SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended July 31, 2023

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 302. Mississauga, Ontario, Canada L5N 2X7

(Address of principal executive offices)

  (888) 702-7851

(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: ☒     No: ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes: ☒     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 ☒

As September 14, 2023, there were 53,143,822 shares of Common Stock and 193,661 shares of series B preferred of the issuer outstanding.

	Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of July 31, 2023 (Unaudited) and October 31, 2022 (Audited)	4
Consolidated Statements of Operations and Comprehensive Income (Loss)  for the Three and Nine  Months Ended July 31, 2023 and 2022 (Unaudited)	5
Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended July 31, 2023 and 2022 (Unaudited)	6
Consolidated Statements of Cash Flows for the Nine  Months Ended July 31, 2023 and 2022 (Unaudited)	7
Notes to Consolidated Financial Statements (Unaudited)	8
Item 2. Management’s Discussion and Analysis 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	15
Item 1A. Risk Factors	15
Item 2. Sales of Equity Securities and Use of Proceeds	15
Item 3. Defaults upon Senior Securities	15
Item 4. Mine Safety Information	15
Item 5. Other Information	15
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

	July 31, 2023			October 31, 2022
	(Unaudited)			(Audited)
ASSETS
Current Assets:
Cash and cash equivalents	$	858,370		$	729,936
Accounts receivable		324,085			377,491
Receivable related parties		4,905			4,776
Prepaid expenses		10,876			25,733
Total current assets		1,198,236			1,137,936
Property and equipment, net of accumulated depreciation of $96,196 and $94,357 respectively		5,380			7,058
Total Assets	$	1,203,616		$	1,144,994
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	109,778		$	58,202
Accrued liabilities – related party		153,332			115,475
Deferred revenue		356,809			281,615
Total current liabilities		619,919			455,292
Long Term Liability
Loan payable		-			19,106
Total liabilities		619,919			474,398
Commitments and contingencies		-			-
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 outstanding, respectively		194			194
Common stock; $0.001 par value, 70,000,000 shares authorized, 53,143,822 shares issued and outstanding, respectively		53,145			53,145
Additional paid-in capital		7,069,314			6,990,526
Accumulative other comprehensive income		84,442			76,011
Accumulated deficit		(6,623,403	)		(6,449,285	)
Total stockholders’ equity		583,697			670,596
Total Liabilities and Stockholders’ Equity	$	1,203,616		$	1,144,994

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

4

SKKYNET CLOUD SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	For Three Months Ended July 31,						For Nine Months ended July 31,
	2023			2022			2023			2022
Revenue	$	630,040		$	530,075		$	1,747,623		$	1,547,347
Operating Expenses:
Depreciation		618			641			1,839			1,943
Salary and wages		316,883			262,912			1,066,013			707,082
Advertising		127,061			97,731			347,658			387,473
Stock compensation		12,679			50,773			78,788			149,447
General & administrative expenses		106,916			92,003			438,929			429,136
Operating expense		564,157			504,060			1,933,227			1,675,081
Income (loss) from operations		65,883			26,015			(185,604	)		(127,734	)
Other income (expense):
Other income		14,900			1,906			14,960			6,398
Currency exchange		(15,165	)		(9,555	)		(24,727	)		8,216
Total other income (expense)		(265	)		(7,649	)		(9,767	)		14,614
Income (loss) before taxes		65,618			18,366			(195,371	)		(113,120	)
Income taxes refund		-			-			29,968			39,367
Net income (loss)		65,618			18,366			(165,403	)		(73,753	)
Preferred dividends		(2,905	)		(2,905	)		(8,715	)		(8,715	)
Income (loss) to common stockholders		62,713			15,461			(174,118	)		(82,468	)
Foreign currency translation adjustment		6,967			1,819			8,431			19,753
Comprehensive income (loss)	$	69,680		$	17,280		$	(165,687	)	$	(62,715	)
Net income (loss) per share to common stockholders- basic	$	0.00		$	0.00		$	(0.00	)	$	(0.00	)
Weighted average common shares outstanding -basic		53,143,822			52,454,723			53,143,822			51,880,474
Net income (loss) per share to common stockholders - diluted	$	0.00		$	0.00		$	(0.00	)	$	(0.00	)
Weighted average common shares outstanding – diluted		60,013,772			59,087,173			53,143,822			51,880,474

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 AND NINE MONTHS ENDED JULY 31, 2023 AND 2022

(Unaudited)

