Skkynet (SKKY) Q1 2026 revenue drops 34% and swings to net loss

Rhea-AI Filing Summary

Skkynet Cloud Systems, Inc. reported weaker results for the quarter ended January 31, 2026. Revenue was $549,393, down from $828,052 a year earlier, a 34% decline driven by lower Cogent sales and a shift from perpetual to subscription licenses.

The company swung from operating income of $198,237 in the prior-year quarter to an operating loss of $217,215, and from net income of $229,063 to a net loss of $226,509. Cash and cash equivalents were $1,390,791, with working capital of $868,843, but operating activities used $42,643 of cash versus providing $157,268 a year earlier.

Management highlights growing subscription revenue—up to $73,337 from $19,763—and notes a FedDev Ontario Industrial AI initiative loan of up to $750,000, with a subsequent payment of CDN $187,209 authorized after quarter-end. The company also discloses continuing material weaknesses in internal control over financial reporting due to limited accounting staff and processes.

Positive

• None.

Negative

• Revenue and profitability deterioration: Quarter ended January 31, 2026 revenue fell to $549,393 from $828,052, a 34% decline, driving a swing from $198,237 operating income to a $217,215 operating loss and from $229,063 net income to a $226,509 net loss.
• Internal control weaknesses: Management continues to report material weaknesses in internal control over financial reporting, citing insufficient full-time accounting staff, limited technical expertise, and lack of formalized policies, procedures, and multi-layer review processes.

Insights

Equity analyst

Revenue fell sharply and profits reversed to a loss, while liquidity remains positive but under more pressure.

Skkynet saw quarterly revenue drop to $549,393 from $828,052, a 34% decline, largely from weaker Cogent sales and the transition from perpetual licenses to subscriptions. This shift reduced near-term recognized revenue even as subscription payments rose.

Operating results deteriorated from income of $198,237 to a loss of $217,215, with higher salaries, consulting, and general and administrative costs adding $136,753. Net income of $229,063 in the prior-year period became a net loss of $226,509, indicating a meaningful profitability reversal.

Cash remained at $1,390,791 and working capital at $868,843, but operating activities used $42,643 versus prior inflows. A FedDev Ontario Industrial AI initiative provides up to $750,000 in interest-free funding, with CDN $187,209 authorized after January 31, 2026, partly offsetting pressure. Management also acknowledges material weaknesses in internal controls, which adds execution risk until remedied.

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UNITED STATES

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 January 31, 2026

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 March 17, 2026, 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		4
	Condensed Consolidated Balance Sheets as of January 31, 2026 (Unaudited) and October 31, 2025 (Audited)		4
	Condensed Consolidated Statements of Operations and Comprehensive Income for the Three Months Ended January 31, 2026 and 2025 (Unaudited)		5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended January 31, 2026 and 2025 (Unaudited)		6
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended January 31, 2026 and 2025 (Unaudited)		7
	Notes to Condensed Consolidated Financial Statements (Unaudited)		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3	Quantitative and Qualitative Disclosures About Market Risk		14
Item 4.	Controls and Procedures		14
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		16
Signatures			17

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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.

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PART I

ITEM 1: FINANCIAL STATEMENTS

SKKYNET CLOUD SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

		January 31, 2026				October 31, 2025
		(Unaudited)				(Audited)
ASSETS
Current Assets:
Cash and cash equivalents		$	1,390,791			$	1,427,321
Accounts receivable			365,651				376,830
Prepaid expenses			24,499				26,863
Total current assets			1,780,941				1,831,014
Total Assets		$	1,780,941			$	1,831,014
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses		$	213,799			$	209,901
Accrued liabilities – related party			273,754				245,712
Deferred revenue			424,545				347,686
Total current liabilities			912,098				803,299
Total Liabilities			912,098				803,299
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			7,413,204				7,348,775
Accumulative other comprehensive income			79,285				73,172
Accumulated deficit			(6,676,990	)			(6,447,576	)
Total stockholders’ equity			868,843				1,027,715
Total Liabilities and Stockholders’ Equity		$	1,780,941			$	1,831,014

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

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SKKYNET CLOUD SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

