10-K: Skkynet Cloud Systems Reports Profitable Fiscal Year 2024 Amidst Expansion Efforts

Skkynet Cloud Systems reports a profitable fiscal year 2024 with increased revenue and strategic focus on cloud services and AI integration.

Summary

• Skkynet Cloud Systems, Inc., a Nevada corporation, reported a net income of $99,090 for the fiscal year ended October 31, 2024, compared to a net loss of $97,872 in the previous year.
• The company's revenue increased to $2,561,745 in 2024 from $2,374,216 in 2023, driven by increased sales in the Cogent subsidiary.
• Operating expenses, excluding depreciation, slightly increased to $2,500,623 in 2024 from $2,487,967 in 2023.
• The company is focusing on expanding its business in three primary areas: real-time data software for industrial automation, cloud-based SaaS products, and new business lines such as AI-focused providers.
• Skkynet has exclusive license to nine U.S. patents and several pending patent applications related to real-time technologies.
• The company faces competition from vendors in the industrial automation space, including Siemens, ABB, and Emerson Process Management.
• As of January 31, 2025, the company had 53,143,822 shares of common stock outstanding.
• The company has identified a material weakness in its internal control over financial reporting due to a lack of full-time accounting and financial staff.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook due to the company's return to profitability and strategic focus on growth areas. However, the identified material weakness in internal control and dependence on third-party software temper the overall sentiment.

Positives

• The company achieved net income of $99,090 for fiscal year 2024, a significant turnaround from the $97,872 net loss in fiscal year 2023.
• Revenue increased by $187,529 to $2,561,745 in fiscal year 2024, driven by higher sales in the Cogent subsidiary.
• The company's Cogent DataHub service for Microsoft Azure is available in the Azure Marketplace, offering secure, real-time industrial data communications.
• The company has working capital of $887,374 with a current ratio of 2.34 to 1 as of October 31, 2024.
• Net cash provided by operating activities during the year ended October 31, 2024 was $234,638 compared to net cash provided of $207,822 for the same period in 2023.

Negatives

• The company has identified a material weakness in its internal control over financial reporting due to a lack of full-time accounting and financial staff.
• The company's disclosure controls and procedures are not effective due to the identified material weakness in internal control over financial reporting.
• The company is dependent on third-party provided software applications to conduct key operations, which poses cybersecurity risks.
• The company has accrued but not paid dividends of $11,620 each year on its Series B preferred shares, with a total amount of $107,485 due as of October 31, 2024.

Risks

• The company's ability to attract new clients and retain existing ones is crucial for its success.
• The company's ability to expand its sales organization to target new industries and geographies is essential for growth.
• The company faces risks related to forecasting revenue and planning expenses accurately.
• Continued market acceptance of the company's products and services is necessary for sustained growth.
• The company's ability to protect and defend its intellectual property is vital for maintaining a competitive advantage.
• The company is subject to risks related to regulatory, judicial, and legislative changes in its industry.
• The company faces competition from vendors in the industrial automation space, some of whom have greater resources.
• The occurrence of an uncontrollable event such as the COVID-19 pandemic may negatively affect the company's operations.

Future Outlook

The company plans to expand its business in three primary areas: real-time data software for industrial automation, cloud-based SaaS products, and new business lines such as AI-focused providers.

Management Comments

• Management 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.
• Management will carefully monitor the growth in new markets and manage each opportunity to maximize its return and minimize risks.
• The Company anticipates continually expanding its business through the planned expansion of the Company's marketing of venues in expanded markets.

Industry Context

The company operates in the industrial middleware market, providing connectivity and data acquisition solutions. It is focusing on the growing trend of Industry 4.0, which involves the convergence of technologies like cloud computing, cybersecurity, and the Industrial Internet of Things.

Comparison to Industry Standards

• The document mentions competitors such as Siemens, ABB, Emerson Process Management, Rockwell Automation, Honeywell Process Solutions, Schneider Electric, GE Invensys, and PTC.
• The document references reports from Boston Consulting Group on Industry 4.0, indicating an awareness of industry trends.
• The document cites Goldman Sachs guidance that over $1T will be put towards AI capital expenditures in the coming years.
• The document cites a recent survey published by the Economist Group reporting that only 22% of organizations say their current architecture can support AI workloads without modifications.
• The document cites S&P Global Market Intelligence surveying over 1,500 AI leaders who reported that data management is the #1 barrier to AI success.

Management Changes

Related Party Transactions

• Sakura Software, a corporation owned by our CEO and Chairman of the Board of Directors, 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).
• Real Innovations, in turn, entered into a master intellectual property license agreement (the License Agreement) with Cogent for all of the same IP.
• 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.
• Mr. Andrew S. Thomas and Mr. Paul Benford were each paid $129,897 as salary for the fiscal year ended October 31, 2024 for serving as the CEO and COO of Cogent.
• Mr. Lowell Holden, the Chief Financial Officer of the Company, was paid $48,000 during the year ended October 31, 2024 in consulting fees by the Company
• Mr. Paul E. Thomas, the President of the Company was paid $129,897 for services for the fiscal year ended October 31, 2024.
• Mr. Xavier Mesrobin was paid $149,995 in salary and $36,736 in commissions for services for the fiscal year ended October 31, 2024.

Stakeholder Impact

• Shareholders will benefit from the company's return to profitability and strategic focus on growth areas.
• Employees may benefit from the company's expansion plans and potential for increased job opportunities.
• Customers will benefit from the company's focus on improving its products and services, particularly in the areas of cloud computing and AI.
• Suppliers and creditors will benefit from the company's improved financial performance and ability to meet its obligations.

Next Steps

• The company plans to expand its business in three primary areas: real-time data software for industrial automation, cloud-based SaaS products, and new business lines such as AI-focused providers.
• The Company anticipates continually expanding its business through the planned expansion of the Company's marketing of venues in expanded markets.

Key Dates

Keywords

Cloud systems, Industrial automation, Real-time data, SaaS, Cogent DataHub, Cybersecurity, AI, SCADA, IoT, Revenue