UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 |
For the quarterly period ended December 31, 20182019
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 |
For the transition period from ___________to ____________
Commission File Number001-37464
CEMTREX, INC.
(Exact name of registrant as specified in its charter)
Delaware | 30-0399914 | |
(State or other jurisdiction
| (I.R.S. Employer
|
(Address of principal executive offices) | (Zip Code) |
631-756-9116
(Registrant’s(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 | ||
Series 1 Preferred Stock | CETXP | Nasdaq Capital Market | ||
Series 1 Warrants | CETXW | 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.
[X] | Yes | [ ] | No |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
[X] | Yes | [ ] | No |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer [ ] | |
Non-accelerated filer [ ] | Smaller reporting company [X] | |
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 | [X] | 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 February 11, 2019,17, 2020, the issuer had 14,149,6986,547,702 shares of common stock issued and outstanding.
Table of Contents
CEMTREX, INC. AND SUBSIDIARIES
INDEX
2 |
Cemtrex, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
December 31, 2018 | September 30, 2018 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and equivalents | $ | 818,548 | $ | 973,772 | ||||
Restricted Cash | 1,360,487 | 1,342,163 | ||||||
Accounts receivable, net | 11,580,282 | 13,945,655 | ||||||
Trade receivables - related party | - | 165,220 | ||||||
Inventory, net | 13,362,007 | 11,354,458 | ||||||
Prepaid expenses and other current assets | 3,775,941 | 4,132,996 | ||||||
Total current assets | 30,897,265 | 31,914,264 | ||||||
Property and equipment, net | 26,342,873 | 27,300,654 | ||||||
Goodwill | 3,322,819 | 3,322,818 | ||||||
Investment in Vicon | 1,356,495 | 1,699,271 | ||||||
Other assets | 3,165,528 | 3,093,607 | ||||||
Total Assets | $ | 65,084,980 | $ | 67,330,614 | ||||
Liabilities & Stockholders’ Equity | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 9,074,976 | $ | 7,068,005 | ||||
Accounts payable to related party | 2,000 | - | ||||||
Short-term liabilities | 5,969,187 | 10,913,703 | ||||||
Deposits from customers | 328,196 | 50,619 | ||||||
Accrued expenses | 5,896,286 | 2,333,938 | ||||||
Deferred revenue | 976,632 | 970,590 | ||||||
Accrued income taxes | 424,895 | 565,513 | ||||||
Total current liabilities | 22,672,172 | 21,902,368 | ||||||
Long-term liabilities | ||||||||
Loans payable to bank, net of current portion | 3,905,427 | 4,206,468 | ||||||
Long-term capital lease, net of current portion | 38,486 | 44,081 | ||||||
Notes payable, net of current portion | 309,455 | 276,639 | ||||||
Mortgage payable, net of current portion | 3,461,323 | 3,568,545 | ||||||
Deferred tax liabilities | 2,051,499 | 2,051,847 | ||||||
Total long-term liabilities | 9,766,190 | 10,147,580 | ||||||
Total liabilities | 32,438,362 | 32,049,948 | ||||||
Commitments and contingencies | - | - | ||||||
Shareholders’ equity | ||||||||
Preferred stock , $0.001 par value, 10,000,000 shares authorized, Series 1, 3,000,000 shares authorized, 2,009,946 shares issued and outstanding as of December 31, 2018 and 1,914,168 shares issued and outstanding as of September 30, 2018 (liquidation value of $10 per share) | 2,010 | 1,914 | ||||||
Series A, 1,000,000 shares authorized, issued and outstanding at December 31, 2018 and September 30, 2018 | 1,000 | 1,000 | ||||||
Common stock, $0.001 par value, 20,000,000 shares authorized, 13,385,108 shares issued and outstanding at December 31, 2018 and 12,973,730 shares issued and outstanding at September 30, 2018 | 13,385 | 12,973 | ||||||
Additional paid-in capital | 32,842,394 | 31,485,320 | ||||||
Retained earnings | 1,128,678 | 4,262,756 | ||||||
Accumulated other comprehensive income/(loss) | (1,340,849 | ) | (483,297 | ) | ||||
Total shareholders’ equity | 32,646,618 | 35,280,666 | ||||||
Total liabilities and shareholders’ equity | $ | 65,084,980 | $ | 67,330,614 |
December 31, | September 30, | |||||||
2019 | 2019 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and equivalents | $ | 3,963,958 | $ | 1,769,994 | ||||
Restricted cash | 1,233,269 | 1,088,091 | ||||||
Short-term investments | 114,056 | 412,730 | ||||||
Accounts receivables, net | 6,651,359 | 6,458,984 | ||||||
Accounts receivables - related party | 597,109 | 227,019 | ||||||
Notes receivable - short-term | 1,713,371 | 1,713,371 | ||||||
Inventory –net of allowance for inventory obsolescence | 5,272,892 | 5,207,155 | ||||||
Prepaid expenses and other assets | 2,226,377 | 2,000,265 | ||||||
Total current assets | 21,772,391 | 18,877,609 | ||||||
Property and equipment, net | 16,566,566 | 16,776,552 | ||||||
Right-of-use assets | 1,142,279 | - | ||||||
Goodwill | 4,370,894 | 4,370,894 | ||||||
Notes receivable - long-term | 1,586,918 | 1,586,918 | ||||||
Deferred tax asset | 2,282,867 | 2,282,867 | ||||||
Other | 991,654 | 497,857 | ||||||
Total Assets | $ | 48,713,569 | $ | 44,392,697 | ||||
Liabilities & Stockholders’ Equity | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 3,318,695 | $ | 4,236,945 | ||||
Short-term liabilities | 9,600,331 | 6,817,534 | ||||||
Lease liabilities - short-term | 476,808 | 22,718 | ||||||
Deposits from customers | 35,462 | 33,074 | ||||||
Accrued expenses | 2,715,205 | 2,673,646 | ||||||
Deferred revenue | 1,711,099 | 1,433,803 | ||||||
Accrued income taxes | 419,353 | 419,541 | ||||||
Total current liabilities | 18,276,953 | 15,637,261 | ||||||
Long-term liabilities | ||||||||
Loans payable to bank, net of current portion | 2,005,405 | 2,240,526 | ||||||
Long-term lease liabilities, net of current portion | 665,471 | 20,061 | ||||||
Notes payable, net of current portion | 3,083,493 | 2,817,661 | ||||||
Other long-term liabilities | 1,177,590 | 1,221,549 | ||||||
Deferred Revenue - long-term | 476,221 | 489,535 | ||||||
Total long-term liabilities | 7,408,180 | 6,789,332 | ||||||
Total liabilities | 25,685,133 | 22,426,593 | ||||||
Commitments and contingencies | - | - | ||||||
Stockholders’ equity | ||||||||
Preferred stock , $0.001 par value, 10,000,000 shares authorized, | ||||||||
Series 1, 3,000,000 shares authorized, 2,216,683 shares issued and outstanding as of December 31, 2019 and 2,110,718 shares issued and outstanding as of September 30, 2019 (liquidation value of $10 per share) | 2,217 | 2,111 | ||||||
Series A, 1,000,000 shares authorized, issued and outstanding at December 31, 2019 and September 30, 2019 | 1,000 | 1,000 | ||||||
Series C, 100,000 shares authorized, issued and outstanding at December 31, 2019 | 100 | - | ||||||
Common stock, $0.001 par value, 20,000,000 shares authorized, 4,424,583 shares issued and outstanding at December 31, 2019 and 3,962,790 shares issued and outstanding at September 30, 2019 | 4,424 | 3,963 | ||||||
Additional paid-in capital | 42,040,809 | 40,344,837 | ||||||
Accumulated deficit | (21,461,500 | ) | (20,067,685 | ) | ||||
Accumulated other comprehensive income (loss) | 1,379,030 | 796,004 | ||||||
Cemtrex stockholders’ equity | 21,966,080 | 21,080,230 | ||||||
Non-controlling interest | 1,062,356 | 885,874 | ||||||
Total liabilities and stockholders’ equity | $ | 48,713,569 | $ | 44,392,697 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
3 |
Cemtrex, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss)
(Unaudited)
For the three months ended | ||||||||
December 31, | ||||||||
2018 | 2017 | |||||||
Revenues | ||||||||
Advanced Technologies Revenue | $ | 467,835 | $ | - | ||||
Electronics Manufacturing Revenue | 11,026,253 | 20,443,101 | ||||||
Industrial Technology Revenue | 5,790,456 | 11,938,799 | ||||||
Total revenues | 17,284,544 | 32,381,900 | ||||||
Cost of revenues | ||||||||
Cost of Sales, Advanced Technologies | 192,365 | - | ||||||
Cost of Sales, Electronics Manufacturing | 6,512,329 | 13,187,955 | ||||||
Cost of Sales, Industrial Technology | 3,584,728 | 8,669,453 | ||||||
Total cost of revenues | 10,289,422 | 21,857,408 | ||||||
Gross profit | 6,995,122 | 10,524,492 | ||||||
Operating expenses | ||||||||
General and administrative | 8,240,174 | 9,507,584 | ||||||
Research and development | 379,517 | 149,217 | ||||||
Total operating expenses | 8,619,691 | 9,656,801 | ||||||
Operating income/(loss) | (1,624,569 | ) | 867,691 | |||||
Other income (expense) | ||||||||
Other Income (expense) | 47,643 | 291,767 | ||||||
Interest Expense | (189,747 | ) | (368,461 | ) | ||||
Total other income (expense) | (142,104 | ) | (76,694 | ) | ||||
Net income (loss) before income taxes and equity interest | (1,766,673 | ) | 790,997 | |||||
Income tax (expense)/benefit | (66,849 | ) | (59,006 | ) | ||||
Earnings/(loss) in equity interests | (342,776 | ) | - | |||||
Net income (loss) | (2,176,298 | ) | 731,991 | |||||
Preferred dividends paid | 957,780 | - | ||||||
Net income/(loss) available to common shareholders | $ | (3,134,078 | ) | $ | 731,991 | |||
Other comprehensive income/(loss) | ||||||||
Foreign currency translation gain/(loss) | (857,552 | ) | 631,045 | |||||
Comprehensive income/(loss) available to common shareholders | $ | (3,991,630 | ) | $ | 1,363,036 | |||
Income/(loss) Per Common Share-Basic | $ | (0.24 | ) | $ | 0.07 | |||
Income/(loss) Per Common Share-Diluted | $ | (0.24 | ) | $ | 0.07 | |||
Weighted Average Number of Common Shares-Basic | 13,110,211 | 10,486,770 | ||||||
Weighted Average Number of Common Shares-Diluted | 13,110,211 | 10,644,723 |
For the three months ended | ||||||||
December 31, 2019 | December 31, 2018 | |||||||
Revenues | 12,220,083 | 5,717,589 | ||||||
Cost of revenues | 6,871,597 | 3,530,003 | ||||||
Gross profit | 5,348,486 | 2,187,586 | ||||||
Operating expenses | ||||||||
General and administrative | 4,852,957 | 3,334,561 | ||||||
Research and development | 376,586 | 379,517 | ||||||
Total operating expenses | 5,229,543 | 3,714,078 | ||||||
Operating income/(loss) | 118,943 | (1,526,492 | ) | |||||
Other income (expense) | ||||||||
Other Income (expense) | 224,325 | (10,560 | ) | |||||
Loss in equity interests | - | (342,776 | ) | |||||
Interest expense | (482,522 | ) | (115,266 | ) | ||||
Total other expense, net | (258,197 | ) | (468,602 | ) | ||||
Net loss before income taxes | (139,254 | ) | (1,995,094 | ) | ||||
Income tax benefit | - | 50 | ||||||
Loss from continuing operations | (139,254 | ) | (1,995,044 | ) | ||||
Loss from discontinued operations, net of tax | - | (181,254 | ) | |||||
Net loss | (139,254 | ) | (2,176,298 | ) | ||||
Less noncontrolling interest | (194,911 | ) | - | |||||
Net Income/(loss) | (334,165 | ) | (2,176,298 | ) | ||||
Preferred dividends paid | 1,059,650 | 957,780 | ||||||
Net loss available to Cemtrex, Inc. shareholders | (1,393,815 | ) | (3,134,078 | ) | ||||
Other comprehensive income/(loss) | ||||||||
Foreign currency translation gain/(loss) | 583,026 | (857,552 | ) | |||||
Other comprehensive loss attribitable to noncontrolling interest | (18,429 | ) | - | |||||
Comprehensive income/(loss) | 564,597 | (857,552 | ) | |||||
Comprehensive loss | $ | (829,218 | ) | $ | (3,991,630 | ) | ||
Loss Per Share-Basic | ||||||||
Continuing Operations | $ | (0.34 | ) | $ | (1.80 | ) | ||
