2024 was $0.3 million, representing 6.5% of revenues, compared to $2.8 million or 19.1% of revenues in Q3 2023 [9]. - The net loss for Q3 2024 was $4.4 million, compared to a net loss of $0.6 million in Q3 2023 [9][18]. Operational Highlights - The company completed refurbishment at its Foreland refinery, which included an overhaul of primary and secondary boilers and the completion of 24 work packages, aimed at enhancing operational efficiency and production levels [2][4]. - Sky Quarry entered into a partnership with Atlas Roofing Corporation to explore asphalt shingle recycling processes, leveraging its proprietary technology [5]. - The company announced the launch of a European financing effort, focusing on sustainable investing [2]. Management Changes - Darryl Delwo was appointed as Chief Financial Officer, bringing extensive finance and accounting experience to lead the company through its next growth phase as a public entity [6]. Future Outlook - The company anticipates strong growth as improvements at its refinery increase production, with expectations of refining blended sustainable oil by 2025 [7].
Sky Quarry Inc.(SKYQ) - 2024 Q3 - Quarterly Report
2024-11-14 21:16
[PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Sky Quarry Inc., including the balance sheets, statements of operations and comprehensive loss, statements of shareholders' equity, and statements of cash flows, along with their accompanying notes. These statements provide a snapshot of the company's financial position, performance, and cash movements for the periods ended September 30, 2024, and December 31, 2023, and are prepared in accordance with GAAP and SEC regulations [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheets provide a snapshot of the company's assets, liabilities, and equity at specific points in time | Metric | September 30, 2024 | December 31, 2023 | | :-------------------------- | :----------------- | :---------------- | | **ASSETS** | | | | Total current assets | $4,801,943 | $6,395,859 | | Property, plant, equipment | $6,882,227 | $6,287,351 | | Oil and gas properties | $8,435,197 | $7,745,205 | | Restricted cash | $2,887,588 | $4,354,014 | | Goodwill | $3,209,003 | $3,209,003 | | Total assets | $26,348,051 | $28,175,980 | | **LIABILITIES & EQUITY** | | | | Total current liabilities | $15,591,245 | $12,871,163 | | Total Liabilities | $17,726,267 | $15,087,923 | | Total shareholders' equity | $8,621,784 | $13,088,057 | - Total assets decreased by **$1,827,929** from December 31, 2023, to September 30, 2024, primarily due to a decrease in accounts receivable and restricted cash, partially offset by increases in property, plant, and equipment and oil and gas properties[96](index=96&type=chunk) - Total liabilities increased by **$2,638,344**, driven by a significant rise in current maturities of notes payable and the introduction of a warrant liability, partially offset by decreases in accounts payable and lines of credit[96](index=96&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) These statements detail the company's revenues, expenses, and net income or loss over specific reporting periods | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net sales | $4,846,795 | $14,397,648 | $19,174,369 | $39,140,246 | | Cost of goods sold | $4,532,565 | $11,647,135 | $18,409,703 | $33,406,211 | | Gross profit | $314,230 | $2,750,513 | $764,666 | $5,734,035 | | Total Operating expenses | $1,499,382 | $1,433,634 | $4,446,685 | $3,821,476 | | Income (loss) from operations | $(1,185,152) | $1,316,879 | $(3,682,019) | $1,912,559 | | Other expense, net | $(3,260,108) | $(1,914,406) | $(6,842,474) | $(1,459,756) | | Net income (loss) | $(4,445,260) | $(597,527) | $(10,524,493) | $450,476 | | Basic Earnings (loss) per common share | $(0.25) | $(0.04) | $(0.59) | $0.03 | | Diluted Earnings (loss) per common share| $(0.25) | $(0.04) | $(0.59) | $0.03 | - Net sales for the nine months ended September 30, 2024, decreased by **$19,965,877 (51%)** compared to the same period in 2023, primarily due to a reduction in WTI pricing and refurbishment activities at the Foreland refinery[84](index=84&type=chunk)[88](index=88&type=chunk) - The company reported a significant net loss of **$(10,524,493)** for the nine months ended September 30, 2024, a substantial decline from a net income of **$450,476** in the prior year, driven by reduced sales, higher interest expense, and a loss on warrant issuance[86](index=86&type=chunk)[93](index=93&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) This statement outlines changes in the company's equity accounts, including common stock, preferred stock, and accumulated deficit | Shareholder's Equity Component | Balance Jan 1, 2024 | Balance Sep 30, 2024 | | :----------------------------- | :------------------ | :------------------- | | Preferred Stock | $246 | $369 | | Common Stock | $1,632 | $1,744 | | Additional Paid-in-Capital | $22,527,262 | $28,593,381 | | Accumulated Deficit | $(9,239,578) | $(19,764,071) | | Accumulated Other Comp. Loss | $(201,505) | $(209,639) | | Total Shareholders' Equity | $13,088,057 | $8,621,784 | - Total shareholders' equity decreased from **$13,088,057** at December 31, 2023, to **$8,621,784** at September 30, 2024, primarily due to a net loss of **$(10,524,493)** for the nine-month period, partially offset by increases in additional paid-in capital from stock and warrant issuances[8](index=8&type=chunk)[16](index=16&type=chunk) - The company issued **1,123,421 shares of common stock** and **123,200 shares of Series B preferred stock** during the nine months ended September 30, 2024, raising **$3,206,711** and **$267,126** respectively, net of offering costs[58](index=58&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement categorizes cash inflows and outflows into operating, investing, and financing activities, showing liquidity