THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

Principal Amount: $175,000.00Issue Date: August 29, 2025 

12% Convertible Promissory Note

 

FOR VALUE RECEIVED, SKY QUARRY INC., a Delaware corporation (hereinafter called “Borrower” or “Company”), hereby promises to pay to the order of  Varie Asset Management LLC (the “Holder”), address at 22647 Ventura Blvd #925, Woodland Hills, CA 91364, the sum of One Hundred Seventy Five Thousand Dollars ($175,000.00) (“Principal Amount”), with interest accruing thereon, payable on August 29, 2027 (the “Maturity Date”), if not sooner paid, converted or modified as permitted herein.  This 12% Convertible Promissory Note is referred to herein as the “Note”.  

 

The following terms shall apply to this Note:

 

ARTICLE I

 

GENERAL PROVISIONS

 

1.1Interest Rate and Interest Payment Date.   Except as otherwise provided herein, interest payable on this Note shall accrue at a rate of twelve percent (12.0%) per annum from the Issue Date through the Maturity Date. Interest shall be paid on a semi-annual basis commencing on December 31, 2025.  Payment of interest shall be made to the Holder in the form of cash. 

 

1.2Maturity Date. The Maturity Date shall be August 29, 2027 (24 months from date of the issuance of the Note). 

 

1.3Payment Grace Period.  The Borrower shall have a ten (10) day grace period to pay any monetary amounts due under this Note.  After the Maturity Date and during the pendency of an Event of Default, (as defined in Article IV), the interest rate shall be increased to fourteen percent (14%) per annum. 

 

1.4Miscellaneous.   Interest on this Note shall be calculated on the basis of a 365-day year and the actual number of days elapsed.  Principal and interest on this Note and other payments in connection with this Note shall be payable at the Holder’s offices as designated above in lawful money of the United States of America in immediately available funds without set-off, deduction or counterclaim.  Upon assignment of the interest of Holder in this Note, Borrower shall instead make its payment pursuant to the assignee’s instructions upon receipt of written notice thereof. 

---

 

ARTICLE II

 

CONVERSION RIGHTS

 

The Holder shall have the right to convert the principal and any interest due under this Note into Shares of the Borrower’s Common Stock, $0.0001 par value per share (“Common Stock”) as set forth below.

 

2.1.Conversion into the Borrower’s Common Stock. 

 

(a)The Holder shall have the right at any time commencing on the date hereof until this Note is fully paid, to convert any outstanding and unpaid principal portion of this Note, and accrued interest, at the election of the Holder (the date of giving of such notice of conversion being a “Conversion Date”) into fully paid and non-assessable shares of Common Stock. Upon delivery to the Borrower of a completed Notice of Conversion, a form of which is annexed hereto as Schedule A, Borrower shall issue and deliver to the Holder within five (5) business days after the Conversion Date (such fifth day being the “Delivery Date”) that number of shares of Common Stock for the portion of the Note converted in accordance with the foregoing.  The Holder will not be required to surrender the Note to the Borrower until the Note has been fully converted or satisfied.  The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing that portion of the principal of the Note and interest, if any, to be converted, by the Conversion Price. 

 

(b)Subject to adjustment as provided in Article 2.1(c) hereof, the conversion price (“Conversion Price”) per share shall be a price equal to $0.48 per share of the Company’s Common Stock, subject to a floor price of $0.40 per share (“Floor Price”).  

 

(c) The Conversion Price and number and kind of shares or other securities to be issued upon conversion determined pursuant to Article 2.1(a), shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows: 

 

