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What changed in CEMTREX INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of CEMTREX INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+299 added−173 removedSource: 10-K (2024-12-30) vs 10-K (2023-12-28)

Top changes in CEMTREX INC's 2024 10-K

299 paragraphs added · 173 removed · 119 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

24 edited+30 added−23 removed10 unchanged
Biggest changeOn July 26, 2022, the Company received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC Nasdaq notifying the Company that, it had been granted an additional 180 days or until January 23, 2023, to regain compliance with the Minimum Bid Price Requirement based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Capital Market with the exception of the bid price requirement, and the Company’s written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
Biggest changeTo qualify for additional time, the Company would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and would need to provide written notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary.
Although price is an important factor and may in some cases be the governing factor, it is not always determinative, and contracts are often awarded on the basis of the efficiency or reliability of products, past performance records, and the engineering and technical expertise of the bidder. Several companies market products that compete directly with Company’s products.
Although price is an important factor and may in some cases be the governing factor, it is not always determinative, and contracts are often awarded on the basis of the efficiency or reliability of products and services, past performance records, and the engineering and technical expertise of the bidder. Several companies market products that compete directly with Company’s products.
The Company has announced a special meeting of Series 1 Preferred stock shareholders scheduled for December 26, 2023, to approve the reverse stock split.
The Company has announced a special meeting of Series 1 Preferred Stock shareholders was scheduled for December 26, 2023, to approve the reverse stock split.
We constantly look for opportunities to gain new customers and penetrate geographic locations and end markets or acquire new product or service opportunities through acquisitions that are operationally and financially beneficial for the Company. Suppliers The Company is not solely dependent on, nor expects to become overtly dependent on, any one or a limited number of suppliers.
We constantly look for opportunities to gain new customers and penetrate geographic locations and end markets or acquire new product or service opportunities through acquisitions that are operationally and financially beneficial for the Company. Suppliers The Company is not solely dependent on, nor expects to become overly dependent on, any one or a limited number of suppliers.
Additionally, the Company’s management believes that the successful delivery, installation and performance of the Company’s products and systems is a key factor in gaining business as customers typically prefer to make significant purchases from a company with a solid performance history. The Company obtains virtually all its contracts through competitive bidding.
Additionally, the Company’s management believes that the successful delivery, installation and performance of the Company’s products and services is a key factor in gaining business as customers typically prefer to make significant purchases from a company with a solid performance history. The Company obtains virtually all its contracts through competitive bidding.
On September 8, 2023, Cemtrex Inc. (the “Company”) received a letter from the Nasdaq Hearings Panel (“Panel”) informing the Company that the Panel has granted the Company a temporary exception to regain compliance with The Nasdaq Stock Market LLC’s (“Nasdaq” or the “Exchange”) Listing Rule 5555(a)(1) (the “Bid Price Rule”) by no later than January 19, 2024.
On September 8, 2023, the Company received a letter from the Nasdaq Hearings Panel (“Panel”) informing the Company that the Panel has granted the Company a temporary exception to regain compliance with The Nasdaq Stock Market LLC’s (“Nasdaq” or the “Exchange”) Listing Rule 5555(a)(1) (the “Bid Price Rule”) by no later than January 19, 2024.
Generally, these markets are high growth markets that are changing due to innovation, new technologies, or other industry shifts taking place. In these markets we seek to build or acquire businesses that have attractive gross margins, strong opportunities for customer retention, and are asset light.
Generally, these markets are high growth markets that are changing due to innovation, new technologies, or other industry shifts taking place. In these markets we seek to build or acquire businesses that have attractive gross margins, strong opportunities for customer retention, and are not capital intensive.
Notice of Delisting, Extension of cure period, and Subsequent Compliance Series 1 Preferred Stock On July 29, 2022, the Company received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, because the closing bid price for the Company’s Series 1 preferred stock listed on Nasdaq was below $1.00 for 30 consecutive trading days, the Company no longer met the minimum bid price requirement for continued listing on The Nasdaq Capital Market under Nasdaq Marketplace Rule 5550(a)(2), requiring a minimum bid price of $1.00 per share (the “Minimum Bid Price Requirement”).
Nasdaq Notices for Listing Deficiencies On July 29, 2022, the Company received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, because the closing bid price for the Company’s Series 1 Preferred Stock listed on Nasdaq was below $1.00 for 30 consecutive trading days, the Company no longer met the minimum bid price requirement for continued listing on The Nasdaq Capital Market under Nasdaq Marketplace Rule 5550(a)(2), requiring a minimum bid price of $1.00 per share (the “Minimum Bid Price Requirement”).
The Company’s sales representatives also serve as an ongoing liaison function between the Company and its customers during the installation phase of the products and systems and address customers’ questions or concerns arising thereafter.
The Company’s sales representatives do not have authority to execute contracts on the Company’s behalf. The Company’s sales representatives also serve as an ongoing liaison function between the Company and its customers during the installation phase of the products and systems and address customers’ questions or concerns arising thereafter.
The Company’s arrangements with sales representatives accord each a defined territory or market within which to sell some or all of its products and systems, provide for the payment of agreed-upon sales commissions or wholesale pricing and are terminable at will. The Company’s sales representatives do not have authority to execute contracts on the Company’s behalf.
Our sales are global in nature, but predominantly focused on the US market presently. The Company’s arrangements with sales representatives accord each a defined territory or market within which to sell some or all of its products and systems, provide for the payment of agreed-upon sales commissions or wholesale pricing and are terminable at will.
On December 26, 2023, the Company held the meeting but failed to establish a quorum and has adjourned the meeting to December 29, 2023. 5 Common Stock On January 24, 2022, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company that, because the closing bid price for the Company’s common stock listed on Nasdaq was below $1.00 for 30 consecutive trading days, the Company no longer met the minimum bid price requirement for continued listing on The Nasdaq Capital Market under Nasdaq Marketplace Rule 5550(a)(2), requiring a minimum bid price of $1.00 per share (the “Minimum Bid Price Requirement”).
On June 14, 2024, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company that, because the closing bid price for the Company’s common stock listed on Nasdaq was below $1.00 for 30 consecutive trading days, the Company no longer meets the minimum bid price requirement for continued listing on The Nasdaq Capital Market under Nasdaq Marketplace Rule 5550(a)(2), requiring a minimum bid price of $1.00 per share.
(“Vicon”), which provides end-to-end security solutions to meet the toughest corporate, industrial and governmental security challenges. Vicon’s products include browser-based video monitoring systems and analytics-based recognition systems, cameras, servers, and access control systems for every aspect of security and surveillance in industrial and commercial facilities, federal prisons, hospitals, universities, schools, and federal and state government offices.
Vicon’s products include browser-based video monitoring systems and analytics-based recognition systems, cameras, servers, and access control systems for every aspect of security and surveillance in industrial and commercial facilities, federal prisons, hospitals, universities, schools, and federal and state government offices. Vicon provides innovative, mission critical security and video surveillance solutions utilizing Artificial Intelligence (AI) based data algorithms.
AIS installs high precision equipment in a wide variety of industrial markets like automotive, printing and graphics, industrial automation, packaging, and chemicals, among others. AIS is a leading provider of reliability-driven maintenance and contracting solutions for machinery, packaging, printing, chemical, and other manufacturing markets.
AIS is a leading provider of reliability-driven maintenance and contracting solutions for machinery, packaging, printing, chemical, and other manufacturing markets.
The focus is on customers seeking to achieve greater asset utilization and reliability to cut costs and increase production from existing assets, including small projects, sustaining capital, turnarounds, maintenance, specialty welding services, and high-quality scaffolding. 3 Cemtrex Corporate Cemtrex’s Corporate segment is the holding company of our other two segments.
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. 3 Recent Developments Common Stock Reverse Stock Split On October 2, 2024, the Company completed a 60:1 reverse stock split on its common stock, and on November 26, 2024, The Company completed a 35:1 reverse stock split on its common stock.
The Company also utilizes sub-suppliers and third-party vendors to procure from or fabricate its components based on its design, engineering, and specifications. The Company also enters into subcontracts for field installation, which the Company supervises; and the Company manages all technical, physical and commercial aspects of the performance of the Company contracts.
The Company also utilizes sub-suppliers and third-party vendors to procure from or fabricate its components based on its design, engineering, and specifications.
