UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
OR
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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) | ||||||||
| December 31, | September 30, | |||||||
| 2024 | 2024 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Trade receivables, net | ||||||||
| Trade receivables, net - related party | ||||||||
| Inventory, net | ||||||||
| Contract assets, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use operating lease assets | ||||||||
| Royalties receivable, net - related party | ||||||||
| Goodwill | ||||||||
| Other | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities & Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Sales tax payable | ||||||||
| Revolving line of credit | ||||||||
| Current maturities of long-term liabilities | ||||||||
| Operating lease liabilities - short-term | ||||||||
| Deposits from customers | ||||||||
| Accrued expenses | ||||||||
| Accrued payable on inventory in transit | ||||||||
| Contract liabilities | ||||||||
| Deferred revenue | ||||||||
| Accrued income taxes | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Long-term debt | ||||||||
| Long-term operating lease liabilities | ||||||||
| Other long-term liabilities | ||||||||
| Deferred Revenue - long-term | ||||||||
| Warrant liabilities | ||||||||
| 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 December 31, 2024 and shares issued and | ||||||||
| shares outstanding as of September 30, 2024 (liquidation value of $ | ||||||||
| Series C, shares authorized, shares issued and outstanding at | ||||||||
| December 31, 2024 and September 30, 2024 | ||||||||
| Common stock, $par value, shares authorized, | ||||||||
| shares issued and outstanding at December 31, 2024 and | ||||||||
| shares issued and outstanding at September 30, 2024 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Treasury stock, shares of Series 1 Preferred Stock at December 31, 2024, | ||||||||
| and September 30, 2024 | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total Cemtrex stockholders’ equity | ( | ) | ||||||
| Non-controlling interest | ||||||||
| Total liabilities and stockholders’ 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 | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Revenues | ||||||||
| Cost of revenues | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| General and administrative | ||||||||
| Research and development | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other (expense)/income | ||||||||
| Other income, net | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Loss on exercise of warrant liabilities | ( | ) | ||||||
| Changes in fair value of warrant liability | ( | ) | ||||||
| Total other expense, net | ( | ) | ( | ) | ||||
| Net loss before income taxes | ( | ) | ( | ) | ||||
| Income tax expense | ( | ) | ( | ) | ||||
| Loss from Continuing operations | ( | ) | ( | ) | ||||
| (Loss)/income from discontinued operations, net of tax | ( | ) | ||||||
| Net loss | ( | ) | ( | ) | ||||
| Less net loss in noncontrolling interest | ( | ) | ( | ) | ||||
| Net loss attributable to Cemtrex, Inc. stockholders | $ | ( | ) | $ | ( | ) | ||
| (Loss)/income per share - Basic & Diluted | ||||||||
| Continuing Operations | $ | ) | $ | ) | ||||
| Discontinued Operations | $ | ) | $ | |||||
| Weighted Average Number of Shares-Basic & Diluted | ||||||||
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
| For the three months ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Other comprehensive loss | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Foreign currency translation (loss)/gain | ( | ) | ||||||
| Comprehensive loss | ( | ) | ( | ) | ||||
| Comprehensive loss attributable to noncontrolling interest | ( | ) | ( | ) | ||||
| Comprehensive loss attributable to Cemtrex, Inc. stockholders | $ | ( | ) | $ | ( | ) | ||
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)
| Preferred Stock Series 1 | Preferred Stock Series C | Common Stock Par | Treasury Stock, 64,100 shares of | Accumulated | ||||||||||||||||||||||||||||||||||||||||||||
| Par Value $0.001 | Par Value $0.001 | Value $0.001 | Additional | Series 1 | other | Cemtrex | Non- | |||||||||||||||||||||||||||||||||||||||||
| Number of | Number of | Number of | Paid-in | Accumulated | Preferred | Comprehensive | Stockholders’ | controlling | ||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Stock | Income | Equity | interest | |||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | |
$ | |||||||||||||||||||||||||||||||||
| Foreign currency translation loss | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | ||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends paid in Series 1 preferred shares | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of Series A warrants | ||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of Series B warrants | ||||||||||||||||||||||||||||||||||||||||||||||||
| Income/(loss) attributable to noncontrolling interest | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||||||||
| Par Value $0.001 | Par Value $0.001 | Value $0.001 | ||||||||||||||||||||||||||||||||||||||||||||||
|
Number of Shares |
Amount |
Number of Shares |
Amount |
Number of Shares |
Amount |
Additional Paid-in Capital |
Accumulated Deficit |
Treasury Stock, 64,100 shares of Series 1 Preferred Stock |
Accumulated other Comprehensive Income |
Cemtrex Stockholders’ Equity |
Non- controlling interest |
|||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Foreign currency translation gain | ||||||||||||||||||||||||||||||||||||||||||||||||
| 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, 2023 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | $ | |||||||||||||||||||||||||||||||||||
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)
For the three months ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities | ||||||||
| 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 (recovery)/expense | ( | ) | ||||||
| Contract modification - related party | ||||||||
| Share-based compensation | ||||||||
| Shares issued to pay for services | ||||||||
| Accrued interest on notes payable | ||||||||
| Non-cash royalty income | ( | ) | ( | ) | ||||
| Amortization of original issue discounts on notes payable | ||||||||
| Loan origination costs | ||||||||
| Loss on exercise of warrant liabilities | ||||||||
| Changes in fair value of warrant liability | ||||||||
| Changes in operating assets and liabilities net of effects from acquisition | ||||||||
| of subsidiaries: | ||||||||
| Trade receivables | ( | ) | ||||||
| Trade receivables - related party | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Contract assets | ( | ) | ||||||
| Prepaid expenses and other current assets | ||||||||
| Other assets | ( | ) | ||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accounts payable - related party | ||||||||