changes | Cash Flow Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :----------------- | :----------------------------- | :----------------------------- | | Operating | $(4,616,746) | $2,529,554 | | Investing | $(1,899,212) | $(1,307,264) | | Financing | $5,023,763 | $2,779,344 | | Net Change in Cash | $(1,500,327) | $4,017,804 | | End of Period Cash | $3,180,509 | $5,372,370 | - Net cash used in operating activities significantly increased to **$(4,616,746)** for the nine months ended September 30, 2024, compared to cash generated of **$2,529,554** in the prior year, primarily due to the net loss and changes in working capital[98](index=98&type=chunk) - Cash flows from financing activities provided **$5,023,763** for the nine months ended September 30, 2024, driven by proceeds from lines of credit, notes payable, and stock issuances, partially offset by significant payments on debt and offering costs[100](index=100&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures supporting the condensed consolidated financial statements, covering the company's operations, accounting policies, financial health, and specific accounts. Key areas include the company's going concern status, inventory, mineral leases, property and equipment, various liabilities (warrant, debt, future revenues), equity transactions, and subsequent events [Nature of Operations](index=10&type=section&id=NATURE%20OF%20OPERATIONS) This section describes Sky Quarry Inc.'s core business activities in oil production, refining, and environmental remediation - Sky Quarry Inc. operates as an oil production, refining, and development-stage environmental remediation company, focusing on recycling waste asphalt shingles and remediating oil-saturated soils to reduce landfill dependence and virgin crude oil extraction[13](index=13&type=chunk) [Basis of Presentation and Significant Accounting Policies](index=10&type=section&id=BASIS%20OF%20PRESENTATION%20AND%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines the accounting principles and presentation methods used in preparing the financial statements - The condensed consolidated financial statements are unaudited, prepared in accordance with SEC rules and GAAP, and include all necessary adjustments for fair presentation. No significant changes to accounting policies occurred during the quarter ended September 30, 2024[14](index=14&type=chunk)[15](index=15&type=chunk) [Going Concern](index=10&type=section&id=GOING%20CONCERN) This section addresses the company's ability to continue operations given its financial condition and management's plans to mitigate risks - The company has an accumulated deficit of **$19,764,071** and negative cash flows from operations of **$4,616,746** for the nine months ended September 30, 2024, raising significant doubt about its ability to continue as a going concern[16](index=16&type=chunk) - Management's plan to mitigate going concern uncertainties includes monitoring expenses, refinancing debt, and raising additional capital through debt, equity, or warrant exercises to fund future expenditures and support growth plans[17](index=17&type=chunk) [Inventory](index=11&type=section&id=INVENTORY) This section details the composition and changes in the company's inventory, including finished goods and raw materials | Inventory Component | September 30, 2024 | December 31, 2023 | | :------------------ | :----------------- | :---------------- | | Finished goods | $2,015,569 | $1,287,927 | | Raw materials | $416,457 | $892,665 | | Chemicals | $253,917 | $256,589 | | Total Inventory | $2,685,943 | $2,437,181 | - Total inventory increased by **$248,762** from December 31, 2023, to September 30, 2024, primarily driven by an increase in finished goods, while raw materials decreased[19](index=19&type=chunk)[96](index=96&type=chunk) [Mineral Leases](index=11&type=section&id=MINERAL%20LEASES) This section describes the company's mineral lease holdings, including acreage, expiry dates, and royalty obligations - The company holds mineral leases covering approximately **5,930.3 net acres** in Utah, acquired through 2020 Utah, with lease expiry dates ranging from 2020 to 2025[18](index=18&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) | Lease Reference | Gross Acres | Net Acres | Lease Expiry Date | Annual Rent | Annual Advance Minimum Royalty | Production Royalty Rate | | :-------------- | :---------- | :-------- | :---------------- | :---------- | :----------------------------- | :---------------------- | | ML-49579 | 50.4 | 50.4 | 12/31/2024 | $500 | $5,000 | 6.5% | | ML-49927 | 4,319.9 | 4,319.9 | 5/31/2025 | $4,320 | $43,200 | 6.5% | | ML-51705 | 1,560.0 | 1,560.0 | 1/31/2020 | $1,560 | $15,600 | 8% | | Total | 5,930.3 | 5,930.3 | | $6,380 | $63,800 | | - No amortization of lease rights has been recorded as operations have not yet commenced[21](index=21&type=chunk) [Property, Plant, and Equipment](index=13&type=section&id=PROPERTY%2C%20PLANT%2C%20AND%20EQUIPMENT) This section provides details on the company's tangible assets, including buildings, machinery, and accumulated depreciation | Component | September 30, 2024 | December 31, 2023 | | :------------------------------ | :----------------- | :---------------- | | Buildings | $1,575,000 | $1,575,000 | | Machinery and equipment | $6,611,753 | $5,435,388 | | Office furniture and equipment | $6,733 | $6,733 | | Less: Accumulated depreciation | $(1,311,259) | $(729,770) | | Net Property, Plant, Equipment | $6,882,227 | $6,287,351 | - Depreciation and amortization expense for property, plant, and equipment totaled **$589,267** for the nine months ended September 30, 2024, an increase from **$308,875** in the prior year[25](index=25&type=chunk) [Oil and Gas Properties](index=13&type=section&id=OIL%20AND%20GAS%20PROPERTIES) This section outlines the company's investments and activities related to oil