# EDGAR Filing Document

**Accession Number:** 0001812447
**File Stem:** 0001096906-26-000807
**Filing Date:** 2026-5
**Character Count:** 143557
**Document Hash:** 644359663e9055ea31d43b73657484e8
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001096906-26-000807.hdr.sgml**: 20260515

**ACCESSION NUMBER**: 0001096906-26-000807

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 103

**CONFORMED PERIOD OF REPORT**: 20260331

**FILED AS OF DATE**: 20260515

**DATE AS OF CHANGE**: 20260515

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Sky Quarry Inc.
- **CENTRAL INDEX KEY:** 0001812447
- **STANDARD INDUSTRIAL CLASSIFICATION:** HAZARDOUS WASTE MANAGEMENT [4955]
- **ORGANIZATION NAME:** 01 Energy & Transportation
- **EIN:** 841803091
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-42296
- **FILM NUMBER:** 26985038

**BUSINESS ADDRESS:**
- **STREET 1:** 707 W. 700 S.
- **STREET 2:** SUITE 101
- **CITY:** WOODS CROSS
- **STATE:** UT
- **ZIP:** 84087
- **BUSINESS PHONE:** 424-394-1090

**MAIL ADDRESS:**
- **STREET 1:** 707 W. 700 S.
- **STREET 2:** SUITE 101
- **CITY:** WOODS CROSS
- **STATE:** UT
- **ZIP:** 84087

?xml version='1.0' encoding='ASCII'? SKY QUARRY INC. - Form 10-Q SEC filing

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

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

For the quarterly period ended March 31, 2026

**☐** **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** | &nbsp;&nbsp;**84-1803091** |
| (State or other jurisdiction of | &nbsp;&nbsp;(I.R.S. Employer |
| incorporation or organization) | &nbsp;&nbsp;Identification No.) |
| **707 W. 700 South, Suite 101** |  |
| **Woods Cross, UT** | &nbsp;&nbsp;**84087** |
| (Address of principal executive offices) | &nbsp;&nbsp;(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 |  | Emerging growth company | ☒ |
| 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 May 15, 2026, there were 4,794,646 shares of common stock, $0.0001 par value, issued and outstanding.

------

**SKY QUARRY INC.**

**FORM 10 -Q QUARTERLY REPORT**

**FOR THE QUARTER ENDED MARCH 31, 2026**

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
|  |  | &nbsp;&nbsp;&nbsp;**Page** |
| PART I – FINANCIAL INFORMATION | PART I – FINANCIAL INFORMATION |  |
| Item 1. | [Financial Statements](#a3) | 2 |
| Item 2. | [Management's Discussion and Analysis of Financial Condition and Results of Operations](#a4) | 27 |
| Item 3. | [Quantitative and Qualitative Disclosure About Market Risks](#a5) | 33 |
| Item 4. | [Controls and Procedures](#a6) | 33 |
| PART II – OTHER INFORMATION | PART II – OTHER INFORMATION |  |
| Item 1. | [Legal Proceedings](#a7) | 34 |
| Item 1A. | [Risk Factors](#a8) | 35 |
| Item 2. | [Unregistered Sales of Equity Securities and Use of Proceeds](#a9) | 35 |
| Item 3. | [Defaults Upon Senior Securities](#a10) | 35 |
| Item 4. | [Mine Safety Disclosures](#a11) | 35 |
| Item 5. | [Other Information](#a12) | 35 |
| Item 6. | [Exhibits](#a13) | 36 |
| [SIGNATURES](#a14) | [SIGNATURES](#a14) | 37 |

---

------

**CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS**

Forward-looking statements are not guarantees of future performance and are, by their very nature, uncertain and risky. Although Sky Quarry Inc.'s (the "Sky Quarry," the "Company," "we," "us" or "our") management believes that the expectations and assumptions reflected in the forward-looking statements are reasonable, they involve risks and uncertainties that are difficult to predict and, in many cases, beyond the Company's control. These risks and uncertainties include, without limitation, international, national and local economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to consummate certain transactions and realize the benefits of such transactions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the U.S. Securities and Exchange Commission (the "SEC"). Actual results may differ materially from those expressed or implied by these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements, which speak only as of the date of this Report. Except as may be required by law, we expressly disclaim any obligation to update these forward-looking statements to reflect events or circumstances after the date of this Report. You are urged to carefully review and consider the risks, uncertainties and additional discussions related thereto in this Report and other filings we file from time to time with the SEC.

------

**PART I – FINANCIAL INFORMATION**

**ITEM 1 Financial Statements**

------

**Sky Quarry Inc.**

Condensed Consolidated Balance Sheets (Unaudited)

As of March 31, 2026 and December 31, 2025

---

| | | |
|:---|:---|:---|
|  | **March 31,**<br>**2026** | **December 31,**<br>**2025** |
| &nbsp;&nbsp;&nbsp;ASSETS |  |  |
| &nbsp;&nbsp;&nbsp;Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash | $66828  | $35370  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivables | -  | 4688  |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other assets | 544219  | 609257  |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventory | 654912  | 678365  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 1265959  | 1327680  |
| &nbsp;&nbsp;&nbsp;&nbsp;Property, plant and equipment | 5267662  | 5089139  |
| &nbsp;&nbsp;&nbsp;&nbsp;Oil and gas properties | 8783450  | 8783450  |
| &nbsp;&nbsp;&nbsp;&nbsp;Restricted cash | 771758  | 770335  |
| &nbsp;&nbsp;&nbsp;&nbsp;Right-of-use-asset | 14271  | 35214  |
| &nbsp;&nbsp;&nbsp;&nbsp;Goodwill | 3209003  | 3209003  |
| &nbsp;&nbsp;&nbsp;Total assets | $19312103  | $19214821  |
| &nbsp;&nbsp;&nbsp;LIABILITIES AND SHAREHOLDERS' EQUITY |  |  |
| &nbsp;&nbsp;&nbsp;Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses | $5323129  | $4546064  |
| &nbsp;&nbsp;&nbsp;&nbsp;Related-party payables | 372212  | -  |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating lease liability | 14697  | 36278  |
| &nbsp;&nbsp;&nbsp;&nbsp;Warrant liabilities | 172828  | 97486  |
| &nbsp;&nbsp;&nbsp;&nbsp;Lines of credit | 1549138  | 1453737  |
| &nbsp;&nbsp;&nbsp;&nbsp;Current portion of notes payable | 8964679  | 8987208  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 16396683  | 15120773  |
| &nbsp;&nbsp;&nbsp;&nbsp;Notes payable, net of current portion | 917605  | 907081  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 17314288  | 16027854  |
| &nbsp;&nbsp;&nbsp;Commitments and contingencies |  |  |
| &nbsp;&nbsp;&nbsp;SHAREHOLDERS' EQUITY: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Common Stock $0.0001 par value: 2,000,000,000 shares authorized: 3,762,586 and 3,233,329 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively | 3007  | 2586  |
| &nbsp;&nbsp;&nbsp;&nbsp;Additional paid in capital | 40694331  | 39563657  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive loss | (212790)  | (212788)  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated deficit | (38486733)  | (36166488)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total shareholders' equity | 1997815  | 3186967  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $19312103  | $19214821  |

---

See accompanying Notes to Condensed Consolidated Financial Statements.

------

**Sky Quarry Inc.**

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

For the three months ended March 31, 2026 and 2025

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** |
|  | **March 31,** | **March 31,** |
|  | **2026** | **2025** |
| &nbsp;&nbsp;&nbsp;Net sales | $383  | $6332967  |
| &nbsp;&nbsp;&nbsp;Cost of goods sold | 389601  | 7059059  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross margin | (389218)  | (726092)  |
| &nbsp;&nbsp;&nbsp;Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;General and administrative | 1213236  | 1935457  |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 2210  | 2028  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 1215446  | 1937485  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss from operations | (1604664)  | (2663577)  |
| &nbsp;&nbsp;&nbsp;Other income (expense): |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest expense | (333989)  | (901561)  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss on extinguishment of debt | (269396)  | (56660)  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain or (loss) on warrant revaluation | (75342)  | 274980  |
| &nbsp;&nbsp;&nbsp;&nbsp;Other income (expense) | (36854)  | 7477  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on disposal of assets | -  | 5647  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other expense, net | (715581)  | (670117)  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss before provision for income taxes | (2320245)  | (3333694)  |
| &nbsp;&nbsp;&nbsp;&nbsp;Provision for income taxes | -  | -  |
| &nbsp;&nbsp;&nbsp;Net loss | (2320245)  | (3333694)  |
| &nbsp;&nbsp;&nbsp;Other Comprehensive Loss |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Exchange loss on translation of foreign operations | (2)  | 422  |
| &nbsp;&nbsp;&nbsp;Net loss and comprehensive loss | (2320247)  | (3333272)  |
| &nbsp;&nbsp;&nbsp;Loss per common share |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic and diluted | $(0.65)  | $(1.25)  |
| &nbsp;&nbsp;&nbsp;Weighted average shares outstanding |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic and diluted | 3579933  | 2657616  |

---

See accompanying Notes to Condensed Consolidated Financial Statements.

------

**Sky Quarry Inc.**

Condensed Consolidated Statements of Shareholders' Equity (Unaudited)

For the three months ended March 31, 2026 and 2025

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Common Stock Outstanding** | **Common Stock** | **Additional Paid-in-Capital** | **Accumulated Deficit** | **Accumulated Other Comprehensive**<br> **Loss** | **Total** |
| &nbsp;&nbsp;&nbsp;Balance January 1, 2025 | 2378401 | $1903  | $35674391  | $(23968089)  | $(209708)  | $11498497  |
| &nbsp;&nbsp;&nbsp;&nbsp;Common shares issued for non-cash consideration | 265673 | 212  | 1186384  | -  | -  | 1186596  |
| &nbsp;&nbsp;&nbsp;&nbsp;Debt converted to common shares | 13542 | 11  | 92073  | -  | -  | 92084  |
| &nbsp;&nbsp;&nbsp;&nbsp;Share based compensation | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - | -  | 78880  | -  | -  | 78880  |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock warrants issued | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - | -  | 56660  | -  | -  | 56660  |
| &nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive loss | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - | -  | -  | -  | 422  | 422  |
| &nbsp;&nbsp;&nbsp;Net loss | - | -  | -  | (3333694)  | -  | (3333694)  |
| &nbsp;&nbsp;&nbsp;Balance March 31, 2025 | 2657616 | $2126  | $37088388  | $(27301783)  | $(209286)  | $9579445  |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Common Stock Outstanding** | **Common Stock** | **Additional Paid-in-Capital** | **Accumulated Deficit** | **Accumulated Other Comprehensive**<br> **Loss** | **Total** |
| &nbsp;&nbsp;&nbsp;Balance January 1, 2026 | 3233329 | $2586  | $39563657  | $(36166488)  | $(212788)  | $3186967  |
| &nbsp;&nbsp;&nbsp;&nbsp;Common shares subscription, less offering costs | 426143 | 338  | 747637  | -  | -  | 747975  |
| &nbsp;&nbsp;&nbsp;&nbsp;Common shares issued for non-cash consideration | 33332 | 27  | 81897  | -  | -  | 81924  |
| &nbsp;&nbsp;&nbsp;&nbsp;Debt converted to common shares | 69782 | 56  | 213686  | -  | -  | 213742  |
| &nbsp;&nbsp;&nbsp;&nbsp;Share based compensation | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - | -  | 87454  | -  | -  | 87454  |
| &nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive loss | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - | -  | -  | -  | (2)  | (2)  |
| &nbsp;&nbsp;&nbsp;Net loss | - | -  | -  | (2320245)  | -  | (2320245)  |
| &nbsp;&nbsp;&nbsp;Balance March 31, 2026 | 3762586 | $3007  | $40694331  | $(38486733)  | $(212790)  | $1997815  |

---

See accompanying Notes to Condensed Consolidated Financial Statements

------

**Sky Quarry Inc.**

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the three months ended March 31, 2026 and 2025

---

| | | |
|:---|:---|:---|
|  | **Three Months**<br>**Ended March 31,** | **Three Months**<br>**Ended March 31,** |
|  | **2026** | **2025** |
| &nbsp;&nbsp;&nbsp;CASH FLOWS FROM OPERATING ACTIVITIES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net loss | $(2320245)  | $(3333694)  |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net loss to cash and restricted cash and cash equivalents used in operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share based compensation | 87454  | 78880  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 264857  | 242004  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of debt issuance costs | (101649)  | 765793  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of ROU asset | 20943  | 24129  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain (loss) on revaluation of warrant liabilities | 75342  | (274980)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on extinguishment of debt | 269396  | 56660  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on the sale of assets | -  | (5647)  |
| &nbsp;&nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | 4688  | (634263)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other assets | (122546)  | (302302)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory | 23453  | 1045857  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses | 1231257  | 373889  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease liability | (21581)  | 450  |
| &nbsp;&nbsp;&nbsp;Net cash and restricted cash and cash equivalents used in operating activities | (588631)  | (1963224)  |
| &nbsp;&nbsp;&nbsp;CASH FLOWS FROM INVESTING ACTIVITIES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sale of assets | -  | 14060  |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchase of property, plant, and equipment | (443380)  | (297389)  |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchase of oil and gas development assets | -  | (32881)  |
| &nbsp;&nbsp;&nbsp;Net cash and restricted cash and cash equivalents used in investing activities | (443380)  | (316210)  |
| &nbsp;&nbsp;&nbsp;CASH FLOWS FROM FINANCING |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds on lines of credit | 97720  | 5339736  |
| &nbsp;&nbsp;&nbsp;&nbsp;Payments on lines of credit | (2319)  | (4272336)  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from note payable | 227830  | 143237  |
| &nbsp;&nbsp;&nbsp;&nbsp;Payments on note payable | (6312)  | (1231214)  |
| &nbsp;&nbsp;&nbsp;&nbsp;Payments on finance lease | -  | (3473)  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds on issuance of common stock | 1378265  | -  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net issuance cost | (630290)  | -  |
| &nbsp;&nbsp;&nbsp;Net cash and restricted cash and cash equivalents provided by (used in) financing activities | 1064894  | (24050)  |
| &nbsp;&nbsp;&nbsp;Effects of exchange rate on cash | (2)  | 422  |
| &nbsp;&nbsp;&nbsp;Increase (decrease) in cash and restricted cash and cash equivalents | 32881  | (2303062)  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents and restricted cash, beginning of the period | 805705  | 3314913  |
| &nbsp;&nbsp;&nbsp;Cash and restricted cash and cash equivalents, end of the period | $838586  | $1011851  |

---

See accompanying Notes to Condensed Consolidated Financial Statements.

