10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2020

OR

¨ TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934

For the transition period from ___________ to ____________.

Commission File Number 000-54747

SKKYNET CLOUD SYSTEMS INC.

(Exact name of registrant as specified in its charter)

Nevada	45-3757848
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
2233 Argentia Road Suite 306. Mississauga, Ontario, Canada L5N 2X7
(Address of principal executive offices)
(888) 628-2028
(Issuer’s telephone number)

Indicate by check mark whether the Company (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes: x No: ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes: x No: ¨

Indicate by check mark whether the Company is a large accelerated filer, an accelerated file, non-accelerated filer, or a smaller reporting company.

Large accelerated filer	☐	Accelerated filed	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the Company is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of March 23, 2020, there were 51,576,122 shares of Common Stock of the issuer outstanding.

		Page
PART I:     FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of January 31, 2020 (Unaudited) and October 31, 2019	4
	Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended January 31, 2020 and 2019 (Unaudited)	5
	Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended January 31, 2020 and 2019 (Unaudited)	6
	Consolidated Statements of Cash Flows for the Three Months Ended January 31, 2020 and 2019 (Unaudited)	7
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	13
Item 4.	Controls and Procedures	13
PART II:      OTHER INFORMATION
Item 1.	Legal Proceedings	14
Item 1A.	Risk Factors	14
Item 2.	Sales of Equity Securities and Use of Proceeds	14
Item 3.	Defaults upon Senior Securities	14
Item 4.	Mine Safety Information	14
Item 5.	Other Information	14
Item 6.	Exhibits	15
Signatures		16

2

FORWARD LOOKING STATEMENTS

Statements made in this Form 10-Q that are not historical or current facts are forward-looking statements. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. Among the factors that could cause actual results to differ materially from the forward-looking statements are the following: the Company’s ability to obtain necessary capital, the Company’s ability to meet anticipated development timelines, the Company’s ability to protect its proprietary technology and knowhow, the Company’s ability to establish a global market, the Company’s ability to successfully consummate future acquisitions, and such other risk factors identified from time to time in the Company’s reports filed with the Securities and Exchange Commission, including those filed with this Form 10-Q quarterly report. We disclaim any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

3

PART I

ITEM 1: FINANCIAL STATEMENTS

SKKYNET CLOUD SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

	January 31, 2020			October 31, 2019
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	646,124		$	700,410
Accounts receivable		163,042			146,277
Prepaid expenses		4,321			10,690
Total current assets		813,487			857,377
Property and equipment, net of accumulated depreciation of $81,246 and $81,653 respectively		10,275			8,469
Right of use asset		62,869			--
Total Assets	$	886,631		$	865,846
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	73,235		$	96,979
Accrued liabilities – related party		--			76,821
Deferred revenue		117,058			111,732
Current portion of operating lease liability		20,980			--
Total current liabilities		211,273			285,532
Operating lease liability- net of current portion		41,889
Total liabilities		253,162			285,532
Stockholders’ Equity:
Preferred stock: $0.001 par value, 5,000,000 shares authorized, 5,000 shares issued and outstanding, respectively		5			5
Series B Preferred convertible stock: $0.001 par value, 500,000 shares authorized, 193,661 issued and 193,661 outstanding, respectively		193,661			193,661
Common stock; $0.001 par value, 70,000,000 shares authorized, 51,576,122 and 51,576,122 shares issued and outstanding, respectively		51,577			51,577
Additional paid-in capital		6,259,761			6,192,476
Accumulative other comprehensive income		59,823			65,472
Accumulated deficit		(5,931,358	)		(5,922,877	)
Total stockholders’ equity		633,469			580,314
Total Liabilities and Stockholders’ Equity	$	886,631		$	865,846

The accompanying notes are an integral part of the unaudited consolidated financial statements.

4

SKKYNET CLOUD SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

	For the Three Months Ended January 31,
	2020			2019
Revenue	$	419,482		$	262,989
Operating Expenses:
General & administrative expenses		431,126			395,423
Depreciation		627			120
Loss from operations		(12,271	)		(132,554	)
Other Income:
Other income		3			1
Currency exchange		3,787			6,436
Total other income		3,790			6,437
Loss before taxes		(8,481	)		(126,117	)
Income taxes		--			--
Loss from continuing operations		(8,481	)		(126,117	)
Loss from discontinued operations		--			(28,195	)
Net loss		(8,481	)		(154,312	)
Preferred dividends		(2,905	)		(2,905	)
Net loss to common shareholders		(11,386	)		(157,217	)
Foreign currency translation adjustment		(5,649	)		(8,746	)
Comprehensive loss	$	(17,035	)	$	(165,963	)
Net loss per common share from continuing operations-basic and diluted	$	(0.00	)	$	(0.00	)
Net loss per common share from discontinued operations-basic and diluted	$	(0.00	)	$	(0.00	)
Net loss per share to common shareholders	$	(0.00	)	$	(0.00	)
Weighted average common shares outstanding -basic and diluted		51,576,122			51,363,022

The accompanying notes are an integral part of the unaudited consolidated financial statements.

5

SKKYNET CLOUD SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JANUARY 31, 2020 AND 2019

(Unaudited)

									Series B Preferred				Additional					Accumulated Other			Total
	Common Stock				Preferred Stock				Convertible Stock				Paid-In		Accumulated			Comprehensive			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Loss (Income)			Equity
Balance at October 31, 2018		51,363,022	$	51,364		5,000	$	5		193,661	$	193,661	$	5,832,725	$	(5,347,023	)	$	(74,643	)	$	656,089
Stock option expense		--		--		--		--		--		--		59,844		--			--			59,844
Change due to currency translation		--		--		--		--		--		--		--		--			(8,746	)		(8,746	)
Net loss		--		--		--		--		--		--		--		(154,312	)		--			(154,312	)
Balance at January 31, 2019		51,363,022	$	51,364		5,000	$	5		193,661	$	193,661	$	5,892,569	$	(5,501,335	)	$	(83,389	)	$	552,875
Balance at October 31, 2019		51,576,122	$	51,577		5,000	$	5		193,661	$	193,661	$	6,192,476	$	(5,922,877	)	$	65,472		$	580,314
Stock option expense		--		--		--		--		--		--		67,285		--			--			67,285
Change due to currency translation		--		--		--		--		--		--		--		--			(5,649	)		(5,649	)
Net loss		--		--		---		--		--		--		--		(8,481	)		--			(8,481	)
Balance at January 31, 2020		51,576,122	$	51,577		5,000	$	5		193,661	$	193,661	$	6,259,761	$	(5,931,358	)	$	59,823		$	633,469