| Sales tax payable | ( | ) | ( | ) | ||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Deposits from customers | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| Contract liabilities | ||||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Income taxes payable | ( | ) | ( | ) | ||||
| Other liabilities | ( | ) | ||||||
| Net cash used by operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from sale of property and equipment | ||||||||
| Royalties on related party revenues | ||||||||
| Proceeds from sale of marketable securities | ||||||||
| Investment in MasterpieceVR | ( | ) | ( | ) | ||||
| Net cash used by investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds on revolving line of credit | ||||||||
| Payments on revolving line of credit | ( | ) | ( | ) | ||||
| Payments on debt | ( | ) | ( | ) | ||||
| Payments on Paycheck Protection Program Loans | ( | ) | ( | ) | ||||
| Proceeds on bank loans | ||||||||
| Proceeds from notes payable | ||||||||
| Proceeds from warrant exercises | ||||||||
| Net cash 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 cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents, and restricted cash | $ | $ | ||||||
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 (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 | $ | $ | ||||||
| Financing of fixed asset purchase | $ | $ | ||||||
| Series A Warrant Exercises | $ | $ | ||||||
| Noncash recognition of new leases | $ | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 8 |
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.
The Company’s reporting segments consist of Security and Industrial Services. Additionally, the Company’s operational structure also reports unallocated corporate expenses.
Security
Cemtrex’s Security segment operates under the brand of its 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.
Common Stock Reverse Stock Split
On
October 2, 2024, the Company completed a
Nasdaq Notices for Listing Deficiencies
On June 14, 2024, 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 meets 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 notification letter also disclosed that in the event the Company does not regain compliance with the Minimum Bid Price Requirement by December 11, 2024. On December 11, 2024, we received a notification letter from the Nasdaq notifying us that we have regained compliance with the Minimum Bid Requirement.
The Reverse Stock Split would potentially increase our bid price such that we maintain the Minimum Bid Requirement required for maintaining the listing requirements for the Nasdaq Capital Market. Although we currently meet the Nasdaq Minimum Bid Requirement, out of abundance of caution, we believe that a future reverse split may be necessary in the future if we were to fall short of the Minimum Bid Price Requirement.
| 9 |
On October 23, 2024, the Company received a letter from Nasdaq that it had been granted an extension to February 17, 2025, to regain compliance with the Minimum Stockholder’s Equity Requirement.
On
January 2, 2025, the Company received a letter from Nasdaq notifying the Company that based on the Company’s Form 10-K filed on
December 30, 2024, evidencing stockholders’ equity of $
Going Concern Considerations
The accompanying unaudited 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 operational 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. The Company has $
| 10 |
Overall, there is no guarantee that cash flow from our existing or future operations and any external capital that we may be able to raise will be sufficient to meet our working capital needs. The Company currently do not have adequate cash to meet our short or long-term needs. The condensed consolidated financial statements do not include any adjustments relating to this uncertainty.
The unaudited condensed consolidated financial statements do not include any adjustments relating to this uncertainty.
Reclassifications
Certain reclassifications have been made to prior period amounts to conform to the current period presentation. This had no effect on the Company's statement of operations or retained earnings. The reclassification was to the caption “Accrued expenses” a portion of which has been reclassified to “Accrued payable on inventory in transit” on the condensed consolidated balance sheet The following table illustrates the reclassifications made.
| September 30, 2024 | ||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | As previously reported | Reclassification | As revised | |||||||||
| Accrued expenses | $ | $ | ( | ) | $ | |||||||
| Accrued payable on inventory in transit | $ | $ | $ | |||||||||
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, 2024, of Cemtrex, Inc.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the Unites States (“U.S. 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.
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, 2024, includes a summary of the significant accounting policies used in the preparation of the unaudited condensed consolidated financial statements.
| 11 |
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which enhances the disclosures required for operating segments in the Company’s annual and interim consolidated financial statements. ASU 2023-07 is effective for the Company for annual reporting for fiscal 2025 and for interim period reporting beginning in fiscal 2026 on a retrospective basis. Early adoption is permitted. On October 1, 2024, the Company implemented this standard and there has been no material change to the unaudited condensed consolidated financial statements.
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. On October 1, 2024, the Company implemented this standard and there has been no material change to the unaudited condensed consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Effective
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires public entities to disclose consistent categories and greater disaggregation of information in the rate reconciliation and for income taxes paid. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is required to adopt this standard prospectively in fiscal year 2026 for the annual reporting period ending September 30, 2026. The Company is currently in the process of evaluating the impact of adoption on the unaudited condensed consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, “Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses”, that requires public companies to disclose, in interim and reporting periods, additional information about certain expenses in the financial statements. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. The Company is currently assessing the potential impacts of adoption on the unaudited condensed consolidated financial statements.
