Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Jul. 31, 2017 | Sep. 14, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | Skkynet Cloud Systems, Inc. | |
Entity Central Index Key | 1,546,853 | |
Document Type | 10-Q | |
Document Period End Date | Jul. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --10-31 | |
Entity a Well-known Seasoned Issuer | No | |
Entity a Voluntary Filer | No | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 51,164,200 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,017 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Jul. 31, 2017 | Oct. 31, 2016 |
Current Assets: | ||
Cash and cash equivalents | $ 607,122 | $ 266,860 |
Accounts receivable | 178,547 | 156,977 |
Inventory | 3,834 | 4,079 |
Prepaid | 31,832 | 11,492 |
Total current assets | 821,335 | 439,408 |
Property and equipment, net of accumulated depreciation of 77,516and $78,807 respectively | 1,173 | 1,311 |
Other assets | 7,398 | 9,352 |
Total Assets | 829,906 | 450,071 |
Current Liabilities: | ||
Accounts payable and accrued expenses | 77,705 | 59,110 |
Accrued liabilities - related party | 230,839 | 49,984 |
Deferred revenue | 135,221 | 94,711 |
Total current liabilities | 443,765 | 203,805 |
Total liabilities | 443,765 | 203,805 |
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 share authorized, 193,661 issued and 193,661 outstanding, respectively | 193,661 | 193,661 |
Common stock; $0.001 par value, 70,000,000 shares authorized, 51,164,200 and 50,931,266 shares issued and outstanding, respectively | 51,165 | 50,932 |
Additional paid-in capital | 4,826,069 | 4,190,320 |
Accumulative other comprehensive loss | (50,390) | (75,398) |
Accumulated deficit | (4,634,369) | (4,113,254) |
Total shareholders' equity | 386,141 | 246,266 |
Total Liabilities and Stockholders' Equity | $ 829,906 | $ 450,071 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Jul. 31, 2017 | Oct. 31, 2016 |
ASSETS | ||
Property and equipment, Accumulated depreciation | $ 77,516 | $ 78,807 |
Stockholders' Deficit: | ||
Preferred stock, Par value | $ 0.001 | $ 0.001 |
Preferred stock, Authorized | 5,000,000 | 5,000,000 |
Preferred stock, Issued | 5,000 | 5,000 |
Preferred stock, Outstanding | 5,000 | 5,000 |
Series B Preferred convertible stock, Par value | $ 0.001 | $ 0.001 |
Series B Preferred convertible stock, Authorized | 500,000 | 500,000 |
Series B Preferred convertible stock, Issued | 193,661 | 193,661 |
Series B Preferred convertible stock, Outstanding | 193,661 | 193,661 |
Common stock, Par value | $ 0.001 | $ 0.001 |
Common stock, Authorized | 70,000,000 | 70,000,000 |
Common stock, Issued | 51,164,200 | 50,931,266 |
Common stock, Outstanding | 51,164,200 | 50,931,266 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jan. 31, 2017 | Jan. 31, 2016 | Jul. 31, 2017 | Jul. 31, 2016 | |
Consolidated Statements Of Operations And Comprehensive Loss | ||||
Revenue | $ 363,049 | $ 365,045 | $ 1,026,669 | $ 926,411 |
Direct material costs | 447 | 3,313 | 28,069 | 21,824 |
Gross Profit | 362,602 | 361,732 | 998,600 | 904,587 |
Operating Expenses: | ||||
General & administrative | 460,242 | 568,757 | 1,510,760 | 1,777,300 |
Depreciation and amortization | 173 | 264 | 514 | 744 |
Loss from operations | (97,813) | (207,289) | (512,674) | (873,457) |
Other Income (Expenses): | ||||
Other income | 1,090 | (9) | 1,090 | 6 |
Currency exchange | (49,201) | 12,108 | (42,117) | 7,380 |
Total other income (expenses) | (48,111) | 12,099 | (41,027) | 7,386 |
Net loss before taxes | (145,924) | (195,190) | (553,701) | (866,071) |
Tax refund | 34,593 | 34,272 | 32,586 | 34,272 |
Net loss after tax | (111,331) | (160,918) | (521,115) | (831,799) |