The accompanying notes are an integral part of the unaudited consolidated financial statements

6

SKKYNET CLOUD SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Three Months Ended January 31,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(8,481	)	$	(154,312	)
Loss from discontinued operations		--			28,195
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		627			120
Option based compensation		67,285			59,844
Non-cash lease expense		5,715			--
Changes in operating assets and liabilities:
Accounts receivable		(16,765	)		95,262
Accounts payable and accrued expenses		(23,744	)		25,093
Accrued liabilities – related parties		(76,821	)		(3,872	)
Prepaid expenses and other assets		6,369			(35,477	)
Operating lease liability		(7,109	)		--
Deferred income		5,326			(8,080	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(47,598	)		6,773
DISCONTINUED OPERATIONS
Net cash used in operating activities		--			(10,422	)
Net cash used in discontinued operations		--			(10,422	)
Effect of exchange rate changes on cash and cash equivalents		(6,688	)		(10,351	)
Net decrease in cash and cash equivalents		(54,286	)		(14,000	)
Cash and cash equivalents, beginning of period		700,410			677,303
Cash and cash equivalents, end of period	$	646,124		$	656,827
SUPPLEMENTAL CASH FLOWS INFORMATION
Interest paid	$	--		$	--
Income taxes paid	$	--		$	--
NONCASH INVESTING AND FINANCING ACTIVITIES:					-
Capitalization of right to use asset and operating liability	$	68,584		$	-

The accompanying notes are an integral part of the unaudited consolidated financial statements.

7

SKKYNET CLOUD SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

Skkynet Cloud Systems, Inc. (“Skkynet” or “the Company”) is a Nevada corporation formed on August 31, 2011 and headquartered in Toronto, Canada. Skkynet operates its business through its wholly-owned subsidiaries Cogent Real-Time Systems, Inc. (“Cogent”), Skkynet Corp. (Canada) and Skkynet, Inc. (USA). Skkynet was formed primarily for the purpose of taking the existing business lines of Cogent and its current and future customers and integrating these businesses with Cloud based systems. We also intend to expand the areas of business activity to which the kinds of products and services we provide are applied.

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (the “SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s October 31, 2019 Annual Report on form 10-K filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the consolidated financial statements for the most recent fiscal year end October 31, 2019 as reported on Form 10-K, have been omitted.

On August 1, 2019 the Company disposed of its wholly owned subsidiary Skkynet Japan which represented a strategic shift in the Company’s operations. The assets and liabilities have been accounted for as discontinued operations in the Company’s consolidated balance sheet for the periods presented. The operating results related to this subsidiary have been included in discontinued operations in the Company’s consolidated statements of operations and comprehensive loss for all periods presented.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, "Leases (Topic 842)". The amendments in this ASU revise the accounting related to lessee accounting. Under the new guidance, lessees are required to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018 and are to be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. The Company has adopted the new accounting pronouncement and recorded a right to use asset and operating lease liability of $68,584 as of November 1, 2019. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification. The adoption of the policy did not have a cumulative impact on retained earnings.

8

NOTE 3 - REVENUE RECOGNITION

As part of the revenue recognition reporting, the Company reports revenue by product line and geographic area. During the three month periods ended January 31, 2020 and 2019 the revenue by product line is as follows:

Category	Percentage			2020		Percentage			2019
Product sales		71	%		297,536		62	%		162,191
Support		27	%		114,559		35	%		92,567
Cloud & Other		2	%		7,387		3	%		8,231
Total		100	%		419,482		100	%		262,989

The Company sells its products on a worldwide basis. During the three month periods ended January 31, 2020 and 2019 the Company’s geographic concentration of revenue is as follows:

Area	Percentage			2020		Percentage			2019
North America		31	%		130,746		35	%		90,870
Europe		24	%		101,400		49	%		128,977
Asia		21	%		87,759		7	%		19,692
Middle East-Africa		14	%		60,619		6	%		14,656
South America		9	%		38,958		3	%		8,794
Total		100	%		419,482		100	%		262,989

NOTE 4 - RELATED PARTY TRANSACTIONS

Sakura Software, a corporation owned by our CEO and Chairman of the Board of Directors, Andrew S. Thomas, and Benford Consultancy, a corporation owned by our COO and a member of our Board of Directors, Paul Benford, own, respectively, 72.34% and 27.66% of the issued and outstanding shares of Real Innovations International LLC, (“Real Innovations”) a corporation organized under the laws of Nevis, West Indies. In March 2012, Cogent, our operating subsidiary, assigned all of its intellectual property including the pending patent applications for its real-time data transmission and display technology (the “IP”) to Real Innovations under an assignment of intellectual property agreement (the “Assignment Agreement”). In return for the assignment Real Innovations required a one-time payment of $30,000 to Cogent. Cogent elected to forgo the payment allowing Real Innovations to offset future expenses against the payment. There is no ongoing royalty payment or other form of compensation from Real Innovations to Cogent under the Assignment Agreement.

Real Innovations, in turn, entered into a master intellectual property license agreement (the “License Agreement”) with Cogent for all of the same IP. Under the License Agreement Real Innovations granted a royalty-free license in perpetuity to Cogent for the use and exploitation of the IP in return for which Cogent agreed to: (i) pay all operating expenses of Real Innovations incurred in connection with the continued prosecution of pending patent applications and others that may be prepared; (ii) prosecute all claims for infringement of the IP; (iii) defend and indemnify Real Innovations from and against all claims of infringement of the IP asserted by third parties against Real Innovations, Cogent or our Company; (iv) purchase liability insurance in favor of Real Innovations for this purpose. Under the termination provision of the licenses agreement, there is no unilateral right of termination. Termination may occur by mutual consent of the parities, the Company ceasing doing business, by breach by the Company or by the Company failing to maintain the license and the support to prosecute and protect the license under applicable laws.

Under the License Agreement, Messrs. Andrew S. Thomas and Paul Benford will benefit indirectly from their indirect ownership of all of the shares of Real Innovations to the extent of any such payments or other undertakings by Cogent on behalf of Real Innovations, but the exact amount of these benefits cannot be determined at this time. No payments have been made as of January 31, 2020.