		For Three Months Ended January 31,
		2026				2025
Revenue		$	549,393			$	828,052
Operating Expenses:
Depreciation			-				580
Consultants & directors			119,714				95,573
Salaries and wages			270,801				228,359
Advertising			102,961				108,560
General & administrative expenses			273,132				196,743
Operating expense			766,608				629,815
Income (loss) from operations			(217,215	)			198,237
Other income (expense):
Other income			11,684				9,752
Currency exchange			(17,161	)			21,074
Total other income (expense)			(5,477	)			30,826
Income (loss) before taxes			(222,692	)			229,063
Income taxes			(3,817	)			-
Net (loss) income			(226,509	)			229,063
Preferred dividends			(2,905	)			(2,905	)
Income to common stockholders			(229,414	)			226,158
Foreign currency translation adjustment			6,113				(4,673	)
Comprehensive income		$	(223,301	)		$	221,485
Net income (loss) per share to common stockholders- basic		$	(0.00	)		$	0.00
Weighted average common shares outstanding -basic			53,143,822				53,143,822
Net income (loss) per share to common stockholders - diluted		$	(0.00	)		$	0.00
Weighted average common shares outstanding – diluted			53,143,822				61,758,522

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

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SKKYNET CLOUD SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY 

FOR THE THREE MONTHS ENDED JANUARY 31, 2026 AND 2025

(Unaudited)

																		Series B																Accumulated
																		Preferred								Additional								Other				Total
		Common Stock								Preferred Stock								Convertible Stock								Paid-In				Accumulated				Comprehensive				Stockholders’
		Shares				Amount				Shares				Amount				Shares				Amount				Capital				Deficit				Income (loss)				Equity
Balance at October 31, 2024			53,143,822			$	53,145				5,000			$	5				193,661			$	194			$	7,226,547			$	(6,471,307	)		$	80,946			$	889,530
Change due to currency translation			-				-				-				-				-				-				-				-				(4,673	)			(4,673	)
Dividend accrued on series B preferred shares			-				-				-				-				-				-				-				(2,905	)			-				(2,905	)
Stock option expense			-				-				-				-				-				-				32,098				-				-				32,098
Net income			-				-				-				-				-				-				-				229,063				-				229,063
Balance at January 31, 2025			53,143,822				53,145				5,000				5				193,661				194				7,258,645				(6,245,149	)			76,273				1,143,113
Balance at October 31, 2025			53,143,822				53,145				5,000				5				193,661				194				7,348,775				(6,447,576	)			73,172				1,027,715
Change due to currency translation			-				-				-				-				-				-				-				-				6,113				6,113
Dividend accrued on series B preferred shares			-				-			-					-				-				-				-				(2,905	)			-				(2,905	)
Stock option expense			-				-				-				-				-				-				64,429				-				-				64,429
Net loss			-				-				-				-				-				-				-				(226,509	)			-				(226,509	)
Balance at January 31, 2026			53,143,822			$	53,145				5,000			$	5				193,661			$	194			$	7,413,204			$	(6,676,990	)		$	79,285			$	868,843

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

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SKKYNET CLOUD SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 (Unaudited)

		For the Three Months Ended January 31,
		2026				2025
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$	(226,509	)		$	229,063
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			-				580
Stock based compensation			64,429				32,098
Changes in operating assets and liabilities:
Accounts receivable			11,179				(151,699	)
Accounts payable and accrued expenses			3,898				2,018
Accrued liabilities – related parties			25,137				16,051
Prepaid expenses and other assets			2,364				4,856
Deferred revenue			76,859				24,301
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES			(42,643	)			157,268
Effect of exchange rate changes on cash and cash equivalents			6,113				(4,607	)
Net increase in cash and cash equivalents			(36,530	)			152,661
Cash and cash equivalents, beginning of period			1,427,321				1,158,255
Cash and cash equivalents, end of period		$	1,390,791			$	1,310,255
SUPPLEMENTAL CASH FLOWS INFORMATION
Interest paid		$	-			$	-
Income taxes paid		$	-			$	-
NON CASH INVESTING AND FINANCING ACTIVITIES
Dividends accrued on Series B preferred shares		$	2,905			$	2,905

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

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SKKYNET CLOUD SYSTEMS, INC.

NOTES TO CONDENSED 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 condensed 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, 2025 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, 2025 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 – SUMMARY OF SIGNIFICANT ACCOUNTING POICIES

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates.

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) and Skkynet Inc (US). All material intercompany balances and transactions have been eliminated.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Cash deposits are insured up to US$250,000 in US banks and CDN$100,000 in Canadian banks. The concentration of the Company’s cash deposits at times may exceed the insured amount, leaving the Company exposed to a credit risk on its deposits.

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Income tax

The Company accounts for income taxes under ASC 740. Current tax expense (benefit) is recognized for taxes payable for the period; deferred tax assets and liabilities are recognized for temporary differences between financial and tax bases of assets and liabilities.

Basic and Diluted Earnings Per Share

Basic earnings per share (EPS) is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if dilutive securities, such as stock options and convertible preferred shares, were exercised or converted to common stock. The treasury method is used to calculate the effect of options, and if the converted method is used for convertible preferred shares. Securities that are antidilutive are excluded from the computation of diluted EPS.