Discontinued Operations | $ | - | $ | (0.11 | ) | |||
Loss Per Share-Diluted | ||||||||
Continuing Operations | $ | (0.34 | ) | $ | (1.80 | ) | ||
Discontinued Operations | $ | - | $ | (0.11 | ) | |||
Weighted Average Number of Shares-Basic | 4,086,609 | 1,638,776 | ||||||
Weighted Average Number of Shares-Diluted | 4,086,609 | 1,638,776 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
4 |
Cemtrex, Inc. and Subsidiaries
CondensedConsolidated StatementsStatement of Cash FlowsStockholders’ Equity
(Unaudited)
For the three months ended | ||||||||
December 31, | ||||||||
2018 | 2017 | |||||||
Cash Flows from Operating Activities | ||||||||
Consolidated net income/(loss) | $ | (2,176,298 | ) | $ | 731,991 | |||
Adjustments to reconcile net income/(loss) to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 1,077,262 | 841,855 | ||||||
Deferred revenue | 6,042 | 20,983 | ||||||
Change in allowance for inventory obsolescence | - | 623,775 | ||||||
Share-based compensation | 36,108 | - | ||||||
Interest expense on convertible debt | - | 109,144 | ||||||
Loss on equity interests | 342,776 | - | ||||||
Changes in operating assets and liabilities net of effects from acquisition of subsidiaries: | ||||||||
Accounts receivable | 2,365,373 | (2,379,205 | ) | |||||
Trade receivables - related party | 165,220 | - | ||||||
Inventory | (2,007,549 | ) | 3,798,092 | |||||
Prepaid expenses and other assets | 357,055 | (782,447 | ) | |||||
Other assets | (71,921 | ) | (89,268 | ) | ||||
Accounts payable | 2,006,971 | 800,010 | ||||||
Accounts payable to related party | 2,000 | - | ||||||
Deposits from customers | 277,577 | - | ||||||
Accrued expenses | 3,562,348 | (569,336 | ) | |||||
Income taxes payable | (140,618 | ) | (57,286 | ) | ||||
Net cash provided by operating activities | 5,802,346 | 3,048,308 | ||||||
Cash Flows from Investing Activities | ||||||||
Purchase of property and equipment | (548,361 | ) | (2,344,266 | ) | ||||
Net cash used by investing activities | (548,361 | ) | (2,344,266 | ) | ||||
Cash Flows from Financing Activities | ||||||||
Proceeds from notes payable | - | 2,300,000 | ||||||
Payments on notes payable | (143,882 | ) | (144,977 | ) | ||||
Payments on secured loan | (2,154,561 | ) | - | |||||
Payments on bank loans | (779,173 | ) | (360,543 | ) | ||||
Proceeds from at-the-market offering | 150,721 | - | ||||||
Expenses on at-the-market offering | (12,027 | ) | - | |||||
Revolving line of credit | (2,446,368 | ) | (473,936 | ) | ||||
Payments on caplital lease obligations | (5,595 | ) | - | |||||
Net cash provided/(used) by financing activities | (5,390,885 | ) | 1,320,544 | |||||
Net increase (decrease) in cash | (136,900 | ) | 2,024,586 | |||||
Cash beginning of period | 2,315,935 | 11,974,752 | ||||||
Cash end of period | $ | 2,179,035 | $ | 13,999,338 | ||||
Supplemental Disclosure of Cash Flow Information: | ||||||||
Cash paid during the period for interest | $ | 166,547 | $ | 259,317 | ||||
Cash paid during the period for income taxes | $ | 140,618 | $ | 57,286 | ||||
Supplemental Schedule of Non-Cash Investing and Financing Activities | ||||||||
Payment of convertible notes in common stock | $ | - | $ | 220,000 | ||||
Payment of interest on convertible notes in common stock | $ | - | $ | 109,144 | ||||
Payment of short-term notes payable in common stock | $ | 225,000 | $ | - | ||||
Dividends paid in equity shares | $ | 957,780 | $ | - |
Preferred Stock Series 1 | Preferred Stock Series A | Preferred Stock Series C | Common Stock Par | Retained | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||
Par Value $0.001 | Par Value $0.001 | Par Value $0.001 | Value $0.01 | Additional | Earnings | other | Cemtrex | Non- | ||||||||||||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Number of | Paid-in | (Accumulated | Comprehensive | Stockholders’ | controlling | ||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit) | Income(loss) | Equity | interest | ||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2019 | 2,110,718 | $ | 2,111 | 1,000,000 | $ | 1,000 | - | $ | - | 3,962,790 | $ | 3,963 | $ | 40,344,837 | $ | (20,067,685 | ) | $ | 796,004 | $ | 21,080,230 | $ | 885,874 | |||||||||||||||||||||||||||||
Comprehensive income | 564,597 | 564,597 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | 100,000 | 100 | 119,004 | 119,104 | ||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued to pay accounts payable | 18,358 | 18 | 27,565 | 27,583 | ||||||||||||||||||||||||||||||||||||||||||||||||
Shares sold in Securities Purchase Agreements | 338,393 | 338 | 359,712 | 360,050 | ||||||||||||||||||||||||||||||||||||||||||||||||
Stock issued to pay notes payable | 105,042 | 105 | 130,147 | 130,252 | ||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid in Series 1 preferred shares | 105,965 | 106 | 1,059,544 | (1,059,650 | ) | - | ||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling interest | 18,429 | 18,429 | 176,482 | |||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | (334,165 | ) | (334,165 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2019 | 2,216,683 | $ | 2,217 | 1,000,000 | $ | 1,000 | 100,000 | $ | 100 | 4,424,583 | $ | 4,424 | $ | 42,040,809 | $ | (21,461,500 | ) | $ | 1,379,030 | $ | 21,966,080 | $ | 1,062,356 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statementstatements.
5 |
Cemtrex, Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders’ Equity (Continued)
(Unaudited)
Preferred Stock Series 1 | Preferred Stock Series A | Common Stock Par | Retained | Accumulated | ||||||||||||||||||||||||||||||||||||||||
Par Value $0.001 | Par Value $0.001 | Value $0.01 | Additional | Earnings | other | Cemtrex | Non- | |||||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Paid-in | (Accumulated | Comprehensive | Stockholders’ | controlling | |||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit) | Income(loss) | Equity | interest | ||||||||||||||||||||||||||||||||||
Balance at September 30, 2018 | 1,914,168 | $ | 1,914 | 1,000,000 | $ | 1,000 | 1,621,719 | $ | 1,622 | $ | 31,496,671 | $ | 4,262,756 | $ | (483,297 | ) | $ | 42,344,777 | $ | - | ||||||||||||||||||||||||
Foreign currency translations | - | - | - | - | - | - | - | - | (857,552 | ) | (857,552 | ) | ||||||||||||||||||||||||||||||||
Share-based compensation | - | - | - | - | - | - | 36,108 | - | - | 36,108 | ||||||||||||||||||||||||||||||||||
Stock issued in Subscription Rights Offering | - | - | - | - | 25,126 | 25 | 138,669 | - | - | 138,694 | ||||||||||||||||||||||||||||||||||
Stock issued to pay notes payable | - | - | - | - | 26,342 | 26 | 224,974 | - | - | 225,000 | ||||||||||||||||||||||||||||||||||
Dividends paid in Series 1 preferred shares | 95,778 | 96 | - | - | - | - | 957,684 | (957,780 | ) | - | - | |||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | (2,176,298 | ) | - | (2,176,298 | ) | ||||||||||||||||||||||||||||||||
Balance at December 31, 2018 | 2,009,946 | $ | 2,010 | 1,000,000 | $ | 1,000 | 1,673,187 | $ | 1,673 | $ | 32,854,106 | $ | 1,128,678 | $ | (1,340,849 | ) | $ | 32,646,618 | $ | - |
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, | ||||||||
2019 | 2018 | |||||||
Cash Flows from Operating Activities | ||||||||
Net loss | $ | (139,254 | ) | $ | (2,176,298 | ) | ||
Net loss from discontinued operations | - | (181,254 | ) | |||||
Net loss from continuing operations | (139,254 | ) | (1,995,044 | ) | ||||
Adjustments to reconcile net loss to net cash provided/(used) by operating activities: | ||||||||
Depreciation and amortization | 674,353 | 640,215 | ||||||
Gain/(loss) on disposal of property & equipment | 826 | - | ||||||
Amortization of right-of-use assets | 162,713 | - | ||||||
Change in allowance for inventory obsolescence | (19,569 | ) | - | |||||
Change in allowance for doubtful accounts | 4,362 | - | ||||||
Share-based compensation | 119,104 | 36,108 | ||||||
Interest expense paid in equity shares | 30,252 | - | ||||||
Loss on equity interests | - | 342,776 | ||||||
Changes in operating assets and liabilities net of effects from acquisition of subsidiaries: | ||||||||
Accounts receivable | (196,737 | ) | 1,246,088 | |||||
Accounts receivable - related party | (370,090 | ) | 167,220 | |||||
Inventory | (46,168 | ) | (1,439,893 | ) | ||||
Prepaid expenses and other curent asstets | (226,112 | ) | (414,116 | ) | ||||
Other assets | (493,797 | ) | (71,921 | ) | ||||
Other liabilities | (43,959 | ) | - | |||||
Accounts payable | (890,667 | ) | 2,079,745 | |||||
Deposits from customers | 2,388 | 277,577 | ||||||
Accrued expenses | 327,612 | 351,524 | ||||||
Deferred revenue | 263,982 | 6,042 | ||||||
Income taxes payable | (188 | ) | 397 | |||||
Net cash provided/(used) by operating activities - continuing operations | (840,949 | ) | 1,226,718 | |||||
Net cash provided by operating activities - discontinued operations | - | 4,575,628 | ||||||
Net cash provided/(used) by operating activities | (840,949 | ) | 5,802,346 | |||||
Cash Flows from Investing Activities | ||||||||
Purchase of property and equipment | (465,193 | ) | (428,879 | ) | ||||
Proceeds from sale of marketable securities | 298,674 | - | ||||||
Net cash used by investing activities - continuing operations | (166,519 | ) | (428,879 | ) | ||||
Net cash used by investing activities - discontinued operations | - | (119,482 | ) | |||||
Net cash used by investing activities | (166,519 | ) | (548,361 | ) | ||||
Cash Flows from Financing Activities | ||||||||
Proceeds from notes payable | 2,990,000 | - | ||||||
Payments on notes payable | (109,520 | ) | (143,882 | ) | ||||
Payments on bank loans | (236,153 | ) | (495,629 | ) | ||||
Proceeds from securities purchase agreements | 379,000 | 150,721 | ||||||
Expenses on securities purchase agreements | (18,950 | ) | (12,027 | ) | ||||
Revolving line of credit | (16,872 | ) | (1,101,340 | ) | ||||
Payments on lease liabilities | (205,492 | ) | (5,595 | ) | ||||
Net cash provided/(used) by financing activities - continuing operations | 2,782,013 | (1,607,752 | ) | |||||
Net cash provided/(used) by financing activities - discontinued operations | - | (2,925,581 | ) | |||||
Net cash provided/(used) by financing activities | 2,782,013 | (4,533,333 | ) | |||||
Effect of currency translation | 564,597 | (857,552 | ) | |||||
Net increase in cash | 1,774,545 | 720,652 | ||||||
Cash beginning of period | 2,858,085 | 2,315,935 | ||||||
Cash end of period | $ | 5,197,227 | $ | 2,179,035 | ||||
Supplemental Disclosure of Cash Flow Information: | ||||||||
Cash paid during the period for interest | $ | 176,218 | $ | 166,547 | ||||
Cash paid during the period for income taxes | $ | 188 | $ | 140,618 | ||||
Supplemental Schedule of Non-Cash Investing and Financing Activities | ||||||||
Payment of convertible notes in common stock | $ | - | $ | 220,000 | ||||
Stock issued to pay accounts payable | $ | 27,583 | $ | - | ||||
Stock issued to pay notes payable | $ | 130,252 | $ | - | ||||
Dividends paid in equity shares | $ | 1,059,650 | $ | 915,080 | ||||
Amortization of original issue discounts on notes payable | $ | 133,833 | $ | - |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
7 |
