UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
OR
For the transition period from ___________to ____________
Commission
File Number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller
reporting company | ||
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
As of August 8, 2023, the issuer had shares of common stock issued and outstanding.
Table of Contents
CEMTREX, INC. AND SUBSIDIARIES
INDEX
| 2 |
Part I. Financial Information
Item 1. Financial Statements
Cemtrex, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| (Unaudited) | ||||||||
| June 30, | September 30, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Short-term investments | ||||||||
| Trade receivables, net | ||||||||
| Trade receivables - related party | ||||||||
| Inventory –net of allowance for inventory obsolescence | ||||||||
| Prepaid expenses and other assets | ||||||||
| Assets of discontinued operations | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets | ||||||||
| Royalties receivable - related party | ||||||||
| Note receivable - related party | ||||||||
| Goodwill | ||||||||
| Other | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities & Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable - related party | ||||||||
| Short-term liabilities, net of unamortized original issue discounts | ||||||||
| Lease liabilities - short-term | ||||||||
| Deposits from customers | ||||||||
| Accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Accrued income taxes | ||||||||
| Liabilities of discontinued operations | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Loans payable to bank | ||||||||
| Long-term lease liabilities | ||||||||
| Notes payable | ||||||||
| Mortgage payable | ||||||||
| Other long-term liabilities | ||||||||
| Paycheck Protection Program Loans | ||||||||
| Deferred Revenue - long-term | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $ par value,
shares authorized, Series 1, shares authorized, shares issued and shares outstanding as of June 30,
2023 and shares issued and shares outstanding as of September 30, 2022 (liquidation value of $ | ||||||||
| Series C, shares authorized, shares issued and outstanding at June 30, 2023 and September 30, 2022 | ||||||||
| Common stock, $ par value, shares authorized, shares issued and outstanding at June 30, 2023 and shares issued and outstanding at September 30, 2022 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Treasury stock, shares of Series 1 Preferred Stock at June 30, 2023 and September 30, 2022 | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total Cemtrex stockholders’ equity | ||||||||
| Non-controlling interest | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
Cemtrex, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
| For the three months ended | For the nine months ended | |||||||||||||||
| June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Research and development | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating income/(loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income/(expense) | ||||||||||||||||
| Other income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other (expense)/income, net | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax benefit/(expense) | ( | ) | ( | ) | ||||||||||||
| (Loss)/income from Continuing operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Income/(loss) from discontinued operations, net of tax | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less loss in noncontrolling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to Cemtrex, Inc. shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Income (loss) per share - Basic & Diluted | ||||||||||||||||
| Continuing Operations | $ | ) | $ | $ | ) | $ | ) | |||||||||
| Discontinued Operations | $ | $ | ) | $ | ) | $ | ) | |||||||||
| Weighted Average Number of Shares-Basic & Diluted | ||||||||||||||||
| 4 |
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
| For the three months ended | For the nine months ended | |||||||||||||||
| June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | |||||||||||||
| Other comprehensive loss | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Foreign currency translation gain/(loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less comprehensive income attributable to noncontrolling interest | ||||||||||||||||
| Comprehensive loss attributable to Cemtrex, Inc. shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
Cemtrex, Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders’ Equity
(Unaudited)
| Preferred Stock Series 1 | Preferred Stock Series C | Common Stock Par | Treasury Stock, 64,100 | |||||||||||||||||||||||||||||||||||||||||||||
| Par Value $0.001 | Par Value $0.001 | Value $0.001 | shares of | |||||||||||||||||||||||||||||||||||||||||||||
| Number of | Number of | Number of | AdditionalPaid-in | Accumulated | Series 1 Preferred | Accumulated otherComprehensive | Cemtrex Stockholders’ | Non-controlling | ||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Stock | Income(loss) | Equity | interest | |||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Foreign currency translation gain/(loss) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | ||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued to pay notes payable | ||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends paid in Series 1 preferred shares | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Income/(loss) attributable to noncontrolling interest | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Foreign currency translation gain/(loss) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | ||||||||||||||||||||||||||||||||||||||||||||||||
