SKKYNET CLOUD SYSTEMS INC.
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(Exact name of registrant as specified in its charter)
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Nevada
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45-3757848 | |
(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.) |
Large accelerated filer
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o |
Accelerated filed
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o |
Non-accelerated filer
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o |
Smaller reporting company
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x |
Page
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PART I: FINANCIAL INFORMATION | ||||
Item 1. |
Financial Statements (Unaudited)
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4 | ||
Consolidated Balance Sheets as of April 30, 2014 (Unaudited) and October 31, 2013
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4 | |||
Consolidated Statements of Operations for the Three and six months Ended April 30, 2014 and 2013 (Unaudited)
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5 | |||
Consolidated Statements of Cash Flows for the Three Months Ended April 30, 2014 and 2013 (Unaudited)
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6 | |||
Notes to Consolidated Financial Statements (Unaudited)
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7 | |||
Item 2. |
Management’s Discussion and Analysis and Plan of Operation
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10 | ||
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk
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12 | ||
Item 4. |
Controls and Procedures
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12 | ||
PART II: OTHER INFORMATION | ||||
Item 1. |
Legal Proceedings
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13 | ||
Item 1A. |
Risk Factors
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13 | ||
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds
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13 | ||
Item 3. |
Defaults upon Senior Securities
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13 | ||
Item 4. |
Mine Safety Information
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13 | ||
Item 5. |
Other Information
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13 | ||
Item 6. |
Exhibits
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14 | ||
Signatures
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15 |
April 30,
2014
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October 31,
2013
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ASSETS
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Current Assets:
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||||||||
Cash and cash equivalents
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$ | 443,692 | $ | 365,415 | ||||
Accounts receivable
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199,881 | 88,806 | ||||||
Total current assets
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643,573 | 454,221 | ||||||
Property and equipment, net of accumulated depreciation of $67,659 and $70,484 respectively
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4,319 | 5,398 | ||||||
Intangible assets
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2,289 | 1,648 | ||||||
Total Assets
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$ | 650,181 | $ | 461,267 | ||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY(DEFICIT)
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Current Liabilities:
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||||||||
Accounts payable and accrued expenses
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$ | 5,793 | $ | 34,567 | ||||
Accounts payable – related parties
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-- | 52,432 | ||||||
Accrued liabilities – related party
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137,968 | 143,872 | ||||||
Notes payable – related parties
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156,351 | 197,424 | ||||||
Deferred income
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93,350 | 59,312 | ||||||
Total current liabilities
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393,462 | 487,617 | ||||||
Total liabilities
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393,462 | 487,617 | ||||||
Stockholders’ Deficit:
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||||||||
Preferred stock; $0.001 par value, 5,000,000 shares authorized, 5,000 shares issued and outstanding
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5 | 5 | ||||||
Common stock; $0.001 par value, 70,000,000 shares authorized, 49,844,000 and 49,334,000 shares issued and outstanding, respectively
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49,844 | 49,334 | ||||||
Additional paid-in capital
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1,097,595 | 555,773 | ||||||
Accumulative other comprehensive income (loss)
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19,366 | 12,603 | ||||||
Accumulated deficit
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(910,091 | ) | (644,065 | ) | ||||
Total stockholders’ equity (deficit)
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256,719 | (26,350 | ) | |||||
Total Liabilities and Stockholders’ Equity
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$ | 650,181 | $ | 461,267 |
Three Months Ended April 30, |
Six Months Ended April 30,
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|||||||||||||||
2014
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2013
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2014
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2013
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Revenue
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$ | 248,298 | $ | 250,878 | $ | 535,347 | $ | 405,635 | ||||||||
Direct material costs
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1,373 | 1,872 | 1,455 | 3,734 | ||||||||||||
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Operating Expenses:
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General & administrative
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422,460 | 257,397 | 805,822 | 510,991 | ||||||||||||
Depreciation
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370 | 447 | 810 | 895 | ||||||||||||
Loss from operations
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(175,905 | ) | (8,838 | ) | (272,740 | ) | (109,985 | ) | ||||||||
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Other Income (Expenses):
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||||||||||||||||
Tax refund
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-- | -- | -- | 85,840 | ||||||||||||
Gain on debt forgiveness
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11,982 | -- | 11,982 | -- | ||||||||||||
Interest expense
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(2,180 | ) | (3,881 | ) | (5,268 | ) | (7,730 | ) | ||||||||
Total other income (expenses)
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9,802 | (3,881 | ) | 6,714 | 78,110 | |||||||||||
Net loss
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$ | (166,103 | ) | $ | (12,719 | ) | $ | (266,026 | ) | $ | (31,875 | ) |
Foreign currency translation adjustment
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11,538 | (2,072 | ) | (6,763 | ) | 793 | ||||||||||
Comprehensive (loss)
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(154,565 | ) | (14,791 | ) | $ | (272,789 | ) | $ | (31,082 | ) | ||||||
Net loss per common share attributable to common stockholders (basic and diluted)
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$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) | ||||
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Weighted average common shares outstanding (basic and diluted)
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49,844,000 | 49,334,000 | 49,632,674 | 49,334,000 |
Six Months Ended April 30,
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||||||||
2014
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2013
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net income (loss)
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$ | (266,026 | ) | $ | (31,875 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
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Depreciation expense
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810 | 895 | ||||||
Option based compensation
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172,582 | |||||||
Gain on debt forgiveness
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(11,982 | ) | -- | |||||
Changes in operating assets and liabilities:
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Accounts receivable
