Risk Factors Summary
The following is a summary of some of the principal risks that could materially adversely affect our business, financial condition and results of operations. You should read this summary together with the more detailed description of each risk factor contained in “Part I, Item 1A. Risk Factors.”
General Risks Related to our Business
· Our recurring losses from operations raise substantial doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations.
· We have outstanding debt that is past due and we are not currently making full payments to certain of our lenders pursuant to outstanding loans and merchant cash advance agreements which could result in our lenders declaring the loans to be in default.
· We have a limited operating history upon which you can evaluate our performance, have a history of losses and have only been operating the Eagle Springs Refinery since September 30, 2022. Accordingly, our prospects must be considered in light of the risks that any new company encounters.
· We depend on several significant customers, and a loss of one or more significant customers could adversely affect our results of operations.
· We depend on several principal suppliers for the majority of our crude oil. A disruption in supply or a change in our relationship with any one of them could adversely affect our business, financial condition and results of operations.
· Our future success is dependent on the continued service of our management team.
· The issuance of shares of our common stock as compensation to officers, directors, employees and consultants could have an adverse effect on our operating results and a dilutive effect on our shareholders.
· We entered into financing arrangements that contain covenants that could limit our ability to engage in certain transactions.
· Acquisition opportunities may present themselves that in hindsight did not achieve the positive results anticipated by our management.
· Environmental and regulatory compliance may impose substantial costs on us.
· We may be exposed to third party liability and environmental liability in the operation of our business.
· We rely on technology to conduct our business, and our technology could become ineffective or obsolete.
· An overall decline in the health of the economy and other factors impacting consumer spending, such as recessionary conditions, governmental instability, inclement weather, and natural disasters, may affect consumer purchases, which could reduce demand for our products and harm our business, financial condition, and results of operations.
· We are exposed to the impact of rising inflation rates, which could negatively affect our results of operations and our ability to invest and hold our cash.
· Failure to maintain an effective system of disclosure controls and procedures and internal control over financial reporting, or our failure to remediate our existing material weaknesses in our internal control over financial reporting, could have a material adverse effect on our results of operations, financial condition and cash flows.
· We have engaged in transactions with related parties, and such and other transactions in the future could present conflicts of interest that could have a material adverse effect on our results of operations, financial condition and cash flows.
· Our financial results may fluctuate from quarter to quarter due to certain maintenance requirements.
· Disruptions or breaches of our IT systems, due to cyber-attacks or otherwise, could cause us to lose financial and operational data, prevent us from efficiently operating our business and cause us to lose revenue and profits or incur significant costs.
· If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.
Risks Related to Asphalt Shingle Recycling
· The nature of our WAS recycling operations may involve various risks.
· Our ECOSolv Technology May Not Work as Expected.
· The viability of our asphalt shingle recycling and reclamation business plan, business operations, and future operating results and financial condition are and will be exposed to fluctuating prices for our end-products.
· Because of the speculative nature of asphalt shingle recycling, there is a risk that our business may not succeed.
· The price for asphalt cement, shingle granules, sand aggregate, limestone and/or fiberglass is subject to a variety of factors that are beyond our control.
· The market for asphalt cement, shingle granules, sand aggregate, limestone and/or fiberglass may be highly competitive, and intensely competitive pressures could force us to abandon or curtail our business plan related to asphalt shingle recycling and reclamation.
· Decommissioning costs are unknown and may be substantial. Unplanned costs could divert resources from other projects.
· We may have difficulty marketing or distributing the asphalt cement, shingle granules, sand aggregate, limestone and/or fiberglass we may produce, which could harm our financial condition.
· We do not yet have a market for the anticipated recycled products that we expect to generate from our PR Spring Facility.
· Our shingle remediation activities will be dependent upon having an available supply of waste asphalt shingles from waste haulers, shingle manufacturers or other third parties.
Risks Related to Oil Sands Exploration
· We do not have any proven oil reserves.
· The price of oil has historically been volatile.
· Oil sands development involves many risks.
· Decommissioning costs are unknown and may be substantial. Unplanned costs could divert resources from other projects.
Risks Related to Oil Refining and Fuels Production
· Volatility in crude oil and wholesale diesel prices affect our business, financial condition and results of operations.
· There are difficulties in operating an oil refinery which could adversely affect our business, financial condition and results of operations.
· A significant decrease in demand for diesel and gasoline, including increased consumer preference for alternative fuels or improvements in fuel efficiency, in the areas we serve would materially affect our revenues and profitability.
· Through early 2026, the U.S. regulatory environment for vehicle emissions and fuel economy has shifted from an aggressive expansion of electric vehicle (“EV”) adoption mandates to a proposed rollback of prior standards, creating continued uncertainty regarding future demand for petroleum-based fuels.
· The industries in which we operate are subject to seasonal trends, which may cause our operating costs to fluctuate, affecting our cash flow.
· Our operations are subject to stringent environmental laws and regulations that may expose us to significant costs and liabilities that could exceed current expectations.
· A climate-related decrease in demand for crude oil could negatively affect our business.
· Our business operations may be materially adversely affected by negative impacts to the global economy, capital markets, or other geopolitical conditions resulting from economic uncertainty, armed conflicts, acts of terrorism, political unrest or health epidemics.
Risks Related to Ownership of our Common Stock
· We may not be able to maintain a listing of our common shares on Nasdaq.
· We received a notice of noncompliance with the Nasdaq Capital Market minimum bid price requirement, and if we do not regain compliance by March 23, 2026, our common stock may be delisted; although our stockholders have approved a reverse stock split, there is no assurance that such action will restore or maintain compliance.
· The market price of our stock may be highly volatile, and you could lose all or part of your investment.
· An active, liquid trading market for our common stock may not be sustained, which may make it difficult for you to sell the common stock you purchase.
· Since we do not expect to pay any cash dividends for the foreseeable future, investors may be forced to sell their stock in order to obtain a return on their investment.
· If securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our common stock could be negatively affected.
· Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our common stock to decline and would result in the dilution of your holdings.
· Future issuances of debt securities, which would rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of preferred stock, which could rank senior to our common stock for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our common stock.
· We expect to raise additional capital through equity and/or debt offerings to support our working capital requirements and operating losses.
· If our shares of common stock become subject to the penny stock rules, it would become more difficult to trade our shares.
· We are subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies, and our stockholders could receive less information than they might expect to receive from more mature public companies.
· We are also a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
Item 1. Business
Overview
We operate a regional refinery (the Eagle Springs Refinery) producing diesel, vacuum gas oil (VGO), naphtha and liquid paving asphalt from crude oil suppliers in the Uintah basin near Nevada and Utah. In addition to our goal of growing the refinery, we have a separate division in the development-stage (P.R. Springs) formed to deploy technologies to facilitate the recycling of waste asphalt shingles and remediation of oil-saturated sands and soil, providing sustainable refined crude products. We anticipate several benefits from the recycling and production of oil from asphalt shingles reducing the dependence on landfills for the disposal of waste and reducing dependence on foreign oil.
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 up to 99% of the solvent being recoverable for continuous reuse and requires no water. The solvent has demonstrated oil separation rates of up to 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 in May and August 2022.
Currently, we intend to finish retrofitting our oil sands remediation facility located in PR Spring in eastern Utah in the next twelve months from when the necessary funding is obtained 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 intend to continue to develop regional model asphalt shingle recycling facilities, 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.
Recent Developments
Plant Outages and Maintenance
Our facilities require ongoing maintenance and from time-to-time certain repairs, improvements and retrofitting, which may require us to temporarily shut down or operate at a diminished capacity. Our Eagle Springs refinery operated by Foreland Refinery Corporation experienced a shut down during the fourth quarter of 2025 in connection with a boiler repair. Currently, repairs have been completed, and the refinery is being prepared to resume operations, subject to the procurement of feedstock. The unscheduled repairs and outages at Foreland’s Eagle Springs Refinery have had a negative impact on our final financial results for the third and fourth quarters of 2025, and financial results for the first quarter of 2026. We expect the facility to be operational by the end of the second quarter of 2026.
Stock Split
On March 5, 2026, we filed a Certificate of Amendment to the Certificate of Incorporation with the Secretary of State of Delaware to (i) effect on the corporate level a one-for-eight (1-for-8) reverse stock split of shares of our Common Stock. The Reverse Stock Split was effective on March 15, 2026, at 11:59pm Eastern Time.
Corporate History and Structure
We were incorporated in Delaware on June 4, 2019, as “Recoteq, Inc.” On April 22, 2020, we changed our name to “Sky Quarry Inc.” We have three (3) wholly-owned subsidiaries: 2020 Resources, 2020 Canada, and Foreland.
On September 16, 2020, we acquired 2020 Resources (formerly, US Oil Sands (Utah) LLC and USO (Utah) LLC), which was incorporated on November 2, 2017. The assets of 2020 Resources include the PR Spring Facility and a 100% interest in asphalt bitumen leases covering approximately 5,930 acres in the PR Spring region in Utah. On September 16, 2020, we also acquired 2020 Canada (formerly, USO (Canada) Ltd.), which was incorporated on April 26, 2018, and is currently inactive.
On September 30, 2022, we acquired Foreland (formerly, Petro Source Resources), which was incorporated on May 29, 1998. Foreland is engaged in the refining of heavy crude oil into diesel and other petroleum products (naphtha, VGO, and paving asphalt liquids) at its Eagle Springs Refinery located near Ely, Nevada.
The following chart depicts our organizational structure:
Industry
Oil Refining and Sales Market
The process of converting crude oil into usable products is known as refining. Refining is a core component of the U.S. midstream energy sector and supports the production of transportation fuels, petrochemical feedstocks, and infrastructure-related materials. The most common products derived from a barrel of crude oil are gasoline and diesel, followed by jet fuel, heating oil, asphalt, lubricants, and petrochemical inputs used in plastics and industrial manufacturing.
According to the U.S. Energy Information Administration (EIA), the United States has remained the world’s largest crude oil producer in recent years. U.S. crude oil production reached multiple record highs during 2024 and 2025, reflecting continued efficiency gains and strong output from major producing basins.
