|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 |
For
the quarterly period ended
OR
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 |
For the transition period from ___________to ____________
Commission
File Number
(Exact name of registrant as specified in its charter)
|
|
|
|
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
|
|
|
|
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| ☒ |
|
☐ | No |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| ☒ |
|
☐ | No |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
|
|
Smaller
reporting company
|
|
|
Emerging
growth company
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
|
|
Yes | ☒ | No |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
As of February 15, 2022, the issuer had shares of common stock issued and outstanding.
Table of Contents
CEMTREX, INC. AND SUBSIDIARIES
INDEX
| 2 |
Part I. Financial Information
Item 1. Financial Statements
Cemtrex, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| (Unaudited) | ||||||||
| December 31, | September 30, | |||||||
| 2021 | 2021 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and equivalents | $ |
|
$ |
|
||||
| Restricted cash |
|
|
||||||
| Short-term investments |
|
|
||||||
| Trade receivables, net |
|
|
||||||
| Trade receivables - related party |
|
|
||||||
| Inventory –net of allowance for inventory obsolescence |
|
|
||||||
| Prepaid expenses and other assets |
|
|
||||||
| Total current assets |
|
|
||||||
| Property and equipment, net |
|
|
||||||
| Right-of-use assets |
|
|
||||||
| Goodwill |
|
|
||||||
| Other |
|
|
||||||
| Total Assets | $ |
|
$ |
|
||||
| Liabilities & Stockholders’ Equity (Deficit) | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ |
|
$ |
|
||||
| Short-term liabilities |
|
|
||||||
| Lease liabilities - short-term |
|
|
||||||
| Deposits from customers |
|
|
||||||
| Accrued expenses |
|
|
||||||
| Deferred revenue |
|
|
||||||
| Accrued income taxes |
|
|
||||||
| Total current liabilities |
|
|
||||||
| Long-term liabilities | ||||||||
| Loans payable to bank |
|
|
||||||
| Long-term lease liabilities |
|
|
||||||
| Notes payable |
|
|
||||||
| Mortgage payable |
|
|
||||||
| Other long-term liabilities |
|
|
||||||
| Paycheck Protection Program Loans |
|
|
||||||
| Deferred Revenue - long-term |
|
|
||||||
| Total long-term liabilities |
|
|
||||||
| Total liabilities |
|
|
||||||
| Commitments and contingencies | - | - | ||||||
| Shareholders’ equity | ||||||||
|
Preferred stock , $
par value,
shares authorized, Series 1,
shares authorized,
shares issued and outstanding as of December
31, 2021 and
shares issued and outstanding as of September 30, 2021 (liquidation value of $
|
|
|
||||||
| Series C, shares authorized, shares issued and outstanding at December 31, 2021 and September 30, 2021 |
|
|
||||||
| Common stock, $ par value, shares authorized, shares issued and outstanding at December 31, 2021 and shares issued and outstanding at September 30, 2021 |
|
|
||||||
| Additional paid-in capital |
|
|
||||||
| Retained earnings (accumulated deficit) |
(
|
) |
(
|
) | ||||
| Treasury stock at cost |
(
|
) |
(
|
) | ||||
| Accumulated other comprehensive income (loss) |
|
|
||||||
| Total Cemtrex stockholders’ equity |
|
|
||||||
| Non-controlling interest |
|
|
||||||
| Total liabilities and shareholders’ equity | $ |
|
$ |
|
||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
Cemtrex, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss)
(Unaudited)
| For the three months ended | ||||||||
| December 31, 2021 | December 31, 2020 | |||||||
| Revenues | $ |
|
$ |
|
||||
| Cost of revenues |
|
|
||||||
| Gross profit |
|
|
||||||
| Operating expenses | ||||||||
| General and administrative |
|
|
||||||
| Research and development |
|
|
||||||
| Total operating expenses |
|
|
||||||
| Operating income/(loss) |
(
|
) |
(
|
) | ||||
| Other income/(expense) | ||||||||
| Other income/(expense) |
|
|
||||||
| Interest Expense |
(
|
) |
(
|
) | ||||
| Total other income/(expense), net |
(
|
) |
|
|||||
| Net loss before income taxes |
(
|
) |
(
|
) | ||||
| Income tax benefit/(expense) | - |
(
|
) | |||||
| Net income/(loss) |
(
|
) |
(
|
) | ||||
| Less income/(loss) in noncontrolling interest |
(
|
) |
(
|
) | ||||
| Net income/(loss) attributable to Cemtrex, Inc. shareholders | $ |
(
|
) | $ |
(
|
) | ||
| Other comprehensive income/(loss) | ||||||||
| Net income/(loss) | $ |
(
|
) | $ |
(
|
) | ||
| Foreign currency translation gain/(loss) |
|
|
||||||
| Comprehensive income/(loss) |
(
|
) |
(
|
) | ||||
| Less comprehensive income/(loss) attributable to noncontrolling interest |
(
|
) |
(
|
) | ||||
| Comprehensive income/(loss) attributable to Cemtrex, Inc. shareholders | $ |
(
|
) | $ |
(
|
) | ||
| Income/(loss) Per Share-Basic | $ |
(
|
) | $ |
(
|
) | ||
| Income/(loss) Per Share-Diluted | $ |
(
|
) | $ |
(
|
) | ||
| Weighted Average Number of Shares-Basic |
|
|
||||||
| Weighted Average Number of Shares-Diluted |
|
|
||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
Cemtrex, Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders’ Equity
(Unaudited)
| Preferred Stock Series 1 | Preferred Stock Series C | Common Stock Par | Retained | Accumulated | ||||||||||||||||||||||||||||||||||||||||||||
| Par Value $0.001 | Par Value $0.001 | Value $0.01 | Additional | Earnings | Treasury | other | Cemtrex | Non- | ||||||||||||||||||||||||||||||||||||||||
| Number of | Number of | Number of | Paid-in | (Accumulated | Stock, | Comprehensive | Stockholders’ | controlling | ||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit) | At cost | Income(loss) | Equity | interest | |||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||
| Foreign currency translation gain/(loss) |
|
|
||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation |
|
|
||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued to pay notes payable |