Cemtrex continues to invest in research and development with the intention of developing proprietary technology and intellectual property as allowed by its financial resources. 7 Sales and Marketing The Company sells its products globally and depending on the brand, relies on direct sales force, manufacturing representatives, distributors, integrators and installers, commission sales agents, magazine advertisements, internet advertising, trade shows, trade directories and catalogue listings, e-commerce, to market its products and services.
Sales and Marketing The Company sales strategies vary across its businesses and depending on the brand, relies on direct sales force, manufacturing representatives, distributors, integrators and installers, word of mouth or referrals, commission sales agents, magazine advertisements, internet advertising, trade shows, trade directories and catalogue listings, e-commerce, to market its products and services.
Employees The Company employs approximately 328 full-time employees and approximately 5 part-time employees as of the date of this Annual Report, including 118 engaged in engineering, 129 in manufacturing and field service and 86 in administrative, sales and marketing functions.
Management believes that the insurance coverage that it has is adequate for its current business needs. Employees The Company employs approximately 264 full-time employees and approximately 17 part-time employees as of the date of this Annual Report, including 58 engaged in engineering, 140 in manufacturing and field service and 83 in administrative, sales and marketing functions.
Competition The Company competes on the basis of price, engineering and technological expertise, know-how and the quality of its products, systems and services.
The Company also enters into subcontracts for field installation, which the Company supervises; and the Company manages all technical, physical and commercial aspects of the performance of the Company contracts. 6 Competition The Company competes on the basis of price, engineering and technological expertise, know-how and the quality of its products, systems and services.
Insurance The Company currently maintains different types of insurance, including general property coverage, and directors and officers’ insurance. The Company also maintains product liability insurance with respect to its products and equipment. Management believes that the insurance coverage that it has is adequate for its current business needs.
No one single customer accounts for more than 10% of its annual sales. 7 Insurance The Company currently maintains different types of insurance, including general property coverage, and directors’ and officers’ insurance. The Company also maintains product liability insurance with respect to its products and equipment.
Historically, most of the customers have purchased individual products or systems which, in many instances, operate in conjunction with products and systems supplied by others. The Company’s principal customers in its Industrial Services segment include businesses engaged in manufacturing, chemical, packaging, printing, electronics, automotive, construction, and metallurgical processing.
Historically, most of the customers have purchased individual products or systems which, in many instances, operate in conjunction with products and systems supplied by others. The Company is responsible for the design, production, supply, and delivery of products to its customers.
Vicon provides innovative, mission critical security and video surveillance solutions utilizing Artificial Intelligence (AI) based data algorithms. Industrial Services Cemtrex’s Industrial Services segment operates under the brand, Advanced Industrial Services (“AIS”), which offers single-source expertise and services for rigging, millwrighting, in plant maintenance, equipment erection, relocation, and disassembly to diversified customers.
Industrial Services Cemtrex’s Industrial Services segment operates under the brand, Advanced Industrial Services (“AIS”), which offers single-source expertise and services for rigging, millwrighting, in plant maintenance, equipment erection, relocation, and disassembly to diversified customers. AIS installs high precision equipment in a wide variety of industrial markets like automotive, printing and graphics, industrial automation, packaging, and chemicals, among others.
No one single customer accounts for more than 10% of its annual sales. For the Security segment, the Company is responsible for the design, production, supply, and delivery of products to its customers. In order to satisfy customer orders, in both segments, the Company must consistently meet production deadlines and maintain a high standard of quality.
In order to satisfy customer orders, in both segments, the Company must consistently meet production deadlines and maintain a high standard of quality. The Company’s principal customers in its Industrial Services segment include businesses engaged in manufacturing, chemical, packaging, printing, electronics, automotive, construction, and metallurgical processing.
During the first quarter of fiscal year 2023, the Company reorganized its reporting segments to be in line with its current structure consisting of (i) Security, (ii) Industrial Services, and (iii) Cemtrex Corporate. Security Cemtrex’s Security segment operates under the brand of its majority owned subsidiary, Vicon Industries, Inc.
Security Cemtrex’s Security segment operates under the brand of its majority owned subsidiary, Vicon Industries, Inc. (“Vicon”), which provides end-to-end security solutions to meet the toughest corporate, industrial and governmental security challenges.
The Company currently has multiple patents and patent claims that it owns.
The Company currently has multiple patents and patent claims that it owns. Cemtrex continues to invest in research and development with the intention of developing proprietary technology and intellectual property as allowed by its financial resources.
Removed
Recent Developments Sale of former Cemtrex Brands On November 22, 2022, the Company entered into two Asset Purchase Agreements and one Simple Agreement for Future Equity (“SAFE”) with the Company’s CEO, Saagar Govil, to secure the sale of the subsidiaries Cemtrex Advanced Technologies, Inc, which include the brand SmartDesk, and Cemtrex XR, Inc., which include the brands Cemtrex XR, Virtual Driver Interactive, Bravo Strong, and good tech (formerly Cemtrex Labs), to Mr.
Added
All share and per share data have been retroactively adjusted for the reverse splits.
Removed
On November 22, 2022, the Company completed the above disposition for the following consideration. ● Cemtrex XR, Inc. ○ $895,000 comprised of: ■ $75,000 in cash payable at Closing; and ■ 5% royalty of all revenues on the Business to be paid 90 days after the end of each calendar year for the next three years; and should the total sum of royalties due be less than $820,000 at the end of the three-year period, Purchaser shall be obligated to pay the difference between $820,000 and the royalties paid. ● Cemtrex Advanced Technologies, Inc. ○ $10,000 in cash payable at Closing; and ○ 5% royalty of all revenues on the Business to be paid 90 days after the end of each calendar year for the next 5 years; and ○ $1,600,000 in SAFE (common equity) at any subsequent fundraising or exit above $5,000,000 with a $10,000,000 cap.
Added
On December 26, 2023, the meeting was adjourned to December 29, 2023, due to insufficient votes represented by proxy or virtually in person to constitute a quorum for the transaction of business at the Special Meeting.
Removed
The Company’s Board of Directors, excluding Saagar Govil who abstained from all voting on these agreements, approved these actions and agreements. Acquisition of Heisey Mechanical On July 1, 2023, the Company under AIS, completed the acquisition of a leading service contractor and steel fabricator that specializes in industrial and water treatment markets, Heisey Mechanical, Ltd.
Added
On December 29, 2023, there were still insufficient votes represented by proxy or virtually in person to constitute a quorum thus the resolution did not pass.
Removed
(“Heisey”) based in Columbia, Pennsylvania for $2,400,000 plus adjustments for the outstanding contract assets and liabilities of $393,291. The real estate of the business was purchased at fair market value on August 30, 2023, for $1,500,000 in a separate transaction.
Added
On January 5, 2024, and January 12, 2024, the Company bought back an aggregate of 71,951 shares of Series 1 Preferred Stock for $69,705 under the Share Repurchase Program approved on August 22, 2023, that allows the Company to repurchase shares of the Series 1 Preferred Stock through various means, including through privately negotiated transactions and through an open market program.
Removed
Heisey provides the water treatment industry with a variety of fabricated vessels and equipment including ASME pressure vessels, heat exchangers, mix tanks, reactors, and other specialized fabricated equipment. Additionally, the contracting team assists with installation and service of fabricated items.
Added
On April 8, 2024, these shares were cancelled. The Company’s Series 1 Preferred Stock was delisted from the NASDAQ Capital Market on January 22, 2024. The Series 1 Preferred Stock is now quoted on the OTC Markets under the symbol “CETXP”.
Removed
The company has over 33,000 square feet of manufacturing floor space in its facility and an experienced staff of fabricators, welders, and field mechanics. The purchase price allocation presented below is still preliminary but has been developed based on an estimate of fair values of Heisey’s identifiable tangible and intangible assets acquired and liabilities assumed as of July 1, 2023.
Added
Nasdaq filed a Form 25 on March 21, 2024, and the deregistration of the Company’s Series 1 Preferred Stock under Section 12(b) of the Exchange Act became effective for 90 days after filing of the Form 25.
Removed
The final allocation of the purchase price will be determined within one year from the closing date of the Heisey acquisition. 4 The consideration transferred and preliminary allocation of Heisey’s tangible and intangible assets and liabilities, are as follows: Consideration Transferred: Cash $ 393,291 Seller’s note 240,000 Financed amount 2,160,000 Total consideration transferred $ 2,793,291 Purchase Price Allocation: Inventory 300,000 Contract assets 667,259 Machinery and equipment 1,625,000 Contract liabilities (216,469 ) Accrued expenses (57,499 ) Goodwill 475,000 Total consideration transferred $ 2,793,291 The pro forma summary below presents the results of operations as if the Heisey acquisition occurred on October 1, 2021.