In November 2024, the FASB issued ASU 2024-04, “Debt with Conversion and Other Options (Subtopic 470-20), which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. ASU 2024-04 is effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06. Adoption can be on a prospective or retrospective basis. The Company is currently in the process of evaluating the impact of adoption on the unaudited condensed consolidated 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 unaudited condensed consolidated financial statements.
NOTE 3 – REVENUE
The following table illustrates the approximate disaggregation of the Company’s revenue based off timing of revenue recognition for the three months ended December 31, 2024 and 2023:
| For the three months ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Over time | % | % | ||||||
| Point-in-time | % | % | ||||||
| 12 |
Basic net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net income per common share is computed by dividing net income by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants. For the three months ended December 31, 2024, and 2023, the following items were excluded from the computation of diluted net loss per common share as their effect is anti-dilutive:
| For the three months ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Options | ||||||||
| Warrants | ||||||||
| For the three months ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Loss from Continuing operations | $ | ( | ) | $ | ( | ) | ||
| Less loss in noncontrolling interest | ( | ) | ( | ) | ||||
| Preferred stock dividends | ||||||||
| Net loss applicable to common shareholders | ( | ) | ( | ) | ||||
| Weighted Average Number of Shares-Basic & Diluted | ||||||||
| Loss per share - Basic & Diluted - Continuing Operations | $ | ) | $ | ) | ||||
In accordance with ASC 260-45-13, the common shares underlying the Series A Warrants under the alternative cashless exercise have been included in the calculation of the weighted average shares.
NOTE 5 – SEGMENT INFORMATION
The Company reports and evaluates financial information for two reportable segments: the Security segment and the Industrial Services segment. The Chief Operating Decision Maker (“CODM”) for all segments is Saagar Govil, the CEO of the Company.
The following tables summarize the Company’s reportable segment information and unallocated corporate expenses:
| For the three months ended December 31, 2024 | For the three months ended December 31, 2023 | |||||||||||||||||||||||||||||||
| Reportable Segments | Reportable Segments | |||||||||||||||||||||||||||||||
| Security | Industrial Services | Corporate | Consolidated | Security | Industrial Services | Corporate | Consolidated | |||||||||||||||||||||||||
| External revenues | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Cost of revenues | ||||||||||||||||||||||||||||||||
| Gross profit | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||||||||||
| General, and administrative | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||||||||||
| Operating (loss)/income | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
| Other expense | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||
| December 31, | September 30, | |||||||
| 2024 | 2024 | |||||||
| Identifiable Assets | ||||||||
| Security | $ | $ | ||||||
| Industrial Services | ||||||||
| Corporate | ||||||||
| Total Assets | $ | $ | ||||||
Unallocated corporate expenses mainly relate to payroll and benefits for corporate officers, investor relation expenses, accounting expenses related to audit and taxes, legal expenses related to corporate matters, interest expense on notes payable, and Series A and B Warrants transaction losses.
| 13 |
NOTE 6 – RESTRICTED CASH
A
subsidiary of the Company participates in a consortium in order to self-insure group care coverage for its employees. The plan is administrated
by Benecon Group and the Company makes monthly deposits in a trust account to cover medical claims and any administrative costs associated
with the plan. These funds, as required by the plan are restricted in nature and amounted to $
NOTE 7 – FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level hierarchy is applied to prioritize the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
The three levels of the fair value hierarchy under the guidance for fair value measurements are described below:
Level 1 — Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Our Level 1 assets include cash equivalents, banker’s acceptances, trading securities investments and investment funds. The Company measures trading securities investments and investment funds at quoted market prices as they are traded in an active market with sufficient volume and frequency of transactions.
Level 2 — Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified contractual term, a Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3 — Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. Level 3 assets and liabilities include cost method investments. Quantitative information for Level 3 assets and liabilities reviewed at each reporting period includes indicators of significant deterioration in the earnings performance, credit rating, asset quality, business prospects of the investee, and financial indicators of the investee’s ability to continue as a going concern.
| 14 |
The Company’s fair value liabilities at December 30, 2024 and September 30, 2024, are as follows.