and gas exploration and development | Activity | September 30, 2024 | December 31, 2023 | | :------------------------- | :----------------- | :---------------- | | Balance, beginning of period | $7,745,205 | $7,477,238 | | Additions | $689,992 | $679,367 | | Disposal | $0 | $(411,400) | | Balance, end of period | $8,435,197 | $7,745,205 | - Additions to oil and gas properties during the nine months ended September 30, 2024, relate to the development of land, extraction facilities, and a mine at PR Spring[25](index=25&type=chunk) [Right-of-Use Asset and Lease Liability](index=13&type=section&id=RIGHT-OF-USE%20ASSET%20AND%20LEASE%20LIABILITY) This section details the company's accounting for leased assets and corresponding lease obligations under ASC 842 - Lease expense for office space included amortization of the right-of-use asset of **$52,455** and accretion of the lease liability of **$12,046** for the nine months ended September 30, 2024[25](index=25&type=chunk) - The weighted average remaining lease term was **1.67 years** as of September 30, 2024, with a weighted average discount rate of **10.25%**[25](index=25&type=chunk) | Year | Undiscounted Future Cash Flows | | :----------------- | :----------------------------- | | 2024 (Remainder) | $21,494 | | 2025 | $87,481 | | 2026 | $36,898 | | Total lease payments | $145,873 | | Less: interest | $(11,243) | | Present value | $134,630 | [Goodwill](index=14&type=section&id=GOODWILL) This section explains the goodwill recognized from acquisitions and its carrying value on the balance sheet - Goodwill of **$3,209,003** was recognized from the acquisition of Foreland in 2022 and remained unchanged as of September 30, 2024[31](index=31&type=chunk) [Accounts Payable and Accrued Expenses](index=14&type=section&id=ACCOUNTS%20PAYABLE%20AND%20ACCRUED%20EXPENSES) This section provides a breakdown of the company's short-term liabilities, including trade payables and various accrued costs | Component | September 30, 2024 | December 31, 2023 | | :-------------------------- | :----------------- | :---------------- | | Trade accounts payable | $2,766,648 | $4,753,782 | | Accrued expenses | $331,809 | $120,888 | | Accrued vacation | $18,491 | $25,971 | | Sales tax payable | $2,697 | $3,480 | | Total Accounts Payable & Accrued Expenses | $3,119,645 | $4,904,121 | - Accounts payable and accrued expenses decreased by **$1,784,476** from December 31, 2023, to September 30, 2024, primarily due to a reduction in trade accounts payable[31](index=31&type=chunk)[96](index=96&type=chunk) [Warrant Liability](index=14&type=section&id=WARRANT%20LIABILITY) This section describes the accounting treatment and valuation of the company's warrant obligations - A warrant liability of **$1,936,937** was recorded as of September 30, 2024, resulting from the issuance of common stock purchase warrants on August 27, 2024, classified as a liability due to a leverage provision in the fair value calculation[35](index=35&type=chunk) | Black Scholes Assumption | September 30, 2024 | | :----------------------- | :----------------- | | Stock price | $4.50 | | Risk-free interest rate | 3.66% | | Expected volatility | 85% | | Expected life (in years) | 5 | | Expected dividend yield | - | - The fair value of the warrant liability was initially recorded at **$1,936,937** at the grant date, with no change in fair value recognized during the three and nine months ended September 30, 2024[35](index=35&type=chunk) [Lines of Credit](index=15&type=section&id=LINES%20OF%20CREDIT) This section details the company's available and utilized credit facilities, including their terms and balances | Line of Credit Type | September 30, 2024 | December 31, 2023 | | :------------------------------ | :----------------- | :---------------- | | Invoice purchase and security agreement | $1,279,013 | $1,696,368 | | Inventory finance rider | $449,125 | $1,365,330 | | Total Lines of Credit | $1,728,138 | $3,061,698 | - Lines of credit decreased by **$1,333,560** from December 31, 2023, to September 30, 2024, with the Invoice Purchase and Security Agreement and Inventory Finance Rider maturing on December 21, 2024[38](index=38&type=chunk)[40](index=40&type=chunk)[96](index=96&type=chunk) [Debt](index=16&type=section&id=DEBT) This section provides a comprehensive overview of the company's various debt instruments, including principal balances, interest rates, and maturity dates | Lender / Merchant | Maturity Date | Interest Rate | Sep 30, 2024 Principal Balance | Dec 31, 2023 Principal Balance | | :---------------- | :--------------- | :------------ | :----------------------------- | :----------------------------- | | Libertas 5 | Dec 6, 2024 | 58% | $2,937,305 | $0 | | Libertas 6 | Nov 29, 2024 | 58% | $1,723,582 | $0 | | Lendspark 3 | Mar 4, 2025 | 68% | $1,554,522 | $0 | | Private Lender A | Oct 14, 2024 | 150% | $1,435,368 | $0 | | Lendspark 4 | Dec 4, 2024 | 68% | $1,004,397 | $0 | | Libertas 7 | Jan 7, 2025 | 66% | $916,140 | $0 | | Libertas 4 | Sep 12, 2024 | 68% | $626,014 | $1,394,324 | | Libertas 8 | Mar 6, 2025 | 68% | $515,140 | $0 | | Parkside Funding | Sep 6, 2024 | 177% | $216,000 | $0 | | ACMO USOS LLC | Mar 15, 2021 | 15% | $191,699 | $191,699 | | UFS West | Sep 6, 2024 | 177% | $188,400 | $0 | | Private Lender B | Mar 23, 2023 | 20% | $83,487 | $72,085 | | USA SBA | Mar 1, 2026 | 1% | $53,957 | $82,265 | | Total Principal | | | $11,446,011 | $6,017,936 | | Less: Unamortized Debt Issuance Costs | | | $(2,684,805) | $(1,100,104) | | Net Debt | | | $8,761,206 | $4,917,832 | - Total debt, net of unamortized debt issuance costs, increased from **$4,917,832** at December 31, 2023, to **$8,761,206** at September 30, 2024, with a significant portion (**$11,392,054**) due in less than one year[41](index=41&type=chunk)[42](index=42&type=chunk) - The company entered into several new loan agreements during 