Key Highlights

• Sky Quarry Inc. (NASDAQ: SKYQ) converted merchant cash advance obligations into a single 8% promissory note.

• The new note consolidates four separate agreements dating from October 2023 to February 2024.

• A personal guarantee was provided for the full principal amount, replacing prior guarantees tied to the original advances.

• The note includes restrictive covenants on asset sales and future receivables pledges without lender consent.

Sky Quarry Inc. Has restructured its short-term debt, replacing merchant cash advances with a structured promissory note. The move extends repayment terms while introducing new financial covenants and personal liability for an executive.

Debt Conversion Terms

Sky Quarry, along with subsidiary Foreland Refining Corporation and 2020 Resources LLC, exchanged cancelled merchant cash advance obligations for a single promissory note. The note carries an 8% annual interest rate and follows a principal-first repayment schedule with escalating weekly payments.

Original Advance Details

The cancelled obligations stemmed from four separate agreements with Libertas Funding LLC. These included sales of future receivables, with one agreement involving Foreland for the sale of $1,731,660, another for the sale of $2,632,852, a third for the sale of $4,224,000, and a fourth for the sale of $1,386,000. The new note consolidates these into one instrument with a fixed principal amount in the original principal amount of $3,985,000.

Security and Covenants

Existing collateral securing the original advances remains in place under the new note. The company is prohibited from selling or pledging future receivables, except for standard accounts receivable financing, without Libertas Funding's written consent. The company also cannot dispose of material operating assets without lender approval while the note remains outstanding.

Personal Guarantee

An executive executed a personal guarantee covering all obligations under the note. The guarantee supersedes prior personal undertakings related to the merchant cash advances. Sky Quarry's board unanimously approved an indemnification agreement, requiring the company to reimburse the guarantor for any payments made under the guarantee, with interest thereon at a rate of 8%.

Repayment Structure

The note allows for prepayment without penalty at any time. Events of default include missed payments, insolvency, or breach of material covenants. Upon default, Libertas Funding may accelerate the entire unpaid principal and accrued interest.

Transaction Timing

The conversion agreement and note issuance were finalized on June 29, 2026. Libertas Funding released all claims against Sky Quarry and its affiliates arising from the original merchant cash advance agreements, copies of which are filed as Exhibits 10.1, 10.2, and 10.3.

Financial Implications

The refinancing shifts short-term liabilities into a longer-term instrument with predictable payments. While the interest rate remains elevated, the structure provides clearer repayment visibility compared to the original merchant cash advance terms. This type of refinancing is common in the energy and resource sectors, where companies often rely on alternative financing solutions to manage cash flow while pursuing growth initiatives.

The new covenants may limit operational flexibility but provide stability in debt servicing.

This article is for informational purposes only and does not constitute financial advice. Please consult a licensed financial adviser before making investment decisions.