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**Sky Quarry Inc.**

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the three months ended March 31, 2026 and 2025

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended March 31,** | **Three Months Ended March 31,** |
|  | **2026** | **2025** |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash paid for interest | $-  | $262590  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash paid for income taxes | -  | 2188  |
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
| &nbsp;&nbsp;&nbsp;&nbsp;Common shares issued for non-cash consideration | $81924  | $1186596  |
| &nbsp;&nbsp;&nbsp;&nbsp;Conversion of debt to equity | 213742  | 92084  |

---

See accompanying Notes to Condensed Consolidated Financial Statements

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**Sky Quarry Inc.**

**Notes to Condensed Consolidated Financial Statements (Unaudited)**

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**1.** **NATURE OF OPERATIONS**

Sky Quarry Inc. and its subsidiaries ("Sky Quarry", "SQI" or the "Company") are, collectively, an oil production, refining, and a development-stage environmental remediation company formed to deploy technologies to facilitate the recycling of waste asphalt shingles and remediation of oil-saturated soils. The recycling and production of oil from asphalt shingles is expected to reduce the dependence on landfills for the disposal of waste and to also reduce dependence on foreign and domestic virgin crude oil extraction for industrial uses.

**2.** **BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES**

***Basis of Presentation***

The condensed consolidated financial statements include the accounts of Sky Quarry and its subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.

These accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and are not audited. Certain information and footnote disclosures that are usually included in the financial statements prepared in accordance with generally accepted accounting principles in the United States ("GAAP") have been either condensed or omitted in accordance with SEC rules and regulations. The accompanying condensed consolidated financial statements contain all the adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the Company's financial position as of March 31, 2026 and December 31, 2025, the results of operations for the three months ended March 31, 2026 and 2025, and the cash flows for the three months ended March 31, 2026 and 2025. The results of operations for the three months ended March 31, 2026 and 2025 are not necessarily indicative of the results for a full-year period. These interim unaudited condensed consolidated financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed, with the SEC.

***Significant Accounting Policies***

The significant accounting policies were described in Note 1 to the audited consolidated financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2025. There have been no changes to these policies during the quarter ended March 31, 2026, that are of significance or potential significance to the Company.

***Recently Issued and Adopted Accounting Pronouncements***

The Company has reviewed recently issued accounting standard updates and determined that all applicable standards have already been adopted, as disclosed in the Company's previously filed Annual Report on Form 10-K. Accordingly, there are no new pronouncements requiring adoption in the current interim reporting period.

***Reverse Stock Split***

The Company effected the Reverse Stock Split (as defined below) on March 15, 2026, at 11:59 PM Eastern Time, and the split has been retroactively applied to all share and per share amounts presented in the financial statements. See Note 17 for additional information.

**3.** **GOING CONCERN** 

These condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which assumes that the Company will be able to realize its assets and satisfy its liabilities in the normal course of business for the foreseeable future. Management is aware, in making its going concern assessment, of material uncertainties related to events and conditions that may cast significant doubt upon the Company's ability to continue as a going concern. As of March 31, 2026, the Company has an accumulated deficit of $38,486,733. During the three months ended March 31, 2026, the Company had negative cash flows from operations of $588,631. The Company has received financing and capital through proceeds from notes payable of $227,830 and equity offering net proceeds of $747,975 during the three months ended March 31, 2026.

Without additional financing, the Company does not have sufficient operating cash flows to pay for its expenditures and settle its obligations as they mature. Subsequent to March 31, 2026, there is uncertainty in meeting these obligations. The Company does have to raise additional capital in the form of debt, equity and/or warrant exercise proceeds, or a combination thereof, to fund future capital expenditures, retire maturing debt obligations and any possible acquisitions. The Company's current plan includes generating margin contribution

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**Sky Quarry Inc.**

**Notes to Condensed Consolidated Financial Statements (Unaudited)**

------

from refinery operations, closely monitoring its operating expenses, refinancing its current debt with longer term debt with amortization schedules that decrease monthly debt service obligations and utilizing its current ATM offering for equity proceeds. These actions are intended to mitigate the going concern uncertainties and support the Company's growth plans in commercializing its extraction technology. There is no assurance, however, that the Company will be successful in these efforts.

Management believes that the implementation of its plans will allow the Company to continue as a going concern. Investors are encouraged to review the financial statements and related disclosures for a comprehensive understanding of the Company's financial position.

The condensed consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and statement of financial position classifications that would be necessary were the going concern assumption inappropriate. These adjustments could be material.

**4.** **INVENTORY**

Inventory consists primarily of raw crude, chemicals and finished goods. Inventory consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **Period Ended** | **Year Ended** |
|  | **March 31, 2026** | **December 31, 2025** |
| &nbsp;&nbsp;&nbsp;&nbsp;Finished goods | $102374  | $136717  |
| &nbsp;&nbsp;&nbsp;&nbsp;Raw materials | 329751  | 323034  |
| &nbsp;&nbsp;&nbsp;&nbsp;Chemicals | 222787  | 218614  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $654912  | $678365  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

**5.** **MINERAL LEASES**

Through its acquisition of 2020 Utah, the Company indirectly acquired certain mineral rights under three mineral leases entitled "Utah State Mineral Lease for Bituminous-Asphaltic Sands" between the State of Utah's School and Institutional Trust Land Administration ("SITLA"), as lessor, and 2020 Utah, as lessee, covering certain lands in the PR Spring Area largely adjacent to each other (the "SITLA Leases"). The SITLA Mineral Lease consisted of the following and is included in property plant and equipment under capital projects started in the Condensed Consolidated Balance Sheets.

---

| | |
|:---|:---|
|  | **SITLA Mineral Lease** |
| Cost |  |
| December 31, 2024 | $63800 |
| Additions | 18040 |
| December 31, 2025 | 81840 |
| Additions | 426000 |
| March 31, 2026 | 507840 |
| Accumulated Amortization |  |
| March 31, 2026, 2025, and 2024 | - |
| Carrying Amounts |  |
| March 31, 2026 | $507840 |

---

During the three months ended March 31, 2026, and year ended December 31, 2025, the Company did not record any amortization of the lease rights as operations have not yet commenced.

The Company (through its subsidiary) holds mineral leases (or the operating rights under leases) covering approximately 5,880 net acres within the State of Utah. Terms of the SITLA Leases are set forth in the table below.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Gross** | **Net** | **Lease Expiry Date** | **Annual Rent** | **Annual Advance Minimum Royalty** | **Production Royalty Rate**  |
| **Reference** | **Acres** | **Acres** | **(1)** | **(2)** | **(3)** | **(4)** |
| &nbsp;&nbsp;&nbsp;&nbsp;ML-49927 | 4319.9 | 4319.9 | 1/31/2030 | $4320 | $410400 | 10% |
| &nbsp;&nbsp;&nbsp;&nbsp;ML-51705 | 1560.0 | 1560.0 | 1/31/2030 | 1560 | 15600 | 8% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 5879.9 | 5879.9 |  | $5880  | $426000  |  |

---

------

**Sky Quarry Inc.**

**Notes to Condensed Consolidated Financial Statements (Unaudited)**

------

Notes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)Leases may be extended past expiry date by continued payment of annual rent and annual advance minimum royalty.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)Annual rent may be credited against production royalties payable during the year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)Annual advance minimum royalty may be credited against production royalties payable during the year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)The production royalty is payable on the market price of products produced from the leased substances, without deduction of costs for mining, overhead, labor, distribution or general and administrative activities.

**6.** **PROPERTY, PLANT, AND EQUIPMENT**

Property, plant, and equipment is comprised of the following:

---

| | | |
|:---|:---|:---|
|  | **March 31, 2026** | **December 31, 2025** |
| &nbsp;&nbsp;&nbsp;&nbsp;Buildings | $1575000  | $1575000  |
| &nbsp;&nbsp;&nbsp;&nbsp;Machinery and equipment | 6085776  | 6085776  |
| &nbsp;&nbsp;&nbsp;&nbsp;Capital projects started | 525220  | 81840  |
| &nbsp;&nbsp;&nbsp;&nbsp;Office furniture and equipment | 34401  | 34401  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total property, plant and equipment | 8220397  | 7777017  |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: Accumulated depreciation and amortization | (2952735)  | (2687878)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property, plant and equipment, net | $5267662  | $5089139  |

---

Eagle Springs Refinery consists of tanks, buildings, refining processing equipment, shop, lab and equipment. For Eagle Springs Refinery, each class of property, plant and equipment is estimated to have a useful life of 5 years and are being amortized over a straight-line basis.

Depreciation and amortization expense totaled $264,857 and $242,004 for the three months ended March 31, 2026 and 2025, respectively.

**7.** **OIL AND GAS PROPERTIES**

Oil and gas properties are comprised of the following:

---

| | | |
|:---|:---|:---|
|  | **March 31, 2026** | **December 31, 2025** |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance, beginning of period | $8783450  | $8534967  |
| &nbsp;&nbsp;&nbsp;&nbsp;Disposal | -  | (252334)  |
| &nbsp;&nbsp;&nbsp;&nbsp;Additions | -  | 500817  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Balance, end of period | $8783450  | $8783450  |

---

Oil and gas properties, located in the eastern Utah tar sands, includes undeveloped lands, unproved properties, research and development equipment, mining equipment and seismic costs where management has not fully evaluated for technical feasibility and commercial viability.

As of March 31, 2026, the Company holds oil and gas assets representing more than 10% of the total assets, which are primarily the PR Spring facility costs, which includes all direct costs incurred to acquire or construct the assets, including tanks, buildings, extraction processing equipment, shop, lab and equipment. The costs of the PR Spring facility under construction are capitalized as part of oil and gas properties. These costs include direct materials, labor, and overhead attributable to the construction activities. As the facility is not yet operational, depreciation has not commenced. The construction project is classified as "construction in progress" until the PR Spring facility is placed into service. Once the asset is ready for its intended use, depreciation will begin based on its estimated useful life. The Company evaluates oil and gas properties for impairment in accordance with ASC 360-10-35. If indicators of impairment arise, the Company will assess the recoverability of the asset's carrying value by comparing the asset's carrying amount to the undiscounted future cash flows expected to be generated by the asset. If impairment is identified, the asset will be written down to its fair value. As of March 31, 2026, the Company has determined that there has been no impairment of the PR Spring facility under construction, as there are no indicators suggesting a decline in the asset's recoverable value. The Company has no proved reserves, and there have been no significant changes in reserves during the reporting period. The capitalized costs related to these oil and gas assets amount to $8,783,450 recorded at full cost, are not being depreciated and amortized as the facility is still under construction. Additions during the three months ended March 31, 2026 and the period ended December 31, 2025, relate to development and construction of the extraction facility at PR Spring. There were no

------

**Sky Quarry Inc.**

**Notes to Condensed Consolidated Financial Statements (Unaudited)**

------

costs associated with well exploration during the periods ended March 31, 2026 and 2025, respectively. Disposals were $0 and $252,334 in the periods ended March 31, 2026 and 2025, respectively.

PR Springs has not commenced active extraction of reserves. Consequently, the Company is not required to provide reserve quantities or future cash flow disclosures in accordance with ASC 935-235-50-2. Based on our analysis of the asset group, we have determined that no impairment is necessary as of the reporting date. The carrying amounts of the development-stage extraction facility and related oil and gas properties are fully supported by projected future cash flows, which are derived from reasonable and supportable assumptions regarding commodity prices, expected production rates, and operating costs once the assets are operational. Additionally, no significant adverse changes in the economic environment, regulatory landscape, or project costs have occurred to suggest that the recoverable amount of these assets is less than their carrying value. As such, the assets continue to meet the criteria for capitalization, and no impairment loss has been recognized in accordance with ASC 360-10-35. Further, under ASC 932-360-35-19, the impairment analysis specifically considers the recoverability of costs capitalized for oil and gas properties in the development phase. As these costs are expected to be recoverable through future production, no impairment charge was required as of March 31, 2026 or March 31, 2025.

**8.** **RIGHT-OF-USE ASSET AND LEASE LIABILITY**

The Company currently leases office space, which is classified as operating leases under ASC 842.

The components of operating lease expense, associated with the Company's leasing of office space, consisted of amortization of the right-of-use asset of $20,943 and $24,129 during the three months ended March 31, 2026 and 2025, respectively, and accretion of the lease liability of $557 and $2,635 for the three months ended March 31, 2026 and 2025, respectively.