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Dividends paid in Series 1 preferred shares |
|
|
(
|
) | - | |||||||||||||||||||||||||||||||||||||||||||
| Income/(loss) attributable to noncontrolling interest | - |
(
|
) | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss |
(
|
) |
(
|
) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
Cemtrex, Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders’ Equity (Continued)
(Unaudited)
| Preferred Stock Series 1 | Preferred Stock Series 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 | Treasury | other | Cemtrex | Non- | |||||||||||||||||||||||||||||||||||||||||||||||
| Number of | Number of | Number of | Number of | Paid-in | (Accumulated | Stock, | Comprehensive | Stockholders’ | controlling | |||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit) | At cost | Income(loss) | Equity | interest | |||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2020, as restated |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||
| Foreign currency translation gain/(loss) |
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation |
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued to pay notes payable |
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends paid in Series 1 preferred shares |
|
|
(
|
) | - | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Income/(loss) attributable to noncontrolling interest | - |
(
|
) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss |
(
|
) |
(
|
) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 |
|
|
|
|
|
|
|
|
|
(
|
) |
(
|
) |
|
|
|
||||||||||||||||||||||||||||||||||||||||
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, | ||||||||
| Cash Flows from Operating Activities | 2021 | 2020 | ||||||
| Net income/(loss) | $ |
(
|
) | $ |
(
|
) | ||
| Adjustments to reconcile net loss to net cash provided/(used) by operating activities: | ||||||||
| Depreciation and amortization |
|
|
||||||
| (Gain)/loss on disposal of property and equipment |
|
(
|
) | |||||
| Amortization of right-of-use assets |
|
|
||||||
| Change in allowance for doubtful accounts |
|
(
|
) | |||||
| Share-based compensation |
|
|
||||||
| Income tax expense/ (benefit) | - |
(
|
) | |||||
| Interest expense paid in equity shares |
|
|
||||||
| Accrued interest on notes payable |
|
|
||||||
| Amortization of original issue discounts on notes payable |
|
|
||||||
| Gain/loss on marketable securities |
|
(
|
) | |||||
| Discharge of Paycheck Protection Program Loans |
(
|
) | - | |||||
| Changes in operating assets and liabilities net of effects from acquisition of subsidiaries: | ||||||||
| Accounts receivable |
|
|
||||||
| Accounts receivable - related party |
(
|
) |
(
|
) | ||||
| Inventory |
(
|
) |
(
|
) | ||||
| Prepaid expenses and other current assets |
(
|
) |
|
|||||
| Other assets |
(
|
) |
|
|||||
| Other liabilities |
(
|
) |
|
|||||
| Accounts payable |
(
|
) |
(
|
) | ||||
| Operating lease liabilities |
(
|
) |
(
|
) | ||||
| Deposits from customers |
|
|
||||||
| Accrued expenses |
(
|
) |
(
|
) | ||||
| Deferred revenue |
(
|
) |
(
|
) | ||||
| Income taxes payable |
(
|
) |
(
|
) | ||||
| Net cash used by operating activities |
(
|
) |
(
|
) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of property and equipment |
(
|
) |
(
|
) | ||||
| Proceeds from sale of property and equipment |
|
|
||||||
| Investment in MasterpieceVR | - |
(
|
) | |||||
| Investment in related party |
- |
(
|
) | |||||
| Proceeds from sale of marketable securities | - |
|
||||||
| Purchase of marketable securities | - |
(
|
) | |||||
| Net cash used by investing activities |
(
|
) |
(
|
) | ||||
| Cash Flows from Financing Activities | ||||||||
| Payments on notes payable |
(
|
) |
(
|
) | ||||
| Payments on bank loans |
(
|
) |
(
|
) | ||||
| Net cash used by financing activities |
(
|
) |
(
|
) | ||||
| Effect of currency translation |
|
(
|
) | |||||
| Net decrease in cash, cash equivalents, and restricted cash |
(
|
) |
(
|
) | ||||
| Cash, cash equivalents, and restricted cash at beginning of period |
|
|
||||||
| Cash, cash equivalents, and restricted cash at end of period | $ |
|
$ |
|
||||
| Balance Sheet Accounts Included in Cash, Cash Equivalents, and Restricted Cash | ||||||||
| Cash and equivalents | $ |
|
$ |
|
||||
| Restricted cash |
|
|
||||||
| Total cash, cash equivalents, and restricted cash | $ |
|
$ |
|
||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 7 |
Cemtrex, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Cash paid during the period for interest | $ |
|
$ |
|
||||
| Cash paid during the period for income taxes | $ |
|
$ |
|
||||
| Supplemental Schedule of Non-Cash Investing and Financing Activities | ||||||||
| Investment in Virtual Driver Interactive | $ | $ |
|
|||||
| Stock issued to pay notes payable | $ |
|
$ |
|
||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 8 |
Cemtrex Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – ORGANIZATION AND PLAN OF OPERATIONS
Cemtrex was incorporated in 1998, in the state of Delaware and has evolved through strategic acquisitions and internal growth into a leading multi-industry technology company. The Company has expanded in a wide range of sectors, including smart technologies, virtual and augmented realities, 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 has
Advanced Technologies (AT)
Cemtrex’s Advanced Technologies segment operates several brands that deliver cutting-edge software and hardware technologies:
| - | Vicon Industries – Vicon Industries, a majority owned subsidiary, provides end-to-end video security solutions to meet the toughest corporate, industrial and governmental security challenges. Vicon’s products include browser-based video monitoring systems and analytics-based recognition systems, cameras, servers, and access control systems for every aspect of security and surveillance in industrial and commercial facilities, federal prisons, hospitals, universities, schools, and federal and state government offices. Vicon provides cutting edge, mission critical security and video surveillance solutions utilizing Artificial Intelligence (AI) based data algorithms. | |