2024, including with Lendspark Corporation and Private Lender A, often involving high interest rates and the issuance of share purchase warrants as inducement[42](index=42&type=chunk)[44](index=44&type=chunk) [Liability for Sale of Future Revenues](index=19&type=section&id=LIABILITY%20FOR%20SALE%20OF%20FUTURE%20REVENUES) This section explains the company's obligations arising from agreements to sell future revenue streams - As of September 30, 2024, the company had **five outstanding agreements** with Libertas Funding, LLC for the sale of future revenues, with a total of **$1,524,807** in unamortized interest and discounts[46](index=46&type=chunk) | Lender | Date Issue | Gross Discount | Unamortized Discount (Sep 30, 2024) | | :-------- | :--------------- | :------------- | :---------------------------------- | | Libertas 4 | October 25, 2023 | $449,737 | $155,327 | | Libertas 5 | January 11, 2024 | $575,936 | $377,033 | | Libertas 6 | January 18, 2024 | $990,000 | $642,535 | | Libertas 7 | February 19, 2024| $397,500 | $222,095 | | Libertas 8 | May 16, 2024 | $175,000 | $127,817 | | Total | | $2,588,173 | $1,524,807 | - During the nine months ended September 30, 2024, the company amortized **$3,805,971** of discount to interest expense related to these agreements and recognized a loss on extinguishment of debt of **$108,887** from refinancing three Libertas agreements[46](index=46&type=chunk)[48](index=48&type=chunk) [Convertible Debentures](index=21&type=section&id=CONVERTIBLE%20DEBENTURES) This section details the company's convertible debt instruments, including conversion terms and outstanding balances | Lender | Maturity Date | Interest Rate | Principal Due Sep 30, 2024 | Principal Due Dec 31, 2023 | | :--------------- | :--------------- | :------------ | :------------------------- | :------------------------- | | Private Lender C | November 24, 2024| 9% | $2,045,714 | $2,018,247 | - A **$2,000,000** promissory note issued to Private Lender C on November 24, 2023, is convertible into common stock at **$4.80 per share** (post reverse split). The note holder elected to convert accumulated interest totaling **$107,507** into **22,398 shares of common stock** during 2024[54](index=54&type=chunk) [Income Taxes](index=21&type=section&id=INCOME%20TAXES) This section discusses the company's tax position, including net operating loss carryforwards and valuation allowances - The company has U.S. federal net operating loss carryforwards but has recorded a **full valuation allowance** against its deferred tax assets in both the U.S. and Canada due to a three-year cumulative loss position, indicating that realization is not more likely than not[55](index=55&type=chunk) - No Section 382 study has been performed to determine potential impairment of tax attributes due to ownership changes[55](index=55&type=chunk) [Net Loss Per Common Share](index=22&type=section&id=NET%20LOSS%20PER%20COMMON%20SHARE) This section presents the calculation of basic and diluted net loss per common share for the reporting periods - Basic and diluted net loss per common share were **$(0.59)** for the nine months ended September 30, 2024, compared to **$0.03** net income per share in the prior year[7](index=7&type=chunk) - All outstanding options, warrants, and convertible preferred stock totaling **7,062,242** for the nine months ended September 30, 2024, were excluded from diluted EPS calculation as they were anti-dilutive[57](index=57&type=chunk) [Equity](index=22&type=section&id=EQUITY) This section details changes in the company's equity structure, including stock issuances and shares reserved for future grants - During the nine months ended September 30, 2024, the company issued **1,123,421 shares of common stock** and **123,200 shares of Series B preferred stock**, generating **$3,206,711** and **$267,126** in net proceeds, respectively[58](index=58&type=chunk) - Equity issuance costs for the nine months ended September 30, 2024, amounted to **$1,761,493**, significantly higher than **$0** in the prior year[58](index=58&type=chunk) | Shares Reserved for Issuance | Maximum Issuable (Sep 30, 2024) | | :--------------------------- | :------------------------------ | | Company Stock Option Plan | 4,000,000 | | Common Share Purchase Warrants issued | 1,223,333 | | Offering Warrants (Reg A) | 3,787,933 | | Brokers Warrants (Reg A) | 48,522 | | Conversion of Common Shares | 3,333,333 | | Brokers Warrants (Reg A) | 76,666 | | Convertible Note | 416,667 | | TOTAL SHARES RESERVED | 12,886,454 | [Stock Option Plan](index=23&type=section&id=STOCK%20OPTION%20PLAN) This section describes the company's stock option plan, including shares available for grant and share-based compensation expense - The company amended its 2020 Stock Plan on September 7, 2024, increasing the number of shares available for grant from **1,666,666** to **4,000,000**[63](index=63&type=chunk) - Share-based compensation expense for the nine months ended September 30, 2024, was **$534,572**, up from **$325,887** in the prior year[64](index=64&type=chunk) | Stock Option Activity (Nine Months Ended Sep 30, 2024) | Number of Options | Weighted Average Exercise Price Per Share | | :----------------------------------------------------- | :---------------- | :---------------------------------------- | | Outstanding as of December 31, 2023 | 1,269,667 | $3.87 | | Forfeited | (308,880) | $3.86 | | Outstanding as of September 30, 2024 | 960,787 | $3.88 | [Related Party Transactions](index=25&type=section&id=RELATED%20PARTY%20TRANSACTIONS) This section discloses transactions and relationships with parties that have the ability to influence the company's operations - JPMorgan, a significant shareholder (**12.89% common shares**), holds consent rights over certain business matters, Board observation rights, and financial statement access rights[68](index=68&type=chunk) - The