The weighted average remaining lease term in years was 0.17 and 1.17 as of March 31, 2026 and 2025, respectively. The weighted average discount rate as of March 31, 2026 and 2025, was 10.25%.

Amortization expense on operating leases is included as part of general and administrative expenses on the income statement. The total lease expense recognized on the income statement is the sum of the accretion of the lease liability and amortization expense. This total expense reflects the cost of using the leased asset over the lease term.

The following table reconciles the undiscounted future cash flows for the next five years and thereafter to the operating lease liabilities recorded within the condensed consolidated balance sheet as of March 31, 2026:

---

| | |
|:---|:---|
| 2026 | $14759  |
| Total lease payments | 14759  |
| Less: amounts representing interest | (62) |
| Present value of lease liabilities | $14697  |

---

The Company previously leased remote accommodation camps under finance lease agreements. During the third quarter of 2025, the Company terminated its finance lease arrangement, and all associated right-of-use assets and lease liabilities were fully derecognized during June 2025. No termination payments were made in connection with the early termination.

The components of finance lease expense, associated with the Company's leasing of remote accommodation camps, consisted of amortization of the right-of-use asset of $0 and $5,264 during the three months ended March 31, 2026 and 2025, respectively, and accretion of the lease liability of $0 and $25,551 during the three months ended March 31, 2026 and 2025, respectively.

The weighted average remaining lease term in years was 0 and 18.75 as of March 31, 2026 and 2025, respectively. The weighted average discount rate used was 10.25%.

Amortization expense on financing leases is included as part of general and administrative expenses on the statement of operations. The total lease expense recognized on the statement of operations is the sum of the accretion of the lease liability and amortization expense. This total expense reflects the cost of using the leased asset over the lease term.

Included in the total lease payments are approximately $36,837 in demobilization costs associated with the decommissioning and removal of the remote accommodation camps at the end of the lease term. These costs have been capitalized as part of the lease liability and right-of-use asset and were recognized over the term of the lease.

------

**Sky Quarry Inc.**

**Notes to Condensed Consolidated Financial Statements (Unaudited)**

------

**9.** **GOODWILL**

Goodwill is derived from the acquisition of Foreland in 2022. Goodwill recognized from the acquisition was $3,209,003.

**10.** **ACCOUNTS PAYABLE AND ACCRUED EXPENSES** 

Accounts payable and accrued expenses consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **March 31, 2026** | **December 31, 2025** |
| Trade accounts payable | $3633201  | $2668663  |
| Accrued expenses | 1633236  | 1831702  |
| Accrued vacation | 56521  | 45510  |
| Sales tax payable | 171  | 189  |
|  | $5323129  | $4546064  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

**11.** **WARRANT LIABILITY**

The details of warrant liability transactions for the three months ended March 31, 2026 and 2025, are as follows:

---

| | | |
|:---|:---|:---|
|  | **March 31, 2026** | **December 31, 2025** |
| Beginning balance | $97486  | $459067  |
| Fair value upon issuance of warrants | -  | -  |
| Change in fair value | 75342  | (361581)  |
| Ending balance | $172828  | $97486  |

---

On August 27, 2024, as consideration for the reduction of weekly payments to certain lenders during the Company's Reg A Offering, the Company issued common stock, warrants to purchase ("Purchase Warrant") up to an aggregate of 78,125 shares of the Company's common stock (the "Common Warrants") at $4.50 per share.

The Purchase Warrant provides for a value calculation for the Purchase Warrant using the Black Scholes model in the event of certain fundamental transactions. The fair value calculation provides for a floor on the volatility amount utilized in the value calculation at 100% or greater. The Company has determined this provision introduces leverage to the holders of the Purchase Warrant that could result in a value that would be greater than the settlement amount of a fixed-for-fixed option on the Company's own equity shares. Therefore, pursuant to ASC 815, the Company has classified the Purchase Warrant as a liability in its condensed consolidated balance sheet. The classification of the Purchase Warrant, including whether the Purchase Warrant should be recorded as a liability or as equity, is evaluated at the end of each reporting period with changes in the fair value reported in other income (expense) in the condensed consolidated statements of operations and comprehensive loss. The Purchase Warrant was initially recorded at a fair value at $1,936,937 at the grant date and is re-valued at each reporting date. Upon the issuance of warrants, the fair value of the Purchase Warrant liability was recorded as a loss on debt modification.

During the three months ended March 31, 2026 and 2025, the Company recognized change in fair value of the warrant liability of $75,342 and $274,980. As of December 31, 2025, the fair value of the warrant liability was $97,486.

All changes in the fair value of the warrant liabilities are recognized as a change in fair value of warrant liability in the Company's consolidated statements of operations until they are either exercised or expire.

The warrant liabilities for the Common Warrants were valued using a Black Scholes pricing model with the following weighted average assumptions:

---

| | | |
|:---|:---|:---|
|  | **March 31, 2026** | **December 31, 2025** |
| Stock price | 2.57  | 1.76  |
| Risk-free interest rate | 3.92%  | 3.73%  |
| Expected volatility | 179%  | 139%  |
| Expected life (in years) | 3.41  | 3.65  |
| Fair value of warrants | $172828  | $97486  |

---

------

**Sky Quarry Inc.**

**Notes to Condensed Consolidated Financial Statements (Unaudited)**

------

**12. LINES OF CREDIT**

---

| | | |
|:---|:---|:---|
|  | **March 31, 2026** | **December 31, 2025** |
| &nbsp;&nbsp;&nbsp;&nbsp;Invoice purchase and security agreement | $1549138  | $1453737  |

---

On December 21, 2022, Foreland entered into an Invoice Purchase and Security Agreement (the "IPSA") and inventory finance rider (the "Rider") with Alterna Capital Solutions, LLC ("Alterna"). Under the terms of the IPSA, Alterna provides an advance of 85% of the amount of the purchased receivables to Foreland and during the time the receivables remain outstanding, is granted a continuing senior security interest in all assets of Foreland, to the extent and in the amount of the purchased receivables. The Rider provides a standby security for certain letters of credit in place with certain crude oil suppliers to Foreland. The letters of credit are adjusted periodically to correlate with the price and quantities of purchased heavy crude oil. The Agreement is senior secured by the sale-ready and pre-sale petroleum product inventory on hand at Foreland and matures on December 31, 2026. Funds drawn under the agreement accrue interest at a per annum rate equal to the sum of the Wall Street Journal Prime Rate of 7.50% plus 2.25%. In addition, a collateral monitoring fee of 0.17% on outstanding advances made is due monthly. Repayment of advances shall be payable from collection of Foreland accounts receivable, including those accounts arising from the sale of the inventory to its customers.

**13.** **DEBT**

Debt consisted of the following:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  |  |  | **Principal Balance** | **Principal Balance** |
| **Lender / Merchant** | **Maturity Date** | **Effective Interest Rate** | **March 31,**<br> **2026** | **December**<br> **31, 2025** |
| Libertas #6 | December 6, 2024 | 58% | $2388381  | $2388381  |
| Private Lender A | November 24, 2025 | 30% | 1205479  | 1131507  |
| Libertas #5 | November 29, 2024 | 58% | 1187082  | 1187082  |
| Lendspark #3 | March 4, 2025 | 68% | 555650  | 555650  |
| Libertas #7 | January 7, 2025 | 66% | 379675  | 379675  |
| ACMO USOS LLC | March 15, 2021 | 15% | 191699  | 191699  |
| Libertas #4 | September 12, 2024 | 68% | 89549  | 89549  |
| Lendspark #4 | December 4, 2024 | 68% | -  | 163795  |
| USA SBA | March 1, 2026 | 1% | -  | 6313  |
|  |  |  | 5997515  | 6093651  |
| Less: Unamortized debt issuance costs | Less: Unamortized debt issuance costs |  | (951598)  | (917708)  |
|  |  |  | $5045917  | $5175943  |

---

The past due debt is owed to Libertas in the amount of $4,044,687, Private Lender A in the amount of $1,205,479, Lendspark in the amount of $555,650, and ACMO USOS LLC in the amount of $191,699. Provided that neither Libertas nor LendSpark Corporation commence foreclosure proceedings against us, we do not expect any adverse impact on our operations as a result of our past due debt.

The debt terms related to private lenders are as follows:

On July 24, 2025, the Company entered into a business loan with KF Business (private lender A) in the amount of $1,000,000. This loan carries a rate of 30% and matures on November 24, 2025 and is secured by all assets of 2020 Resources. As an inducement for advancing the note, the lender was issued 62,500 shares valued at the market price of $5.50 per share in addition to 250,000 share purchase warrants, each granting the holder the right to purchase one common share of the company at a price of $5.60 per share for a period of five years from the issuance date of the warrant. The warrants were classified as equity and the fair value of the warrants and shares issued were recorded separately as debt discount and amortized over the term of the debt.

On March 4, 2026, KF Business Ventures, LP (private lender A) filed a lawsuit against the Company and its subsidiaries, Foreland Refining Corp. and 2020 Resources LLC, in Utah state court alleging, among other things, breach of contract, and seeking repayment of approximately $2,200,000 in principal under certain promissory notes, plus accrued interest, unpaid advisory fees, and foreclosure on the collateral securing the notes. The Company intends to vigorously defend against these claims. For additional information, see Item 3, "Legal Proceedings."

------

**Sky Quarry Inc.**

**Notes to Condensed Consolidated Financial Statements (Unaudited)**

------

On September 9, 2025, Foreland entered into a one-month forbearance agreement with Lendspark Corporation to forebear foreclosing the debt from August 1, 2025, to August 31, 2025, in exchange for 12,500 shares of SkyQuarry common stock. The expense was recognized as interest in September 2025, with a value of $61,270 based on recent common stock sales for cash of $4.90 per share.

On May 16, 2024, Foreland entered into a business loan and security agreement with LendSpark Corporation for a loan in the amount of $900,000 (LendSpark #4"). The loan is repaid in 40 equal weekly payments of $30,750 for total repayment of $1,215,000. The loan is secured by all of the assets of Foreland. As inducement for advancing the note, the lender was issued 12,500 share purchase warrants, each warrant granting the holder the right to purchase one common share of the Company at a price of $36.00 per share for a period of three years from the issuance date of the warrants. The warrants were classified as equity and the fair value of the warrants were recorded separately as debt discount and amortized over the term of the debt. On April 25, 2025, as an inducement to negotiate and enter into a forbearance agreement the amount owing was increased by $32,108. This forbearance expired August 31, 2025.

On April 30, 2024, Foreland entered into a business loan and security agreement with LendSpark Corporation for a loan in the amount of $1,500,000 (LendSpark #3"). The loan is repaid in 44 equal weekly payments of $45,000 for total repayment of $1,980,000. The loan is secured by all the assets of Foreland. Subsequent to April 30, 2024, as inducement to a reduction in payment the lender was issued 31,250 share purchase warrants, each warrant granting the holder the right to purchase one common share of the Company at a price of $36.00 per share for a period of five years from the issuance date of the warrant. The warrants were classified as liabilities and the fair value of the warrants were recorded separately as debt discount and amortized over the term of the debt. Subsequent to December 31, 2024, as inducement to a reduction in payment the warrant agreement was amended to reduce the price to $11.20 per share and the incremental fair value warrants were recorded to debt issuance costs.

LIABILITY FOR SALE OF FUTURE REVENUES

As of March 31, 2026, the Company is party to several agreements related to the sale of future revenues with Libertas Funding, LLC ("Libertas"), a total of four agreements remain outstanding and four agreements have been terminated. The agreements, summarized below, contain substantially the same terms and conditions and grant a continuing security interest in all assets of Foreland, to the extent and in the amount of the purchased receivables.

Interest and discounts related to the agreements are amortized to expense over the estimated term of the agreements, which is anticipated to be between 10 to 12 months from the funding of each agreement. During the three months ended March 31, 2026, the Company amortized an aggregate of $0 discount to interest expense. Unamortized interest and discounts in the aggregate is $896,394 as of March 31, 2026. As inducement to a reduction in payment the lender was issued 4,688 share purchase warrants, each warrant granting the holder the right to purchase one common share of the Company at a price of $36.00 per share for a period of five years from the issuance date of the warrant. The warrants were classified as debt and the fair value of the warrants were recorded separately as debt discount and amortized over the term of the debt. On December 30, 2024, as further inducement to a reduction in payment the warrant agreement was amended to reduce the price to $6.64 per share.

On February 19, 2024, Foreland entered into an agreement of sale of future receivables with Libertas for the sale of $1,386,000 of future sales receipts ("Libertas #7") for gross proceeds of $1,018,500. Under the agreement, Foreland will make weekly delivery of receivables not less than $30,000 until the amount sold is extinguished. As of March 31, 2026, a total of $379,675 exclusive of debt discounts, remained outstanding.

On January 18, 2024, Foreland entered into an agreement of sale of future receivables with Libertas for the sale of $4,224,000 of future sales receipts ("Libertas #6") for gross proceeds of $3,300,000, of which $884,667 was used to pay off the Libertas September 14, 2023, agreement. Under the agreement, Foreland will make weekly delivery of receivables not less than $91,429 until the amount sold is extinguished. As of March 31, 2026, a total of $2,388,381, exclusive of debt discounts, remained outstanding.

On January 11, 2024, Foreland entered into an agreement of sale of future receivables with Libertas for the sale of $2,632,852 of future sales receipts ("Libertas #5") for gross proceeds of $2,056,916, of which $796,916 and $1,260,000 was used to pay off the Libertas May 17, 2023, and June 30, 2023, agreements respectively. Under the agreement, Foreland will make weekly delivery of receivables not less than $56,988 until the amount sold is extinguished. As of March 31, 2026, a total of $1,187,082, exclusive of debt discounts, remained outstanding.