| - | SmartDesk – SmartDesk is focused on reinventing the workspace through developing state-of-the-art, modern, fully integrated, workplace solutions. | |
| - | Cemtrex XR (“CXR”) – CXR is focused on realizing the potential of the metaverse. CXR delivers Virtual Reality (VR) and Augmented Reality (AR) solutions that provide higher productivity, progressive design and impactful experiences for consumer products, and various commercial and industrial applications. The Company is in the process of developing virtual reality applications for commercialization in the metaverse over the next couple years. CXR also invests in emerging startups focused on building best in class solutions for the metaverse. | |
| - | Virtual Driver Interactive (“VDI”) – VDI provides innovative driver training simulation solutions for effective and engaging learning for all ages and skills. | |
| - | Bravo Strong – Bravo Strong is a gaming and content studio working to building games and experiences for the metaverse. | |
| - | good tech (formerly Cemtrex Labs) – good tech provides mobile, web, and enterprise software application development services for startups to large enterprises. |
Industrial Services (IS)
Cemtrex’s IS segment operates through a brand, Advanced Industrial Services (“AIS”), that offers single-source expertise and services for rigging, millwrighting, in plant maintenance, equipment erection, relocation, and disassembly to diversified customers. We 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 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.
| 9 |
Acquisition of Virtual Driver Interactive
On
October 26, 2020, the company acquired Virtual Driver Interactive (“VDI”), a California based provider of innovative driver
training simulation solutions for a purchase price of $
For over 10 years, VDI has been known for its effective and engaging driver training systems, designed for users of all ages and skill levels. The Company offers comprehensive training for new teen and novice drivers, along with advanced training for corporate fleets and truck drivers. VDI’s wide range of training courses and system options provide customers with highly portable, affordable and effective solutions, all while focusing on the dangers of distracted driving. Results for VDI will be reported under the AT segment.
The
Company paid $
Strategic Investment
On
November 13, 2020, Cemtrex made a $
Potential Impacts of COVID-19 on our Business
The current COVID-19 pandemic has impacted our business operations and the results of our operations in the last fiscal year, primarily with delays in expected orders by many customers and new product development, including newer versions of surveillance software since our technical facility in Pune, India has been under lock down on multiple occasions. Overall bookings level in the IS segment of our business were down by more than 20%, however our AT segment had experienced relatively less slow down. Bookings and revenue are starting to show signs of recovery in this fiscal quarter compared to the same period last year. However, due to delays in certain supply chain areas, the expected launch times of our new products and new versions has resulted in delays of several months. Additionally, increased prices and the need to increase wages to retain talent may cause our gross margin percentages to shrink and our operational costs to rise.
The broader implications of COVID-19 on our results from operations going forward remains uncertain. The COVID-19 pandemic and the resulting supply chain issues and inflation has the potential to cause adverse effects to our customers, suppliers or business partners in locations that have or will experience more pronounced disruptions, which could result in a reduction to future revenue and manufacturing output as well as delays in our new product development activities. However, opportunities in the video surveillance field have been growing for Vicon products.
The extent of the pandemics effect on our operational and financial performance will depend in large part on future developments, which cannot be reasonably estimated at this time. Future developments include the duration, scope and severity of the pandemic, the emergence of new virus variants that are more contagious or harmful than prior variants, the actions taken to contain or mitigate its impact both within and outside the jurisdictions where we operate, the impact on governmental programs and budgets, the development of treatments or vaccines, and the resumption of widespread economic activity. Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we are unable to predict with any confidence the likely impact of the COVID-19 pandemic on our future operations.
| 10 |
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, 2021, of Cemtrex Inc.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the Unites States (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X pursuant to the requirements of the U.S. Securities and Exchange Commission (‘SEC”). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the interim periods are not necessarily indicative of the results of operations for the entire year.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated financial statements, the disclosure of contingent assets and liabilities in the condensed consolidated financial statements and the accompanying notes, and the reported amounts of revenues, expenses and cash flows during the periods presented. Actual amounts and results could differ from those estimates. The estimates and assumptions the Company makes are based on historical factors, current circumstances and the experience and judgment of the Company’s management. The Company evaluates its estimates and assumptions on an ongoing basis.
The condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, Cemtrex Advanced Technologies Inc., Cemtrex Technologies Pvt. Ltd., Cemtrex XR Inc., and Advanced Industrial Services, Inc. and the Company’s majority owned subsidiary Vicon Industries, Inc. and its subsidiary, Vicon Industries Ltd. All inter-company balances and transactions have been eliminated in consolidation.
Accounting Pronouncements
Significant Accounting Policies
Note 2 of the Notes to Consolidated Financial Statements, included in the annual report on Form 10-K for the year ended September 30, 2021, includes a summary of the significant accounting policies used in the preparation of the consolidated financial statements.
| 11 |
Recently Issued Accounting Standards
ASU 2016-13 Measurement of Credit Losses on Financial Instrument is effective for fiscal years beginning after December 15, 2022. This is not expected to apply to the Company as financial instruments giving rise to credit risk are not utilized by the Company.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The new ASU addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact this new guidance will have on its financial statements
The Company does not believe that any other recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.
Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income per common share is computed by dividing net income by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants. For the three months ended December 31, 2021, and 2020, the following items were excluded from the computation of diluted net loss per common share as their effect is anti-dilutive:
| For the three months ended | ||||||||
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Warrants to purchase shares |
|
|
||||||
| Options |
|
|
||||||
NOTE 4 – SEGMENT INFORMATION
The
Company reports and evaluates financial information for
| 12 |
The following tables summarize the Company’s segment information:
| For the three months ended | ||||||||
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Revenues from external customers | ||||||||
| Advanced Technologies | $ |
|
$ |
|
||||
| Industrial Services |
|
|
||||||
| Total revenues | $ |
|
$ |
|
||||
| Gross profit | ||||||||
| Advanced Technologies | $ |
|
$ |
|
||||
| Industrial Services |
|
|
||||||
| Total gross profit | $ |
|
$ |
|
||||
| Operating loss | ||||||||
| Advanced Technologies | $ |
(
|
) | $ |
(
|
) | ||
| Industrial Services |
(
|
) |
(
|
) | ||||
| Total operating loss | $ |
(
|
) | $ |
(
|
) | ||
| Other income/(expense) | ||||||||
| Advanced Technologies | $ |
(
|
) | $ |
|
|||
| Industrial Services |
(
|
) |
(
|
) | ||||
| Total other expense | $ |
(
|
) | $ |
|
|||
| Depreciation and Amortization | ||||||||
| Advanced Technologies | $ |
|
$ |
|
||||
| Industrial Services |
|
|
||||||
| Total depreciation and amortization | $ |
|
$ |
|
||||
| December 31, | September 30, | |||||||
| 2021 | 2021 | |||||||
| Identifiable Assets | ||||||||
| Advanced Technologies | $ |
|
$ |
|
||||
| Industrial Services |
|
|
||||||
| Total Assets | $ |
|
$ |
|
||||
NOTE 5 – FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level hierarchy is applied to prioritize the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
The three levels of the fair value hierarchy under the guidance for fair value measurements are described below:
Level 1 — Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Our Level 1 assets include cash equivalents, banker’s acceptances, trading securities investments and investment funds. 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.
| 13 |
Level 2 — Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified contractual term, a Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3 — Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. Level 3 assets and liabilities include cost method investments. Quantitative information for Level 3 assets and liabilities reviewed at each reporting period includes indicators of significant deterioration in the earnings performance, credit rating, asset quality, business prospects of the investee, and financial indicators of the investee’s ability to continue as a going concern.
The Company’s fair value assets at December 31, 2021 and September 30, 2021, are as follows.
| Quoted Prices | Significant | |||||||||||||||
| in Active | Other | Significant | Balance | |||||||||||||
| Markets for | Observable | Unobservable | as of | |||||||||||||
| Identical Assets | Inputs | Inputs | December 31, | |||||||||||||
| (Level 1) | (Level 2) | (Level 3) | 2021 | |||||||||||||
| Assets | ||||||||||||||||
| Investment in marketable securities | ||||||||||||||||
| (included in short-term investments) | $ |
|
$ | - | $ | - | $ |
|
||||||||
| $ |
|
$ | $ | $ |
|
|||||||||||
| Quoted Prices | Significant | |||||||||||||||
| in Active | Other | Significant | Balance | |||||||||||||
| Markets for | Observable | Unobservable | as of | |||||||||||||
| Identical Assets | Inputs | Inputs | September, 30 | |||||||||||||
| (Level 1) | (Level 2) | (Level 3) | 2021 | |||||||||||||
| Assets | ||||||||||||||||
| Investment in marketable securities | ||||||||||||||||
| (included in short-term investments) | $ |
|
$ | - | $ | - | $ |
|
||||||||
| $ |
|
$ | $ | $ |
|
|||||||||||
NOTE 6 – RESTRICTED CASH
A
subsidiary of the Company participates in a consortium in order to self-insure group care coverage for its employees. The plan is administrated
by Benecon Group and the Company makes monthly deposits in a trust account to cover medical claims and any administrative costs associated
with the plan. These funds, as required by the plan are restricted in nature and amounted to $
NOTE 7 – ACCOUNTS RECEIVABLE, NET
Accounts receivables, net consist of the following:
| December 31, | September 30, | |||||||
| 2021 | 2021 | |||||||
| Accounts receivable | $ |
|
$ |
|
||||
| Allowance for doubtful accounts |
(
|
) |
(
|
) | ||||
| $ |
|
$ |
|
|||||
Accounts receivable include amounts due for shipped products and services rendered.
