SKYQ.NASDAQSky Quarry INC

S-1/A: Sky Quarry Files S-1/A for $8.1M Equity Line Amid Nasdaq Delisting Threat

Sentiment:

Registration Statement Amendment (S-1/A)

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Sky Quarry Inc. filed an S-1/A to register up to 13.8 million shares for resale by a selling stockholder and to enable a potential $8.125 million equity line of credit, while facing a Nasdaq delisting notice.

Capital raisePotential to raise up to $8,125,000 in gross proceeds through the sale of common stock to Varie Asset Management, LLC under a Purchase Agreement over a 24-month period.Received $150,000 from Varie Asset Management, LLC for a 12% convertible promissory note and a warrant.Proceeds from the Purchase Agreement are intended for debt repayment (25% of amounts over $1M) and working capital.
Worse than expectedReceived a Nasdaq notification of non-compliance with the minimum bid price requirement ($1.00 per share), with the stock trading at $0.4896 as of August 25, 2025, indicating a significant risk of delisting.The company carries substantial high-interest debt, with an effective interest rate of 31% per annum on $4,162,187 outstanding with Libertas Funding, LLC.The auditor's report includes an explanatory paragraph regarding the company's ability to continue as a going concern, signaling severe financial uncertainty.The potential capital raise through the Purchase Agreement, while necessary, involves significant potential dilution to existing shareholders, estimated at up to 36.8% if the full amount is raised at the minimum price.

Summary

  • Registered 13,834,230 shares of common stock for resale by Varie Asset Management, LLC, including shares from a convertible note, a warrant, and a Purchase Agreement.
  • Will not receive proceeds from the Selling Stockholder's resale, but may receive up to $8,125,000 in gross proceeds from direct sales to the Selling Stockholder under the Purchase Agreement.
  • Proceeds from direct sales are intended for general corporate and working capital purposes, with 25% of amounts exceeding $1,000,000 allocated to existing debt obligations.
  • Operates as an oil production, refining, and development-stage environmental remediation company, focusing on recycling waste asphalt shingles and remediating oil-saturated sands using its proprietary ECOSolv technology.
  • Received a Nasdaq notification on March 28, 2025, for non-compliance with the minimum bid price requirement ($1.00 per share), with a deadline of September 28, 2025, to regain compliance.
  • The common stock closed at $0.4896 on The Nasdaq Capital Market on August 25, 2025.
  • Qualifies as an emerging growth company and a smaller reporting company, allowing for reduced public company reporting requirements.

Sentiment

Score: 3

Explanation: The company faces severe financial distress, evidenced by a Nasdaq delisting threat and an auditor's going concern warning, coupled with high-interest debt. While the potential $8.125 million capital raise offers a lifeline, it comes with substantial dilution. The innovative environmental technology is a positive, but its financial stability is highly questionable, indicating a high-risk investment.

Positives

  • Potential access to up to $8,125,000 in capital through the Purchase Agreement, providing a funding source for operations and debt repayment.
  • Retain flexibility to control the timing and amount of sales to the Selling Stockholder under the Purchase Agreement.
  • Ability to terminate the Purchase Agreement at any time without fee, penalty, or cost.
  • Proprietary ECOSolv technology offers a sustainable solution for recycling waste asphalt shingles and remediating oil-saturated sands, reducing landfill dependence and reliance on virgin crude oil.

Negatives

  • Significant potential for dilution to existing stockholders due to the issuance and resale of up to 13,834,230 shares.
  • Will not receive any proceeds from the immediate sale of shares by the Selling Stockholder.
  • Faces a Nasdaq minimum bid price non-compliance issue, risking delisting if not resolved by September 28, 2025.
  • Carries substantial debt with an effective interest rate of 31% per annum on $4,162,187 outstanding with Libertas Funding, LLC as of July 31, 2025.
  • Reliance on future financing, with no assurance of securing sufficient funds or that terms will not be prohibitively dilutive.
  • The auditor's report contains an explanatory paragraph regarding the company's ability to continue as a going concern.

