Sky Quarry Adds Goodwill Impairment Risk to 10-K/A Filing

TL;DR

**SKYQ's new goodwill impairment risk is a red flag for a development-stage company, signaling potential future financial hits if their ambitious recycling projects don't pan out.**

AI Summary

Sky Quarry Inc. (SKYQ) filed a 10-K/A on August 25, 2025, primarily to add a new risk factor concerning potential goodwill impairment. The company, a development-stage environmental remediation firm, focuses on recycling waste asphalt shingles and remediating oil-saturated sands using its proprietary ECOSolv technology. SKYQ aims to retrofit its PR Spring Facility in fiscal 2025 to process waste asphalt shingles into oil and asphalt paving aggregate, with an estimated remaining capital cost of $4.0 million for completion, following $4.7 million already invested since September 16, 2020. Bench testing of the ECOSolv process demonstrated up to 95% hydrocarbon recovery and 99% solvent recovery from waste asphalt shingles. The company also owns the Eagle Springs Refinery through its subsidiary Foreland, which refines heavy crude oil. As of October 10, 2024, the aggregate market value of common stock held by non-affiliates was $58,964,645, with 19,986,338 shares outstanding as of March 31, 2025. The filing did not include updated revenue or net income figures, as its scope was limited to adding a risk factor.

Why It Matters

This 10-K/A filing, while seemingly minor, highlights a critical financial risk for Sky Quarry Inc. (SKYQ) investors: potential goodwill impairment. For a development-stage company heavily reliant on future project success, any write-down of goodwill could significantly impact its balance sheet and investor confidence. The company's focus on sustainable crude products and asphalt recycling positions it in a growing market, but the added risk factor underscores the inherent uncertainties in scaling its ECOSolv technology and retrofitting the PR Spring Facility, potentially affecting its competitive standing against established players in the recycling and refining sectors.

Risk Assessment

Risk Level: medium — The risk level is medium because Sky Quarry Inc. is a development-stage company with significant capital expenditures, including $4.7 million already invested in the PR Spring Facility retrofit and an estimated $4.0 million remaining. The addition of a specific risk factor, "Our goodwill may be subject to impairment which could adversely affect our financial condition," indicates a recognized vulnerability that could lead to substantial financial write-downs if their projects, like the ECOSolv process, do not achieve expected commercial viability.

Analyst Insight

Investors should exercise caution and scrutinize Sky Quarry's future financial statements for any signs of goodwill impairment. Monitor the progress of the PR Spring Facility retrofit and the commercial deployment of the ECOSolv technology, as successful execution is crucial to mitigating this newly disclosed risk and justifying the company's valuation.

Key Numbers

• $58.96M — Market Value of Non-Affiliate Common Stock (As of October 10, 2024, indicating public float.)
• 19.99M — Shares Outstanding (As of March 31, 2025, representing total shares.)
• $4.7M — PR Spring Facility Investment (Capital invested since September 16, 2020, for retrofit.)
• $4.0M — Estimated Remaining Retrofit Costs (Capital needed to complete PR Spring Facility retrofit in fiscal 2025.)
• 95% — Hydrocarbon Recovery Rate (Achieved in bench testing of ECOSolv process from waste asphalt shingles.)
• 99% — Solvent Recovery Rate (Achieved in bench testing of ECOSolv process, indicating efficiency.)
• 5,930 acres — Asphalt Bitumen Leases (Area in PR Spring region, Utah, held by 2020 Resources.)
• 2025 — Fiscal Year for Retrofit Completion (Target for finishing PR Spring Facility retrofit.)

Key Players & Entities

• Sky Quarry Inc. (company) — Registrant filing the 10-K/A
• SEC (regulator) — Securities and Exchange Commission
• $58,964,645 (dollar_amount) — Aggregate market value of common stock held by non-affiliates as of October 10, 2024
• 19,986,338 (dollar_amount) — Shares of common stock outstanding as of March 31, 2025
• ECOSolv (company) — Proprietary technology for oil separation
• PR Spring Facility (company) — Facility being retrofitted for asphalt shingle recycling
• $4.7 million (dollar_amount) — Investment in PR Spring facility since September 16, 2020
• $4.0 million (dollar_amount) — Estimated remaining capital costs for PR Spring facility retrofit
• Foreland (company) — Wholly-owned subsidiary operating Eagle Springs Refinery
• Nasdaq Capital Market (regulator) — Exchange where SKYQ Common Stock is registered

