Skkynet Cloud Systems, Inc. 2025 Annual Report: A Closer Look for Investors

1. Business Overview

Skkynet Cloud Systems, Inc., based in Canada with operations in Nevada, specializes in secure, real-time data connectivity for industrial applications. Its primary operating subsidiary, Cogent Real-Time Systems, provides software and services that enable businesses to securely collect, process, and share critical operational data across networks. Skkynet's technology plays a crucial role in the Industrial Internet of Things (IoT) and Industry 4.0, facilitating remote management, control, and data sharing for manufacturing facilities. It also feeds vital operational data directly into Artificial Intelligence (AI) systems.

2. Financial Performance

Skkynet faced a challenging fiscal year ending October 31, 2025, with core revenue declining by 3% and a significant net loss. This section details the key financial results:

• Revenue: Cogent Real-Time Systems, the main revenue driver, reported $2,484,315 in revenue for FY2025, down from $2,561,745 in FY2024. This represents a 3% year-over-year decrease.
• Gross Profit: The company maintained a strong gross margin despite the revenue dip. Gross profit was approximately $1,800,000 in FY2025 (72% of revenue), compared to $1,900,000 in FY2024 (74% of revenue).
• Operating Expenses: Operating expenses rose to approximately $3,500,000 in FY2025, up from $3,200,000 in FY2024. This rise, coupled with falling revenue, significantly impacted profitability.
• Net Loss: Skkynet reported a net loss of approximately $1,700,000 for FY2025, which widened from a net loss of $1,300,000 in FY2024. This indicates ongoing unprofitability and capital consumption.
• Cash Flow from Operations: Operating activities consumed approximately $1,500,000 in cash during FY2025, a worsening from the $1,000,000 consumed in FY2024. This highlights the company's reliance on external financing or existing cash reserves to fund daily operations.

3. Financial Health

Skkynet's classification by the SEC as a "smaller reporting company" and a "non-accelerated filer" means it operates as a smaller public company with fewer disclosure requirements than larger entities. This status is common for companies of its size.

• Cash Position: Skkynet's cash and cash equivalents totaled approximately $500,000 as of October 31, 2025, a sharp decline from $1,200,000 at the end of FY2024. This decline reflects significant cash burn from operations.
• Total Assets & Liabilities: Total assets reached approximately $2,000,000 in FY2025, decreasing from $2,500,000 in FY2024. Total liabilities rose slightly to $1,000,000 in FY2025 from $800,000 in FY2024.
• Shareholder Equity: Shareholder equity fell to approximately $1,000,000 in FY2025 from $1,700,000 in FY2024, driven primarily by accumulated losses.

The combination of a shrinking cash balance and widening net losses clearly shows Skkynet is operating at a deficit. The company will likely need additional capital to sustain operations and fund growth initiatives.

4. Management Discussion and Analysis (MD&A) Highlights

In its Management Discussion and Analysis (MD&A), Skkynet's leadership focused on the company's operational performance and financial condition for fiscal year 2025. The year brought a 3% decline in core revenue and a widening net loss, reflecting a challenging period. This revenue drop, combined with increased operating expenses, significantly impacted profitability, resulting in a substantial net loss of approximately $1,700,000. These financial results suggest challenges in sales execution or market demand.

Despite these financial headwinds, Skkynet also made strategic progress. The company achieved significant cloud integration of its Cogent DataHub™ service with Microsoft Azure, enhancing market accessibility for both existing and new customers. Skkynet continues to leverage its patented and patent-pending "push-pull system" technology. This technology offers a unique and secure data transmission advantage in the industrial sector, aligning with the growing demands for remote manufacturing management and AI integration within the Industrial IoT and Industry 4.0.

However, substantial financial challenges persist. The company generated negative cash flow from operations and saw a notable decrease in its cash position, signaling significant cash burn. This led to resource limitations, which restrict Skkynet's ability to aggressively pursue new market expansions, even with identified opportunities in areas like fleet tracking, energy monitoring, and agriculture. Management acknowledges the critical need for additional capital to fund ongoing operations, support growth initiatives, and reverse the current financial trajectory. Securing such financing on favorable terms remains crucial for the company's future viability and growth.

5. Competitive Position

Skkynet stands out with its specialized software for secure, real-time data handling in industrial environments. Its patented "push-pull system" provides a key competitive advantage, offering superior security by preventing direct internet exposure for customer firewalls. The company's products integrate into existing industrial control systems (SCADA) or form the foundation for new ones.

Although the company operates in a growing market, it competes with large industrial automation firms, other specialized IoT software providers, and internal IT solutions. Skkynet's strategy focuses on deepening cloud integration for its Cogent offerings and capitalizing on the Industrial IoT and Industry 4.0 markets. However, financial resources currently constrain the pursuit of broader market opportunities.

6. Future Outlook

Regarding leadership, the 10-K filing indicates no specific changes during the past year.

Skkynet anticipates strong future demand for its services, driven by global manufacturing relocation, which creates a need for remote monitoring, and the increasing integration of AI with operational data. While significant potential exists in adjacent markets like fleet tracking and energy management, realizing these opportunities depends on overcoming current financial constraints and securing resources for aggressive expansion. While optimistic about market trends, the outlook is tempered by the company's current financial challenges and capital needs. Skkynet's strategy involves expanding its sales team and reaching new industries and geographies, but this requires substantial investment and successful execution.

7. Risk Factors

Investors should be aware of several key risks:

• Financial Sustainability: The company's continued net losses and significant cash burn threaten its ability to fund operations without additional capital. The company risks being unable to secure necessary financing on favorable terms, or at all, which could materially and adversely affect its business, financial condition, and results of operations.
• Client Acquisition & Retention: Skkynet's success depends on its ability to attract new customers for software subscriptions and installations, and to retain them through renewals. Failure to do so would negatively impact revenue growth.
• Sales & Marketing Expansion: Expanding its sales team and reaching new industries and geographies is critical for Skkynet, but requires substantial investment and successful execution. An inability to effectively scale sales and marketing efforts could limit growth.
• Market Acceptance & Competition: The industrial IoT market is evolving rapidly. Skkynet faces risks from rapidly evolving technologies, alternative solutions, and aggressive competition from larger, better-funded players. Failure to adapt or compete effectively would harm its market position.
• Intellectual Property: Protecting its patented technologies and defending against or pursuing infringement claims could prove costly and divert resources. Loss or compromise of key intellectual property would undermine its competitive advantage.
• Cybersecurity & Data Integrity: Given its focus on secure data, any breach or failure in Skkynet's security systems could severely damage its reputation, lead to regulatory penalties, and result in significant financial losses.
• Talent Acquisition & Retention: Attracting and retaining skilled employees and key leadership remains vital for a technology-driven company. A shortage of qualified personnel or the loss of key individuals would impair its ability to innovate and operate effectively.
• Economic & Regulatory Factors: Broader economic downturns, shifts in industrial spending, or new data privacy and industrial regulations could negatively impact Skkynet's business. Changes in global trade policies or supply chain disruptions could also affect its operations.