A.Merger, Sale of Assets, etc.  If (A) the Borrower effects any merger or  consolidation of the Borrower with or into another entity, (B) the Borrower effects any sale of all or substantially all of its assets in one or a series of related transactions,  (C) any tender offer or exchange offer (whether by the Borrower or another entity) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, (D) the Borrower consummates a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more persons or entities whereby such other persons or entities acquire more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by such other persons or entities making or party to, or associated or affiliated with the other persons or entities making or party to, such stock purchase agreement or other business combination), (E) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate Common Stock of the Borrower), or (F) the Borrower effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than a reverse merger)  (in any such case, a “Fundamental  Transaction”), this Note, as to the unpaid principal portion thereof and accrued interest thereon, if any, shall thereafter be deemed to evidence the right to convert into such number and kind of shares or other securities and property as would have been issuable or distributable on account of such Fundamental Transaction, upon or with respect to the securities subject to the conversion right immediately prior to such Fundamental Transaction.  The foregoing provision shall similarly apply to successive Fundamental  

---

Transactions of a similar nature by any such successor or purchaser.  Without limiting the generality of the foregoing, the anti-dilution provisions of this Article shall apply to such securities of such successor or purchaser after any such Fundamental Transaction.

 

B.Reclassification, etc.  If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes that may be issued or outstanding, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change. 

 

C.Stock Splits, Combinations and Dividends.  If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Conversion Price shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event. 

 

D.Sale of Convertible Securities.  In the event that the Company sells securities that are convertible into shares of the Company’s Common Stock for cash and the conversion price of such securities is less than the Conversion Price then in effect, the Conversion Price shall be reduced to equal such lower conversion price, subject to the Floor Price.  This provision shall only be applicable to a sale of securities by the Company in the minimum amount of $250,000. 

 

(d)Whenever the Conversion Price is adjusted pursuant to Article 2.1(c) above, the Borrower shall promptly but not later than the fifth (5^th) business day after the effectiveness of the adjustment, provide notice to the Holder setting forth the Conversion Price after such adjustment and setting forth a statement of the facts requiring such adjustment.  Failure to provide the foregoing notice is an Event of Default under this Note. 

 

2.2Method of Conversion.  This Note may be converted by the Holder in whole or in part as described in Article 2.1(a) hereof.  Upon partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of this Note and interest which shall not have been converted or paid. 

 

2.3             Beneficial Ownership Limitation. Notwithstanding anything to the contrary contained in this Note, the Company shall not issue or sell, and the Holder shall not purchase or acquire, any shares of Common Stock under this Note which, when aggregated with all other shares of Common Stock then beneficially owned by the Holder and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder), would result in the beneficial ownership by the Holder of more than 9.99% of the then issued and outstanding shares of Common Stock (the “Beneficial Ownership Limitation”). Upon the written or oral request of the Holder, the Company shall promptly (but not later than 24 hours) confirm orally or in writing to the Holder the number of shares of Common Stock then outstanding. The Holder and the Company shall each cooperate in good faith in the determinations required hereby and the application hereof. The Holder’s written certification to the Company of the applicability of the Beneficial Ownership Limitation, and the resulting effect thereof hereunder at any time, shall be conclusive with respect to the applicability thereof and such result absent manifest error.

---

 

ARTICLE III

 

REDEMPTION

 

This Note may be prepaid, in whole or in part, by the Borrower, at any time after the issuance hereof, without the consent of the Holder except as otherwise described in this Note.   If the Note is prepaid prior to the date that is twelve months from the date of this Note, the Borrower shall pay a one percent (1%) prepayment penalty to Holder.  Any pre-payment penalty shall only be applied to the then outstanding principal amount being prepaid.  Borrower shall provide Holder at least thirty (30) days prior written notice of its intent to prepay the Note, during which time Holder may elect to convert all or a portion of the outstanding principal and accrued interest of the Note.  Holder shall notify Borrower in writing of its election to convert the Note at least five (5) days prior to the prepayment date, pursuant to which it shall indicate the amount of principal and/or accrued interest it intends to convert into shares of the Borrower’s common stock at the Conversion Price then in effect.  If Holder does not timely notify Borrower of its election to convert the Note in accordance herewith, Holder shall not be entitled to convert the Note at such time, however, if the Note is not repaid in full Holder shall continue to have the right to convert the Note in connection with any future repayment notices provided to Holder. 