| Quoted Prices | Significant | Significant | Balance | |||||||||||
| in Active | Other | Unobservable | as of | |||||||||||
| Markets for | Observable | Inputs | December 31,, | |||||||||||
| Identical Assets | Inputs | (Level 3) | 2024 | |||||||||||
| (Level 1) | (Level 2) | |||||||||||||
| Liabilities | ||||||||||||||
| Warrant liabilities | $ | $ | $ | $ | ||||||||||
| $ | $ | $ | $ | |||||||||||
| Quoted Prices | Significant | Significant | Balance | |||||||||||
| in Active | Other | Unobservable | as of | |||||||||||
| Markets for | Observable | Inputs | September 30, | |||||||||||
| Identical Assets | Inputs | (Level 3) | 2024 | |||||||||||
| (Level 1) | (Level 2) | |||||||||||||
| Liabilities | ||||||||||||||
| Warrant liabilities | $ | $ | $ | $ | ||||||||||
| $ | $ | $ | $ | |||||||||||
A summary of the warrant liabilities activity for the three months ended December 31, 2024, is as follows:
| Series A Warrants | Series B Warrants | Total | ||||||||||
| Warrant Liabilities at September 30, 2024 | $ | $ | $ | |||||||||
| Warrants Issued | ||||||||||||
| Warrants Exercised | ( | ) | ( | ) | ( | ) | ||||||
| Fair market revaluation | ||||||||||||
| Warrant Liabilities at December 31, 2024 | $ | $ | $ | |||||||||
For the three months ended December
31, 2024, the company recognized losses on changes in fair value of warrant liability of $
For the three months ended December 31, 2024, the company recognized losses on exercise of warrant liabilities of
$
NOTE 8 – TRADE RECEIVABLES, NET
Trade receivables, net consist of the following:
| December 31, | September 30, | |||||||
| 2024 | 2024 | |||||||
| Trade receivables | $ | $ | ||||||
| Allowance for credit losses | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Trade receivables include amounts due for shipped products and services rendered.
Allowance for credit losses include estimated losses resulting from the inability of our customers to make the required payments.
| 15 |
NOTE 9 – PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
| December 31, 2024 | September 30, 2024 | |||||||
| Prepaid expenses | $ | $ | ||||||
| Prepaid inventory | ||||||||
| Deferred costs | ||||||||
| Short-term investments | ||||||||
| Prepaid income taxes | ||||||||
| VAT and GST tax receivable | ||||||||
| Prepaid expenses and other current assets total | $ | $ | ||||||
NOTE 10 – INVENTORY, NET
Inventory, net consisted of the following:
| December 31, | September 30, | |||||||
| 2024 | 2024 | |||||||
| Raw materials | $ | $ | ||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| Inventory, net | ||||||||
The
Company maintained an allowance for obsolete inventories of $
NOTE 11 – PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
| December 31, | September 30, | |||||||
| 2024 | 2024 | |||||||
| Land | $ | $ | ||||||
| Building and leasehold improvements | ||||||||
| Furniture and office equipment | ||||||||
| Computers and software | ||||||||
| Machinery and equipment | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation
expense for the three months ended December 31, 2024 and 2023, was $
| 16 |
NOTE 12 – GOODWILL
Changes in the carrying amount of goodwill, by segment, are as follows:
| Security | Industrial Services | Consolidated | ||||||||||
| Balance at September 30, 2024 | $ | $ | $ | |||||||||
| Impairment /adjustments | ||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | |||||||||
As
of December 31, 2024, and September 30, 2024, accumulated impairment losses of $
NOTE 13 – OTHER ASSETS
On
November 13, 2020, and January 19, 2022, Cemtrex made $
Other assets consisted of the following:
| December 31, 2024 | September 30, 2024 | |||||||
| Rental deposits | $ | $ | ||||||
| Investment in Masterpiece VR | ||||||||
| Other deposits | ||||||||
| Demonstration equipment supplied to resellers | ||||||||
| Other assets total | $ | $ | ||||||
NOTE 14 – ACCRUED EXPENSES
Accrued expenses consisted of the following:
| December 31, 2024 | September 30, 2024 | |||||||
| Accrued expenses | $ | $ | ||||||
| Accrued payroll | ||||||||
| Accrued warranty | ||||||||
| Accrued expenses total | $ | $ | ||||||
| 17 |
NOTE 15 – DEFERRED REVENUE
The Company’s deferred revenue as of and for the three months ended December 31, 2024, and 2023, were as follows:
For the three months ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Deferred revenue at beginning of period | $ | $ | ||||||
| Net additions: | ||||||||
| Deferred software revenues | ||||||||
| Recognized as revenue: | ||||||||
| Deferred software revenues | ( | ) | ( | ) | ||||
| Deferred revenue at end of period | ||||||||
| Less: current portion | ||||||||
| Long-term deferred revenue at end of period | $ | $ | ||||||
For
the three months ended December 31, 2024 and 2023, the Company recognized revenue of $
NOTE 16 – CONTRACT ASSETS AND LIABILITIES
Project contracts typically provide for a schedule of billings on percentage of completion of specific tasks inherent in the fulfillment of the Company’s performance obligation(s). The schedules for such billings usually do not precisely match the schedule on which costs are incurred. As a result, contract revenue recognized in the statements of operations can and usually does differ from amounts that can be billed to the customer at any point during the contract. Amounts by which cumulative contract revenue recognized on a contract as of a given date exceeds cumulative billings and unbilled receivables to the customer under the contract are reflected as a current asset in the unaudited condensed consolidated balance sheets under the caption “Contract assets.” Amounts by which cumulative billings to the customer under a contract as of a given date exceed cumulative contract revenue recognized are reflected as a current liability in the unaudited condensed consolidated balance sheets under the caption “Contract liabilities.” Conditional retainage represents the portion of the contract price withheld until the work is substantially complete for assurance of the Company’s obligations to complete the job.