Recent adopted accounting standards

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-Financial Instruments- Credit Losses, which replaces the incurred impairment methodology to reflect expected credit losses. The amendments requires the measurement of all expected credit losses for financial assets held at the reporting due to the performance based on historical experience, current conditions and reasonable supportable forecasts. ASU 2016-13 is effective for annual and interim periods beginning after December 31, 2022. The Company adopted the standard on October 31, 2024. The adoption did not have a material impact on the Company’s consolidated financial statements.

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07 Segment Reporting The change in this announcement requires more detailed profit and loss reporting by business segments used by the Company to determine the allocation of assets. ASU 2016-07 is effective for annual periods beginning after December 15, 2023 and interim periods within the fiscal years beginning December 15, 2024. The Company adopted the standard on October 31, 2025. The adoption did not have a material impact on the Company’s consolidated financial statements.

In July 2025, the FASB issued ASU 2025‑05, which provides a practical expedient for estimating expected credit losses on current accounts receivable and current contract assets arising from revenue transactions within the scope of ASC 606. The expedient allows entities to assume that current conditions as of the balance sheet date remain unchanged over the remaining life of the asset when developing reasonable and supportable forecasts. Public business entities are not permitted to elect the optional accounting policy to consider subsequent cash collections The Company adopted ASU 2025‑05 on January 1, 2026, on a prospective basis. The adoption did not have a material impact on the Company’s consolidated financial statements. Upon adoption, the Company elected the practical expedient for current accounts receivable and current contract assets. No other changes were made to the Company’s credit‑loss estimation methodologies.

The Company adopted ASU 2023‑09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, in the quarter ended January 31, 2026 consistent with the effective date for public business entities (annual periods beginning after December 15, 2024). The Company applied the amendments on a prospective basis to the condensed consolidated financial statements for the current reporting period. Impact on financial statements and disclosures — Adoption of ASU 2023‑09 did not affect the Company’s measurement of income tax expense, deferred tax assets or liabilities, or its effective tax rate.

Accounts receivable

Accounts Receivable are carried at face value less any provisions for uncollectible accounts considered necessary. Accounts receivable include receivables from customers that have received software and support from the Company. Credit losses is a recognition of uncollectable receivables based on past years’ experience and management’s estimate of likely losses for the year. No allowance for bad debt was considered necessary for the three months ended January 31, 2026 and 2025, respectively.

NOTE 3 – 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.

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. During the three months period ended January 31, 2026, $272,654 of sales was classified as deferred revenue and $206,377 of deferred revenue was reported as sales. As of January 31, 2026 and October 31, 2025 the deferred revenue was $424,545 and $347,686, respectively.

Payments for subscription revenue has increased 271%  to $73,337 in the three months period ending January 31, 2026 from $19,763 in the same period in 2025.  Perpetual revenue for the three months ended January 31, 2026 was $476,056 compared to $808,289 for the same period in 2025. The move to subscription revenue from perpetual revenue impacts the Company’s revenue reported as subscription licenses pay over a three year period while perpetual licenses are paid ,in full, on the purchase of the license.

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, 2026, and 2025 the revenue by product line is as follows:

Category		Percentage				2026				Percentage				2025
Product sales			62	%		$	338,844				74	%		$	615,865
Support			37	%			204,972				25	%			203,771
Cloud & Other			1	%			6,437				1	%			8,416
Total			100	%		$	549,393				100	%		$	828,052

The Company sells its products on a worldwide basis. During the three month periods ended January 31, 2026, and 2025 the Company’s geographic concentration of revenue is as follows:

Area		Percentage				2026				Percentage				2025
Europe			50	%		$	276,499				46	%		$	379,912
North America			39	%			214,623				19	%			155,199
Asia Pacific			7	%			37,964				15	%			123,484
Middle East Africa/Other			3	%			15,750				19	%			157,488
South America			1	%			4,557				1	%			11,969
Total			100	%		$	549,393				100	%		$	828,952

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NOTE 4 – RELATED PARTY TRANSACTIONS

Sakura Software, a corporation owned by our CTO, 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 January 31, 2026.

As of January 31, 2026, the amount due to related parties was $273,754 compared to $245,712 as of October 31, 2025. As of January 31, 2026, the amount consisted of accrued dividends of $122,010, directors fees of $9,000 and accrued liabilities of $142,475.

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.