Allowance for doubtful accounts include estimated losses resulting from the inability of our customers to make required payments.
| 14 |
NOTE 8 – INVENTORY, NET
Inventory, net, consist of the following:
| December 31, | September 30, | |||||||
| 2021 | 2021 | |||||||
| Raw materials | $ |
|
$ |
|
||||
| Work in progress |
|
|
||||||
| Finished goods |
|
|
||||||
|
|
|
|||||||
| Less: Allowance for inventory obsolescence |
(
|
) |
(
|
) | ||||
| Inventory –net of allowance for inventory obsolescence | $ |
|
$ |
|
||||
NOTE 9 – PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
| December 31, | September 30, | |||||||
| 2021 | 2021 | |||||||
| Land | $ |
|
$ |
|
||||
| Building and leasehold improvements |
|
|
||||||
| Furniture and office equipment |
|
|
||||||
| Computers and software |
|
|
||||||
| Machinery and equipment |
|
|
||||||
|
|
|
|||||||
| Less: Accumulated depreciation |
(
|
) |
(
|
) | ||||
| Property and equipment, net | $ |
|
$ |
|
||||
Depreciation
expense for the three months ended December 31, 2021, and 2020 were $
NOTE 10 – LEASES
ASC 842, “Leases”, 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 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. |
| 15 |
The
Company entered into a financing lease for a single vehicle in the Industrial services segment with a term of
Finance and operating lease liabilities consist of the following:
| December 31, | September 30, | |||||||
| 2021 | 2021 | |||||||
| Lease liabilities - current | ||||||||
| Finance leases | $ | $ | ||||||
| Operating leases |
|
|
||||||
|
|
|
|||||||
| Lease liabilities - net of current portion | ||||||||
| Finance leases | $ | $ | ||||||
| Operating leases |
|
|
||||||
| $ |
|
$ |
|
|||||
A reconciliation of undiscounted cash flows to finance and operating lease liabilities recognized in the condensed consolidated balance sheet at December 31, 2021, is set forth below:
| Years ending September 30, | Finance leases | Operating Leases | Total | |||||||||
| 2022 |
|
|
||||||||||
| 2023 |
|
|
||||||||||
| 2024 |
|
|
||||||||||
| 2025 |
|
|
||||||||||
| 2026 & Thereafter |
|
|
||||||||||
| Undiscounted lease payments |
|
|
||||||||||
| Amount representing interest |
(
|
) |
(
|
) | ||||||||
| Discounted lease payments | $ | $ |
|
$ |
|
|||||||
| 16 |
Additional disclosures of lease data are set forth below:
| Three months ended | ||||||||
| December 31, 2021 | December 31, 2020 | |||||||
| Lease costs: | ||||||||
| Finance lease costs: | ||||||||
| Depreciation of finance lease assets | $ | $ |
|
|||||
| Interest on lease liabilities |
|
|||||||
| Operating lease costs: | ||||||||
| Amortization of right-of-use assets |
|
|
||||||
| Interest on lease liabilities |
|
|
||||||
| Total lease cost | $ |
|
$ |
|
||||
| Other information: | ||||||||
| Cash paid for amounts included in the | ||||||||
| measurement of lease liabilities: | ||||||||
| Operating leases | $ |
|
$ |
|
||||
| Finance leases |
|
|||||||
| $ |
|
$ |
|
|||||
| Weighted-average remaining lease term - finance leases (months) |
|
|
||||||
| Weighted-average remaining lease term - operating leases (months) |
|
|
||||||
| Weighted-average discount rate - finance leases |
|
% |
|
% | ||||
| Weighted-average discount rate - operating leases |
|
% |
|
% | ||||
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, 2021, the Company had prepaid and other current assets consisting of prepayments on inventory purchases of $
NOTE 12 – OTHER ASSETS
As
of December 31, 2021, the Company had other assets of $
NOTE 13 – RELATED PARTY TRANSACTIONS
On
August 31, 2019, the Company entered into an Asset Purchase Agreement for the sale of Griffin Filters, LLC to Ducon Technologies, Inc.,
which Aron Govil, the Company’s Founder and former CFO, is President, for total consideration of $
| 17 |
On February 23, 2021, Cemtrex’s Board of Directors determined that certain transactions between Cemtrex Inc. and First Commercial, a company owned by former Executive Director, former Controlling Shareholder and former CFO, Aron Govil, were incorrectly handled and accounted for.