| Additional rounding shares issued for reverse stock split | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Income/(loss) attributable to noncontrolling interest | ||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued to pay for services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Foreign currency translation gain/(loss) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | ||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends paid in Series 1 preferred shares | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued to pay notes payable | ||||||||||||||||||||||||||||||||||||||||||||||||
| Income/(loss) attributable to noncontrolling interest | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued to pay for services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
Cemtrex, Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders’ Equity (Continued)
(Unaudited)
| Preferred Stock Series 1 | Preferred Stock Series C | Common Stock Par | Treasury Stock,64,100 | |||||||||||||||||||||||||||||||||||||||||||||
| Par Value $0.001 | Par Value $0.001 | Value $0.001 | shares of | |||||||||||||||||||||||||||||||||||||||||||||
| Number of | Number of | Number of | Additional Paid-in | Accumulated | Series 1 Preferred | Accumulated other Comprehensive | Cemtrex | Non- controlling | ||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount |
Capital | Deficit | Stock | Income(loss) |
Stockholders’Equity |
interest | |||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Foreign currency translation gain/(loss) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | ||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued to pay notes payable | ||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends paid in Series 1 preferred shares | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Income/(loss) attributable to noncontrolling interest | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Foreign currency translation gain/(loss) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | ||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued with note payable | ||||||||||||||||||||||||||||||||||||||||||||||||
| Income/(loss) attributable to noncontrolling interest | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Foreign currency translation gain/(loss) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | ||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued to pay notes payable | ||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends paid in Series 1 preferred shares | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Income/(loss) attributable to noncontrolling interest | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 7 |
Cemtrex, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| For the nine months ended | ||||||||
| June 30, | ||||||||
| Cash Flows from Operating Activities | 2023 | 2022 | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used by operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Loss on disposal of property and equipment | ||||||||
| Noncash lease expense | ||||||||
| Bad debt expense (recovery) | ( | ) | ( | ) | ||||
| Share-based compensation | ||||||||
| Income tax expense/ (benefit) | ( | ) | ||||||
| Interest expense paid in equity shares | ||||||||
| Accrued interest on notes payable | ||||||||
| Amortization of original issue discounts on notes payable | ||||||||
| Gain/(loss) on marketable securities | ( | ) | ||||||
| Discharge of Paycheck Protection Program Loans | ( | ) | ||||||
| Changes in operating assets and liabilities net of effects from acquisition of subsidiaries: | ||||||||
| Trade receivables | ( | ) | ||||||
| Trade receivables - related party | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Other assets | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Accounts payable - related party | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Deposits from customers | ( | ) | ( | ) | ||||
| Accrued expenses | ( | ) | ||||||
| Deferred revenue | ||||||||
| Income taxes payable | ( | ) | ( | ) | ||||
| Other liabilities | ( | ) | ( | ) | ||||
| Net cash used by operating activities - continuing operations | ( | ) | ( | ) | ||||
| Net cash provided by operating activities - discontinued operations | ||||||||
| Net cash used by operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from sale of property and equipment | ||||||||
| Investment in MasterpieceVR | ( | ) | ||||||
| Proceeds from sale of marketable securities | ||||||||
| Purchase of marketable securities | ( | ) | ||||||
| Net cash (used in)/provided by investing activities - continuing operations | ( | ) | ||||||
| Net cash used by investing activities - discontinued operations | ( | ) | ||||||
| Net cash (used in)/provided by investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from notes payable | ||||||||
| Payments on debt | ( | ) | ( | ) | ||||
| Payments on Paycheck Protection Program Loans | ( | ) | ||||||
| Payments on bank loans | ( | ) | ( | ) | ||||