company paid **$112,750** in sitting and committee fees to board members for the nine months ended September 30, 2024, a slight decrease from **$120,250** in the prior year[68](index=68&type=chunk) [General and Administrative Expenses](index=25&type=section&id=GENERAL%20AND%20ADMINISTRATIVE%20EXPENSES) This section provides a breakdown of the company's administrative and overhead costs for the reporting periods | Expense Category | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------- | :----------------------------- | :----------------------------- | | Executive compensation| $1,157,696 | $1,838,402 | | Professional fees | $920,378 | $858,657 | | Insurance | $479,600 | $133,237 | | Lease and utilities | $200,090 | $146,399 | | Bank charges | $136,477 | $9,488 | | Travel expenses | $158,748 | $134,175 | | Automobile | $79,544 | $0 | | Licenses | $36,068 | $51,073 | | Other | $154,244 | $15,283 | | Total G&A Expenses | $3,322,846 | $3,186,714 | - General and administrative expenses increased by **$127,797** for the nine months ended September 30, 2024, primarily due to a full nine months of rent expense and incremental costs associated with the RegA Offering and Nasdaq listing[90](index=90&type=chunk)[92](index=92&type=chunk) [Commitments and Contingencies](index=26&type=section&id=COMMITMENTS%20AND%20CONTINGENCIES) This section outlines the company's contractual obligations and potential liabilities from ongoing legal or operational matters | Right-of-Way Grant | Acres | Expiration | Annual Fee | | :----------------- | :---- | :--------- | :--------- | | N-41035 | 19.66 | 2024-12-31 | $2,850 | | N-42414 | 20.32 | 2044-12-31 | $1,400 | | Total | | | $4,250 | - The company has commitments for two leased land rights of way in Nye County, Nevada, totaling approximately **40 acres**, with annual fees of **$4,250**[71](index=71&type=chunk) [Subsequent Events](index=26&type=section&id=SUBSEQUENT%20EVENTS) This section reports significant events that occurred after the balance sheet date but before the financial statements were issued - On October 9, 2024, the company closed its Reg A Offering, selling **1,118,005 common shares** for gross proceeds of **$6,708,030**, resulting in net proceeds of **$5,724,782** after fees[72](index=72&type=chunk) - Subsequent to September 30, 2024, the company repaid outstanding loans to Parkside Funding LLC and UFS West LLC, each for **$216,000**[73](index=73&type=chunk) - The company entered into an investor relations services agreement on October 17, 2024, with a payment of **$300,000** for communication services to the financial community[73](index=73&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting key factors influencing performance, liquidity, and capital resources. It includes discussions on the reverse stock split, business overview, corporate history, going concern issues, and detailed analysis of revenue, expenses, and cash flows for the periods presented [Forward-Looking Statements](index=28&type=section&id=Forward-Looking%20Statements) This section cautions readers about statements regarding future events that are subject to risks and uncertainties - The report contains forward-looking statements based on management's beliefs and assumptions, which involve risks, uncertainties, and assumptions that could cause actual results to differ materially from expectations[4](index=4&type=chunk) - Readers are cautioned not to place undue reliance on forward-looking statements due to inherent risks and uncertainties, including economic conditions, growth management, acquisitions, raw material costs, and regulatory changes[4](index=4&type=chunk)[75](index=75&type=chunk) [Reverse Stock Split](index=28&type=section&id=Reverse%20Stock%20Split) This section explains the details and impact of the company's reverse stock split on its common shares - A **one-for-three (1-for-3) reverse stock split** of common shares was effected on April 9, 2024, without changing the par value or rights of shares[76](index=76&type=chunk) - Fractional shares resulting from the split were rounded up to the nearest whole share, and historical share and per-share amounts in the financial statements have been adjusted to reflect this split[76](index=76&type=chunk)[78](index=78&type=chunk) [Overview](index=29&type=section&id=Overview) This section provides a general description of Sky Quarry Inc.'s business model, operations, and strategic focus - Sky Quarry Inc. is an oil production, refining, and development-stage environmental remediation company focused on recycling waste asphalt shingles and remediating oil-saturated sands and soils using its proprietary ECOSolv technology[79](index=79&type=chunk) - The ECOSolv process uses a closed-loop distillation and evaporation circuit, recovering over **99%** of the solvent and requiring no water, demonstrating over **95%** oil separation rates in bench testing[79](index=79&type=chunk) - Future plans include retrofitting the PR Spring Facility for asphalt shingle recycling and developing modular asphalt shingle recycling facilities (ASR Facilities) in strategic locations[79](index=79&type=chunk) [Corporate History](index=29&type=section&id=Corporate%20History) This section outlines the company's formation, name changes, and significant acquisitions that shaped its current structure - Incorporated in Delaware on June 4, 2019, as 'Recoteq, Inc.', the company changed its name to 'Sky Quarry Inc.' on April 22, 2020, and operates as a holding company for its subsidiaries[80](index=80&type=chunk) - Key acquisitions include 2020 Resources LLC (September 16, 2020), which brought the PR Spring facility and asphalt bitumen leases, and Foreland Refining Corporation (September 30, 2022), which added heavy crude oil refining capabilities and was immediately accretive to revenues and cash flow[80](index=80&type=chunk) [Our Financial Condition and