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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934

 

For the quarterly period ended June 30, 2024

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934

 

For the transition period from ___________to ____________

 

Commission File Number 001-37464

 

Z:\2024 OPERATIONS\EDGAR\08 AUGUST\Cemtrex Inc\08-09-2024\Form 10-Q\Draft\Production

 

CEMTREX, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   30-0399914
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)

 

135 Fell Ct. Hauppauge, NY 11788
(Address of principal executive offices) (Zip Code)

 

631-756-9116

(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
Common Stock   CETX   Nasdaq Capital Market

 

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.

 

Yes ☐ No

 

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).

 

Yes ☐ No

 

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 ☐
  Non-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 No

 

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 9, 2024, the issuer had 17,437,456 shares of common stock issued and outstanding.

 

 

 

 
 

 

Table of Contents

 

CEMTREX, INC. AND SUBSIDIARIES

 

INDEX

 

    Page
     
PART I. FINANCIAL INFORMATION  
     
Item 1. Financial Statements  
     
  Condensed Consolidated Balance Sheets as of June 30, 2024 (Unaudited) and September 30, 2023 3
     
  Condensed Consolidated Statements of Operations for the three and nine months ended June 30, 2024 and 2023 (Unaudited) 4
     
  Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended June 30, 2024 and 2023 (Unaudited) 4
     
  Condensed Consolidated Statement of Stockholders’ Equity for the three and nine months ended June 30, 2024 (Unaudited) 5
     
  Condensed Consolidated Statement of Stockholders’ Equity for the three and nine months ended June 30, 2023 (Unaudited) 6
     
  Condensed Consolidated Statements of Cash Flow for the nine months ended June 30, 2024 and 2023 (Unaudited) 7
     
  Notes to Unaudited Condensed Consolidated Financial Statements 9
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 30
     
Item 4. Controls and Procedures 35
     
PART II. OTHER INFORMATION  
     
Item 1. Legal Proceedings 36
     
Item 1A Risk Factors 36
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 36
     
Item 3. Defaults Upon Senior Securities 36
     
Item 4. Mine Safety Disclosures 36
     
Item 5. Other Information 36
     
Item 6. Exhibits 37
     
SIGNATURES 38

 

2
 

 

Part I. Financial Information

 

Item 1. Financial Statements

Cemtrex, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 

   (Unaudited)     
   June 30,   September 30, 
   2024    2023 
Assets          
Current assets          
Cash and cash equivalents  $6,468,197   $5,329,910 
Restricted cash   1,152,028    1,019,652 
Trade receivables, net   7,800,883    9,209,695 
Trade receivables, net - related party   755,198    1,143,342 
Inventory, net   7,531,955    8,739,219 
Contract assets, net   1,115,060    1,739,201 
Prepaid expenses and other current assets   1,582,026    2,112,022 
Total current assets   26,405,347    29,293,041 
           
Property and equipment, net   8,583,113    9,218,701 
Right-of-use operating lease assets   1,936,441    2,287,623 
Royalties receivable, net - related party   453,330    674,893 
Note receivable, net - related party   -    761,585 
Goodwill   4,238,822    4,381,891 
Other   2,210,090    1,836,009 
Total Assets  $43,827,143   $48,453,743 
           
Liabilities & Stockholders’ Equity          
Current liabilities          
Accounts payable  $3,612,634   $6,196,406 
Accounts payable - related party   3,797    68,509 
Sales tax payable   37,865    35,829 
Revolving line of credit   2,730,325    - 
Current maturities of long-term liabilities   661,271    14,507,711 
Operating lease liabilities - short-term   780,423    741,487 
Deposits from customers   246,765    57,434 
Accrued expenses   2,347,458    2,784,390 
Contract liabilities   1,901,606    980,319 
Deferred revenue   1,284,688    1,583,406 
Accrued income taxes   398,054    388,627 
Total current liabilities   14,004,886    27,344,118 
Long-term liabilities          
Long-term debt   16,893,184    9,929,348 
Long-term operating lease liabilities   1,216,184    1,607,202 
Other long-term liabilities   299,988    501,354 
Deferred Revenue - long-term   631,581    727,928 
Warrant liabilities   10,428,397    - 
Total long-term liabilities   29,469,334    12,765,832 
Total liabilities   43,474,220    40,109,950 
           