																		Accumulated
									Series B Preferred				Additional					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, 2021		51,576,122	$	51,577		5,000	$	5		193,661	$	194	$	6,790,306	$	(6,470,423	)	$	80,908		$	452,567
Stock option expense		-		-		-		-		-		-		49,337		-			-			49,337
Change due to currency translation		-		-		-		-		-		-		-		-			(16,549	)		(16,549	)
Dividends accrued on series B preferred shares		-		-		-		-		-		-		-		(2,905	)		-			(2,905	)
Net loss		-		-		-		-		-		-		-		(74,164	)		-			(74,164	)
Balance at January 31, 2022		51,576,122		51,577		5,000		5		193,661		194		6,839,643		(6,547,492	)		64,359			408,286
Stock option expense		-		-		-		-		-		-		49,337		-			-			49,337
Change due to currency translation		-		-		-		-		-		-		-		-			(1,385	)		(1,385	)
Dividends accrued on series B preferred shares		-		-		-		-		-		-		-		(2,905	)		-			(2,905	)
Net loss		-		-		-		-		-		-		-		(17,955	)		-			(17,955	)
Balance at April 30, 2022		51,576,122		51,577		5,000		5		193,661		194		6,888,980		(6,568,352	)		62,974			435,378
Stock option expense		-		-		-		-		-		-		50,773		-			-			50,773
Change due to currency translation		-		-		-		-		-		-		-		-			(1,819	)		(1,819	)
Dividend accrued on series preferred shares		-		-		-		-		-		-		-		(2,905	)		-			(2,905	)
Common stock issued for option conversion		1,567,700		1,568		-		-		-		-		-		-			-			1,568
Net income (loss)		-		-		-		-		-		-		-		18,366			-			18,366
Balance at July 31, 2022		53,143,822	$	53,145		5,000	$	5		193,661	$	194	$	6,939,753	$	(6,552,891	)	$	61,155		$	501,361
Balance at October 31, 2022		53,143,822	$	53,145		5,000	$	5		193,661	$	194	$	6,990,526	$	(6,449,285	)	$	76,011		$	670,596
Stock option expense		-		-		-		-		-		-		52,283		-			-			52,283
Change due to currency translation		-		-		-		-		-		-		-		-			5,484			5,484
Dividend accrued on series B preferred shares		-		-		-		-		-		-		-		(2,905	)		-			(2,905	)
Net loss		-		-		-		-		-		-		-		(147,206	)		-			(147,206	)
Balance at January 31, 2023		53,143,822		53,145		5,000		5		193,661		194		7,042,809		(6,599,396	)		81,495			578,252
Stock option expense		-		-		-		-		-		-		13,826		-			-			13,826
Change due to currency translation		-		-		-		-		-		-		-		-			(4,020	)		(4,020	)
Dividend accrued on series B preferred shares		-		-		-		-		-		-		-		(2,905	)		-			(2,905	)
Net loss		-		-		-		-		-		-		-		(83,815	)		-			(83,815	)
Balance at April 30, 2023		53,143,822		53,145		5,000		5		193,661		194		7,056,635		(6,686,116	)		77,475			501,338
Change due to currency translation		-		-		-		-		-		-		-		-			6,967			6,967
Dividend accrued  on series B preferred shares		-		-		-		-		-		-		-		(2,905	)		-			(2,905	)
Stock option expense		-		-		-		-		-		-		12,679		-			-			12,679
Net income (loss)		-		-		-		-		-		-		-		65,618			-			65,618
Balance at July 31, 2023		53,143,822	$	53,145		5,000	$	5		193,661	$	194	$	7,069,314	$	(6,623,403	)	$	84,442		$	583,697

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 Nine Months Ended July 31,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(165,403	)	$	(73,753	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		1,839			1,943
Option based compensation		78,788			149,447
Non-cash lease expense		-			16,234
Changes in operating assets and liabilities:
Accounts receivable		53,406			8,746
Accounts payable and accrued expenses		51,576			(148,082	)
Accrued liabilities – related parties		29,013			(94,365	)
Prepaid expenses and other assets		14,857			5,862
Operating lease liability		-			(16,234	)
Deferred income		75,194			62,692
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		139,270			(87,510	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (payment on) Canadian loan activity		(19,106	)		(20,139	)
Proceeds from exercise of stock options – related parties		-			1,568
NET CASH USED IN FINANCING ACTIVITIES		(19,106	)		(18,571	)
Effect of exchange rate changes on cash and cash equivalents		8,270			(19,430	)
Net increase (decrease) in cash and cash equivalents		128,434			(125,511	)
Cash and cash equivalents, beginning of period		729,936			797,808
Cash and cash equivalents, end of period	$	858,370		$	672,297
SUPPLEMENTAL CASH FLOWS INFORMATION
Interest paid	$	-		$	-
Income taxes paid	$	-		$	-

NONCASH INVESTING AND FINANCING ACTIVITIES:
Dividends accrued on Series B preferred shares	$	8,715	$	8,715

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, 2022 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, 2022 as reported on Form 10-K, have been omitted.

