10-Q: Skkynet Cloud Systems Reports Q3 2026 Results

Skkynet Cloud Systems reported a 16% revenue increase for the three-month period ended July 31, 2026, but a 9% decrease for the nine-month period, alongside widening operating losses and a material weakness in internal controls.

Summary

• For the three months ended July 31, 2026, revenue was $560,504, a 16% increase from the prior year's $482,682.
• For the nine months ended July 31, 2026, revenue was $1,716,003, a 9% decrease from the prior year's $1,897,446.
• Operating expenses increased significantly, leading to an operating loss of $226,957 for the three months and $713,950 for the nine months, compared to $52,403 and $48,859 respectively in the prior year.
• Net loss for the nine months was $352,741, offset by a tax credit of $329,919.
• The company reported a material weakness in internal controls due to a lack of sufficient accounting and financial personnel.
• Cash and cash equivalents increased to $1,585,566 as of July 31, 2026, from $1,427,321 as of October 31, 2025.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative sentiment due to declining revenues, increasing operating losses, and a material weakness in internal controls, despite some positive revenue growth in the short term.

Positives

• Revenue increased by 16% to $560,504 for the three months ended July 31, 2026, compared to the same period in 2025.
• The company received $220,706 from an Industrial AI Product Development Initiative loan.
• Cash and cash equivalents increased to $1,585,566 as of July 31, 2026, from $1,427,321 as of October 31, 2025.
• No allowance for bad debt was considered necessary for the periods presented.
• Deferred revenue increased to $406,694 as of July 31, 2026, from $347,686 as of October 31, 2025, indicating future revenue potential.

Negatives

• Revenue for the nine months ended July 31, 2026, decreased by 9% to $1,716,003 from $1,897,446 in the prior year.
• Operating expenses increased by $483,648 for the nine months ended July 31, 2026, compared to the same period in 2025.
• Operating loss widened to $713,950 for the nine months ended July 31, 2026, from $48,859 in the prior year.
• Net loss for the nine months ended July 31, 2026, was $352,741, compared to $14,105 in the prior year.
• Net cash used in operating activities was $85,328 for the nine months ended July 31, 2026, a significant decrease from $203,449 provided in the same period of 2025.
• A material weakness in internal control over financial reporting was identified due to a lack of sufficient accounting and financial personnel.

Risks

• 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 know-how.
• The company's ability to establish a global market.
• The company's ability to successfully consummate future acquisitions.
• The concentration of cash deposits may exceed insured amounts, exposing the company to credit risk.
• The company's history of losses has limited its budget to hire and train adequate accounting and financial personnel, contributing to material weaknesses in internal controls.

Future Outlook

The company's future outlook is impacted by its ability to manage increasing operating expenses, reverse the trend of declining nine-month revenues, and address the identified material weakness in internal controls. Investments in staff and systems are intended to support future growth.

Management Comments

• Operating 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.
• 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.
• 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.

Industry Context

StockSavvy.ai notes that the shift towards subscription-based revenue models, as mentioned by Skkynet, is a common trend in the SaaS and cloud services industry, aiming for more predictable recurring revenue. However, this transition can temporarily impact reported revenue figures.

Comparison to Industry Standards

• The company's revenue growth for the three-month period (16%) is positive but needs to be sustained and applied to the longer nine-month period where revenue declined.
• The increasing operating expenses and resulting operating losses are a concern, especially for a company in the growth phase of the cloud and SaaS sector, where profitability is a key metric for investors.
• The identification of material weaknesses in internal controls is a significant concern and deviates from the robust control environments expected of established public companies in the technology sector.

Corporate Governance

Legal Proceedings

• The company is not currently aware of any legal proceedings or claims that are believed to have a material adverse effect on its business, financial condition, or operating results.

Related Party Transactions

• Sakura Software (owned by CTO Andrew S. Thomas) and Benford Consultancy (owned by COO Paul Benford) own Real Innovations International LLC. Cogent assigned IP to Real Innovations. Cogent pays Real Innovations' operating expenses, prosecutes infringements, and indemnifies Real Innovations. As of July 31, 2026, $200,311 was due to related parties, including $127,820 in accrued dividends and $72,491 in accrued liabilities to officers and directors.

Stakeholder Impact

• Shareholders: Potential for decreased share value due to declining revenues, increasing losses, and material control weaknesses. The company's ability to secure future capital is also a concern.
• Employees: The identified material weakness in internal controls may indicate understaffing or lack of expertise in the accounting department, potentially impacting workload and job security.
• Creditors: The increasing operating losses and negative cash flow from operations could impact the company's ability to meet its debt obligations, although a new loan was secured.
• Suppliers: No direct impact mentioned, but financial instability could indirectly affect payment terms.

Next Steps

• Continue to integrate cloud-based systems with existing business lines.
• Expand business activity areas for products and services.
• Address material weaknesses in internal controls by hiring and training accounting and financial personnel.
• Monitor and manage operating expenses to improve profitability.
• Focus on strategies to reverse the nine-month revenue decline.

Key Dates

Recommendation

The filing indicates a worsening financial trend with declining nine-month revenues, significantly increased operating losses, and a critical material weakness in internal controls. While there was short-term revenue growth, the overall financial health and operational integrity concerns outweigh this positive aspect, suggesting a sell recommendation.

Keywords

Cloud Systems, SaaS, Industrial IoT, Industry 4.0, Real-time data, Software, Revenue, Operating Loss