------

**Sky Quarry Inc.**

**Notes to Condensed Consolidated Financial Statements (Unaudited)**

------

On October 25, 2023, Foreland entered into an agreement of sale of future receivables with Libertas for the sale of $1,731,660 of future sales receipts ("Libertas #4") for gross proceeds of $1,302,000. Under the agreement, Foreland will make weekly delivery of receivables not less than $37,482 until the amount sold is extinguished. As of March 31, 2026, a total of $89,549, exclusive of debt discounts, remained outstanding.

As of March 31, 2026, the Company had the following unamortized debt discounts related to the Libertas agreements:

---

| | | | |
|:---|:---|:---|:---|
| **Lender** | **Date Issue** | **Gross** <br>**Discount** | **Unamortized Discount** |
| Libertas #4 | October 25, 2023 | $-  | $22219  |
| Libertas #5 | January 11, 2024 | -  | 259674  |
| Libertas #6 | January 18, 2024 | -  | 522458  |
| Libertas #7 | February 19, 2024 | -  | 92042  |
|  |  | $-  | $896394  |

---

Mandatorily redeemable preferred stock:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  |  |  | **Principal** | **Principal** |
|  |  | **Effective** | **Balance** | **Balance** |
|  | **Maturity** | **Interest** | **March 31,** | **December 31,** |
| **Lender / Merchant** | **Date** | **Rate** | **2026** | **2025** |
| Private Lender F | October 2, 2030 | 10% | $179500  | $179500  |
| Private Lender F | October 2, 2030 | 10% | 117500  | 117500  |
| Private Lender F | October 2, 2030 | 10% | 118200  | 118200  |
| Private Lender F | October 2, 2030 | 10% | 42500  | 42500  |
| Private Lender F | October 2, 2030 | 10% | 55600  | 55600  |
|  |  |  | 513300  | 513300  |
| Less: Unamortized debt issuance costs | Less: Unamortized debt issuance costs |  | (29116)  | (30770)  |
|  |  |  | $484184  | $482530  |

---

As of March 31, 2026, the maturity date of the mandatorily redeemable preferred shares is as follows:

---

| | |
|:---|:---|
| Due in less than one year | $-  |
| Due in more than one year | 513300  |
| Less: Unamortized debt issuance costs | (29116)  |
|  | $484184  |

---

On July 22, 2025, Foreland received $159,211 (net of fees and holdback) in funding from issuance of preferred stock in Foreland Refinery of $179,500. The company issued 1,795 of preferred shares in Foreland Refining valued at the market price of $100 per share which are automatically redeemed after five years. This agreement has a term of 5 years, with interest/dividends accrued annually at a rate of 10%.

On August 7, 2025, Foreland received $103,856 (net of fees and holdback) in funding from issuance of preferred stock in Foreland Refinery of $117,500. The company issued 1,175 of preferred shares in Foreland Refining valued at the market price of $100 per share which are automatically redeemed after five years. This agreement has a term of 5 years, with interest/dividends accrued annually at a rate of 10%.

On October 1, 2025, Foreland received $107,120 (net of fees and holdback) in funding from issuance of preferred stock in Foreland Refinery of $118,200. The company issued 1182 of preferred shares in Foreland Refining valued at the market price of $100 per share which are automatically redeemed after five years. This agreement has a term of 5 years, with interest/dividends accrued annually at a rate of 10%.

On November 21, 2025, Foreland received $52,199 (net of fees and holdback) in funding from issuance of preferred stock in Foreland Refinery of $42,500. The company issued 425 of preferred shares in Foreland Refining valued at the market price of $100 per share which are automatically redeemed after five years. This agreement has a term of 5 years, with interest/dividends accrued annually at a rate of 10%.

------

**Sky Quarry Inc.**

**Notes to Condensed Consolidated Financial Statements (Unaudited)**

------

On December 26, 2025, Foreland received $53,551 (net of fees and holdback) in funding from issuance of preferred stock in Foreland Refinery of $55,600. The company issued 556 of preferred shares in Foreland Refining valued at the market price of $100 per share which are automatically redeemed after five years. This agreement has a term of 5 years, with interest/dividends accrued annually at a rate of 10%.

In July 2025, the Company's wholly-owned subsidiary, Foreland Refining Corporation ("Foreland"), commenced an offering of its Series A 10% Redeemable Preferred Stock ("Preferred Stock") pursuant to Regulation C ("Reg CF Offering"). On October 1, 2025, Foreland completed the sale of 1,182 shares of Preferred Stock for aggregate proceeds to date from the Reg CF Offering of $416,700 from the sale of 4,167 shares of Preferred Stock. All amounts are classified as notes payable on the balance sheet.

Pursuant to the terms of the Reg CF Offering, Foreland is offering up to $1,235,000 of its Preferred Stock at a price of $100.00 per share. The material terms of the Preferred Stock are set forth below:

The Preferred Stock carries an annual dividend payment of ten percent (10%) ("Preferred Dividend"). The dividend on the Preferred Stock shall accrue, beginning from the date of issuance. Preferred Dividends shall be computed on the basis of the actual number of days elapsed and a 365-day year. The Preferred Dividends shall accrue and be paid to the holder of the Preferred Stock within fifteen (15) days of the end of each calendar year. The Preferred Stock will be senior preferred equity of Foreland and contain customary provisions restricting the payment of dividends on, and the repurchase of, junior and pari passu equity at any time when all Preferred Dividends on the Preferred Stock have not been paid in full in cash.

The Preferred Stock is not convertible into shares of Foreland's common stock and does not have any voting rights.

Holders of the Preferred Stock shall receive a royalty of $0.75 (for every $1 million of Preferred Stock, prorated for lesser amounts) per barrel of crude oil refined and sold by Foreland at all times while the Preferred Stock is outstanding ("Royalty Payment"). The Royalty Payment shall be paid to the holders of the Preferred Stock within thirty (30) days of Foreland's annual financial statements being audited and filed with the SEC as part of its parent company's, Sky Quarry Inc. ("Sky Quarry" or "Parent Company"), obligations to file a Form 10-K with the SEC ("Royalty Payment Date"). The amount of the annual Royalty Payment shall not exceed an aggregate return of more than twenty-five percent (25%) per annum to the holders of the Preferred Stock, inclusive of the annual 10% Preferred Dividend.

The Preferred Stock shall be redeemed by Foreland on the date that is five (5) years after the date of issuance ("Automatic Redemption Date") at a price equal to the liquidation preference. If the Preferred Stock is redeemed prior to the Automatic Redemption Date between the date of issuance and the date that is: (i) thirty-six (36) months thereafter, the Preferred Stock may be redeemed by Foreland in whole or in part in its sole discretion at a price equal to 110% of the liquidation preference; (ii) between thirty-six (36) months and forty-eight (48) months after the issuance of the Preferred Stock, the Preferred Stock may be redeemed by Foreland in whole or in part in its sole discretion at a price equal to 105% of the liquidation preference; or (iii) between forty-eight (48) months after the issuance of the Preferred Stock and the Automatic Redemption Date, the Preferred Stock may be redeemed by Foreland in whole or in part in its sole discretion at a price equal to 103% of the liquidation preference. If the Preferred Stock is redeemed prior to the Automatic Redemption Date, the holder of the Preferred Stock shall be entitled to their Royalty Payment through the date of redemption.

**14. CONVERTIBLE DEBENTURES**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  |  | **Interest** | **Principal Due** | **Principal Due** |
| **Lender** | **Maturity Date** | **Rate** | **March 31, 2026** | **December 31, 2025** |
| Private Lender C | November 24, 2026 | 9% | $2144776  | 2098131  |
| Private Lender A | March 2, 2025 | 30% | 1677370  | 1588603  |
| Private Lender E | August 31, 2027 | 12% | 187691  | 182245  |
| Private Lender E | May 22, 2027 | 12% | 166175  | 161353  |
| Private Lender E | July 21, 2027 | 12% | 135787  | 131848  |
| Private Lender E | April 10, 2026 | 12% | 105409  | 102351  |
| Private Lender D | July 16, 2025 | 5% | -  | 48794  |
|  |  |  | 4417208  | 4313325  |
| Less: Unamortized debt issuance costs | Less: Unamortized debt issuance costs |  | (65025)  | (77509)  |
|  |  |  | $4352183  | 4235816  |

---

------

**Sky Quarry Inc.**

**Notes to Condensed Consolidated Financial Statements (Unaudited)**

------

On May 16, 2024, Foreland entered into a business loan and security agreement with LendSpark Corporation for a loan in the amount of $900,000 (LendSpark #4). The loan is repaid in 40 equal weekly payments of $30,750 for total repayment of $1,215,000. The loan is secured by all of the assets of Foreland. As an inducement for advancing the note, the lender was issued 12,500 share purchase warrants, each warrant granting the holder the right to purchase one common share of the Company at a price of $36.00 per share for a period of three years from the issuance date of the warrant. The warrants were classified as equity and the fair value of the warrants were recorded separately as debt discount and amortized over the term of the debt. On April 25, 2025, as an inducement to negotiate and enter into a forbearance agreement the amount owing was increased by $32,108. This forbearance expired August 31, 2025. On December 11, 2025, the Company issued 87,498 shares of its common stock ("Initial Shares") to LendSpark Corporation ("LendSpark") pursuant to the terms of a settlement agreement entered into between the Company and LendSpark on December 1, 2025 ("Settlement Agreement"). The Settlement Agreement settled $491,384 due and owing from Foreland Refining Corporation, the Company's wholly-owned subsidiary, to LendSpark pursuant to the terms of the business loan and security agreement dated May 16, 2024. In addition to the Initial Shares, LendSpark is entitled to the issuance of an additional 87,498 shares of its common stock ("Additional Shares") in full settlement of all amounts due to LendSpark pursuant to the terms of the Settlement Agreement. The Company also issued an additional 8,750 shares of its common stock to LendSpark for fees incurred by LendSpark in connection with the settlement. All of the shares described above were issued pursuant to Section 3(a)(10) of the Securities Act. On January 6, 2025, Lendspark Corp. converted $245,692 of an amount due to them by the Company into 87,498 shares of our common stock.

On December 2, 2024, the Company entered into a promissory note for $1,200,000 from private lender A. The Note is convertible into shares of our common stock at a conversion price of $6.72 per share at any time after the issuance date of the Note. As an inducement for advancing the note, the lender was issued 150,000 share purchase warrants, each warrant granting the holder the right to purchase one common share of the Company at a price of $6.72 per share for a period of five years from the issuance date of the warrant. The warrants were classified as equity and the fair value of the warrants were recorded separately as debt discount and are being amortized over the term of the debt. The Company also amended previous warrant agreements dated April 6, 2023, June 19, 2024, and August 27, 2024, agreeing to extend the exercise period to five years from the issuance date of the amendment. On April 24, 2025, as an inducement for extending the maturity date to June 2, 2025, the Company agreed to reduce the exercise price of each of the warrants to $5.60 per share and agreeing the default rate of interest of the Note be calculated retroactively to December 2, 2024.

On November 24, 2023, the Company issued a promissory note in the amount of $2,000,000, convertible at the election of the holder into shares of common stock at an exercise price of $36.00 post reverse split, with a maturity date of November 24, 2026. The note has a term of thirty-six months and bears interest at a rate of 9% per annum payable semi-annually, with any outstanding interest and principal due on maturity. On April 30, 2024, the note holder elected to convert the accumulated interest as of December 31, 2023, totaling $18,247 to 476 shares of common stock, and on June 30, 2024, elected to convert the accumulated interest from January 1, 2024, to June 30, 2024, totaling $89,260 to 2,325 shares of common stock.

On April 16, 2025, the Company issued a promissory note in the amount of $100,000 to private lender D, convertible at the election of the holder into shares of common stock at an exercise price of eighty percent (80%) of the lowest trading price of the common stock during the ten (10) consecutive trading days including and immediately preceding the conversion date, subject to a floor price of $3.20 per share in replacement of current debt. On May 5, 2025, the note holder elected to convert $79,197 of debt and the accumulated interest as of May 5, 2025, totaling $21,292 into 5,000 shares of common stock. On January 5, 2026, the holder elected to convert $49,974.02 of a promissory note into 18,816 shares of common stock.

On May 22, 2025, the Company entered into a promissory note for $150,000 from private lender E. The note is unsecured, bears interest at a rate of 12% per annum, with a maturity date of May 22, 2027. As consideration for advancing the note, the lender was issued warrants to purchase up to 7,500 shares of common stock at a price of $10.00 per share for a period of two years from the date of issuance. The warrants were classified as equity and the fair value of the warrants were recorded separately as debt discount and amortized over the term of the debt. The promissory note can be converted into common stock of the Company at the holder's option at a price of $10.00 per share.

------

**Sky Quarry Inc.**

**Notes to Condensed Consolidated Financial Statements (Unaudited)**

------

On July 21, 2025, the Company entered into a promissory note for $125,000 from private lender E. This note is unsecured, and bears interest at a rate of 12% per annum, with a maturity date of July 21, 2027. As consideration for advancing the note, the lender was issued 6,250 warrants with each warrant granting the holder the right to purchase one common share of the Company at a price of $0.63 per share for a period of two years from the date of issuance. The warrants were classified as equity and the fair value of the warrants were recorded separately as a debt discount and amortized over the term of the debt. The promissory note can be converted into common stock of the Company at the holder's option at a price of $5.04 per share.