Added
The notification letter also disclosed that in the event the Company does not regain compliance with the Minimum Bid Price Requirement by December 11, 2024, the Company may be eligible for additional time.
Removed
Proforma adjustments for the twelve months ended September 30, 2023, includes $127,800 of depreciation expense from acquired fixed assets, $127,883 of interest expense on the debt used in the acquisition. Proforma adjustments for the twelve months ended September 30, 2022, includes $255,600 of depreciation expense from acquired fixed assets, $81,140 of interest expense on the debt used in the acquisition.
Added
On August 21, 2024, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company that, because the stockholder’s equity for the Company was below $2,500,000 as reported on our Form 10-Q for the period ended June 30, 2024, the Company no longer meets the minimum shareholder’s equity requirement for continued listing on The Nasdaq Capital Market under Nasdaq Marketplace Rule 5550(b)(1), requiring a minimum stockholder’s equity of $2,500,000 (the “Minimum Stockholder’s Equity Requirement”). 4 On October 23, 2024, the Company received a letter from Nasdaq that it had been granted an extension to regain compliance with the Minimum Stockholder’s Equity Requirement.
Removed
The pro forma summary uses estimates and assumptions based on information available at the time. Management believes the estimates and assumptions to be reasonable; however, actual results may have differed significantly from this pro forma financial information.
Added
The terms of the extension are as follows: on or before February 17, 2025, the Company must complete the submitted plan and opt for one of the two following alternatives to evidence compliance with the Rule: Alternative 1 : The Company must furnish to the SEC and Nasdaq a publicly available report (e.g., a Form 8-K) including: 1.
Removed
The pro forma information does not reflect any cost savings, operating synergies or revenue enhancements that might have been achieved from combining the operations.
Added
A disclosure of Staff’s deficiency letter and the specific deficiency(ies) cited; 2. A description of the completed transaction or event that enabled the Company to satisfy the stockholders’ equity requirement for continued listing; 3.
Removed
The unaudited pro forma summary is provided for illustrative purposes only and does not purport to represent the Company’s actual consolidated results of operations had the acquisition been completed as of the date presented, nor should it be considered indicative of Cemtrex’s future consolidated results of operations.
Added
An affirmative statement that, as of the date of the report, the Company believes it has regained compliance with the stockholders’ equity requirement based upon the specific transaction or event referenced in Step 2; and 4.
Removed
Unaudited For the year ended September 30, 2023 September 30, 2022 Revenues $ 66,274,838 $ 53,970,595 Net loss (9,173,748 ) (13,038,817 ) On August 30, 2023, the Company acquired a mortgage in the amount of $1,200,000 from Fulton Bank to finance the purchase of the properties formerly owned by Heisey Mechanical Ltd.
Added
A disclosure stating that Nasdaq will continue to monitor the Company’s ongoing compliance with the stockholders’ equity requirement and, if at the time of its next periodic report the Company does not evidence compliance, that it may be subject to delisting. Alternative 2: The Company must furnish to the SEC and Nasdaq a publicly available report including: 1.
Removed
The mortgage carries interest at the Secured Overnight Financing Rate (SOFR) plus 2.8% and matures on September 30, 2043. Common Stock Reverse Stock Split On January 25, 2023, the Company completed a 35:1 reverse stock split on its common stock. All share and per share data have been retroactively adjusted for this reverse split.
Added
Steps 1 & 2 set forth above; 2. A balance sheet no older than 60 days with pro forma adjustments for any significant transactions or event occurring on or before the report date. The pro forma balance sheet must evidence compliance with the stockholders’ equity requirement; and 3.
Removed
On January 26, 2023, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company that it has not regained compliance with Listing Rule 5550(a)(2) and accordingly would be delisted from the Capital Market.
Added
A disclosure that the Company believes it also satisfies the stockholders’ equity requirement as of the report date and that Nasdaq will continue to monitor the Company’s ongoing compliance with the stockholders’ equity requirement and, if at the time of its next periodic report the Company does not evidence compliance, that it may be subject to delisting.
Removed
The Company then requested and had been granted a hearing to occur on March 16, 2023, appealing this determination to a Hearings Panel (the “Panel”), pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series.
Added
Regardless of which alternative the Company chooses, if the Company fails to evidence compliance upon filing its periodic report for the March 31, 2025, with the SEC and Nasdaq, the Company may be subject to delisting.
Removed
On February 8, 2023, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company that it has regained compliance with Listing Rule 5550(a)(2) and is in compliance with all applicable listing standards. The Company’s common stock will continue to be listed and traded on The Nasdaq Stock Market.
Added
May 2024 Equity Financing On May 1, 2024, the Company entered into an underwriting agreement with Aegis Capital Corp., in connection with a firm commitment underwritten public offering (the “Offering”), providing for the issuance of (i) 554,705 units (the “Common Units”), each consisting of one share of common stock of the Company (“Common Stock”), a warrant to purchase one share of common stock at an exercise price of $0.85 per share, which warrant will expire on the two-and-a-half year anniversary of the original issuance date (the “Series A Warrants”), and a warrant to purchase one share of common stock at an exercise price of $0.85 per share, which warrant will expire on the five-year anniversary of the original issuance date (the “Series B Warrants”); and (ii) 11,210,000 pre-funded units (the “Pre-funded Units”), each consisting of one pre-funded warrant to purchase one share of common stock (the “Pre-funded Warrants”), a Series A Warrant and a Series B Warrant.
Removed
Settlement with the Securities and Exchange Commission On September 30, 2022, acting pursuant to an offer of settlement submitted by the Company, the U.S.
Added
The purchase price of each Unit was $0.85, and the purchase price of each Pre-Funded Unit was $0.849. The Pre-Funded Warrants are immediately exercisable and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.
Removed
Securities and Exchange Commission (“SEC”) issued an order pursuant to Section 8A of the Securities Act, directing the Company to cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder (the “SEC Order”). The SEC Order also directed Mr.
Added
In addition, the Company granted the Underwriter a 45-day option to purchase additional 1,764,705 shares of common stock and/or Pre-Funded Warrants, representing up to 15% of the number of common stock and Pre-Funded Warrants sold in the Offering, and/or additional 1,764,705 Series A Warrants representing up to 15% of the Series A Warrants sold in the Offering, and/or additional 1,764,705 Series B Warrants representing up to 15% of the Series B Warrants sold in the Offering to cover over-allotments, if any.
Removed
Saagar Govil to cease and desist from committing or causing any violations and any future violations of Section 17(a)(3) of the Securities Act.
Added
The Offering closed on May 3, 2024. An aggregate of 11,764,705 Units (which includes 554,705 shares of common stock) and 11,210,000 Pre-Funded Units (which includes 11,210,000 Pre-Funded Warrants) were sold in the Offering. On May 3, 2024, the Underwriter partially exercised its over-allotment option with respect to 1,764,705 Series A Warrants and 1,764,705 Series B Warrants.
Removed
The SEC found that, as a result of its conduct, which was neither admitted nor denied, the Company violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, which prohibit fraudulent conduct in the offer or sale of securities and in connection with the purchase or sale of securities.
Added
The aggregate gross proceeds to the Company were approximately $10,035,293, before deducting underwriting discounts and other issuance expenses of $995,333 recorded under the caption “General and administrative” on the Company’s Consolidated Statements of Operations.
Removed
The SEC also found that, as a result of his conduct, which was neither admitted nor denied, Mr. Govil violated Section 17(a)(3) of the Securities Act, which makes it illegal to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.
Added
The underwriting discounts and other issuance expenses were expensed since the Series A, Series B, and Pre-Funded Warrants were each determined to be liabilities and recorded at their fair value. 5 May 2024 Warrants The Company evaluated the Series A, Series B, and Prefunded Warrants (collectively, the “Warrants”) in accordance with the guidance at ASC 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging, and determined that the Warrants did not meet the definition a liability under ASC 480, and the warrants are precluded from being considered indexed to the entity’s own stock under ASC 815, resulting in the Warrants being classified as a liability.
