DEF: Sky Quarry Seeks Shareholder Approval for Reverse Split, Capital Boost

Sky Quarry, Inc. is seeking shareholder approval for a significant increase in authorized shares and a potential reverse stock split to maintain its Nasdaq listing, alongside director elections and stock plan amendments.

Summary

• Sky Quarry, Inc. will hold its 2025 Annual Meeting of Stockholders on November 4, 2025, to vote on five key proposals.
• Shareholders will vote to elect four directors: Marcus Laun, Matthew Flemming, Leo Womack, and Todd Palin.
• A proposal seeks to amend the company's certificate of incorporation to increase authorized common stock from 100,000,000 shares to 2,000,000,000 shares, a 1900% increase.
• The Board is requesting discretion to implement a reverse stock split in a range from one-for-two (1:2) up to one-for-twenty five (1:25) on or before April 30, 2027, primarily to regain compliance with Nasdaq's $1.00 minimum bid price requirement.
• The company received a Nasdaq deficiency letter on March 28, 2025, due to its stock price falling below $1.00, with a compliance date of September 28, 2025. The closing bid price was $0.4847 on September 15, 2025.
• Shareholders will also vote to ratify an amendment to the 2020 Stock Plan, increasing authorized shares for issuance from 1,666,667 to 4,000,000.
• The selection of Tanner LLC as the independent registered public accounting firm for the fiscal year ending December 31, 2025, is also up for ratification.
• As of September 10, 2025, there were 23,314,603 shares of common stock outstanding.

Sentiment

Score: 4

Explanation: The filing presents a mixed bag. While the company is taking steps to address its Nasdaq listing and ensure future flexibility for financing and employee incentives, the underlying reason for these actions (low stock price, need for reverse split, significant potential dilution) points to considerable challenges and weak market performance. The proactive governance measures are positive, but the financial implications of the proposals are concerning for existing shareholders.

Positives

• The company is actively addressing its Nasdaq listing deficiency by proposing a reverse stock split.
• The proposed increase in authorized shares and the amendment to the 2020 Stock Plan provide flexibility for future financing, acquisitions, and employee incentives.
• The Board has an independent Chairman (Matthew Flemming) and an audit committee with a financial expert (Matthew Flemming), indicating a commitment to corporate governance.
• The company has adopted a Code of Ethics and an Insider Trading Policy.

Negatives

• The company's common stock bid price of $0.4847 (as of September 15, 2025) is significantly below Nasdaq's $1.00 minimum requirement, indicating poor market performance.
• The necessity of a reverse stock split often signals underlying issues with stock valuation and can sometimes lead to further price declines post-split.
• The substantial increase in authorized shares (1900%) and the increase in shares for the 2020 Stock Plan could lead to significant dilution for existing shareholders if new shares are issued.
• The company does not yet have a standing nominating and corporate governance committee, though it plans to establish one.

Risks

• Failure to regain compliance with Nasdaq's $1.00 minimum bid price requirement by the September 28, 2025, compliance date (or extended period) could lead to delisting.
• There is no assurance that the market price for the common stock will react proportionally to the reverse stock split, and the price may not remain at or above $1.00.
• The future issuance of additional common stock from the increased authorized shares or the expanded 2020 Stock Plan could dilute the voting rights, earnings per share, and book value per share of existing stockholders.
• The reverse stock split will reduce the number of outstanding shares, which may adversely affect the liquidity of the common stock.
• As an oil production, refining, and development-stage environmental remediation company, Sky Quarry faces inherent risks associated with technology deployment, market acceptance of recycled products, and commodity price fluctuations.
• Matthew Flemming was an executive officer of HII Technologies, Inc. in 2016, and that company subsequently entered into a plan of reorganization under Chapter 11, which could be a past risk indicator for management.

Future Outlook

The company intends to finish retrofitting its PR Spring Facility in the next twelve months to recycle waste asphalt shingles using its ECOSolv technology to produce and sell oil and asphalt paving aggregate. It also plans to continue developing regional modular Asphalt Shingle Recycling (ASR) Facilities. The Board believes a reverse stock split will increase the stock price, improve marketability and liquidity, and help maintain its Nasdaq listing. The increase in authorized shares is intended to provide flexibility for future financings or acquisition transactions, stock dividends or splits, and employee benefit plans.