Risks

  • The sale or issuance of common stock to the Selling Stockholder may cause substantial dilution to the interests of other holders of common stock.
  • Sales of common stock by the Selling Stockholder, or the anticipation of such sales, could cause the trading price of common stock to decrease.
  • May require additional financing to sustain operations, and the terms of subsequent financings may adversely impact stockholders.
  • Risk of delisting from Nasdaq Capital Market due to failure to meet the minimum bid price requirement of $1.00 per share.
  • Delisting could materially impair stockholders' ability to buy and sell common stock and negatively impact the market price and capital raising ability.
  • Management will have broad discretion over the use of net proceeds from stock sales, which may not align with investor expectations or yield successful returns.
  • Forward-looking statements are inherently subject to risks and uncertainties, and actual results may differ materially from projections.

Future Outlook

The company intends to finish retrofitting its oil sands remediation facility in PR Spring, Utah, in fiscal 2025 to recycle waste asphalt shingles and produce oil and asphalt paving aggregate. It also expects to complete the build-out of an initial modular asphalt shingle recycling facility in fiscal 2025. Any net proceeds received from the Purchase Agreement are planned for general corporate and working capital purposes, with a portion dedicated to debt repayment. The company does not anticipate paying cash dividends in the near future, intending to retain all available funds for business operations.

Management Comments

  • "We are an oil production, refining, and development-stage environmental remediation company 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 expect the recycling and production of oil from asphalt shingles 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."
  • "Our management will have broad discretion as to the use of the net proceeds from our sale of shares of common stock to the Selling Stockholder, and we could use them for purposes other than those contemplated at the time of commencement of this offering."

Industry Context

The company operates in the environmental remediation and oil production sectors, specifically targeting waste asphalt shingle recycling and oil-saturated sand remediation. This aligns with growing global demand for sustainable practices and resource recovery, aiming to reduce landfill dependence and reliance on virgin crude oil. The modular facility design suggests a strategy for localized deployment in areas with high waste concentrations, potentially addressing a significant environmental challenge while creating valuable products. However, the capital-intensive nature of such projects and the current financial distress highlight the challenges of scaling innovative environmental technologies.

Comparison to Industry Standards

  • NA

Related Party Transactions

  • Secured promissory note for $1,200,000 issued to KF Business Ventures, LP on December 2, 2024, convertible at $0.83 per share, with an associated 5-year warrant for 1,200,000 shares.
  • Advisory agreement with KF Business Ventures, LP for $21,000 per month (half cash, half stock), with 10,274 shares issued monthly.
  • Promissory note for $2,000,000 issued to Bengt Eriksson, convertible at $4.80 per share, with interest payments made in shares.
  • Issuance of common stock to directors (Leo B. Womack, Todd Palin, Matthew Flemming) for services rendered.

Stakeholder Impact

  • **Shareholders**: Face significant potential for dilution from the issuance of up to 13,834,230 shares, and a potential decrease in share price due to sales by the Selling Stockholder. The risk of delisting from Nasdaq could severely impair liquidity and investment value.
  • **Creditors**: May benefit from potential debt repayment using proceeds from the Purchase Agreement, which could improve the company's ability to meet its obligations, particularly the high-interest Libertas Funding debt.
  • **Employees**: Continued operations and potential growth from capital infusion could secure employment, but the company's financial instability and the going concern warning pose significant risks to job security.
  • **Customers/Suppliers**: Continued operations and facility build-out could benefit customers (for refined products) and suppliers (for materials/services), but the company's financial risks could disrupt business relationships and product/service delivery.

Next Steps

  • Finish retrofitting the oil sands remediation facility in PR Spring, Utah, in fiscal 2025.
  • Complete the build-out of the initial modular asphalt shingle recycling facility in fiscal 2025.
  • Regain compliance with Nasdaq's minimum bid price requirement by September 28, 2025, to avoid delisting.
  • Seek SEC effectiveness for the registration statement to commence sales under the Purchase Agreement.
  • Management will exercise broad discretion over the allocation and use of net proceeds from future stock sales.