Removed
In addition to the above cease and desists, the Company undertook to not publicly announce that it has partnered with another company or that another company has become a customer of the Company without providing prior written notice, including a copy of the announcement text, to the businessperson at the other company responsible for that company’s relationship with the Company. 6 Also, the Company received a civil monetary penalty of two million two hundred thousand dollars ($2,200,000) in the aggregate that must be paid to the SEC.
Added
The fair value of the Series A Warrants was determined based on the stock price on issuance of $0.277 multiplied by the total number of shares of common stock issuable upon exercise of the Series A alternative cashless exercise.
Removed
Mr. Govil also received a civil monetary penalty of three hundred and fifty thousand dollars ($350,000) in the aggregate that must be paid to the SEC. The Company and Mr. Govil have remitted the payments as of September 30, 2022. The SEC Order can be accessed at www.sec.gov.
Added
Under the alternative cashless exercise, the Holder is entitled to receive three times the normal number of shares issued in a cash exercise.
Added
The Series A Holder may only execute the alternative cashless exercise after Stockholder Approval (and received June 17, 2024); at the time of issuance, Stockholder Approval was deemed perfunctory and almost certain to occur, and the most likely settlement option would be through the alternative cashless exercise.
Added
In addition, beginning on the date of the Warrant Stockholder Approval, the Warrants will contain a reset of the exercise price to a price equal to the lesser of (i) the then-current exercise price and (ii) lowest volume weighted average price for the five trading days immediately preceding and immediately following the date we effect a reverse stock split in the future with a proportionate adjustment to the number of shares underlying the Warrants.
Added
As such, upon issuance, the total fair value of the Series A Warrants was $11,242,940, which was based on 40,588,230 common shares issuable under the alternative cashless exercise.
Added
The measurement of fair value of the Series B Warrants were determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $0.277, exercise price of $0.85, term of five years, volatility of 132%, risk-free rate of 4.5%, and expected dividend rate of 0%).
Added
The grant date fair value of these Series B Warrants was estimated to be $2,942,711 on May 3, 2024, and such warrants were classified as liabilities. Due to the nominal exercise price, the fair value of the Prefunded Warrants was based on the intrinsic value of each Warrant on the grant date.
Added
The intrinsic value was calculated based on the May 3, 2024, stock price of $0.277 and the strike price of $0.001, resulting in a total fair value of $3,105,170. The total fair value of the Warrants upon issuance was $17,290,821.
Added
Given that the gross proceeds received of $10,035,293 was less than the total fair value of the liability classified Warrants, the Company recorded a loss on excess fair value of $7,255,528 at issuance.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

66 edited+105 added−15 removed144 unchanged
Biggest changeOur gross margins are dependent upon our ability to maintain sales volumes at levels that allow us to cover our fixed costs and variable costs per unit. To the extent that one or more product lines experience a significant and protracted decline in sales volume, we may experience significant declines in our gross margins that may result in losses.
Biggest changeThe uncertainty in the United States and in the international economic and political environment could result in a decline in demand for our products in any industry. Our gross margins are dependent upon our ability to maintain sales volumes at levels that allow us to cover our fixed costs and variable costs per unit.
Our business is affected by varying degrees of technological change and corresponding shifts in customer demand, which result in unpredictable product transitions, shortened life cycles and increased importance of being first to market with new products and services.
Our business is affected by varying degrees of technological change and corresponding shifts in customer demand, which result in unpredictable product transitions, shortened life cycles and increased importance of being first to market with new products and services.
Our results of operations may fluctuate as a result of a number of factors, some of which are beyond our control including but not limited to: ■ general economic conditions in the geographies and industries where we sell our services and conduct operations; legislative policies where we sell our services and conduct operations; ■ the budgetary constraints of our customers; seasonality; ■ success of our strategic growth initiatives; ■ costs associated with the launching or integration of new or acquired businesses; 13 ■ timing of new product introductions by us, our suppliers and our competitors; product and service mix, availability, utilization and pricing; ■ the mix, by state and country, of our revenues, personnel and assets; ■ movements in interest rates or tax rates; ■ changes in, and application of, accounting rules; ■ changes in the regulations applicable to us; ■ litigation matters.
Our results of operations may fluctuate as a result of a number of factors, some of which are beyond our control including but not limited to: ■ general economic conditions in the geographies and industries where we sell our services and conduct operations; legislative policies where we sell our services and conduct operations; ■ the budgetary constraints of our customers; seasonality; ■ success of our strategic growth initiatives; ■ costs associated with the launching or integration of new or acquired businesses; ■ timing of new product introductions by us, our suppliers and our competitors; product and service mix, availability, utilization and pricing; ■ the mix, by state and country, of our revenues, personnel and assets; ■ movements in interest rates or tax rates; ■ changes in, and application of, accounting rules; ■ changes in the regulations applicable to us; and ■ litigation matters.
Regardless of merit or eventual outcome, liability claims may result in: ■ decreased demand for our product or any planned products that we may develop; ■ injury to our reputation and significant negative media attention; 18 ■ significant costs to defend the related litigation and distraction to our management team; ■ substantial monetary awards to plaintiffs; ■ loss of revenue; and ■ the inability to commercialize any future products that we may develop.
Regardless of merit or eventual outcome, liability claims may result in: ■ decreased demand for our product or any planned products that we may develop; ■ injury to our reputation and significant negative media attention; ■ significant costs to defend the related litigation and distraction to our management team; ■ substantial monetary awards to plaintiffs; ■ loss of revenue; and ■ the inability to commercialize any future products that we may develop.
Political uncertainty surrounding trade and other international disputes could also have a negative effect on consumer confidence and spending, which could adversely affect our business. 9 Many of our operations and facilities, as well as critical business operations of our suppliers and contract manufacturers, are in locations that are prone to earthquakes and other natural disasters.
Political uncertainty surrounding trade and other international disputes could also have a negative effect on consumer confidence and spending, which could adversely affect our business. Many of our operations and facilities, as well as critical business operations of our suppliers and contract manufacturers, are in locations that are prone to earthquakes and other natural disasters.
Litigation relating to our intellectual property may not prove successful and might result in substantial costs and diversion of resources and management attention. From our customers’ standpoint, the strength of the intellectual property under which we control can be a critical determinant of the value of our products and services.
Litigation relating to our intellectual property may not prove successful and might result in substantial costs and diversion of resources and management attention. 18 From our customers’ standpoint, the strength of the intellectual property under which we control can be a critical determinant of the value of our products and services.
Without an active trading market, there can be no assurance of any liquidity or resale value of the common stock, and stockholders may be required to hold their shares of common stock for an indefinite period of time. We may not pay cash dividends on our common stock.
Without an active trading market, there can be no assurance of any liquidity or resale value of the common stock, and stockholders may be required to hold their shares of common stock for an indefinite period of time. 24 We may not pay cash dividends on our common stock.
Furthermore, the disclosure of non-public sensitive information through external media channels could lead to the loss of intellectual property or damage our reputation and brand image. We are also in the process of converting certain information technology networks and systems and consolidating certain global systems.
Furthermore, the disclosure of non-public sensitive information through external media channels could lead to the loss of intellectual property or damage our reputation and brand image. 15 We are also in the process of converting certain information technology networks and systems and consolidating certain global systems.
These and other impacts can materially adversely affect our business, results of operations, financial condition and stock price. Our business can be impacted by political events, trade and other international disputes, war, terrorism, natural disasters, public health issues, industrial accidents and other business interruptions.
These and other impacts can materially adversely affect our business, results of operations, financial condition and stock price. 8 Our business can be impacted by political events, trade and other international disputes, war, terrorism, natural disasters, public health issues, industrial accidents and other business interruptions.
There can be no assurance that our business will grow through acquisitions, as anticipated. We may fail to successfully integrate our acquisitions or otherwise be unable to benefit from pursuing acquisitions.
There can be no assurance that our business will grow through acquisitions, as anticipated. 20 We may fail to successfully integrate our acquisitions or otherwise be unable to benefit from pursuing acquisitions.
We also depend on our information technology infrastructure for digital marketing and sales activities and for electronic communications among our locations, personnel, customers, and suppliers around the world. Many of the information technology systems used by us globally have been in place for many years and not all hardware and software is currently supported by vendors.
We also depend on our information technology infrastructure for digital marketing and sales activities and for electronic communications among our locations, personnel, customers, and suppliers around the world. Many of the information technology systems used by us globally have been in place for many years and not all hardware and software are currently supported by vendors.