As of January 31, 2020, and October 31, 2019, the Company had the following outstanding accrued liabilities due to related parties:

As of	January 31, 2020		October 31, 2019
Accrued liabilities	$	---	$	55,378
Accrued commissions	$	---	$	21,443
Total accrued liabilities	$	---	$	76,821

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NOTE 5 - OPTIONS

The Company, under its 2012 Stock Option Plan, issues options to various officers, directors, and consultants. The options vest in equal annual installments over a five year period with the first 20% vested when the options are granted. All of the options are exercisable at a purchase price based on the last trading price of the Company’s common stock.

On December 12, 2019 the Company 336,250 options: 120,000 to two officers, 11,250 to three independent directors and 205,000 to six employees and consultants. The options are exercisable into common stock of the Company at $0.59 per share. The Company calculated a fair value of the options of $132,673 using the Black Scholes option pricing model with computed volatility of 207%, risk-free interest rate of 2%, expected dividend yield 0%, stock price at measurement date of $0.39 and the expected term of ten years. The options are expensed over a five year period with 20% upon issuance and 20% for the first and each subsequent year.

During the three month period ended January 31, 2020, the Company recognized $67,285 of option expense. The unrecognized future balance to be expensed over the term of the options is $602,135.

The following sets forth the options granted and outstanding as of January 31, 2020:

	Options		Weighted Average Exercise price		Weighted Average Remaining Contract Life		Granted Options Exercisable		Intrinsic value
Outstanding at October 31, 2019		7,581,400		0.13		7.19		5,470,540	$	1,827,117
Granted		336,250		0.56		9.75		--		--
Exercised		--		--		--		--		--
Forfeited/Expired by termination		--		--		--		--		-
Outstanding at January 31, 2020		7,917,650		0.15		7.06		5,537,790	$	2,007,081

NOTE 6- LEASES 

The Company leases office space located at 2233 Argentia Road Suite 306 Mississauga, Ontario Canada L5N 2X7. During May 2017, the Company signed a new 5 year lease for the Company’s office being effective on August 1, 2017 through July 31, 2022. The lease is for approximately 2,210 square feet of office space with a base monthly rental cost including common area charges of $2,369.

The yearly rental obligations including the lease agreements are as follows:

Fiscal Year
2020	$	28,428
2021	$	28,428
2022	$	14,215
Total lease payments	$	71,071
Less present value discount	$	(8,202	)
	$	62,869
Less operating lease short term	$	(20,980	)
Operating lease liability, long term	$	41,899

Under the new standards the lease has been determined to be a right to use operating lease and is recognized based on the present value of the lease payments over the lease term at the commencement date which upon adoption of ASC 842 the value was determined to be $68,584 which is presented in the balance sheet as an asset labeled “right to use asset” offset by a liability labeled “ operating lease liability”. The amount was determined as the net present value of the lease over a 30 month period and discount using an 8% interest rate. During the three months ended January 31, 2020 the asset was amortized by $5,715 and liability was reduced by $7,109.

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NOTE 7 - DISCONTINUED OPERATIONS

On August 1, 2019, the Company disposed its wholly owned subsidiary Skkynet Japan by entering into a share purchase agreement with the former owners. The following table presents the breakdown of the results of operations related to the discontinued operations for the three months ended January 31, 2019:

Operating Results of Discontinued Operations
For the Three Months Ended January 31,
	2019
Revenue included in discontinued operations	$	30,140
Operating costs and expenses included in discontinued operations
Cost of goods sold		6,154
General and administrative expenses		52,181
Net loss from Discontinued operations	$	(28,195	)
Net loss per share of discontinued operations basic & diluted	$	(0.00	)

NOTE 8 - MAJOR CUSTOMERS

The Company sells to their end-user customers both directly and through resellers. Five resellers accounted for 51% of sales of which two resellers accounted for 19% and 11% individually in the three month period ended January 31, 2020 and five resellers accounted for 53% of sales in the same period in 2019. The Company maintains all the information on their end user customers, and should a reseller discontinue operations, the Company can sell directly to the end user. In the three month period ended January 31, 2020, no end user customers were responsible for more than 10% of our revenues and thirteen end user customers were responsible for approximately 50% of gross revenue. In the same period in 2019, fifteen end user customers were responsible for approximately 50% of gross revenue of which one end user customer was responsible for 11% of revenue

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ITEM2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 This report contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Skkynet’s actual results could differ materially from those set forth on the forward-looking statements as a result of the risks set forth in Skkynet’s filings with the Securities and Exchange Commission, general economic conditions, and changes in the assumptions used in making such forward looking statements.

OVERVIEW

Skkynet is a Nevada corporation headquartered in Mississauga, Canada. Skkynet operates three different lines of business through its wholly-owned subsidiaries Cogent Real-Time Systems, Inc. (“Cogent”), Skkynet, Inc. (“Skkynet (USA)”), and Skkynet Corp. (“Skkynet (Canada)"). Skkynet was established to enhance Cogent’s existing business lines through the integration of Cloud-based systems, and to deliver a Software-as-a-Service (“SaaS”) product targeting the Industrial Internet of Things (“IoT”) market, now referred to by the terms “Industry 4.0” and “Industrial Internet Consortium”.

The Company provides software and related systems and facilities to collect, process, and distribute real-time information over a network. This capability allows the customers to both locally and remotely manage, supervise, and control industrial processes and financial information systems. By using this software and, when requested by a client, our web based assets, our clients and their customers (to the extent relevant) are given the ability and the tools to observe and interact with these processes and services in real-time as they are underway and to give them the power to analyze, alter, stop, or otherwise influence these activities to conform to their plans.

The results of operations reflects the adjustments of the three months periods in 2019 for discontinued operations. Discontinued operations are not part of the results of operations in this section.

RESULTS OF OPERATIONS

For the three month period ended January 31, 2020, revenue was $419,482 compared to $262,989 for the same period in 2019. Revenue increased for the three month period ended January 31, 2020 over the same period in 2019 by 59.5%. The increase in revenue for the three month period ended January 31, 2020 is attributed to higher sales by Cogent. The Company has recently increased its investment in sales and marketing which has contributed to the increase in Cogent’s sales.

General and administrative expense was $431,126 for the three month period ended January 31, 2020 compared to $395,423 for the same period in 2019. The increase in general and administrative expenses for the three month period ended January 31, 2020 resulted from increased sales and marketing expenditures over the same period in 2019.