The following is a summary of the Company’s uncompleted contracts:
| December 31, 2024 | September 30, 2024 | |||||||
| Costs incurred on uncompleted contracts | $ | $ | ||||||
| Estimated gross profit | ||||||||
| Applicable billings to date | ( | ) | ( | ) | ||||
| Net earnings in excess of billings / (billing in excess of costs) | $ | $ | ( | ) | ||||
For
the three months ended December 31, 2024 and 2023, the Company recognized revenue of $
The following table summarizes the net activity of the contract assets and contract liabilities for the three- period ended December 31 2024 and 2023.
| 18 |
| For three months ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts | ||||||||
| Contract asset, beginning balance | $ | $ | ||||||
| Changes in revenue billed, contract price or cost estimates | ( | ) | ||||||
| Contract asset, net, ending balance | $ | $ | ||||||
| Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts | ||||||||
| Contract liability, beginning balance | ( | ) | $ | ( | ) | |||
| Changes in revenue billed, contract price or cost estimates | ( | ) | ( | ) | ||||
| Contract liability, ending balance | $ | ( | ) | $ | ( | ) | ||
| Net Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts | ||||||||
| Net billings in excess of costs, beginning balance | $ | ( | ) | $ | ||||
| Changes in revenue billed, contract price or cost estimates | $ | ( | ) | |||||
| Net billings in excess of costs, ending balance | $ | $ | ||||||
NOTE 17 – RELATED PARTY TRANSACTIONS
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 January 6, 2025, the Company and Saagar Govil signed an agreement to revise the purchase price structure and payment terms.
The
Agreement’s Purchase Price provisions was amended to reflect that the Purchase Price will solely consist of the royalties based on the
actual revenues generated in the three years following closing. The provision requiring the total sum of royalties to reach a minimum
of $
Additionally, it was agreed that the payment terms due under the royalties shall be as follows commencing on January 1, 2025:
| ● | First
Year (January 2025) Monthly Payment: $ | |
| ● | Second
Year (January 2026) Monthly Payment: $ | |
| ● | Balloon Payment at the end of the Second Year (December 31, 2026): Total outstanding royalties |
This transaction was approved by the Board of Directors with Saagar Govil abstaining from the vote.
As
of December 31, 2024, management had been engaged in negotiations with Mr. Govil regarding the amendment to the contract, as both parties
sought to modify the agreement as stated above. Based on the status of negotiations at year-end and the high likelihood that the modification
would be finalized, management determined that it was appropriate to remove the previously recognized royalty receivable of $
As
of December 31, 2024, there were royalties receivable from the sale of Cemtrex, XR, Inc. of $
As
of December 31, 2024, there was $
| 19 |
NOTE 18 – LEASES
The
Company is party to contracts where we lease property from others under contracts classified as operating leases. The Company primarily
leases office and operating facilities, vehicles, and office equipment. The weighted average remaining term of our operating leases was
approximately
The Company has elected not to recognize lease assets and liabilities for leases with a term of 12 months or less.
The
Company’s corporate segment leases approximately
The
Company’s security segment leases approximately
A reconciliation of undiscounted cash flows to operating lease liabilities recognized in the unaudited condensed consolidated balance sheet at December 31, 2024, is set forth below:
| Years ending September 30, | Operating Leases | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Undiscounted lease payments | ||||
| Amount representing interest | ( | ) | ||
| Discounted lease payments | ||||
| Less short-term operating lease liabilities | ||||
| Long-term operating lease liabilities | $ | |||
Lease costs for the three months ended December 31, 2024, and 2023 are set forth below:
For the three months ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating lease costs | ||||||||
| Short-term lease costs | ||||||||
| Total lease cost | $ | $ | ||||||
NOTE 19 – LINES OF CREDIT AND LONG-TERM LIABILITIES
Revolving line of credit
On
October 5, 2023, the Company obtained a revolving line of credit in the amount of $
Standstill Agreement
On
April 30, 2024, the Company entered into a Standstill Agreement with Streeterville Capital, LLC (“Streeterville”) in which
Streeterville agreed not to seek to redeem any portion of its two outstanding notes with the Company for a period of
Notes payable
On
November 21, 2024, the Company, issued a note payable to Streeterville Capital, LLC in the amount of $
| 20 |
The following table outlines the Company’s secured liabilities:
| December 31, | September 30, | |||||||||||
| Interest Rate | Maturity | 2024 | 2024 | |||||||||
| Fulton Bank - $ | SOFR plus | |||||||||||
| Fulton Bank - $ | SOFR plus | |||||||||||
| Fulton Bank mortgage $ | SOFR plus | |||||||||||
| Fulton Bank (HEISEY) - $ | SOFR plus | |||||||||||
| Fulton Bank (HEISEY) - $ | SOFR plus | |||||||||||
| Note payable - $ | ||||||||||||
| Note payable - $ | ||||||||||||
| Note payable - $ | ||||||||||||
| Paycheck Protection Program loan - $ | ||||||||||||
| Total debt | $ | $ | ||||||||||
| Less: Current maturities | ( | ) | ( | ) | ||||||||
| Less: Unamortized original issue discount | ( | ) | ||||||||||
| Long-term debt | $ | $ | ||||||||||
NOTE 20 – STOCKHOLDERS’ EQUITY
Series 1 Preferred Stock
The Company’s Series 1 Preferred Stock was suspended from the Nasdaq Capital Market on January 22, 2024. The Series 1 Preferred Stock is now quoted on the OTC Markets under the symbol “CETXP.”