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 from a small environmental monitoring instruments company into a world leading multi-industry technology company. The Company drives innovation in a wide range of sectors, including smart technology, virtual and augmented realities, advanced electronic systems, industrial solutions, and intelligent security systems. 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 continuously assesses the composition of its portfolio businesses to ensure it is aligned with its strategic objectives and positioned to maximize growth and return in the coming years. During fiscal 2019, the Company made a strategic decision to exit its Electronics Manufacturing group by selling all companies in that business segment on August 15, 2019. Accordingly, the Company has reported the results of the Electronics Manufacturing business as discontinued operations in the Consolidated Statements of Income and in the Consolidated Balance Sheets. These changes have been applied for all periods presented. During fiscal 2019, the Company also reached a strategic decision to exit the environmental products business which was part of Industrial Services group. Accordingly, the Company has reported the results of the environmental control products business as discontinued operations in the Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss) and in the Condensed Consolidated Statements of Cash Flows.
Now the Company has two business segments, consisting of (i) Advanced Technologies (AT) and (ii) Industrial Services (IS)
Advanced Technologies (AT)
Cemtrex’s Advanced Technologies segment delivers cutting-edge technologies in the IoT, Wearables and Smart Devices, such as the SmartDesk. Through the Company’s advanced engineering and product design, they deliver progressive design and development solutions to create impactful experiences for mobile, web, virtual and augmented reality, wearables and television as well as providing cutting edge, mission critical security and video surveillance. Through its Cemtrex VR division, the Company is developing a wide variety of applications for virtual and augmented reality markets.
Cemtrex has developed a cutting edge IoT product,The AT business segment also includes the SmartDesk, overCompany’s majority owned subsidiary, Vicon Industries, which provides end-to-end security solutions to meet the last eighteen months to revolutionize the desktop PC market. The SmartDesk is custom engineeredtoughest corporate, industrial and manufactured by Cemtrex with over eighteen patents pending around the product. SmartDesk combinesgovernmental security challenges. Vicon’s products include browser-based Video monitoring systems and reimagines the needsfacial recognition systems, cameras, servers, and access control systems for every aspect of the modern office workstationsecurity and surveillance in a sleek, clutter-free design. The product includes 72 inches of touch display monitors, proprietary patent-pending touchindustrial and gesture control, digital phonecommercial facilities, federal prisons, hospitals, universities, schools, and webcam, integrated document scanner, wireless smartphone charging,federal and a built-in keyboard / trackpad with an electric-powered, adjustable-height desk.
The Company is marketing this product to both consumers and enterprises alike. The Company currently markets this product directly to consumers but is also bringing on value added resellers (VARs) to reach enterprise customers. Cemtrex has received pre-orders from large Fortune 500 organizations like Black & Decker and United airlines. The Company will start fulfilling most SmartDesk orders in its fiscal second quarter. The Company also offers white glove installation, extended warranties, and accessories to go along with the SmartDesk.
state government offices.
Electronics Manufacturing (EM)
Industrial Services (IS)
Cemtrex’s Electronics Manufacturing (EM) segment provides end to end electronic manufacturing services, which includes product design and sustaining engineering services, printed circuit board assembly and production, cabling and wire harnessing, systems integration, comprehensive testing services and completely assembled electronic products.
Cemtrex works with industry leading OEMs in their outsourcing of advanced manufacturing services by forming a long-term relationship as an electronics manufacturing partner. We work in close relationships with our customers throughout the entire electronic lifecycle of a product, from design, manufacturing, and distribution. The Company seeks to grow the business through the addition of new, high quality customers, the expansion of its share of business with existing customers and participating in the growth of existing customers.
Using its manufacturing capabilities, the Company provides customers with advanced product assembly and system level integration combined with test services to meet the highest standards of quality. Through its agile manufacturing environment, we can deliver low and medium volume and mix services to our clients. Additionally, we design, develop, and manufacture various interconnects and cable assemblies that often are sold in conjunction with its PCBAs to enhance value for their customers. The Company also provides engineering services from new product introductions and prototyping, related testing equipment, to product redesigns.
Industrial Technology (IT)
Cemtrex’s Industrial Technology (IT)IS segment, offers single-source expertise and services for rigging, millwrighting, in plant maintenance, equipment erection, relocation, and disassembly to diversified customers. The segment also sells a complete line of air filtration and environmental control products toWe install high precision equipment in a wide variety of industrial markets like automotive, printing & graphics, industrial automation, packaging, and chemicals among others. We are a leading provider of reliability-driven maintenance and contracting solutions for the machinery, packaging, printing, chemical, and other manufacturing markets. The focus is on customers in industries such as: chemical, cement, steel, food, construction, mining, & petrochemical worldwide.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.
The Company believes its ability to attract and retain new customers comes from their ongoing commitment to understanding its customers’ business performance requirements and our expertise in meeting or exceeding these requirements and enhancing their competitive edge. We work closely with our customers from an operational and senior executive level to achieve a deep understanding of our customer’s goals, challenges, strategies, operations, and products to ultimately build a long-lasting successful relationship.
Recent Developments
In December 2017, Company set up a subsidiary named Cemtrex Technologies Pvt. Ltd., by acquiring certain fixed assets consisting of computers, hardware and proprietary software from a private third party located in Pune, India, to carry out software and prototype development work related to new Virtual & Augmented Reality applications and Smart Technology products to be produced by Cemtrex Advanced Technologies Inc., located in New York.
In January 2018, the Company completed the consolidation of its Paderborn EM factory into the EM factory at Neulingen, Germany to create economies of scale. However, the ROB Logistics and ROB Assets subsidiaries remained at the Paderborn location.
The Company continues to experience weakness in new orders in its environmental instruments and control products markets both domestically and internationally. Revenues in that segment continue to be down as fewer number of projects are being decided and awarded due to relaxation of numerous environmental regulations under the current administration. Company has shifted its focus into smart devices and virtual reality applications, and hence the Company will continue to reduce its presence in the environmental instruments and control products markets in the coming year.
Vicon Industries, Inc.
On March 23, 2018, in a private resale transaction, Cemtrex purchased 7,284,824 shares of common stock and a warrant to purchase an additional 1,500,000 shares of common stock of Vicon Industries, Inc. (OTCMKTS: VCON), (“Vicon”), from former Vicon shareholder NIL Funding Corporation, pursuant to the terms of a Securities Purchase Agreement. Cemtrex’s purchase of the Vicon Industries common stock and warrant resulted in its beneficial ownership of approximately 46% of the outstanding shares of common stock of Vicon. Cemtrex purchased the shares of common stock and warrant of Vicon Industries in exchange for 1,012,625 shares of Cemtrex common stock. Following the closing of the transaction, Saagar Govil, Cemtrex’s Chairman and Chief Executive Officer, and Aron Govil, Cemtrex’s Executive Director, joined the Vicon Industries Board of Directors and Saagar Govil assumed the position of Chief Executive Officer of Vicon Industries. The Company had elected to account for Vicon using the equity method.
On August 8, 2018, the Company entered into a Research and Development Services Agreement (the “Agreement”) with Vicon to provide Vicon with outsourced software development services. Vicon is transitioning its principal Israeli based software development activities to the Company’s India based services group, which has now assumed principal software coding and test responsibilities for Vicon. The outsourcing of these activities is expected to materially reduce the Vicon’s software development costs and provide development efficiencies, which should help expedite its software roadmap. The terms of the Agreement, among other things, set forth the scope of services, consideration, developed technology ownership, non-disclosure and safeguard of Vicon’s software code. Pursuant to an informal agreement, $ 190,811 of fees were billed to Vicon during the three months ended December 31, 2018 in connection with the transition of software development activities.
8 |
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, 2018 (“2018 Annual Report”)2019 of Cemtrex Inc. (“Cemtrex” or the “Company”). A summary of the Company’s significant accounting policies is identified in Note 2 of the notes to the consolidated financial statements included in the Company’s 2018 Annual Report.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the Unites States (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X pursuant to the requirements of the U.S. Securities and Exchange Commission (‘SEC”). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the interim periods are not necessarily indicative of the results of operations for the entire year.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated financial statements, the disclosure of contingent assets and liabilities in the condensed consolidated financial statements and the accompanying notes, and the reported amounts of revenues, expenses and cash flows during the periods presented. Actual amounts and results could differ from those estimates. The estimates and assumptions the Company makes are based on historical factors, current circumstances and the experience and judgment of the Company’s management. The Company evaluates its estimates and assumptions on an ongoing basis.
The condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, (Griffin Filters LLC, MIP Cemtrex Inc., Cemtrex Advanced Technologies Inc., Cemtrex Ltd., Cemtrex Technologies Pvt. Ltd., ROB Cemtrex GmbH, ROB Systems Srl, ROB Cemtrex Assets UG, ROB Cemtrex Logistics GmbH, and Advanced Industrial Services, Inc. and the Company’s majority-owned subsidiary Vicon Industries, Inc. and its subsidiaries, Telesite USA, IQInVision, Vicon Industries Ltd., Vicon Deutschland GmbH, and Vicon Systems, Ltd. All inter-company balances and transactions have been eliminated in consolidation.
Significant Accounting Policies and Recent Accounting Pronouncements
Significant Accounting Policies
Note 2 of the Notes to Consolidated Financial Statements, included in the annual report on Form 10-K for the year ended September 30, 2018,2019, includes a summary of the significant accounting policies used in the preparation of the consolidated financial statements.
Recently Adopted Accounting Pronouncements
Adoption of ASC 606ASU 2016-02 (Topic 842)
EffectiveOn October 1, 2018,2019, the Company adopted ASC 606 using the modified retrospective approach for all of its contracts. Following the adoption of ASC 606, the Company continues to recognize revenue at a point-in-time when control of goods transfers to the customer. This is consistent with the Company’s previous revenue recognition accounting policy under which the Company recognized revenue when title and risk of loss pass to the customer and collectability was reasonably assured. ASC 606 did not impact the Company’s presentation of revenue on a gross or net basis. The Company recognizes contract revenue from the sales of services for rigging, millwrighting, in plant maintenance, equipment erection, relocation, and disassembly. In addition, there was no impact of adoption on the statement of operations or balance sheet as of December 31, 2018 or for the three months then ended. The Company expects the impact of adopting the new revenue standard to be immaterial to net income on an ongoing basis.
Revenue Recognition
The Company recognizes revenue from sales of services for rigging, millwrighting, in plant maintenance, equipment erection, relocation, and disassembly at the point in time when the performance obligations in the contract are met, which is when the customer obtains control of such products and typically occurs upon delivery depending on the terms of the underlying contracts. Revenue is measured as the amount of consideration expected to be received in exchange for transferring goods or providing services. In some instances, the Company enters into contracts with customers that contain multiple performance obligations to deliver volumes of co-products over a contractual period of less than 12 months. The Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices and recognizes the related revenue as control of each individual product is transferred to the customer in satisfaction of the corresponding performance obligation.
Recently Issued Accounting Standards
In February 2016, The FASB issued ASU 2016-02 (Topic 842), “Leases”. ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. See Note 10 of these financial statements.
9 |
Recently Issued Accounting Standards
In August 2018, the FASB issued amended guidance, Fair Value Measurement: Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, to modify the disclosure requirements on fair value measurements based on the concepts in the FASB Concepts Statements, including the consideration of costs and benefits. The new standard is effective for the Company from October 1, 2020. The Company will adopt this standard starting October 1, 2019. The Company does not believebelieves adoption will not have a material effect on itsthe Company’s financial position.
In December 2019, the FASB issued amended guidance, Simplifying the Accounting for Income Taxes, to remove certain exceptions to the general principles from ASC 740 - Income Taxes, and to improve consistent application of U.S. GAAP for other areas of ASC 740 by clarifying and amending existing guidance. The guidance is effective for the Company from October 1, 2021; early adoption is permitted. The Company is currently evaluating the effect the guidance will have on its consolidated financial statement disclosures, results of operations and financial position.
Reclassifications
Certain reclassifications have been made to prior period amounts to conform to the current period presentation.
NOTE 3 – LOSS PER COMMON SHARE
Basic income/net income (loss) per common share is computed as income/by dividing net income (loss) applicable to common stockholders divided by the weighted-averageweighted average number of shares of common sharesstock outstanding forduring the period. Diluted income/(loss)net income per common share reflectsis 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 if securities or other contracts to issuefrom common shares were exercised or converted to common stock.issuable through contingent share arrangements, stock options and warrants.
The following table represents
For the three months ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
Basic weighted average shares outstanding | 4,086,609 | 1,638,776 | ||||||
Dilutive effect of options | - | - | ||||||
Dilutive effect of convertible debt | - | - | ||||||
Diluted weighted average shares outstanding | 4,086,609 | 1,638,776 |
For the three months ended December 31, 2019 and 2018, 1,483,965 and 513,076 shares of common stock, equivalents thatrespectively, were excluded from the computation of diluted lossearnings per share for the three months ended December 31, 2018 and 2017, because the effect of their inclusion would be anti-dilutive.
For the three months ended | ||||||||
December 31, | ||||||||
(unaudited) | ||||||||
2018 | 2017 | |||||||
Options | 632,889 | 609,518 | ||||||
Warrants | 3,471,717 | 3,471,717 | ||||||
4,104,606 | 4,081,235 |
NOTE 4 – EQUITY METHOD INVESTMENT
On March 23, 2018, in a private resale transaction, Cemtrex purchased 7,284,824 shares of common stock and a warrant to purchase an additional 1,500,000 shares of common stock of Vicon Industries, Inc. (See NOTE 1).
Below is the summarized statement of income for Vicon;
For the three | ||||
months ended | ||||
December 31, 2018 | ||||
Revenues | $ | 6,379,274 | ||
Net loss | $ | (745,165 | ) |
NOTE 54 – SEGMENT INFORMATION
The Company reports and evaluates financial information for threetwo segments: Advanced Technologies (AT) segment, the Electronics Manufacturing (EM) segment and the Industrial Technology (IT)Services (IS) segment. The AT segment develops smart devices and provides progressive design and development solutions to create impactful experiences for mobile, web, virtual and augmented reality, wearables and television as well as providing cutting edge, mission critical security and video surveillance. The EM segment provides end to end electronic manufacturing services, which includes product design and sustaining engineering services, printed circuit board assembly and production, cabling and wire harnessing, systems integration, comprehensive testing services and completely assembled electronic products. This segment also sells software development services for mobile, web, virtual reality, and PC applications. The ITIS segment offers single-source expertise and services for rigging, millwrighting, in plant maintenance, equipment erection, relocation, and disassembly to diversified customers in USA. The segment also sells a complete line of air filtration and environmental control instruments & products to a wide variety of customersUSA in industries such as: chemical, cement, steel, food,printing, construction, mining, & petrochemical worldwide.petrochemical.
10 |
The following tables summarize the Company’s segment information:
For the three months ended | For the three months ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2018 | 2017 | 2019 | 2018 | |||||||||||||
Revenues from external customers | ||||||||||||||||
Advanced Technologies | $ | 467,835 | $ | - | $ | 7,225,233 | $ | 467,835 | ||||||||
Electronics Manufacturing | 11,026,253 | 20,443,101 | ||||||||||||||
Industrial Technology | 5,790,456 | 11,938,799 | ||||||||||||||
Industrial Services | 4,994,850 | 5,249,754 | ||||||||||||||
Total revenues | $ | 17,284,544 | $ | 32,381,900 | $ | 12,220,083 | $ | 5,717,589 | ||||||||
Gross profit | ||||||||||||||||
Advanced Technologies | $ | 275,470 | $ | - | 3,542,787 | $ | 275,470 | |||||||||
Electronics Manufacturing | 4,513,924 | 7,255,146 | ||||||||||||||
Industrial Technology | 2,205,728 | 3,269,346 | ||||||||||||||
Industrial Services | 1,805,699 | 1,912,116 | ||||||||||||||
Total gross profit | $ | 6,995,122 | $ | 10,524,492 | $ | 5,348,486 | $ | 2,187,586 | ||||||||
Operating (loss) income | ||||||||||||||||
Advanced Technologies | $ | (1,230,308 | ) | $ | - | $ | 19,932 | $ | (1,230,308 | ) | ||||||
Electronics Manufacturing | (187,174 | ) | 487,094 | |||||||||||||
Industrial Technology | (207,087 | ) | 380,597 | |||||||||||||
Total operating (loss) income | $ | (1,624,569 | ) | $ | 867,691 | |||||||||||
Industrial Services | 99,011 | (296,184 | ) | |||||||||||||
Total operating income/(loss) | $ | 118,943 | $ | (1,526,492 | ) | |||||||||||
Other income (expense) | ||||||||||||||||
Advanced Technologies | $ | (160 | ) | $ | - | $ | (226,815 | ) | $ | (391,564 | ) | |||||
Electronics Manufacturing | (16,278 | ) | (141,202 | ) | ||||||||||||
Industrial Technology | (125,666 | ) | 64,508 | |||||||||||||
Industrial Services | (31,382 | ) | (77,038 | ) | ||||||||||||
Total other income (expense) | $ | (142,104 | ) | $ | (76,694 | ) | $ | (258,197 | ) | $ | (468,602 | ) | ||||
Depreciation and Amortization | ||||||||||||||||
Advanced Technologies | $ | 520,542 | $ | - | $ | 384,226 | $ | 536,194 | ||||||||
Electronics Manufacturing | 280,961 | 436,000 | ||||||||||||||
Industrial Technology | 275,759 | 405,855 | ||||||||||||||
Industrial Services | 290,127 | 104,021 | ||||||||||||||
Total depreciation and amortization | $ | 1,077,262 | $ | 841,855 | $ | 674,353 | $ | 640,215 |
The Company generates revenue from product sales and services from its subsidiaries located in the United States, The United Kingdom, and India. Revenue information for the Company is as follows:
December 31, | December 31, | |||||||
Revenues | 2019 | 2018 | ||||||
U.S. Operations | $ | 11,293,075 | $ | 5,717,589 | ||||
Non-U.S. Operations | 927,008 | - | ||||||
$ | 12,220,083 | $ | 5,717,589 |
NOTE 65 – FAIR VALUE MEASUREMENTS
The Company complies with the provisions of ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”). Under ASC 820, fairFair value is defined as the price that would be received to sellupon sale of an asset or paid to transfer a liability (i.e., the “exit price”) 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 Company had nothree 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 reportable under ASC 820or 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. We measure 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.
11 |
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, goodwill, intangible assets, and property, plant and equipment, which are measured at fair value using a discounted cash flow approach when they are impaired. 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.
The Company’s fair value assets for the years ended December 31, 2019 and 2018 and 2017.are as follows;
Quoted Prices | Significant | |||||||||||||||
in Active | Other | Significant | Balance | |||||||||||||
Markets for | Observable | Unobservable | as of | |||||||||||||
Identical Assets | Inputs | Inputs | December 30, | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | 2019 | |||||||||||||
Assets | ||||||||||||||||
Investment in trading securities | ||||||||||||||||
(included in short-term investments) | $ | 114,056 | $ | - | $ | - | $ | 114,056 | ||||||||
$ | 114,056 | $ | - | $ | - | $ | 114,056 |
Quoted Prices | Significant | |||||||||||||||
in Active | Other | Significant | Balance | |||||||||||||
Markets for | Observable | Observable | as of | |||||||||||||
Identical Assets | Inputs | Inputs | December 30, | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | 2018 | |||||||||||||
Assets | ||||||||||||||||
Investment in trading securities | ||||||||||||||||
(included in short-term investments) | $ | - | $ | - | $ | - | $ | - | ||||||||
$ | - | $ | - | $ | - | $ | - |
NOTE 76 – 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 $1,360,487$1,233,269 as of December 31, 2018.2019. The Company also records a liability for claims that have been incurred but not recorded at the end of each year. The amount of the liability is determined by Benecon Group. The liability recorded in accrued expenses amounted to $104,987$118,889 as of December 31, 20182019 and September 30, 2018.2019.