In August 2024, U.S. crude oil production set a monthly record, averaging approximately 13.4 million barrels per day (b/d), surpassing the prior record set in late 2023. Annual average production for 2025 is estimated at approximately 13.6 million b/d, representing the highest annual output in U.S. history. For 2026, the EIA projects U.S. crude oil production to remain near record levels, averaging approximately 13.5 million b/d, before moderating modestly in subsequent years.
U.S. refining capacity continues to support high levels of refined product output. Refinery utilization rates have generally remained strong, particularly during peak driving seasons, with gasoline and diesel accounting for the majority of refined product demand. Refined petroleum products remain essential inputs for freight transportation, aviation, construction, agriculture, and petrochemical manufacturing.
The United States also continues to play a critical role as a supplier of refined petroleum products to domestic and export markets. Demand for crude oil and refined products has been supported by federally funded infrastructure projects, increased construction activity, and sustained transportation needs across the country.
Overall, the U.S. oil refining and sales market remains characterized by record-level crude production, stable refining operations, and continued demand tied to transportation, industrial activity, and long-term infrastructure investment.
Waste Asphalt Shingle Market
According to a report by the United States Environmental Protection Agency titled “Advancing Sustainable Materials Management: Assessing Trends in Materials Generation and Management in the United States” dated December 2020, about 15.1 million tons of waste shingles are generated annually. Waste asphalt shingles amount to about 2.5% of the total building-related waste in the U.S. Over 96% of these waste shingles end up in landfills, occupying over 23 million cubic yards of space.
This waste stream is expected to increase considering that, according to the Asphalt Roofing Manufacturers Association, four-out-of-five homes in the U.S. are roofed with asphalt shingles. According to Grand View Research, the U.S. residential and commercial roofing materials market size was estimated at $16 billion in 2024 and is anticipated to grow at a compound annual growth rate of 4.5% from 2024 to 2030.
According to an industry survey by National Asphalt Pavement Association (“NAPA”), the use of reclaimed asphalt pavement (“RAP”) has risen by 75.2% since NAPA began collecting data in 2009, while total asphalt mixture tonnage has grown by 23.3% during the same period. RAP usage during the 2022 paving season reduced the need for an estimated 26.9 million barrels of asphalt binder and more than 93 million tons of aggregate. RAP storage for future use also reduced the landfill space needed by 68.2 million cubic yards.
According to NAPA, manufacturers also kept 641,000 tons of unprocessed, recycled asphalt shingle (“RAS”) out of landfills nationwide, as RAS usage in 2022 increased by 7% over 2021 totals, reducing the need for 740,000 barrels of asphalt binder.
NAPA also reported that the usage of warm-mix asphalt (“WMA”) technologies in 2022 decreased by 1.6% from 2021, with the decreased WMA tonnage in the commercial and residential sector leading the decline. NAPA further reported that the usage of 175 million tons of WMA mix, representing slightly less than 40% of the estimated market, resulted in reduced greenhouse gas emissions on a scale equal to the annual emissions of approximately 40,000 passenger vehicles.
States and local agencies around the U.S. are beginning to see the advantage of using RAS in road infrastructure projects on county, city and state roads. They are using RAS in aggregate base courses and for granular base stabilization on local roads. Paving contractors in many states are using RAS for parking lots, private driveways and in hot mix asphalt (“HMA”) for varied purposes such as patching and temporary roads. The most promising future market may be local governments. Over the last ten years, the Minnesota Department of Transportation has been doing laboratory and field tests with RAS on hiking and biking trails and on town and county road sections, with positive results. The Georgia Department of Transportation has also experienced good results using RAS on local roads to the extent that they have modified their HMA specifications to allow for 5% waste shingles in the total mix.
The Oil Sands Market
As an unconventional hydrocarbon resource, oil sands (or bitumen) hold hundreds of billions of barrels of oil on a worldwide basis. Although Canada is the only country that is currently extracting large quantities of oil from its oil sands deposits, the United States also has large oil sands resources that can be developed, according to the U.S. Department of Interior Bureau of Land Management. In a 2007 Report entitled “A Technical, Economic, and Legal Assessment of North American Oil Shale, Oil Sands, and Heavy Oil Resources In Response to Energy Policy Act of 2005 Section 369(p)” (September 2007), prepared by the Utah Heavy Oil Program, Institute For Clean and Secure Energy and The University of Utah for the U.S. Department of Energy, the authors reported the following estimates, which estimates were based upon source material published in 1979, 1987 and 1993:
· The United States has an estimated 76 billion barrels of oil-in-place (“OIP”) from bitumen and heavy oil contained in oil sands resources (OIP are not estimates of reserves or recoverable resources).
· In the United States, Utah is known to have the largest oil sands deposits, with total resource estimates ranging from 23 to 32 billion barrels of OIP from bitumen and heavy oil contained in oil sands formations and deposits.
A substantial part of the oil sands deposits in our oil sands leases described below are accessible through outcroppings or in shallow depths with limited or no overburden. In our view, the location and accessibility of oil sands deposits at the PR Spring Facility creates an opportunity for commercial development, supported by positive economics, using surface mining techniques and our extraction technology.
The worldwide growing demand for heavy crude oil and the recent decline in crude oil production in countries such as Venezuela, Russia and the Ukraine make the high quality, low sulfur, heavy oil found in oil sands deposits in the United States a valuable resource that has been underdeveloped to date. The development of oil sands domestically has the potential to turn the United States into a major supplier of heavy oil to world markets. To date, oil sands development has been limited by the absence of viable technology that can extract heavy oil and bitumen from the oil
sands deposits in an economical and environmentally responsible manner. To that end, we aim to develop our oil sands leases in an economically and environmentally responsible manner.
Asphalt Paving Sales Market
Asphalt is a key infrastructure construction material noted for its durability, flexibility, and ability to withstand adverse weather conditions. Asphalt is widely used for resurfacing projects to extend the lifespan of existing infrastructure and to repair cracks, potholes, and deterioration. The asphalt market is driven by the demand for road infrastructure development, maintenance, and repair.
The paving infrastructure industry is seeing progress in the adoption of asphalt technologies aimed at elevating performance, durability, and sustainability, including the use of polymer-modified asphalt and warm mix asphalt, and the use of asphalt shingles and reclaimed asphalt pavement. For example, the Missouri Department of Transportation reports that blending asphalt shingles to its hot mix asphalt results in a very durable, more-rut resistant asphalt at a much lower price, and that by using RAS, the department reduces the amount of liquid asphalt in a mix design by 20% to 25%. Together, these innovations strive to extend the longevity, environmental impact, and durability of paving asphalt and to reduce the demand for virgin materials and promote circular economy principles.
Recent favorable economic developments are expected to further boost overall activity and revenue in the construction industry where Federal and State government departments are investing in infrastructure projects such as highway or roadway repair, bridge and road construction and rehabilitation.
On November 15, 2021, President Biden signed into law a $1.2 trillion bipartisan package for new federal investments in America’s infrastructure over five years, including money for roads, bridges, mass transit, rail, airports, ports and waterways. Over $110 billion of new funds is allocated toward improving the nation’s roads and bridges, and investments in other major transportation programs.
Under the infrastructure package, $2.6 billion will be invested in roads and bridges in Utah over the next five years. Projects scheduled to start or are already under construction include a brand-new highway, new interchanges, widened freeways and highways, new paths for pedestrians and cyclists, maintenance to keep roads and bridges in good condition and improved access to a new state park. Under that same infrastructure package, California will receive $28.2 billion to build and repair more than 14,220 miles of highways and 1,536 bridges over five years. As of the date of this report, the infrastructure law referenced above is still the federal framework controlling these investments.
Oil Refining and Sales Market
The process of converting crude oil into usable products is known as refining. Refining is a core component of the U.S. midstream energy sector and supports the production of transportation fuels, petrochemical feedstocks, and infrastructure-related materials. The most common products derived from a barrel of crude oil are gasoline and diesel, followed by jet fuel, heating oil, asphalt, lubricants, and petrochemical inputs used in plastics and industrial manufacturing.
According to the U.S. Energy Information Administration (EIA), the United States has remained the world’s largest crude oil producer in recent years. U.S. crude oil production reached multiple record highs during 2024 and 2025, reflecting continued efficiency gains and strong output from major producing basins.
In August 2024, U.S. crude oil production set a monthly record, averaging approximately 13.4 million barrels per day (b/d), surpassing the prior record set in late 2023. Annual average production for 2025 is estimated at approximately 13.6 million b/d, representing the highest annual output in U.S. history. For 2026, the EIA projects U.S. crude oil production to remain near record levels, averaging approximately 13.5 million b/d, before moderating modestly in subsequent years.
U.S. refining capacity continues to support high levels of refined product output. Refinery utilization rates have generally remained strong, particularly during peak driving seasons, with gasoline and diesel accounting for the majority of refined product demand. Refined petroleum products remain essential inputs for freight transportation, aviation, construction, agriculture, and petrochemical manufacturing.
The United States also continues to play a critical role as a supplier of refined petroleum products to domestic and export markets. Demand for crude oil and refined products has been supported by federally funded infrastructure projects, increased construction activity, and sustained transportation needs across the country.
Overall, the U.S. oil refining and sales market remains characterized by record-level crude production, stable refining operations, and continued demand tied to transportation, industrial activity, and long-term infrastructure investment.
The PR Spring Facility
Construction of the PR Spring Facility was completed in 2019 and originally utilized a hybrid water/biosolvent recovery system for the separation of oil from oily sands and asphalt sludge. This process has since been shown to be uneconomical in the current environment and to use significant amounts of water.
We are in the process of retrofitting the PR Spring Facility to utilize our ECOSolv process to recycle waste asphalt shingles into crude oil and clean solids, and to produce oil and asphalt paving aggregate from its bitumen deposits, which will require very little or no water. This same solvent process has been demonstrated in bench tests to be effective in the separation of waste asphalt shingles into its base components of oil, sand and fiberglass. Although there are no proven oil reserves at the PR Spring facility, we believe that we will be able to economically operate the facility solely with the use of waste asphalt shingles.