On August 29, 2025, the Company entered into a promissory note for $175,000 from private lender E. This note is unsecured, and bears interest at a rate of 12% per annum, with a maturity date of August 29, 2027. As consideration for advancing the note, the lender was issued 5,000 shares purchase warrants, each warrant granting the holder the right to purchase one common share of the Company at a price of $4.08 per share for a period of two years from the date of issuance. The warrants were classified as equity and the fair value of the warrants were recorded separately as a debt discount and amortized over the term of the debt. The promissory note can be converted into common stock of the Company at the holder's option at a price of $4.08 per share.

On October 21, 2025, the Company entered into a promissory note for $100,000 from private lender E. This note is unsecured, and bears interest at a rate of 12% per annum, with a maturity date of April 10, 2026 or the Company's completion of the sale of a minimum of $5,000,000 of its equity securities. As consideration for advancing the note, the lender was issued 8,750 shares purchase warrants, each warrant granting the holder the right to purchase one common share of the Company at a price of $3.84 per share for a period of two years from the date of issuance. The warrants were classified as equity and the fair value of the warrants were recorded separately as a debt discount and amortized over the term of the debt. The promissory note can be converted into common stock of the Company at the holder's option at a price of $3.84 per share.

**15.** **INCOME TAXES**

As of March 31, 2026, the Company had U.S. federal net operating loss carryforwards.

The Company considered all positive and negative evidence. Given the caution of Subtopic 30-21 regarding the difficulty in forming a conclusion that a valuation allowance is not needed in the case of cumulative losses, it is the Company's conclusion that it is more likely than not that the Company's existing deferred tax assets in the U.S. will not be realized and that a valuation allowance is necessary as of March 31, 2026. Accordingly, the Company has recorded a full valuation allowance of in the U.S. The Company has evaluated all of the negative and positive evidence as of March 31, 2026, and concludes that due to the Company being in a 3-year cumulative loss position, it is more likely than not that the net Canadian deferred tax assets will be not realized. As such, the Company has recorded and maintained a full valuation allowance in Canada.

The Company has not performed a Section 382 study to determine whether it had experienced a change in ownership and, if so, whether the tax attributes (net operating losses or credits) were impaired. Under Section 382 of the Internal Revenue Code of 1986, as amended, the Company's ability to utilize net operating loss or other tax attributes, such as research tax credits, in any taxable year may be limited if the Company has experienced an "ownership change." Generally, a Section 382 ownership change occurs if there is a cumulative increase of more than 50 percentage points in the stock ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation's stock within a specified testing period. Similar rules may apply under state tax laws.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024, with early adoption permitted. The Company adopted this for the year ended December 31, 2025.

As of March 31, 2026, and December 31, 2025, the Company does not have any unrecognized tax benefits. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of March 31, 2026 and December 31, 2025, the Company had no accrued interest or penalties related to uncertain tax positions.

------

**Sky Quarry Inc.**

**Notes to Condensed Consolidated Financial Statements (Unaudited)**

------

**16.** **NET LOSS PER COMMON SHARE**

Net loss per common share is computed based on the weighted average number of common shares outstanding and, when appropriate, dilutive potential common stock outstanding during the period. Stock options, convertible preferred stock and warrants are considered to be potential common stock. The computation of diluted net loss per common share does not assume exercise or conversion of securities that would have an anti-dilutive effect.

Basic net loss per common share is the amount of net loss for the period available to each weighted average share of common stock outstanding during the reporting period. Diluted net loss per common share is the amount of net loss for the period available to each weighted average share of common stock outstanding during the reporting period and to each share of potential common stock outstanding during the period, unless inclusion of potential common stock would have an anti-dilutive effect.

All outstanding options, warrants and convertible preferred stock for common shares are not included in the computation of diluted net loss per common share because they are anti-dilutive, which for the three months ended March 31, 2026 and 2025, totaled 862,978 and 1,054,827, respectively.

**17.** **EQUITY**

During the three months ended March 31, 2026 and 2025, the Company issued 33,332 and 265,673 shares of common stock for non-cash payments of accounts payable of $81,924 and $1,186,596, respectively. During the three months ended March 31, 2026 and 2025, the Company issued 69,782 and 13,542 shares of common stock, for conversion of debt, amounting to $213,742 and $92,084 net of offering costs of $0, respectively.

During the three months ended March 31, 2026 and 2025, the Company issued 426,143 and 0 shares of common stock, respectively, for acceptance of share subscriptions, amounting to $747,975 and $0 net of offering costs of $630,287 and $0, respectively.

For the three months ended March 31, 2026, the Company incurred equity issuance costs of $630,287. For the three months ended March 31, 2025, the Company incurred equity issuance costs of $0. These costs consisted of legal, marketing, accounting, printing, administration, broker-dealer, escrow and filing fees directly related to their respective offerings

On June 14, 2024, the SEC qualified an offering of securities submitted by the Company under Regulation A (the "2024 Reg A Offering"). Under the 2024 Reg A Offering, the Company proposed to sell up to 416,667 shares ("Shares") at a price of $48.00 per Share, and up to 606,528 shares of common stock underlying warrants issued in the Company's 2021 Reg A Offering, exercisable at a price of $36.00 per warrant.

On March 5, 2026, the Company filed its Certificate of Amendment to the Certificate of Incorporation (the "Certificate of Amendment") with the Secretary of State of Delaware to (i) effect on the corporate level a one-for-eight (1-for-8) reverse stock split (the "Reverse Stock Split") of the Company's shares of Common Stock, par value $0.0001 (the "Common Stock"). The reverse stock split was effective on March 15, 2026, at 11:59pm Eastern Time and the split has been retroactively applied to all share and per share amounts presented in the financial statements

The Common Stock began trading on a Reverse Stock Split-adjusted basis on the Nasdaq Capital Market on March 16, 2026. The trading symbols for the Common Stock will remain "SKYQ". The next CUSIP number for the Common Stock following the Reverse Stock Split is 83087C303.

As a result of the Reverse Stock Split, every eight (8) shares of the pre-split issued and outstanding shares of Common Stock automatically converted into one (1) post-split share of Common Stock. No fractional shares were issued in connection with the Reverse Stock Split. Instead, registered stockholders who would be entitled to receive fractional shares of Common Stock because they held a number of shares not evenly divisible by the Reverse Stock Split ratio had their fractional share rounded up to the nearest whole number of shares of Common Stock. No cash was paid in lieu of fractional shares.

The Reverse Stock Split had no effect on the number of authorized shares of Common Stock nor the par value of the Common Stock. The Reverse Stock Split affected all stockholders uniformly and did not affect any stockholder's ownership percentage of the Company's shares of Common Stock (except to the extent that the Reverse Stock Split resulted in some of the stockholders' fractional shares being rounded up).

------

**Sky Quarry Inc.**

**Notes to Condensed Consolidated Financial Statements (Unaudited)**

------

Through March 31, 2026, the Company sold 426,143 shares of common stock through the ATM Offering, generating net proceeds of $747,975.

The table below sets forth the shares reserved as of March 31, 2026, by the Company for future potential issuance.

---

| | |
|:---|:---|
|  | &nbsp;&nbsp;**Maximum Issuable** |
| Company Stock Option Plan | 500000 |
| Common Share Purchase Warrants issued | 787708 |
| Shares issuable on exercise of outstanding Brokers Warrants issued<br>under the Reg A Offering | 6065 |
| Reservation for conversion of maximum issuable common shares | 416667 |
| Shares issuable on exercise of outstanding Brokers Warrants issued<br>under the Reg A Offering | 3214 |
| Reservation for convertible note | 328539 |
| Total shares reserved for issuance | 2042193 |

---

On June 14, 2024, the Company entered into an engagement agreement with Digital Offering, LLC to provide broker-dealer services in connection with the 2024 Reg A Offering. Under the terms of the engagement letter, the Company will issue a warrant to purchase one share of the Company's common stock (an "Agent Warrant") equal to 2.30% of the total Shares sold to investors under the offering at an exercise price of $7.50 per share and subject to transfer, lock-up and exercise restrictions as set forth in Rule 5110 of the Financial Industry Regulatory Authority, Inc ("FINRA"), as applicable. The 2024 Reg A Offering closed on October 9, 2024, and 25,714 Agent Warrants were issued to Digital Offering, LLC in connection with its services under the 2024 Reg A Offering.

As of March 31, 2026, the Company had a total of 796,988 warrants issued and outstanding each to purchase one share of common stock, exercisable at a range from $60 to $3.84 per share for cash and a range length of time to exercise from 0.8 to 5 years. There were 800,113 warrants to purchase common stock outstanding as of December 31, 2025.

**18.** **STOCK OPTION PLAN AND RESTRICTED SHARE AWARDS**

On March 27, 2020, the Company adopted an incentive stock option plan (the "Plan"). The Plan allows the Board of Directors of the Company to grant restricted shares and options to acquire shares of common stock of the Company to directors, officers, key employees and consultants. The option price, term and vesting periods are determined at the discretion of the Board of Directors, subject to certain restrictions as required by the policies of Section 422 of the Internal Revenue Code. The Plan is a fixed number plan with a maximum of 208,334 shares of common stock reserved for issuance under the Plan.

On September 7, 2024, the Company amended the 2020 Stock Plan to increase the number of shares of common stock of the Corporation available for grant under the plan from 208,334 (as adjusted for the 1 for 3 reverse split) to 500,000. On November 4, 2025, the Company's shareholders approved the amendment to the 2020 Stock Plan.

The table below sets forth share options outstanding as of March 31, 2026.

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| | | | | |
|:---|:---|:---|:---|:---|
| **Grant**<br>**Date** | **Options**<br>**Outstanding** | **Exercise**<br>**Price** | <br>**Expiration** | <br>**Vesting** |
|  |  |  |  | Equally over 3 years |
| &nbsp;&nbsp;September 1, |  |  | August | commencing on first |
| &nbsp;&nbsp;2022 | 4896  | $21.60  | 31, 2027 | anniversary of grant date |
|  |  |  |  | Equally over 3 years |
| &nbsp;&nbsp;October 15, |  |  | October 14, | commencing on first |
| &nbsp;&nbsp;2023 | 42345  | 38.40  | 2028 | anniversary of grant date |
|  |  |  |  | 31,112 vest immediately, |
|  |  |  |  | remaining vest equally over 3 |
| &nbsp;&nbsp;November 1, |  |  | &nbsp;&nbsp;October 31, | years commencing on first |
| &nbsp;&nbsp;2023 | 10417  | 38.40  | 2028 | anniversary of grant date |
|  |  |  |  | Equally over 3 years |
| &nbsp;&nbsp;November 22, |  |  | November | commencing on first |
| &nbsp;&nbsp;2024 | 8333  | 11.76  | 23, 2027 | anniversary of grant date |

---

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**Sky Quarry Inc.**

**Notes to Condensed Consolidated Financial Statements (Unaudited)**

------

During the three months ended March 31, 2026 and 2025, the Company recorded share-based compensation expense of $87,454 and $78,880, respectively, as part of general and administrative expenses.

As of March 31, 2026, the Company had $94,091 of unrecognized share-based compensation costs related to non-vested awards that will be recognized over a weighted average period of 3 years. As of March 31, 2026, 88,706 options have vested, and are exercisable.

The following sets forth the outstanding common share options and related activity for the period ended March 31, 2026:

---

| | | |
|:---|:---|:---|
| | <br>**Number of**<br>**Options** | **Weighted Average**<br>**Exercise Price**<br>**Per Share** |
| Outstanding as of December 31, 2025 | 69449 | $12.00 |
| Granted | - | - |
| Exercised | - | - |
| Forfeited | (3458)  | 38.40 |
| Outstanding as of March 31, 2026 | 65991 | $9.48 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Grant Date**  | **Restricted Shares** | **Issue Price** | **Expiration** | **Vesting** |
| December 31, 2024 | 10417 | $8.24 | January 2, 2026 | Vested on August 8, 2025, by board resolution |
| January 10, 2025 | 10417 | 11.12 | January 12, 2026 | Vested on August 8, 2025, by board resolution |
| February 28, 2025 | 10417 | 5.76 | March 2, 2026 | Vested on August 8, 2025, by board resolution |
| May 27, 2025 | 56250 | 6.64 | May 29, 2026 | Vested on August 8, 2025, by board resolution |
| November 4, 2025 | 87500 | 3.35 | September 4, 2026 | Vesting over 10 months |
| November 5, 2025 | 56250 | 3.19 | November 5, 2025 | Vested at issuance |

---

During the three months ended March 31, 2026 and 2025, the Company recorded restricted share-based compensation expense of $87,454 and $72,500, respectively, as part of general and administrative expenses. As of March 31, 2026, the Company had $175,980 of unrecognized restricted share-based compensation costs related to non-vested awards that will be recognized over a weighted average period of 10 months. As of March 31, 2026, 178,750 restricted shares have vested.

**19.** **RELATED-PARTY TRANSACTIONS**

Related-party transactions in these consolidated financial statements are as follows:

Board of Director observation rights;

the right to receive certain quarterly and annual financial statements of the Company; and

certain inspection rights so long as JPMorgan owns at least 10% of the Company's outstanding shares of common stock.

The JPM Agreement terminated immediately upon the listing of the company's common stock on the Nasdaq stock market in October 2024.

During the three months ended March 31, 2026, and as of December 31, 2025, the company received $150,000 and $84,112, respectively in cash proceeds from a director. The advances are unsecured, non-interest-bearing and due on demand. The company owed the director $234,112 as of March 31, 2026 which is included in related-party accounts payable on the Company's consolidated balance sheet.