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(111,075 | ) | (87,635 | ) | ||||
Accounts payable and accrued expenses
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(9,624 | ) | 30,459 | |||||
Accrued liabilities – related parties
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(58,336 | ) | 188,515 | |||||
Taxes payable
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(7,168 | ) | (1,267 | ) | ||||
Deferred Income
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34,038 | -- | ||||||
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
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(256,781 | ) | 99,092 | |||||
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CASH FLOWS FROM INVESTING ACTIVITIES
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Cash paid for the purchase of fixed assets
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(735 | ) | (984 | ) | ||||
NET CASH USED IN INVESTING ACTIVITIES
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(735 | ) | (984 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES
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Proceeds from the sale of common stock
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369,750 | |||||||
Payments on notes payable –related parties
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(41,083 | ) | (6,086 | ) | ||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
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328,667 | (6,086 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents
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7,126 | (793 | ) | |||||
Net increase in cash and cash equivalents
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78,277 | 91,229 | ||||||
Cash and cash equivalents, beginning of period
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365,415 | 122,053 | ||||||
Cash and cash equivalents, end of period
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$ | 443,692 | $ | 213,282 | ||||
SUPPLEMENTAL CASH FLOWS INFORMATION
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Interest paid
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$ | 21,920 | $ | 1,479 | ||||
Income taxes paid
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$ | -- | $ | -- |
Note balance as of:
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April 30,
2014
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October 31,
2013
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||||||
Andrew Thomas
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$ | 47,410 | $ | 59,572 | ||||
Paul Benford
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$ | 77,064 | $ | 97,545 | ||||
Shizuka Thomas
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$ | 31,877 | $ | 40,317 | ||||
Total
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$ | 156,351 | $ | 197,434 |
As of
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April 30,
2014
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October 31,
2013
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Accrued salaries
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112,423 | 90,808 | ||||||
Accrued interest
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2,345 | 18,064 | ||||||
Accounts payable
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-- | 52,432 | ||||||
Consulting fees
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23,200 | 35,000 | ||||||
Total accrued liabilities
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137,968 | 196,304 |
Options as of
October 31, 2013
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Options
Granted
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Total
Outstanding
as of April
30, 2014
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Number
Exercisable
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Number
Exercised
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Aggregate
Intrinsic Value
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$ | 3,055,000 | $ | 780,000 | $ | 3,835,000 | $ | 1,987,000 | $ | -- | $ | 4,781,250 |
31.1 |
Certification of Principal Executive Officer
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31.2 |
Certification of Principal Financial Officer
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32.1 |
Certification of Compliance to Sarbanes-Oxley
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32.2 |
Certification of Compliance to Sarbanes-Oxley
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101.INS **
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XBRL Instance Document
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101.SCH **
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XBRL Taxonomy Extension Schema Document
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101.CAL **
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF **
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB **
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE **
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XBRL Taxonomy Extension Presentation Linkbase Document
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SKKYNET CLOUD SYSTEMS INC. | |||
Date: June 10, 2014 |
By:
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/s/ Andrew Thomas | |
Andrew Thomas, CEO | |||
By | /s/ Lowell Holden | ||
Lowell Holden, CFO |
1.
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I have reviewed this Form 10-Q of Skkynet Cloud Systems Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change to the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: June 10, 2014
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By:
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/s/ Andrew Thomas | |
Andrew Thomas | |||
Chief Executive Officer |
1.
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I have reviewed this Form 10-Q of Skkynet Cloud Systems Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change to the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: June 10, 2014
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By:
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/s/ Lowell Holden | |
Lowell Holden | |||
Chief Financial Officer |
1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.
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Date: June 10, 2014
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By:
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/s/ Andrew Thomas | |
Andrew Thomas | |||
Chief Executive Officer |
1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Skkynet.
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Date: June 10, 2014
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By:
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/s/ Lowell Holden | |
Lowell Holden | |||
Chief Financial Officer |
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OPTIONS
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 30, 2014
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Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTE 4 - OPTIONS |
The Company under its 2012 option plan issues options to various officers, directors and consultants. The options vest in equal annual installments over a five year period with the first 20% vested when the options were granted. All of the options are exercisable at a purchase price based on the last trading price of the Companys common stock on the date the options were granted.
On November 1, 2013 the Company issued 185,000 options with an exercise price of $0.55 per share to an officer of the Company. Computed volatility of 397.88% and a discount rate of 2.65 were used in calculating the fair value of the options of $101,750.
On December 14, 2013 the Company issued 15,000 options with an exercise price of $0.85 per share to two independent directors and a consultant of the Company. Computed volatility of 371.40% and a discount rate of 2.89 were used in calculating the fair value of the options of $12,750.
On January 13, 2014 the Company issued 580,000 options with an exercise price of $0.88 per share to four officers of the Company. Computed volatility of 360.15% and a discount rate of 2.84 were used in calculating the fair value of the options of $102,080.
The Company has elected to expense the options over the life of the option as stock based compensation. The expense is calculated with a Black Scholes model to calculate the fair value over the 5 year period of each option. The total value calculated for option expense is $624,900 As of April 30, 2014 the Company expensed $172,582 for the six month period ended April 30, 2014. The unrecognized future balance to be expensed over the term of the options is $452,318.
The following sets forth the options granted and outstanding as of April 30, 2014:
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