We have invested approximately $6.3 million since September 16, 2020, at the PR Spring facility, all of which is related to the retrofit of the facility. We estimate the remaining capital costs for the completion of the retrofit will be approximately $4.0 million. We intend to finish retrofitting the PR Spring Facility in the next twelve months from when the necessary funding is obtained. We also plan to develop a modular asphalt shingle recycling facility design to grind and mill the shingle feedstock, which can be deployed in areas with high concentrations of waste asphalt shingles and near asphalt shingle manufacturers.
The ECOSolv Process
Under the ECOSolv process, mined oil sands or waste asphalt shingle pellets are crushed and then mixed with a proprietary hydrocarbon-based waterless solvent and heated and agitated in a mixing vessel into a slurry. The solvent “washes” the sand clean and separates the sand from the pre-oil liquid asphalt. The freed ‘pre-oil’ is then processed during the separation stage and various products can be produced – West Texas Intermediate (WTI) market bitumen, heavy oil or heavy crude oil. The solvent is extracted by separation, distillation and evaporation processes and is captured for re-use in the closed loop system, leaving clean heavy oil behind ready for sale. Separation of the sand is done by mechanical drying units, which evaporate and capture the solvent for reuse, leaving behind clean sand.
Bench testing for oil recovery from waste asphalt shingles was performed using samples containing 22% to 25% weight saturation asphalt bitumen content. The samples were processed using our ECOSolv process and resulted in a product containing, on average, 20.8% bitumen and less than 1% solvent, implying a hydrocarbon recovery factor of up to 95% and solvent recovery of up to 99%.
PR Spring Asphalt Bitumen Leases
2020 Resources holds a 100% undivided interest in contiguous asphalt bitumen leases covering approximately 5,880 acres in the PR Spring region of Uintah County, Utah. The leases were issued by the State of Utah’s School and Institutional Trust Land Administration and require payment of annual rent of $5,880 per year. Once production from the bitumen deposit begins production royalties will be paid at 8% and 10% of gross sales per year.
The PR Spring oil sands deposit is located along the southeast flank of the Uintah Basin, formed during the late Cretaceous and Early Tertiary period. The deposit is within the Eocene-aged Green River Formation of the Douglas Creek Member. In general, the sands thicken to the southeast, closer to their source, becoming increasingly finer-grained and carbonate rich to the north and northwest.
The location of the project is amongst rugged topography, meaning the overburden thickness of the oil-saturated sands is highly variable. This variability directly affects the total volume to bitumen in-place calculations across the property. The target deposit is topographically high, which has resulted in erosion of much of the non-reservoir overburden. The mine pits have been proposed in an ideal location where the target resource is very shallow and thick with minimal
overburden and outcropping at the surface in some locations. Well data in the mine pits is very dense and high quality, with 70 core holes in the Phase 1 mine pit locations and over 180 cored wells across PR Spring acreage. A detailed understanding of the reservoir can be achieved by analysis of this data. To that end, we aim to develop our oil sands leases in an economically and environmentally responsible manner.
Eagle Springs Refinery
On September 30, 2022, we acquired Foreland Refinery Corp, which is engaged in the refining of heavy crude oil into diesel and other petroleum products (naphtha, VGO, and paving asphalt liquids) operating as the Eagle Springs Refinery located near Ely, Nevada. The refinery has a “name plate” production capacity of approximately 80,000 barrels per month, subject to air permit limitations and the regional aspect of its feedstock supply. We anticipate operating at approximately 45,000 barrels per month during 2026. In addition to securing additional crude oil from regional producers, management anticipates that the heavy oil produced at the PR Spring Facility once operational will be refined at the Eagle Springs Refinery resulting in increased production and revenues and higher efficiencies across the production chain.
The refinery’s major processing units include crude oil distillation, catalytic cracker, naphtha hydrotreating, and reforming units, which produce diesel, VGO, naphtha, asphalt paving oil and other associated refined products.
Feedstock crude oil, consisting largely of heavy sulfur-heavy oil, is sourced from local producers in Nevada and Utah as well as other North American sources. All the crude oil is delivered to the refinery by truck. Refined products are transported by third parties to wholesale, bulk, and retail customers primarily across Nevada, Utah and California and other North American jurisdictions.
Crude oil is received into the refinery tank farm and crude oil terminals, which include over 29,500 barrels of oil storage. The crude oil is processed through various refining units into products and where they are stored in the refinery’s approximately 73,800 barrels of refined product specific tankage.
Revenue Streams
Foreland produces diesel, vacuum gas oil (VGO), naphtha and asphalt paving liquids, which is then sold through short-term and long-term contracts to our established long-term customers and on the spot market.
The PR Spring Facility, once operational, is expected to produce asphalt paving aggregate, a low-sulfur heavy oil product from remediated asphalt shingles and in the future from mined bitumen sands, to be sold to and refined by the Eagle Springs Refinery.
We anticipate that the products derived from the recycling of waste asphalt shingles will include liquid asphalt cement, shingle granules and sand aggregate, limestone and fiberglass, which can be sold back to asphalt paving companies or shingle manufacturers.
ASR Facilities
Our historical growth plans have included the strategy of decentralized modular asphalt shingle recycling facilities referred to as ASR Facilities. We have determined that we should focus on processing waste shingles and work with partners and other companies to own and operate ASR facilities. We believe that this will provide us with a steady supply of waste shingle feedstock, allow for quality control and collection of tipping (waste disposal) fees. Discussions with other suitable facilities with existing waste shingle stockpiles are underway.
We have reviewed and analyzed several designs for ASR Facilities with a “front end” module, which could be used to grind, and mill shingle feedstock processing extracts and separating the granules and sand. The remaining bitumen can be pressed into solid pellets for ease of transportation to PR Springs. Strategically, we are reviewing the opportunity to process waste asphalt shingle pellets from the front-end modules that could potentially be shipped initially to the PR Spring Facility for secondary remediation while “back end” modules could be used for the distillation process to separate the solvents.
Remediating waste asphalt shingles into their basic components of asphalt cement, shingle granules, sand aggregate, limestone and fiberglass could be sold for use as binding material and tar coat, to the asphalt paving industry, or to roofing shingle manufacturers.
Reserves
We do not have any proven reserves on our bitumen leases at the PR Spring Facility, primarily because we have not yet produced oil from the bitumen leases and sold the product in a commercial setting.
Raw Materials and Suppliers
Currently, the primary raw materials used in the manufacture of our current products are crude oil and other petroleum fuel operational inputs. The cost of these raw materials is a key factor in pricing our products.
We source raw materials and crude oil feedstock mostly from regional producers and suppliers, and we continue to explore partnerships and opportunities to optimize our supply costs.
We have historically purchased certain key raw materials from a limited number of suppliers. For the year ended December 31, 2025, we did not owe any vendors for our supply of crude oil and other petroleum fuel operational inputs, and for the year ended December 31, 2024, three vendors accounted for 20%, 13% and 11%, respectively, of our supply of crude oil and other petroleum fuel operational inputs. We purchase raw materials with the use of purchase orders. While we believe that there is an ample supply of most of the raw materials that we need, in the absence of firm and long-term contracts, we may not be able to obtain a sufficient supply of these raw materials from our existing suppliers or alternatives in a timely fashion or at a reasonable cost. If we fail to secure a sufficient supply of key raw materials in a timely fashion, it will result in a significant delay in delivering our products. Furthermore, failure to obtain a sufficient supply of these raw materials at a reasonable cost could also harm our revenue and gross profit margins.
Please see “ Risk Factors—General Risks Related to Our Business—We depend on several principal suppliers for most of our crude oil. A disruption in supply or a change in our relationship with any one of them could adversely affect our business, financial condition and results of operations ” for a description of the risks related to our supplier relationships.
Sales and Marketing
Our comprehensive sales and marketing strategy will be utilized to drive growth, establish brand recognition, and expand our market reach and client base. This will involve attending industry conferences and events in the green tech, energy, and waste management sectors, leveraging our website, email marketing, and social media platforms, and regularly distributing press releases to share important Company updates and milestones. We will also pursue both earned and paid placements in newsletters and media outlets at local and national levels to further enhance visibility to amplify our message.
Customers
Our customers generally include refineries that use our products for feedstock to process them into finished petroleum products.
For the year ended December 31, 2025, three customers accounted for approximately 33%, 31% and 24%, respectively, of our total net sales, and for the year ended December 31, 2024, these customers accounted for approximately 35%, 23% and 22%, respectively, of our total net sales. These customers do not have any ongoing commitment to purchase our products. While additional customers continue to be sourced, customer concentration risk still exists. The loss of or a sustained decrease in demand by any one of these customers could result in a substantial loss of revenues and could have a material adverse effect on our results of operations. See “ Risk Factors—General Risks Related to Our Business—We depend on several significant customers, and a loss of one or more significant customers could adversely affect our results of operations .”
Competition
We compete with a multitude of foreign, regional, and local competitors that vary by market. If our existing or future competitors seek to gain or retain market share by reducing prices, we may be required to lower our prices, which would adversely affect our operating results. Similarly, if customers or potential customers perceive the products or services offered by our existing or future competitors to be of higher quality than ours or part of a broader product mix, our revenues may decline, which would adversely affect our operating results.
Competitive Strengths
In our operating refinery business, we have identified Foreland Refinery Corp to have a competitive advantage as the only licensed operating refinery currently in the state of Nevada. A lack of national pipeline infrastructure and trucking logistics requirements give a competitive advantage for our refinery to work with geographically located oil producers.
In our development stage emerging waste asphalt shingles business, we have identified several competitive strengths that we believe will support our position. These include our ability to optimize margins through diversified revenue streams, establishing long-term contracts, and our ability to scale our operations.
We believe that our adaptable business model, focused on collecting tipping fees ranging from $45 to $150 per ton for waste asphalt shingles with a processing cost of approximately $25 per ton, will enable us to produce bitumen and other materials at minimal cost based on our internal analysis. According to a Statista report dated August 28, 2024, tipping fees in the US in 2022 and 2023 ranged from $43 to $83 per ton, however based on our internal research we believe that tipping fees can be as high as $145-$160 per ton, in certain locations.