Based on its evaluation, our management concluded that as of September 30, 2023, that our internal control over financial reporting were effective. We are required to disclose changes made in our internal control and procedures on a quarterly basis.
Based on its evaluation, our management concluded that as of September 30, 2024, that our internal control over financial reporting were effective. We are required to disclose changes made in our internal control and procedures on a quarterly basis.
A voluntary or involuntary departure by Saagar Govil could have a materially adverse effect on our business operations if we were not able to attract a qualified replacement for them in a timely manner.
A voluntary or involuntary departure by Saagar Govil could have a materially adverse effect on our business operations if we were not able to attract a qualified replacement for him in a timely manner.
Since our business concerns new and developing technologies, and many of these endeavors fail, some of the businesses in our portfolio may not be successful in generating sufficient revenue to be a viable option for our company. Currently, the Company has the following business segments, consisting of (i) Security, (ii) Industrial Services, and (iii) Cemtrex Corporate.
Since our business concerns new and developing technologies, and many of these endeavors fail, some of the businesses in our portfolio may not be successful in generating sufficient revenue to be a viable option for our company. Currently, the Company has the following business segments, consisting of (i) Security and (ii) Industrial Services.
Our management, including our principal executive officer and principal accounting officer, conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ( “ COSO ” ) in Internal Control—Integrated Framework (2013).
Our management, including our principal executive officer and principal accounting officer, conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013).
No other cash dividends have been declared or paid by us on our stock during either of the two most recent fiscal years or the period through the date of this Annual Report.
No other cash dividends have been declared or paid by us on our stock during either of the two most recent fiscal years or the period through the date of this prospectus.
We have no real control over factors affecting the industries that utilize our products and to the extent that any one or more of these industries change dramatically, we may be facing significant financial challenges that are in excess of our existing capabilities.
Factors affecting the industries that utilize our products could negatively impact our customers and us. We have no real control over factors affecting the industries that utilize our products and to the extent that any one or more of these industries change dramatically, we may be facing significant financial challenges that are in excess of our existing capabilities.
This discussion of risk factors contains forward-looking statements. You should carefully consider the risks and uncertainties described below, together with all of the other information in this report, including the consolidated audited financial statements and the related notes appearing at the end of this annual report on Form 10-K, with respect to any investment in shares of our common stock.
You should carefully consider the risks and uncertainties described below, together with all of the other information in this report, including the consolidated audited financial statements and the related notes appearing at the end of this annual report on Form 10-K, with respect to any investment in shares of our common stock.
We have incurred net losses, including net losses attributable to Cemtrex, Inc. shareholders of $9.2 million in 2023, $13.0 million in 2022, and $7.8 million in 2021. We have an accumulated deficit of $64.2 million as of September 30, 2023. We expect to continue to incur significant product development, sales and marketing and administrative expenses.
We have incurred net losses, including net losses attributable to Cemtrex, Inc. shareholders of $7.2 million in 2024, $9.2 million in 2023, and $13.0 million in 2022. We have an accumulated deficit of $71.4 million as of September 30, 2024. We expect to continue to incur significant product development, sales and marketing and administrative expenses.
Within these segments there are a number of technologies that we are pursuing, as discussed in this annual report under “Item 1. Business.” There is a risk that one or more of our technologies will not be successful in generating revenue to sustain the expenditures associated with its existence.
In addition, there is Cemtrex Corporate, which reports unallocated corporate expenses. Within these segments there are a number of technologies that we are pursuing, as discussed in this annual report under “Item 1. Business.” There is a risk that one or more of our technologies will not be successful in generating revenue to sustain the expenditures associated with its existence.
Volatility in currency exchange rates may adversely affect our financial condition, results of operations and cash flows. Our international operations accounted for approximately 9.2% of our net sales in 2023.
Volatility in currency exchange rates may adversely affect our financial condition, results of operations and cash flows. Our international operations accounted for approximately 5.9% of our net sales in 2024.
If our stockholders sell substantial amounts of our securities in the public market, including the shares of common stock issuable upon the exercise of our Series 1 warrants and stock options, and shares issued as consideration in future acquisitions, or the market perceives that such sales may occur, the market price of our securities could fall and we may be unable to sell our securities in the future.
If our stockholders sell substantial amounts of our securities in the public market, including the shares of common stock issuable upon the exercise of our stock options, those under our 2020 Equity Compensation Plan, and shares issued as consideration in future acquisitions, or the market perceives that such sales may occur, the market price of our securities could fall and we may be unable to sell our securities in the future.
This substantial debt could have important consequences, including the following: (i) a substantial portion of our cash flow from operations may be dedicated to the payment of principal and interest on indebtedness, thereby reducing the funds available for operations, future business opportunities and capital expenditures; (ii) our ability to obtain additional financing for working capital, debt service requirements and general corporate purposes in the future may be limited; (iii) we may face a competitive disadvantage to lesser leveraged competitors; (iv) our debt service requirements could make it more difficult to satisfy other financial obligations; and (v) we may be vulnerable in a downturn in general economic conditions or in our business and we may be unable to carry out activities that are important to our growth.
This substantial debt could have important consequences, including the following: (i) a substantial portion of our cash flow from operations may be dedicated to the payment of principal and interest on indebtedness, thereby reducing the funds available for operations, future business opportunities and capital expenditures; (ii) our ability to obtain additional financing for working capital, debt service requirements and general corporate purposes in the future may be limited; (iii) we may face a competitive disadvantage to lesser leveraged competitors; (iv) our debt service requirements could make it more difficult to satisfy other financial obligations; and (v) we may be vulnerable in a downturn in general economic conditions or in our business and we may be unable to carry out activities that are important to our growth . 11 Our ability to make scheduled payments of the principal of, or to pay interest on, or to refinance our indebtedness depends on and is subject to our financial and operating performance, which in turn is affected by general and regional economic, financial, competitive, business and other factors beyond management’s control.
To date, we have seen no material impact on our business or operations from these attacks or events. Any future significant compromise, breach, or misuse of our data security could result in significant costs and damage to our reputation.
We have been, and likely will continue to be, subject to various cyber-attacks. To date, we have seen no material impact on our business or operations from these attacks or events. Any future significant compromise, breach, or misuse of our data security could result in significant costs and damage to our reputation.
We intend to make acquisitions of complementary (including competitive) businesses, products and technologies. However, any future acquisitions may result in material transaction costs, increased interest and amortization expenses related to goodwill and other intangible assets, increased depreciation expense and increased operating expenses, any of which could have an adverse effect on our operating results and financial position.
However, any future acquisitions may result in material transaction costs, increased interest and amortization expenses related to goodwill and other intangible assets, increased depreciation expense and increased operating expenses, any of which could have an adverse effect on our operating results and financial position.
The market price of our securities may fluctuate substantially due to a variety of factors, including: ● our business strategy and plans; ● changing factors related to doing business in various jurisdictions within the United States; ● new regulatory pronouncements and changes in regulatory guidelines and timing of regulatory approvals; ● general and industry-specific economic conditions; ● additions to or departures of our key personnel; ● variations in our quarterly financial and operating results; ● changes in market valuations of other companies that operate in our business segments or in our industry; ● lack of trading liquidity; ● announcements about our business partners; ● Intellectual property disputes; ● Operating results below or exceeding expectations or period-to-period fluctuations in our financial results; ● Whether we achieve profits or not; ● changes in accounting principles; and ● general market conditions, economic and other external factors.
The market price of our securities may fluctuate substantially due to a variety of factors, including: ● our business strategy and plans; ● changing factors related to doing business in various jurisdictions within the United States; ● new regulatory pronouncements and changes in regulatory guidelines and timing of regulatory approvals; ● general and industry-specific economic conditions; ● additions to or departures of our key personnel; ● variations in our quarterly financial and operating results; ● changes in market valuations of other companies that operate in our business segments or in our industry; ● lack of trading liquidity; ● announcements about our business partners; ● intellectual property disputes; ● operating results below or exceeding expectations or period-to-period fluctuations in our financial results; ● whether we achieve profits or not; ● changes in accounting principles; and ● general market conditions, economic and other external factors. 22 The market prices of the securities of early-stage companies, particularly companies like ours without consistent product revenues and earnings, have been highly volatile and are likely to remain highly volatile in the future.
If our information technology systems suffer severe damage, disruption, or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition, and results of operations may be materially affected, and we could experience delays in reporting our financial results. 15 We have been, and likely will continue to be, subject to various cyber-attacks.
