OVERVIEW

The Company was incorporated on August 31, 2011 in the State of Nevada. On March 26, 2012, the Company acquired Cogent Real-Time Systems, Inc.

Skkynet is an evolution of Cogent, an established financial and industrial middleware software vendor. Cogent's specialization has focused on providing connectivity and data acquisition to a wide variety of industrial and office hardware and software products, and then making that data available over a network using industry-standard protocols. The architecture of Cogent's software naturally suits it for use both as a data aggregation platform at the process level, and as a data server at the Cloud level. By marrying these two capabilities together, Skkynet can effectively and securely offer the Cloud as an extension to any local process.






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Cogent's market has been primarily in industrial automation. With little advertising, Cogent has also acquired a number of financial trading companies as clients, due to the fact that Cogent's software is both source and content agnostic. High-speed trading and high-speed industrial automation behave very similarly at the level of abstraction that Cogent's software uses. Recently, Cogent has been working with Japanese companies to penetrate the lucrative embedded device manufacturing world. Japan is one of the largest producers of consumer and business electronics devices, more and more of which contain small embedded computers. Cogent has been working with partners in Japan to establish a name and presence in this world, with the aim of having Cogent's software installed directly on the electronic devices, allowing the manufacturers to instantly make them network-accessible.

The Company believes that deploying its product in a Cloud environment will increase the potential applications for customers and broaden its usage and expansion into various markets including Cloud industrial middleware, Cloud financial services, home monitoring, fleet tracking, and energy usage monitoring. New applications that may not exist today but will through the new Cloud platform may also open new markets unknown to Skkynet today. However, management will carefully monitor the growth in new markets and manage each opportunity to maximize its return and minimize risks. This includes selecting specific markets with known trends to introduce its products and services and maintain a controlled release until the market has been understood and sales in the market have become significant to the Company. Only then will the Company risk new markets for its product. We must also include additional staffing at the senior management level with proven experiences and business records in the Company's environment to implement these markets.

The expansion into new markets will require additional cash resources from sources other than those available to the Company today. Only after the Company has secured specific amounts of financing it believes is required for development of each market application enumerated above will Skkynet begin its marketing efforts.

The additional staffing will not begin until Skkynet has funded itself to finance both the staff increase and the required capital to carry out its marketing plan. If the Company is not successful in obtaining the required additional capital, it believes the present business operation will be able to sustain Skkynet's additional costs as a public company at a minimal level.





RESULTS OF OPERATIONS

The following table sets forth selected statement of operations data as a percentage of total revenues for the periods indicated:





                                                  For Years Ended October 31,
                                               2019                          2020
Revenue                              $ 1,367,448          100 %    $ 1,506,929          100 %

Operating expenses: General and administrative expense 1,924,384 (140.3 )% 1,896,705 (125.9 )% Depreciation

                                 480        (0.00 )%         2,455        (0.00 %
Income (loss) from operations           (557,416 )      (40.6 )%      (392,232 )      (26.0 )%
Other income (expense)                   (17,436 )       (1.3 )%        64,896          4.3 %

Net income (loss) before taxes (574,852 ) (42.0 )% (327,337 ) (21.7 )% Tax refund

                                30,482          2.3 %         16,004         1.02 %
Loss on discontinued operations          (31,484 )       (2.3 )%            --           --
Net income (loss)                    $  (575,854 )      (41.9 )%   $  (311,333 )      (20.7 )%





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Revenue: For the year ended October 31, 2019, the Company had revenues of $1,367,448 compared to $1,506,929 of revenue for the year ended October 31, 2020. This reflects an increase of $139,481 from 2019 to 2020. Revenues increase can be attributed to the increase of sales in Cogent. During the year ended October 31, 2019, the Company's deferred revenue was $111,732 compared to a deferred revenue balance of $168,728 as of October 31, 2020, an increase of $56,986. Deferred revenue consists of services billed but not yet provided to the customer and reflects revenues that will be recognized in the future.

General and Administrative Expenses: (G&A) Total general and administrative expenses decreased to $1,896,705 in the year ended October 31, 2020 from $1,924,384 for the same period in 2019. This was a decrease of $27,679 and as a percent of revenue G&A decreased from 140,3% in 2019 to 125.9% in 2020. The decrease as a percentage is attributed to lower costs in the Cogent subsidiary in 2020 offset by an increasing sales and marketing of the Company's products.

Depreciation and Amortization: The Company had depreciation of $480 in 2019 compared to $2,455 in 2020.

Other Income (Expense): Other income (expense) totaled $17,436 in expense during the year ended October 31, 2019 compared to $64,896 in income during the same period in 2020.

Income Tax: During the periods ended October 31, 2019 and 2020 the Company and subsidiary incurred no tax. The subsidiary filed tax returns as a foreign corporation. During the year ended October 31, 2019 the subsidiary received a tax refund of $30,482 and $16,004 for the same period in 2020.

Net Income (Loss): The Company recorded a net loss of $575,854 for the year ended October 31, 2019 compared to net loss of $311,333 for the same period in 2020, a decrease of $264,521. An increase of other income of which $59,674 was income from Canadian Covid-19 programs and a positive change of $10,682 in currency exchange were the key components of the decreased in net loss in 2020 over 2019.

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity and capital has been dependent on the revenue generated internally by the Company's subsidiaries, by loans from its officers and directors and by deferral of accrued salaries. There are no agreements or understandings with regard to future loans by or with the officers, directors, principals, affiliates or shareholders of the Company. In the past, officers and directors of the Company have lent or advanced monies to the Company to fund operations, but there are no formal agreements or arrangements for them to continue to do so.

