Quarterly Report for Quarter Ending July 31, 2026 (Form 10-Q)

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 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, 2026, revenue was $560,504 and $1,716,003 compared to $482,682 and $1,897,446 for the same period in 2025. Revenue increased for the three months in 2026 by 16% and decreased for the nine months period ended July 31, 2026 over the same period in 2025 by 9%. The decrease in the nine months revenue in 2026 is attributed to Cogent along with the move by the Company from perpetual to subscription licenses. Revenue may vary quarter to quarter due to the number of opportunities that are closed during the quarter.

Operating expense was $787,461 and $2,429,953 for the three month and nine month periods ended July 31, 2026 compared to $535,085 and $1,946,305 for the same periods in 2025. The increase in operating expenses was impacted by an increase in advertising of $75,780, compensation increase by $209,028 and general and administrative expenses of $199,601 during the nine months ended July 31, 2026. Expenses increased during the nine months ended July 31, 2026 due to additional staff and consultants added to support the future growth plan implemented by the Company. This is an investment in the underlying support and systems to generate future revenue.

For the three and nine month periods ended July 31, 2026, the Company reported an operating loss of $226,957 and $713,950 compared to operating loss of $52,403 and $48,859 for the same period in 2025. The increase in the operating loss during the nine month period ended July 31, 2026 over the operating income for same period in 2025 is attributable to $181,443 in lower revenues plus increased expenses of $483,648 in the nine month period ended July 31, 2026, versus the same period in 2025.

Other income (expense) for the three and nine months period ended July 31, 2026 was interest income of $26,430 and $31,290, respectively and a currency gain of $16,694 and currency loss of $3,415, respectively. This compared to interest income of $11,857 and $29,966, respectively, bad debt expense of $13,631 and a currency loss of $3,532 and $9,131, respectively for the same three and nine month periods in 2025. The significant changes in the nine month period ending July 31, 2026 over 2025 was the increase in other income from interest earned and the bad debt write off of $13,474 in 2025 verses zero in 2026.

Net loss after income taxes of $16,840 and $352,741, was reported for the three month and nine month periods ended July 31, 2026, compared to net loss after income taxes of $15,445 and $14,105 for the same periods in 2025. The net loss for the three and nine month periods in 2026 can be attributed to lower revenue and higher expenses as noted above during that period in 2026 versus the same period in 2025. The loss during 2026 was offset by tax credits of $329,919 in the nine month period ended July 31, 2026.

Net loss to common stockholders was $19,745 and $361,456 for the three and nine month periods ended July 31, 2026, compared to net loss of $18,353 and $22,820 for the same periods in 2025. Net income to common shareholders includes the expense of dividend for preferred stockholders of $2,905 and $8,715 being accrued for the three and nine month periods ended July 31, 2026 and 2025.

The Company reported comprehensive loss of $22,418 and $338,589 for the three and nine month periods ended July 31, 2026 compared to a comprehensive loss of $17,838 and $31,652 for the same periods in 2025. The comprehensive income is an adjustment to net gain or loss each period due to foreign currency changes during the specific period.

LIQUIDITY AND CAPITAL RESOURCES

At July 31, 2026, the Company had current assets of $1,896,680 and current liabilities of $797,885, resulting in working capital of $1,098,795. Accumulated deficit, as of July 31, 2026, was $6,809,032 with total stockholders' equity of $878,089. 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 $1,027,715.

Net cash used in operating activities for the nine month period ended July 31, 2026, was $85,328 compared to net cash provided by operating activities of $203,449 for the same period in 2025. The change in cash used in operating activities for the nine month period ended July 31, 2026 compared to the cash provided by operating activities over the same period in 2025 was due to a combination of decreased revenue of $181,443 and increased operating expenses of $483,648 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.