Commitments and contingencies   -    - 
           
Stockholders’ equity          
Preferred stock , $0.001 par value, 10,000,000 shares authorized,          
Series 1, 3,000,000 shares authorized, 2,456,827 shares issued and 2,392,727 shares outstanding as of June 30, 2024 and 2,293,016 shares issued and 2,228,916 shares outstanding as of September 30, 2023 (liquidation value of $10 per share)   2,457    2,293 
Series C, 100,000 shares authorized, 50,000 shares issued and outstanding at June 30, 2024 and September 30, 2023   50    50 
Common stock, $0.001 par value, 50,000,000 shares authorized,16,352,270 shares issued and outstanding at June 30, 2024 and 1,045,783 shares issued and outstanding at September 30, 2023   16,353    1,046 
Additional paid-in capital   73,002,738    68,881,705 
Accumulated deficit   (75,787,626)   (64,125,895)
Treasury stock, 64,100 shares of Series 1 Preferred Stock at June 30, 2024, and September 30, 2023   (148,291)   (148,291)
Accumulated other comprehensive income   2,962,275    3,076,706 
Total Cemtrex stockholders’ equity   47,956    7,687,614 
Non-controlling interest   304,967    656,179 
Total liabilities and stockholders’ equity  $43,827,143   $48,453,743 

 

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)

 

   June 30, 2024   June 30, 2023   June 30, 2024   June 30, 2023 
   For the three months ended   For the nine months ended 
   June 30, 2024   June 30, 2023   June 30, 2024   June 30, 2023 
                 
Revenues  $14,686,398   $14,730,140   $48,724,159   $42,773,779 
Cost of revenues   8,809,251    8,249,497    28,825,197    23,914,249 
Gross profit   5,877,147    6,480,643    19,898,962    18,859,530 
Operating expenses                    
General and administrative   8,192,180    5,376,960    22,184,303    16,456,602 
Research and development   864,483    1,049,909    2,664,688    3,895,717 
Total operating expenses   9,056,663    6,426,869    24,848,991    20,352,319 
Operating (loss)/income   (3,179,516)   53,774    (4,950,029)   (1,492,789)
Other (expense)/income                    
Other (expense)/income, net   (933,539)   34,652    (710,363)   394,073 
Interest expense   (521,316)   (1,254,185)   (1,697,803)   (3,717,557)
Loss on excess fair value of warrants   (7,255,528)   -    (7,255,528)   - 
Changes in fair value of warrant liability   2,807,890    -    2,807,890    - 
Total other expense, net   (5,902,493)   (1,219,533)   (6,855,804)   (3,323,484)
Net loss before income taxes   (9,082,009)   (1,165,759)   (11,805,833)   (4,816,273)
Income tax expense   (67,294)   (19,641)   (238,049)   (19,641)
Loss from Continuing operations   (9,149,303)   (1,185,400)   (12,043,882)   (4,835,914)
(Loss)/income from discontinued operations, net of tax   9,984    13,281    30,939    (3,212,108)
Net loss   (9,139,319)   (1,172,119)   (12,012,943)   (8,048,022)
Less loss in noncontrolling interest   (158,293)   (25,595)   (351,212)   (29,493)
Net loss attributable to Cemtrex, Inc. stockholders  $(8,981,026)  $(1,146,524)  $(11,661,731)  $(8,018,529)
(Loss)/income per share - Basic & Diluted                    
Continuing Operations  $(0.29)  $(1.36)  $(1.06)  $(5.90)
Discontinued Operations  $0.00   $0.01   $0.00   $(3.89)
Weighted Average Number of Shares-Basic & Diluted   31,346,628    897,897    11,044,569    824,689 

  

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

 

   June 30, 2024   June 30, 2023   June 30, 2024   June 30, 2023 
   For the three months ended   For the nine months ended 
   June 30, 2024   June 30, 2023   June 30, 2024   June 30, 2023 
Other comprehensive loss                    
Net loss  $(9,139,319)  $(1,172,119)  $(12,012,943)  $(8,048,022)
Foreign currency translation gain/(loss)   188,491    22,470    (114,431)   (71,179)
Comprehensive loss   (8,950,828)   (1,149,649)   (12,127,374)   (8,119,201)
Comprehensive loss attributable to noncontrolling interest   158,293    25,595    351,212    29,493 
Comprehensive loss attributable to Cemtrex, Inc. stockholders  $(9,109,121)  $(1,175,244)  $(12,478,586)  $(8,148,694)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4
 

 

Cemtrex, Inc. and Subsidiaries

 

Condensed Consolidated Statement of Stockholders’ Equity

(Unaudited)

 

  