Nasdaq filed a Form 25 on March 21, 2024. The deregistration of the Company’s Series 1 Preferred Stock under Section 12(b) of the Exchange Act became effective 90 days after filing of the Form 25.
During the three months ended December 31, 2024, shares of Series 1 Preferred Stock were issued to pay dividends to holders of Series 1 Preferred Stock.
| 21 |
As of December 31, 2024, and September 30, 2024, there were and shares of Series 1 Preferred Stock issued and and shares of Series 1 Preferred Stock outstanding, respectively.
Common Stock
On
October 2, 2024, and November 26, 2024, the Company completed a
During the three months ended December 31, 2024, shares of common stock were issued for the exercise of Series A Warrants under the Alternative Cashless Exercise option as adjusted for reverse stock splits and exercise price adjustments.
During the three months ended December 31, 2024, shares of common stock were issued for the exercise of Series B Warrants.
May 2024 Equity Financing
On
May 1, 2024, the Company entered into an underwriting agreement with Aegis Capital Corp., in connection with a firm commitment underwritten
public offering (the “Offering”), providing for the issuance of
In
addition, the Company granted the Underwriter a 45-day option to purchase additional shares of common stock and/or Pre-Funded
Warrants, representing up to
May 2024 Warrants
The
Company evaluated the Series A, Series B, and Prefunded Warrants (collectively, the “Warrants”) in accordance with the guidance
at ASC 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging, and determined that the Warrants are precluded
from being considered indexed to the entity’s own stock, resulting in the Warrants being classified as a liability. The fair value
of the Series A Warrants was determined based on the stock price on issuance of $ multiplied by the total number of shares of common
stock issuable upon exercise of the Series A alternative cashless exercise. Under the alternative cashless exercise, the Holder is entitled
to receive three times the normal amount of shares issued in a cashless exercise. The Series A Holder may only execute the alternative
cashless exercise after Stockholder Approval (and received June 17, 2024); at the time of issuance, Stockholder Approval was deemed perfunctory
and almost certain to occur, and the most likely settlement option would be through the alternative cashless exercise. As such, upon
issuance, the total fair value of the Series A Warrants was $
| 22 |
The following table summarizes information about shares issuable under warrants outstanding as of December 31, 2024.
| Warrant Shares Outstanding | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | ||||||||||
| Outstanding at September 30, 2023 | ||||||||||||
| Warrants granted | $ | |||||||||||
| Warrants exercised | ( | ) | $ | |||||||||
| Warrants forfeited | ||||||||||||
| Warrants cancelled | ||||||||||||
| Outstanding at September 30, 2024 | $ | |||||||||||
| Warrants granted | ||||||||||||
| Warrants exercised | ( | ) | $ | |||||||||
| Warrants forfeited | ||||||||||||
| Warrants cancelled | ||||||||||||
| Exercise price adjustments | ( | ) | ||||||||||
| Outstanding at December 31, 2024 | $ | |||||||||||
On
October 2, 2024, the Company completed a
The following table illustrates the adjustment.
| Warrants outstanding | Aggregate Value | Adjusted number of warrants outstanding | ||||||||||
| Series A Warrants | $ | |||||||||||
| Series B Warrants | $ | |||||||||||
On
November 26, 2024, the Company completed a
| Warrants outstanding | Aggregate Value | Adjusted number of warrants outstanding | ||||||||||
| Series A Warrants | $ | |||||||||||
| Series B Warrants | $ | |||||||||||
| 23 |
For the three months ended December 31, 2024, and 2023, the Company recognized $ and $ of share-based compensation expense on its outstanding options, respectively. As of December 31, 2024, $ of unrecognized share-based compensation expense is expected to be recognized over a period of two years. Future compensation amounts will be adjusted for any change in estimated forfeitures.
During the three months ended December 31, 2024, no options were granted, cancelled, or forfeited.
NOTE 22 – COMMITMENTS AND CONTINGENCIES
From time to time, the Company and its subsidiaries are involved in legal proceedings that are incidental to the operation of our business. The Company continues to defend vigorously against all claims. Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information, including assessment of the merits of the particular claim, as well as current accruals and insurance coverage, the Corporation does not expect that such legal proceedings will have a material adverse impact on its unaudited condensed consolidated financial statements.
NOTE 23 – INCOME TAXES
The
Company recorded an income tax expense of approximately $
As
of year-end 2024, the Company had federal, state, and UK net operating losses (“NOL”) of approximately $
The
Company’s effective tax rate for the three months ended December 31, 2024, and 2023, was (%) and (
NOTE 24 – SUBSEQUENT EVENTS
Contract Modification and Removal of Minimum Royalty Guarantee
On January 6, 2025, the Company and Saagar Govil signed an agreement to revise the purchase price structure and payment terms.
| 24 |
The
Agreement’s Purchase Price provisions was amended to reflect that the Purchase Price will solely consist of the royalties based on the
actual revenues generated in the three years following closing. The provision requiring the total sum of royalties to reach a minimum
of $
Additionally, it was agreed that the payment terms due under the royalties shall be as follows commencing on January 1, 2025:
| ● | First
Year (Jan 2025) Monthly Payment: $ | |
| ● | Second
Year (Jan 2026) Monthly Payment: $ | |
| ● | Balloon Payment at the end of the Second Year (12/31/26): Total outstanding royalties |
This transaction was approved by the Board of Directors with Saagar Govil abstaining from the vote.