 

ARTICLE IV

 

EVENT OF DEFAULT 

 

The occurrence of any of the following events of default (“Event of Default”) shall, at the option of the Holder hereof, make all sums of principal and interest then remaining unpaid hereon and all other amounts payable hereunder immediately due and payable, upon demand, without presentment or grace period, all of which hereby are expressly waived, except as set forth below:

 

4.1Failure to Pay Principal or Interest.  The Borrower fails to pay any installment of principal, interest or other sum due under this Note when due in full, subject to a ten (10) day grace period. 

 

4.2Breach of Covenant.  The Borrower or any Subsidiary breaches any material covenant or other term or condition of this Note in any material respect and such breach, if subject to cure, continues for a period of ten (10) business days after written notice to the Borrower from the Holder. 

 

4.3Breach of Representations and Warranties.  Any material representation or warranty of the Borrower made herein,  or in any agreement, statement or certificate given in writing pursuant hereto or in connection therewith shall be false or misleading in any material respect as of the date made and the Closing Date and such inaccuracy, if subject to cure, continues for a period of ten (10) business days after written notice to the Borrower from the Holder. 

 

4.4Liquidation.   Any dissolution, liquidation or winding up of Borrower or a Subsidiary’s substantial portion of their business. 

 

4.5Cessation of Operations.   Any cessation of operations by Borrower or a Subsidiary. 

 

4.6Maintenance of Assets.   The failure by Borrower or any Subsidiary to maintain any material intellectual property rights, personal, real property, equipment, leases or other assets which are necessary to conduct its business (whether now or in the future) and such breach is not cured with ten (10) business days after written notice to the Borrower from the Holder. 

---

4.7Receiver or Trustee.  The Borrower or any Subsidiary shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed. 

 

4.8Judgments.  Any money judgment, writ or similar final process shall be entered or made in a non-appealable adjudication against Borrower or any Subsidiary or any of its property or other assets for more than $250,000, unless stayed vacated or satisfied within ten days. 

 

4.9Bankruptcy.  Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law, or the issuance of any notice in relation to such event, for the relief of debtors shall be instituted by or against the Borrower or any Subsidiary. 

 

4.10Notification Failure.   A failure by Borrower to notify Holder of any material event of which Borrower is obligated to notify Holder pursuant to the terms of this Note or any other transaction document. 

 

4.11Failure to Deliver Shares/DWAC Shares. A failure by Borrower or Borrower’s transfer agent for any reason or for no reason to electronically transfer any shares of Common Stock issuable upon conversion of this Note as DWAC Shares on or before the Delivery Date.  “DWAC Shares” means shares of Common Stock that are (i) issued in electronic form, (ii) freely tradable and transferable and without restriction on resale and (iii) timely credited by the Company to the Investor’s or its designee’s specified Deposit/Withdrawal at Custodian (DWAC) account with DTC under its Fast Automated Securities Transfer (FAST) Program, or any similar program hereafter adopted by DTC performing substantially the same function. 

 

4.12Cross-Default.  A breach or default by the Borrower of any representation, warranty, covenant or other term or condition contained in any other material agreement, including, without limitation, any note purchase agreement, loan agreement(s) or promissory note(s), entered into between the Holder and the Borrower or issued by the Borrower to the Holder, after the passage of all applicable notice and cure or grace  periods, shall, at the option of the Holder, be considered a default under this Note.  

 

Upon the occurrence and during the continuation of any Event of Default specified in this Article IV, (i) the Note shall become immediately due and payable (subject to any applicable cure periods); and (ii) if the Borrower fails to pay all principal and interest due and payable within five (5) business days of the date which such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default, to require the Borrower upon written notice, to immediately issue the number of shares of Common Stock of the Borrower equal to the amount of outstanding principal and interest then due and owing divided by the 90% of the Conversion Price then in effect.

 

ARTICLE V

 

MISCELLANEOUS

 

5.1Failure or Indulgence Not Waiver.  No failure or delay on the part of the Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.  All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. 

 

5.2Notices.  All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i)  

---

personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the first business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be: (i) if to the Borrower to:  Sky Quarry Inc., 707 W. 700 S, Suite 101, Woods Cross, UT 84087, Attn: President, facsimile: (801) 606-2722, and (ii) if to the Holder, to the name, address and facsimile number set forth in the Borrower’s public filings with the SEC.