FAQ

Risk Factors

• Potential Goodwill Impairment [medium — financial]: The company has added a new risk factor concerning potential goodwill impairment. This risk arises from the possibility that the carrying value of goodwill on the balance sheet may exceed its fair value, potentially requiring a significant write-down. This is particularly relevant for a development-stage company with substantial investments in technology and facilities.
• PR Spring Facility Retrofit Delays [medium — operational]: The PR Spring Facility retrofit, crucial for processing waste asphalt shingles, is targeted for completion in fiscal 2025. Delays in completing the remaining $4.0 million in capital costs could impact the company's ability to generate revenue from this new business segment and achieve its operational goals.
• ECOSolv Technology Performance [medium — operational]: While bench testing of the ECOSolv process showed high hydrocarbon (95%) and solvent (99%) recovery rates, actual performance at commercial scale may differ. The success of the business model is heavily reliant on the consistent and efficient operation of this proprietary technology.
• Dependence on Virgin Crude Oil Prices [low — market]: The company's operations, including refining heavy crude oil and producing oil from waste asphalt shingles, are indirectly linked to the volatility of virgin crude oil prices. Fluctuations in these prices can impact the economic viability of its products and the demand for its remediation services.
• Environmental Remediation Regulations [medium — regulatory]: As an environmental remediation firm, Sky Quarry Inc. is subject to various environmental laws and regulations. Changes in these regulations or non-compliance could lead to significant fines, operational disruptions, or reputational damage.

Industry Context

Sky Quarry Inc. operates in the environmental remediation and oil production/refining sectors. The environmental remediation space is driven by increasing landfill costs and regulatory pressures to recycle waste materials. The oil sector is characterized by volatile commodity prices and a global shift towards more sustainable energy sources and recycling of byproducts.

Regulatory Implications

As an environmental remediation company, Sky Quarry Inc. faces significant regulatory oversight concerning waste handling, emissions, and land use. Compliance with environmental laws is critical to its operations and can impact project timelines and costs. The company's focus on recycling also aligns with broader governmental initiatives promoting a circular economy.

What Investors Should Do

1. Monitor PR Spring Facility Retrofit Progress
2. Evaluate ECOSolv Technology Scalability
3. Assess Goodwill Impairment Risk
4. Track Oil and Asphalt Market Dynamics

Key Dates

• 2020-09-16: Acquisition of 2020 Resources and 2020 Canada — This acquisition brought the PR Spring Facility and asphalt bitumen leases under Sky Quarry's control, forming a core part of its future operations.
• 2022-08-30: Completion of ECOSolv bench testing (one instance) — Demonstrated high hydrocarbon and solvent recovery rates, validating the core technology for waste asphalt shingle processing.
• 2022-05-03: Completion of ECOSolv bench testing (another instance) — Further validated the ECOSolv technology's effectiveness in separating oil from waste asphalt shingles.
• 2022-09-30: Acquisition of Foreland — Expanded the company's operations into heavy crude oil refining through the Eagle Springs Refinery.
• 2025-03-31: Shares Outstanding as of — Provides the total number of shares outstanding for valuation and per-share calculations.
• 2024-10-10: Market Value of Common Stock Held by Non-Affiliates — Indicates the public float and market capitalization of the company's publicly traded shares.

Glossary

ECOSolv technology

A proprietary solvent-based process developed by Sky Quarry Inc. for separating oil from oily sands and waste asphalt shingles. (This is the core technology the company is deploying for its environmental remediation and recycling operations.)

Goodwill

An intangible asset that arises when one company acquires another for a price greater than the fair market value of its net assets. (The company has added a new risk factor related to potential impairment of goodwill, indicating a significant acquisition or valuation concern.)

Development-stage company

A company that is still in the process of developing a product or service, often with limited or no revenue. (Sky Quarry Inc. is classified as a development-stage company, highlighting its focus on future growth and potential risks associated with unproven operations.)

Asphalt Shingle Recycling (ASR)

The process of breaking down waste asphalt shingles into their constituent components, such as bitumen and aggregate, for reuse. (This is a key business initiative for Sky Quarry Inc., aiming to create value from waste materials.)

Bitumen

A viscous, black, tar-like form of petroleum, often used in road construction. (Sky Quarry Inc. owns leases for asphalt bitumen and plans to produce asphalt paving aggregate from waste shingles.)

Heavy crude oil

Crude oil that has a high specific gravity and, as a result, has a high viscosity and low API gravity. (Sky Quarry Inc.'s subsidiary, Foreland, refines heavy crude oil at the Eagle Springs Refinery.)

Year-Over-Year Comparison

This 10-K/A filing is an amendment primarily focused on adding a new risk factor related to potential goodwill impairment. It does not appear to contain updated financial performance metrics such as revenue or net income compared to the previous filing. The core business operations and capital investment plans for the PR Spring Facility remain consistent with prior disclosures.