Certain prior period amounts were reclassified to conform to the manner of presentation in the current period. The reclassifications have no effect on the net loss or stockholders’ equity.

NOTE 2- REVENUE RECOGNITION

As part of the revenue recognition reporting, the Company reports revenue by product line and geographic area. During the nine month periods ended July 31, 2023 and 2022 the revenue by product line is as follows:

Category	Percentage			2023		Percentage			2022
Product sales		71	%		1,246,595		70	%		1,081,856
Support		26	%		449,185		29	%		451,664
Cloud & Other		3	%		51,843		1	%		13,827
Total		100	%	$	1,747,623		100	%	$	1,547,347

The Company sells its products on a worldwide basis. During the nine month periods ended July 31, 2023 and 2022 the Company’s geographic concentration of revenue is as follows: 

Area	Percentage			2023		Percentage			2022
Europe		34	%		603,926		35	%		541,255
North America		37	%		642,158		33	%		516,211
Asia Pacific		17	%		292,632		22	%		346,573
Middle East-Africa/Other		10	%		175,670		9	%		131,276
South America		2	%		33,237		1	%		12,031
Total		100	%	$	1,747,623		100	%	$	1,547,347

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NOTE 3- 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 parties, 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 July 31, 2023.

As of July 31, 2023, the amount due related parties was $153,332 compared to $115,475 as of October 31, 2022.

NOTE 4 – 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 15, 2020, the Company issued 41,250 options of which 11,250 options were issued to three independent directors and 30,000 options were issued to three consultants. The options are exercisable into common stock of the Company at $0.64 per share.  The Company calculated a fair value of the options of  $27,190 using the Black Scholes option pricing model with computed volatility of 201.22%, risk-free interest rate of 2%, expected dividend yield 0%, stock  price at measurement date of $0.64 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.

On February 4, 2022 the Company granted 37,500 options to three directors and four Company personnel. The options are for 10 years and are exercisable into common stock at $0.31 per share.

9

On March 14, 2022, the Company granted 3,750 options to three directors. The options are for 10 years and are exercisable into common stock at $0.21 per share.

During the nine month period ended July 31, 2023, the Company recognized $78,788 of option expense. The unrecognized future balance to be expensed over the term of the options is $63,395. 

 The following sets forth the options granted and outstanding as of July 31, 2023:

	Options			Weighted  Average Exercise price		Weighted Average Remaining Contract Life		Granted Options Exercisable		Intrinsic value
Outstanding at October 31, 2021		7,958,900		$	0.15		5.16		6,081,250	$	3,805,201
Granted		241,250			0.17		9.00		-		-
Exercised		(1,567,300	)		0.001		-		-		-
Forfeited/Expired by termination		-			-		-		-		-
Outstanding at October 31, 2022		6,632,450			0.15		4.25		5,100,960	$	256,000
Granted		237,500			0.22		9.90		-		-
Exercised		-			-		-		-		-
Forfeited/Expired by termination		-			-		-		-		-
Outstanding at July 31, 2023		6,869,950		$	0.15		3.50		5,616,450	$	598,018

NOTE 5 – MAJOR CUSTOMERS

The Company sells to their end-user customers both directly and through a network of resellers. Seven resellers accounted for 51% of sales, of which one reseller accounted for 25% in the nine-month period ended July 31, 2023. 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 nine-month period ended July 31, 2023, twenty-five end user customers were responsible for approximately 50% of gross revenue, with no end user customer responsible for more than 10% of revenue. In the same period in 2022, twenty-one end user customers were responsible for approximately 50% of gross revenue, with no end user customers responsible for more than 10% of revenue.

NOTE 6 – LOANS PAYABLE

On April 30, 2020, the Company’s subsidiary Cogent Systems issued a two year note for US$15,678 (CDN $20,000) under the Canadian Emergency Business Account (CEBA). The CEBA provides interest free loans to small businesses to help cover operating costs during a period when their revenues may have been reduced due to the impact of COVID-19. The loan is subject to zero interest and 25% of the amount will be forgiven if 75% of the loan amount is repaid on or before December 31, 2022. The Company has the option to extend the term of the loan for another 3 years subject to an annual interest of 5% on any balance remaining.