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**Sky Quarry Inc.**

**Notes to Condensed Consolidated Financial Statements (Unaudited)**

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**20.** **DISAGGREGATED REVENUE**

Revenue consisted of the following refined product types sold domestically in the Southwest USA region for the three months ended March 31:

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** |
|  | **March 31, 2026** | **March 31, 2025** |
| Diesel | $382  | $1852935  |
| Liquid Asphalt | 1  | 2724298  |
| VGO | -  | 1624504  |
| Naphtha | -  | 120486  |
| Other | -  | 10744  |
| Total Revenue | $383  | $6332967  |

---

The Company refines crude oil to produce several key products, including Diesel, Liquid Asphalt, Vacuum Gas Oil (VGO), and Naphtha, each with distinct industrial applications. Diesel is used primarily in transportation and industrial sectors, while Liquid Asphalt is essential for road construction and roofing. VGO serves as an intermediate product for further refining, and Naphtha is used as a feedstock for gasoline production and petrochemicals.

**21.** **DISAGGREGATED EXPENSES**

Cost of sales consisted of the following for March 31:

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended**  | **Three Months Ended**  |
|  | **March 31, 2026** | **March 31, 2025** |
| Crude Oil | $(305)  | $3718254  |
| Fuels and chemicals | (1068)  | 1514851  |
| Freight out | (81995)  | 754089  |
| Freight in | (2801)  | 462384  |
| Salary and wages | 125103  | 290960  |
| Depreciation and amortization | 262647  | 241138  |
| Repairs and maintenance | 75816  | 57800  |
| Other | 12204  | (9)  |
| Automobile | -  | 19592  |
| Total cost of Goods Sold  | $389601  | $7059059  |

---

General and administrative expenses consisted of the following for March 31:

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended**  | **Three Months Ended**  |
|  | **March 31, 2026** | **March 31, 2025** |
| Executive compensation | $508733  | $633630  |
| Professional fees | 452548  | 964516  |
| Insurance | 132036  | 162775  |
| Lease and utilities | 44453  | 57404  |
| Travel | 37180  | 68710  |
| Licenses | 20129  | 5422  |
| Other general and administrative | 13599  | 23720  |
| Bank charges | 4558  | 18217  |
| Auto | -  | 1063  |
| Total General and Administrative  | $1213236  | $1935457  |

---

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**Sky Quarry Inc.**

**Notes to Condensed Consolidated Financial Statements (Unaudited)**

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Professional fees included the following for March 31:

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| | | |
|:---|:---|:---|
|  | **Three Months Ended**  | **Three Months Ended**  |
|  | **March 31, 2026** | **March 31, 2025** |
| Auditor | $175955  | $146498  |
| Legal | 125851  | (32470)  |
| Business development | 107533  | 340996  |
| Membership and subscriptions | 29767  | 118375  |
| Environmental | 13434  | 4778  |
| Investor relations | 8  | 5348  |
| Advertising and marketing | -  | 348353  |
| Other | -  | 22643  |
| Tax | -  | 9995  |
| Total  | $452548  | $964516  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

**22.** **SEGMENT REPORTING**

The Company has one reportable segment: refined crude oil. The Company refines crude oil to produce several key products, including Diesel, Liquid Asphalt, VGO, and Naphtha, each with distinct industrial applications. Diesel is used primarily in transportation and industrial sectors, while Liquid Asphalt is essential for road construction and roofing. VGO serves as an intermediate product for further refining, and Naphtha is used as a feedstock for gasoline production and petrochemicals.

The Company's chief operating decision maker is the chief executive officer. The chief decision maker uses gross profit to evaluate income generated from segment assets in deciding whether to reinvest profits into the refined crude oil segment or into other parts of the entity.

The Company is in the process of developing a second segment, 2020 Resources LLC (PR Spring facility), which currently is not generating revenues. There continues to be associated development costs which are being capitalized, with a plan to be completed in the summer 2027.

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**Sky Quarry Inc.**

**Notes to Condensed Consolidated Financial Statements (Unaudited)**

------

The following presents selected financial information with respect to our single reportable segment for March 31:

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| | | |
|:---|:---|:---|
|  | **3 months Ended** | **3 months Ended** |
|  | **March 31,** | **March 31,** |
|  | **2026** | **2025** |
| &nbsp;&nbsp;&nbsp;Net sales | $383  | $6332967  |
| &nbsp;&nbsp;&nbsp;Cost of goods sold | 389601  | 7059059  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross margin | (389218)  | (726092)  |
| &nbsp;&nbsp;&nbsp;Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;General and administrative | 1213236  | 1935457  |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 2210  | 2028  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 1215446  | 1937485  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss from operations | (1604664)  | (2663577)  |
| &nbsp;&nbsp;&nbsp;Other income (expense): |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest expense | (333989)  | (901561)  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss on extinguishment of debt | (269396)  | (56660)  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain or (loss) on warrant revaluation | (75342)  | 274980  |
| &nbsp;&nbsp;&nbsp;&nbsp;Other income (expense) | (36854)  | 7477  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on disposal of assets | -  | 5647  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other expense, net | (715581)  | (670117)  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss before provision for income taxes | (2320245)  | (3333694)  |
| &nbsp;&nbsp;&nbsp;&nbsp;Provision for income taxes | -  | -  |
| &nbsp;&nbsp;&nbsp;Net loss | (2320245)  | (3333694)  |
| &nbsp;&nbsp;&nbsp;Other Comprehensive Loss |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Exchange loss on translation of foreign operations | (2)  | 422  |
| &nbsp;&nbsp;&nbsp;Net loss and comprehensive loss | (2320247)  | (3333272)  |
| &nbsp;&nbsp;&nbsp;Loss per common share |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic and diluted | $(0.65)  | $(1.25)  |
| &nbsp;&nbsp;&nbsp;Weighted average shares outstanding |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic and diluted | 3579933  | 2657616  |

---

The segmented assets as of March 31, 2026 are as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **Foreland**<br> **Refining** | **2020**<br> **Resource**<br> **LLC** | **Total** |
| Total Assets | $8292577 | $11019526 | $19312103 |

---

The segmented assets as of December 31, 2025 are as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **Foreland**<br> **Refining** | **2020**<br> **Resource**<br> **LLC** | **Total** |
| Total Assets | $8497814 | $10717007 | $19214821 |

---

------

**Sky Quarry Inc.**

**Notes to Condensed Consolidated Financial Statements (Unaudited)**

------

**23.** **COMMITMENTS AND CONTINGENCIES**

As of March 31, 2026, the Company has the following commitments for two leased land rights of way rentals in Nye County, Nevada, totaling approximately 40 acres:

---

| | | | |
|:---|:---|:---|:---|
|  | **Acres** | **Expiration** | **Annual Fee** |
| &nbsp;&nbsp;&nbsp;Right-of-Way Grant N-41035 | 19.66 | December 31, 2054 | $2850 |
| &nbsp;&nbsp;&nbsp;Right-of-Way Grant N-42414 | 20.32 | December 31, 2044 | 1400 |
|  |  |  | $4250 |

---

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

**24.** **SUBSEQUENT EVENTS**

Management performed a review and determined that, except as disclosed elsewhere herein and below, no material events occurred subsequent to March 31, 2026 through the date of the presentation of these financial statements.

On March 31, 2026, the Company entered into an exclusivity agreement (the "Exclusivity Agreement") with a counterparty in connection with the Company's evaluation of a potential transaction involving the acquisition of digital infrastructure assets (the "Potential Transaction"). In connection with its evaluation of the Potential Transaction, the Company received certain information relating to the counterparty's plans, including that the counterparty is currently in discussions with a potential tenant regarding a long-term lease and the counterparty is considering several potential financing options. As of the date hereof, discussions between the Company and the counterparty regarding the Potential Transaction are ongoing. No definitive terms have been agreed upon, and the Company has not entered into any definitive agreement with respect to the Potential Transaction.

On April 22, 2026, in connection with its At-the Market Program (the "ATM Program"), the Company entered into that certain Amended and Restated Sales Agreement (the "A&R Sales Agreement") with Muriel Siebert & Co., LLC ("Siebert" or the "Agent"), pursuant to which Siebert replaced Cantor Fitzgerald & Co. ("Cantor") as the principal and/or the sole designated sales agent. The material terms and conditions of the Sales Agreement, dated January 12, 2026, by and between the Company and Cantor otherwise remain unchanged.

On April 22, 2026, in connection with its ATM Program, the Company filed a prospectus supplement with the SEC, updating the aggregate sales price to up to $12,600,000, pursuant to the A&R Sales Agreement. As of May 12, 2026 the Company issued 822,764 shares of common stock through Siebert under the ATM Program, generating net proceeds to the Company of $4,803,278.

On April 8, 2026, Company convertible note holder Varie Asset Management, LLC elected to convert $125,000of the principal and $11,099.80 of its interest due on the Note issued by Sky Quarry Inc. ("Borrower") on July 21, 2025, into 34,025 shares of our common stock.

On April 8, 2026, Company convertible note holder Varie Asset Management, LLC elected to convert $150,000of the principal and $16,556.93 of its interest due on the Note issued by Sky Quarry Inc. ("Borrower") on May 22, 2025, into 41,640 shares of our common stock.

On April 13, 2026, Company convertible note holder Varie Asset Management, LLC elected to convert $175,000of the principal and $13,308.03 of its interest due on the Note issued by Sky Quarry Inc. ("Borrower") on August 29, 2025, into 49,039 shares of our common stock.

------

**Sky Quarry Inc.**

**Notes to Condensed Consolidated Financial Statements (Unaudited)**

------

On May 7, 2026, Company convertible note holder Varie Asset Management, LLC elected to convert $100,000.00 of the principal and $6,659 of its interest due on the Note issued by Sky Quarry Inc. ("Borrower") on October 21, 2025, into 30,301 shares of our common stock.

During the month of April 2026, the company received $60,648 in cash proceeds from a director. $448,724 of funds were converted into a short term note payable with an origination fee of $15,864 and bearing interest of 15% per annuum. The maturity date is the earlier of July 29, 2026 or the date on which the aggregate proceeds of at least three million dollars of new capital through the current ATM offering are received. Regular payments are being made and the balance of this note as of May 12, 2026 was $248,908.

------

**ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations**

**Overview**

We operate a regional refinery (the Eagle Springs Refinery) producing diesel, VGO, naphtha and liquid paving asphalt from crude oil suppliers in the Uintah basin near Nevada and Utah. In addition to our goal of growing the refinery, we have a separate division in the development-stage (P.R. Springs) formed to deploy technologies to facilitate the recycling of waste asphalt shingles and remediation of oil-saturated sands and soils, providing sustainable refined crude products. We anticipate several benefits from the recycling and production of oil from asphalt shingles reducing the dependence on landfills for the disposal of waste and reducing dependence on foreign oil.

We have developed a process for separating oil from oily sands and other oil-bearing solids utilizing a proprietary solvent, which we refer to as our ECOSolv technology or the ECOSolv process. The solvent is used in a closed-loop distillation and evaporation circuit which results in up to 99% of the solvent being recoverable for continuous reuse and requires no water. The solvent has demonstrated oil separation rates of up to 95% in bench testing using samples of both mined crushed ore and ground asphalt shingles. Bench testing was conducted in house, and through unaffiliated third parties which were completed in May and August 2022.

Currently, we intend to finish retrofitting our oil sands remediation facility located in PR Spring in eastern Utah in the 2027 calendar year when the necessary funding is obtained to recycle waste asphalt shingles using our ECOSolv technology, to produce and sell oil as well as asphalt paving aggregate mined from our bitumen deposit.

We intend to continue to develop regional model asphalt shingle recycling facilities, which can be deployed in areas with high concentrations of waste asphalt shingles and near asphalt shingle manufacturing centers. Our design contemplates a modular, scalable, purpose-built facility capable of remediating waste asphalt shingles and separation into their base components of bitumen / asphalt cement, shingle granules, sand aggregate, limestone and fiberglass.

The Company has a single segment reporting approach given all revenues are generated from Foreland Refining products. The Company anticipates the possibility of segmental reporting in the future in connection with alternative revenue streams and cost centers.

**Reverse Stock Split**

We filed a Certificate of Amendment to our Certificate of Incorporation with the State of Delaware on March 5, 2026, to affect a one-for-eight (1-for-8) reverse stock split (the "Reverse Stock Split") of our shares of common stock, par value $0.0001 (the "Common Stock"). The Reverse Stock Split was effective on March 15, 2026, at 11:59 PM Eastern Time.

All historical share and per-share amounts reflected throughout the consolidated financial statements and our discussions herein in this Item 2 have been adjusted to reflect the Reverse Stock Split.

**ATM Program**

On April 22, 2026, the Company replaced Cantor Fitzgerald & Co. with Muriel Siebert & Co., LLC ("Siebert" or the "Agent") as the principal and/or the sole designated sales agent and updated the size of the program to up to $12,600,000. As of March 31, 2026, the Company issued 426,143 shares of common stock through its previous ATM sales agent, Cantor Fitzgerald & Co., generating net proceeds of $747,975.

**Exclusivity Agreement**

In March 2026, the Company entered into an exclusivity agreement (the "Exclusivity Agreement") with a counterparty in connection with the Company's evaluation of a potential transaction involving the acquisition of digital infrastructure assets (the "Potential Transaction"). No definitive terms have been agreed upon, and the Company has not entered into any definitive agreement with respect to the Potential Transaction.

