0001096906-26-000438
SEC filingSky Quarry Inc. faced a challenging fiscal year 2025, with operating losses widening significantly due to refinery disruptions and pricing pressures, though net loss improved as debt restructuring provided some relief against a backdrop of persistent cash burn and going concern uncertainty.
The fiscal year 2025 was defined by significant operational headwinds for Sky Quarry Inc. The decrease in net sales was due to a combination of refinery shutdowns for repairs and refurbishment and the reduction in WTI pricing below the historical average, which correlated to lower pricing for end products. This operational disruption created a challenging revenue environment that impacted all subsequent financial metrics.
As with net sales, the decrease in cost of goods sold was due to a reduction in revenues, lower volumes of refined products and lower pricing, but did not decrease at the same rate as revenues due to fixed overhead costs. This structural challenge resulted in a gross loss that widened significantly to -$3.1 million from -$1.4 million in the prior year, representing a 122% deterioration. The operating loss followed a similar trajectory, deepening to -$9.2 million from -$7.5 million, as the company continued to bear operational expenses while revenue generation was constrained.
The net loss showed improvement to -$12.2 million from -$14.7 million in the prior year, representing a 17% reduction. This decrease in interest expense is primarily due to the conversion of existing debt to equity. The decision to utilize this form of debt was driven by the need to fund critical capital expenditures required for operational expansion and procurement of necessary crude inventory. Management continues to evaluate alternatives to optimize the capital structure and reduce reliance on higher-cost debt instruments moving forward.
Management's plan to improve our cost of goods sold as a percentage of net sales includes increasing the volume of oil refined to create better economy of scale and decreasing transportation costs, which is anticipated to enhance gross margin. We believe these costs support the targeted incremental production capacity increase at the Foreland refinery, generating more operating cash flow. Moving forward, the Company intends to manage debt levels prudently and explore ways to enhance capital efficiency, including the consideration of lower-cost financing alternatives as market conditions evolve. The future stock issuance will provide capital to support the Company's expected revenue growth, profit margins, and operating cash flow, all of which contribute to the fair value of the reporting units.