For the three month period ended January 31, 2020, the Company reported an operating loss of $12,271 compared to operating loss of $132,554 for the same period in 2019. The decrease of operating loss during the three month period ended January 31, 2020 over the same period in 2019 is attributable to much higher revenue in 2020 compared to 2019.

Other income and expense for the three month period ended January 31, 2020, was other income of $3,790 compared to other income of $6,437 for the same periods in 2019. The amount in both periods were due to the effect of currency exchange.

Net loss before and after income taxes of $8,481 was reported for the three month period ended January 31, 2020, compared to a net loss before and after income taxes of $154,312 consisting to an operating loss of $126,117 and loss from discontinued operations of $28,195 for the same period in 2019. The lower net loss for the three month period in 2020 can be attributed to significantly higher sales in in 2020 compared to the same period in 2019.

The Company reported comprehensive loss of $17,035 for the three month period ended January 31, 2020 compared to a comprehensive loss of $165,963 for the same period in 2019. The comprehensive loss is an adjustment to net loss with accrued preferred stock dividends and foreign currency translation adjustments along with taxes taken into account.

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LIQUIDITY AND CAPITAL RESOURCES

At January 31, 2020, Skkynet had current assets of $813,487 and current liabilities of $211,273, resulting in working capital of $602,214. Accumulated deficit, as of January 31, 2020, was $5,931,358 with total shareholders’ equity of $633,469.

Net cash used in operating activities for the three month period ended January 31, 2020, was $47,598 compared to net cash provided by operating activities of $6,773 for the same period in 2019.

The increase in cash used in operating activities for the three month period ended January 31, 2020 over the same period in 2019 was primarily due to an increase in accounts receivable, reduction in accounts payable and a large reduction in accrued liabilities to related parties.

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, Skkynet is not required to provide information required under this Item.

ITEM 4: CONTROLS AND PROCEDURES

This report includes the certifications of our Chief Executive Officer and Chief Financial Officer required by Rule 13a-14 under the Securities Exchange Act of 1934 (the “Exchange Act”). See Exhibits 31.1 and 31.2. This Item 4 includes information concerning the controls and control evaluations referred to in those certifications.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Principal Executive Officer and the Principal Financial Officer, to allow timely decisions regarding required disclosures.

Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of January 31, 2020 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework- 2013. Based on its evaluation, our management concluded that there are material weaknesses in our internal control over financial reporting. We lack full time personnel in accounting and financial staff to sufficiently monitor and process financial transactions in an efficient and timely manner. Our history of losses has severely limited our budget to hire and train enough accounting and financial personnel needed to adequately provide this function. Consequently, we lacked sufficient technical expertise, reporting standards and written policies and procedures along with a lack of a formal review process which includes multiple layers of review. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our management believes that the Unaudited Financial Statements included herein present, in all material respects, the Company’s financial condition, results of operations and cash flows for the periods presented.

13

PART II – OTHER INFORMATION

ITEM 1: 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.

ITEM 1A: RISK FACTORS

There have been no material changes to Skkynet’s risk factors as previously disclosed in our most recent 10-K filing for the year ended October 31, 2019.

ITEM 2: SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4: MINE SAFETY INFORMATION

None.

ITEM 5: OTHER INFORMATION

None.

14

ITEM 6: EXHIBITS

EXHIBIT 31.1	Certification of Principal Executive Officer of the Registrant pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
EXHIBIT 31.2	Certification of Principal Financial Officer of the Registrant pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
EXHIBIT 32.1	Certification of Principal Executive Officer of the Registrant pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
EXHIBIT 32.2	Certification of Principal Financial Officer of the Registrant pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

15

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SKKYNET CLOUD SYSTEMS INC.
Date: March 23, 2020	By:	/s/ Andrew Thomas
		Andrew Thomas, Chief Executive Officer (Duly Authorized Principal Executive Officer)
	By:	/s/ Lowell Holden
		Lowell Holden, Chief Financial Officer (Duly Authorized Principal Financial Officer)

16

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF

PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Andrew Thomas, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Skkynet Cloud Systems Inc.
2.	Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
4.	The registrant’s other certifying officer and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared.
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change to the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 23, 2020	By:	/s/ Andrew Thomas
	Name:	Andrew Thomas
	Title:	Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF

PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Lowell Holden, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Skkynet Cloud Systems Inc.
2.	Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
4.	The registrant’s other certifying officer and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared.
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change to the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 23, 2020	By:	/s/ Lowell Holden
	Name:	Lowell Holden
	Title:	Chief Financial Officer (Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Skkynet Cloud Systems Inc. (the “Company”) on Form 10-Q for the period ended January 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Andrew Thomas, Principal Executive Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: March 23, 2020	By:	/s/ Andrew Thomas
		Andrew Thomas
		Chief Executive Officer
		(Duly Authorized Principal Executive Officer)

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes ofSection 18 of the Securities Exchange Act of 1934, as amended.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Skkynet Cloud Systems Inc. (the “Company”) on Form 10-Q for the period ended January 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lowell Holden, Principal Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: March 23, 2020	By:	/s/ Lowell Holden
		Lowell Holden
		Chief Financial Officer
		(Duly Authorized Principal Financial Officer)

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes ofSection 18 of the Securities Exchange Act of 1934, as amended.

XML

REVENUE RECOGNITION

3 Months Ended

Jan. 31, 2020

REVENUE RECOGNITION

NOTE 3 - REVENUE RECOGNITION

As part of the revenue recognition reporting, the Company reports revenue by product line and geographic area. During the three month periods ended January 31, 2020 and 2019 the revenue by product line is as follows:

Category	Percentage			2020		Percentage			2019
Product sales		71	%		297,536		62	%		162,191
Support		27	%		114,559		35	%		92,567
Cloud & Other		2	%		7,387		3	%		8,231
Total		100	%		419,482		100	%		262,989

The Company sells its products on a worldwide basis. During the three month periods ended January 31, 2020 and 2019 the Company’s geographic concentration of revenue is as follows:

Area	Percentage			2020		Percentage			2019
North America		31	%		130,746		35	%		90,870
Europe		24	%		101,400		49	%		128,977
Asia		21	%		87,759		7	%		19,692
Middle East-Africa		14	%		60,619		6	%		14,656
South America		9	%		38,958		3	%		8,794
Total		100	%		419,482		100	%		262,989