Going Concern Issues](index=30&type=section&id=Our%20Financial%20Condition%20and%20Going%20Concern%20Issues) This section discusses the company's financial health, accumulated losses, and plans to address its ability to continue as a going concern - The company has incurred accumulated net losses of **$19,764,072** through September 30, 2024, leading to significant doubt about its ability to continue as a going concern[82](index=82&type=chunk) - To address the going concern, management plans to increase revenues by securing more crude oil for the Foreland refinery, reduce debt service through refinancing, establish strategic partnerships, and raise capital via equity or debt offerings[82](index=82&type=chunk) - There is no guarantee that the company will successfully raise sufficient capital, grow revenues, or generate adequate cash flow to meet its operating expenses and capital requirements[82](index=82&type=chunk) [Special Notes Regarding Smaller Reporting Company Status](index=30&type=section&id=Special%20Notes%20Regarding%20Smaller%20Reporting%20Company%20Status) This section clarifies the company's reporting status and any exemptions or reduced disclosure requirements it utilizes - The company is filing this report as a 'smaller reporting company' and has elected to omit certain information from the Management's Discussion and Analysis of Financial Condition and Results of Operations, as permitted by Rule 12b-2 of the Securities Exchange Act of 1934[83](index=83&type=chunk) [Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023](index=30&type=section&id=Results%20of%20Operations%20for%20the%20Three%20and%20Nine%20Months%20Ended%20September%2030%2C%202024%20and%202023) This section provides a detailed comparison of the company's financial performance for the three and nine months ended September 30, 2024, versus 2023, covering net sales, cost of goods sold, gross profit, operating expenses, other income/expense, and net income/loss. It highlights the impact of WTI pricing, refinery refurbishment, and increased financing costs on the company's results [Net Sales](index=32&type=section&id=Net%20Sales) This section analyzes the company's revenue performance, explaining changes in sales figures and contributing factors | Period | Net Sales (2024) | Net Sales (2023) | Change ($) | Change (%) | | :------------------------------------ | :--------------- | :--------------- | :----------- | :--------- | | Three Months Ended September 30 | $4,846,795 | $14,397,648 | $(9,550,853) | -66.3% | | Nine Months Ended September 30 | $19,174,369 | $39,140,246 | $(19,965,877)| -51.0% | - The significant decline in net sales was primarily due to a reduction in WTI crude oil pricing (from **$87 to $67 per barrel**) and the refurbishment of the Foreland refinery from May to July 15, 2024[84](index=84&type=chunk)[88](index=88&type=chunk) [Cost of Goods Sold](index=32&type=section&id=Cost%20of%20Goods%20Sold) This section examines the direct costs associated with the goods sold, and its impact on gross profit | Period | COGS (2024) | COGS (2023) | Gross Profit (2024) | Gross Profit (2023) | | :------------------------------------ | :--------------- | :--------------- | :------------------ | :------------------ | | Three Months Ended September 30 | $4,532,565 | $11,647,135 | $314,230 | $2,750,513 | | Nine Months Ended September 30 | $18,409,703 | $33,406,211 | $764,666 | $5,734,035 | - Cost of goods sold decreased by **$14,996,508** for the nine months ended September 30, 2024, reflecting the decline in net sales[89](index=89&type=chunk) - Gross profit decreased by **$4,969,369** for the nine months ended September 30, 2024. One-time costs of approximately **$770,915** were incurred during the refinery refurbishment, representing **4% of COGS** for the period[89](index=89&type=chunk) [General and Administrative](index=32&type=section&id=General%20and%20Administrative) This section discusses trends and changes in the company's overhead and administrative expenses | Period | G&A Expenses (2024) | G&A Expenses (2023) | Change ($) | | :------------------------------------ | :------------------ | :------------------ | :--------- | | Three Months Ended September 30 | $1,205,032 | $1,173,593 | $31,439 | | Nine Months Ended September 30 | $3,322,846 | $3,195,049 | $127,797 | - The increase in G&A expenses for the nine months ended September 30, 2024, was primarily due to realizing a full nine months of rent expense and incremental professional, consulting, and marketing costs related to the RegA Offering and Nasdaq listing[92](index=92&type=chunk) [Other Income (Expense)](index=33&type=section&id=Other%20Income%20(Expense)) This section details non-operating income and expenses, such as interest, gains/losses, and their impact on net income | Period | Other Expense (2024) | Other Expense (2023) | Change ($) | | :------------------------------------ | :------------------- | :------------------- | :--------- | | Three Months Ended September 30 | $(3,260,108) | $(1,914,406) | $(1,345,702)| | Nine Months Ended September 30 | $(6,842,474) | $(1,459,756) | $(5,382,718)| | Components (9M 2024) | | | | | Interest expense | $(4,773,663) | | | | Loss on issuance of warrants | $(1,935,934) | | | | Loss on extinguishment of debt | $(108,887) | | | | Loss on sale of assets | $(25,075) | | | | Other income | $1,085 | | | - The significant increase in other expense was driven by higher interest expense on increased term debt and a one-time loss of **$1,935,934** related to the initial measurement of warrant liability[93](index=93&type=chunk) [Net Income (Loss)](index=33&type=section&id=Net%20Income%20(Loss)) This section summarizes the company's overall profitability or loss for the reporting periods and key drivers | Period | Net Income (Loss) (2024) | Net Income (Loss) (2023) | EPS (2024) | EPS (2023) | | :------------------------------------ | :----------------------- | :----------------------- | :--------- | :--------- | | Three Months Ended September 30 | $(4,445,260) | $(597,781) | $(0.25) | $(0.04) | | Nine Months Ended September 30 | $(10,524,493) | $466,646 | $(0.59) | $0.03 | - The shift from net income in the prior year to a substantial net loss was primarily due to reduced net sales from refinery refurbishment, higher interest expense on increased term debt, and the loss on issuance of private placement warrants[93](index=93&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) This section details the company's cash position, working capital, and ability to meet its financial obligations. It addresses the negative operating cash flows and the ongoing need for external financing to support operations and capital expenditures, outlining the sources and uses of cash across operating, investing, and financing activities [Introduction](index=34&type=section&id=Introduction%20(Liquidity)) This section introduces the company's current liquidity position and its ability to fund ongoing operations - The company experienced negative operating cash flows for the three and nine months ended September 30, 2024, with cash on hand of **$292,290** as of September 30, 2024[95](index=95&type=chunk) - Anticipated medium to long-term cash needs are expected to be met through the issuance of debt or equity securities until cash flows from operations become sufficient[95](index=95&type=chunk) [Cash Requirements](index=34&type=section&id=Cash%20Requirements) This section outlines the company's anticipated cash needs for operations, capital expenditures, and debt service - The company continues to require additional cash to meet ongoing operational and capital needs, as it is not yet generating sufficient cash flow to cover costs due to refinery activities and high debt payments[97](index=97&type=chunk) - Management plans to secure necessary resources through debt or equity issuance to ensure financial obligations are met and long-term objectives are executed[97](index=97&type=chunk) [Sources and Uses of Cash](index=35&type=section&id=Sources%20and%20Uses%20of%20Cash) This section analyzes the company's cash flows from operating, investing, and financing activities [Operating Activities](index=35&type=section&id=Operating%20Activities) This section details cash generated or used by the company's primary business operations - Net cash used in operating activities for the nine months ended September 30, 2024, was **$4,616,746**, a significant change from cash generated of **$2,529,554** in the prior year[98](index=98&type=chunk) - This was primarily driven by a net loss of **$10,524,493**, partially offset by non-cash adjustments such as amortization of debt issuance costs (**$2,936,408**) and loss on issuance of warrants (**$1,936,937**)[98](index=98&type=chunk) [Investing Activities](index=35&type=section&id=Investing%20Activities) This section describes cash flows related to the acquisition and disposal of long-term assets - Cash flow used in investing activities increased to **$1,899,211** for the nine months ended September 30, 2024, from **$1,307,265** in the prior year[99](index=99&type=chunk) - This increase was due to payments for exploration and evaluation assets (**$117,547**) and property, plant, and equipment (**$274,398**), partially offset by proceeds from asset sales in the prior year[99](index=99&type=chunk) [Financing Activities](index=35&type=section&id=Financing%20Activities) This section covers cash flows from debt, equity, and dividend transactions - Net cash provided by financing activities was **$5,023,763** for the nine months ended September 30, 2024, an increase of **$2,244,416** from the prior year[100](index=100&type=chunk) - Key financing inflows included proceeds from lines of credit (**$33,556,317**) and notes payable (**$16,767,738**), while outflows included payments on lines of credit (**$34,889,877**) and notes payable (**$12,216,266**), along with significant debt discount and offering costs[100](index=100&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that the company is not providing quantitative and qualitative disclosures about market risk, as it is not applicable for this filing - The company has indicated that disclosures about market risk are not applicable for this report[102](index=102&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of the company's disclosure controls and procedures and internal control over financial reporting. Management concluded that disclosure controls were not effective as of September 30, 2024, and is implementing a plan to address deficiencies, while noting no material changes to internal controls over financial reporting [Evaluation of Disclosure Controls and Procedures](index=36&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section reports management's assessment of the effectiveness of the company's disclosure controls and procedures - Management concluded that the company's disclosure controls and procedures were **not effective** as of September 30, 2024, to provide reasonable assurance that required information is accumulated and communicated timely[102](index=102&type=chunk) - A plan is actively being developed and implemented to address and resolve identified material deficiencies in disclosure controls and procedures[102](index=102&type=chunk) [Changes in Internal Control Over Financial Reporting](index=36&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section discloses any material changes in the company's internal control over financial reporting during the period - There were no changes in internal controls over financial reporting during the quarter ended September 30, 2024, that materially affected or are reasonably likely to materially affect these controls[102](index=102&type=chunk) [Limitations on the Effectiveness