Key Dates

DateDescription
May 3, 2022Bench testing of ECOSolv technology completed.
August 30, 2022Bench testing of ECOSolv technology completed.
April 10, 2023Issued 33,334 shares of common stock to Jody R. Samuels, Esq. for services rendered.
May 22, 2023Issued 10,000 shares of common stock in connection with a warrant exercise by Keegan Wetzel for gross proceeds of $37,500.
May 22, 2023Issued 10,000 shares of common stock in connection with a warrant exercise by Ruth York for gross proceeds of $37,500.
October 25, 2023Foreland Refining Corporation entered into an agreement of sale of future receivables with Libertas Funding, LLC for $1,731,660.
January 11, 2024Foreland Refining Corporation entered into an agreement of sale of future receivables with Libertas Funding, LLC for $1,268,582.
January 18, 2024Foreland Refining Corporation entered into an agreement of sale of future receivables with Libertas Funding, LLC for $4,224,000.
January 30, 2024Issued 4,000 shares of common stock to Smart Sales for services rendered.
February 19, 2024Foreland Refining Corporation entered into an agreement of sale of future receivables with Libertas Funding, LLC for $1,386,000.
March 23, 2024Issued 3,802 shares of common stock to Bengt Eriksson as payment of $18,250 in interest due on an outstanding note payable.
May 1, 2024Issued 33,334 shares of common stock to Jody R. Samuels, Esq. for services rendered.
May 16, 2024Foreland Refining Corporation entered into an agreement of sale of future receivables with Libertas Funding, LLC for $665,000.
May 17, 2024Issued a five-year warrant for the purchase of 375,000 shares of common stock to Libertas Funding, LLC.
May 17, 2024Issued a three-year warrant for the purchase of 100,000 shares of common stock to Lendspark Corporation.
June 12, 2024Issued a five-year warrant for the purchase of 50,000 shares of common stock.
June 24, 2024Commencement of period during which 1,063,690 shares of common stock were issued from warrant exercises.
June 30, 2024Issued 18,593 shares of common stock to Bengt Eriksson as payment of $89,260 in interest due on an outstanding note payable.
August 15, 2024End of period during which 1,063,690 shares of common stock were issued from warrant exercises.
August 27, 2024Issued a five-year warrant for the purchase of 375,000 shares of common stock to Libertas Funding, LLC.
August 27, 2024Issued a three-year warrant for the purchase of 100,000 shares of common stock to Lendspark Corporation.
October 8, 2024Issued a three-year warrant for the purchase of 15,000 shares of common stock.
October 9, 2024Issued 1,118,005 shares of common stock for gross proceeds of $6,708,030 under Regulation A.
October 10, 2024Issued 232,461 shares of common stock in connection with the conversion of 369,211 shares of series B preferred stock.
November 18, 2024Issued 60,000 shares of common stock to Outside The Box for services rendered.
November 18, 2024Issued 10,511 shares of common stock to General Research GmbH for services rendered.
November 26, 2024Issued 38,333 shares of common stock to MZ Group for services rendered.
December 2, 2024Issued a secured promissory note in the principal amount of $1,200,000 to KF Ventures.
December 2, 2024Issued a five-year warrant for the purchase of 1,200,000 shares of common stock to KF Ventures.
December 2, 2024Entered into an advisory agreement with KF Ventures.
December 3, 2024Issued 27,778 shares of common stock to Smart Sales for services rendered.
December 2024Issued 10,274 shares of common stock to KF Ventures pursuant to the business advisory agreement.
December 31, 2024Issued 83,334 shares of common stock to Matthew Flemming for director services rendered.
January 10, 2025Issued 83,334 shares of common stock to Leo B. Womack for director services rendered.
January 12, 2025Issued 10,274 shares of common stock to KF Business Ventures for services rendered.
February 7, 2025Issued 25,000 shares of common stock to General Research GmbH for services rendered.
February 10, 2025Issued 200,000 shares of common stock to Outside The Box for services rendered.
February 12, 2025Issued 10,274 shares of common stock to KF Business Ventures for services rendered.