XML

MAJOR CUSTOMERS (Details Narrative)	3 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
Concentration risk percentage of revenue, description	No end user customers were responsible for more than 10% of our revenues
One resellers [Memebr]
Concentration risk, percentage	19.00%
Two resellers [Member]
Concentration risk, percentage	11.00%
Five resellers [Member]
Concentration risk, percentage	51.00%	53.00%
Thirteen Customers [Member]
Concentration risk, percentage	50.00%	50.00%
Revenue [Member] | One Customers [Member]
Concentration risk, percentage		11.00%
Revenue Member [Member] | Fifteen Customers [Member]
Concentration risk, percentage	50.00%	50.00%

XML

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (Unaudited) - USD ($)	Total	Series B Preferred convertible stock [Member]	Common Stock [Member]	Preferred Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Loss (Income) [Member]
Balance, shares at Oct. 31, 2018		193,661	51,363,022	5,000
Balance, amount at Oct. 31, 2018	$ 656,089	$ 193,661	$ 51,364	$ 5	$ 5,832,725	$ (5,347,023)	$ (74,643)
Stock option expense	59,844				59,844
Change due to currency translation	(8,746)						(8,746)
Net Income (Loss)	$ (154,312)					$ (154,312)
Balance, shares at Jan. 31, 2019		193,661	51,363,022	5,000
Balance, amount at Jan. 31, 2019	$ 552,875	$ 193,661	$ 51,364	$ 5	$ 5,892,569	$ (5,501,335)	$ (83,389)
Balance, shares at Oct. 31, 2019		193,661	51,576,122	5,000
Balance, amount at Oct. 31, 2019	$ 580,314	$ 193,661	$ 51,577	$ 5	$ 6,192,476	$ (5,922,877)	$ 65,472
Stock option expense	67,285				67,285
Change due to currency translation	(5,649)						(5,649)
Net Income (Loss)	$ (8,481)					$ (8,481)
Balance, shares at Jan. 31, 2020		193,661	51,576,122	5,000
Balance, amount at Jan. 31, 2020	$ 633,469	$ 193,661	$ 51,577	$ 5	$ 6,259,761	$ (5,931,358)	$ 59,823

XML

Document and Entity Information - shares	3 Months Ended
	Jan. 31, 2020	Mar. 23, 2020
Document And Entity Information
Entity Registrant Name	SKKYNET CLOUD SYSTEMS, INC.
Entity Central Index Key	0001546853
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--10-31
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	true
Entity Current Reporting Status	Yes
Document Period End Date	Jan. 31, 2020
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2020
Entity Ex Transition Period	false
Entity Common Stock Shares Outstanding		51,576,122
EntityFileNumber	000-54747
EntityAddressAddressLine1	2233 Argentia Road
EntityAddressAddressLine2	Suite 306
EntityAddressPostalZipCode	L5N 2X7
EntityTaxIdentificationNumber	453757848
EntityAddressCityOrTown	Mississauga Ontario
LocalPhoneNumber	628-2028
CityAreaCode	888
EntityAddressStateOrProvince	CANADA (FEDERAL LEVEL)

XML

LEASES (Table)

3 Months Ended

Jan. 31, 2020

LEASES

Schedule of rental obligations lease agreements

Fiscal Year
2020	$	28,428
2021	$	28,428
2022	$	14,215
Total lease payments	$	71,071
Less present value discount	$	(8,202	)
	$	62,869
Less operating lease short term	$	(20,980	)
Operating lease liability, long term	$	41,899

XML

SIGNIFICANT ACCOUNTING POLICIES(Policies)

3 Months Ended

Jan. 31, 2020

SIGNIFICANT ACCOUNTING POLICIES

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, "Leases (Topic 842)". The amendments in this ASU revise the accounting related to lessee accounting. Under the new guidance, lessees are required to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018 and are to be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. The Company has adopted the new accounting pronouncement and recorded a right to use asset and operating lease liability of $68,584 as of November 1, 2019. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification. The adoption of the policy did not have a cumulative impact on retained earnings.

XML

OPTIONS

3 Months Ended

Jan. 31, 2020

OPTIONS

NOTE 5 - OPTIONS

The Company, under its 2012 Stock Option Plan, issues options to various officers, directors, and consultants. The options vest in equal annual installments over a five year period with the first 20% vested when the options are granted. All of the options are exercisable at a purchase price based on the last trading price of the Company’s common stock.

On December 12, 2019 the Company 336,250 options: 120,000 to two officers, 11,250 to three independent directors and 205,000 to six employees and consultants. The options are exercisable into common stock of the Company at $0.59 per share. The Company calculated a fair value of the options of $132,673 using the Black Scholes option pricing model with computed volatility of 207%, risk-free interest rate of 2%, expected dividend yield 0%, stock price at measurement date of $0.39 and the expected term of ten years. The options are expensed over a five year period with 20% upon issuance and 20% for the first and each subsequent year.

During the three month period ended January 31, 2020, the Company recognized $67,285 of option expense. The unrecognized future balance to be expensed over the term of the options is $602,135.

The following sets forth the options granted and outstanding as of January 31, 2020:

	Options		Weighted Average Exercise price		Weighted Average Remaining Contract Life		Granted Options Exercisable		Intrinsic value
Outstanding at October 31, 2019		7,581,400		0.13		7.19		5,470,540	$	1,827,117
Granted		336,250		0.56		9.75		--		--
Exercised		--		--		--		--		--
Forfeited/Expired by termination		--		--		--		--		-
Outstanding at January 31, 2020		7,917,650		0.15		7.06		5,537,790	$	2,007,081

XML

OPTIONS (Details)	3 Months Ended
	Jan. 31, 2020 USD ($) $ / shares shares
Options
Shares outstanding beginning balance | shares	7,581,400
Granted | shares	336,250
Exercised | shares
Forfeited | shares
Shares outstanding ending balance | shares	7,917,650
Weighted Average Exercise Price
Weighted average exercise price of shares outstanding beginning balance | $ / shares	$ 0.13
Weighted average exercise price of share granted | $ / shares	0.56
Weighted average exercise price of share exercised | $ / shares
Weighted average exercise price of share forfeited | $ / shares
Weighted average exercise price of shares outstanding ending balance | $ / shares	$ 0.15
Weighted Average Remaining Contractual Terms
Weighted average remaining contractual terms of share outstanding, beginning	7 years 2 months 8 days
Weighted average remaining contractual terms of share granted	9 years 9 months
Weighted average remaining contractual terms of share outstanding, ending	7 years 21 days
Granted Options Exercisable
Outstanding beginning balance | $ / shares	$ 5,470,540
Outstanding ending balance | shares	5,537,790
Intrinsic Value
Aggregate intrinsic value of share outstanding beginning balance | $	$ 1,827,117
Aggregate intrinsic value of share outstanding ending balance | $	$ 2,007,081