5.3Amendment Provision.  The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented. 

 

5.4Assignability.  This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns.   

 

5.5Cost of Collection.  If default is made in the payment of this Note, Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys’ fees. 

 

5.6Governing Law.  This Note shall be governed by and construed in accordance with the laws of the State of Delaware without regard to conflicts of laws principles that would result in the application of the substantive laws of another jurisdiction.  Any action brought by either party against the other concerning the transactions contemplated by this Agreement must be brought only in the civil or state courts of the state of Delaware or in the federal courts located in the state of Delaware.  Both parties and the individual signing this Agreement on behalf of the Borrower agree to submit to the jurisdiction of such courts.  The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.  In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other provision of this Note. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Borrower in any other jurisdiction to collect on the Borrower’s obligations to Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other decision in favor of the Holder.   

 

5.7Maximum Payments.  Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum rate permitted by applicable law.  In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum rate permitted by applicable law, any payments in excess of such maximum rate shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower. 

 

5.8Non-Business Days.   Whenever any payment or any action to be made shall be due on a Saturday, Sunday or a public holiday under the laws of the State of Delaware, such payment may be due or action shall be required on the next succeeding business day and, for such payment, such next succeeding day shall be included in the calculation of the amount of accrued interest payable on such date. 

---

 

5.9Expenses: Registration of Note and Warrants.  Each party shall be responsible for its own expenses. The shares to be issued pursuant to this Note, the Warrant issued by the Company to the Holder dated July 21, 2025 and the Warrant issued by the Company to the Holder of even date herewith shall be included in an amendment to the Form S-1/A to the Registration Statement filed by the Company on August 26, 2025.  

 

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by an authorized officer as of the 29^th day of August, 2025.

 

 

SKY QUARRY INC.

 

 

 

By: /s/ Marcus Laun                                        

                                                                Name: Marcus Laun

                                                                Title: President

---

 

SCHEDULE A - NOTICE OF CONVERSION

 

(To be executed by the Registered Holder in order to convert the Note)

 

 

The undersigned hereby elects to convert $_________ of the principal and $_________ of the interest due on the Note issued by Sky Quarry Inc. (“Borrower”) on August 29, 2025 into Shares of Common Stock of Borrower according to the conditions set forth in such Note, as of the date written below.

 

 

 

Date of Conversion:____________________________________________________________________

 

 

Conversion Price:______________________________________________________________________

 

 

Shares To Be Delivered:_________________________________________________________________

 

 

Signature:____________________________________________________________________________

 

 

Print Name:__________________________________________________________________________

 

 

Address:_____________________________________________________________________________

 

  ___________________________________________________________________________

 

 

---

SKY QUARRY INC.

SKY QUARRY INC., a Delaware corporation (the “Company”), hereby certifies that, for value received, Varie Asset Management LLC (the “Warrant Holder,” which term includes its successors and registered assigns) is entitled, subject to the terms set forth below, to purchase an aggregate of seventy thousand (70,000) shares of common stock, par value $0.0001 per share, of the Company (the “Common Stock”) at an exercise price of $0.48 per share (the “Exercise Price”) pursuant to the terms and conditions of this warrant (“Warrant”). The shares of Common Stock purchasable upon exercise of this Warrant, as adjusted from time to time pursuant to the provisions of this Warrant, are sometimes hereinafter referred to as the “Warrant Shares”.

 

WHEREAS, the Warrant Holder loaned $175,000 to the pursuant to the terms of a 12% Convertible Promissory Note (“Note”) dated even date herewith and in connection with the Note the Company agreed to issue this Warrant to the Warrant Holder; 

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Company and the Warrant Holder hereby agree as follows: 

 

1. Vesting of Warrant.  Upon issuance hereof, this Warrant shall vest immediately and all of the Warrant Shares which the Registered Holder is permitted to acquire pursuant to this Warrant shall be immediately exercisable. 