If our information technology systems suffer severe damage, disruption, or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition, and results of operations may be materially affected, and we could experience delays in reporting our financial results.
However, trade secrets and technical know-how are difficult to maintain and do not provide the same legal protections provided by patents. In particular, only patents will allow us to prohibit others from using independently developed technology that are similar.
Outside of these patent applications, we seek to protect our technology as trade secrets and technical know-how. However, trade secrets and technical know-how are difficult to maintain and do not provide the same legal protections provided by patents. In particular, only patents will allow us to prohibit others from using independently developed technology that are similar.
Although we have filed various patent applications for some of our core technologies, we currently hold only six issued patents, with two in the United States and four in Canada, and we may face delays and difficulties in obtaining our other filed patents, or we may not be able to obtain such patents at all. 17 Outside of these patent applications, we seek to protect our technology as trade secrets and technical know-how.
Although we have filed various patent applications for some of our core technologies, we currently hold only six issued patents, with two in the United States and four in Canada, and we may face delays and difficulties in obtaining our other filed patents, or we may not be able to obtain such patents at all.
If we experience material weaknesses in the future or otherwise fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. 19 If we experience material weaknesses in the future or otherwise fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
Provisions in the Delaware law and our Bylaws could make it very difficult for an investor to bring any legal actions against our directors or officers for violations of their fiduciary duties or could require us to pay any amounts incurred by our directors or officers in any such actions.
A copy of the SEC Order can be found at www.sec.gov . 17 Provisions in the Delaware law and our Bylaws could make it very difficult for an investor to bring any legal actions against our directors or officers for violations of their fiduciary duties or could require us to pay any amounts incurred by our directors or officers in any such actions.
In these circumstances, we anticipate that we could be required to increase or decrease staffing and more closely manage other expenses in order to meet the anticipated demand of our existing and future customers.
Any of these factors could negatively impact our business, results of operations and financial condition. In these circumstances, we anticipate that we could be required to increase or decrease staffing and more closely manage other expenses in order to meet the anticipated demand of our existing and future customers.
Our global operations subject us to many different and complex laws and rules, and we may face difficulty in compliance. Due to our global operations, we are subject to many laws governing international relations (including but not limited to the Foreign Corrupt Practices Act, the U.S. Export Administration Act the EU General Data Protection Regulation, and the U.K.
Due to our international operations, we are subject to many laws governing international relations (including but not limited to the Foreign Corrupt Practices Act, the U.S. Export Administration Act the EU General Data Protection Regulation, and the U.K.
If we are unable to assert that our internal control over financial reporting is effective, or when required in the future, if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be adversely affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources. 19 Risks Related to Acquisitions We have grown through acquisitions and are continuously looking to fund other acquisitions; our failure to raise funds for acquisitions may have the effect of slowing down our growth and our use of funds for acquisitions subjects us to acquisition-related risks.
If we are unable to assert that our internal control over financial reporting is effective, or when required in the future, if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be adversely affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.
We may also need to increase spending on marketing, advertising and new product innovation to protect existing market share or increase market share. The success of our investments is subject to risks, including uncertainties about trade and consumer acceptance.
We may also need to increase spending on marketing, advertising and new product innovation to protect existing market share or increase market share. The success of our investments is subject to risks, including uncertainties about trade and consumer acceptance. As a result, our increased expenditures may not maintain or enhance market share and could result in lower profitability.
By comparison, as of September 30, 2022, our total indebtedness was approximately $20.6 million, including notes payable of $17.7 million, mortgage payable of $2.3 million, and bank loans of $0.6 million, including $0.1 million of PPP loans. For 2023 and 2022 approximately $14.5 million and $16.9 million, respectively, of such debt is classified as current.
By comparison, as September 30, 2023, our total indebtedness was approximately $24.4 million, including notes payable of $18.1 million, mortgage payable of $3.4 million, vendor financed purchase of $0.7 million, bank loans of $1.3 million, and $0.9 million of PPP loans. For 2024 and 2023 approximately $7.9 million and $14.5 million, respectively, of such debt is classified as current.
On September 30, 2022, acting pursuant to an offer of settlement submitted by the Company, the SEC issued an order pursuant to Section 8A of the Securities Act, directing the Company to cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder (the “SEC Order”). 16 While we have already paid the penalties imposed by the order into which we entered pursuant to the SEC Order, it contains ongoing and continuing requirements that we refrain from violating the Securities Act.
On September 30, 2022, acting pursuant to an offer of settlement submitted by the Company, the SEC issued an order pursuant to Section 8A of the Securities Act, directing the Company to cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder (the “SEC Order”).
These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our Common Stock, and therefore shareholders may have difficulty selling their shares.
These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our Common Stock, and therefore shareholders may have difficulty selling their shares. FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our securities.
Although our Common Stock and Series 1 Preferred Stock are listed on the Nasdaq Capital Market, the exchange will require us to meet certain financial, public float, bid price and liquidity standards on an ongoing basis in order to continue the listing of our Common Stock and Series 1 Preferred Stock.
Although our Common Stock is listed on the Nasdaq Capital Market, the exchange will require us to meet certain financial, public float, bid price and liquidity standards on an ongoing basis in order to continue the listing of our Common Stock. If we fail to meet these continued listing requirements, our Common Stock may be subject to delisting.
This could make it impossible for public stockholders to influence the affairs of our company. Risks Related to Our Securities Sales of substantial amounts of our common stock in the public market could depress the market price of our common stock. Our common stock and Series 1 Preferred Stock are listed for trading on the Nasdaq Capital Market.
Risks Related to Our Securities and the Markets for Our Securities Sales of substantial amounts of our securities in the public market could depress the market price of our common stock. Our common stock is listed for trading on the Nasdaq Capital Market and our Series 1 Preferred Stock is quoted on the OTC Markets.
Further issues could reduce investor and shareholder confidence in our company and could result in a failure to execute on our business plan, which would negatively impact our business. A copy of the SEC Order can be found at www.sec .gov.
Further issues could reduce investor and shareholder confidence in our company and could result in a failure to execute on our business plan, which would negatively impact our business.
Our Series 1 preferred stock and all of our existing and future indebtedness rank senior to our common stock in the event of a liquidation, winding up or dissolution of our business.
Accordingly, we will likely not receive any additional funds upon the exercise of the Series A Warrants. Our Series 1 preferred stock and all of our existing and future indebtedness rank senior to our common stock in the event of a liquidation, winding up or dissolution of our business.
In addition, currency fluctuations may affect the prices we pay suppliers for materials used in our products, along with other local costs incurred in foreign countries for foreign entities with U.S. dollar functional currency. As a result, fluctuating exchange rates may adversely impact our results of operations and cash flows.
In addition, currency fluctuations may affect the prices we pay suppliers for materials used in our products, along with other local costs incurred in foreign countries for foreign entities with U.S. dollar functional currency.
Our future operating results depend in part on continued successful research, development and marketing of new and improved products and services through our Security segment, and there can be no assurance that we will successfully introduce new products and services into the market.
As we continuously review our portfolio of businesses we may exit or enter into new business activities which may ultimately prove to be unsuccessful. 12 Our future operating results depend in part on continued successful research, development and marketing of new and improved products and services through our Security segment, and there can be no assurance that we will successfully introduce new products and services into the market.
Competing technologies may be offered by both existing competitors or by those that enter the market, and these competing technologies may offer a better cost-benefit ratio than our products and/or at lower prices with the result that our sales, profits, and cash flow may suffer significantly over an extended period with serious adverse impact on our financial condition. 12 We have taken a multi-operational approach, and some of our business segments have historically failed to benefit our company to date, and there remains a risk that our remaining segments may not prove to be successful.
Competing technologies may be offered by both existing competitors or by those that enter the market, and these competing technologies may offer a better cost-benefit ratio than our products and/or at lower prices with the result that our sales, profits, and cash flow may suffer significantly over an extended period with serious adverse impact on our financial condition.
Although our Common Stock and Series 1 Preferred Stock are listed on the Nasdaq Capital Market, the exchange may subsequently delist our Common Stock or Series 1 Preferred Stock if we fail to comply with ongoing listing standards.
Although our Common Stock is listed on the Nasdaq Capital Market, the exchange may subsequently delist our Common Stock as it has with our Series 1 Preferred Stock if we fail to comply with ongoing listing standards. We previously received a deficiency letter from Nasdaq on our Series 1 Preferred Stock.