Preferred dividends | (2,905) | (2,905) | (8,715) | (8,715) |
Net loss to common shareholders | (114,236) | (163,823) | (529,830) | (840,514) |
Foreign currency translation adjustment | 19,343 | (15,196) | 25,008 | 32,842 |
Comprehensive (loss) | $ (94,893) | $ (179,019) | $ (504,822) | $ (807,672) |
Net loss per common share attributable to common stockholders (basic and diluted) | $ 0 | $ 0 | $ (0.01) | $ (0.02) |
Weighted average common shares outstanding (basic and diluted): | 51,164,200 | 50,876,600 | 51,020,288 | 50,876,600 |
CONSOLDIATED STATEMENTS OF CASH
CONSOLDIATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Jul. 31, 2017 | Jul. 31, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (521,115) | $ (831,799) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation and amortization expense | 514 | 744 |
Option based compensation | 343,078 | 470,678 |
Changes in operating assets and liabilities: | ||
Increase in accounts receivable | (21,570) | (63,463) |
Increase in accounts payable and accrued expenses | 18,595 | 14,962 |
Increase in inventory | 245 | (2,030) |
Increase in accrued liabilities - related parties | 217,459 | 236,272 |
Increase in prepaid and other assets | (18,386) | (23,863) |
Increase in Deferred income | 40,510 | 23,846 |
NET CASH (USED IN) OPERATING ACTIVITIES | 59,330 | (174,653) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Common stock sold for cash | 256,300 | |
NET CASH FLOWS FROM FINANCING ACTIVITIES | 256,300 | |
Effect of exchange rate changes on cash | 24,632 | 32,265 |
Net increase (decrease) in cash | 340,262 | (142,388) |
Cash, beginning of period | 266,860 | 469,944 |
Cash, end of period | 607,122 | 327,606 |
SUPPLEMENTAL CASH FLOWS INFORMATION | ||
Interest paid | ||
Income taxes paid | ||
NON-MONETARY TRANSACTIONS | ||
Options granted for accrued commissions | $ 36,604 |
ORGANIZATION AND BASIS OF PRESE
ORGANIZATION AND BASIS OF PRESENTATION | 9 Months Ended |
Jul. 31, 2017 | |
Notes to Financial Statements | |
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), Skkynet, Inc. (USA) and Nic Corporation (NiC) (Japan). 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. On November 1, 2014, the Company acquired NiC as a wholly owned subsidiary. On February 1, 2015, the Company formed a wholly owned US subsidiary Skkynet, Inc., and a wholly owned Canadian subsidiary Skkynet Corp. On July 30, 2015, the Company designated 500,000 shares of the preferred stock as Series B Convertible preferred. The Series B shares have a par value of $0.001 and issue value of $1.00 per share. The series B is convertible by the holder into common stock at $1.35 per share. The Company may, any time at its option, redeem the Series B shares at their stated value. The Series B preferred shares hold a 6% per annum cumulative dividend. On July 30, 2015, the Company issued 193,661 shares of Series B convertible preferred stock to three related parties in exchange for the outstanding notes payable and accrued interest of $193,661. Dividends are not paid. The Company has accounted for $8,715 in Series B dividends which increases the loss to common shareholders from $521,115 to $529,830 for the nine month period ended July 31, 2017. 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 Companys October 31, 2016 Annual Report filed with the SEC on Form 10-K. 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 audited financial statements for the most recent fiscal year end October 31, 2016 as reported on Form 10-K, have been omitted. Inventory Inventories are stated at the lower or cost of market using the first-in; first-out (FIFO) cost method of accounting. The inventory consists of switch boxes held by the Companys subsidiary NiC programs for resale. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Jul. 31, 2017 | |