| Net cash provided by financing activities - continuing operations | ( | ) | ||||||
| Net cash used by financing activities - discontinued operations | ||||||||
| Net cash (used)/provided by financing activities | ( | ) | ||||||
| Effect of currency translation | ( | ) | ( | ) | ||||
| Net decrease in cash, cash equivalents, and restricted cash | ( | ) | ( | ) | ||||
| Cash, cash equivalents, and restricted cash at beginning of period | ||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | $ | ||||||
| Balance Sheet Accounts Included in Cash, Cash Equivalents, and Restricted Cash | ||||||||
| Cash and equivalents | $ | $ | ||||||
| Less cash attributed to discontinued operations | ( | ) | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents, and restricted cash | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 8 |
Cemtrex, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Cash paid during the period for interest | $ | $ | ||||||
| Cash paid during the period for income taxes, net of refunds | $ | $ | ||||||
| Supplemental Schedule of Non-Cash Investing and Financing Activities | ||||||||
| Shares issued to pay for services | $ | $ | ||||||
| Shares issued to pay notes payable | $ | $ | ||||||
| Purchase of property and equipment through vendor financing | $ | $ | ||||||
| Shares issued in connection with note payable | $ | $ | ||||||
| Investment in right of use asset | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 9 |
Cemtrex, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – ORGANIZATION AND PLAN OF OPERATIONS
Cemtrex was incorporated in 1998 in the state of Delaware and has evolved through strategic acquisitions and internal growth into a leading multi-industry company. Unless the context requires otherwise, all references to “we”, “our”, “us”, “Company”, “registrant”, “Cemtrex” or “management” refer to Cemtrex, Inc. and its subsidiaries.
During the first quarter of fiscal year 2023, The Company reorganized its reporting segments to be in line with its current structure consisting of (i) Security (ii) Industrial Services and (iii) Cemtrex Corporate.
Security
Cemtrex’s Security segment operates under the brand of its majority owned subsidiary, Vicon Industries, Inc. (“Vicon”), which provides end-to-end security solutions to meet the toughest corporate, industrial and governmental security challenges. Vicon’s products include browser-based video monitoring systems and analytics-based recognition systems, cameras, servers, and access control systems for every aspect of security and surveillance in industrial and commercial facilities, federal prisons, hospitals, universities, schools, and federal and state government offices. Vicon provides innovative, mission critical security and video surveillance solutions utilizing Artificial Intelligence (AI) based data algorithms.
Industrial Services
Cemtrex’s Industrial Services segment operates under the brand, Advanced Industrial Services (“AIS”), which offers single-source expertise and services for rigging, millwrighting, in plant maintenance, equipment erection, relocation, and disassembly to diversified customers. AIS installs high precision equipment in a wide variety of industrial markets like automotive, printing & graphics, industrial automation, packaging, and chemicals, among others. AIS is a leading provider of reliability-driven maintenance and contracting solutions for machinery, packaging, printing, chemical, and other manufacturing markets. The focus is on customers seeking to achieve greater asset utilization and reliability to cut costs and increase production from existing assets, including small projects, sustaining capital, turnarounds, maintenance, specialty welding services, and high-quality scaffolding.
Cemtrex Corporate
Cemtrex’s Corporate segment is the holding company of our other two segments.
Sale of former Cemtrex Brands
On November 22, 2022, the Company entered into two Asset Purchase Agreements and one Simple Agreement for Future Equity (“SAFE”) with the Company’s CEO, Saagar Govil, to secure the sale of the subsidiaries Cemtrex Advanced Technologies, Inc, which include the brand SmartDesk, and Cemtrex XR, Inc., which include the brands Cemtrex XR, Virtual Driver Interactive, Bravo Strong, and good tech (formerly Cemtrex Labs), to Mr. Govil.
On November 22, 2022, the Company completed the above disposition for the following consideration.
| ● | Cemtrex XR, Inc. |
| ○ | $ |
| ■ | $ | |
| ■ |
| 10 |
| ● | Cemtrex Advanced Technologies, Inc. |
| ○ | $ | |
| ○ | ||
| ○ | $ |
The Company’s Board of Directors, excluding Saagar Govil who abstained from all voting on these agreements, approved these actions and agreements.
Common Stock Reverse Stock Split
On
January 25, 2023, the company completed a
Notice of Delisting, Extension of cure period, and Subsequent Compliance
Series 1 Preferred Stock
On July 29, 2022, the Company received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, because the closing bid price for the Company’s Series 1 preferred stock listed on Nasdaq was below $ for 30 consecutive trading days, the Company no longer met the minimum bid price requirement for continued listing on The Nasdaq Capital Market under Nasdaq Marketplace Rule 5550(a)(2), requiring a minimum bid price of $ per share (the “Minimum Bid Price Requirement”).