 

2.Exercise of Warrant.  This Warrant may be exercised in whole or in part, subject to the terms and conditions of Section 1, during the twenty-four month period commencing on August 29, 2025 and expiring at 5:00 p.m., Mountain Standard time, on August 29, 2027 (the “Exercise Term”), or if such day is a day on which banking institutions in the State of Utah are authorized by law to close, then on the next succeeding day which shall not be such a day, by presentation and surrender of this Warrant evidencing the Warrant to be exercised to the Company at its principal office or at the office of its stock transfer agent, if any, with the Exercise Form annexed hereto duly executed, and payment of the Exercise Price.  If any Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation and presentment of the Exercise Form, execute and deliver a new Warrant or Warrants, as the case may be, evidencing the rights of the Warrant Holder thereof to purchase the balance of the shares purchasable thereunder.  Upon receipt by the Company of this Warrant at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise together with the payment of the Exercise Price, the Warrant Holder shall be deemed to be the holder of record of the Warrant Shares, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such Warrant Shares shall not then be actually delivered to the Warrant Holder.  Certificates for the Warrant Shares shall be delivered to the Warrant Holder within a reasonable time following the exercise of this Warrant in accordance with the foregoing.  

 

3. Reservation and Listing of Shares. The Company hereby agrees that at all times while the Warrants are outstanding there shall be reserved for issuance and delivery upon exercise of this Warrant, such number of shares of its Common Stock as shall be required for issuance and delivery upon exercise of this Warrant.  

 

4. Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. Any fraction of a share called for upon any exercise hereof shall be canceled. The Warrant Holder, by his acceptance hereof, expressly waives any right to receive any fractional share of stock or fractional Warrant upon exercise of this Warrant.  

 

5. Exchange, Transfer, Assignment or Loss of Warrant. This Warrant is exchangeable, without expense, at the option of the Warrant Holder, upon presentation and surrender of this Warrant evidencing such Warrants to the Company at its office or at the office of its stock transfer agent, if any, for other Warrants of different denominations entitling the Warrant Holder thereof to purchase in the aggregate the same number of shares of Common Stock as are purchasable thereunder at the same respective Exercise Price. Subject to Section 9 hereof, upon surrender of this Warrant to the Company at its principal office or at the office of its stock transfer agent, if any, with a duly executed assignment form and funds sufficient to pay the applicable transfer tax, if any, the Company shall, without charge, execute and deliver new Warrant(s) in the name of the assignee named in such instrument of assignment and the original Warrant shall promptly be canceled. This Warrant may be divided or combined with other Warrants which carry the same rights upon presentation of this Warrant at the office of the Company or at the office  

---

---

of its stock transfer agent, if any, together with a written notice signed by the Warrant Holder hereof specifying the names and denominations in which new Warrants are to be issued. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver new Warrants of like tenor and date.

 

6. Rights of the Warrant Holder. The Warrant Holder shall not, by virtue hereof, be entitled to any rights of a shareholder of the Company until exercise of any Warrants.  

 

7. Adjustments of Purchase Price and Number of Shares.  

 

(a) Subdivision and Combination. If the Company shall at any time subdivide or combine the outstanding shares of Common Stock by way of stock split, reverse stock split or the like, the Exercise Price shall forthwith be proportionately increased or decreased.  

 

(b) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price pursuant to the provisions of paragraph 7(a), the number of shares of Common Stock issuable upon the exercise of this Warrant shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price.  

 

(c) Reclassification, Consolidation, Merger, etc. In case of any reclassification or change of the outstanding shares of Common Stock (other than a change in par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in the case of any consolidation of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger in which the Company is the surviving corporation and which does not result in any reclassification or change of the outstanding shares of Common Stock, except a change as a result of a subdivision or combination of such shares or a change in par value, as aforesaid), or in the case of a sale or conveyance to another corporation of all or a substantial part of the property of the Company, the Warrant Holder shall thereafter have the right to purchase the kind and number of shares of stock and other securities and property receivable upon such reclassification, change, consolidation, merger, sale or conveyance as if the Warrant Holder were the owner of the shares of Common Stock underlying this Warrant immediately prior to any such events at a price equal to the product of (x) the number of shares issuable upon exercise of this Warrant and (y) the Exercise Price in effect immediately prior to the record date for such reclassification, change, consolidation, merger, sale or conveyance as if such Warrant Holder had exercised this Warrant.  