Shares

   Amount   Shares   Amount  

Shares

   Amount  

Capital

   Deficit   Series 1 Preferred Stock   Income   Equity   interest 
     Preferred Stock Series 1       Preferred Stock Series C       Common Stock Par              Treasury    Accumulated         
   Par Value $0.001   Par Value $0.001   Value $0.001   Additional       Stock,    other   Cemtrex   Non- 
   Number of       Number of       Number of       Paid-in   Accumulated   64,100 shares of   Comprehensive   Stockholders’   controlling 
  

Shares

   Amount   Shares   Amount  

Shares

   Amount  

Capital

   Deficit   Series 1 Preferred Stock   Income   Equity   interest 
Balance at September 30, 2023   2,293,016   $2,293    50,000   $50    1,045,783   $1,046   $68,881,705   $(64,125,895)  $(148,291)  $3,076,706   $7,687,614   $656,179 
Foreign currency translation gain                                                                                 227,764    227,764      
Share-based compensation                                 7,558                   7,558      
Dividends paid in Series 1 preferred shares   115,037    115                        (115)                  -      
Loss attributable to noncontrolling interest                                                     -    (96,409)
Shares issued to pay for services                       9,853    10    39,990                   40,000      
Net loss             -     -                    (1,207,494)   -          (1,207,494)     
Balance at December 31, 2023   2,408,053   $2,408    50,000   $50    1,055,636   $1,056   $68,929,138   $(65,333,389)  $(148,291)  $3,304,470   $6,755,442   $559,770 
Foreign currency translation loss                                                (530,686)   (530,686)     
Share-based compensation                                 7,558                   7,558      
Purchase of treasury stock                                           (69,705)        (69,705)     
Loss attributable to noncontrolling interest                                                     -    (96,510)
Net loss   -     -     -     -     -     -          (1,473,211)             (1,473,211)     
Balance at March 31, 2024   2,408,053   $2,408    50,000   $50    1,055,636   $1,056   $68,936,696   $(66,806,600)  $(217,996)  $2,773,784   $4,689,398   $463,260 
Foreign currency translation loss                                                188,491    188,491      
Share-based compensation                                 7,559                   7,559      
Dividends paid in Series 1 preferred shares   120,725    121                        (121)                  -      
Issuance of common stock                       554,705    555    (555                  

-

      
Exercise of prefunded warrants                       11,210,000    11,210    3,179,110                   3,190,320      
Exercise of Series A warrants                       3,508,593    3,509    860,705                   864,214      
Cancellation of treasury stock   (71,951)   (72)                       (69,633)        69,705         -      
Loss attributable to noncontrolling interest                                                     -    (158,293)
Shares issued to pay for services                       23,336    23    88,977                   89,000      
Net loss             -     -                    (8,981,026)             (8,981,026)     
Balance at June 30, 2024   2,456,827   $2,457    50,000   $50    16,352,270   $16,353   $73,002,738   $(75,787,626)  $(148,291)  $2,962,275   $47,956   $304,967 

 

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 (Continued)

(Unaudited)

 

     Preferred Stock Series 1       Preferred Stock Series C       Common Stock Par              Treasury    Accumulated         
   Par Value $0.001   Par Value $0.001   Value $0.001   Additional       Stock,    other   Cemtrex   Non- 
   Number of       Number of       Number of       Paid-in   Accumulated   64,100 shares of   Comprehensive   Stockholders’   controlling 
  