Any inability to retain, attract or motivate such personnel could have a material adverse effect on our business and results of operations. 20 Our management stockholders have significant stockholdings in and influence over our company which could make it impossible for public stockholders to influence the affairs of our company. We are a “controlled company” under Nasdaq Listing Rules.
Our management stockholders have significant stockholdings in and influence over our company which could make it impossible for public stockholders to influence the affairs of our company. We are a “controlled company” under Nasdaq Listing Rules.
These factors include: ● increased competition among our customers and their competitors; ● the inability of our customers to develop and market their products; ● recessionary periods in our customers’ markets; ● the potential that our customers’ products become obsolete; ● our customers’ inability to react to rapidly changing technology; and ● our customers’ inability to pay for our products, which could, in turn, affect the company’s results of operations.
These factors include: ● increased competition among our customers and their competitors; ● the inability of our customers to develop and market their products; ● recessionary periods in our customers’ markets; ● the potential that our customers’ products become obsolete; ● our customers’ inability to react to rapidly changing technology; and ● our customers’ inability to pay for our products, which could, in turn, affect the company’s results of operations. 14 If we are unable to develop new products, our competitors may develop and market products with better features that may reduce demand for our existing and potential products or otherwise result in our products becoming obsolete and could materially and adversely affect our ability to sustain profitability.
We currently maintain product liability insurance coverage, which may not be adequate to cover all liabilities that we may incur. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.
We currently maintain product liability insurance coverage, which may not be adequate to cover all liabilities that we may incur. Insurance coverage is increasingly expensive.
Our business and results of operations may be materially adversely affected by compliance with import and export laws.
As a result, fluctuating exchange rates may adversely impact our results of operations and cash flows. 9 Our business and results of operations may be materially adversely affected by compliance with import and export laws.
In the past, companies that experience volatility in the market price of their securities have often faced securities class action litigation. Whether or not meritorious, litigation brought against us could result in substantial costs, divert our management’s attention and resources and harm our financial condition and results of operations.
Whether or not meritorious, litigation brought against us could result in substantial costs, divert our management’s attention and resources and harm our financial condition and results of operations.
We are increasingly dependent on information technology, and if we are unable to protect against service interruptions, data corruption, cyber-based attacks, or network security breaches our operations could be disrupted and we could incur significant costs and reputational harm as a result We rely on information technology networks and systems, including the Internet, to process, transmit, and store electronic and financial information; to manage a variety of business processes and activities; and to comply with regulatory, legal, and tax requirements.
We are increasingly dependent on information technology, and if we are unable to protect against service interruptions, data corruption, cyber-based attacks, or network security breaches our operations could be disrupted, and we could incur significant costs and reputational harm as a result.
Changes in demand mix, needed technologies, and end-use markets may adversely affect our ability to match our products, inventory, and capacity to meet customer demand and could adversely affect our operating results and financial condition. We are also vulnerable to general economic events or trends beyond our control, and our sales and profits may suffer in periods of weak demand.
Changes in demand mix, needed technologies, and end-use markets may adversely affect our ability to match our products, inventory, and capacity to meet customer demand and could adversely affect our operating results and financial condition.
The Company’s investments can be negatively affected by liquidity, credit deterioration, financial results, market and economic conditions, political risk, sovereign risk, interest rate fluctuations or other factors. 11 Although we have not recognized any material losses related to our cash equivalents, short-term investments, or long-term investments, future declines in the market values of such investments could have an adverse effect on our financial condition and operating results.
Although we have not recognized any material losses related to our cash equivalents, short-term investments, or long-term investments, future declines in the market values of such investments could have an adverse effect on our financial condition and operating results. As a result, the value and liquidity of the Company’s cash, cash equivalents, and marketable securities may fluctuate substantially.
If our shares become subject to the penny stock rules, it would become more difficult to trade our shares. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks.
When any one or more of these risks materialize from time to time, our business, reputation, results of operations, financial condition and stock price can be materially and adversely affected. 8 Because of the following factors, as well as other factors affecting the Company’s results of operations and financial condition, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.
Because of the following factors, as well as other factors affecting the Company’s results of operations and financial condition, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods. This discussion of risk factors contains forward-looking statements.
If we are unable to establish our technologies in the market, and overcome the challenges of doing so, we could go out of business. As we continuously review our portfolio of businesses we may exit or enter into new business activities which may ultimately prove to be unsuccessful.
If we are unable to establish our technologies in the market, and overcome the challenges of doing so, we could go out of business.
Any restrictions on the export of our products or product lines could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition. Risks Related to Covid-19 The global pandemic may disrupt our business or the business of our customers.
Any restrictions on the export of our products or product lines could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition. Our international operations subject us to many different and complex laws and rules, and we may face difficulty in compliance.
As of September 30, 2023, our total indebtedness was approximately $24.4 million, including notes payable of $18.1 million, mortgage payable of $3.4 million, vendor financed purchase of $0.7 million, and bank loans of $2.2 million, including $0.9 million of PPP loans that the Company expects to be forgiven.
As of September 30, 2024, our total indebtedness was approximately $21.05 million, including notes payable of $12.4 million, revolving line of credit of $3.1 million, mortgage payable of $3.3 million, bank loans of $2.2 million, and $0.05 million of PPP loans.
As the source of our technological and product innovations, our design and technical personnel represent a significant asset.
As the source of our technological and product innovations, our design and technical personnel represent a significant asset. Any inability to retain, attract or motivate such personnel could have a material adverse effect on our business and results of operations.
Acquisitions of new businesses in new non-U.S. jurisdictions may also subject us to new regulations and laws, and we may face difficulties ensuring compliance with these new requirements.
Acquisitions of new businesses in new non-U.S. jurisdictions may also subject us to new regulations and laws, and we may face difficulties ensuring compliance with these new requirements. Risks Related to our Financial Condition The report of our independent registered public accounting firm contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a going concern.
Any liquidation, winding up or dissolution of our company or of any of our wholly or partially owned subsidiaries would have a material adverse effect on holders of our common stock. 21 Our common stockholders may be adversely affected by the issuance of any subsequent series of preferred stock.
Our common stockholders may be adversely affected by the issuance of any subsequent series of preferred stock.
Further, any adverse changes in tax rates and laws affecting our customers could result in decreases in demand of our products and thus decrease our gross margins. Any of these factors could negatively impact our business, results of operations and financial condition.
To the extent that one or more product lines experience a significant and protracted decline in sales volume, we may experience significant declines in our gross margins that may result in losses. Further, any adverse changes in tax rates and laws affecting our customers could result in decreases in demand of our products and thus decrease our gross margins.
Our sales and gross margins depend significantly on market demand for our products, as to which there can be no assurance. The uncertainty in the United States and in the international economic and political environment could result in a decline in demand for our products in any industry.
We are also vulnerable to general economic events or trends beyond our control, and our sales and profits may suffer in periods of weak demand. 13 Our sales and gross margins depend significantly on market demand for our products, as to which there can be no assurance.
Risks Related to our Financial Condition There is no guarantee that cash flow from operations and/or debt and equity financings will provide sufficient capital to meet our expansion goals working capital needs or fund our operations. Our current strategic plan includes the expansion of our company both organically and through acquisitions if market conditions and competitive conditions allow.
Our current strategic plan includes the expansion of our company both organically and through acquisitions if market conditions and competitive conditions allow.
The market prices of the securities of early-stage companies, particularly companies like ours without consistent product revenues and earnings, have been highly volatile and are likely to remain highly volatile in the future. This volatility has often been unrelated to the operating performance of particular companies.
This volatility has often been unrelated to the operating performance of particular companies. In the past, companies that experience volatility in the market price of their securities have often faced securities class action litigation.
Removed
In December 2019, a novel strain of corona virus, which causes the infectious disease known as COVID-19 was reported. The World Health Organization declared COVID-19 a Public Health Emergency and Global Pandemic.
Added
When any one or more of these risks materialize from time to time, our business, reputation, results of operations, financial condition and stock price can be materially and adversely affected.
Removed
COVID-19 has severely impacted economies around the world. 10 The current COVID-19 pandemic has impacted our business operations and the results of our operations in this 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.
Added
The Company has incurred substantial losses of $7.2 million and $9.2 million for fiscal years 2024 and 2023, respectively, and working capital of $8.1 million as at the end of fiscal 2024, that raise substantial doubt with respect to the Company’s ability to continue as a going concern.