XML

REVENUE RECOGNITION (Details) - USD ($)	3 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
Total Revenue	$ 419,482	$ 262,989
Revenue percentage	100.00%	100.00%
Product Sales [Member]
Total Revenue	$ 297,536	$ 162,191
Revenue percentage	71.00%	62.00%
Support sales [Member]
Total Revenue	$ 114,559	$ 92,567
Revenue percentage	27.00%	35.00%
Cloud & Other [Member]
Total Revenue	$ 7,387	$ 8,231
Revenue percentage	2.00%	3.00%

XML

RELATED PARTY TRANSACTIONS (Details Narrative)	Jan. 31, 2020 USD ($)
One time payment to be made by Real Innovations in return of assignment to Cogent	$ 30,000
Andrew Thomas [Member]
Ownership percentage in Real Innovations hold by related parties	72.34%
Paul Benford [Member]
Ownership percentage in Real Innovations hold by related parties	27.66%

XML

SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	3 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
SIGNIFICANT ACCOUNTING POLICIES
Capitalization of right to use asset and operating liability	$ 68,584

XML

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) - USD ($)	3 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
Revenue	$ 419,482	$ 262,989
Operating Expenses:
General and administrative expense	431,126	395,423
Depreciation	627	120
Loss from operations	(12,271)	(132,554)
Other Income:
Other income	3	1
Currency exchange	3,787	6,436
Total other income	3,790	6,437
Loss before taxes	(8,481)	(126,117)
Income taxes
Loss from continuing operations	(8,481)	(126,117)
Loss from discontinued operations		28,195
Net loss	(8,481)	(154,312)
Preferred dividends	(2,905)	(2,905)
Net loss to common shareholders	(11,386)	(157,217)
Foreign currency translation adjustments	(5,649)	(8,746)
Comprehensive loss	$ (17,035)	$ (165,963)
Net loss per common share from continuing operations, basic and diluted	$ (0.00)	$ (0.00)
Net loss per common share from discontinued operations-basic and diluted	(0.00)	(0.00)
Net loss per share to common shareholders	$ (0.00)	$ (0.00)
Weighted average number of shares outstanding	51,576,122	51,363,022

XML

SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Jan. 31, 2020

SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, "Leases (Topic 842)". The amendments in this ASU revise the accounting related to lessee accounting. Under the new guidance, lessees are required to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018 and are to be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. The Company has adopted the new accounting pronouncement and recorded a right to use asset and operating lease liability of $68,584 as of November 1, 2019. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification. The adoption of the policy did not have a cumulative impact on retained earnings.

XML

MAJOR CUSTOMERS

3 Months Ended

Jan. 31, 2020

MAJOR CUSTOMERS

NOTE 8 - MAJOR CUSTOMERS

The Company sells to their end-user customers both directly and through resellers. Five resellers accounted for 51% of sales of which two resellers accounted for 19% and 11% individually in the three month period ended January 31, 2020 and five resellers accounted for 53% of sales in the same period in 2019. The Company maintains all the information on their end user customers, and should a reseller discontinue operations, the Company can sell directly to the end user. In the three month period ended January 31, 2020, no end user customers were responsible for more than 10% of our revenues and thirteen end user customers were responsible for approximately 50% of gross revenue. In the same period in 2019, fifteen end user customers were responsible for approximately 50% of gross revenue of which one end user customer was responsible for 11% of revenue

XML

RELATED PARTY TRANSACTIONS

3 Months Ended

Jan. 31, 2020

RELATED PARTY TRANSACTIONS

NOTE 4 - RELATED PARTY TRANSACTIONS

Sakura Software, a corporation owned by our CEO and Chairman of the Board of Directors, Andrew S. Thomas, and Benford Consultancy, a corporation owned by our COO and a member of our Board of Directors, Paul Benford, own, respectively, 72.34% and 27.66% of the issued and outstanding shares of Real Innovations International LLC, (“Real Innovations”) a corporation organized under the laws of Nevis, West Indies. In March 2012, Cogent, our operating subsidiary, assigned all of its intellectual property including the pending patent applications for its real-time data transmission and display technology (the “IP”) to Real Innovations under an assignment of intellectual property agreement (the “Assignment Agreement”). In return for the assignment Real Innovations required a one-time payment of $30,000 to Cogent. Cogent elected to forgo the payment allowing Real Innovations to offset future expenses against the payment. There is no ongoing royalty payment or other form of compensation from Real Innovations to Cogent under the Assignment Agreement.

Real Innovations, in turn, entered into a master intellectual property license agreement (the “License Agreement”) with Cogent for all of the same IP. Under the License Agreement Real Innovations granted a royalty-free license in perpetuity to Cogent for the use and exploitation of the IP in return for which Cogent agreed to: (i) pay all operating expenses of Real Innovations incurred in connection with the continued prosecution of pending patent applications and others that may be prepared; (ii) prosecute all claims for infringement of the IP; (iii) defend and indemnify Real Innovations from and against all claims of infringement of the IP asserted by third parties against Real Innovations, Cogent or our Company; (iv) purchase liability insurance in favor of Real Innovations for this purpose. Under the termination provision of the licenses agreement, there is no unilateral right of termination. Termination may occur by mutual consent of the parities, the Company ceasing doing business, by breach by the Company or by the Company failing to maintain the license and the support to prosecute and protect the license under applicable laws.

Under the License Agreement, Messrs. Andrew S. Thomas and Paul Benford will benefit indirectly from their indirect ownership of all of the shares of Real Innovations to the extent of any such payments or other undertakings by Cogent on behalf of Real Innovations, but the exact amount of these benefits cannot be determined at this time. No payments have been made as of January 31, 2020.