While we believe we are well-positioned to participate in the waste asphalt shingle recycling sector due to our know how to recycle this material into multiple high value products, we recognize the challenges that come with the rapid growth of this emerging industry. However, we believe our fully integrated process, capable of producing and refining, will offer a distinct advantage by streamlining every step from extraction to refining, ensuring greater efficiency and control over production. By combining refining capabilities with cost-effective operations, we believe that we can produce high-quality materials with significant cost savings and minimal environmental impact.
Growth Strategies
Our growth strategies include growing the production output of our Eagle Spring Refinery operated by Foreland Refinery Corp to a higher capacity, and to commence operations at our PR Spring facility.
We believe our growth of our refinery will be driven in part by permanent nearby refinery shutdowns reducing the supply of diesel and other products in the regional area driving higher crack spreads or refinery margins. Additionally, refinery growth strategies include acquiring more crude feedstock from regional suppliers and operating in longer uninterrupted production cycles.
We believe the commercialization of PR Spring facility is another component in our growth strategy. Currently, we believe PR Spring represents a significant opportunity to both unlock value in terms of the previous facility owners’ sunk costs with the plant’s investment and the available hydrocarbon resource near the facility to be processed.
Intellectual Property
We hold the following patents and patent applications:
ID Type
Patent Name
Filing Date
Issue Date
Expiry Date
Patent 2578873
Removal of hydrocarbons from particulate solids (Canada)
Patent 8758601B2
Removal of hydrocarbons from particulate solids (U.S.)
Patent 10184084B2
Oilsands processing using inline agitation and an inclined plate separator (U.S.)
Application 3028202 (1)
Method for producing pipeline specification bitumen from oil sands mining and extraction facilities using non-miscible solvents and centrifuge processing (Canada)
Application 2017/ 0306242 A1 (1)
Method for producing pipeline specification bitumen from oil sands mining and extraction facilities (U.S.)
(1) Patent applications are currently under review and may not be renewed if they have no practical application under the new solvent-based recovery system being contemplated.
Our ECOSolv process is protected as a trade secret.
Properties
Our corporate headquarters are in Woods Cross, Utah, where we lease office space at 707 W. 700 S, Suite 101.
We hold mineral leases (or the operating rights under leases) covering approximately 5,880 net acres within the State of Utah. Our oilsands remediation at the PR Spring Facility is sited on one of these leases. Terms of the leases are set forth in the table below.
Gross
Net
Lease Expiry Date
Annual Rent
Annual Advance Minimum Royalty
Production Royalty Rate
Reference
Acres
Acres
Total
Mineral leases may be extended past expiry date by continued payment of annual rent and annual advance minimum royalty.
Annual rent on mineral leases may be credited against production royalties payable during the year.
Annual advance on mineral leases of minimum royalty may be credited against production royalties payable during the year.
The production royalty is payable on the market price of products produced from the mineral leased substances, without deduction of costs for mining, overhead, labor, distribution or general and administrative activities.
We also hold two leased land rights of way rentals in Nye County, Nevada, totaling approximately 40 acres. Our Eagle Springs Refinery is sited on one of these leases.
Reference
Acres
Lease
Expiry
Date
Annual
Fee
Right-of-Way Grant N-41035
Right-of-Way Grant N-42414
We are seeking to develop the 5,930 acres of land in PR Spring, Utah to produce heavy oil/bitumen and asphalt paving aggregate from bituminous asphaltic sands deposits and are in the process of retrofitting our existing mining and processing facilities to utilize our ECOSolv technology. During the years ended December 31, 2025 and 2024, we conducted no mining operations. As of the date hereof, the PR Spring lands are classified as an exploration stage property and hold no mineral reserves or proven minerals reserves, as those terms are defined in Subpart 1300 of Regulation S-K.
We believe that our facilities are adequate to meet our needs for the immediate future, and that, should it be needed, suitable space will be available to accommodate any such expansion of our operations.
Employees
As of December 31, 2025, we had 26 full-time employees.
Legal Proceedings
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.
On March 4, 2026, KF Business Ventures, LP 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 Item 3, “Legal Proceedings.”
Government Regulation
We are subject to regulation by multiple U.S. government agencies, including the U.S. Environment Protection Agency, or the EPA.
We are subject to the requirements of the Federal Occupational Safety and Health Act, or OSHA, and comparable state laws. The OSHA hazard communication standard, the EPA community right-to-know regulations under Title III of the Comprehensive Environmental Response, Compensation, and Liability Act and similar state laws require that we organize and/or disclose information about hazardous materials used or produced in our operations. Also, pursuant to OSHA, the Occupational Safety and Health Administration has established a variety of standards related to workplace exposure to hazardous substances and employee health and safety.
The Federal Oil Pollution Act of 1990, or OPA, and resulting regulations impose a variety of obligations on responsible parties related to the prevention of oil spills and liability for damages resulting from such spills in waters of the United States. The term “waters of the United States” has been broadly defined to include inland water bodies, including wetlands and intermittent streams. The OPA assigns joint and strict liability to each party responsible for oil removal costs and a variety of public and private damages. We believe that we are in compliance with the OPA and the federal regulations promulgated thereunder in the conduct of our operations.
The Federal Water Pollution Control Act, or the Clean Water Act, and resulting regulations, which are primarily implemented through a system of permits, also govern the discharge of certain contaminants into waters of the United States. Sanctions for failure to comply strictly with the Clean Water Act are generally resolved by payment of fines and correction of any identified deficiencies. However, regulatory agencies could require us to cease construction or operation of certain facilities or to cease hauling wastewater to facilities owned by others that are the source of water discharges. We believe that we substantially comply with the Clean Water Act and related federal and state regulations.
The application, interpretation, and enforcement of these U.S. laws and regulations are often uncertain, particularly in the rapidly evolving industry in which we operate and may be interpreted and applied inconsistently with our current policies and practices. Any existing or new legislation applicable to our operations could expose us to substantial liability, including significant expenses necessary to comply with such laws and regulations, to respond to regulatory
inquiries or investigations, and to defend individual or class litigation. These events could cause us to divert significant resources and funds to address these issues and possibly require us to change our business practices.
Implications of Being an Emerging Growth Company
We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As a result, we will be permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:
· have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act;
· comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
· submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and
· disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the first registered offering of our securities, (ii) the last day of the first fiscal year in which our total annual gross revenues are $1.235 billion or more, (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iv) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
Item 1A. Risk Factors
RISK FACTORS
An investment in our securities involves a high degree of risk. You should carefully consider the risks described below as well as the other information included in this Form 10-K, including “Cautionary Note Regarding Forward-Looking Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto included elsewhere in this Form 10-K, before making an investment decision. Our business, prospects, financial condition, or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. The trading price of our securities could decline due to any of these risks, and, as a result, you may lose all or part of your investment.
General Risks Related to our Business
Our recurring losses from operations raise substantial doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations.
We sustained losses from operations of $9,248,500 and $7,523,186 for the years ended December 31, 2025 and 2024, respectively. Accordingly, we have concluded that substantial doubt exists regarding our ability to continue as a going concern. Our audited consolidated financial statements for the year ended December 31, 2025, have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. Our consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of these uncertainties related to our ability to operate on a going concern basis. In its report on our consolidated financial statements for the years ended December 31, 2025 and 2024, our independent registered public accounting firm included an explanatory paragraph stating that our recurring losses from operations and net capital deficiency raise substantial doubt about our ability to continue as a going . The perception that we may not be to continue as a going may cause others to choose not to deal with us due to about our ability to meet our contractual obligations, which would have a material effect on our operations.
Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations. If we are unable to obtain sufficient funding, our business, prospects, financial condition and results of operations will be materially and adversely affected, and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our financial statements, and it is likely that investors will lose all or a part of their investment. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all.
We have outstanding debt that is past due and we are not currently making full payments to certain of our lenders pursuant to outstanding loans and merchant cash advance agreements which could result in our lenders declaring the loans to be in default.
As of the date hereof, we have outstanding debt in the amount of approximately $7,618,831 that is currently past due. Foreland is party to a loan agreement with LendSpark Corporation, or LendSpark, and a merchant cash advance agreement with Libertas Funding LLC, or Libertas. At present, Foreland is making reduced payments to both LendSpark and Libertas. These payments continue to decrease the outstanding balances owed under the agreements; however, making less than the full payments required constitutes a breach of the respective agreements. The Company and Foreland are also party to loan agreements with KF Business Ventures LTD., or KFBV, and ACMO USOS LLC.
As part of these agreements, Foreland has pledged all of its assets as collateral. Consequently, LendSpark, Libertas or KFBV could declare a default and initiate foreclosure proceedings on Foreland’s assets. Such an action would have a materially adverse impact on our operations, as Foreland currently represents all our revenue-generating activities. On March 4, 2026, KFBV filed a complaint against us in the Third Judicial District Court of Salt Lake County, Utah, seeking, among other things, repayment and judicial foreclosure/ possession of collateral. Although the Company intends to vigorously defend against the claims asserted in this action, the litigation is in its early stages and no
assurance can be given as to the timing or outcome of the proceeding. An unfavorable outcome could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
In the event of foreclosure, it is likely that our ability to continue operations would be compromised, which could result in significant losses for our stockholders and could require us to pursue bankruptcy protection.
We have a limited operating history upon which you can evaluate our performance, have a history of losses and have only been operating the Eagle Springs Refinery since September 30, 2022. Accordingly, our prospects must be considered in light of the risks that any new company encounters.
On September 30, 2022, we acquired the Eagle Springs Refinery and the likelihood of our creation of a viable business must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the integration of a newly acquired operating business, the growth of our business from the PR Spring Facility, operation in a competitive industry, declining revenues at Eagle Springs Refinery, and the continued development of our technology and products. We anticipate that our operating expenses will increase for the near future, and there is no assurance that we will be profitable soon, if at all.
You should consider our business, operations, and prospects in light of the risks, expenses, and challenges facing the Company in its early stages.