------

**Plant Outages and Maintenance**

Our facilities require ongoing maintenance and from time-to-time certain repairs, improvements and retrofitting, which may require us to temporarily shut down or operate at a diminished capacity. Our Eagle Springs refinery operated by Foreland Refinery Corporation experienced a shut down during the fourth quarter of 2025 in connection with a boiler repair. Currently, repairs have been completed, and the refinery is being prepared to resume operations, subject to the procurement of feedstock. The unscheduled repairs and outages at Foreland's Eagle Springs Refinery have had a negative impact on our final financial results for the third and fourth quarters of 2025, and financial results for the first quarter of 2026. Currently, we expect the facility to be operational by the end of the second quarter of 2026.

**Our Financial Condition and Going Concern Issues**

As a result of our financial condition, we have included in our condensed consolidated financial statements as of March 31, 2026 and December 31, 2025, and for the three months ended March 31, 2026 and 2025, a note indicating that there is significant doubt about the Company's ability to continue as a going concern. The opinion on the December 31, 2025 audited financial statements from our independent registered public accounting firm for those statements also includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. From inception (June 4, 2019) through March 31, 2026, we have incurred accumulated net losses of $38,486,733. To address our going concern, we aim to increase revenues by securing greater volumes of crude oil for our Foreland refinery, which should enhance our contribution margin. Additionally, we are pursuing opportunities to reduce debt service through refinancing or repayment of existing obligations, establish strategic partnerships, and raise capital through equity or debt offerings, or a combination of these actions. Given our current revenue and cash usage levels, we have pressing working capital needs that necessitate raising funds through equity or debt issuance, coupled with efforts to boost revenue and control operating expenses. However, there is no guarantee that we will be able to raise sufficient capital, grow revenues, and generate the cash flow needed to meet our operating expenses and capital requirements effectively.

**Special Notes Regarding Smaller Reporting Company Status**

We are filing this report as a "smaller reporting company" (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended). As a result of being a smaller reporting company, we are allowed and have elected to omit certain information from this Management's Discussion and Analysis of Financial Condition and Results of Operations; however, we have provided all information for the periods presented that we believe to be appropriate.

**Results of Operations for the Three Months ended March 31, 2026 and 2025**

Introduction

This section includes a summary of our historical results of operations, followed by detailed comparisons of our results for the three months ended March 31, 2026 and 2025, respectively. We have derived this data from our unaudited interim condensed consolidated financial statements included in this Quarterly Report.

We had net sales of $383 for the three months ended March 31, 2026, compared to $6,332,967 for the three months ended March 31, 2025. Our cost of goods sold for the three months ended March 31, 2026, were $389,601, compared to $7,059,059 for the three months ended March 31, 2025. Cost of goods sold does not change directly with sales due to certain fixed cost allocations across significantly lower production barrels. The significant decrease in our sales were the direct result of the company's challenges associated with the outage of our Eagle Springs refinery.

Our operating expenses were $1,215,446 for the three months ended March 31, 2026, compared to $1,937,485 for the three months ended March 31, 2025. Our operating expenses consisted of general and administrative and depreciation and amortization.

------

Net Sales and Net Loss

Our net sales, costs of goods sold, gross profit, operating expenses, other income (expense) and net loss for the three months ended March 31, 2026 and 2025, were as follows:

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** |
|  | **March 31,** | **March 31,** |
|  | **2026** | **2025** |
| &nbsp;&nbsp;&nbsp;Net sales | $383  | $6332967  |
| &nbsp;&nbsp;&nbsp;Cost of goods sold | 389601  | 7059059  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross margin | (389218)  | (726092)  |
| &nbsp;&nbsp;&nbsp;Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and administrative | 1213236  | 1935457  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 2210  | 2028  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 1215446  | 1937485  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss from operations | (1604664)  | (2663577)  |
| &nbsp;&nbsp;&nbsp;Other income (expense): |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense | (333989)  | (901561)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on extinguishment of debt | (269396)  | (56660)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain or (loss) on warrant revaluation | (75342)  | 274980  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other income (expense) | (36854)  | 7477  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on disposal of assets | -  | 5647  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other expense, net | (715581)  | (670117)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss before provision for income taxes | (2320245)  | (3333694)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for income taxes | -  | -  |
| &nbsp;&nbsp;&nbsp;Net loss | (2320245)  | (3333694)  |
| &nbsp;&nbsp;&nbsp;Other Comprehensive Loss |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exchange loss on translation of foreign operations | (2)  | 422  |
| &nbsp;&nbsp;&nbsp;Net loss and comprehensive loss | (2320247)  | (3333272)  |
| &nbsp;&nbsp;&nbsp;Loss per common share |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic and diluted | $(0.65)  | $(1.25)  |
| &nbsp;&nbsp;&nbsp;Weighted average shares outstanding |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic and diluted | 3579933  | 2657616  |

---

*Net Sales*

The following table shows net sales by category for the three months ended March 31, 2026 and 2025:

---

| | | | |
|:---|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** | **Change** |
|  | **March 31, 2026** | **March 31, 2025** |  |
| Diesel | $382  | $1852935  | (100%) |
| Liquid Asphalt | 1  | 2724298  | (100%) |
| VGO | -  | 1624504  | (100%) |
| Naphtha | -  | 120486  | (100%) |
| Other | -  | 10744  | (100%) |
| Total Net Sales | $383  | $6332967  | (100%) |

---

We had net sales of $383 for the three months ended March 31, 2026, compared to $6,332,967 for the three months ended March 31, 2025, a decrease of $6,332,584. Beginning in late June 2025, the Company's production was limited due to crude supplier disruptions and delays in completing certain maintenance activities. The lack of refinery operational revenue during the first quarter of 2026 was the result of refinery repairs that were concluded subsequent to the end of the period. Restart challenges and reconnecting refinery feedstock supply will be the primary focus of the Company in the subsequent quarter to generate revenues from operations. The Company expects production to resume in June of 2026.

------

Additionally, feedstock pricing, based partly on WTI market pricing rose from approximately $57 per barrel on January 1, 2026 to $101 per barrel by March 31, 2026, roughly a 77% increase according to the US Energy Information Agency (EIA). Currently, we believe regional market dynamics may be reflected in the second half of 2026 in crack spreads or refinery margins, based on industry peers' publicly available comments.

*Cost of Goods Sold*

The following table shows cost of goods sold by category for the three months ended March 31, 2026 and 2025:

---

| | | | |
|:---|:---|:---|:---|
|  | **Three Months Ended**  | **Three Months Ended**  |  |
|  | **March 31, 2026** | **March 31, 2025** | **Change** |
| Crude Oil | $(305)  | $3718254  | (100)% |
| Fuels and chemicals | (1068)  | 1514851  | (100)% |
| Freight out | (81995)  | 754089  | (111)% |
| Freight in | (2801)  | 462384  | (101)% |
| Salary and wages | 125103  | 290960  | (57)% |
| Depreciation and amortization | 262647  | 241138  | 9% |
| Repairs and maintenance | 75816  | 57800  | 31% |
| Other | 12204  | (9)  | (135700)% |
| Automobile | -  | 19592  | (100)% |
| Total Cost of Goods Sold  | $389601  | $7059059  | (94)%  |

---

Our cost of goods sold for the three months ended March 31, 2026 was $389,601 compared to $7,059,059 for the three months ended March 31, 2025, a decrease of $6,669,458. Gross margin loss for the three months ended March 31, 2026 was $389,218, compared to $726,092 for the three months ended March 31, 2025, a decrease of $336,874 for the comparative period. The decline in cost of sales for the three months ended March 31, 2026 presented compared to the prior periods was primarily due to the decline in net sales described above.

Cost of goods sold as a percentage of net sales was 101,723% for the three months ended March 31, 2026, compared to 112% for the three months ended March 31, 2025. We believe this comparison is not meaningful as the refinery was not operational during the first quarter of 2026 as described above.

*General and Administrative*

The following table shows general and administrative expenses by category for the three months ended March 31, 2026 and 2025:

---

| | | | |
|:---|:---|:---|:---|
|  | **Three Months Ended**  | **Three Months Ended**  |  |
|  | **March 31, 2026** | **March 31, 2025** | **Change** |
| Executive compensation | $508733  | $633630  | (20)% |
| Professional fees | 452548  | 964516  | (53)% |
| Insurance | 132036  | 162775  | (19)% |
| Lease and utilities | 44453  | 57404  | (23)% |
| Travel | 37180  | 68710  | (46)% |
| Licenses | 20129  | 5422  | 271% |
| Other general and administrative | 13599  | 23720  | (43)% |
| Bank charges | 4558  | 18217  | (75)% |
| Auto | -  | 1063  | (100)% |
| Total General and Administrative  | $1213236  | $1935457  | (37)% |

---

Our general and administrative expenses decreased by $722,221 for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to a decrease of $124,897 in executive compensation attributable to a smaller Board of Directors with lower fees expensed in the current year. The decreased in general and administrative costs for the three months ended March 31, 2026 compared to 2025 were also due to a $511,968 decrease in professional fees, primarily consisting of decreases in advertising and marketing, and business development.

*Other Income (Expense)*

Other expense was $715,581 for the three months ended March 31, 2026, compared to $670,117 for the three months ended March 31, 2025, a decrease of $45,464. In the three months ended March 31, 2026, other income (expense) consisted of interest expense $333,989, loss on extinguishment of debt $269,396, loss on warrant valuation $75,342, and other expense $36,854. In the three months ended March 31, 2025, other income (expense) consisted of interest expense $901,561, loss on extinguishment of debt $56,660, offset by gain on warrant valuation $274,980, other income $7,477, and gain on disposal of assets $5,647.

------

The warrant liability is revalued at each reporting date based on changes in the underlying factors influencing the fair value of the warrants, such as the Company's stock price, volatility, and other market conditions. The Company's management believes that the non-cash gain recognized in the current period from the remeasurement of warrant liabilities is not reflective of ongoing operating performance. During the period, the Company incurred significant interest expense related to its term debt. This interest expense is primarily due to the high financing costs associated with the term notes, which were utilized to support ongoing working capital needs and operational expenses. These notes, characterized by higher interest rates relative to traditional debt instruments, have resulted in a notable impact on our financial performance for the quarter. This increase in interest expense reflects the financial obligations of maintaining liquidity and funding operations, particularly during a phase of substantial investment in refinery refurbishment and related activities. The Company continues to evaluate its capital structure to optimize costs and enhance financial stability, considering refinancing options and alternative capital sources where feasible.

*Net Loss*

Net loss was $2,320,245 or a loss of $(0.65) per share, for the three months ended March 31, 2026, compared to net loss of $3,333,694 or $(1.25) per share, for the three months ended March 31, 2025.

Our net loss compared to the previous periods' net loss was primarily driven by a reduction in total production of the refinery attributable to the outage which resulted in reduced revenues during the period.

**Liquidity and Capital Resources**

Introduction

We had negative operating cash flows for the three months ended March 31, 2026. Our cash on hand as of March 31, 2026, was $66,828. While we had negative net cash from operations for the three months ended March 31, 2026, our monthly cash flow burn rate for the three months ended March 31, 2026, was $196,210. In connection with the Foreland Refinery acquisition and PR Spring facility retrofit program, we believe we will continue to have material capital expenditures and face long term cash needs. While we anticipate that these needs will be satisfied through the issuance of our debt and/or equity securities until such time as our cash flows from operations will satisfy our cash needs, we cannot provide any assurances of such.

Our cash, current assets, total assets, current liabilities, and total liabilities as of March 31, 2026 and December 31, 2025, respectively, are as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **March 31, 2026** | **December 31, 2025** | **Increase (decrease)** |
| Cash | $66828  | $35370  | $31458  |
| Total Current Assets | 1265959  | 1327680  | (61721)  |
| Total Assets | 19312103  | 19214821  | 97282  |
| Total Current Liabilities | 16396683  | 15120773  | 1275910  |
| Total Liabilities | $17314288  | $16027854  | $1286434  |

---

Our cash increased by $31,458 as of March 31, 2026, as compared to December 31, 2025. Our total current assets decreased by $61,721 primarily because of a decrease in inventory of $23,453, and prepaids of $65,038.

Our total assets increased by $97,282 due to the changes in property, plant and equipment of $178,523, and cash $31,458.

Our current liabilities as of March 31, 2026 as compared to December 31, 2025, increased by $1,275,910 and our total liabilities increased by $1,286,434, both primarily as a result of an increase in accounts payable of $777,065, related-party payables of $372,212, notes payable of $10,524, lines of credit of $95,401, and warrant liability of $75,342.

The increase in liabilities, noted above, are due to the losses described above.

In order to repay our obligations in full or in part when due, we will be required to raise significant capital from other sources. There is no assurance, however, that we will be successful in these efforts.

On June 27, 2025, the Company's wholly owned subsidiary, Foreland Refining Corporation, launched a Regulation Crowdfunding (Reg CF) offering to raise up to $1.235 million to fund working capital and general corporate purposes. As of March 31, 2026, the subsidiary had raised $513,300 in commitments. Although the Reg CF is being conducted at the subsidiary level, the proceeds are expected to support business lines that may be consolidated into the Company's operations. The offering is not expected to have a material near-term impact on the Company's consolidated liquidity position.

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ATM Program

We continue to maintain an ATM Program. On January 12, 2026, we entered into a Controlled Equity OfferingSM Sales Agreement (the "Sales Agreement") with Cantor, pursuant to which we, from time to time, may offer and sell shares (the "ATM Shares") of our common stock, through or to Cantor, acting as principal and/or sales agent, having an aggregate sales price of up to $4,700,000.

On April 22, 2026, the Company entered into that certain Amended and Restated Sales Agreement (the "A&R Sales Agreement") with Siebert, pursuant to which Siebert replaced Cantor as the principal and/or the sole designated sales agent. The material terms and conditions of the Sales Agreement otherwise remain unchanged.