 

(d) Dividends and Other Distributions with Respect to Outstanding Securities. In the event that the Company shall at any time prior to the exercise of all Warrants declare a dividend (other than a dividend consisting solely of shares of Common Stock or a cash dividend or distribution payable out of current or retained earnings) or otherwise distribute to the holders of its Common Stock any monies, assets, property, rights, evidences of indebtedness, securities (other than shares of Common Stock), whether issued by the Company or by another person or entity, or any other thing of value, the Warrant Holder of the unexercised Warrants shall thereafter be entitled, in addition to the shares of Common Stock or other securities receivable upon the exercise thereof, to receive, upon the exercise of such Warrants, the same monies, property, assets, rights, evidences of indebtedness, securities or any other thing of value that they would have been entitled to receive at the time of such dividend or distribution. At the time of any such dividend or distribution, the Company shall make appropriate reserves to ensure the timely performance of the provisions of this Subsection 7(d).  

 

(e) Warrant After Adjustment. Irrespective of any change pursuant to this Section 7 in the Exercise Price or in the number, kind or class of shares or other securities or other property obtainable upon exercise of this Warrant, this Warrant may continue to express as the Exercise Price and as the number of shares obtainable upon exercise, the same price and number of shares as are stated herein.  

 

(f) Statement of Calculation. Whenever the Exercise Price shall be adjusted pursuant to the provisions of this Section 7, the Company shall forthwith file at its principal office, a statement signed by an executive officer of the Company specifying the adjusted Exercise Price determined as above provided in such section. Such statement shall show in reasonable detail the method of calculation of such adjustment and the facts requiring the  

---

---

adjustment and upon which the calculation is based. The Company shall forthwith cause a notice setting forth the adjusted Exercise Price to be sent by certified mail, return receipt requested, postage prepaid, to the Warrant Holder.

 

8. Definition of “Common Stock”. For the purpose of this Warrant, the term “Common Stock” shall mean, in addition to the class of stock designated as the Common Stock, $.0001 par value, of the Company on the date hereof, any class of stock resulting from successive changes or reclassifications of the Common Stock consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. If at any time, as a result of an adjustment made pursuant to one or more of the provisions of Section 7 hereof, the shares of stock or other securities or property obtainable upon exercise of this Warrant shall include securities of the Company other than shares of Common Stock or securities of another corporation, then thereafter the amount of such other securities so obtainable shall be subject to adjustment from time to time in a manner and upon terms as nearly equivalent as practicable to the provisions with respect to Common Stock contained in Section 7 hereof and all other provisions of this Warrant with respect to Common Stock shall apply on like terms to any such other shares or other securities.  

 

9. Restrictions on Offer and Sale. THE OFFER AND SALE OF THE SECURITIES REPRESENTED HEREBY AND THE WARRANT SHARES HAVE NOT BEEN REGISTERED WITH OR APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY SECURITIES COMMISSION OR REGULATORY AUTHORITY AND ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). 

 

THE SALE, ASSIGNMENT, CONVEYANCE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS WARRANT AND THE WARRANT SHARES IS PROHIBITED EXCEPT (1) PURSUANT TO REGISTRATION UNDER THE ACT OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT, AND ANY CERTIFICATE REPRESENTING WARRANT SHARES SHALL BEAR A LEGEND TO SUCH EFFECT.  