Shares

   Amount   Shares   Amount  

Shares

   Amount  

Capital

   Deficit   Series 1 Preferred Stock   Income   Equity   interest 
Balance at September 30, 2022   2,079,122   $2,079    50,000   $50    754,711   $755   $66,641,698   $(54,929,020)  $(148,291)  $2,377,525   $13,944,796   $692,742 
Foreign currency translation gain                                                                                           223,569    223,569      
Share-based compensation                                 39,842                   39,842      
Shares issued to pay notes payable                       39,016    39    232,106                   232,145      
Dividends paid in Series 1 preferred shares   104,341    104                        (104)                  -      
Loss attributable to noncontrolling interest                                                     -    (59,163)
Net loss             -     -                    (6,277,211)   -          (6,277,211)     
Balance at December 31, 2022   2,183,463   $2,183    50,000   $50    793,727   $794   $66,913,542   $(61,206,231)  $(148,291)  $2,601,094   $8,163,141   $633,579 
Foreign currency translation loss                                               $(317,218)   (317,218)     
Share-based compensation                                 26,735                   26,735      
Additional rounding shares issued for reverse stock split                       19,314    19    (19)                  -      
Income attributable to noncontrolling interest                                                     -   $55,265 
Shares issued to pay for services                       15,529    15    102,485                   102,500      
Net loss   -     -     -     -                    (594,794)   -          (594,794)     
Balance at March 31, 2023   2,183,463   $2,183    50,000   $50    828,570   $828   $67,042,743   $(61,801,025)  $(148,291)  $2,283,876   $7,380,364   $688,844 
Foreign currency translation gain/(loss)                                                22,470    22,470      
Share-based compensation                                 26,736                   26,736      
Dividends paid in Series 1 preferred shares   109,553    110                        (110)                  -      
Shares issued to pay notes payable                       122,702    123    1,193,883                   1,194,006      
Income/(loss) attributable to noncontrolling interest                                                     -    (25,595)
Shares issued to pay for services                       6,488    7    39,365                   39,372      
Net loss             -     -                    (1,146,524)   -          (1,146,524)     
Balance at June 30, 2023   2,293,016   $2,293    50,000   $50    957,760   $958   $68,302,617   $(62,947,549)  $(148,291)  $2,306,346   $7,516,424   $663,249 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

6
 

 

Cemtrex, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

Cash Flows from Operating Activities  2024   2023 
   For the nine months ended 
   June 30, 
Cash Flows from Operating Activities  2024   2023 
         
Net loss  $(12,012,943)  $(8,048,022)
           
Adjustments to reconcile net loss to net cash used by operating activities          
Depreciation and amortization   998,641    698,269 
(Gain)/loss on disposal of property and equipment   (13,595)   69,611 
Noncash lease expense   645,695    614,254 
Bad debt expense   1,429,791    (155)
Share-based compensation   22,675    93,313 
Interest expense paid in equity shares   -    276,151 
Accounts payable paid in equity shares   129,000    141,872 
Accrued interest on notes payable   937,899    1,858,631 
Non-cash royalty income   (39,846)   - 
Amortization of original issue discounts on notes payable   -    1,200,200 
Amortization of loan origination costs   54,400    - 
Loss on excess fair value of warrants   7,255,528    - 
Changes in fair value of warrant liability   (2,807,890)   - 
           
Changes in operating assets and liabilities net of effects from acquisition of subsidiaries:          
Trade receivables   1,420,733    (2,108,384)
Trade receivables - related party   (136,277)   (578,388)
Inventory   1,350,333    (231,923)
Contract assets   624,141    215,304 
Prepaid expenses and other current assets   548,129    (883,018)
Other assets   (274,081)   (246,658)
Accounts payable   (1,588,439)   674,168 
Accounts payable - related party   (5,009)   (15,761)
Sales tax payable   2,036    66,121 
Operating lease liabilities   (646,595)   (550,019)
Deposits from customers   189,331    (38,863)
Accrued expenses   (496,932)   1,198,788 
Contract liabilities   921,287    369,072 
Deferred revenue   (395,065)   156,108 
Income taxes payable   

11,942

   (45,773)
Other liabilities   (201,366)   (278,946)
Net cash used by operating activities - continuing operations   (2,076,477)   (5,394,048)
Net cash provided by operating activities - discontinued operations   -    2,474,863 
Net cash used by operating activities   (2,076,477)   (2,919,185)
           
Cash Flows from Investing Activities          
Purchase of property and equipment   (429,334)   (761,470)
Proceeds from sale of property and equipment   77,110    26,205 
Royalties on related party revenues   

46,000

    - 
Investment in MasterpieceVR   (100,000)   - 
Net cash used by investing activities   (406,224)   (735,265)
           
Cash Flows from Financing Activities          
Proceeds on revolving line of credit   26,682,873    - 
Payments on revolving line of credit   (24,025,081)   - 
Payments on debt   (7,818,405)   (1,260,837)
Payments on Paycheck Protection Program Loans   (30,365)   (20,154)
Proceeds on bank loans   28,267    - 
Purchases of treasury stock   (69,705)   - 
Proceeds from offerings   10,035,293    - 
Expenses on offerings   (935,333)   - 
Net cash provided by/(used by) financing activities   3,867,544    (1,280,991)
           
Effect of currency translation   (114,180)   (104,123)
Net increase/(decrease) in cash, cash equivalents, and restricted cash   1,384,843    (4,935,441)
Cash, cash equivalents, and restricted cash at beginning of period   6,349,562    11,473,676 
Cash, cash equivalents, and restricted cash at end of period  $7,620,225   $6,434,112 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

7