Notes to Financial Statements | |
NOTE 2 - RELATED PARTY TRANSACTIONS | On January 1, 2012 and April 15, 2012, the Company and its subsidiary Cogent entered into employment agreements with four of its officers and directors. As a result of these agreements the Company has accrued compensation for each of the individuals. In addition, the Company is accruing director compensation at the rate of $2,500 per director per month. As of July 31, 2017, the accrued liability for compensation was $230,839. As of July 31, 2017, and October 31, 2016, the Company had the following outstanding accrued liabilities due to related parties: As of July 31, 2017 October 31, 2016 Accrued salaries $ 111,272 $ -- Director fees $ 67,500 $ -- Accrued Commissions (1) $ 37,667 $ 49.984 Consulting fees $ 14,400 $ -- Total accrued liabilities and accrued expense $ 230,839 $ 49,984 _________ (1) An officer of the Company elected to take 74,500 zero cost options reducing the accrued commission by $36,604 (CDN $94,404 to CDN $44,404). |
EQUITY
EQUITY | 9 Months Ended |
Jul. 31, 2017 | |
Notes to Financial Statements | |
NOTE 3 - EQUITY | On March 7, 2017, the Company issued 233,000 shares of common stock to one individual at $1.10 per share with a value of $256,300 for cash. |
OPTIONS
OPTIONS | 9 Months Ended |
Jul. 31, 2017 | |
Notes to Financial Statements | |
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 Companys common stock. On January 6, 2016, the Company issued 509,500 options with an exercise price of $1.02 per share to 14 officers, directors, employees and consultants of the Company. On April 7, 2017, the Company issued 418,200 options with an exercise price of $0.50 per share to 14 officers, employees and consultants of the Company On April 7, 2017, the Company issued 74,500 options with a zero exercise price to one employee for the reduction of $36,604 of accrued commissions (CDN $94,404 to CDN $44,404). The options have a fair value using the Black Sholes valuation of $35,392. The Company has elected to expense the options over the life of the option as stock based compensation. The expense is calculated with a Black Scholes model to reach the fair value over the length of each option. The total value calculated for option expense is $2,661,593. During the nine month period ended July 31, 2017, the Company expensed $343,078 for options. The unrecognized future balance to be expensed over the term of the options is $1,379,785. The following sets forth the options granted and outstanding as of July 31, 2017: Options Weighted Average Exercise price Weighted Average Remaining Contract Life Granted Options Exercisable Intrinsic value Outstanding at October 31, 2016 6,263,200 0.54 5.18 4,308,600 2,857,703 Granted 492,700 0.42 -- -- -- Exercised -- -- -- -- -- Forfeited/Expired by termination (50,000 ) (1.14 ) -- -- -- Outstanding at July 31, 2017 6,705,900 0.52 4.94 4,938,240 1,198,174 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Jul. 31, 2017 | |
Notes to Financial Statements | |
NOTE 5 - COMMITMENTS AND CONTINGENCIES | The Company leases office space located at 2233 Argentia Road Suite 306 Mississauga, Ontario Canada L5N 2X7. The offices contain approximately 2,810 square feet of office space and are leased from July 1, 2014 through July 31, 2017. Under the terms of the lease, the gross monthly rental cost including common area charges is $6,700. The lease terminates on July 31, 2017. During May 2017, the Company signed a new 5 year lease for the Companys office being effective on August 1, 2017 through July 31, 2022. The lease is for approximately 2,210 square feet of office space with a gross monthly rental cost including common area charges of $4,097. The yearly rental obligations including the lease agreements are as follows: Calendar Year 2017 $ 20,485 2018 $ 49,164 2019 $ 49,164 2020 $ 49,164 2021 $ 49,164 2022 $ 28,679 Total $ 245,820 |