Our future operating results will depend on many factors, including but not limited to:
· our ability to efficiently run Eagle Springs Refinery;
· our ability to recover lost market share at the Eagle Springs Refinery;
· our ability to raise adequate working capital;
· the success of the development of our facilities;
· the level of our competition;
· the New York Mercantile Exchange West Texas Intermediate Crude Oil spot contract (an oil price benchmark that is central to global commodities trading and is used to forecast energy input and commodity sale prices), or WTI, market;
· our ability to successfully integrate the acquisition of the Eagle Springs Refinery and operations;
· our ability to attract and maintain key management and employees; and
· our ability to efficiently develop and produce sufficient quantities of saleable products from waste asphalt shingles in a highly competitive and speculative environment while maintaining quality and controlling costs.
We depend on several significant customers, and a loss of one or more significant customers could adversely affect our results of operations.
For the year ended December 31, 2025, three customers accounted for approximately 31%, 33% and 24%, respectively, of our total net sales, and for the year ended December 31, 2024, these customers accounted for approximately 35%, 23% and 22%, respectively, of our total net sales. These customers do not have any ongoing commitment to purchase our products. The loss of or a sustained decrease in demand by any one of these customers could result in a substantial loss of revenues and could have a material adverse effect on our results of operations. In addition, should any of these large customers default on their obligations to pay, our results of operations and cash flows could be adversely affected.
We depend on several principal suppliers for the majority of our crude oil. A disruption in supply or a change in our relationship with any one of them could adversely affect our business, financial condition and results of operations.
We have historically purchased certain key raw materials from a limited number of suppliers. For the year ended December 31, 2025, one vendor accounted for 17% of our supply of crude oil and other petroleum fuel operational inputs, and for the year ended December 31, 2024, three vendors accounted for 20%, 13%, and 11%, respectively, of our supply of crude oil and other petroleum fuel operational inputs. A change of vendors, a disruption in supply or a significant change in pricing with any of these suppliers could have a material adverse effect on our business, financial condition and results of operations.
Our future success is dependent on the continued service of our management team .
Our future success is dependent, in a large part, on retaining the services of our current management team. Our executive officers possess a unique and comprehensive knowledge of our industry, our technology and related matters that are vital to our success within the industry. The knowledge, leadership and technical expertise of these individuals would be difficult to replace and the loss of one or more of our officers could have a material adverse effect on our operating and financial performance, including our ability to develop and execute our long-term business strategy. We do not maintain a key person life insurance policy on any of the members of our senior management team. As a result, we would have no way to cover the financial loss if we were to lose the services of our directors or officers. Notwithstanding the above, none of our officers have any experience in recycling waste asphalt shingles.
The issuance of shares of our common stock as compensation to officers, directors, employees and consultants could have an adverse effect on our operating results and a dilutive effect on our shareholders.
From time-to-time we issue shares of our common stock to officers, directors, employees and consultants for services rendered. A significant issuance of our common stock to any of these recipients would have a dilutive effect on the value of your shares, would increase general and administrative expenses, would have an adverse effect on our earnings, and may require us to make subjective estimates and assumption, all of which could have a material impact on our results of operations.
We entered into financing arrangements that contain covenants that could limit our ability to engage in certain transactions.
We entered into financing arrangements with lenders that contain covenants that could limit our ability to engage in specified types of transactions. These covenants may limit our ability to, among other things, consolidate, merge, sell, or otherwise dispose of all or substantially all our assets.
A breach of any of the covenants with our lenders could result in a default under the terms of the financings in which the lender could elect to declare all amounts outstanding thereunder to be immediately due and payable and foreclose on substantially all our assets which are secured by such financing arrangements. Furthermore, if our current secured financial obligations are repaid, we may need to pledge all our assets as collateral to secure additional financing in the future.
Acquisition opportunities may present themselves that in hindsight did not achieve the positive results anticipated by our management.
From time to time, acquisition opportunities may become available to us. Those opportunities may involve the acquisition of specific assets, such as intellectual property or inventory, or may involve the assumption of the business operations of another entity. Our goal with any future acquisition is that any acquisition should be able to contribute neutral to positive EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) to us after integration. To make these acquisitions, we will likely be required to obtain lender financing or issue additional shares of stock in exchange for the shares of the target entity. If the performance of the acquired assets or entity does not produce positive results for us, the terms of the acquisition, whether it is interest rate on debt, or additional dilution of stockholders, may prove detrimental to our financial results or the performance of your shares.
Environmental and regulatory compliance may impose substantial costs on us.
Our operations are or will be subject to stringent federal, state and local laws and regulations relating to improving or maintaining environmental quality. Environmental laws often require parties to pay for remedial action or to pay
damages regardless of fault. Environmental laws also often impose liability with respect to divested or terminated operations, even if the operations were terminated or divested many years ago.
Our activities are or will be subject to extensive laws and regulations governing our remediation, and recycling activities, as well as those governing exports, taxes, labor standards, occupational health, waste disposal, land use, protection and remediation of the environment, protection of endangered and protected species, operational safety, toxic substances and other matters. Generally, our activities and operations may be subject to risks and liabilities associated with pollution of the environment and disposal of any waste products. Compliance with these laws and regulations may impose substantial costs on us and may subject us to potential liabilities. In addition, should there be changes to existing laws or regulations, our competitive position within the industry may be adversely affected, as many industry players may have greater resources than we do.
We may be exposed to third party liability and environmental liability in the operation of our business.
Our operations could result in liability for personal injuries, property damage, discharge of hazardous materials, remediation and clean-up costs and other environmental damage. We could be liable for environmental damages caused by previous owners. As a result, we may incur substantial liabilities to third parties or governmental entities, and the payment of such liabilities could have a material adverse effect on our financial condition and results of operations. The release of harmful substances in the environment or other environmental damages caused by our activities could result in us losing our operating and environmental permits or inhibit us from obtaining new permits or renewing existing permits. When we commence operations at our PR Spring Facility and ASR Facility, we intend to obtain and maintain additional insurance coverage for our operations, including limited insurance coverage for sudden environmental damages. Accordingly, we could incur substantial costs to comply with environmental laws and regulations which could affect our ability to operate as planned.
We rely on technology to conduct our business, and our technology could become ineffective or obsolete.
We rely on technology, including proprietary techniques, processes, and intellectual property, as well as closely-held economic models, to develop our plans and estimates and to guide our development, processing, and production activities. We will be required to continually enhance and update our technologies to maintain their efficacy and to avoid obsolescence. As such, our business may carry with it a greater degree of technological risk than other projects that employ commercially proven technologies. If major process design changes are required, the costs of doing so may be substantial and may be higher than the costs that we anticipate for technology maintenance and development. If we are unable to maintain the efficacy of our technology, our ability to manage our business and to compete may be impaired. Further, even if we are able to maintain technical effectiveness, our technology may not be the most efficient means of reaching our objectives, in which case we may incur higher operating costs than if we were technology more efficient.
An overall decline in the health of the economy and other factors impacting consumer spending, such as recessionary conditions, governmental instability, inclement weather, and natural disasters, may affect consumer purchases, which could reduce demand for our products and harm our business, financial condition, and results of operations.
Macroeconomic conditions that affect the economy and the economic outlook of the United States and the rest of the world could adversely affect us and our vendors and suppliers, which could have a material adverse effect on our business, financial condition and results of operations. Our business depends on consumer demand for our services and, consequently, is sensitive to a number of factors that influence consumer confidence and spending, such as general economic conditions, consumer disposable income, energy and fuel prices, recession and fears of recession, unemployment, legislative and regulatory changes, minimum wages, availability of consumer credit, consumer debt levels, conditions in the housing market, interest rates, tax rates and policies, inflation, consumer confidence in future economic conditions and political conditions, war and fears of war, inclement weather and climate change, natural disasters, terrorism, uncertainty in the banking system, outbreak of viruses or widespread illness, and consumer perceptions of personal well-being and security. Unfavorable economic conditions can lead consumers to forgo our services and consumer demand for our services may not grow as we expect. We believe perceived risks will continue to impact our results of operation in 2026. For example, perceived risks may cause companies and individuals to reduce travel for either professional or personal reasons and drive higher prices in the supply chains we rely upon.
We are exposed to the impact of rising inflation rates, which could negatively affect our results of operations and our ability to invest and hold our cash.
The United States has recently experienced historically high levels of inflation. Additionally, recent trade disputes between the United States and other countries resulting in the imposition of increased tariffs on products imported into the U.S., and the ongoing conflicts between Russia and Ukraine and in the Middle East, have contributed to higher inflation.
The Consumer Price Index for All Urban Consumers, a widely followed inflation gauge published by the U.S. Bureau of Labor Statistics, increased by 2.4% from January 2025 to January 2026. The general effects of inflation on the global economy can be wide-ranging, evidenced by rising wages and rising costs of consumer goods and necessities. If the inflation rate continues to increase, this will result in, for example, increases in the cost of fuel, labor and other costs, which will adversely affect our expenses, such as employee compensation, which accounts for a significant portion of our operating expenses.
Our fuel purchase and labor contracts generally do not provide meaningful price protection against increases in costs. Our current policy is not to enter into transactions to hedge our fuel costs, although we review this policy from time to time based on market conditions and other factors. Accordingly, as of December 31, 2025, and December 31, 2024, we did not have any fuel hedging contracts outstanding to hedge our fuel costs. Additionally, we do not typically enter long-term labor agreements with our ground service personnel to fix our employee-related costs. We do not intend in the foreseeable future to enter into any future transactions to hedge the cost of fuel, and assuming we do not otherwise fix our labor costs, we will continue to be fully exposed to fluctuations in prices of material operating costs.
Failure to maintain an effective system of disclosure controls and procedures and internal control over financial reporting, or our failure to remediate our existing material weaknesses in our internal control over financial reporting, could have a material adverse effect on our results of operations, financial condition and cash flows.