The
total amount of disputed transfers was approximately $
Upon
the Company’s investigation into this matter, the Company has determined that there were inaccuracies in the Company’s
financial statements. The financials for the periods 2017 and 2018 were incorrect corresponding to the amounts that were incorrectly
accounted for, and subsequent years were affected by the roll forward effects of these entries. The Company found unsupported
advertising expenses in the amount of approximately $
On February 26, 2021, the Company entered into a Settlement Agreement and Release with Aron Govil regarding these transactions.
As
part of the Settlement Agreement, Mr. Govil was required to pay the Company consideration with a total value of $
In March 2021, Mr. Govil returned to the Company shares of Series A Preferred Stock, Shares of Series C Preferred Stock, shares of Series 1 Preferred Stock, and forfeited all outstanding options to purchase shares of commons stock (collectively, the “Securities”). For the purposes of accounting recognition, the Company determined the fair value of the Series A, Series C, and Series 1 Preferred stock based on the closing trading value of the Series 1 Preferred Stock on the date of the agreement. The options surrendered were valued using the Black-Scholes option pricing model.
The
Company recognized the gain with respect to the surrendered Securities during this reporting period. The gain of $
As
discussed above, Mr. Govil also executed a secured promissory note (the “Note”) in the amount of $
NOTE 14 – LINES OF CREDIT AND LONG-TERM LIABILITIES
Lines of credit
The
Company currently has a line of credit with Fulton Bank for $
| 18 |
Loans payable to bank
On
December 15, 2015, the Company acquired a loan from Fulton Bank in the amount of $
On
May 1, 2018, the Company acquired a loan from Fulton Bank in the amount of $
On
January 28, 2020, the Company acquired a loan from Fulton Bank in the amount of $
Notes payable
On
September 30, 2020, the Company, issued a note payable to an independent private lender in the amount of $
On
September 30, 2021, the Company, issued a note payable to an independent private lender in the amount of $
On
March 3, 2020, Vicon, a subsidiary of the Company, amended the $
Mortgage Payable
On
January 28, 2020, the Company’s subsidiary, Advanced Industrial Services, Inc., completed the purchase of two buildings for a total
purchase price of $
| 19 |
Paycheck Protection Program Loans
In
April and May of 2020, and January and April of 2021, the Company and its subsidiaries applied for and were granted $
NOTE 15 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is authorized to issue shares of Preferred Stock, $ par value. As of December 31, 2021, and September 30, 2021, there were and shares issued and outstanding, respectively.
Series 1 Preferred Stock
During the three months ended December 31, 2021, shares of Series 1 Preferred Stock were issued to pay dividends to holders of Series 1 Preferred Stock.
As of December 31, 2021, and September 30, 2021, there were and shares of Series 1 Preferred Stock issued and outstanding, respectively.
Series C Preferred Stock
On
October 3, 2019, pursuant to Article IV of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred
stock entitled Series C Preferred Stock, consisting of up to one hundred thousand (
) shares, par value $
.
As of December 31, 2021, and September 30, 2021, there were shares of Series C Preferred Stock issued and outstanding.
Common Stock
The Company is authorized to issue shares of common stock, $ par value. As of December 31, 2021, there were shares issued and outstanding and at September 30, 2021, there were shares issued and outstanding.
During
the three months ended December 31, 2021,
shares of the Company’s common stock have been issued to satisfy $
For the three months ended December 31, 2021, and 2020, the Company recognized $ and $ of share-based compensation expense on its outstanding options, respectively. As of December 31, 2021, $ of unrecognized share-based compensation expense is expected to be recognized over a period of . Future compensation amounts will be adjusted for any change in estimated forfeitures.
| 20 |
NOTE 17 – COMMITMENTS AND CONTINGENCIES
The
Company has its corporate headquarters in New York City with a month-to-month lease of
The
Company’s IS segment owns approximately
The
Company’s AT segment leases (i) approximately
NOTE 18 – 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.
On January 28, 2022, Christopher C. Moore was dismissed from his position as Chief Financial Officer and Paul J. Wyckoff was appointed Cemtrex’s Interim Chief Financial Officer.
On
February 2, 2022, the Company invested an additional $
| 21 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Except for historical information contained in this report, the matters discussed are forward-looking statements that involve risks and uncertainties. When used in this report, words such as “anticipates”, “believes”, “could”, “estimates”, “expects”, “may”, “plans”, “potential” and “intends” and similar expressions, as they relate to the Company or its management, identify forward-looking statements. Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. Such forward-looking statements are based on the beliefs of the Company’s management, as well as assumptions made by and information currently available to the Company’s management. Among the factors that could cause actual results to differ materially are the following: the effect of business and economic conditions; the impact of competitive products and their pricing; unexpected manufacturing or supplier problems; the Company’s ability to maintain sufficient credit arrangements; changes in governmental standards by which our environmental control products are evaluated and the risk factors reported from time to time in the Company’s SEC reports, including its recent report on Form 10-K. The Company undertakes no obligation to update forward-looking statements as a result of future events or developments.