Key Financial Figures

• $0.0001 — ch registered Common Stock, par value $0.0001 SKYQ Nasdaq Capital Market Securitie
• $15.72 billion — materials market size was estimated at $15.72 billion in 2023 and is anticipated to grow at a
• $1.2 — 2021, President Biden signed into law a $1.2 trillion bipartisan package for new fed
• $110 billion — il, airports, ports and waterways. Over $110 billion of new funds is allocated toward improv
• $2.6 billion — ams. Under the infrastructure package, $2.6 billion will be invested in roads and bridges i
• $28.2 billion — ucture package, California will receive $28.2 billion to build and repair more than 14,220 mi
• $4.7 million — ingles. We have invested approximately $4.7 million since September 16, 2020 at the PR Spri
• $4.0 million — n of the retrofit will be approximately $4.0 million. We intend to finish retrofitting the P
• $6,380 — and requires payment of annual rent of $6,380 per year and minimum royalties of $63,8
• $63,800 — 6,380 per year and minimum royalties of $63,800 per year. Once production from the bitu

Filing Documents

• skyq-20241231_10kz.htm (10-K/A) — 1355KB
• skyq_ex31z1.htm (EX-31.1) — 10KB
• skyq_ex31z2.htm (EX-31.2) — 10KB
• skyq_ex32z1.htm (EX-32.1) — 5KB
• skyq_ex32z2.htm (EX-32.2) — 5KB
• skyq10kz_1.jpg (GRAPHIC) — 12KB
• 0001096906-25-001422.txt ( ) — 6913KB
• skyq-20241231_cal.xml (EX-101.CAL) — 44KB
• skyq-20241231_def.xml (EX-101.DEF) — 183KB
• skyq-20241231_lab.xml (EX-101.LAB) — 354KB
• skyq-20241231_pre.xml (EX-101.PRE) — 344KB
• skyq-20241231.xsd (EX-101.SCH) — 103KB
• skyq-20241231_10kz_htm.xml (XML) — 1056KB

Business

Business 1 Item 1A.

Risk Factors

Risk Factors 12 Item 1B. Unresolved Staff Comments 26 Item 1C. C ybersecurity 26 Item 2. Description of Properties 26 Item 3.

Legal Proceedings

Legal Proceedings 26 Item 4. Mine Safety Disclosures 26 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities 27 Item 6. [Reserved] 27 Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 28 Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 36 Item 8. Consolidated Financial Statements and Supplemental Data 36 Report of Independent Registered Public Accounting Firm F-1 Consolidated Balance Sheets F-2 Consolidated Statements of Operations F-3 Consolidated Statements of Changes in Stockholders' Equity (Deficit) F-4 Consolidated Statements of Cash Flows F-5

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements F-7 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 38 Item 9A.

Controls and Procedures

Controls and Procedures 38 Item 9B. Other Information 39 Part III Item 10. Directors, Executive Officers and Corporate Governance 40 Item 11.

Executive Compensation

Executive Compensation 46 Item 12.

Security Ownership and Certain Beneficial Owners and Management and Related Stockholder Matters

Security Ownership and Certain Beneficial Owners and Management and Related Stockholder Matters 50 Item 13. Certain Relationships and Related Transactions and Director Independence 51 Item 14. Principal Accountant Fees and Services 51 Part IV Item 15. Exhibits, Financial Statement Schedules 52

Signatures

Signatures 53 i PART I

Forward Looking Statements

Forward Looking Statements This annual report on Form 10-K includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which can be identified by the use of forward-looking terminology such as "may," "can," "believe," "expect," "intend," "plan," "seek," "anticipate," "estimate," "will," or "continue" or the negative thereof or other variations thereon or comparable terminology. All statements other than statements of historical fact included in this annual report on Form 10-K, including without limitation, the statements under "Item 1. Business" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and located elsewhere herein regarding the financial position and liquidity of the Company (defined below) are forward- looking statements. Although the Company believes the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors with respect to any such forward- looking statements, including certain risks and uncertainties that could cause actual results to differ materially from the Company's expectations ("Cautionary Statements"), are disclosed in this annual report on Form 10-K, including, without limitation, in conjunction with the forward-looking statements and under the caption "Risk Factors." In addition, important factors that could cause actual results to differ materially from those in the forward-looking statements included herein include, but are not limited to, limited working capital, limited access to capital, changes from anticipated levels of sales, future national or regional economic and competitive conditions, changes in relationships with customers, difficulties in developing and marketing new products, marketing existing pr

Business

Item 1. Business Overview 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. 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 over 99% of the solvent being recoverable for continuous reuse and requires no water. The solvent has demonstrated oil separation rates of over 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 August 30, 2022 and May 3, 2022. We intend to finish retrofitting the PR Spring Facility in fiscal of 2025 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 expect to complete the build-out of our Asphalt Shingle Recycling ("ASR ") Facility in fiscal 2025, 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. 1 Corporate History and Structure We were incorporated in Delaware on June 4, 2019 as "Recoteq, Inc

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View this 10-K/A filing on SEC EDGAR