Sky Quarry Inc.

Condensed Consolidated Balance Sheets (Unaudited)

As of June 30, 2026 and December 31, 2025

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements

Condensed Consolidated Statements of Cash Flows (Unaudited)

Condensed Consolidated Statements of Cash Flows (Unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements

**1.**NATURE OF OPERATIONS

Sky Quarry, Inc. and its subsidiaries (“Sky Quarry”, “SQI” or the “Company”) is a domestic refining and resource development company. Through its Foreland Refinery Corp wholly owned subsidiary located near Ely, Nevada, the Company operates the only licensed permitted crude oil refinery in that state servicing the crude oil supply in the Uintah basin. For over 25 years, the refinery has produced diesel, vacuum gas oil (VGO), naphtha and asphalt for adjacent regional markets in the United States. Recent refinery shutdowns in California have highlighted fuel resiliency needs for this area which we intend to support and supply. Sky Quarry’s second wholly owned subsidiary known as 2020 Resources, LLC owns a development stage facility known as PR Springs near Vernal, Utah representing an opportunity to monetize further resources in the area for growth. For more information, visit www.skyquarry.com.

**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 June 30, 2026 and December 31, 2025, the results of operations for the three and six months ended June 30, 2026 and 2025, and the cash flows for the three and six months ended June 30, 2026 and 2025. The results of operations for the three and six months ended June 30, 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 June 30, 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 June 30, 2026, the Company has an accumulated deficit of $42,542,109. During the six months ended June 30, 2026, the Company had negative cash flows from operations of $5,413,699. The Company has received financing and capital through proceeds from sales of its common stock through an ATM offering of net proceeds of $12,539,949 and notes payable of $896,866 during the six months ended June 30, 2026.

Currently, repairs to the refinery have been completed and initial feedstock has been procured, subject to scale up operational testing and state inspection. As of the date of this report, the Foreland Refinery operations have not yet restarted after a significant non-operating turnout period with no meaningful cash flow contributed to the Company during 2026 year to date. 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 June 30, 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 from resumed 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 equity offering proceeds where appropriate. 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.

As of the date of this report, the Foreland Refinery operations have not yet restarted after a significant non-operating turnout period with no meaningful cash flow contributed to the Company during 2026 year to date. 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 June 30, 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 from resumed 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 equity offering proceeds where appropriate. 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:

**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 Springs 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.

During the six months ended June 30, 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.

Notes:

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

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

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

(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:

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 $227,901 and $315,450 for the three months ended June 30, 2026 and 2025, and $492,758 and $557,454 for the six months ended June 30, 2026 and 2025, respectively.

**7.**OIL AND GAS PROPERTIES

Oil and gas properties are comprised of the following:

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 June 30, 2026, the Company holds oil and gas assets representing more than 10% of the total assets, which are primarily the PR Springs 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 Springs 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 Springs 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 June 30, 2026, the Company has determined that there has been no impairment of the PR Springs facility under construction, as there are no indicators suggesting a decline in the asset's recoverable value. The Company has no proven 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 and six months ended June 30, 2026 and 2025, relate to development and construction of the extraction facility at PR Springs There were no costs associated with well exploration during the periods ended the three and six months ended June 30, 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 June 30, 2026 or June 30, 2025.

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

The Company currently leases office space, which are 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 $37,112 and $38,220 during the six months ended June 30, 2026 and 2025, respectively, and accretion of the lease liability of $780 and $4,781 for the six months ended June 30, 2026 and 2025, respectively.

The weighted average remaining lease term in years was 2.92 and 1.17 as of June 30, 2026 and 2025, respectively. The weighted average discount rate as of June 30, 2026 and 2025, was 11.90%.

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 June 30, 2026:

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 $10,623 during the six months ended June 30, 2026 and

2025, respectively, and accretion of the lease liability of $0 and $51,007 during the six months ended June 30, 2026 and 2025, respectively.

The weighted average remaining lease term in years was 0 and 1 as of June 30, 2026 and 2025, respectively. The weighted average discount rate 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 in 2025. 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.