NOTE 87 – ACCOUNTS RECEIVABLE, NET
TradeAccounts receivables, net consist of the following:
December 31, | September 30, | |||||||||||||||
December 31, 2018 | September 30, 2018 | 2019 | 2019 | |||||||||||||
Accounts receivable | $ | 11,878,990 | $ | 14,244,363 | $ | 7,261,772 | $ | 7,065,035 | ||||||||
Allowance for doubtful accounts | (298,708 | ) | (298,708 | ) | (610,413 | ) | (606,051 | ) | ||||||||
$ | 11,580,282 | $ | 13,945,655 | $ | 6,651,359 | $ | 6,458,984 |
Accounts receivable include amounts due for shipped products and services rendered.
12 |
Allowance for doubtful accounts include estimated losses resulting from the inability of our customers to make required payments.
NOTE 98 – INVENTORY, NET
Inventory, net, consist of the following:
December 31, | September 30, | |||||||||||||||
December 31, 2018 | September 30, 2018 | 2019 | 2019 | |||||||||||||
Raw materials | $ | 9,526,708 | $ | 8,654,497 | $ | 4,100,771 | $ | 4,917,700 | ||||||||
Work in progress | 1,959,264 | 1,412,828 | 1,040,499 | 543,857 | ||||||||||||
Finished goods | 2,886,983 | 2,298,081 | 4,050,265 | 3,683,810 | ||||||||||||
�� | 14,372,955 | 12,365,406 | 9,191,535 | 9,145,367 | ||||||||||||
Less: Allowance for inventory obsolescence | (1,010,948 | ) | (1,010,948 | ) | (3,918,643 | ) | (3,938,212 | ) | ||||||||
Inventory –net of allowance for inventory obsolescence | $ | 13,362,007 | $ | 11,354,458 | $ | 5,272,892 | $ | 5,207,155 |
NOTE 109 – PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
December 31, | September 30, | |||||||||||||||
December 31, 2018 | September 30, 2018 | 2019 | 2019 | |||||||||||||
Land | $ | 1,241,720 | $ | 1,063,715 | $ | - | $ | - | ||||||||
Building | 5,047,245 | 5,321,926 | ||||||||||||||
Building and leasehold improvements | 1,233,732 | 1,233,733 | ||||||||||||||
Furniture and office equipment | 2,710,175 | 2,685,315 | 617,855 | 614,569 | ||||||||||||
Computers and software | 6,941,286 | 6,762,046 | 5,147,574 | 5,166,922 | ||||||||||||
Trade show display | 89,330 | - | 89,330 | 89,330 | ||||||||||||
Machinery and equipment | 21,776,771 | 22,102,390 | 23,459,569 | 23,463,953 | ||||||||||||
37,806,527 | 37,935,392 | 30,548,060 | 30,568,507 | |||||||||||||
Less: Accumulated depreciation | (11,463,654 | ) | (10,634,738 | ) | (13,981,494 | ) | (13,791,955 | ) | ||||||||
Property and equipment, net | $ | 26,342,873 | $ | 27,300,654 | $ | 16,566,566 | $ | 16,776,552 |
Depreciation expense for the three months ended December 31, 2019 and 2018 were $674,353 and 2017 were $1,077,262$640,215, respectively.
NOTE 10 – LEASES
ASC 842, “Leases”, requires that a lessee recognize the assets and $841,855, respectively.liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at either the effective date (the “effective date method”) or the beginning of the earliest period presented (the “comparative method”) using a modified retrospective approach. Under the effective date method, the Company’s comparative period reporting is unchanged. In contrast, under the comparative method, the Company’s date of initial application is the beginning of the earliest comparative period presented, and the Topic 842 transition guidance is then applied to all comparative periods presented. Further, under either transition method, the standard includes certain practical expedients intended to ease the burden of adoption. The Company adopted ASC 842 October 1, 2019 using the effective date method and elected certain practical expedients allowing the Company not to reassess:
● | whether expired or existing contracts contain leases under the new definition of a lease; | |
● | lease classification for expired or existing leases; and | |
● | whether previously capitalized initial direct costs would qualify for capitalization under Topic 842. |
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The Company also made the accounting policy decision not to recognize lease assets and liabilities for leases with a term of 12 months or less.
The Company entered into a financing lease for a single vehicle in the Industrial services segment with a term of 3 years. The Company enters into operating leases for its facilities in New York, United Kingdom, and India, as well as for vehicles for use in our Industrial Services segment. The operating lease terms range from 2 to 5 years. The Company excluded the renewal option on its applicable facility leases from the calculation of its right-of-use assets and lease liabilities.
Finance and operating lease liabilities consist of the following:
December 31, | September 30, | |||||||
2019 | 2019 | |||||||
Lease liabilities - current | ||||||||
Finance leases | $ | 22,452 | $ | 22,452 | ||||
Operating leases | 454,356 | - | ||||||
476,808 | 22,452 | |||||||
Lease liabilities - net of current portion | ||||||||
Finance leases | $ | 14,532 | $ | 20,061 | ||||
Operating leases | 650,939 | - | ||||||
$ | 665,471 | $ | 20,061 |
A reconciliation of undiscounted cash flows to finance and operating lease liabilities recognized in the condensed consolidated balance sheet at December 31, 2019 is set forth below:
Years ending September 30, | Finance leases | Operating Leases | Total | |||||||||
Remainder of 2020 | $ | 17,808 | $ | 342,498 | $ | 360,306 | ||||||
2021 | 19,787 | 385,573 | 405,360 | |||||||||
2022 | - | 269,311 | 269,311 | |||||||||
2023 | - | 158,957 | 158,957 | |||||||||
2024 | - | 32,265 | 32,265 | |||||||||
Undiscounted lease payments | 37,595 | 1,188,604 | 1,226,199 | |||||||||
Amount representing interest | (611 | ) | (83,309 | ) | (83,920 | ) | ||||||
Discounted lease payments | $ | 36,984 | $ | 1,105,295 | $ | 1,142,279 |
Additional disclosures of lease data are set forth below:
Three months ended | ||||
December 31, 2019 | ||||
Lease costs: | ||||
Finance lease costs: | ||||
Amortization of right-of-use assets | 5,728 | |||
Interest on lease liabilities | 208 | |||
Operating lease costs: | 156,777 | |||
Total lease cost | 162,713 | |||
Other information: | ||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||
Operating leases | 5,936 | |||
Finance leases | 199,290 | |||
205,226 | ||||
Weighted-average remaining lease term - finance leases (months) | 19 | |||
Weighted-average remaining lease term - operating leases (months) | 36 | |||
Weighted-average discount rate - finance leases | 6.95 | % | ||
Weighted-average discount rate - operating leases | 6.57 | % |
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The Company used the rate implicit in the lease, where known, or its incremental borrowing rate as the rate used to discount the future lease payments.
NOTE 11 – PREPAID AND OTHER CURRENT ASSETS
On December 31, 2018,2019, the Company had prepaid and other current assets consisting of prepayments on inventory purchases of $1,392,954,$23,809, other current assets of $391,633 and other receivables of $1,991,354.$2,202,568. On September 30, 2018,2019, the Company had prepaid and other current assets consisting of prepayments on inventory purchases of $1,026,441,$530,447, and other current assets of $1,115,201 and other receivables of $1,991,354.$1,469,818.
NOTE 12 –- OTHER ASSETS
As of December 31, 2018,2019, the Company had other assets of $3,165,528$991,654 which was comprised of rent security of $144,125, deferred tax assets of $2,967,529,$140,246, and other assets of $53,874.$851,618. As of September 30, 2018,2019, the Company had other assets of $3,093,607$497,857 which was comprised of rent security of $126,078, and deferred tax$140,246, other assets of $2,967,529.$357,611.
NOTE 13 – SHORT-TERM LIABILITIES
The Company’s subsidiaries have revolving lines of credit with various banks in order to fund operations. As of December 31, 2018, and September 30, 2018,2019, the balancesbalance of these accounts were $342,825 and $2,639,542, respectively.$408,940.
On February 12,September 21, 2018, the Company’s subsidiary, ROB Cemtrex GmbH obtainedVicon Industries, entered into a $3,680,079 (€3,000,000 based on the exchange rate at the time) secured loan$5,600,000 Term Loan Agreement with Deutsche Bank. This loan carries interest of EURIBOR (Euro Interbank Offer Rate)plus 1.25% per annum (1.133% as of December 31, 2018) and is payable on January 1, 2020. ROB Cemtrex GmbH has pledged its receivables to secure this loan. As of December 31, 2018, the loan had a balance of $1,336,690, based on the exchange rate at the time.
On November 15, 2017, the Company issued a note payable to an unrelated third party, for $2,300,000.NIL Funding Corporation. This note carries interest of 8%8.95% and is due after 18 months. At Septemberhas a maturity date of March 30, 2018 1,475,000 of this note was outstanding with $225,000 classified as long-term. During the three months ended December 31, 2018, 210,736 shares of the Company’s common stock have been issued to satisfy $225,000 of this note.2020. As of December 31, 2018, $1,250,0002019, $5,425,000 of this note remains outstanding with $275,000 classified as long-term.
On May 11, 2018, the Company issued a note payable to an unrelated third party, for $1,725,000. This note carries interest of 8% and is due after 18 months.outstanding.
As of December 31, 2018, and September 30, 20182019, there were $1,589,672 and $1,807,910$3,766,391 in current portion of long-term liabilities, respectively.liabilities.
NOTE 14 – CONVERTIBLE NOTES PAYABLE
As of December 31, 2018, the Company has satisfied all outstanding convertible notes payable, to various unrelated third parties.
NOTE 1514 – RELATED PARTY TRANSACTIONS
TheOn August 31, 2019, the Company leased its principal office at Farmingdale, New York, 8,000 square feetentered into an Asset Purchase Agreement for the sale of office and warehouse/assembly space on a monthGriffin Filters, LLC to month lease in a building owned byDucon Technologies, Inc., which Aron Govil, Executive Directorthe Company’s CFO, is President, for total consideration of the Company, at a monthly rental of $10,000. For the three months ended December 31, 2018 and 2017 rent expense under this lease was $30,000.$550,000. As of December 31, 20182019, and December 31, 2019, there was $597,109 and $227,019 in receivables due from Ducon Technologies, Inc., respectively.
NOTE 15 – LONG-TERM LIABILITIES
Notes payable
On October 25, 2019, the Company, issued a note payable to an independent third-party in the amount of $1,725,000. This note carries interest of 8% and matures on April 25, 2021. After deduction of an original issue discount of $225,000 and legal fees of $5,000, the Company received $1,495,000 in cash.
On December 23, 2019, the Company, issued a note payable to an independent third-party in the amount of $1,725,000. This note carries interest of 8% and matures on June 23, 2021. After deduction of an original issue discount of $225,000 and legal fees of $5,000, the Company received $1,495,000 in cash.