During the three months period ended January 31, 2025 the Company issued 631,250 options 18 individuals. The options are exercisable into common stock of the Company at $0.41 per share. The Company calculated a fair value of the outstanding options of $53,128 using the Black Scholes option pricing model with computed volatility of 128.00%, risk-free interest rate of 4.5%, expected dividend yield 0%, stock price at measurement date of $0.51 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.

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During the three month period ended January 31, 2026 the Company issued 1,595,000 to options 19 individuals. The options are exercisable into common stock of the Company at $0.33-$0.48 per share. The Company calculated a fair value for the outstanding options as of January 31, 2026 of $64,429 using the Black Scholes option pricing model with computed volatility of 142%, risk-free interest rate of 4.5%, expected dividend yield 0%, stock price at measurement date of $0.33-$0.48 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.

As of January 31, 2026 the total number of options was 10,332,200 with 7,315,450 exercisable and 3,016,750 not exercisable.

During the three month period ended January 31, 2026, the Company recognized $64,429 of option expense. The unrecognized future balance to be expensed over the term of the options is $803,085.

The following sets forth the options granted and outstanding as of January 31, 2026:

		Options				Weighted  Average Exercise price				Weighted Average Remaining Contract Life				Granted Options Exercisable				Intrinsic value
Outstanding at October 31, 2025			8,737,200			$	0.20				3.10				7,068,450			$	3,575,987
Granted			1,595,000				0.43				9.75				--				--
Exercised			--				--				--				--				--
Forfeited/Expired by termination			--				--				--				--				--
Outstanding as January 31, 2026			10,332,200				0.24				4.58				7,315,450			$	842,024
Exercisable and vested at January 31, 2026			7,315,450				0.17				2.60				--				--

NOTE 6 – MAJOR CUSTOMERS

The Company sells to their end-user customers both directly and indirectly, through resellers. In the three months ended January 31, 2026, 7 resellers accounted for 50% of sales, of which one reseller accounted for 23% of sales. In the three months ended January 31st, 2025, 7 resellers accounted for 53% of sales, of which two resellers each accounted for more than 10%, representing 26% of sales. 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. No reseller has exclusivity in their territory. In the three months ended January 31, 2026, no end user customers were responsible for more than 10% of gross revenue and 17 end user customers were responsible for approximately 50% of gross revenue. In the three months ended January 31, 2025, one end user customer was responsible for 14% gross revenue, and nine end user customers were responsible for approximately 51% of gross revenue.

NOTE 7 – SEGMENT REPORTING

ASC Topic 280, “Segment Reporting” establishes the standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about services categories, business segments and major customers in financial statements. The Company is managed as one operating unit, rather than multiple reporting units, for internal reporting purposes and for internal decision-making and discloses its operating results in a single reportable segment. The Company’s chief operating decision maker (“CODM”), represented by the Company’s Chief Executive Officer, reviews financial information and assesses the operations of the Company in order to make strategic decisions such as allocation of resources and assessing operating performance.

NOTE 8 – INITIATIVE LOAN

On December 18, 2025, the Company received a $1.9 million Industrial AI Product Development Initiative funding through FedDev Ontario’s Regional Artificial Intelligence Initiative. The Company and FedDev Ontario entered into a loan agreement whereby up to $750,000 will be provided to the Company over the Project period in the form of an interest-free repayable loan after the Project completion. As of January 31, 2026 the Company had not received any funding from the loan agreement.

NOTE 9 – SUBSEQUENT EVENTS

On February 24, 2026 the Industrial AI Product Development Initiative authorized a payment of CDN $187,209 ( US $136,649) to the Company for the initiative loan (see Note 8 above)

The Company has evaluated subsequent events to determine events occurring after January 31, 2026 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 month period ended January 31, 2025, revenue was $828,052 compared to $549,393 for the same period in 2026. Revenue decreased for the three months period ended January 31, 2026 over the same period in 2025 by 34%. For comparison purposes, the revenue for the quarter ended January 31, 2025 was approximately 32% greater than the 5 year average of revenue of the same periods from 2021 through 2025. The decrease in revenue for the three months period is attributed to lower sales by Cogent along with the move by the Company from perpetual to subscription licenses.

Operating expense was $629,815 for the three month periods ended January 31, 2025 compared to $766,608 for the same period in 2026. The increase in operating expenses was impacted by an increase in salary and wages of $42,442, consulting and directors’ fees of $24,141 and general and administrative expenses of $76,389.

For the three month period ended January 31, 2025, the Company reported an operating income of $198,237 compared to operating loss of $217,215 for the same period in 2026. The operating loss during the three month period ended January 31, 2026 over the operating income for same period in 2025 is attributable to $278,659 lower revenues plus increased expenses of $136,753 in the three month period ended January 31, 2026, versus the same period in 2025.