**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:

**11.**WARRANT LIABILITY

The details of warrant liability transactions for the three and six months ended June 30, 2026 and 2025, are as follows:

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 and six months ended June 30, 2026, the Company recognized change in fair value of the warrant liability of $99,540 and $174,882, respectively. During the three and six months ended June 30, 2025, the Company recognized change in fair value of the warrant liability of $174,354 and $(100,626), respectively. 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:

12. LINES OF CREDIT

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 21, 2025. 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:

As of June 30, 2026, the maturity date of debt is as follows:

The past due debt referred to above is owed to Private Lender A in the amount of $1,280,274, 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 June 29, 2026, Sky Quarry Inc. (the "Company”), together with Foreland Refining Corporation, a Texas corporation ("Foreland”), and 2020 Resources LLC ("2020 Resources,” and together with the Company and Foreland, the "Company Parties”), entered into a Conversion and Exchange Agreement (the "Exchange Agreement”) with Libertas Funding LLC, a Connecticut limited liability company ("Libertas”), pursuant to which the Company Parties converted, exchanged and cancelled $3,985,000 in aggregate outstanding merchant cash advance obligations (the "MCA Obligations”) owed to Libertas pursuant to (i) that certain Agreement of Sale of Future Receipts dated October 25, 2023, by and between Libertas and Foreland, for the sale of $1,731,660 of future sales receipts ("Libertas #4”), (ii) that certain Agreement of Sale of Future Receipts dated January 11, 2024, by and between Libertas and Foreland, for the sale of $2,632,852 of future sales receipts ("Libertas #5”), (iii) that certain Agreement of Sale of Future Receipts dated January 18, 2024, by and between Libertas and Foreland, for the sale of $4,224,000 of future sales receipts ("Libertas #6”), (iv) that certain Agreement of Sale of Future Receipts dated February 19, 2024, by and between Libertas and Foreland, for the sale of $1,386,000 of future sales receipts ("Libertas #7” and, together with Libertas #4, Libertas #5 and Libertas #6, the "MCA Agreements”), for the issuance by the Company Parties to Libertas a promissory note (the "Note”) in the original principal amount of $3,985,000. This note requires repayments over a period of 86 weeks of between $15,000 and $70,000 per week.

Upon issuance of the Note, the MCA Obligations and MCA Agreements were fully and irrevocably satisfied, cancelled and extinguished. Libertas provided a general release of all claims against the Company Parties arising out of or related to the MCA Agreements.

On July 24, 2025, the Company entered into a business loan with KF Business Ventures, LP (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 Part II, Item 1, “Legal Proceedings.”

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 Sky Quarry 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 June 30, 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 six months ended June 30, 2026, the Company amortized an aggregate of $941,618 discount, respectively, to interest expense. Unamortized interest and discounts in the aggregate is $0 as of June 30, 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 June 30, 2026, a total of $0, 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 June 30, 2026, a total of $0, 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 June 30, 2026, a total of $0, exclusive of debt discounts, remained outstanding.

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 June 30, 2026, a total of $0, exclusive of debt discounts, remained outstanding.

As of June 30, 2026, the Company had the following unamortized debt discounts related to the Libertas agreements:

Mandatorily redeemable preferred stock:

As of June 30, 2026, the maturity date of the mandatorily redeemable preferred shares is as follows:

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 1,182 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%.

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 Crowdfunding ("Reg CF Offering”).

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

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 the shares described above were issued pursuant to Section 3(a)(10) of the Securities Act. On January 6, 2026, 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. This note matured on November 24, 2025.

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.

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 $5.04 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.

On April 8, 2026, Company convertible note holder Varie Asset Management, LLC elected to convert $125,000 of the principal and $11,100 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 $150,000 of the principal and $16,557 of its interest due on the Note issued by 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 $175,000 of the principal and $13,308 of its interest due on the Note issued by Borrower on August 29, 2025, into 49,039 shares of our common stock.

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 Borrower on October 21, 2025, into 30,301 shares of our common stock.

**15.**INCOME TAXES

As of June 30, 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 June 30, 2026. Accordingly, the Company has recorded a full valuation allowance of in the U.S. The Company has evaluated all the negative and positive evidence as of June 30, 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 own 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 June 30, 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 June 30, 2026 and December 31, 2025, the Company had no accrued interest or penalties related to uncertain tax positions.

**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 six months ended June 30, 2026 and 2025, totaled 862,979 and 1,054,827, respectively.

**17.**EQUITY

During the six months ended June 30, 2026 and 2025, the Company issued 342,624 and 366,828 shares of common stock for non-cash payments of accounts payable of $905,423 and $1,330,599, respectively. During the six months ended June 30, 2026 and 2025, the Company issued 224,787 and 18,542 shares of common stock, for conversion of debt, amounting to $811,359 and $192,573 net of offering costs of $0, respectively.

During the six months ended June 30, 2026 and 2025, the Company issued 4,781,795 and 0 shares of common stock, respectively, for acceptance of share subscriptions, amounting to $13,907,446 and $0 net of offering costs of $1,367,497 and $0, respectively. 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).

