SKKY Skkynet Cloud Systems In (QB)

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)”), Skkynet Corp. (“Skkynet (Canada)”), and Nic Corporation (“NiC”). 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”. We will also expand the areas of business activity to which our products and services are applied.

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, this gives clients and their customers (to the extent relevant) 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 ending July 31, 2016, revenues were $365,045 and $926,411 compared to $308,028 and $849,778 for the same periods in 2015. Revenue increased for the three month period ending July 31, 2016 over the three month period ended July 31, 2015 by 19% and increased by 9% for the nine month period in 2016 over 2015. The increase in revenue for the three month period ended July 31, 2016 is attributed stronger marketing efforts by the Cogent division on an international basis with the base products of the Company

General and administrative expense was $556,649 and $1,769,920 for the three and nine month ended July 31, 2016 compared to $523,634 and $1,869,620 for the same periods in 2015. The decrease in general and administrative expenses for the nine month ended July 31, 2016, even with the options expensed of $470,678 compared to $314,111 in 2015, resulted from decreased consulting and lower other G&A expenses in 2016 versus 2015.

For the three and nine month periods ending July 31, 2016, the Company posted an operating loss of $195,181 and $866,077 compared to an operating loss of $221,743 and $1,063,294 for the same periods in 2015. The decrease in operating loss during the nine month period is attributable to decreased expenses in consulting, salaries, and office expenses, plus higher revenue for the same period in 2016 over 2015.

Other income and expenses for the three and nine month periods ending July 31, 2016, was other expense of $9 and other income of $6 compared to other expense of $2,121 and of $6,249 in the same periods in 2015. The Corporate tax refunds, which is a research and development refund against corporate tax received in the third quarter each year, was the significant factor in other income for the period.

Net loss of $160,918 and $831,799 was recorded for the three and nine month periods ending July 31, 2016, compared to a net loss of $223,864 and $991,517 for the same periods in 2015. The lower loss for the three month period in 2016 can be attributed to increased revenue and lower marketing and general and administrative expenses in 2016 compared to 2015. The lower loss for the nine month period ended July 31, 2016 was attributable to higher revenue and lower expenses during that period over the same period in 2015.

LIQUIDITY AND CAPITAL RESOURCES

At July 31, 2016, Skkynet had current assets of $584,989 and current liabilities of $470,502, resulting in working capital of $114,487. Accumulated deficit, as of July 31, 2016, was $3,847,609 with total shareholders’ equity of $136,716.

Net cash used in operations for the nine months ending July 31, 2016, was $174,653 compared to net cash used of $480,512 for the same period in 2015. Net cash used in operations decreased primarily due to a decrease in the net loss decrease of $159,718 and increase in option expense of $156,567 in 2016 over 2015 and accounts payable change of $50,550. This is offset by accrued liabilities to related parties increasing by $57,974, decrease in deferred revenue of $19,393 and a decrease in accounts receivable of $134,340.

Cash used in investing activities in the nine months period ended July 31, 2016 was zero and in 2015 was $1,118.

Net cash provided in financing activities, during the nine months ended July 31, 2016, was zero compared to net cash provided of $100,000 for the same period in 2015. The difference was due to the sale of common stock of $100,000 in the nine month period ended July 31, 2015 and none in the same period in 2016.

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.