Management Comments

• "Your vote is very important. We encourage you to read the Proxy Statement and vote your shares as soon as possible." Marcus Laun, Interim CEO and President.
• "On behalf of the Board of Directors, thank you for your continued confidence and investment in Sky Quarry." Marcus Laun, Interim CEO and President.
• "Our board believes that, at this time, having a non-executive Chairman is the appropriate leadership structure for the Company." Board of Directors.
• "The Board believes that approval of the Share Authorization Proposal is crucial predominantly to ensure that the Company has sufficient authorized shares to meet its existing obligations to issue shares of Common Stock as and if they become due, and to secure needed financing without incurring the delay and expense of holding additional stockholders meetings." Board of Directors.
• "The Board of Directors believes that a reverse stock split will increase the price per share of the common stock and assist in meeting the Bid Price Requirement for maintaining Nasdaq listing." Board of Directors.
• "The Board does not intend as part of the Reverse Stock Split to reduce the amount of the Companys authorized shares of common stock." Board of Directors.
• "The Board confirms that the contemplated Reverse Stock Split is not and will not be the first step in a series of plans or proposals of a going private transaction within the meaning of Rule 13e-3 of the Exchange Act." Board of Directors.

Industry Context

Sky Quarry operates in the oil production, refining, and environmental remediation sectors, specifically targeting waste asphalt shingle recycling and oil-saturated sands/soils. This positions the company at the intersection of traditional energy and emerging sustainable technologies. The focus on recycling waste asphalt shingles aligns with broader industry trends towards circular economy principles and waste reduction, potentially offering a more sustainable source of refined crude products compared to virgin crude oil extraction. The development of modular ASR facilities suggests a strategy for decentralized processing, which could be a competitive advantage in waste management logistics. However, the company's current low stock price and Nasdaq compliance issues indicate challenges in gaining investor confidence or achieving profitability in these capital-intensive sectors.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Legal Proceedings

• Matthew Flemming was an executive officer of HII Technologies, Inc. in 2016, and that company subsequently entered into a plan of reorganization under Chapter 11.
• No pending litigation or proceeding involving any of our directors, officers, employees or agents where indemnification will be required or permitted.

Related Party Transactions

• No related party transactions exceeding $120,000 or one percent of average total assets have occurred since the beginning of the 2023 fiscal year, and none are currently proposed.
• Future related-party transactions will be approved by the audit committee or a similar committee of independent directors.

Stakeholder Impact

• Shareholders face potential for significant dilution from increased authorized shares and expanded stock plan. There is a risk of further stock price decline or volatility post-reverse split, but also the benefit of maintaining Nasdaq listing.
• Employees may benefit from the expanded 2020 Stock Plan, which provides more shares for equity-based compensation, potentially aiding in attraction and retention of talent.
• Management gains increased flexibility for financing and acquisitions. Marcus Laun's employment agreement includes severance benefits.
• Regulatory bodies are impacted by the company's efforts to comply with Nasdaq listing rules and SEC disclosure requirements.
• Customers and suppliers are not directly impacted by this filing, but successful implementation of recycling technologies could affect supply chains for asphalt and crude products.

Next Steps

• Hold the 2025 Annual Meeting of Stockholders on November 4, 2025, to vote on the proposals.
• If approved, file the amendment to the certificate of incorporation promptly after the Annual Meeting to increase authorized shares.
• If approved, the Board may implement a reverse stock split on or before April 30, 2027, to regain Nasdaq compliance.
• If approved, the amendment to the 2020 Stock Plan will enable continued stock-based grants.
• File a Current Report on Form 8-K with the SEC within four business days after the Annual Meeting to disclose preliminary or final voting results.
• Establish a standing nominating and corporate governance committee once additional independent directors are appointed.
• Finish retrofitting the PR Spring Facility in the next twelve months.
• Continue to develop regional model Asphalt Shingle Recycling (ASR) Facilities.

Key Dates

Recommendation

The company is at a critical juncture, facing potential delisting from Nasdaq due to a low stock price. The proposed reverse stock split is a necessary step to address this, but its effectiveness in sustaining a higher price is uncertain. While the increase in authorized shares provides flexibility for future growth and financing, it also carries a significant risk of dilution for existing shareholders. The company's business model in environmental remediation and oil production has long-term potential, but the immediate financial health and market perception are weak. A "hold" recommendation is appropriate as investors should monitor the outcome of the shareholder votes, the actual implementation and market reaction to the reverse stock split, and the company's progress in its operational initiatives before making further investment decisions. The current situation presents high risk and uncertainty, but the strategic moves to secure financing and maintain listing are essential for survival and future potential.

Keywords

Sky Quarry, SEC Filing, DEF 14A, Proxy Statement, Annual Meeting, Reverse Stock Split, Nasdaq Listing, Authorized Shares, Stock Plan, Corporate Governance, Oil Production, Environmental Remediation, Asphalt Recycling, ECOSolv Technology, Shareholder Vote, Dilution, Marcus Laun, Matthew Flemming, Tanner LLC