Long-term lease liabilities
On October 1, 2019, the Company adopted ASU 2016-02 (Topic 842), “Leases”. ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. As of December 31, 2019, the Company has completed its move to Long Island City and will no longer lease this office space.liabilities of $1,225,588 of which $476,808 is classified as short-term. The Company has calculated that at September 30, 2019 it would have had an additional $1,351,317 with $289,235 classified as short-term.
On August 8, 2018, the Company entered into a Research and Development Services Agreement (the “Agreement”) with Vicon to provide Vicon with outsourced software development services. Vicon is transitioning its principal Israeli based software development activities to the Company’s India based services group, which has now assumed principal software coding and test responsibilities for Vicon. The outsourcing of these activities is expected to materially reduce the Vicon’s software development costs and provide development efficiencies, which should help expedite its software roadmap. The terms of the Agreement, among other things, set forth the scope of services, consideration, developed technology ownership, non-disclosure and safeguard of Vicon’s software code. Pursuant to an informal agreement, $190,811 of fees were billed to Vicon during the three months ended December 31, 2018 in connection with the transition of software development activities. As of December31, 2018, there were no open receivables due from Vicon.
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NOTE 16 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is authorized to issue 10,000,000 shares of Preferred Stock, $0.001 par value. As of December 31, 2018,2019, and September 30, 2018,2019, there were 3,009,9463,316,683 and 2,914,1683,110,718 shares issued and outstanding, respectively.
Series 1 Preferred Stock
For the three months ended December 31, 2019, 105,965 shares of Series 1 Preferred Stock were issued to pay $1,059,650 worth of dividends to holders of Series 1 Preferred Stock.
As of December 31, 2019, and September 30, 2019, there were 2,216,683 and 2,110,718 shares of Series 1 Preferred Stock issued and outstanding, respectively.
Series A Preferred stock
Each issued and outstanding Series A Preferred Share shall be entitled to the number of votes equal to the result of: (i) the number of shares of common stock of the Company issued and outstanding at the time of such vote multiplied by 1.01; divided by (ii) the total number of Series A Preferred Shares issued and outstanding at the time of such vote, at each meeting of shareholders of the Company with respect to any and all matters presented to the shareholders of the Company for their action or consideration, including the election of directors. Holders of Series A Preferred Shares shall vote together with the holders of Common Shares as a single class.
During the three-month periodsperiod ended December 31, 2018 and 2017,2019, the Company did not issue any Series A Preferred Stock.
As of December 31, 2018,2019, and September 30, 2018,2019, there were 1,000,000 shares of Series A Preferred Stock issued and outstanding.
Series 1C Preferred Stock
Dividends
Holders of the Series 1 Preferred will be entitledOn October 3, 2019, pursuant to receive cumulative cash dividends at the rate of 10% of the purchase price per year, payable semiannually on the last day of March and September in each year. Dividends may also be paid, at our option, in additional shares of Series 1 Preferred, valued at their liquidation preference. The Series 1 Preferred will rank senior to the common stock with respect to dividends. Dividends will be entitled to be paid prior to any dividend to the holdersArticle IV of our common stock.
Liquidation Preference
TheArticles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled Series 1C Preferred will have a liquidation preferenceStock, consisting of $10.00 per share, equalup to its purchase price. Inone hundred thousand (100,000) shares, par value $0.001. Under the eventCertificate of any liquidation, dissolution or winding up of our company, any amounts remaining available for distribution to stockholders after payment of all liabilities of our company will be distributed first to theDesignation, holders of Series 1C Preferred and thenpari passuStock are entitled to the holdersnumber of votes equal to the series A preferred stock and our common stock. The holdersresult of Series 1 Preferred will have preference over(i) the holderstotal number of our common stock on any liquidation, dissolution or winding up of our company. The holders of Series 1 Preferred will also have preference over the holders of our series A preferred stock.
Voting Rights
Except as otherwise provided in the certificate of designation, preferences and rights or as required by law, the Series 1 Preferred will vote together with the shares of our common stock (and not as a separate class)Common Stock outstanding at any annual or special meetingthe time of stockholders. Except as requiredsuch vote multiplied by law, each holder10.01, and divided by (ii) the total number of shares of Series 1C Preferred will be entitled to two votes forStock outstanding at the time of such vote, at each share of Series 1 Preferred held on the record date as though each share of Series 1 Preferred were 2 sharesmeeting of our common stock. Holders of the Series 1 Preferred will vote as a class on any amendment altering or changing the powers, preferences or special rights of the Series 1 Preferred so as to affect them adversely.
No Conversion
The Series 1 Preferred will not be convertible into or exchangeable for shares of our common stock or any other security.
Rank
The Series 1 Preferred will rankshareholders with respect to distribution rights uponany and all matters presented to our liquidation, winding-upshareholders for their action or dissolution and dividend rights, as applicable:
Asconsideration, including the election of December 31, 2018, and September 30, 2018, there were 2,009,946 and 1,914,168 shares of Series 1 Preferred Stock issued and outstanding, respectively.directors.
For the three months ended December 31, 2018, 95,7782019, 100,000 shares of Series 1C Preferred Stock were issued to pay $957,780 worthAron Govil, Executive Director and CFO of dividendsthe Company as part of his employment agreement. In order to holdersdetermine the fair market value of these shares the Company used the closing price of its Series 1 preferred stock of $0.95 on October 3, 2019.
As of December 31, 2019, there were 100,000 shares of Series 1C Preferred Stock.
Listing on NASDAQ Capital Markets
On June 25, 2015, the Company’s common stock commenced trading on the NASDAQ Capital Market under the symbol “CETX”.Stock issued and outstanding.
Common Stock
The Company is authorized to issue 20,000,000 shares of common stock, $0.001 par value. As of December 31, 2018,2019, there were 13,385,1084,424,583 shares issued and outstanding and at September 30, 2018,2019, there were 12,973,7303,962,790 shares issued and outstanding.
During the three months ended December 31, 2018, 210,7362019, 105,142 shares of the Company’s common stock have been issued to satisfy $225,000$100,000 of a short-term note payable and 201,002$30,252 interest, 338,393 shares were issued in a Securities Subscription Agreement (See below), 18,358 shares were issued to satisfy $27,583 of accounts payable.
During the three months ended December 31, 2019, the Company issued an Subscription Rights Offering.aggregate of 123,400 shares of common stock in exchange for aggregate consideration of $157,835, which was used for working capital.
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Subscription Rights Offering
On November 26, 2018, Cemtrex, Inc. (the “Company”) commencedDecember 4, 2019, the “Company entered into a rights offering to its stockholders (“Rights Offering”). PursuantSubscription Agreement relating to the Rights Offering, the Company has distributed, at no charge to holderspublic offering of record338,393 shares (the “Shares”) of the Company’s common stock, and series 1 warrants aspar value $0.001 per share, all of November 19, 2018which were sold by the Company (the “Record Date”“Offering”), non-transferable subscription rights to purchase up to an aggregate of $2,700,000 worth of shares of common stock, at a purchase price equal to the lesser of (i) $1.06 per share (in which case 2,547,170 shares may be sold), or (ii) 95% of the volume weighted averageaccredited investor. The Offering price of the Company’s common stock for the five trading day period through and including December 19, 2018, which is the initial expiration date of the Rights Offering, all as set forth in the Prospectus Supplement filed on November 21, 2018 with the Securities and Exchange Commission (the “Prospectus Supplement”). On December 19, 2018 the priceShares was set at $0.75$1.12 per share and the expiration date was extended to December 21, 2018. Each stockholder of record on the Record Date received one right for each one share of common stock held by the stockholder, and each series 1 warrant holder of record on the Record Date received one right for every ten shares for which their warrant is exercisable. Each right entitles the holder to purchase one share of the Company’s common stock, subject to proration. In connection with the Rights Offering, the Company entered into a Dealer-Manager Agreement (the “Agreement”) with Advisory Group Equity Services, Ltd. doing business as RHK Capital (“RHK”). As of December 31, 2018, 201,002 shares of common stock were issued for gross proceeds of $150,721.$379,000. After deducting offering expenses of $12,027$18,950 the Company received $138,694$360,050 in net proceeds.
NOTE 17 – SHARE-BASED COMPENSATION
For the three months ended December 31, 20182019 and 2017,2018, the Company recognized $36,108$119,104 and zero$36,108 of share-based compensation expense on its outstanding options, respectively. As of December 31, 2018, $148,5922019, $400,838 of unrecognized share-based compensation expense is expected to be recognized over a period of threefour years. Future compensation amounts will be adjusted for any change in estimated forfeitures.
NOTE 18 – COMMITMENTS AND CONTINGENCIES
The Company has moved its corporate activities to Long IslandNew York City with a lease of 12,0002,500 square feet of office space at a rate of $30,000$13,000 per month that expires MayJune 30, 2020. The Company has recognized $39,000 of lease expense for this lease, for the three months ended December 31, 2020.2019.
The Company’s ITIS segment leases (i) approx. 5,000 square feet of office and warehouse space in Liverpool, New York from a third party on a month to month lease at a monthly rent of $2,200, (ii) approximately 25,000 square feet of warehouse space in Manchester, PA from a third party in a seven year lease at a monthly rent of $7,300, expiringthis lease terminated on January 29, 2020, upon the purchase of this property (SEE NOTE 20), the Company has recognized $21.900 of lease expense for this lease, for the three months ended December 13, 2022, (iii)31, 2019, (ii) approximately 43,000 square feet of office and warehouse space in York, PA from a third party in a seven yearseven-year lease at a monthly rent of $21,825 expiring on December 13, 2022, (iv) approximately 15,500 square feet of warehouse space in Emigsville, PA from a third party in a one year lease at a monthly rent of $4,555 expiring on August 31, 2019.
The Company’s EM segment owns a 70,000 square-foot manufacturing building in Neulingen. The EM segment also leases (i) a 10,000 square foot manufacturing facility in Sibiu, Romania from a third party in a ten-year lease at a monthly rent of $9,363 (€8,000) expiring on May 31, 2019, (ii) approximately 86,000 square feet of office, warehouse and manufacturing space in Paderborn, Germany at monthly rental of $51,480 (€44,000) which expires on September 30, 2018, this lease was not renewed.terminated on January 29, 2020, upon the purchase of this property (SEE NOTE 20), the Company has recognized $65,475 of lease expense for this lease, for the three months ended December 31, 2019. Additionally, the Company’s IS segment leases various vehicles with monthly lease payments ranging from $84 to $1,979 that terminate during 2019 through 2023. The Company has recognized $67,002 of lease expense for these leases for the three months ended December 31, 2019.
The Company’s AT segment leases (i) approximately 6,700 square feet of office and warehouse space in Pune, India from a third party in an eighteen-monthfive year lease at a monthly rent of $6,265 (INR454,365)$6,453 (INR456,972) expiring on September 6,February 28, 2024, the Company has recognized $19,359 of lease expense for this lease, for the three months ended December 31, 2019, (ii) approximately 27,000 square feet of office and warehouse space in Hauppauge, New York from a third party in a five-year lease at a monthly rent of $25,480 expiring on April 30, 2020, the Company has recognized $76,440 of lease expense for this lease, for the three months ended December 31, 2019, and (iii) approximately 9,400 square feet of office and warehouse space in Hampshire, England in a fifteen-year lease with at a monthly rent of $7,329 (£5,771) which expires on March 24, 2031 and contains provisions to terminate in 2021 and 2026, the Company has recognized $21,988 of lease expense for this lease for the three months ended December 31, 2019.