February 28, 2025Issued 83,334 shares of common stock to Todd Palin for director services rendered.
March 12, 2025Issued 10,274 shares of common stock to KF Business Ventures for services rendered.
March 16, 2025Issued 500,000 shares of common stock to Michael Kahari for services rendered.
March 16, 2025Issued 108,334 shares of common stock to Bengt Eriksson as payment of $92,083.90 in interest due on an outstanding note payable.
March 28, 2025Received a notification letter from Nasdaq regarding non-compliance with the minimum bid price requirement.
April 2, 2025Issued 1,184,593 shares of common stock to Allegheny Manufacturing LLC for services rendered.
April 12, 2025Issued 10,274 shares of common stock to KF Business Ventures for services rendered.
April 29, 2025Issued 16,692 shares of common stock to General Research GmbH for services rendered.
April 29, 2025Issued 40,300 shares of common stock to MZ Group for services rendered.
April 29, 2025Issued 38,089 shares of common stock to Skeleton Crrew Labs LLC for services rendered.
April 29, 2025Issued 25,000 shares of common stock to SDK Sentinel LLC for services rendered.
April 30, 2025Issued 25,000 shares of common stock to SDK Sentinel LLC for services rendered.
May 5, 2025Issued 40,000 shares of common stock to Lucas Ventures for services rendered.
May 12, 2025Issued 10,274 shares of common stock to KF Business Ventures for services rendered.
May 22, 2025Entered into a note purchase agreement with Varie Asset Management, LLC for $150,000, including a Convertible Note and a Warrant.
May 22, 2025Issued 100,000 shares of common stock to JRS Law for services rendered.
June 1, 2025Issued 150,000 shares of common stock to Leo B. Womack for director services rendered.
June 1, 2025Issued 150,000 shares of common stock to Todd Palin for director services rendered.
June 1, 2025Issued 150,000 shares of common stock to Matthew Flemming for director services rendered.
June 1, 2025Issued 83,334 shares of common stock to JRS Law for services rendered.
June 12, 2025Issued 10,274 shares of common stock to KF Business Ventures for services rendered.
July 9, 2025Entered into a Purchase Agreement with Varie Asset Management, LLC for up to $8,125,000 of common stock.
July 9, 2025Issued 366,260 Initial Commitment Shares to Varie Asset Management, LLC.
July 9, 2025Entered into a Registration Rights Agreement with Varie Asset Management, LLC.
July 16, 2025Date used for outstanding shares calculation in the dilution table (22,480,036 shares).
July 31, 2025Total outstanding debt for Libertas Funding, LLC agreements was $4,162,187.
August 22, 2025Date of Tanner LLC's consent report.
August 25, 2025Closing price of common stock on The Nasdaq Capital Market was $0.4896.
August 25, 2025Date used for outstanding shares calculation (22,480,036 shares).
August 26, 2025Filing date of Amendment No. 1 to Form S-1.
September 28, 2025Deadline to regain compliance with Nasdaq Listing Rule 5550(a)(2) minimum bid price requirement.
December 31, 2025First semi-annual interest payment due on the Convertible Note.
May 22, 2027Maturity date for the Convertible Note.

Recommendation

strong sell

The company faces severe financial distress, evidenced by a Nasdaq delisting notice for failing to meet the minimum bid price, an auditor's going concern warning, and substantial high-interest debt. While the potential $8.125 million equity line offers a funding source, it comes with significant dilution risk (up to 36.8%). The current stock price is well below the minimum required for Nasdaq compliance and the conversion/exercise prices of recent financing instruments. The innovative technology is overshadowed by the immediate and critical financial challenges, making the stock a high-risk, speculative investment with a strong likelihood of further value erosion.

Keywords

SEC Filing, S-1/A, Equity Line, Common Stock, Dilution, Nasdaq, Delisting Risk, Environmental Remediation, Waste Asphalt Recycling, ECOSolv Technology, Oil Production, Capital Raise, Varie Asset Management, Convertible Note, Warrant, Purchase Agreement, Debt Financing

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