Sky Quarry Inc.(SKYQ) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements Sky Quarry Inc.'s unaudited condensed consolidated financial statements as of June 30, 2025, show total assets decreased to $22.8 million, a net loss of $5.5 million, and an accumulated deficit of $29.5 million, indicating significant going concern uncertainty Condensed Consolidated Financial Statements The company's financial statements show a weakened balance sheet with cash at $173,795 and total assets at $22.8 million, while net sales decreased to $10.9 million for the six months ended June 30, 2025, resulting in a $5.5 million net loss and $0.7 million cash used in operations Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash | $173,795 | $385,116 | | Total Current Assets | $3,199,332 | $4,997,373 | | Total Assets | $22,800,561 | $26,947,243 | | Total Current Liabilities | $11,723,448 | $12,398,672 | | Total Liabilities | $14,935,079 | $15,448,746 | | Total Shareholders' Equity | $7,865,482 | $11,498,497 | Condensed Consolidated Statements of Operations (Unaudited) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Sales | $10,874,439 | $14,327,574 | | Gross Margin | ($843,060) | $83,860 | | Loss from Operations | ($4,402,430) | ($2,498,347) | | Net Loss | ($5,542,344) | ($6,025,023) | | Basic and Diluted Loss per Share | ($0.27) | ($0.37) | Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($729,401) | ($2,602,375) | | Net cash used in investing activities | ($381,296) | ($1,371,716) | | Net cash provided by (used in) financing activities | ($1,226,930) | $4,178,508 | | Increase (decrease) in cash and restricted cash | ($2,339,302) | $196,283 | Notes to Condensed Consolidated Financial Statements The notes detail the company's oil production and environmental remediation business, highlighting a significant 'Going Concern' uncertainty due to an accumulated deficit of $29.5 million and reliance on additional capital, alongside disclosures on debt, revenue, and subsequent management and financing events - The company is an oil production, refining, and development-stage environmental remediation company focused on recycling waste asphalt shingles and remediating oil-saturated soils[21] - Management has identified material uncertainties that cast significant doubt on the Company's ability to continue as a going concern, with an accumulated deficit of $29,510,433 as of June 30, 2025, and insufficient operating cash flows without additional financing[26][28] - Subsequent to the quarter end, the company entered into an agreement for the potential purchase of up to $8.125 million of common stock, secured a new $1 million promissory note, and appointed Marcus Laun as President and Interim CFO following the resignation of Darryl Delwo[136][145][146] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 24% year-over-year decrease in net sales for the first six months of 2025 due to supply challenges and lower WTI pricing, alongside increased operating expenses, critical liquidity with only $173,795 in cash, and the ongoing need for additional capital to address going concern uncertainties Results of Operations For the six months ended June 30, 2025, net sales decreased 24% to $10.9 million, resulting in a gross loss of $843,060 due to lower product sales, while general and administrative expenses rose 38% to $3.6 million, though the net loss slightly improved to $5.5 million Net Sales by Product (Six Months Ended June 30) | Product | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Diesel | $3,608,873 | $5,318,870 | (32%) | | Liquid Asphalt | $4,125,288 | $3,631,543 | 14% | | VGO | $2,931,119 | $3,474,668 | (16%) | | Naphtha | $196,482 | $1,340,594 | (85%) | | Total | $10,874,439 | $14,327,574 | (24%) | - The decline in net sales was primarily due to challenges in regaining supply volumes after the 2024 Foreland Refinery outage and a drop in WTI pricing from $87 to $68 per barrel[168] - General and administrative expenses increased by 38% for the six-month period, mainly due to a $926,000 increase in professional fees and a $156,000 increase in executive compensation associated with becoming a public company[174] Liquidity and Capital Resources The company's liquidity is precarious, with cash at $173,795 and total assets decreasing by $4.1 million, alongside negative operating cash flow of $729,401, necessitating additional capital through debt or equity to fund ongoing operations Balance Sheet Summary | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash | $173,795 | $385,116 | | Total Current Assets | $3,199,332 | $4,997,373 | | Total Assets | $22,800,561 | $26,947,243 | | Total Current Liabilities | $11,723,448 | $12,398,672 | - The company had negative operating cash flows of $729,401 for the six months ended June 30, 2025[179][188] - The company will continue to require additional cash for operational and capital needs, which it anticipates satisfying through debt or equity issuance until cash flows from operations are sufficient[186] Quantitative and Qualitative Disclosure About Market Risks This section is not applicable as the company is a smaller reporting company - Not applicable[192] Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2025, with no material changes to internal controls during the quarter, though a CFO resignation and interim appointment occurred subsequently - Management concluded that the Company's disclosure controls and procedures as of June 30, 2025, were not effective[192] - There were no changes in internal controls over financial reporting during the quarter ended June 30, 2025, that materially affected or are reasonably likely to materially affect internal controls[193] PART II – OTHER INFORMATION Legal Proceedings The company is involved in various legal actions in the ordinary course of business, but management does not expect a material adverse effect on its financial position or results of operations - Management does not expect currently pending or threatened legal matters to have a material adverse effect on the company's financial position or results of operations[196] Risk Factors As a smaller reporting company, Sky Quarry is not required to provide this information - As a smaller reporting company, this item is not required[197] Unregistered Sales of Equity Securities and Use of Proceeds During the six months ended June 30, 2025, the company issued 1,050,824 shares of common stock in exchange for services and interest payments on promissory notes, receiving no cash proceeds - The company issued an aggregate of 1,050,824 shares of common stock during the six-month period, which were issued in exchange for services and to pay interest on notes, with no cash proceeds received[198] Defaults Upon Senior Securities The company reported no events under this item - There have been no events required to be reported under this Item[199] Mine Safety Disclosures This section is not applicable to the company - Not applicable[200] Other Information On August 12, 2025, Marcus Laun, an Executive VP and director, was appointed President and Interim Chief Financial Officer - Marcus Laun was appointed President and Interim Chief Financial Officer on August 12, 2025[201] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The report includes CEO and CFO certifications pursuant to Rule 13a-14(a) and Section 1350, as well as XBRL filings[202]