On April 8, 2026, Company convertible note holder Varie Asset Management, LLC elected to convert $125,000 of the principal and $11,099.80 of its interest due on the Note issued by 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 $150,000 of the principal and $16,556.93 of its interest due on the Note issued by 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 $175,000 of the principal and $13,308.03 of its interest due on the Note issued by Borrower on August 29, 2025, into 49,039 shares of our common stock.

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 June 28, 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 May 27, 2026 the Compensation Committee of the Board of Directors granted and the Company issued a total of 199,500 shares of its common stock to its Directors and eight other employees of the Company pursuant to the Company’s 2020 Stock Plan.

On June 18, 2026, the Company issued 300,000 shares of its restricted common stock in connection with executing an advisory and consulting agreement with Quantum PR OU for a six month engagement.

From April 23, 2026 until June 24, 2026, under the previously announced ATM equity sales program, the Company issued 4,355,652 shares of common stock and received net proceeds after offering expenses of $12,221,999 during the second quarter. The proceeds were allocated for working capital purposes.

The table below sets forth the shares reserved as of June 30, 2026, by the Company for future potential issuance.

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 June 30, 2026, the Company had a total of 796,987 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 June 30, 2026.

During the three and six months ended June 30, 2026 and 2025, the Company recorded share-based compensation expense of $606,548 and $230,474, and $694,002 and $309,354, respectively.

As of June 30, 2026, the Company had $158,998 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 June 30, 2026,108,324 options have vested, and are exercisable.

The following sets forth the outstanding common share options and related activity for the period ended June 30, 2026:

As of the six months ended June 30, 2026, the Company recorded restricted share-based compensation expense of $566,790, as part of general and administrative expenses. As of June 30, 2026, the Company had $87,990 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 June 30, 2026,404,500 restricted shares have vested.

**19.**RELATED-PARTY TRANSACTIONS

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

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, 2025, the company received $150,000 in cash proceeds from a director. As of December 31, 2025, the Company owed $84,112 to a director as a result of cash proceeds. The advances were unsecured, non-interest-bearing and due on demand. As of June 30, 2026, the Company had repaid the director the full amount as reflected in related-party accounts payable on the Company's consolidated balance sheet.

The Company paid an aggregate of $0 in board fees during the quarter to its directors. Subsequent to the second quarter 2026, in July 2026, the Company paid $175,000 to each of its independent directors, Alex Monje, Robert Byrne and Omar Hussien for board services.

These directors qualify as related parties under ASC 850 due to their fiduciary roles with the Company.

The Company paid a one time bonus during the second quarter 2026 to its interim CEO Marcus Laun of $9,375. In July 2026, the Company paid a one time performance bonus to its interim CEO of $100,000.

The Company paid a one time bonus during the second quarter 2026 to its executive Chairman Matthew Flemming of $10,416. In July 2026, the Company paid a one time performance bonus to its executive Chairman of $125,000.

All fees were paid in accordance with the Company's policies.

**20.**DISAGGREGATED REVENUE

Revenue consisted of the following refined product types sold domestically in the Southwest USA region for June 30:

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 June 30:

General and administrative expenses consisted of the following for June 30:

Professional fees included the following for June 30:

**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 Springs 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.

The following presents selected financial information with respect to our single reportable segment for the three and six months ended June 30, 2026 and 2025:

The segmented assets as of June 30, 2026 are as follows:

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

**23.**COMMITMENTS AND CONTINGENCIES

As of June 30, 2026, the Company has the following commitments for two leased land rights of way rentals in Nye County, Nevada, totaling approximately 40 acres:

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 June 30, 2026 through the date of the presentation of these financial statements.

On July 6, 2026, the Company issued an aggregate of 49,195 shares of its restricted common stock to Bengt Eriksson for interest due in the amount of $104,293 for the period between July 1, 2025 and December 31, 2025 pursuant to the convertible promissory note dated November 24, 2023 based on the Nasdaq official closing price of the Corporation’s common stock of $2.12 per share on July 6, 2026;

On July 15, 2026, the Board of Directors (the "Board”) of Sky Quarry Inc. (the "Company”), upon the recommendation of the Compensation Committee of the Board, approved a one-time, discretionary cash award in the amount of $100,000 (the "Executive Supplemental Award”) to Marcus Laun, in recognition of his service as the Company’s President, interim Chief Executive Officer and interim Chief Financial Officer and his leadership in guiding the Company through its growth initiatives. The Executive Supplemental Award is a lump-sum cash payment approved by the Board outside of, and in addition to, the Company’s annual incentive compensation program. The Company also paid $175,000 to each of its three independent directors for Board services, and $125,000 to its executive Chairman.