Other income for the three months period ended January 31, 2025 was $30,826, consisting of other income of $9,752 and a currency gain of $21,074. This compared to other expenses of $5,477 consisting of other income of $11,684 and a currency loss of $17,161 for the same period in 2026. The amount of change in both periods was due mostly to the effect of currency exchange.

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Net income, after income taxes of $229,063, was reported for the three month period ended January 31, 2025, compared to net loss after income taxes of $266,509 for the same period in 2026. The net loss for the three month period in 2026 can be attributed to $278,659 of lower revenue during the same period in 2026 versus the same period in 2025. Additionally, the operating expenses for the three month period ended January 31, 2026 was $136,753 more than the same period in 2025.

Net income to common stockholders was $226,158 for the three month period ended January 31, 2025, compared to net loss of $229,414 for the same period in 2026. Net income to common shareholders includes the expense of dividend for preferred stockholders of $2,905 being accrued for the three months period ended January 31, 2025 and 2026.

The Company reported comprehensive income of $221,485 for the three month period ended January 31, 2025 compared to a comprehensive loss of $223,301 for the same period in 2026. The comprehensive income is an adjustment to net gain or loss with foreign currency translation adjustments.

LIQUIDITY AND CAPITAL RESOURCES

At January 31, 2026, the Company had current assets of $1,780,941 and current liabilities of $912,098, resulting in working capital of $868,843. Accumulated deficit, as of January 31, 2026, was $6,676,990 with total stockholders’ equity of 868,843. This compares to current assets of $1,831,014 and current liabilities of $803,299 with working capital of $1,027,715 as of October 31, 2025. Accumulated deficit as of October 31, 2025 was $6,447,576 with shareholders’ equity of $1,027,576.

Net cash provided by operating activities for the three month period ended January 31, 2025, was $157,268 compared to net cash used in operating activities of $42,643 for the same period in 2026. The change in cash provided by operating activities for the three month period ended January 31, 2025 compared to the cash used in operating activities over the same period in 2026 was primarily due to a decreased revenue in 2026 compared to 2025 .

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, 2026 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 the Company’s risk factors as previously disclosed in our most recent 10-K filing for the year ended October 31, 2025.

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
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

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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: March 17, 2026	By:	/s/ Gary Tillery
	Gary Tillery, Chief Executive Officer
	(Duly Authorized, Principal Executive Officer)

	SKKYNET CLOUD SYSTEMS, INC.
	By:	/s/ Lowell Holden
	Lowell Holden, Chief Financial Officer
	(Duly Authorized Principal Financial Officer)

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FAQ

How did Skkynet (SKKY) perform in the quarter ended January 31, 2026?

Skkynet posted weaker results, with revenue of $549,393 versus $828,052 a year earlier and a net loss of $226,509 versus prior net income of $229,063. The company also moved from operating income to an operating loss as expenses increased.

What drove Skkynet’s revenue decline in Q1 2026?

Revenue decreased 34%, from $828,052 to $549,393, mainly due to lower sales by Cogent and a strategic shift from perpetual software licenses to subscription licenses. This transition delays revenue recognition because subscription payments are spread over about three years instead of upfront.

What was Skkynet’s profitability for the quarter ended January 31, 2026?

Skkynet reported an operating loss of $217,215 and a net loss of $226,509, compared with operating income of $198,237 and net income of $229,063 a year earlier. Higher salaries, consulting costs, and general and administrative expenses contributed to the reversal.

How is Skkynet’s liquidity and cash position as of January 31, 2026?

The company held $1,390,791 in cash and cash equivalents and had working capital of $868,843. However, operating activities used $42,643 of cash during the quarter, compared with $157,268 of cash provided in the same quarter of the prior year.

What is the FedDev Ontario Industrial AI initiative loan mentioned by Skkynet?

On December 18, 2025, Skkynet entered a FedDev Ontario Industrial AI Product Development Initiative providing up to $750,000 as an interest-free repayable loan after project completion. As of January 31, 2026, no funds were received, though CDN $187,209 was authorized on February 24, 2026.

Does Skkynet have any material weaknesses in internal controls?

Yes. Management concluded there are material weaknesses in internal control over financial reporting as of January 31, 2026, citing limited full-time accounting staff, insufficient technical expertise, inadequate written policies and procedures, and lack of a formal multi-layer review process.

How is Skkynet’s revenue mix changing between perpetual and subscription licenses?

Subscription payments increased to $73,337 from $19,763, while perpetual license revenue fell to $476,056 from $808,289. The move toward subscriptions reduces immediate revenue but creates multi-year payment streams, changing the timing and pattern of reported revenue.