General Overview
Cemtrex was incorporated in 1998, in the state of Delaware and has evolved through strategic acquisitions and internal growth into a leading multi-industry technology company. The Company has expanded in a wide range of sectors, including smart technologies, virtual and augmented realities, 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 has two business segments, consisting of (i) Advanced Technologies (AT) and (ii) Industrial Services (IS).
Advanced Technologies (AT)
Cemtrex’s Advanced Technologies segment operates several brands that deliver cutting-edge software and hardware technologies:
| - | Vicon Industries – Vicon Industries, a majority owned subsidiary, provides end-to-end video security solutions to meet the toughest corporate, industrial and governmental security challenges. Vicon’s products include browser-based video monitoring systems and analytics-based recognition systems, cameras, servers, and access control systems for every aspect of security and surveillance in industrial and commercial facilities, federal prisons, hospitals, universities, schools, and federal and state government offices. Vicon provides cutting edge, mission critical security and video surveillance solutions utilizing Artificial Intelligence (AI) based data algorithms. | |
| - | SmartDesk – SmartDesk is focused on reinventing the workspace through developing state-of-the-art, modern, fully integrated, workplace solutions. | |
| - | Cemtrex XR (“CXR”) – CXR is focused on realizing the potential of the metaverse. CXR delivers Virtual Reality (VR) and Augmented Reality (AR) solutions that provide higher productivity, progressive design and impactful experiences for consumer products, and various commercial and industrial applications. The Company is in the process of developing virtual reality applications for commercialization in the metaverse over the next couple years. CXR also invests in emerging startups focused on building best in class solutions for the metaverse. | |
| - | Virtual Driver Interactive (“VDI”) – VDI provides innovative driver training simulation solutions for effective and engaging learning for all ages and skills. | |
| - | Bravo Strong – Bravo Strong is a gaming and content studio working to building games and experiences for the metaverse. | |
| - | good tech (formerly Cemtrex Labs) – good tech provides mobile, web, and enterprise software application development services for startups to large enterprises. |
| 22 |
Industrial Services (IS)
Cemtrex’s IS segment operates through a brand, Advanced Industrial Services (“AIS”), that offers single-source expertise and services for rigging, millwrighting, in plant maintenance, equipment erection, relocation, and disassembly to diversified customers. We 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 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, 2021.
Results of Operations – For the three months ending December 31, 2021, and 2020
Total revenue for the three months ended December 31, 2021, and 2020 was $10,672,489 and $8,836,076, respectively, an increase of $1,863,413, or 21%. Loss from operations for the three months ended December 31, 2021, was $4,054,523 compared to $2,045,951 for the three months ended December 31, 2020, an increase on the loss of $2,008,572, or 98%. Total revenue for the quarter increased, as compared to total revenue in the same period last year, due to shutdowns and limited operations of businesses due to the COVID-19 crisis during the same period last year. Loss from operations increased due to increased expenses related to personnel costs, travel, and research and development costs.
Revenues
Our Advanced Technologies segment revenues for the three months ended December 31, 2021, increased by $945,648 or 20% to $5,618,517 from $4,672,869 for the three months ended December 31, 2020. This increase is mainly due to an improvement in economic climate from the impact of the COVID-19 crisis during the same period last year.
Our Industrial Services segment revenues for the three months ended December 31, 2021, increased by $890,765 or 21%, to $5,053,972 from $4,163,207 for the three months ended December 31, 2020. This increase is mainly due to an improvement in economic climate from the impact of the COVID-19 crisis during the same period last year.
Gross Profit
Gross Profit for the three months ended December 31, 2021, was $3,869,194 or 36% of revenues as compared to gross profit of $4,005,470 or 45% of revenues for the three months ended December 31, 2020. Gross profit decreased in the three months ended December 31, 2021, compared to the three months ended December 31, 2020, due to increased cost of revenues. The Company’s gross profit margins vary from product to product and from customer to customer.
| 23 |
General and Administrative Expenses
General and administrative expenses for the three months ended December 31, 2021, increased $1,194,808 or 22% to $6,612,004 from $5,417,196 for the three months ended December 31, 2020. General and administrative expenses as a percentage of revenues was 62% and 61% of revenues for the three-month periods ended December 31, 2021, and 2020, respectively. The increase in general and administrative expenses is the result of increased personnel, travel, marketing and sales expenses.
Research and Development Expenses
Research and Development expenses for the three months ended December 31, 2021, was $1,311,713 compared to $634,225 for the three months ended December 31, 2020. Research and Development expenses are primarily related to the Advanced Technologies Segment’s development of proprietary technology and further developments of the SmartDesk and Artificial Intelligence (AI) and next generation solutions associated with security and surveillance systems software.
Other Income/(Expense)
Other income/(expense) for the first quarter of fiscal 2022, was $(475,300) as compared to $342,047 for the first quarter of fiscal 2021. Other income/(expense) for the three months ended December 31, 2021, included the gain on the forgiveness of our PPP loans of $971,500.
Provision for Income Taxes
During the first quarter of fiscal 2022, the Company did not record an income tax provision compared to $28,954 for the first quarter of fiscal 2021. 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 and the Company’s projected ability to utilize net loss carryforwards.