The Company anticipates continually expanding its business through the planned expansion of the Company's marketing of venues in expanded markets. The Company's plans will be limited, however, by its ability to finance such a proposed expansion of its business. If the revenues generated are not sufficient to finance these proposed operations, then the Company will have to scale back its proposed operations. The Company's ultimate success will be based upon whether or not there continues to be a demand for the services that the Company anticipates providing, which is also very dependent on the economy. There can be no assurance that there will be a demand for the Company's services in the future or that the Company will become profitable in providing these services. As the Company's expands its operations, the revenues received, in addition to paying current expenses may increase the Company's capital requirements.






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The Company is attempting to secure additional capital from independent sources in the form of equity and debt. The success and ability to meet its capital needs is highly dependent on its success in generating additional revenue and profitability now and in the future.

Working Capital: At October 31, 2020, the Company had working capital of $466,261 with current assets of $1,035,241 and current liabilities of $568,980 or a current ratio of 1.82 to 1. The current assets consisted of cash of $816,798, account receivable of $194,263, and prepaid expense and other receivable of $24,810. The current liabilities of the Company at October 31, 2020 are composed primarily of accounts payable and accrued expenses of $156,668, accrued liabilities to related party of $222,603 and deferred revenue of $168,728.

Operating Activities: Net cash used in operating activities, during the year ended October 31, 2019 was $2,793 compared to cash provided of $101,550 for the same period in 2020. This represents a positive change of $104,343. The change in cash flow from operating activities is significant from 2019 to 2020 and due to higher loss in 2019 compared to the same period in 2020.

Financing Activities: Net cash provided by financing was $28,717 for the year ended October 31, 2020 compared to net cash provided by financing activities of $5,185 from the conversion of options to stock for the year ended October 31, 2019.

As of October 31, 2020, the Company had total assets of $1,088,289 and total liabilities of $618,913 compared to $865,846 and $285,532, respectively in the same period in 2019. Stockholders' equity as of October 31, 2020 was $469,376 compared to stockholder's equity of $580,314 at October 31, 2019. Liabilities increased in 2020 due to increases in accrued liabilities and accounts payable.

NEED FOR ADDITIONAL FINANCING

The Company's existing capital is sufficient to meet the Company's cash needs if the Company continues to operate its ongoing business as presently conducted through revenues generated from operations of our subsidiary for the next twelve months. The Company may from time to time may seek additional equity or debt financing as it feels is required to continue the growth of the Company.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements.

Critical Accounting Policies and Recent Accounting Pronouncements





Principles of Consolidation

The consolidated financial statements of the Company include the Company and its wholly-owned subsidiaries Cogent Real Time Systems, Inc (Canada), Skkynet Corp. (Canada), Skkynet Inc (US). All material intercompany balances and transactions have been eliminated.





Revenue recognition

In April 2016, the FASB issued ASU 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. Topic 606 includes implementation guidance on (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity's promise to grant a license provides a customer with either a right to use the entity's intellectual property (which is satisfied at a point in time) or a right to access the entity's intellectual property (which is satisfied over time). The amendments are intended to render more detailed implementation guidance with the expectation to reduce the degree of judgement necessary to comply with Topic 606.






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ASC Topic 606 prescribes a new five-step model entities should follow in order
to recognize revenue in accordance with the core principle. These five steps
are:



    1.  Identify the contract(s) with a customer.
    2.  Identify the performance obligations in the contract.
    3.  Determine the transaction price.
    4.  Allocate the transaction price to the performance obligations in the
        contract.
    5.  Recognize revenue when (or as) the entity satisfied the performance
        obligations.

Effective November 1, 2018, the Company implemented the transition using the modified retrospective method of transition. Under this method the determination date of open contracts which could affect any adjustments was November 1, 2018. The open contracts at the time period are the unfulfilled portions of the maintenance contracts. Based on the cut off treatment of the recognition of revenue on the open contracts being determined at the end of the previous period and being no changes in the open obligation requirements, the Company has determined that there are no adjustments in the value of the revenue recognized from these contracts.

The Company has four revenue streams, each of which the revenue is recognized in accordance to the five steps included in Topic 606. The revenue streams are:





  1. Sale of software direct to the end customer
  2. Sale of software through distributors and channel partners
  3. Maintenance support services
  4. Cloud services

Revenue for the sale of software both directly to end users and through the distributor and channel partners is recognized upon delivery of the software and code required for the customer to install the software.

Maintenance support services are recognized as revenue on a straight-line basis over the service period of the arrangement. Revenue from cloud services is recognized over time (typically, on a monthly basis) as service is provided. Payments received in advance of services being rendered are recorded as deferred revenue and recognized to revenue when earned.





Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with the fair value recognition provision of the Financial Accounting Standards Board("FASB") Accounting Standards Codification ("ASC") No 718. The Company issues restricted stock to employees and consultants for their services. Cost of these transactions are measured at fair value of the equity instrument issued at the date of grant. These shares are considered fully vested and the fair market value is recognized as the expense in the period granted. The Company recognized consulting expense and a corresponding increase to the additional paid in capital related to the stock issued for services. For agreements requiring future services the consulting expense is to be recognized ratably over the requisite service period.

The critical accounting policies and account pronouncements are an integral part of the footnotes of the audited financial statements and should be reviewed as part of our discussion of the financial results.






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Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases, which amended current lease accounting to require lessees to recognize (i) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company has adopted this ASU and determined there was no impact on our results of operations, cash flows or financial condition.

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