As
of December 31, 2024, management had been engaged in negotiations with Mr. Govil regarding the amendment to the contract, as both parties
sought to modify the agreement as stated above. Based on the status of negotiations at year-end and the high likelihood that the modification
would be finalized, management determined that it was appropriate to remove the previously recognized royalty receivable of $
This adjustment reflects additional information about conditions that existed at the balance sheet date and was accounted for as a recognized subsequent event in accordance with ASC 855, Subsequent Events.
| 25 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Except for historical information contained in this report, the matters discussed are forward-looking statements that involve risks and uncertainties. When used in this report, words such as “anticipates”, “believes”, “could”, “estimates”, “expects”, “may”, “plans”, “potential” and “intends” and similar expressions, as they relate to the Company or its management, identify forward-looking statements. Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. Such forward-looking statements are based on the beliefs of the Company’s management, as well as assumptions made by and information currently available to the Company’s management. Among the factors that could cause actual results to differ materially are the following: the effect of business and economic conditions; the impact of competitive products and their pricing; unexpected manufacturing or supplier problems; the Company’s ability to maintain sufficient credit arrangements; changes in governmental standards by which our environmental control products are evaluated and the risk factors reported from time to time in the Company’s SEC reports, including its recent report on Form 10-K. The Company undertakes no obligation to update forward-looking statements as a result of future events or developments.
General Overview
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.
The Company’s reporting segments consist of Security and Industrial Services. Additionally, the Company’s operational structure also reports unallocated corporate expenses.
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.
Significant Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon the accompanying unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Although these estimates are based on our knowledge of current events, our actual amounts and results could differ from those estimates. The estimates made are based on historical factors, current circumstances, and the experience and judgment of our management, who continually evaluate the judgments, estimates and assumptions and may employ outside experts to assist in the evaluations.
| 26 |
Certain of our accounting policies are deemed “significant”, as they are both most important to the financial statement presentation and require management’s most difficult, subjective, or complex judgments as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a discussion of our significant accounting policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended September 30, 2024.
Results of Operations – For the three months ended December 31, 2024, and 2023
Revenues
Our Security segment revenues for the three months ended December 31, 2024, decreased by $3,714,102 or 41% to $5,453,699 from $9,167,801 for the three months ended December 31, 2023. This decrease is due to unexpected delays in orders for security technology products under our Vicon brand.
Our Industrial Services segment revenues for the three months ended December 31, 2024, increased by $575,835 or 7%, to $8,286,200 from $7,710,365, for the three months ended December 31, 2023. This increase is mainly due to increased demand for the segment’s services.
Gross Profit
Gross Profit for the three months ended December 31, 2024, was $5,701,936 or 41% of revenues as compared to gross profit of $7,082,399 or 42% of revenues for the three months ended December 31, 2023.
Gross profit in our Security segment was $2,839,759 or 52% of the segment’s revenues for the three months ended December 31, 2024, as compared to gross profit of $4,516,947or 49% of the segment’s revenues for the period ended December 31, 2023. Gross profit percentage was up due to the mix of product sold in the three months ended December 31, 2024, compared to the three months ended December 31, 2023.
Gross profit in our Industrial Services segment was $2,862,177 or 35% of the segment’s revenues for the three months ended December 31, 2024, as compared to gross profit of $2,565,452 or 33% of the segment’s revenues for the period ended December 31, 2023. Gross profit as a percentage of revenues increased due to improved margins on projects in the three months ended December 31, 2024, compared to the three months ended December 31 2023.
General and Administrative Expenses
General and administrative expenses for the three months ended December 31, 2024, increased $121,323 or 2% to $7,093,289 from $6,971,966 for the three months ended December 31, 2023. The increase in general and administrative expenses is mainly related to increased fringe benefits, legal expenses, rent, and travel.
Research and Development Expenses
Research and Development expenses for the three months ended December 31, 2024, were $890,083 compared to $848,805 for the three months ended December 31, 2023, an increase of $41,278 or 5%. Research and Development expenses are related to the Security Segment’s development of next generation solutions associated with security and surveillance systems software.
Other Income/Expense
Other expense for the three months ended December 31, 2024, was $26,265,257, as compared to $505,272 for the three months ended December 31, 2023. Other expense for the three months ended December 31, 2024, was mainly driven by losses on excess fair value of the warrants of $15,796,105 which represents the difference between the fair value of the shares issued and the value of the warrants exercised and losses on changes in fair value of warrant liability of $10,020,212 which represents the change in the fair value of the of the warrants unexercised at the measurement period.
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Provision for Income Taxes
During the three months ended December 31, 2024 and 2023, the Company had income tax expense from continuing operations of $120,538 and $70,751, respectively. The provision for income tax is estimated based upon the current income projections of the Company, the effective rate of the prior year, and the Company’s current ability to utilize net loss carryforwards. The Company’s effective tax rate for the three months ended December 31, 2024, and 2023, was (.42%) and (5.69%) respectively.