On April 22, 2026, in connection with its ATM Program, the Company filed a prospectus supplement with the SEC, updating the aggregate sales price to up to $12,600,000, pursuant to the A&R Sales Agreement. As of March 31, 2026, the Company issued 426,143 shares of common stock through Cantor under the ATM Program, generating net proceeds of $747,975.

Cash Requirements

Our cash on hand as of March 31, 2026, was $66,828. The Company will continue to require additional cash to meet ongoing operational and capital needs. Despite the company's efforts to increase production capacity at the refinery, as well as ongoing maintenance and refurbishment activities, and the high interest payments, we are not yet generating sufficient cash flow to cover operational costs. The need for cash is driven by both ongoing operating expenses, and costs of indebtedness. We anticipate that these needs will be satisfied through the issuance of debt or the sale of our equity securities, or a combination thereof, until such time as improvements to our cash flows from operations will satisfy our cash flow needs. Management remains committed to securing the necessary resources to ensure the Company can meet its financial obligations and continue executing its long-term objectives. There is no assurance, however, that we will be successful in these efforts.

Sources and Uses of Cash

*Operating Activities*

Our net cash used in operating activities for the three months ended March 31, 2026 and 2025, was $588,631 and $1,963,224, respectively. Our net cash used in operating activities for the three months ended March 31, 2026, consisted of a net loss of $2,320,245, favorable working capital changes of $1,374,593, adjusted for share based compensation of $87,454, depreciation and amortization of $264,857, amortization of debt issuance costs of $101,649, amortization of right-of-use asset of $20,943, loss on extinguishment of debt of $269,396, and loss on revaluation of warrant liability of $75,342. Our net cash used in operating activities for the three months, ended March 31, 2025 consisted of a net loss of $3,333,694, less unfavorable changes in working capital of $738,676, share-based compensation of $78,880, depreciation and amortization of $242,004, amortization of right-of-use asset of $24,129, amortization of debt issuance costs of $765,793, loss on extinguishment of debt of $56,660.

*Investing Activities*

Our cash flow used in investing activities for the three months ended March 31, 2026 and 2025, was $443,380 and $316,210, respectively, an increase of $127,170. Our investing activities during the three months ended March 31, 2026, consisted of a net increase from proceeds of sale of assets of $0, and payments for oil and gas properties of $0, and property, plant and equipment of $443,380. Our investing activities during the three months ended March 31, 2025, consisted of a net increase from property, plant and equipment of $297,389, purchase of oil and gas development assets of $32,881 and an increase from proceeds of sale of assets of $14,060.

*Financing Activities*

Our net cash provided by (used in) financing activities for the three months ended March 31, 2026 and 2025, was $1,064,894 and ($24,050), respectively, a decrease of $1,088,944. Our cash flows from financing activities during the three months ended March 31, 2026, consisted of proceeds of lines of credit of $97,720, proceeds from notes payable of $227,830, proceeds from common stock $747,975, offset by payments on lines of credit of $2,319, payments on notes payable of $6,312. Our cash flows from financing activities during the three months ended March 31, 2025, consisted of proceeds of lines of credit of $5,339,736, and proceeds from notes payable of $143,237, offset by payments on lines of credit of $4,272,336, and payments on notes payable of $1,231,214, and payments on finance lease of $3,473.

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**ITEM 3 Quantitative and Qualitative Disclosures About Market Risk**

Not applicable

**ITEM 4 Controls and Procedures**

*Evaluation of Disclosure Controls and Procedures*

Management conducted an evaluation, under the supervision and participation of our principal executive officer and principal financial officer at March 31, 2026, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of March 31, 2026, pursuant to Exchange Act Rule 13a-15. Such disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company is accumulated and communicated to the appropriate management on a basis that permits timely decisions regarding disclosure. Based upon that evaluation, the Company's principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures as of March 31, 2026, were not effective to provide reasonable assurance that information required to be disclosed in the Company's periodic filings under the Exchange Act is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

*Changes in Internal Control Over Financial Reporting*

There were no changes in our internal controls over financial reporting during the quarter ended March 31, 2026, that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

*Limitations on the Effectiveness of Controls*

Our disclosure controls and procedures provide our management with reasonable assurances that our disclosure controls and procedures will achieve their objectives. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting can or will prevent all human error. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Furthermore, the design of a control system must reflect the fact that there are internal resource constraints, and the benefit of controls must be weighed relative to their corresponding costs. Because of the limitations in all control systems, no evaluation of controls can provide complete assurance that all control issues and instances of error, if any, within the Company are detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur due to human error or mistake. Additionally, controls, no matter how well designed, could be circumvented by the individual acts of specific persons within the organization. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all potential future conditions.

------

**PART II – OTHER INFORMATION**

**ITEM 1** **Legal Proceedings**

From time to time, we have in the past and may in the future become subject to legal proceedings or claims arising in the ordinary course of our business. Except as described below, we are not currently a party to any legal proceedings, the outcome of which, if determined adversely, we believe would individually or in aggregate have a material adverse effect on our business, financial condition or results of operations.

***Delwo***

On March 24, 2026, Darryl Delwo, the Company's former Chief Financial Officer, filed a complaint against the Company and its interim-CEO Marcus Laun in the Superior Court of California, County of Los Angeles, asserting claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and tortious interference with contract. Mr. Delwo alleges that the Company failed to increase his compensation as promised following the Company's October 2024 IPO and NASDAQ listing, failed to pay portions of his salary throughout 2024 and 2025, and refused to provide separation payments and benefits owed under his Executive Employment Agreement following his resignation for which he claims there was Good Reason on August 4, 2025. The complaint also alleges that Mr. Laun personally and deliberately induced the Board to withhold Mr. Delwo's compensation and contractual benefits, acting outside the scope of his employment and with malice. Mr. Delwo seeks damages of not less than $875,012.35 on each cause of action, plus attorneys' fees and pre-judgment interest, and has demanded a jury trial.

***KF Business Ventures***

On March 4, 2026, KF Business Ventures, LP ("KF Business"), a California limited partnership, filed a complaint against Company, Foreland Refining Corp., a Texas corporation and wholly owned subsidiary of the Company, and 2020 Resources LLC, a Delaware limited liability company and wholly owned subsidiary of the Company, in the Third Judicial District Court of Salt Lake County, Utah.

The complaint arises from several contractual arrangements between KF Business and the defendants. First, KF Business alleges that the Company breached an Advisory Agreement dated December 2, 2024, pursuant to which the Company agreed to pay KF Business $10,500 plus $10,500 of the Company's Common Stock per month in exchange for business advisory services. KF Business alleges that the Company has failed to pay $126,000 in cash and 41,096 shares of Common Stock owed through February 2026, with monthly payments continuing to accrue.

Second, KF Business alleges that the Company breached a Secured Promissory Note dated December 2, 2024, in the original principal amount of $1,200,000 (as amended, the "Sky Quarry KF Business Note"). The Sky Quarry KF Business Note was subsequently amended in April 2025 and July 2025 to extend the payment deadline to November 24, 2025, and to modify the interest rate to 30% per annum. KF Business alleges that the Company failed to make payment when due.

Third, KF Business alleges that Foreland Refining Corp. breached a Secured Promissory Note dated July 24, 2025 (the "Foreland Refining KF Business Note"), in the principal amount of $1,000,000, bearing interest at 30% per annum, with all unpaid principal and interest due on November 24, 2025. KF Business alleges that Foreland Refining Corp. failed to make payment when due.

Fourth, KF Business alleges that the Company and 2020 Resources LLC breached a Guaranty Agreement dated July 24, 2025, pursuant to which the Company and 2020 Resources LLC guaranteed payment of the Sky Quarry KF Business Note and the Foreland Refining KF Business Note.

In connection with these obligations, KF Business holds security interests in certain collateral pursuant to (i) a security agreement, which granted KF Business a security interest in two natural gas turbine power generators owned by 2020 Resources LLC, and (ii) a security agreement, which granted KF Business a security interest in various assets of 2020 Resources LLC, including accounts, equipment, inventory, and intellectual property.

The complaint asserts fifteen causes of action, including breach of contract, breach of the implied covenant of good faith and fair dealing and quasi contract/unjust enrichment/quantum meruit, and judicial foreclosure and replevin in connection with the security agreements. KF Business seeks relief, including damages in an aggregate amount of $2,200,000 in principal under the promissory notes, plus interest at 30% per annum, $126,000 in unpaid advisory fees and 41,096 shares of the Company's Common Stock, along with attorneys' fees, costs, pre- and post-judgment interest, and judicial foreclosure and possession of collateral.

The Company intends to vigorously defend against the claims asserted in this action. The litigation is in its early stages and no assurance can be given as to the timing or outcome of the proceeding. An unfavorable outcome could have a material adverse effect on the Company's business, financial condition, results of operations, and cash flows.

------

**ITEM 1A** **Risk Factors**

There has been no material change in the Company's risk factors that were described in the Company's Annual Report, except as described below.

**Risks Related to our Business**

***While we have entered the Exclusivity Agreement, the Company has not entered into any definitive agreement with respect to the Potential Transaction, and there can be no guarantee that that we will recognize the anticipated benefits of the Potential Transaction if consummated.***

In March 2026, the Company entered into an exclusivity agreement (the "Exclusivity Agreement") with a counterparty in connection with the Company's evaluation of a potential transaction involving the acquisition of digital infrastructure assets (the "Potential Transaction"). No definitive terms have been agreed upon, and the Company has not entered into any definitive agreement with respect to the Potential Transaction.

There can be no assurance that discussions will result in the execution of a definitive agreement or the consummation of the Potential Transaction, or any similar transaction. Furthermore, pursuant to the Exclusivity Agreement, the counterparty is permitted to consider alternative parties for a Potential Transaction. There can be no assurance that the counterparty will not enter into a definitive agreement with a party other than the Company in connection with the Potential Transaction. Nor can there be any assurance that, in the event the Company consummates the Potential Transaction, it will be on terms favorable to our stockholders or be otherwise accretive to stockholder value or that it will be completed in the time frame or in the manner anticipated.

**ITEM 2** **Unregistered Sales of Equity Securities and Use of Proceeds**

Not applicable.

**ITEM 3** **Defaults Upon Senior Securities**

There have been no events which are required to be reported under this Item.

**ITEM 4** **Mine Safety Disclosures**

Not applicable.

**ITEM 5** **Other Information**

Not applicable.

------

**ITEM 6** **Exhibits**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Exhibits

---

| | |
|:---|:---|
| **Exhibit No.** | **Description** |
| 10.1 | [Amended and Restated Sales Agreement, dated as of April 22, 2026, by and between the Company and Muriel Siebert & Co., LLC. (incorporated by reference to Exhibit 1.1 to the Current Report on Form 8-K filed on April 22, 2026).](http://www.sec.gov/Archives/edgar/data/1812447/000109690626000587/skyq_ex1z1.htm) |
| 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](skyq_ex31z1.htm). |
| 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](skyq_ex31z2.htm). |
| 32.1\*\* | [Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C §1350)](skyq_ex32z1.htm). |
| 32.2\*\* | [Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350)](skyq_ex32z2.htm). |
| 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 |

---

\* Filed herewith.

\*\* Furnished herewith.

------

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | **Sky Quarry Inc.** | **Sky Quarry Inc.** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dated: May 15, 2026 | */s/* |  |
|  | By: | &nbsp;&nbsp;Marcus Laun |
|  | Its: | &nbsp;&nbsp;Chief Executive Officer |

---

------

## Exhibit 31.1

**EXHIBIT 31.1**

**CERTIFICATION**

**Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**

I, Marcus Laun, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.I have reviewed this Quarterly Report on Form 10-Q of Sky Quarry Inc. (the "registrant");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 15, 2026

---

| |
|:---|
| &nbsp;&nbsp;*/s/ Marcus Laun&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*  |
| &nbsp;&nbsp;Name: Marcus Laun |
| &nbsp;&nbsp;Title: **Interim Chief Executive Officer and President** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Principal Executive Officer) |

---

## Exhibit 31.2

**EXHIBIT 31.2**

**CERTIFICATION**

**Pursuant to** 

**Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**

I, Marcus Laun, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.I have reviewed this Quarterly Report on Form 10-Q of Sky Quarry Inc. (the "registrant");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 15, 2026

---

| |
|:---|
| &nbsp;&nbsp;*/s/ Marcus Laun&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*  |
| &nbsp;&nbsp;Name: Marcus Laun |
| &nbsp;&nbsp;Title: **Interim Chief Financial Officer** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Principal Financial and Accounting Officer) |

---

## Exhibit 32.1

**EXHIBIT 32.1**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Quarterly Report of Sky Quarry Inc. (the "Company") on Form 10-Q for the quarter ended March 31, 2026 (the "Report"), Marcus Laun, Interim Chief Executive Officer and President of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | |
|:---|:---|
| Date: May 15, 2026 | Date: May 15, 2026 |
|  | */s/ Marcus Laun* |
| Name: | Marcus Laun |
| Title: | **Interim Chief Executive Officer and President** |
|  | (Principal Executive Officer) |

---

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

## Exhibit 32.2

**EXHIBIT 32.2**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Quarterly Report of Sky Quarry Inc. (the "Company") on Form 10-Q for the quarter ended March 31, 2026 (the "Report"), Marcus Laun, Interim Chief Financial Officer of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | |
|:---|:---|
| Date: May 15, 2026 | Date: May 15, 2026 |
|  | */s/ Marcus Laun* |
| Name: | Marcus Laun |
| Title: | **Interim Chief Financial Officer** |
|  | (Principal Financial and Accounting |
|  | Officer) |

---

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.