Sky Quarry Inc. Debt Disclosure

13.DEBT 

 

Debt consisted of the following as of December 31:

 

Lender / Merchant	Maturity Date	Effective Interest Rate	Principal Balance 2025	Principal Balance 2024
Libertas #6	December 6, 2024	58%	$2,388,381	$2,602,031
Libertas #5	November 29, 2024	58%	1,187,082	1,398,582
Private Lender A	November 24, 2025	30%	1,131,507	-
Lendspark #3	March 4, 2025	68%	555,650	1,058,744
Libertas #7	January 7, 2025	66%	379,675	591,175
ACMO USOS LLC	March 15, 2021	15%	191,699	191,699
Lendspark #4	December 4, 2024	68%	163,795	688,468
Libertas #4	September 12, 2024	68%	89,549	301,049
USA SBA	March 1, 2026	1%	6,313	44,474
Libertas #8	March 6, 2025	68%	-	190,140
			$6,093,651	$7,066,362
Less: Unamortized debt issuance costs			(917,708)	(1,796,687)
			$5,175,943	$5,269,675

 

As of December 31, 2025, the maturity date of debt is as follows:

 

Due in less than one year	$6,093,651
Due in more than one year, but less than two years	-
Less: Unamortized debt issuance costs	(917,708)
	$5,175,943

 

The past due debt referred to above is owed to Libertas Funding LLC in the amount of $4,044,687, is owed to LendSpark the amount of $719,446, Private Lender A is owed $1,131,507, and ACMO USOS LLC is owed $191,699. Provided that neither Libertas nor LendSpark Corporation commence foreclosure proceedings against us, we do not expect any adverse impact on our operations as a result of our past due debt.

 

The debt terms related to private lenders are as follows:

 

On July 24, 2025, the Company entered into a business loan with KF Business (private lender A) in the amount of $1,000,000. This loan carries a rate of 30% and matured 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 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 August 27, 2024, the Company entered into a promissory note for $1,200,000 from private lender A. The note was secured by the 2020 Resources LLC’s Solar Turbine, bears interest at 10% per month, with a minimum interest of $150,000, and matured on October 14, 2024. Repayment of the note is based on proceeds from the Reg A Offering with distribution of escrow funds of 100 percent (100%) of the outstanding loan amount to private Lender A. As inducement for advancing the note, the lender was issued 93,750 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 equity and the fair value of the warrants were recorded separately as debt discount and amortized over the term of the debt. On October 10, 2024, the note was repaid in full.

 

On June 20, 2024, the Company entered into a promissory note for $800,000 from private lender A. The note was secured by the 2020 Resources LLC’s Solar Turbine, which bears interest at 10% per month, with a minimum interest of $100,000, and matured on August 20, 2024. Repayment of the note was to be paid from the proceeds of the Warrant Offering with distribution of escrow funds of sixty percent (60%) to private Lender A. As inducement for advancing the note, the lender was issued 25,000 share purchase warrants, each warrant granting the holder the right to purchase one common share of the Company at a price of $21.60 per share for a period of five years from the issuance date. 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 July 18, 2024, the note was repaid in full.

 

On June 13, 2024, the Company entered into a promissory note for $122,500 from private lender C. The note was unsecured, carries an original issue discount (“OID”) of $22,500, providing the initial purchase price of $100,000 and matured on August 12, 2024. Repayment of the note was to be made on the earlier of (a) sixty days; or (b) the date that the Company receives a minimum of $1,000,000 in funding from sale of convertible notes, sale of equipment, or proceeds from the Warrant Offering. As inducement for advancing the note, the lender was issued 6.250 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 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 July 22, 2024, the note was repaid in full.

 

On June 3, 2024, Foreland entered into a business loan and security agreement with Clearview Funding Group LLC. for a loan in the amount of $105,000. The loan was repaid in 8 equal weekly payments of $17,063 for total repayment of $136,000. The loan is secured by the 2020 Resources Solar Turbine. 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 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 amortized over the term of the debt. On July 29, 2024, the note was repaid in full.

 

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.  

 

On June 14, 2023, Foreland entered into a business loan and security agreement with LendSpark Corporation for a loan in the amount of $1,500,000 (LendSpark #1”). 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 of the assets of Foreland. On April 19, 2024, the loan was repaid in full.

 

On February 21, 2023, the Company entered into a binding term sheet with private lender A for a convertible loan of $1,000,000 and was personally guaranteed and secured by members of the Board and received a deposit of $400,000. During the course of loan document preparation, it was determined that certain terms agreed to in the term sheet could not be completed. On April 6, 2023, the parties amended the terms of the term sheet by way of a debt satisfaction agreement under which the unsecured deposit, plus accrued interest calculated at 20% per annum, would be repaid on or before May 21, 2023, after which amounts unpaid would incur interest at the rate of 30% per annum. As inducement to enter into the debt satisfaction agreement, the lender was issued 83,334 common share purchase warrants, each warrant granting the holder the right to purchase one common share of the Company at a price of $21.60 per share for a period of five years from the issuance date. The warrants were classified as equity and the fair value of the warrants was recorded separately as debt discount and amortized over the term of the debt. On July 18, 2024, the loan was repaid in full.

 

On January 23, 2023, the Company entered into a promissory note for $100,000 from private lender B. The note was unsecured, bears interest at 20% per annum and matured on March 23, 2023. As inducement for advancing the note, the lender was issued 834 share purchase warrants, each warrant granting the holder the right to purchase one common share of the Company at a price of $48.00 per share for a period of two 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. The loan has been repaid as of October 24, 2024.