On December 15, 2020, the Company’s subsidiary Cogent Systems issued a two year note for US$30,032 (CDN $40,000) under the Canadian Emergency Business Account (CEBA). The CEBA provides interest free loans to small businesses to help cover operating costs during a period when their revenues may have been reduced due to the impact of COVID-19. The loan is subject to zero interest and 25% of the amount will be forgiven if 75% of the loan amount is repaid on or before December 31, 2022. The Company has the option to extend the term of the loan for another 3 years subject to an annual interest of 5% on any balance remaining.

10

On May 28, 2023, the outstanding balance of the CEBA loans payable of CDN $20,000, US ($14,756) were forgiven per the terms of the notes agreements leaving the balance of both notes at $0 as of July 31, 2023.

NOTE 7 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events to determine events occurring after July 31, 2023 through the filing of this report that would have a material impact on the Company’s financial results or require disclosure and have determined none exist other than noted above .

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ITEM 2: 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 relevant customers 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.

RESULTS OF OPERATIONS

For the three and  nine month periods ended July 31, 2023, revenue was $630,040 and $1,747,623 compared to $530,075 and $1,547,347 for the same periods in 2022. Revenue increased for the nine  months period ended July 31, 2023 over the same period in 2022 by 12.9%.  The increase in revenue for the three and nine months period is attributed to higher sales by Cogent. The Company is benefiting from its prior investment in sales and marketing and market recognition which has contributed to the increase in Cogent’s sales.

General and administrative expense was $564,157 and $1,933,227 for the three and nine months periods ended July 31, 2023 compared to $504,060 and $1,675,081 for the same periods in 2022. The increase in general and administrative expenses for the three and nine month periods ended July 31, 2023 over the same periods in 2022, resulted from increased expenditures primarily in salaries and wages and hired consultants.

For the three and nine month periods ended July 31, 2023, the Company reported an operating income of $65,883 and operating loss of $185,604 compared to operating income of $26,015 and operating loss of $127,734 for the same periods in 2022. The operating loss during the nine month periods ended July 31, 2023, over the operating losses for same periods in 2022 is attributable to higher salaries, wages and consulting expenses  in the period ended July 31, 2023, as noted in the above paragraph compared to 2022.

Other income and expense for the three and nine  month periods ended July 31, 2023, was other expense of $265 and $9,767 compared to other expense of $7,649 and other income of $14,614 for the same periods in 2022. The amount of change in both periods was due to the effect of currency exchange.

Net income after income taxes of $65,618 and net loss after taxes of $165,403 was reported for the three and nine month periods ended July 31, 2023, compared to a net income after income taxes of $18,366 and net loss after taxes of $73,753 for the same periods in 2022. The higher net loss for the nine month periods in 2023 can be attributed to  higher salaries and wages in 2023 compared to the same period in 2022. During the nine months period ending July 31, 2023 the Company received a tax refund for development of $29,968.

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Net income to common stockholders was $62,713 and net loss to common stockholders of $174,118 for the three and nine month periods ended July 31, 2023, compared to net income of $15,461 and net loss of $82,468 for the same periods in 2022. The loss includes the expense of dividend for preferred stockholders of $8,715 being accrued for the nine  months period ended July 31, 2023 and 2022.

The Company reported comprehensive income of $69,680 and loss of $165,687 for the three and nine month periods ended July 31, 2023 compared to a comprehensive income of $17,280 and loss of $62,715 for the same periods in 2022. The comprehensive loss is an adjustment to net loss with foreign currency translation adjustments.

LIQUIDITY AND CAPITAL RESOURCES

At July 31, 2023, Skkynet had current assets of $1,198,236 and current liabilities of $619,919, resulting in working capital of $578,317. Accumulated deficit, as of July 31, 2023, was $6,623,403 with total stockholders’ equity of $583,697.

Net cash provided in operating activities for the nine months period ended July 31, 2023, was $139,270 compared to net cash used in operating activities of $87,510 for the same period in 2022.  The cash provided by operating activities for the nine-months period ended July 31, 2023 compared to the cash used in operating activities over the same period in 2022 was primarily due positive changes in accounts receivable, accounts payable, amounts due related parties plus the increase in deferred revenue during the period.

Net cash used in financing activities for the nine month period ending July 31, 2023 was $19,106 compared to $18,571 for the same period in 2022. Both periods amounts were mainly due to the repayment of loans during the nine months ended July 31, 2023.

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.

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Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of July 31, 2023 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.

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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, 2022.

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.

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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	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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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: September 14, 2023	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)

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