Skkynet Cloud Systems, Inc. filed on Fri, September 13 10-Q Form

Skkynet Cloud Systems, Inc. files 10-Q in a filing on Friday, September 13.

On July 30, 2015, the Company designated 500,000 shares of the preferred stock as Series B Convertible preferred. The Series B shares have a par value of $0.001 and issue value of $1.00 per share. The series B is convertible by the holder into common stock at $1.35 per share. The Company may, any time at its option, redeem the Series B shares at their stated value. The Series B preferred shares hold a 6% per annum cumulative dividend. On July 30, 2015, the Company issued 193,661 shares of Series B convertible preferred stock to three related parties in exchange for the outstanding notes payable and accrued interest of $193,661. Dividends are not paid. The Company has accounted for $8,715 in Series B dividends which increases the loss to common shareholders from $477,924 to $486,641 for the nine month period ended July 31, 2019.

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’). In return for the assignment Real Innovations required a one-time payment of $30,000 to Cogent. Cogent elected to forgo the payment allowing Real Innovations to offset future expenses against the payment. There is no ongoing royalty payment or other form of compensation from Real Innovations to Cogent under the Assignment Agreement.

The Company, under its 2012 Stock 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 are granted. All of the options are exercisable at a purchase price based on the last trading price of the Company’s common stock.

On January 31, 2018, the company issued 138,000 options to two independent directors and three officers with exercise price of $0.001 for accrued compensation contributed to capital. The options have a fair value using the Black Sholes valuation of $55,114 with computed volatility of 206% and a discount rate of 2.72%. The options were vested upon issuance.

On March 27, 2018, the company issued 215,000 options to various employees and consultants with an exercise price of $0.38. The options have a fair value using the Black Sholes valuation of $105,270 with computed volatility of 208% and a discount rate of 2.82%. The options are vested at 20% upon issuance and 20% each annual anniversary thereafter.

On April 30, 2018, the company issued 110,500 options to two independent directors and three officers with exercise price of $0.001 for accrued compensation contributed to capital. The options have a fair value using the Black Sholes valuation of $84,947 with computed volatility of 207% and a discount rate of 2.95%.The liability for which the options were issued was $52,973 with a loss recognized at settlement of $31,974 which was expensed. The options were vested upon issuance.

On March 2, 2019, the Company modified 3,148,700 options to an exercise price of $0.21 per share upon conversion. The modified options vest in five years and expire in 10 years. The fair value of the modified options was calculated using the Black Scholes method with a 10 year expiration , stock measurement price of $0.20, volatility of 196.31% and discount rate of 3.00%. The total value calculated to be $628,638. The modified options were calculated and the difference between the calculation before modification was subtracted from the calculation of the modified options. The incremental value of the options is $38,162. The modified options have an unamortized expense of $796,286, therefore fair value is $834,448. As of July 31, 2019, $310,179 of option expense was recorded.

On April 30, 2019, the company issued 199,800 options to three officers with exercise price of $0.001 for accrued compensation contributed to capital. The options have a fair value using the Black Sholes valuation of $55,933 with computed volatility of 197.12% and a discount rate of 3.00%.The liability for which the options were issued was $44,700 with a loss recognized at settlement of $11,233. The options were vested upon issuance.

On July 9, 2019 the Company entered into an agreement, effective August 1, 2019, to sell the Company’s wholly owned subsidiary Skkynet Japan to the former owners. Under terms of the agreements, 22,500 shares of common stock and 272,500 options of the Company held by the former owners will be returned to the Company for 100% ownership of Skkynet Japan. In addition, the intellectual property, software documentation and source code of the Company will be returned to the Company with the balance of the assets and liabilities remaining in Skkynet Japan. As part of the agreement, the name of Skkynet Japan will be changed to exclude Skkynet in its new name. The Company will forgive the indebtedness owed to the Company by its subsidiary Skkynet Japan.

On August 1, 2019 the Company completed the agreement dated July 9, 2019 to sell the Company’s wholly owned subsidiary Skkynet Japan to the former owners. Under terms of the agreements, 22,500 shares of common stock and 272,500 options of the Company held by the former owners will be returned to the Company for 100% ownership of Skkynet Japan. In addition, the intellectual property, software documentation and source code of the Company will be returned to the Company with the balance of the assets and liabilities remaining in Skkynet Japan. As part of the agreement, the name of Skkynet Japan will be changed to exclude Skkynet in its new name. The Company will forgive the indebtedness owed to the Company by its subsidiary Skkynet Japan.

For the three and nine month periods ending July 31, 2019, revenue was $337,587 and $973,400 compared to $319,920 and $879,041 for the same periods in 2018. Revenue increased for the nine month period ending July 31, 2019 over same period ended July 31, 2018 by 10.7%. The increase in revenue for the three and nine month periods ended July 31, 2019 is attributed to higher sales by the Cogent.

Receive News & Ratings Via Email - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings with our FREE daily email newsletter.