Net income/(loss) attributable to Cemtrex, Inc. shareholders
The Company had a net loss attributable to Cemtrex, Inc. shareholders of $4,477,951, or 42% of revenues, for the three month period ended December 31, 2021, as compared to a net loss attributable to Cemtrex, Inc. shareholders of $1,692,611 or 19% of revenues, for the three months ended December 31, 2020. Net loss attributable to Cemtrex, Inc. shareholders increased in the first quarter as compared to the same period last year was primarily due to costs of revenues and operating expenses mentioned above.
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 $12,801,113 at December 31, 2021, compared to $15,088,892 at September 30, 2021. This includes cash and equivalents and restricted cash of $11,972,430 at December 31, 2021, and $17,186,323 at September 30, 2021. The decrease in working capital was primarily due to the Company’s use of cash to build inventory and pay down liabilities during the first quarter of fiscal year 2022.
Accounts receivable decreased $2,263,147 or 29% to $5,547,749 at December 31, 2021, from $7,810,896 at September 30, 2021. The decrease in accounts receivable is attributable to collections of receivables from the last quarter of fiscal year 2021 and lower revenues in this quarter and compared to the fourth quarter of fiscal year 2021.
Inventories increased $1,428,411 or 25% to $7,085698 at December 31, 2021, from $5,657,287 at September 30, 2021. The increase in inventories is attributable to the purchase of inventories for new products the Company plans to ship in the future.
Cash used by operating activities for the three months ended December 31, 2021 and 2021 was $4,352,702 and $1,078,052 respectively. The decrease in operating cash flows was primarily due to purchases on inventory and payment of accounts payable and accrued expenses.
Cash used by investment activities for the three months ended December 31, 2021 and 2020 was $291,666 and $675,487, respectively. Investing activities for the first quarter of fiscal year 2022 were driven by the Company’s purchase of fixed assets.
Cash used by financing activities for the three months ended December 31, 2021 and 2020 was $632,753 and $1,629,708, respectively. Financing activities were primarily driven by payments on bank loans and notes.
We believe that our cash on hand and cash generated by operations is sufficient to meet the capital demands of our current operations for fiscal year 2022 (ending September 30, 2022). 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.
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.
| 24 |
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures reporting as promulgated under the Exchange Act is defined as controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our CEO and our CFO have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2021. Based on their evaluation, our management has concluded that as of December 31, 2021, there is a material weakness in our internal control over financial reporting. The material weakness relates to the Company lacking sufficient accounting personnel. The shortage of accounting personal resulted in the Company lacking entity level controls around the review of period-end reporting processes, accounting policies and public disclosures. Additionally, the Company’s current processes and systems do not provide for necessary, timely reconciliation of certain accounts and sufficient consideration regarding recoverability of certain assets. This deficiency is common in small companies, similar to us, with limited personnel.
Notwithstanding the conclusion by our Chief Executive Officer and Chief Financial Officer that our disclosure controls and procedures as of December 31, 2021, were not effective, and notwithstanding the material weakness in our internal control over financial reporting described below, management believes that the unaudited condensed financial statements and related financial information included in this Quarterly Report fairly present in all material respects our financial condition, results of operations and cash flows as of the dates presented, and for the periods ended on such dates, in conformity with GAAP.
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 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.
| 25 |
Part II Other Information
Item 1. Legal Proceedings.
NONE.
Item 1A. Risk Factors
See Risk Factors included in our Annual Report on Form 10-K for 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the three months ended December 31, 2021 the Company issued an aggregate of 2,891,016 shares of common stock to settle outstanding debt of $3,288,071. Such shares were issued pursuant to the exemption contained under Section 4(a)(2) of the Securities Act of 1933, as amended.
| 26 |
Item 6. Exhibits
| * | 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 | Incorporated by reference from Form S-8 filed on May 1, 20120 |
| 6 | Incorporated by reference from Form 8-K filed on June 12, 2019. |
| 7 | Incorporated by reference from Form 8-K/A filed on November 24, 2017. |
| 8 | Incorporated by reference from Form 8-K/A filed on September 26, 2016. |
| 9 | Incorporated by reference from Form 10-Q filed on May 28, 2021. |
| 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. |
| 27 |
| 11 | Incorporated by reference from Form 8-K filed on January 24, 2017. |
| 12 | Incorporated by reference from Form 8-K filed on September 8, 2017. |
| 13 | Incorporated by reference from Form 8-K filed on February 26, 2021. |
| 14 | Incorporated by reference from Form 8-K filed on March 22, 2019. |
| 15 | Intentionally left blank |
| 16 | Incorporated by reference from Form 8-K filed on April 1, 2020. |
| 17 | Incorporated by reference from Form 8-K filed on March 9, 2020. |
| 18 | Incorporated by reference from Form 8-K filed on June 4, 2020. |
| 19 | Incorporated by reference from Form 8-K filed on June 12, 2020. |
| 20 | Incorporated by reference from Form 10-K filed on January 5, 2021. |
| 28 |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Cemtrex, Inc. | ||
| Dated: February 18, 2022 | By: | /s/Saagar Govil |
| Saagar Govil | ||
| Chief Executive Officer | ||
| Dated: February 18, 2022 | /s/Paul J. Wyckoff | |
| Paul J. Wyckoff | ||
| Interim Chief Financial Officer and Principal Financial Officer | ||
| 29 |