 

10. Notices to Warrant Holders. Nothing contained in this Warrant shall be construed as conferring upon the Warrant Holder the right to vote or to consent or to receive notice as a shareholder in respect of any meetings of shareholders for the election of directors or any other matter, or as having any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and its exercise, any of the following events shall occur:  

 

(a) The Company shall take a record of the holders of its shares of Common Stock for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of current or retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company; or  

 

(b) The Company shall offer to all the holders of its Common Stock any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any warrant, right or option to subscribe therefor; or  

 

(c) A dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or merger) or a sale of all or substantially all of its property, assets and business shall be proposed; or  

 

(d) There shall be any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another entity; 

 

then, in anyone or more of said events, the Company shall give written notice of such event at least fifteen (15) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the shareholders entitled to such dividend, distribution, convertible or exchangeable securities or subscription rights, warrants or options, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of closing the transfer books, as the case may be. Failure to give such notice or any defect therein shall not affect the validity of any action taken in connection with the declaration or payment of any such dividend or distribution, or the issuance of any convertible or exchangeable securities or subscription rights, warrants or options, or any proposed dissolution, liquidation, winding up or sale.

---

---

11. Notices.  

 

(a) All communications under this Warrant shall be in writing and shall be mailed by certified mail, postage prepaid, return receipt requested, or telecopied with confirmation of receipt or delivered by hand or by overnight delivery service:  

 

If to the Company at:SKY QUARRY INC. 

Attn: President 

707 West 700 S., Suite 101 

Woods Cross, Utah 84087

 

If to the Warrant Holder at:Varie Asset Management 

22647 Ventura Blvd #925

Woodland Hills CA 91364

 

(b) Any notice so addressed, when mailed by registered or certified mail shall be deemed to be given three days after so mailed, when telecopied shall be deemed to be given when transmitted, or when delivered by hand or overnight shall be deemed to be given when hand delivered or on the day following deposit with the overnight delivery service.  

 

12. Successors. All the covenants and provisions of this Warrant by or for the benefit of the Warrant Holder shall inure to the benefit of his successors and assigns hereunder.  

 

13. Termination. This Warrant (and the right to purchase Warrant Shares upon exercise hereof) will terminate at 5PM MST on August 29, 2027 [two years after the date of issuance hereof].  

 

14. Governing Law. This Warrant shall be deemed to be made under the laws of the State of Delaware and for all purposes shall be construed in accordance with the laws of said State, excluding choice of law principles thereof.  

 

15. Entire Agreement, Amendment, Waiver. This Warrant and all attachments hereto and all incorporation by references set forth herein, set forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them. This Warrant may be amended, the Company may take any action herein prohibited or omit to take any action herein required to be performed by it, and any breach of any covenant, agreement, warranty or representation may be waived, only if the Company has obtained the written consent or waiver of the Warrant Holder. No course of dealing between or among any persons having any interest in this Warrant will be deemed effective to modify, amend or discharge any part of this Warrant or any rights or obligations of any person under or by reason of this Warrant.  

 

IN WITNESS WHEREOF, the undersigned has executed this Warrant as of this 29^th day of August, 2025.

 

SKY QUARRY INC.

 

By: /s/ Marcus Laun

Name: Marcus Laun

Title: President

---

---

WARRANT EXERCISE FORM

 

(To be executed upon exercise Warrant)

 

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

 

SKY QUARRY INC.

 

The undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock (“Warrant Shares”) of SKY QUARRY INC., a Delaware corporation (the “Company”), evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”).  Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant. 

 

1.Exercise and Payment of Exercise Price for Cash.  The Holder hereby elects to exercise an aggregate of ____________ Warrants at an exercise price of $____ per share.  In exchange therefore, the Holder shall pay the aggregate exercise price of $________ to the Company in exchange for an aggregate of __________ Warrant Shares, in accordance with the terms of the Warrant. 

 

2.  At the time such Holder was offered the Warrant, it was, at the date hereof, and on each date on which it exercises any Warrants, it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act of 1933, as amended, or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.  Such Buyer is not required to be registered as a broker-dealer under Section 15 of the Securities Exchange Act of 1934, as amended.

 

The undersigned requests that a certificate for the Warrant Shares being purchased be registered in the name of ______________ and that such certificate be delivered to __________ ______________________________________________________________.  

 

Dated:
			(Signature)
			(Printed Name)