On January 26, 2023, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company that, it had been granted an additional 180 days or until July 24, 2023, to regain compliance with the Minimum Bid Price Requirement based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Capital Market with the exception of the bid price requirement, and the Company’s written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
On July 25, 2023, the Company received a Notice of Staff Determination from the Listing Qualifications Department of Nasdaq notifying the Company that its Series 1 Preferred Stock had not gained compliance and would be suspended from trading at the opening of business on August 3, 2023. The Company has requested a hearing regarding the delisting that has been scheduled for September 14, 2023, which will stay the suspension and filing of Form 25-NSE with the Securities and Exchange Commission.
The Company intends to continue actively monitoring the bid price for its Series 1 preferred stock between now and the hearing date and will consider available options to resolve the deficiency and regain compliance with the Minimum Bid Price Requirement.
Common Stock
On January 24, 2022, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company that, because the closing bid price for the Company’s common stock listed on Nasdaq was below $ for 30 consecutive trading days, the Company no longer met the minimum bid price requirement for continued listing on The Nasdaq Capital Market under Nasdaq Marketplace Rule 5550(a)(2), requiring a minimum bid price of $ per share (the “Minimum Bid Price Requirement”).
On July 26, 2022, the Company received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC Nasdaq notifying the Company that, it had been granted an additional 180 days or until January 23, 2023, to regain compliance with the Minimum Bid Price Requirement based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Capital Market with the exception of the bid price requirement, and the Company’s written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
| 11 |
On January 26, 2023, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company that it has not regained compliance with Listing Rule 5550(a)(2) and accordingly would be delisted from the Capital Market. The Company then requested and had been granted a hearing to occur on March 16, 2023, appealing this determination to a Hearings Panel (the “Panel”), pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series.
On February 8, 2023, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company that it has regained compliance with Listing Rule 5550(a)(2) and is in compliance with all applicable listing standards. The Company’s common stock will continue to be listed and traded on The Nasdaq Stock Market.
Going Concern Considerations
The accompanying condensed consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern and in accordance with generally accepted accounting principles in the United States of America. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. Pursuant to the requirements of the ASC 205, management must evaluate whether there are conditions or events, considered in the aggregate, which raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date these financial statements are issued.
This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.
The
Company has incurred substantial losses of $
While
our working capital and current debt indicate a substantial doubt regarding the Company’s ability to continue as a going concern,
the Company has historically, from time to time, satisfied and may continue to satisfy certain short-term liabilities through the issuance
of common stock, thus reducing our cash requirement to meet our operating needs. Additionally, the Company has sold unprofitable brands,
reducing the cash required to maintain those brands, reevaluated our pricing model on our Vicon brand to improve margins on those products,
and has effected a
| 12 |
NOTE 2 – INTERIM STATEMENT PRESENTATION
Basis of Presentation and Use of Estimates
The accompanying unaudited condensed consolidated financial information should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K for the year ended September 30, 2022, of Cemtrex, Inc.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the Unites States (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X pursuant to the requirements of the U.S. Securities and Exchange Commission (‘SEC”). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the interim periods are not necessarily indicative of the results of operations for the entire year.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated financial statements, the disclosure of contingent assets and liabilities in the condensed consolidated financial statements and the accompanying notes, and the reported amounts of revenues, expenses and cash flows during the periods presented. Actual amounts and results could differ from those estimates. The estimates and assumptions the Company makes are based on historical factors, current circumstances and the experience and judgment of the Company’s management. The Company evaluates its estimates and assumptions on an ongoing basis.
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
The condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, Cemtrex Technologies Pvt. Ltd., Advanced Industrial Services, Inc., Advanced Industrial Leasing, Inc., and the Company’s majority owned subsidiary Vicon Industries, Inc. and its subsidiary, Vicon Industries Ltd. All inter-company balances and transactions have been eliminated in consolidation.