As a public reporting company, we are required to establish and periodically evaluate our disclosure controls and procedures with respect to information we file with or submit to the SEC and our internal control over financial reporting with respect to our financial statements and related disclosures. We are required to assess the effectiveness of our internal control over financial reporting at the end of each fiscal year pursuant to Section 404 of the Sarbanes-Oxley Act. If we identify deficiencies in our internal control over financial reporting, we may be unable to accurately report our financial results or report to them within the timeframes required by the SEC. If this occurs, we could become subject to sanctions or investigations by the SEC or other regulatory authorities, or investors and other users of our financial statement may lose confidence in the accuracy and completeness of our financial reports. This may in turn impair our business, restrict our access to the capital markets, and adversely impact our stock price.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. We are currently in the process of implementing a remediation plan to address these material weaknesses. If our remediation efforts are insufficient or not completed in a timely manner, or if additional material weaknesses in our internal control over financial reporting are identified or occur in the future, our financial statements may contain material misstatements and we could be required to restate our financial results, which could materially and adversely affect our business, results of operations and financial condition, restrict our ability to access the capital markets, require us to expend significant resources to correct the material weaknesses, subject us to , or judgments, our reputation or otherwise cause a in investor confidence.
We have engaged in transactions with related parties, and such and other transactions in the future could present conflicts of interest that could have a material adverse effect on our results of operations, financial condition and cash flows.
We have engaged in the past, and may continue to engage in the future, in related-party transactions. Such transactions may present conflicts of interest, which could result in disadvantages to us and may impair investor confidence, which could have a material adverse effect on our results of operations, financial condition and cash flows. Related parties may be motivated by personal or other interests that may not be in our or our stockholders’ best interests. Certain of our affiliates may economically benefit from our arrangements with related parties, and certain related-party transactions may not involve arms’ length negotiations with respect to their terms and conditions, which could result
in unfavorable terms for us. Further, the mere appearance of a conflict of interest could impair the confidence of our investors.
Our financial results may fluctuate from quarter to quarter due to certain maintenance requirements.
We rely on our facilities, our refineries in particular, for our business. Such facilities require ongoing maintenance, and may from time to time require certain repairs, improvements and retrofitting to ensure optimal or desired performance (collectively, “Maintenance”). Certain Maintenance may require a shutdown of certain facilities or cause such facilities to operate in a diminished capacity (an “Outage”), as was the case in both the third and fourth quarters of 2025. Although certain Outages may be caused by factors outside of our control, such as natural disasters, we have in the past, and will continue to, schedule and perform planned Outages to conduct necessary or desired Maintenance. Outages may affect our business, financial condition and results of operations, and may cause actual results to differ materially from our plans and projections. In addition, Outages may cause our financial results to fluctuate from quarter to quarter, which would make our financial results to compare.
Disruptions or breaches of our IT systems, due to cyber-attacks or otherwise, could cause us to lose financial and operational data, prevent us from efficiently operating our business and cause us to lose revenue and profits or incur significant costs.
Our IT systems may be vulnerable to damage or disruption caused by circumstances beyond our control or anticipation, such as power outages, natural disasters and network failures. In addition, our systems may be vulnerable to cyber-attacks, including the use of malicious codes, worms, phishing, spyware, denial of service attacks and ransomware, all of which are rapidly evolving and becoming increasingly sophisticated. Despite our efforts to ensure the integrity of our IT systems, cyber-attacks evolve and become more difficult to detect and defend against, and there can be no assurance that our efforts will be sufficient to protect our systems from such threats. Such cyber-attacks or other access or disclosure of information could compromise access to our systems, result in the of data, sensitive information and our reputation. Cyber-attacks could also cause us to incur significant remediation costs, including the possibility of government , our operations and key resources and management’s attention. Any one or more of these consequences could have a material effect on our business, financial condition or results of operations. In addition, if our third-party service providers experience a cyber-attack or other cyber , their operations may be affected, which could also have a material effect on our business, financial condition, or results of operations.
If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes appearing elsewhere in this prospectus. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the sections entitled “ Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates ”. The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses. Significant estimates and judgments involve: valuation of our share-based compensation, fair value measurements of our debt and equity transactions; and income taxes. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our common stock.
Risks Related to Asphalt Shingle Recycling
The nature of our waste asphalt shingle recycling operations may involve various risks.
Our anticipated operations in asphalt shingle recycling and reclamation involves many risks that even a combination of experience, knowledge and careful evaluation may not be able to overcome. Furthermore, the marketability of any products produced from waste asphalt shingles will be affected by numerous factors beyond our control. These factors include, but are not limited to, price fluctuations, proximity and capacity of processing equipment, equipment and labor availability and government regulations (including, without limitation, regulations relating to prices, taxes, royalties, allowable production, importing and exporting of base components of asphalt cement, shingle granules, sand
aggregate, limestone and fiberglass, land use and environmental protection). The extent of these factors cannot be accurately predicted, but the combination of these factors may result in us not receiving an adequate return on invested capital.
Our ECOSolv Technology May Not Work as Expected.
The recovery of oil from our bitumen deposit and the process of recycling waste asphalt shingle is dependent on the viability of our proprietary technology, which we refer to as the ECOSolv process. However, the ECOSolv technology has never been used on a commercial scale. If the ECOSolv technology does not perform as expected, our waste asphalt shingle business plan is likely to fail.
The viability of our asphalt shingle recycling and reclamation business plan, business operations, and future operating results and financial condition are and will be exposed to fluctuating prices for our end-products.
Prices for asphalt cement, shingle granules, sand aggregate, limestone and fiberglass, and their related products are affected by supply and demand, which can fluctuate significantly. Factors that influence supply and demand include operational issues, natural disasters, weather, political instability or conflicts, and economic conditions. Price fluctuations can have a material effect on our ability to raise capital and fund our activities, our potential future earnings, and our financial condition.
Because of the speculative nature of asphalt shingle recycling, there is a risk that our business may not succeed.
We cannot provide any assurance that we will be able to obtain a requisite amount of feed stock or asphalt shingles necessary for the success of our asphalt shingle recycling and reclamation operations, which may force us to abandon or curtail our business plan related to asphalt shingle recycling and reclamation and, as a result, any investment in us may become materially adversely effected.
The price for asphalt cement, shingle granules, sand aggregate, limestone and/or fiberglass is subject to a variety of factors that are beyond our control.
The price for asphalt cement, shingle granules, sand aggregate, limestone and/or fiberglass is subject to a variety of factors that are beyond our control. These factors include:
· consumer and/or industrial demand;
· supply of asphalt shingles;
· domestic governmental regulations and taxes;
· the price and availability of solvent materials and feedstocks;
· adverse weather conditions;
· worldwide economic conditions.
The market for asphalt cement, shingle granules, sand aggregate, limestone and/or fiberglass may be highly competitive, and intensely competitive pressures could force us to abandon or curtail our business plan related to asphalt shingle recycling and reclamation.
The market for asphalt cement, shingle granules, sand aggregate, limestone and/or fiberglass products may be highly competitive, and we can only expect competition to intensify in the future. Numerous well-established companies are focusing significant resources on similar recycling and remediation activities and may be competing with us for opportunities. Competitors include larger companies which may have access to greater resources, may be more successful in the recruitment and retention of qualified employees and may conduct their own marketing operations, which may give them a competitive advantage. Actual or potential competitors may be strengthened through the acquisition of additional assets and interests. As a result, there can be no assurance that we will be able to compete successfully or that competitive pressures will not adversely affect our business, results of operations and financial
condition. If we cannot successfully compete in the marketplace, we could be forced to curtail or even abandon our current business plan, which could cause any investment in us to become worthless.
Decommissioning costs are unknown and may be substantial. Unplanned costs could divert resources from other projects.
In the future, we may become responsible for costs associated with abandoning and reclaiming facilities which we use for recycling of asphalt shingles. Abandonment and reclamation of these facilities and the costs associated therewith is often referred to as “decommissioning.” The use of funds to satisfy such decommissioning costs could impair our ability to focus capital investment in other areas of our business.
We may have difficulty marketing or distributing the asphalt cement, shingle granules, sand aggregate, limestone and/or fiberglass we may produce, which could harm our financial condition.
To sell the finished asphalt cement, shingle granules, sand aggregate, limestone and fiberglass that we can produce from the asphalt shingle recycling process, if any, we must be able to make economically viable arrangements for the storage, transportation and distribution of these products. We will rely on local infrastructure and the availability of transportation for storage and shipment of our products, but infrastructure development and storage and transportation facilities may be insufficient for our needs at commercially acceptable terms in the localities in which we operate.
Furthermore, weather conditions or natural disasters, actions by companies doing business in one or more of the areas in which we will operate, or labor disputes may impair the distribution of our products and in turn diminish our financial condition or ability to maintain our operations.
We do not yet have a market for the anticipated recycled products that we expect to generate from our PR Spring Facility.
There can be no assurance that a market will develop for the recycled products that we intend to produce at our PR Spring Facility. We do not have any sales or supply agreements with any company for the byproducts of waste asphalt shingles.
Our shingle remediation activities will be dependent upon having an available supply of waste asphalt shingles from waste haulers, shingle manufacturers or other third parties.
We do not have any supply agreements with landfills and/or private waste haulers to supply us with waste asphalt shingles. As our PR Spring facility is in a remote location, we may not be able to economically source or have waste asphalt shingles delivered to us form waste haulers, shingles manufacturers or other 3 rd parties. If we are unable to source waste asphalt shingles, our business operations and financials would be adversely affected.
Risks Related to Oil Sands Exploration
We do not have any proven oil reserves.
As of the date hereof, our bitumen deposit did not have any proven oil reserves. If our oil sands do not contain economically recoverable heavy oil and bitumen and/or we are unable to commercially extract such quantities, we may be forced to abandon or curtail our planned oilsands operations at our PR Spring Facility and, as a result, our operating results could be adversely affected.
The price of oil has historically been volatile.
Our future financial condition and results of operations will depend, in part, upon the price for oil. Oil prices historically have been volatile and likely will continue to be volatile in the future, especially given current world geopolitical conditions. Our cashflows from operations will be highly dependent on the prices that we receive for oil. This price volatility also affects the amount of our cashflows available for capital expenditures and our ability to borrow money or raise additional capital. The price of oil is subject to a variety of additional factors that are beyond our control. These factors include:
· the level of consumer and industrial demand for oil;
· the domestic and foreign supply of oil;
· the ability of the members of the Organization of Petroleum Exporting Countries, or OPEC, to agree to and maintain oil price and production controls;
· domestic governmental regulations and taxes;
· adverse weather conditions;
· market uncertainty due to political conditions in oil and gas producing regions; and
· worldwide economic conditions.