 

LIABILITY FOR SALE OF FUTURE REVENUES

 

As of December 31, 2025, 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 one agreement has been terminated during the year ended December 31, 2025.  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 year ended December 31, 2025, the Company amortized an aggregate of $243,929 discount, respectively, to interest expense. Unamortized interest and discounts in the aggregate is $896,394 as of December 31, 2025. 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 May 16, 2024, Foreland entered into an agreement of sale of future receivables with Libertas for the sale of $665,000 of future sales receipts (“Libertas #8”) for gross proceeds of $500,000. Under the agreement, Foreland will make weekly delivery of receivables not less than $15,833 until the amount sold is extinguished. As inducement for advancing the note, the lender was issued 46,875 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 equity 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. This amendment was classified as debt and the incremental fair value warrants were recorded to interest expense. As of December 31, 2025, exclusive of debt discounts, the remaining outstanding was zero.

 

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 December 31, 2025, a total of $379,675, exclusive of debt discounts, remained outstanding.

 

On January 18, 2024, Foreland entered into an agreement of sale of future receivables with Libertas for the sale of $4,224,000 of future sales receipts (“Libertas #6”) for gross proceeds of $3,300,000, of which $884,667 was used to pay off the Libertas September 14, 2023, agreement. Under the agreement, Foreland will make weekly delivery of receivables not less than $91,429 until the amount sold is extinguished. As of December 31, 2025, a total of $2,388,381, exclusive of debt discounts, remained outstanding.

 

On January 11, 2024, Foreland entered into an agreement of sale of future receivables with Libertas for the sale of $2,632,852 of future sales receipts (“Libertas #5”) for gross proceeds of $2,056,916, of which $796,916 and $1,260,000 was used to pay off the Libertas May 17, 2023, and June 30, 2023, agreements respectively. Under the agreement, Foreland will make weekly delivery of receivables not less than $56,988 until the amount sold is extinguished. As of December 31, 2025, a total of $1,187,082, 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 December 31, 2025, a total of $89,549, exclusive of debt discounts, remained outstanding.

 

On September 14, 2023, Foreland entered into an agreement of sale of future receivables with Libertas for the sale of $1,463,000 of future sales receipts (“Libertas #2”) for gross proceeds of $1,100,000. Under the agreement, Foreland will make weekly delivery of receivables not less than $31,667 until the amount sold is extinguished. This liability was fully paid during the year ended December 31, 2024.

 

On June 30, 2023, Foreland entered into an agreement of sale of future receivables with Libertas for the sale of $2,520,000 of future sales receipts (“Libertas #3”) with proceeds of $2,000,000 used to pay off Libertas agreement dated January 17, 2023. Under the agreement, Foreland will make weekly delivery of receivables not less than $50,000 until the amount sold is extinguished. This liability was fully paid during the year ended December 31, 2024.

 

On May 17, 2023, Foreland entered into an agreement of sale of future receivables with Libertas for the sale of $2,560,250 of future sales receipts (“Libertas #1”) for gross proceeds of $1,925,000, of which $575,357 was applied to pay off Libertas’s agreement dated February 21, 2023. Under the agreement, Foreland will make weekly delivery of receivables not less than $55,417 until the amount sold is extinguished. This liability was fully paid during the year ended December 31, 2024.

 

During the year ended December 31, 2024, the Company refinanced 3 agreements with Libertas (“Libertas #1, #2, and #3”). Management determined that the transaction should be accounted for as a debt extinguishment. Accordingly, the Company recognized a loss on extinguishment related to loan origination fees of $108,887, which is recorded on the statement of operations and comprehensive loss for the year ended December 31, 2024.

 

As of December 31, 2025, the Company had the following unamortized debt discounts related to the Libertas agreements:

 

		Gross	Unamortized
Lender	Date Issue	Discount	Discount
Libertas #4	October 25, 2023	$449,737	$22,219
Libertas #5	January 11, 2024	575,936	259,674
Libertas #6	January 18, 2024	990,000	522,459
Libertas #7	February 19, 2024	397,500	92,042
Libertas #8	May 16, 2024	175,000	-
		$2,588,173	$896,394

 

On April 19, 2024, Foreland entered into an agreement for the sale of future receivables with Parkside Funding for the sale of $552,000 of future sales receipts for gross proceeds of $400,000. Under the agreement, Foreland will make weekly delivery of receivables not less than $27,600 until the amount sold is extinguished. This liability was fully paid during the year ended December 31, 2024.

 

On April 19, 2024, Foreland entered into an agreement of sale of future receivables with UFS West for the sale of $552,000 of future sales receipts for gross proceeds of $400,000. Under the agreement, Foreland will make weekly delivery of receivables not less than $27,600 until the amount sold is extinguished. This liability was fully paid during the year ended December 31, 2024.

 

Mandatorily redeemable preferred stock:

 

			Principal	Principal
		Effective	Balance	Balance
	Maturity	Interest	December 31,	December 31,
Lender / Merchant	Date	Rate	2025	2024
Private Lender F	October 2, 2030	10%	$179,500	$-
Private Lender F	October 2, 2030	10%	117,500	-
Private Lender F	October 2, 2030	10%	118,200	-
Private Lender F	October 2, 2030	10%	42,500	-
Private Lender F	October 2, 2030	10%	55,600	-
			513,300	-
Less: Unamortized debt issuance costs			(30,770)	-
			$482,530	$-

 

As of December 31, 2025, the maturity date of the mandatorily redeemable preferred stock is as follows:

 

Due in less than one year	$-
Due in more than one year	513,300
Less: Unamortized debt issuance costs	(30,770)
	$482,530

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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