Accounting Pronouncements
Significant Accounting Policies
Note 2 of the Notes to Consolidated Financial Statements, included in the annual report on Form 10-K for the year ended September 30, 2022, includes a summary of the significant accounting policies used in the preparation of the consolidated financial statements.
Recently Issued Accounting Standards
In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“Update 2016-13”). Update 2016-13 replaced the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (“CECL”) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including but not limited to trade receivables. For public business entities, the new standard became effective for annual reporting periods beginning after December 15, 2022, including interim periods within that reporting period. The Company is currently evaluating the impact of this ASU on our financial statements.
In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU No. 2021-08”). ASU No. 2021-08 will require companies to apply the definition of a performance obligation under ASC Topic 606 to recognize and measure contract assets and contract liabilities (i.e., deferred revenue) relating to contracts with customers that are acquired in a business combination. Under current U.S. GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. ASU No. 2021-08 will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606. ASU No. 2021-08 is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact of this ASU on our financial statements.
| 13 |
On June 30, 2022, the FASB issued ASU 2022-03 Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”), which (1) clarifies the guidance in ASC 820 on the fair value measurement of an equity security that is subject to a contractual sale restriction and (2) requires specific disclosures related to such an equity security. Under current guidance, stakeholders have observed diversity in practice related to whether contractual sale restrictions should be considered in the measurement of the fair value of equity securities that are subject to such restrictions. On the basis of interpretations of existing guidance and the current illustrative example in ASC 820-10-55-52 of a restriction on the sale of an equity instrument, some entities use a discount for contractual sale restrictions when measuring fair value, while others view the application of such a discount to be inconsistent with the principles of ASC 820. To reduce the diversity in practice and increase the comparability of reported financial information, ASU 2022-03 clarifies this guidance and amends the illustrative example. ASU No. 2022-03 is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the impact of this ASU on our financial statements.
The Company does not believe that any other recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying condensed consolidated financial statements.
NOTE 3 – DISCONTINUED OPERATIONS
On November 22, 2022, the Company entered into two Asset Purchase Agreements and one Simple Agreement for Future Equity (“SAFE”) with the Company’s CEO, Saagar Govil, to secure the sale of the subsidiaries Cemtrex Advanced Technologies, Inc, which include the brand SmartDesk, and Cemtrex XR, Inc., which include the brands Cemtrex XR, Virtual Driver Interactive, Bravo Strong, and good tech (formerly Cemtrex Labs), to Mr. Govil
Due
to the on-going losses and risk associated with the SmartDesk business the Company has valued the royalty and SAFE agreement associated
with the SmartDesk sale at $
Based
on sales projections for Cemtrex XR, Inc., the Company does not believe that it will exceed the sales levels required to exceed the $
| 14 |
The following table summarizes the loss on the sale recorded during the three months ended December 31, 2022, included in Income/(loss) from discontinued operations, net of tax in the accompanying condensed consolidated statement of Operations:
| Purchase Price | $ | |||
| Less cash and cash equivalents transferred | ( | ) | ||
| Less liabilities assumed | ( | ) | ||
| Net purchase price | $ | |||
| Assets Sold | ||||
| Accounts receivable, net | $ | |||
| Inventory, net | ||||
| Prepaid expenses and other assets | ||||
| Property and equipment, net | ||||
| Goodwill | ||||
| Liabilities Transferred | ||||
| Accounts payable | ||||
| Short-term liabilities | ||||
| Long-term liabilities | ||||
| Net assets sold | $ | |||
| Pretax loss on sale of Cemtrex Advanced Technologies, Inc, and Cemtrex XR, Inc.Companies | $ | ( | ) | |
| 15 |
Assets and liabilities included within discontinued operations on the Company’s Condensed Consolidated Balance Sheets at June 30, 2023, and September 30, 2022, are as follows;
| June 30, | September 30, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and equivalents | $ | $ | ||||||
| Trade receivables, net | ||||||||
| Inventory –net of allowance for inventory obsolescence | ||||||||
| Prepaid expenses and other assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Other | ||||||||
| Total Assets | $ | $ | ||||||