These factors as well as the volatility of the energy markets generally make it extremely difficult to predict future oil price movements with any certainty. In a low oil price environment oil sands exploration and development may not be economically or financially viable or profitable. Prolonged periods of low oil prices, or rising costs, could result in our mining and processing operations being delayed or cancelled.
Furthermore, our ability to sell oil will be affected by numerous factors beyond our control. These factors include, but are not limited to, proximity and capacity of refineries and pipelines and processing equipment, equipment and labor availability and government regulations (including, without limitation, regulations relating to taxes, royalties, importing and exporting of oil, and land use and environmental protection). Weather conditions or natural disasters or labor disputes may impair the distribution of oil and in turn diminish our financial condition and our ability to maintain our operations.
Oil sands development involves many risks.
The oil sands development business involves a variety of operating hazards and risks such as explosions, fires, spills, pollution, release of toxic gas and other environmental hazards and risks. These hazards and risks could result in substantial losses to us from, among other things, injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, cleanup responsibilities, regulatory investigation and penalties and suspension of operations. As a result, we may incur substantial liabilities to third parties or governmental entities, the payment of which could reduce or eliminate the funds available to us and/or force us to expend substantial monies in connection with or settlements.
Decommissioning costs are unknown and may be substantial. Unplanned costs could divert resources from other projects.
In the future, we may become responsible for costs associated with abandoning and reclaiming wells and facilities which we use for processing of oil sands. Abandonment and reclamation of these facilities and the costs associated therewith is often referred to as “decommissioning”. If decommissioning is required before economic depletion of our properties or if our estimates of the costs of decommissioning exceed the value of the reserves remaining at any particular time to cover such decommissioning costs, we may have to draw on funds from other sources to satisfy such costs. The use of other funds to satisfy such decommissioning costs could impair our ability to focus capital investment in other areas of our business.
Risks Related to Oil Refining and Fuels Production
Volatility in crude oil and wholesale diesel prices affect our business, financial condition and results of operations.
Wholesale diesel prices are directly related to, and fluctuate with, the price of crude oil. Volatility in the price of crude oil, and subsequently wholesale fuel prices, is caused by many factors, including general political, regulatory and economic conditions, acts of war, terrorism or armed conflict, instability in oil producing regions, particularly in the Middle East and South America, refinery capacity and the value of U.S. dollars relative to other foreign currencies, particularly those of oil producing nations. In addition, the supply of fuel and our wholesale purchase costs could be adversely affected in the event of a shortage or oversupply of product, which could result from, among other things, the Russian invasion of Ukraine and the sanctions imposed on Russia and other countries, conflict in the Middle East (including Iran) and the US intervention in Venezuela, interruptions of fuel production at oil refineries, new supply
sources, and sustained increases or decreases in global demand for diesel fuels. Significant increases and volatility in wholesale fuel prices could result in lower gross profit, as an increase in the retail price of motor fuel could impact consumer demand for diesel and could result in lower wholesale fuel gross profit dollars. As the market prices of crude oil, and, correspondingly, the market prices of wholesale fuels, experience significant and rapid fluctuations, we attempt to pass along wholesale price changes to our customers; however, we are not always able to do so immediately. The timing of any related increase or decrease in sales prices is affected by competitive conditions in our market areas. As such, our revenues and gross profit can increase or decrease significantly and rapidly over short periods of time and potentially adversely impact our business, financial condition, and results of operations. The volatility in crude oil and wholesale fuel costs and sales prices makes it extremely difficult to forecast future gross profits or predict the effect that future wholesale costs and sales price fluctuations will have on our operating results and financial condition.
There are difficulties in operating an oil refinery which could adversely affect our business, financial condition and results of operations.
Operating a remote refinery requires various steps from receiving raw materials on site, transporting or housing employees, maintaining the refinery in operational condition, to transporting refined products to customers. Additional factors that make operating an oil refinery difficult are the risk of explosions, fire, equipment failure and cyber security threats among others. If Foreland experiences one or more of these factors, the Company’s operations could be materially adversely affected.
A significant decrease in demand for diesel and gasoline, including increased consumer preference for alternative fuels or improvements in fuel efficiency, in the areas we serve would materially affect our revenues and profitability.
The Energy Information Administration of the U.S. Department of Energy projects that U.S. motor gasoline consumption will decline at an average rate of 1.1% per year between 2012 and 2040 as improvements in fuel efficiency are expected to outpace increases in miles driven. A significant decrease in demand for these products in the areas we serve could significantly reduce our revenues. Our revenues are dependent on various trends, such as trends in consumer disposable income, the trucking industry, and travel in our market areas, and these trends can change. Regulatory action, including government-imposed fuel efficiency standards, may also affect demand for these fuels. Because certain of our operating costs and expenses are fixed and do not vary with the volumes of products we distribute, our costs and expenses might not decrease notably or at all should we experience such a reduction. As a result, we may experience declines in our profit margin if our fuel distribution volumes decrease.
Any technological advances, regulatory changes or changes in consumer preferences causing a significant shift toward alternative products could reduce demand for the conventional petroleum-based fuels we currently produce. Additionally, a shift toward electric, hydrogen, natural gas or other alternative-power vehicles could fundamentally change our customers’ shopping habits or lead to new forms of fueling destinations or new competitive pressures.
Through early 2026, the U.S. regulatory environment for vehicle emissions and fuel economy has shifted from an aggressive expansion of electric vehicle (“EV”) adoption mandates to a proposed rollback of prior standards, creating continued uncertainty regarding future demand for petroleum-based fuels. In late 2025, the National Highway Traffic Safety Administration proposed revisions to Corporate Average Fuel Economy (“CAFE”) standards that would reduce required fleetwide fuel economy levels relative to prior targets and slow the rate of annual increases through 2031, effectively moving away from the prior goal of achieving a 49–50 mpg fleet average by 2026. In February 2026, the U.S. Environmental Protection Agency announced plans to repeal vehicle greenhouse gas emission standards applicable to light-, medium-, and heavy-duty vehicles for model years 2027–2032, reversing the more stringent standards adopted in 2024. In addition, the current administration has begun dismantling regulatory initiatives supporting a transition to 100% zero-emission federal vehicle acquisitions by 2035. Notwithstanding these proposed policy reversals, the U.S. Energy Information Administration continues to project a structural decline in domestic motor gasoline consumption, forecasting approximately 5% lower demand in 2026 and 2027 compared to 2019 levels, driven by ongoing efficiency and continued EV market penetration. As a result, while the near-term regulatory risk associated with federal mandates has moderated, longer-term industry trends continue to present potential risks to petroleum demand.
The industries in which we operate are subject to seasonal trends, which may cause our operating costs to fluctuate, affecting our cash flow.
We typically experience more demand for diesel in the late spring and summer months than during the fall and winter. Travel, farming, recreation and construction are typically higher in these months in the market areas in which we operate, increasing the demand for fuel that we sell and distribute. Therefore, our revenues and cashflows are typically higher in the second and third quarters of our fiscal year. As a result, our results from operations may vary widely from period to period, affecting our cash flow.
Our operations are subject to stringent environmental laws and regulations that may expose us to significant costs and liabilities that could exceed current expectations.
Our operations are subject to stringent and complex federal, state and local laws and regulations governing the release, disposal or discharge of materials into the environment, health and safety aspects of our operations, or otherwise relating to environmental protection.
There is an inherent risk of incurring significant environmental costs and liabilities in the performance of our operations due to our handling of petroleum hydrocarbons and other hazardous substances and waste, as a result of air emissions related to our operations. Spills or other releases of regulated substances, including such spills and releases that occur in the future, could expose us to material losses, expenditures and liabilities under applicable environmental laws and regulations. Under certain such laws and regulations, we could be held strictly liable for the removal or remediation of previously released hazardous materials or property contamination, regardless of whether we were responsible for the release or contamination and even if our operations met previous standards in the industry at the time they were conducted. In connection with certain acquisitions, we could acquire, or be required to provide indemnification against, environmental liabilities that could expose us to material losses. In addition, claims for damages to people or property, including natural resources, may result from the environmental, health and safety impacts of our operations. Our insurance may not cover all environmental risks and costs or may not provide sufficient coverage if an environmental claim is made us. Moreover, public interest in the protection of the environment has increased dramatically in recent years. The trend of more expansive and environmental legislation and regulations applied to the trucking industry could continue, resulting in increased costs of doing business and consequently affecting . Changes in environmental laws and regulations occur frequently, and any changes that result in more or storage, transport, disposal or cleanup requirements could require us to make significant expenditures to and maintain compliance and may otherwise have a material effect on our industry in general in addition to our own results of operations, competitive position or financial condition. To the extent laws are enacted or other governmental action is taken that restricts development or imposes more and operating, disposal, and cleanup requirements, our business, prospects, financial condition or results of operations could be materially affected.
A climate-related decrease in demand for crude oil could negatively affect our business.
Supply and demand for crude oil is dependent upon a variety of factors, many of which are beyond our control. These factors include, among others, the potential adoption of new government regulations, including those related to fuel conservation measures and climate change regulations, technological advances in fuel economy and energy generation devices. For example, legislative, regulatory or executive actions intended to reduce emissions of greenhouse gases could increase the cost of consuming crude oil, thereby potentially causing a reduction in the demand for this product. A broader transition to alternative fuels or energy sources, whether resulting from potential new government regulation, carbon taxes or consumer preferences could result in decreased demand for products like crude oil. Any decrease in demand could consequently reduce demand for our services and could have a negative effect on our business.
Our business operations may be materially adversely affected by negative impacts to the global economy, capital markets, or other geopolitical conditions resulting from economic uncertainty, armed conflicts, acts of terrorism, political unrest or health epidemics.
During the last several years, the global supply and demand for crude oil has experienced periodic downturns and sustained volatility, impacted by such factors as the COVID-19 pandemic and recovery, Russia’s invasion of Ukraine and the related sanctions imposed on Russia, the ongoing conflict in Israel and the Gaza Strip and the ensuing conflict in the Middle East (including Iran) and the U.S. intervention in Venezuela, the global response to such conflicts,
supply chain constraints and rising interest rates and costs of capital may result in further volatility in commodity prices the oil industry and the boarder economy.