DEFERRED REVENUE
DEFERRED REVENUE | 9 Months Ended |
Jul. 31, 2017 | |
Notes to Financial Statements | |
NOTE 6 - DEFERRED REVENUE | The Company receives part of its revenue from the sale of software support. The revenue received is for one year of support from the date of the support sale. The Company defers the revenue for the future periods in which it is obligated to perform the support service. As of July 31, 2017, the Company had deferred revenue of $135,221. |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 9 Months Ended |
Jul. 31, 2017 | |
Related Party Transactions Tables | |
Outstanding accrued liabilities due to related parties | As of July 31, 2017, and October 31, 2016, the Company had the following outstanding accrued liabilities due to related parties: As of July 31, 2017 October 31, 2016 Accrued salaries $ 111,272 $ -- Director fees $ 67,500 $ -- Accrued Commissions (1) $ 37,667 $ 49.984 Consulting fees $ 14,400 $ -- Total accrued liabilities and accrued expense $ 230,839 $ 49,984 |
OPTIONS (Tables)
OPTIONS (Tables) | 9 Months Ended |
Jul. 31, 2017 | |
Options Tables | |
Options granted and outstanding | The following sets forth the options granted and outstanding as of July 31, 2017: Options Weighted Average Exercise price Weighted Average Remaining Contract Life Granted Options Exercisable Intrinsic value Outstanding at October 31, 2016 6,263,200 0.54 5.18 4,308,600 2,857,703 Granted 492,700 0.42 -- -- -- Exercised -- -- -- -- -- Forfeited/Expired by termination (50,000 ) (1.14 ) -- -- -- Outstanding at July 31, 2017 6,705,900 0.52 4.94 4,938,240 1,198,174 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 9 Months Ended |
Jul. 31, 2017 | |
Commitments And Contingencies Tables | |
Lease obligations | The yearly rental obligations including the lease agreements are as follows: Calendar Year 2017 $ 20,485 2018 $ 49,164 2019 $ 49,164 2020 $ 49,164 2021 $ 49,164 2022 $ 28,679 Total $ 245,820 |
ORGANIZATION AND BASIS OF PRE15
ORGANIZATION AND BASIS OF PRESENTATION (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Jul. 30, 2015 | Jan. 31, 2017 | Jan. 31, 2016 | Jul. 31, 2017 | Jul. 31, 2016 | Oct. 31, 2016 | |
Organization And Basis Of Presentation Details Narrative | ||||||
State of incorporation | Nevada | |||||
Date of Incorporation | Aug. 31, 2011 | |||||
Series B Preferred convertible stock, Par value | $ 0.001 | $ 0.001 | $ 0.001 | |||
Series B Preferred convertible stock, Shares designated | 500,000 | 500,000 | 500,000 | |||
Series B Preferred convertible stock, Issued | 193,661 | 193,661 | 193,661 | |||
Sale of stock price per share | $ 1 | |||||
Conversion price | $ 1.35 | |||||
Series B convertible preferred stock, Dividend percentage | 6.00% | |||||
Notes payable and accrued interest | $ 193,661 | |||||
Net loss | $ (111,331) | $ (160,918) | $ (521,115) | $ (831,799) | ||
Net loss to common shareholders | (114,236) | (163,823) | (529,830) | (840,514) | ||
Preferred dividends | $ 2,905 | $ 2,905 | $ 8,715 | $ 8,715 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) | Jul. 31, 2017 | Oct. 31, 2016 | |
Related Party Transactions Details | |||
Accrued salaries | $ 111,272 | ||
Director fees | 67,500 | ||
Accrued Commissions | [1] | 37,667 | 49,984 |
Consulting fees | 14,400 | ||
Total accrued liabilities and accrued expense | $ 230,839 | $ 49,984 | |