NOTE 19 – DISCONTINUED OPERATIONS
During fiscal 2019, the Company reached a strategic decision to exit the environmental products business, which was part of Industrial Services group. Additionally, the Company sold its Electronics Manufacturing segment. Accordingly, the Company has reported the results of the environmental control products business and the Electronics Manufacturing segment as discontinued operations in the Consolidated Statements of Operations and in the Consolidated Balance Sheets.
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Income (loss) from discontinued operations, net of tax and the loss on sale of discontinued operations, net of tax, of the ROB Cemtrex Companies and the environmental products business which are presented in total as discontinued operations, net of tax in the Company’s Consolidated Statements of Operations for the three months ended December 31, 2019 and 2018, are as follows:
Three months ended December 31, | ||||||||
2019 | 2018 | |||||||
Total net sales | $ | - | $ | 11,566,955 | ||||
Cost of sales | - | 6,759,419 | ||||||
Operating, selling, general and administrative expenses | - | 4,905,613 | ||||||
Other expenses | - | 16,278 | ||||||
Income (loss) from discontinued operations | - | (114,355 | ) | |||||
Loss on sale of discontinued operations | - | - | ||||||
Income tax provision | - | 66,899 | ||||||
Discontinued operations, net of tax | - | (181,254 | ) |
NOTE 20 - SUBSEQUENT EVENTS
Cemtrex has evaluated subsequent events up to the date the condensed consolidated financial statements were issued. Cemtrex concluded that the following subsequent events have occurred and require recognition or disclosure in the condensed consolidated financial statements.
In January and February of 2019, the Company issued 461,693 shares of common stock to satisfy $275,000 worth of notes payable.Subscription Agreement
InOn January 2019,23, 2020, the Company entered into an At-the-Market (ATM) Offeringa Subscription Agreement (the “Sales Agreement”) with Advisory Group Equity Services, Ltd. doing business as RHK Capital (the “Manager”) relating to the public offering of 500,000 shares (the “Shares”) of ourthe Company’s common stock, par value $0.001 per share. Undershare, all of which were sold by the Sales Agreement, we may offer and sell shares of our common stock havingCompany (the “Offering”) to an aggregate offeringaccredited investor. The Offering price of up to $2,000,000 from time to time through the Manager, as our sales agent. Under the terms of the Sales Agreement, we may also sell sharesShares was $1.50 per share. After offering expenses and a 5% commission paid to the Manager as principal for its own account. During January of 2019, 500,000 shares of common stock were issued and placed in escrow for this agreement and are included in the issued and outstanding count on the cover of this report. As of February 13, 2019, the company issued 88,150 of those shares in escrow and has received gross proceeds of $75,496. After deducting offering expenses of $2,265Company’s placement agent, the Company received $73,231 in net proceeds.proceeds of approximately $705,000 from the Offering.
Purchase of Properties
On January 14, 201828, 2020, the Company’s subsidiary, Advanced Industrial Services, Inc., completed the purchase of two membersbuildings for a total purchase price of $3,381,433. The Company paid $905,433 in cash and acquired a mortgage from Fulton Bank in the Boardamount of Directors$2,476,000. This mortgage carries interest of Vicon Industries, Inc. had resigned. With these resignations the only two remaining membersLIBOR plus 2.50% per annum and is payable on January 28, 2040. This loan carries loan covenants similar to covenants on The Company’s other loans from Fulton Bank.
Purchase of Vicon’s Board were Saagar GovilSeries 1 Preferred Shares.
During January and Aron Govil. Starting on this dateFebruary of 2020, the Company will usepurchased 129,223 shares of its Series 1 Preferred Stock on the consolidation method with regardopen market at an average price per share of $1.103, for an aggregate cost of approximately $142,592. The Company intends to the financial results of Vicon.retire these shares.
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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. 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 from a small environmental monitoring instruments company into a world leading multi-industry technology company that providescompany. The Company drives innovation in a wide arrayrange of sectors, including smart technology, virtual and augmented realities, advanced electronic systems, industrial solutions, to meet today’s consumer, commercial, and industrial challenges. Cemtrex manufactures advanced custom engineered electronics, including SmartDesk, extensive industrial services, integrated hardware and software solutions, proprietary IoT and wearable devices, and systems for controlling particulates and other regulated pollutants.intelligent security systems. 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 continuously assesses the composition of its portfolio businesses to ensure it is aligned with its strategic objectives and positioned to maximize growth and return in the coming years. During fiscal 2019, the Company made a strategic decision to exit its Electronics Manufacturing group by selling all companies in that business segment on August 15, 2019. Accordingly, the Company has reported the results of the Electronics Manufacturing business as discontinued operations in the Consolidated Statements of Income and in the Consolidated Balance Sheets. These changes have been applied for all periods presented. During fiscal 2019, the Company also reached a strategic decision to exit the environmental products business which was part of Industrial Services group. Accordingly, the Company has reported the results of the environmental control products business as discontinued operations in the Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss) and in the Condensed Consolidated Statements of Cash Flows.
Now the Company has two business segments, consisting of (i) Advanced Technologies (AT) and (ii) Industrial Services (IS)
Advanced Technologies (AT)
Cemtrex’s Advanced Technologies segment delivers cutting-edge technologies in the IoT, Wearables and Smart Devices, such as the SmartDesk. Through ourthe Company’s advanced engineering and product design, wethey deliver progressive design and development solutions to create impactful experiences for mobile, web, virtual and augmented reality, wearables and television as well as providing cutting edge, mission critical security and video surveillance. Through its Cemtrex VR division, the Company is developing a wide variety of applications for virtual and augmented reality markets.
The AT business segment also includes the Company’s majority owned subsidiary, Vicon Industries, 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 facial 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.
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Electronics Manufacturing (EM)Industrial Services (IS)
Cemtrex’s Electronics Manufacturing (EM) segment, provides end to end electronic manufacturing services, which includes product design and sustaining engineering services, printed circuit board assembly and production, cabling and wire harnessing, systems integration, comprehensive testing services and completely assembled electronic products.
Industrial Technology (IT)
Cemtrex’s Industrial Technology (IT)IS segment, offers single-source expertise and services for rigging, millwrighting, in plant maintenance, equipment erection, relocation, and disassembly to diversified customerscustomers. We install high precision equipment in USA. The segment also sells a complete line of air filtration and environmental instruments and control products to a wide variety of industrial markets like automotive, printing & graphics, industrial automation, packaging, and chemicals among others. We are a leading provider of reliability-driven maintenance and contracting solutions for the machinery, packaging, printing, chemical, and other manufacturing markets. The focus is on customers in industries such as: chemical, cement, steel, food, construction, mining, & petrochemical worldwide.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.
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, 2018.2019.
Results of Operations - For the three months ending December 31, 20182019 and 20172018
Total revenue for the three months ended December 31, 2019 and 2018 was $12,220,083 and 2017 was $17,284,544 and $32,381,900,$5,717,589, respectively, a decreasean increase of $15,097,356,$6,502,494, or 47%114%. Net incomeLoss from continuing operations for the three months ended December 31, 2019 and 2018 was $139,254 and 2017 was a loss of $2,176,298 and income of $731,991,$1,995,094, respectively, a decrease of $2,908,289,$1,855,790, or 397%93%. Total revenue infor the first quarter decreased,increased, as compared to total revenue in the same period last year, due to the lossconsolidation of two customersVicon Industries, Inc. and sales and other increases in the Electronics Manufacturing segment going into 2018, one as result of consolidation and other due to obsolescence of their product and lower sales in the IndustrialAdvanced Technology segment due to the softening demand for environmental products. Net income available to common shareholdersSegment. Loss from continuing operations decreased due to lower revenues from the loss of two customersreorganization and cost saving measures enacted by management in the Electronics Manufacturing segment going into 2018, one as result of consolidation and other due to obsolescence of their product and lower revenues in the Industrial Technology segment in response the decline in demand for environmental products and increased one-time expenses in research and development required to finish development of the SmartDesk and increased sales & marketing expenses related to the business development of SmartDesk and VR applications in the Advanced Technologies segment as well as the acquisition of the equity method investment, Vicon Industries, Inc.last fiscal year.
Revenues
Our Advanced Technologies segment revenues for the three months ended December 31, 2018 was $467,835. This is a new segment2019, increased by $6,757,398 or 1,444% to $7,225,233 from $467,835 for the company and we anticipate revenues to grow with development and investment in this division.three months ended December 31, 2018. This increase represents mainly the consolidation of Vicon Industries, Inc.
Our Electronics ManufacturingIndustrial Services segment revenues for the three months ended December 31, 20182019, decreased by $9,416,848$254,904 or 46%5%, to $11,026,253$4,994,850 from $20,443,101$5,249,754 for the three months ended December 31, 2017. The primary reason for decreased sales was due to due to the loss of two customers in the EM segment going into 2018, one as result of consolidation and other due to obsolescence of their product.
Our Industrial Technology segment revenues for the three months ended December 31, 2018 decreased by $6,148,343 or 51%, to $5,790,456 from $11,938,799 for the three months ended December 31, 2017.2018. The decrease was primarily due to decreased demand for environmental products globallythe timing and as resultrecognition of relaxation of environmental regulations by the current administration.revenue.
Gross Profit
Gross Profit for the three months ended December 31, 20182019 was $6,995,122$5,348,486 or 40%44% of revenues as compared to gross profit of $10,524,492$2,187,586 or 33%38% of revenues for the three months ended December 31, 2017.2018. Gross profit as a percentage of revenuesincreased in the three months ended December 31, 2018 increased as2019, compared to the three months ended December 31, 2017 as2018 due to a shift by management in the Company workslast fiscal year to achieve economies of scale, lower expenses, and shift tofocus on products and services with higher gross margins. The Company’s gross profit margins vary from product to product and from customer to customer.
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General and Administrative Expenses
General and administrative expenses for the three months ended December 31, 2018 decreased $1,267,4102019 increased $1,518,396 or 13%46% to $8,240,174$4,852,957 from $9,507,584$3,334,561 for the three months ended December 31, 2017.2018. General and administrative expenses as a percentage of revenue was 48%40% and 29%58% of revenues for the three-month periods ended December 31, 20182019 and 2017.2018. The dollar for dollar decreasesincreases in operating expenses was due toGeneral and Administrative Expenses in dollars is the Company’s work on achieving economiesresult of scalethe Consolidation of Vicon Industries, Inc. The decrease in General and lower expenses, while theAdministrative Expenses as a percentage of revenues increase was due torevenue is the decreaseresult of reduction in the Company’s revenues for the three months ended December 31, 2018 as compared to the same period in the prior year.overhead expenses.
Research and Development Expenses
Research and Development expenses for the three months ended December 31, 20182019 was $379,517$376,586 compared to $149,217$379,517 for the three months ended December 31, 2017.2018. Research and Development expenses have developed dueare primarily related to the Advanced Technologies Segment’s development of proprietary technology and further developments of the SmartDesk and VR applications by the Company’s Advanced Technologies segment through the subsidiaries Cemtrex Advanced Technologies, Inc. and Cemtrex Technologies Pvt, Ltd.video surveillance software.