Effects of Inflation
The Company’s business and operations have been affected by inflation during the periods for which financial information is presented. In response, the Company has instituted price increases and initiated cost-saving measures to mitigate the effects of inflation on operations.
Liquidity and Capital Resources
Working capital was $4,130,393 at December 31, 2024, compared to working capital of $8,103,457 at September 30, 2024. This includes cash and equivalents and restricted cash of $5,464,254 at December 31, 2024, and $5,420,392 at September 30, 2024. The decrease in working capital was primarily due to the increase in current maturities of long-term debt, and accrued expenses. The increases in accrued expenses are mainly related to a large order in the Security segment, the revenues of this order are to be recognized in the next quarter.
Cash used by operating activities for the three months ended December 31, 2024, and 2023 was $1,201,817 and $3,139,073, respectively. Our negative operating cash flow was mainly the result of our net loss less the losses on the warrant liabilities, which were non-cash in nature, combined with operating changes in trade payables, and inventory.
Trade receivables decreased by $1,956,874 or 18% to $9,202,802 at December 31, 2024, from $11,159,676 at September 30, 2024. The decrease in trade receivables is attributable to decreased sales in the Security segment.
Cash used by investing activities for the three months ended December 31, 2024, was $1,008,899 compared to $390,310 used for the three months ended December 31, 2023. Investing activities for the three months ended December 31, 2024, were driven by the Company’s purchase of property and equipment and investment in Masterpiece VR. Investing activities for the three months ended December 31, 2023, were driven by the Company’s purchase of property and equipment and investment in Masterpiece VR.
Cash provided by financing activities for the three months ended December 31, 2024, was $2,387,449 compared to providing cash of $998,099 for the three months ended December 31, 2023. Financing activities for the three months ended December 31, 2024, were primarily driven by the proceeds from the Company’s revolving line of credit, note payable, and the exercise of 333,650 Series B Warrants. Financing activities for the three months ended December 31, 2023, were primarily driven by the proceeds from the Company’s revolving line of credit and payments on the Company’s debt.
The Company’s working capital may not be sufficient to cover operating costs which indicates 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. The Company has $5,464,254 in cash and cash equivalents and restricted cash as of December 31, 2024. Additionally, the Company has (i) secured a line of credit for its Vicon brand to fund operations, which as of December 31, 2024, has available capacity of $903,102, (ii) continually reevaluated its pricing model on our Vicon brand to improve margins on those products, (iii) entered into a Standstill Agreement with Streeterville Capital, LLC (“Streeterville”) in which Streeterville agreed not to seek to redeem any portion of its two outstanding notes with the Company expiring on April 30, 2025 in exchange, the Company agreed to pay to Streeterville the greater of $4,000,000 or fifty percent (50%) of the net proceeds the Company receives from the sale of any of its common stock or preferred stock during the Standstill Period. To date, the company has paid Streeterville $4,588,897 under this agreement.
In the event additional capital is raised through equity offerings and/or debt is satisfied with equity, it may have a dilutive effect on our existing stockholders. While the Company believes these plans if successful, would be sufficient to meet the capital demands of our current operations for at least the next twelve months, there is no guarantee that we will succeed. Overall, there is no guarantee that cash flow from our existing or future operations and any external capital that we may be able to raise will be sufficient to meet our working capital needs. The Company currently does not have adequate cash or available liquidity/available capacity on our lines of credit to meet our short or long-term needs. Absent an ability to raise additional outside capital and restructure or refinance all or a portion of our debt, the Company will be unable to meet its obligations as they become due over the next twelve months beyond the issuance date.
Each segment of the Company’s operations has positioned itself for growth and the Company’s long-term objectives include, increasing marketing and sales for the Company’s products and services in each segment, increasing the Company’s presence through collaboration partnerships in each segment and through strategic acquisitions of complementary businesses for each segment. These long-term objectives will require sufficient cash to complete, and the Company expects to fund these objectives with cash on hand, issuance of debt, and from proceeds from the sale of the Company’s securities, which may not be sufficient to fully implement our growth initiatives.
The unaudited condensed consolidated financial statements do not include any adjustments relating to this uncertainty.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures reporting as promulgated under the Exchange Act is defined as controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our CEO and our CFO have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2024. Based on their evaluation, our management has concluded that as of December 31, 2024, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) that occurred during the three months ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
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Part II Other Information
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors
See Risk Factors included in our Annual Report on Form 10-K filed with the SEC on December 28, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Such shares were issued pursuant to the exemption contained under Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Regulation D promulgated thereunder.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
N/A
Item 5. Other Information
None.
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Item 6. Exhibits
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Cemtrex, Inc. | ||
| Dated: February 14, 2025 | By: | /s/ Saagar Govil |
| Saagar Govil | ||
| Chairman of the Board, CEO, | ||
| President and Secretary (Principal Executive Officer) | ||
| Dated: February 14, 2025 | /s/ Paul J. Wyckoff | |
| Paul J. Wyckoff | ||
| Chief Financial Officer and Principal Financial Officer | ||
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