Our business, financial condition and results of operations could be materially and adversely affected by further negative impact on the global economy and capital markets resulting from these global economic conditions, particularly if such conditions are prolonged or worsen. Any such disruptions may also magnify the impact of other risks described herein.
Risks Related to Ownership of our Common Stock
We may not be able to maintain a listing of our common shares on Nasdaq.
Our common stock is listed on Nasdaq, and we must meet certain financial and liquidity criteria to maintain the listing of our common stock on Nasdaq. If we fail to meet any listing standards or if we violate any listing requirements, our common stock may be delisted. In addition, our board of directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our common stock from Nasdaq may materially impair our stockholders’ ability to buy and sell our common stock, including through our ATM program and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. The delisting of our common stock could significantly impair our ability to raise capital and the value of your investment.
We received a notice of noncompliance with the Nasdaq Capital Market minimum bid price requirement, and if we do not regain compliance by March 23, 2026, our common stock may be delisted; although our stockholders have approved a reverse stock split, there is no assurance that such action will restore or maintain compliance.
On March 24, 2026, Sky Quarry Inc. (the “Company”) received a written notification (the “Notice”) from the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) informing the Company that the Staff had determined to delist the Company’s Common Stock, par value $0.0001 (the “Common Stock”), from The Nasdaq Capital Market due to the Company’s continued non-compliance with Nasdaq Listing Rule 5550(a)(2) (the “Rule”), which requires listed securities to maintain a minimum bid price of $1.00 per share (the “Minimum Bid Price”), and that trading of the Common Stock will be suspended at the open of business on March 31, 2026.
Subsequently, on March 30, 2026, the Company was notified by Nasdaq that the Company has regained compliance with the Rule, and that the matter was now closed (the “Compliance Notice”).
As previously disclosed, on March 28, 2025, the Company was notified by Nasdaq that it did not satisfy the Rule because the bid price of the Common Stock had closed below the Minimum Bid Price for 30 consecutive business days. The Company was provided with an initial 180-calendar-day compliance period, which expired on September 24, 2025, and was granted a second 180-calendar-day compliance period, which expired on March 23, 2026, to regain compliance with the Rule by maintaining the Minimum Bid Price for a minimum of 10 consecutive business days.
On, March 15, 2026, the Company effected a one-for-eight (1-for-8) reverse stock split (the “Reverse Stock Split”) of the Common Stock, which began trading on a Reverse Stock Split-adjusted basis on March 16, 2026. Since such date, the Common Stock has maintained the Minimum Bid Price for 10 consecutive business days. As a result, the Company received the Compliance Notice from Nasdaq, noting that the Company has regained compliance with the Rule.
Even though we regained compliance, our common stock may again fall below the $1.00 minimum bid price requirement in the future. In addition, reverse stock splits often result in increased stock price volatility, reduced trading liquidity, and negative investor perception, any of which could adversely affect the market price of our common stock.
If our common stock is delisted, trading may occur on an over-the-counter market or may cease altogether, which could result in reduced liquidity, limited market quotations, decreased investor interest, and a diminished ability to raise capital. Any of these events could materially and adversely affect our business, financial condition, results of operations, and the market price of our common stock.
The market price of our stock may be highly volatile, and you could lose all or part of your investment.
The market for our common stock may be characterized by significant price volatility when compared to the shares of larger, more established companies that have large public floats, and we expect that our stock price will be more volatile than the shares of such larger, more established companies for the indefinite future. The stock market in general has recently been highly volatile. Furthermore, there have been recent instances of extreme stock price run-ups followed by rapid price declines and stock price volatility following several recent initial public offerings, particularly among companies with relatively smaller public floats. We may also experience such volatility, which may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our common stock.
The market price of our common stock is likely to be volatile due to several factors. First, as noted above, our common stock is likely to be more sporadically and thinly traded compared to the shares of such larger, more established companies. The price for our common stock could, for example, decline precipitously if a large number of shares are sold on the market without commensurate demand. Furthermore, we are a speculative or “risky” investment due to our limited operating history. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a larger, more established company that has a large public float. Many of the foregoing factors are beyond our control and may decrease the market price of our common stock regardless of our operating performance. The market price of our common stock could also be subject to wide fluctuations in response to a broad and diverse range of factors, including the following:
· actual or anticipated variations in our periodic operating results;
· increases in interest rates that lead investors of our common stock to demand a higher investment return;
· changes in earnings estimates;
· changes in market valuations of similar companies;
· actions or announcements by our competitors;
· adverse market reaction to any increased indebtedness we may incur in the future;
· additions or departures of key personnel;
· actions by stockholders;
· speculation in the media, online forums, or investment community; and
· our ability to maintain the listing of our common stock on Nasdaq.
As a result, our shareholders could suffer a loss on their investment.
An active, liquid trading market for our common stock may not be sustained, which may make it difficult for you to sell the common stock you purchase.
We cannot predict the extent to which investors’ interest in us will sustain a trading market or how active and liquid that market may remain. If an active and liquid trading market is not sustained, you may have difficulty selling any shares of our common stock that you purchase at a price above the price you purchased them for or at all. The failure of an active and liquid trading market to continue would likely have a material adverse effect on the value of our common stock. An inactive market may also impair our ability to raise capital to continue to fund operations by selling securities and may impair our ability to acquire other companies or technologies by using our securities as consideration.
Since we do not expect to pay any cash dividends for the foreseeable future, investors may be forced to sell their stock in order to obtain a return on their investment.
We do not anticipate declaring or paying in the foreseeable future any cash dividends on our capital stock. Instead, we plan to retain any earnings to finance our operations and growth plans discussed elsewhere in this Form 10-K. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any return on their investment. As a result, investors seeking cash dividends should not purchase our securities.
If securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our common stock could be negatively affected.
The trading market for our common stock may be influenced in part by any research reports that securities industry analysts publish about us. We do not currently have and may never obtain research coverage by securities industry analysts. If no securities industry analysts commence coverage of us, the market price and market trading volume of our common stock could be negatively affected. In the event we are covered by analysts, and one or more such analysts downgrade our securities, or otherwise reports on us unfavorably, or discontinues coverage of us, the market price and market trading volume of our common stock could be negatively affected.
Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our common stock to decline and would result in the dilution of your holdings.
Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our common stock to decline. We cannot predict the effect, if any, of future issuances of our securities, or the future expirations of lock-up agreements, on the price of our common stock. In all events, future issuances of our common stock would result in the dilution of your holdings. In addition, the perception that new issuances of our securities could occur, or the perception that locked-up parties will sell their securities when the lock-ups expire, could adversely affect the market price of our common stock.
Future issuances of debt securities, which would rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of preferred stock, which could rank senior to our common stock for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our common stock.
In the future, we may attempt to increase our capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders of our common stock. Moreover, if we issue preferred stock, the holders of such preferred stock could be entitled to preferences over holders of common stock in respect of the payment of dividends and the payment of liquidating distributions. Because our decision to issue debt or preferred stock in any future offering, or borrow money from lenders, will depend in part on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such future offerings or borrowings. Holders of our common stock must bear the risk that any future offerings we conduct or borrowings we make may adversely affect the level of return, if any, they may be able to achieve from an investment in our common stock.
We expect to raise additional capital through equity and/or debt offerings to support our working capital requirements and operating losses .
To fund future growth and development, we will need to raise additional funds in the future by offering shares of our common stock and/or other classes of equity, or debt that convert into shares of common stock, any of which offerings could dilute the ownership percentage of our stockholders. We cannot assure you that the necessary funds will be available on a timely basis, on favorable terms, or at all, or that such funds, if raised, would be sufficient. The level and timing of future expenditures will depend on several factors, many of which are outside our control. If we cannot obtain additional capital on acceptable terms, or at all, we may be forced to curtail or abandon our growth plans, which could adversely impact us, our business, development, financial condition, operating results or prospects.
If our shares of common stock become subject to the penny stock rules, it would become more difficult to trade our shares.
The Securities and Exchange Commission, or the SEC, has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not retain a listing on Nasdaq or another national securities exchange and if the price of our common stock is less than $5.00, our common stock could be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.
We are subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies, and our stockholders could receive less information than they might expect to receive from more mature public companies.
We are required to publicly report on an ongoing basis as an “emerging growth company” (as defined in the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not emerging growth companies, including but not limited to:
· not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;
· being permitted to comply with reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and
· being exempt from the requirement to hold a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We expect to take advantage of these reporting exemptions until we are no longer an emerging growth company. We would remain an emerging growth company for up to five years, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, we would cease to be an emerging growth company as of the following December 31.
Because we are subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies, our stockholders could receive less information than they might expect to receive from more mature public companies. We cannot predict if investors will find our common stock less attractive if we elect to rely on these exemptions, or if taking advantage of these exemptions would result in less active trading or more volatility in the price of our common stock.
We are also a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to smaller reporting companies, this could make our
securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
Rule 12b-2 of the Exchange Act defines a “smaller reporting company” as an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that:
· had a public float of less than $250 million as of the last business day of its most recently completed second fiscal quarter, computed by multiplying the aggregate worldwide number of shares of its voting and non-voting common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in the principal market for the common equity; or
· in the case of an initial registration statement under the Securities Act or the Exchange Act for shares of its common equity, had a public float of less than $250 million as of a date within 30 days of the date of the filing of the registration statement, computed by multiplying the aggregate worldwide number of such shares held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number of such shares included in the registration statement by the estimated public offering price of the shares; or
· in the case of an issuer whose public float as calculated under paragraph (1) or (2) of this definition was zero or whose public float was less than $700 million, had annual revenues of less than $100 million during the most recently completed fiscal year for which audited financial statements are available.
As a smaller reporting company, we will not be required and may not include a compensation discussion and analysis section in our proxy statements, and we will provide only two years of financial statements. We also will have other “scaled” disclosure requirements that are less comprehensive than issuers that are not smaller reporting companies which could make our common stock less attractive to potential investors, which could make it more difficult for our stockholders to sell their shares.