Other Income/(Expense)
Interest and otherOther income/(expense) for the first quarter of fiscal 20192020 was $(142,104)$(258,197) as compared to $(76,694)$(468,602) for the first quarter of fiscal 2018.2019. Other income/(Expense) for the three months ended December 31, 20182019 was primarily due to interest expense related tooffset by one-time other income generated by the Company’s interest bearing payables.settlement of certain accounts payable.
Provision for Income Taxes
During the first quarter of fiscal 2019 we recorded an2012 no income tax benefit or provision of $66,849was recorded compared to a provisionbenefit of $59,006$50 for the first quarter of fiscal 2018.2019. The provision for income tax is based upon the projected income tax from the Company’s various U.S. and international subsidiaries that are subject to their respective income tax jurisdictions.
Equity Interests
During the first quarter of fiscal 2019 the company recorded a Comprehensive income/loss on its equity interest in Vicon Technologies, Inc. of $342,776.
Net Income/Loss
The Company had neta comprehensive loss of $2,176,298$829,218 or 13%7% of revenues, for the three-month period ended December 31, 20182019 as compared to net incomea comprehensive loss of $733,991$3,991,630 or 2%70% of revenues, for the three months ended December 31, 2017. Net income2018. Comprehensive loss decreased in the first quarter decreased, as compared to net incomecomprehensive loss in the same period last year, due the higher expenses related to the research & developmentas a result of reduction of general and marketing in the Advanced Technologies segment along with lower revenues in both the Electronics Manufacturing and Industrial Technologies segments.administrative expenses.
Effects of Inflation
The Company’s business and operations have not been materially affected by inflation during the periods for which financial information is presented.
Liquidity and Capital Resources
Working capital was $8,225,093$3,495,438 at December 31, 20182019 compared to $10,011,896$3,240,348 at September 30, 2018.2019. This includes cash and equivalents and restricted cash of $2,179,035$5,197,227 at December 31, 20182019 and $2,315,935$2,858,085 at September 30, 2018,2019, respectively. The decreaseincrease in working capital was primarily due to increased marketing and research & development expenses and net decreasesthe increase in ourthe Company’s current assets of $1,016,999 and net decreases$2,894,782 offset by an increase in ourthe Company’s current liabilities of $769,804.$2,639,692.
Accounts receivable decreased $2,365,373increased $192,375 or 17%3% to $11,580,282$6,651,359 at December 31, 20182019 from $13,945,655$6,458,984 at September 30, 2018.2019. The decreaseincrease in accounts receivable is largely attributable to decreased sales.higher sales in the first quarter of fiscal year 2020 as compared to the fourth quarter of fiscal year 2019.
Inventories increased $2,007,549$65,737 or 18%1% to $13,362,007$5,272,892 at December 31, 20182019 from $11,354,458$5,207,155 at September 30, 2018.2019. The increase in inventories is attributable to an increasethe purchase of inventories to fulfill sales bookings not shipped in the inventory purchased for the production of the SmartDesk and the execution of in-house orders, and reductions in purchases of raw materials during the period.first quarter.
Operating activities provided $5,802,346used $840,949 of cash for the three months ended December 31, 20182019 compared to providing $3,048,308$1,226,718 of cash for the nine months ended December 31, 2018. The decrease in operating cash flows was primarily due to the increase in operating assets, as compared to the same period a year ago. Discontinued operations for the three months ended December 31, 2018 provided cash of $4,575,628.
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Investment activities used $166,519 of cash for the three months ended December 31, 2017. The increase in operating cash flows was primarily due to the execution of in-house orders, and decreases in expenditures, as2019 compared to using cash of $428,879 during the samethree-month period aended December 31, 2018. Investing activities for the first quarter of fiscal year ago.
Investment activities used $548,3612020 were driven by the Company’s investment in fixed assets offset by proceeds from the sale of cashmarketable securities. Discontinued operations for the three months ended December 31, 2018 compared to usingused cash of $2,344,266 during the three-month period ended December 31, 2017. Investing activities for the first quarter of 2019 were primarily driven by the Company’s investment in fixed assets.$119,482.
Financing activities used $5,390,885provided $2,782,103 of cash in the three-month period ended December 31, 20182019 as compared to providingusing cash of $1,320,544$1,607,752 in the three-month period ended December 31, 2017.2018. Financing activities were primarily driven by proceeds from notes payable and proceeds from securities purchase agreements offset by payments on bank loans, notes payable, expenses of notes payable and equity offerings, and use of the Company’s revolving linecredit lines. Discontinued operations for the three months ended December 31, 2018 used cash of credit.$2,925,581.
We believe that our cash on hand and cash generated by operations is sufficient to meet the capital demands of our current operations during the 20192020 fiscal year (ending September 30, 2019)2020). Any major increases in sales, particularly in new products, may require substantial capital investment. Failure to obtain sufficient capital could materially adversely impact our growth potential.
On August 22, 2018, Cemtrex entered into an underwriting agreement with Aegis Capital Corp., as the representative of the several underwriters, relating to the firm commitment underwritten public offering of 1,000,000 shares of the Company’s common stock, par value $0.001 per share, at a public offering price of $1.65 per share. The Company received approximately $1.5 million in net proceeds from the offering after deducting the underwriting discount and estimated offering expenses payable by the Company. The Company also granted the Underwriters an option for a period of 45 days to purchase up to an additional 150,000 shares of common stock to cover over-allotments, if any, at the public offering price, less the underwriting discount.
On November 26, 2018, Cemtrex, Inc. (the “Company”) commenced a rights offering to its stockholders (“Rights Offering”). Pursuant to the Rights Offering, the Company has distributed, at no charge to holders of record of the Company’s common stock and series 1 warrants as of November 19, 2018 (the “Record Date”), non-transferable subscription rights to purchase up to an aggregate of $2,700,000 worth of shares of common stock, at a purchase price equal to the lesser of (i) $1.06 per share (in which case 2,547,170 shares may be sold), or (ii) 95% of the volume weighted average price of the Company’s common stock for the five trading day period through and including December 19, 2018, which is the initial expiration date of the Rights Offering, all as set forth in the Prospectus Supplement filed on November 21, 2018 with the Securities and Exchange Commission (the “Prospectus Supplement”). On December 19, 2018 the price was set at $0.75 per share and the expiration date wass extended to December 21, 2018 Each stockholder of record on the Record Date received one right for each one share of common stock held by the stockholder, and each series 1 warrant holder of record on the Record Date received one right for every ten shares for which their warrant is exercisable. Each right entitles the holder to purchase one share of the Company’s common stock, subject to proration. In connection with the Rights Offering, the Company entered into a Dealer-Manager Agreement (the “Agreement”) with Advisory Group Equity Services, Ltd. doing business as RHK Capital (“RHK”). As of December 31, 2018, 201,002 shares of common stock were issued for gross proceeds of $150,721. After deducting offering expenses of $12,027 the Company received $138,694 in net proceeds.
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 expansion goals and working capital needs.
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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 Vice President of FinanceChief Financial Officer (“VPF”CFO”), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our CEO and our VPFCFO have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2018, based2019. Based on itstheir evaluation, our management has concluded that as of December 31, 20182019 there is a material weakness in our internal control over financial reporting. The material weakness relates to the Company lacking sufficient qualified, accounting personnel. The shortage of qualified accounting personal resulted in the Company lacking entity level controls around the review of period-end reporting processes, accounting policies and public disclosures. This deficiency is common in small companies, similar to us, with limited personnel.
In order to mitigate the material weakness, the Board of Directors has assigned a priority to the short-term and long-term improvement of our internal control over financial reporting. Our Board of Directors will work with management to continuously review controls and procedures to identified deficiencies and implement remediation within our internal controls over financial reporting and our disclosure controls and procedures.
Changes in Internal Control Over Financial Reporting
While there was no change in the Company’s internal control over financial reporting during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting, the Company is taking steps to improve its internal controls by obtaining additional qualified accounting personnel.
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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Three securities class action complaints were filed againstNONE.
See Risk Factors included in our company and certain of our executive officers in the U.S. District CourtAnnual Report on Form 10-K for the Eastern District of New York on February 24, 2017. Under the requirements of the Private Securities Litigation Reform Act of 1995, these three alleged class actions, as well as any further related actions, were consolidated into a single lawsuit on March 9, 2018. A follow-on, related derivative complaint also was filed against us and our executive officers and directors in New York State court on April 10, 2017. That derivative action has been stayed by agreement of the parties until after the motion to dismiss process in the consolidated alleged class actions has run its course. Pursuant to a stipulated District Court schedule, plaintiffs filed an Amended Consolidated Class Action Complaint on May 7, 2018. We filed a motion to dismiss this class action with the Court on July 6, 2018. On October 4, 2018, the Company reached a settlement on the securities class action litigation through a mediator for an amount of $625,000 and also reached a settlement on Derivative action for an amount of $100,000. This settlement is subject to a final court approval which will take several months. The settlement amounts shall be paid by the Company’s insurance carrier.2019.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the three months ended December 31, 2018,2019, the Company issued an aggregate of 210,736123,400 shares of common stock in exchange for aggregate consideration of $225,000,$157,835, which was used for working capital. Such shares were issued pursuant to the exemption contained under Section 4(a)(2) of the Securities Act of 1933, as amended.
* Filed herewith
(1) Incorporated by reference from Form 10-12G filed on May 22, 2008.
(2) Incorporated by reference from Form 8-K filed on September 10, 2009.
(3) Incorporated by reference from Form 8-K filed on August 22, 2016.
(4) Incorporated by reference from Form 8-K filed on July 1, 2016.
(5) Intentionally omitted
(6) Incorporated by reference from Form 8-K/A filed on September 26, 2016.
(7)(6) Incorporated by reference from Form 8-K/A8-K filed on November 24, 2017.June 12, 2019.
(7) Intentionally omitted
(8) Incorporated by reference from Form 8-K/A8-K filed on November 9, 2016.October 8, 2019
(9) Incorporated by reference from Form 10-Q/A filed on November 10, 2016.Intentionally omitted
(10) Incorporated by reference from Form S-1 filed on August 29, 2016 and as amended on November 4, 2016, November 23, 2016, and December 7, 2016.
(11) Incorporated by reference from Form 10-K filed on December 28, 2016.
(12) Incorporated by reference from Form 8-K filed on January 24, 2017.
(13) Incorporated by reference from Form 8-K filed on February 10, 2017.
(14) Incorporated by reference from Form 10-Q filed on February 14, 2017.
(15)(12) Incorporated by reference from Form 8-K filed on September 8, 2017.
(16)(13) Incorporated by reference from Form 10-Q10-K filed on February 14, 2018.July 2, 2019.
(17)(14) Incorporated by reference from Form 8-K filed on March 27, 2018.
(18) Incorporated by reference from Form 8-K filed on February 27, 2018.
(19) Incorporated by reference from Form 8-K filed on September 28, 2018.
(20) Incorporated by reference from Form 10-K filed on January 11,22, 2019.
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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 19, | By: | /s/ Saagar Govil |
Saagar Govil | ||
Chief Executive Officer | ||
Dated: February 19, | /s/ | |
Chief Financial Officer and Principal Financial Officer |
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