As of January 31, 2020, and October 31, 2019, the Company had the following outstanding accrued liabilities due to related parties:

As of	January 31, 2020		October 31, 2019
Accrued liabilities	$	---	$	55,378
Accrued commissions	$	---	$	21,443
Total accrued liabilities	$	---	$	76,821

XML

OPTIONS (Tables)

3 Months Ended

Jan. 31, 2020

OPTIONS

Schedule of Options granted and outstanding

	Options		Weighted Average Exercise price		Weighted Average Remaining Contract Life		Granted Options Exercisable		Intrinsic value
Outstanding at October 31, 2019		7,581,400		0.13		7.19		5,470,540	$	1,827,117
Granted		336,250		0.56		9.75		--		--
Exercised		--		--		--		--		--
Forfeited/Expired by termination		--		--		--		--		-
Outstanding at January 31, 2020		7,917,650		0.15		7.06		5,537,790	$	2,007,081

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OPTIONS (Details Narrative) - USD ($)		3 Months Ended
	Dec. 12, 2019	Jan. 31, 2020	Jan. 31, 2019
Unrecognized future balance		$ 602,135
Option based compensation		$ 67,285	$ 59,844
Granted		336,250
Option [Member]
Granted	336,250
Computed volatility	207.00%
Risk free, interest rate	2.00%
Expected divident yield	0.00%
Option excercise	205,000
Stock measurment Excercise prce, per share	$ 0.39
Exercise price	$ 0.59
Fair value of stock option	$ 132,673
Expected term maturity date	10 years
Description of stock option expend	The options are expensed over a five year period with 20% upon issuance and 20% for the first and each subsequent year
Option [Member] | Three directors [Member]
Granted	11,250
Six employees [Member] | Option [Member]
Granted	205,000
Two Officer [Member] | Option [Member]
Granted	120,000

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REVENUE RECOGNITION (Details1) - USD ($)	3 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
Total revenue	$ 419,482	$ 262,989
Revenue percentage	100.00%	100.00%
Geographically [Member]
Total revenue	$ 419,482	$ 262,989
Revenue percentage	100.00%	100.00%
North America [Member]
Total revenue	$ 130,746	$ 90,870
Revenue percentage	31.00%	35.00%
Europe [Member]
Total revenue	$ 101,400	$ 128,977
Revenue percentage	24.00%	49.00%
Asia [Member]
Total revenue	$ 87,759	$ 19,692
Revenue percentage	21.00%	7.00%
MiddleEast-Africa[Member]
Total revenue	$ 60,619	$ 14,656
Revenue percentage	14.00%	6.00%
South America [Member]
Total revenue	$ 38,958	$ 8,794
Revenue percentage	9.00%	3.00%

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DISCONTINUED OPERATIONS (Tables)

3 Months Ended

Jan. 31, 2020

DISCONTINUED OPERATIONS (Tables)

Schedule of discontinued operations

Operating Results of Discontinued Operations
For the Three Months Ended January 31,
	2019
Revenue included in discontinued operations	$	30,140
Operating costs and expenses included in discontinued operations
Cost of goods sold		6,154
General and administrative expenses		52,181
Net loss from Discontinued operations	$	(28,195	)
Net loss per share of discontinued operations basic & diluted	$	(0.00	)

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REVENUE RECOGNITION (Table)

3 Months Ended

Jan. 31, 2020

REVENUE RECOGNITION

Schedule of revenue by product line and geographic area

Category	Percentage			2020		Percentage			2019
Product sales		71	%		297,536		62	%		162,191
Support		27	%		114,559		35	%		92,567
Cloud & Other		2	%		7,387		3	%		8,231
Total		100	%		419,482		100	%		262,989

Schedule of geographic concentration of revenue

Area	Percentage			2020		Percentage			2019
North America		31	%		130,746		35	%		90,870
Europe		24	%		101,400		49	%		128,977
Asia		21	%		87,759		7	%		19,692
Middle East-Africa		14	%		60,619		6	%		14,656
South America		9	%		38,958		3	%		8,794
Total		100	%		419,482		100	%		262,989

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LEASES

3 Months Ended

Jan. 31, 2020

LEASES

NOTE 6 - LEASES

The Company leases office space located at 2233 Argentia Road Suite 306 Mississauga, Ontario Canada L5N 2X7. During May 2017, the Company signed a new 5 year lease for the Company’s office being effective on August 1, 2017 through July 31, 2022. The lease is for approximately 2,210 square feet of office space with a base monthly rental cost including common area charges of $2,369.

The yearly rental obligations including the lease agreements are as follows:

Fiscal Year
2020	$	28,428
2021	$	28,428
2022	$	14,215
Total lease payments	$	71,071
Less present value discount	$	(8,202	)
	$	62,869
Less operating lease short term	$	(20,980	)
Operating lease liability, long term	$	41,899

Under the new standards the lease has been determined to be a right to use operating lease and is recognized based on the present value of the lease payments over the lease term at the commencement date which upon adoption of ASC 842 the value was determined to be $68,584 which is presented in the balance sheet as an asset labeled “right to use asset” offset by a liability labeled “ operating lease liability”. The amount was determined as the net present value of the lease over a 30 month period and discount using an 8% interest rate. During the three months ended January 31, 2020 the asset was amortized by $5,715 and liability was reduced by $7,109.

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CONSOLDIATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	3 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
Cash flows from operating activities:
Net loss	$ (8,481)	$ (154,312)
Loss from discontinued operations		28,195
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation	627	120
Option based compensation	67,285	59,844
Non-cash lease expense	5,715
Changes in operating assets and liabilities:
Accounts receivable	(16,765)	95,262
Accounts payable and accrued expense	(23,744)	25,093
Accrued liability-related party	(76,821)	(3,872)
Prepaid expenses and other assets	6,369	(35,477)
Operating lease liability	(7,109)
Deferred income	5,326	(8,080)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	(47,598)	6,773
DISCONTINUED OPERATIONS
Net cash used in operating activities		(10,422)
Net cash used in discontinued operations		(10,422)
Effect of foreign exchange on cash and cash equivalents	(6,688)	(10,351)
Net increase in cash and cash equivalents	(54,286)	(14,000)
Cash and cash equivalents - beginning of year	700,410	677,303
Cash and cash equivalents - end of year	646,124	656,827
SUPPLEMENTAL CASH FLOWS INFORMATION
Interest paid
Income taxes paid
NONCASH INVESTING AND FINANCING ACTIVITIES:
Capitalization of right to use asset and operating liability	$ 68,584

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DISCONTINUED OPERATIONS (Details) - USD ($)	3 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
Total revenue	$ 419,482	$ 262,989
Operating costs and expenses included in discontinued operations
General and administrative expenses	431,126	395,423
Net loss	$ (8,481)	(154,312)
Discontinued Operations [Member]
Total revenue		30,140
Operating costs and expenses included in discontinued operations
Cost of goods sold		6,154
General and administrative expenses		52,181
Net loss		$ (28,195)
Net loss per share of discontinued operations basic & diluted		$ (0.00)