of Controls](index=36&type=section&id=Limitations%20on%20the%20Effectiveness%20of%20Controls) This section acknowledges the inherent limitations of any control system, regardless of its design - Disclosure controls and procedures, no matter how well designed, can only provide reasonable assurance and are subject to inherent limitations, including human error, circumvention by individuals, and the need to weigh benefits against costs[103](index=103&type=chunk) [PART II – OTHER INFORMATION](index=37&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) This section confirms that there are no updates to previously disclosed legal proceedings. While the company is involved in various legal actions in the ordinary course of business, management does not expect current pending or threatened matters to have a material adverse effect on its financial condition or results of operations - There are no updates to the disclosure of legal proceedings from the company's Offering Circular[104](index=104&type=chunk) - Management believes that current pending or threatened legal actions are not expected to have a material adverse effect on the company's financial position or results of operations[104](index=104&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, Sky Quarry Inc. is not required to provide the information typically mandated by this item - As a smaller reporting company, the registrant is not required to provide risk factor disclosures[105](index=105&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section indicates that there are no unregistered sales of equity securities or uses of proceeds to report for the period - There are no unregistered sales of equity securities and use of proceeds to report[105](index=105&type=chunk) [Item 3. Defaults Upon Senior Securities](index=37&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there have been no events requiring disclosure regarding defaults upon senior securities - No events requiring reporting under this item have occurred[105](index=105&type=chunk) [Item 4. Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[105](index=105&type=chunk) [Item 5. Other Information](index=37&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report for the period - No other information is required to be reported under this item[105](index=105&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, certifications from the CEO and CFO, and XBRL instance documents | Exhibit No. | Description | | :---------- | :------------------------------------------------------------------------------------------------------------------------------------------------------ | | 3.1 | Amended and Restated Certificate of Incorporation | | 3.2 | Amendments to Certificate of Incorporation | | 3.3 | Bylaws of Sky Quarry Inc | | 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934. | | 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934. | | 32.1 | Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350). | | 32.2 | Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350). | | 101.INS | XBRL Instance Document | | 101.SCH | XBRL Schema Document | | 101.CAL | XBRL Calculation Linkbase Document | | 101.DEF | XBRL Definition Linkbase Document | | 101.LAB | XBRL Labels Linkbase Document | | 101.PRE | XBRL Presentation Linkbase Document | [SIGNATURES](index=39&type=section&id=SIGNATURES) This section confirms the official signing of the report by the company's authorized officer - The report was duly signed on November 14, 2024, by David Sealock, Chief Executive Officer of Sky Quarry Inc.[109](index=109&type=chunk)
Sky Quarry Nears Completion of First Waste Asphalt Shingle Modular Facility
GlobeNewswire News Room· 2024-11-14 13:30
Core Insights - Sky Quarry Inc. is constructing its first Waste Asphalt Shingle Modular Facility, which is currently 80% complete, aimed at transforming the waste asphalt shingle recycling industry in the U.S. [1][2] Company Overview - Sky Quarry Inc. focuses on integrated energy solutions, particularly in recycling waste asphalt shingles and environmental remediation [5]. - The company aims to repurpose millions of tons of asphalt shingle waste, contributing to improved waste management and resource efficiency [5]. Facility Details - The completion of the first modular facility will mark a significant milestone in converting millions of tons of waste shingles into reusable resources, with operations expected to start in 2025 [2]. - Each modular facility is designed to process up to 100,000 tons of asphalt shingle feedstock annually, contributing to the recycling of over 15 million tons of waste asphalt shingles generated in the U.S. each year [3]. Strategic Importance - The modular facilities are part of a nationwide network intended to intercept waste at the source, addressing a major waste challenge in the U.S. construction industry [3]. - The initiative aligns with recent regulatory updates that mandate the diversion of construction waste from landfills, positioning the company to provide sustainable solutions [4]. Market Potential - By recycling waste asphalt shingles, Sky Quarry is poised to unlock an energy potential of over 22 million barrels annually, representing a significant opportunity for sustainable resource recovery [3].
Sky Quarry Announces Launch of European Financing Effort
GlobeNewswire News Room· 2024-11-13 13:31
WOODS CROSS, Utah, Nov. 13, 2024 (GLOBE NEWSWIRE) -- Sky Quarry Inc. (NASDAQ: SKYQ) ("Sky Quarry" or "the Company"), an integrated energy solutions company focused on transforming the waste asphalt shingle recycling industry, today announced the launch of its European Financing Effort. This expansion aims to leverage growth capital in the European market. The Company is making this announcement following numerous meetings with institutional investors across several European countries. According to Morningst ...