[1] | (1) An officer of the Company elected to take 74,500 zero cost options reducing the accrued commission by $36,604 (CDN $94,404 to CDN $44,404). |
RELATED PARTY TRANSACTIONS (D17
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Jul. 31, 2017 | Oct. 31, 2016 |
Related Party Transactions Details Narrative | ||
Accrued compensation per month | $ 2,500 | |
Accrued liabilities - related party | $ 230,839 | $ 49,984 |
EQUITY (Details Narrative)
EQUITY (Details Narrative) - USD ($) | Mar. 07, 2017 | Jul. 30, 2015 |
Sale of stock price per share | $ 1 | |
Individual [Member] | ||
Common stock shares issued at $1.10 per share, Shares | 233,000 | |
Common stock shares issued at $1.10 per share, Amount | $ 256,300 | |
Sale of stock price per share | $ 1.10 |
OPTIONS (Details)
OPTIONS (Details) | 9 Months Ended |
Jul. 31, 2017USD ($)$ / sharesshares | |
Options Details | |
Outstanding options, Beginning | 6,263,200 |
Options, Granted | 492,700 |
Options, Exercised | |
Options, Forfeited by termination of employment | (50,000) |
Outstanding options, Ending | 6,705,900 |
Weighted Average Exercise price, Beginning | $ / shares | $ 0.54 |
Weighted Average Exercise price, Granted | $ / shares | 0.42 |
Weighted Average Exercise price, Exercised | $ / shares | |
Weighted Average Exercise price, Forfeited/Expired by termination | $ / shares | (1.14) |
Weighted Average Exercise price, Ending | $ / shares | $ 0.52 |
Weighted Average Remaining Contract Life, Beginning | 5 years 2 months 5 days |
Weighted Average Remaining Contract Life, Ending | 4 years 11 months 8 days |
Granted Options Exercisable, Beginning | 4,308,600 |
Granted Options Exercisable, Granted | |
Granted Options Exercisable, Exercised | |
Granted Options Exercisable, Ending | 4,938,240 |
Intrinsic Value, Beginning | $ | $ 2,857,703 |
Intrinsic Value, Ending | $ | $ 1,198,174 |
OPTIONS (Details Narrative)
OPTIONS (Details Narrative) | Apr. 07, 2017USD ($)Integer$ / sharesshares | Jul. 31, 2017USD ($) | Jul. 31, 2016USD ($) | Jan. 06, 2016Integer$ / sharesshares |
Description of option vested | In equal annual installments over a five year period with the first 20% vested when the options are granted. | |||
Stock issued | shares | 418,200 | 509,500 | ||
Exercise price of shares issued | $ / shares | $ 0.50 | $ 1.02 | ||
Number of officers, directors, employees and consultants | Integer | 14 | 14 | ||
Net calculated value of options expensed | $ 2,661,593 | |||
Option based compensation | 343,078 | $ 470,678 | ||
Unrecognized future balance | $ 1,379,785 | |||
Employee [Member] | ||||
Stock issued | shares | 74,500 | |||
Exercise price of shares issued | $ / shares | $ 0 | |||
Number of officers, directors, employees and consultants | Integer | 1 | |||
Fair value stock option | $ 35,392 | |||
Accrued commissions | $ 36,604 |
COMMITMENTS AND CONTINGENCIES21
COMMITMENTS AND CONTINGENCIES (Details) | Jul. 31, 2017USD ($) |
Commitments And Contingencies Details | |
2,017 | $ 20,485 |
2,018 | 49,164 |
2,019 | 49,164 |
2,020 | 49,164 |
2,021 | 49,164 |
2,022 | 28,679 |
Total | $ 245,820 |
COMMITMENTS AND CONTINGENCIES22
COMMITMENTS AND CONTINGENCIES (Details Narrative) | 1 Months Ended | 9 Months Ended |
May 31, 2017USD ($)Integer | Jul. 31, 2017USD ($)Integer | |
July 1, 2014 to July 31, 2017 [Member] | ||
Office space lease | Integer | 2,810 | |
Monthly rental expense | $ | $ 6,700 | |
Lease expiration | Jul. 31, 2017 | |
August 1, 2017 through July 31, 2022 [Member] | ||
Office space lease | Integer | 2,210 | |
Monthly rental expense | $ | $ 4,097 | |
Lease Term | 5 years |
DEFERRED REVENUE (Details Narra
DEFERRED REVENUE (Details Narrative) - USD ($) | Jul. 31, 2017 | Oct. 31, 2016 |
Deferred Revenue Details Narrative | ||
Deferred revenue | $ 135,221 | $ 94,711 |