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CONSOLIDATED BALANCE SHEETS - USD ($)	Jan. 31, 2020	Oct. 31, 2019
Current Assets:
Cash and cash equivalents	$ 646,124	$ 700,410
Accounts receivable	163,042	146,277
Prepaid expenses	4,321	10,690
Total current assets	813,487	857,377
Property and equipment, net of accumulated depreciation of $81,246 and $81,653 respectively	10,275	8,469
Right of use asset	62,869
Total Assets	886,631	865,846
Current Liabilities:
Accounts payable and accrued expenses	73,235	96,979
Accrued liabilities - related party		76,821
Deferred revenue	117,058	111,732
Current portion of operating lease liability	20,980
Total current liabilities	211,273	285,532
Operating lease liability- net of current portion	41,889
Total liabilities	253,162	285,532
Stockholders' Equity:
Preferred stock; $0.001 par value, 5,000,000 shares authorized, 5,000 shares issued and outstanding	5	5
Common stock; $0.001 par value, 70,000,000 shares authorized, 51,576,122 and 51,576,122 shares issued and outstanding, respectively	51,577	51,577
Additional paid-in capital	6,259,761	6,192,476
Accumulated other comprehensive income	59,823	65,472
Accumulated deficit	(5,931,358)	(5,922,877)
Total shareholders' equity	633,469	580,314
Total Liabilities and Stockholders' Equity	886,631	865,846
Series B Preferred convertible stock [Member]
Stockholders' Equity:
Series B Preferred convertible stock: $0.001 par value, 500,000 shares authorized, 193,661 issued and 193,661 outstanding, respectively	$ 193,661	$ 193,661

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RELATED PARTY TRANSACTIONS (Tables)

3 Months Ended

Jan. 31, 2020

RELATED PARTY TRANSACTIONS

Schedule of outstanding accrued liabilities

As of	January  31, 2020		October  31, 2019
Accrued liabilities	$	---	$	55,378
Accrued commissions	$	---	$	21,443
Total accrued liabilities	$	---	$	76,821

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DISCONTINUED OPERATIONS

3 Months Ended

Jan. 31, 2020

Discontinued Operation, Equity Investment [Abstract]

NOTE 7 - DISCONTINUED OPERATIONS

On August 1, 2019, the Company disposed its wholly owned subsidiary Skkynet Japan by entering into a share purchase agreement with the former owners. The following table presents the breakdown of the results of operations related to the discontinued operations for the three months ended January 31, 2019:

Operating Results of Discontinued Operations
For the Three Months Ended January 31,
	2019
Revenue included in discontinued operations	$	30,140
Operating costs and expenses included in discontinued operations
Cost of goods sold		6,154
General and administrative expenses		52,181
Net loss from Discontinued operations	$	(28,195	)
Net loss per share of discontinued operations basic & diluted	$	(0.00	)

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ORGANIZATION AND BASIS OF PRESENTATION

3 Months Ended

Jan. 31, 2020

ORGANIZATION AND BASIS OF PRESENTATION

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

Skkynet Cloud Systems, Inc. (“Skkynet” or “the Company”) is a Nevada corporation formed on August 31, 2011 and headquartered in Toronto, Canada. Skkynet operates its business through its wholly-owned subsidiaries Cogent Real-Time Systems, Inc. (“Cogent”), Skkynet Corp. (Canada) and Skkynet, Inc. (USA). Skkynet was formed primarily for the purpose of taking the existing business lines of Cogent and its current and future customers and integrating these businesses with Cloud based systems. We also intend to expand the areas of business activity to which the kinds of products and services we provide are applied.

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (the “SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s October 31, 2019 Annual Report on form 10-K filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the consolidated financial statements for the most recent fiscal year end October 31, 2019 as reported on Form 10-K, have been omitted.

On August 1, 2019 the Company disposed of its wholly owned subsidiary Skkynet Japan which represented a strategic shift in the Company’s operations. The assets and liabilities have been accounted for as discontinued operations in the Company’s consolidated balance sheet for the periods presented. The operating results related to this subsidiary have been included in discontinued operations in the Company’s consolidated statements of operations and comprehensive loss for all periods presented.

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LEASES (Details Narrative) - USD ($)	3 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
LEASES
Capitalization of right to use asset and operating liability	$ 68,584
Monthly rental expense	$ 2,369
Lease expiration	Jul. 31, 2022
Lease Term	5 years
Amortization of assets	$ 5,715
Accrued liablility, Decrease	$ 7,109
Operating Lease, Discount Rate	8.00%
Description of Operating Lease	The amount was determined as the net present value of the lease over a 30 month period and discount using an 8% interest rate.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Jan. 31, 2020	Oct. 31, 2018
Property and equipment, Accumulated depreciation	$ 81,246	$ 81,653
Stockholders' Deficit:
Preferred stock, Par value	$ 0.001	$ 0.001
Preferred stock, Authorized	5,000,000	5,000,000
Preferred stock, Issued	5,000	5,000
Preferred stock, Outstanding	5,000	5,000
Common stock, Par value	$ 0.001	$ 0.001
Common stock, Authorized	70,000,000	70,000,000
Common stock, Issued	51,576,122	51,576,122
Common stock, Outstanding	51,576,122	51,576,122
Series B Preferred convertible stock [Member]
Stockholders' Deficit:
Preferred stock, Par value	$ 0.001	$ 0.001
Preferred stock, Authorized	500,000	500,000
Preferred stock, Issued	193,661	193,661
Preferred stock, Outstanding	193,661	193,661

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RELATED PARTY TRANSACTIONS (Details) - USD ($)	Jan. 31, 2020	Oct. 31, 2019
RELATED PARTY TRANSACTIONS
Accrued liabilities		$ 55,378
Accrued commissions		21,443
Total accrued liabilities		$ 76,821

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ORGANIZATION AND BASIS OF PRESENTATION (Details Narrative)	3 Months Ended
	Jan. 31, 2020
ORGANIZATION AND BASIS OF PRESENTATION
State of incorporation	Nevada
Date of Incorporation	Aug. 31, 2011

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LEASES (Details1)	Jan. 31, 2020 USD ($)
LEASES
2020	$ 28,428
2021	28,428
2022	14,215
Total Lease Payments	71,071
Less present value discount	(8,202)
Total balance	62,869
Less operating lease short term	(20,980)
Operating lease liability, long term	$ 41,899