Removed
Bookings and revenue have largely recovered in this calendar year compared to last year. In addition, 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. The broader implications of COVID-19 on our results from operations going forward remains uncertain.
Added
While our working capital and current debt indicate a substantial doubt regarding the Company’s ability to continue as a going concern, the Company has historically, from time to time, satisfied and may continue to satisfy certain short-term liabilities through the issuance of common stock, thus reducing our cash requirement to meet our operating needs.
Removed
The COVID-19 pandemic 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.
Added
The Company has approximately $3.9 million in cash as of September 30, 2024.
Removed
However, on the other hand, opportunities in the video surveillance field have been growing for Vicon products. The extent of the pandemic’s effect on our operational and financial performance will depend in large part on future developments, which cannot be reasonably estimated at this time.
Added
Additionally, the Company has (i) secured a line of credit for its Vicon brand to fund operations, which as of September 30, 2024, has available capacity of $1.9 million, and a line of credit for its AIS brand with a $3.5 million capacity that has not been drawn upon, (ii) continually reevaluate our pricing model on our Vicon brand to improve margins on those products and introducing new innovative products to grow revenues, (iii) raised approximately $9.0 million in net proceeds through our May 2024 equity financing and anticipate an additional $5 to $10 million when the Series B warrants are exercised, and (iv) subsequent to the balance sheet date has effected a 60:1 and a 35:1 reverse stock split on our common stock to remain trading on the Nasdaq Capital Markets, and improve our ability to potentially raise capital through equity offerings that we may use to satisfy debt.
Removed
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.
Added
In the event additional capital is raised through equity offerings and/or debt is satisfied with equity, it may have a dilutive effect on our existing stockholders.
Removed
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. This could materially impact our results of operations, cash flows, and financial condition.
Added
While the Company believes these plans if successful, would be sufficient to meet the capital demands of our current operations for at least the next twelve months, there is no guarantee that we will succeed.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Company’s Security segment leases (i) approximately 6,700 square feet of office and warehouse space in Pune, India from a third party in an five year lease at a monthly rent of $5,810 (INR473,415) expiring on February 28, 2024, (ii) approximately 30,000 square feet of office and warehouse space in Hauppauge, NY from a third party in a seven-year lease at a monthly rent of $28,719 expiring on March 31, 2027, (iii) approximately 911 square feet of office space in Clovis, CA on a month-to-month lease at a monthly rent of $4,930, and (iv) approximately 9,400 square feet of office and warehouse space in Hampshire, England in a fifteen-year lease with at a monthly rent of $9,821 (£7,669) which expires on March 24, 2031 and contains provisions to terminate in 2026.
Biggest changeThe Company’s Security segment leases (i) approximately 6,700 square feet of office and warehouse space in Pune, India from a third party in an five year lease at a monthly rent of $6,048 (INR504,150) expiring on February 28, 2027, (ii) approximately 30,000 square feet of office and warehouse space in Hauppauge, NY from a third party in a seven-year lease at a monthly rent of $28,719 expiring on March 31, 2027, (iii) approximately 911 square feet of office space in Clovis, CA on a month-to-month lease at a monthly rent of $4,930, and (iv) approximately 9,400 square feet of office and warehouse space in Hampshire, England in a fifteen-year lease with at a monthly rent of $9,821 (£7,669) which expires on March 24, 2031 and contains provisions to terminate in 2026.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThese securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising.
Biggest changeOn October 7, 2024, 123,167 shares of Series 1 Preferred Stock were issued to pay dividends to holders of Series 1 Preferred Stock. These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution.
No other cash dividends have been declared or paid by us on our stock during either of the two most recent fiscal years or the period through the date of this Annual Report.
No cash dividends have been declared or paid by us on our stock during either of the two most recent fiscal years or the period through the date of this Annual Report.
This amount does not take into account shareholders whose shares are held in “street name” by brokerage houses or other intermediaries. The Company is authorized to issue 10,000,000 shares of preferred stock, par value $0.001 and 50,000,000 shares of common stock, $0.001 par value per share.
This amount does not take into account shareholders whose shares are held in “street name” by brokerage houses or other intermediaries. The Company is authorized to issue 10,000,000 shares of preferred stock, par value $0.001 and 70,000,000 shares of common stock, $0.001 par value per share.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s Common Stock currently trades on the NASDAQ Capital Markets under the symbol “CETX.” As of December 26, 2023, the Company had 70 shareholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s Common Stock currently trades on the NASDAQ Capital Markets under the symbol “CETX.” As of December 23, 2024, the Company had 71 shareholders of record.
Securities Authorized for Issuance under Equity Compensation Plans The following table presents certain information as of September 30, 2023, regarding our equity compensation plans: Plan category Number of Common Stock Shares to be Issued upon Exercise of Outstanding Options Weighted Average Exercise Price of Outstanding Options Number of Securities Remaining Available for Future Issuance under Plans (1) (a) (b) (c) Approved by security holders 2020 Equity Compensation Plan 8,793 $ 13.65 1,991,207 Not approved by security holders Options 20,003 $ 66.95 Total 28,796 $ 50.67 1,991,207 (1) See more detailed information regarding our equity compensation plans in the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for the year ended September 30,2023. 24 Recent Sales of Unregistered Securities The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933 during the reporting period which were not previously included in an Annual Report on Form 10-K, Quarterly Report on Form 10-Q or Current Report on Form 8-K.
Securities Authorized for Issuance under Equity Compensation Plans The following table presents certain information as of September 30, 2024, regarding our equity compensation plans: Plan category Number of Common Stock Shares to be Issued upon Exercise of Outstanding Options Weighted Average Exercise Price of Outstanding Options Number of Securities Remaining Available for Future Issuance under Plans (1) (a) (b) (c) Approved by security holders 2020 Equity Compensation Plan 6 $ 28,577.25 22 Not approved by security holders Options 12 $ 143,599.76 Total 18 $ 105,258.92 22 (1) See more detailed information regarding our equity compensation plans in the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for the year ended September 30,2024. 29 Recent Sales of Unregistered Securities The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933 during the reporting period which were not previously included in an Annual Report on Form 10-K, Quarterly Report on Form 10-Q or Current Report on Form 8-K.
Dividend Policy Our board of directors declared a one-time cash dividend on our common stock in April 2017. The terms of our series 1 preferred stock provide for the payment of semiannual dividends on the last day of March and September in each year, which began in March 2017.
Dividend Policy The terms of our series 1 preferred stock provide for the payment of semiannual dividends on the last day of March and September in each year, which began in March 2017.
On December 26, 2023, there were 1,055,636 shares of common stock issued and outstanding, 2,408,053 shares of Series 1 preferred stock issued and 2,343,953 shares outstanding, and 50,000 shares of Series C preferred stock issued and outstanding. As reported by NASDAQ Capital Markets, on December 26, 2023, the closing sales price of the Company’s Common Stock was $5.40 per share.
On December 23, 2024, there were 1,724,162 shares of common stock issued and outstanding, 2,579,994 shares of Series 1 preferred stock issued and 2,515,894 shares outstanding, and 50,000 shares of Series C preferred stock issued and outstanding. As reported by NASDAQ Capital Markets, on December 23, 2024, the closing sales price of the Company’s Common Stock was $2.98 per share.
For the fiscal year ended September 30, 2023, we issued 30,103 shares of common stock in exchange for $215,800 of services to the Company. On October 6, 2022, 115,037 shares of Series 1 Preferred Stock were issued to pay dividends to holders of Series 1 Preferred Stock.
For the fiscal year ended September 30, 2024, 235,762 shares of Series 1 Preferred Stock were issued to pay dividends to holders of Series 1 Preferred Stock. For the fiscal year ended September 30, 2024, we issued 105 shares of common stock in exchange for $169,000 of services to the Company.
We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.
The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.
Removed
For the fiscal year ended September 30, 2023, 213,894 shares of Series 1 Preferred Stock were issued to pay dividends to holders of Series 1 Preferred Stock. For the fiscal year ended September 30, 2023, we issued 241,655 shares of common stock to satisfy $1,917,873 of notes payable and accumulated interest.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

19 edited+45 added−15 removed16 unchanged
Biggest changeFinancing activities provided $2,036,655 of cash for the year ended September 30, 2023, as compared to $5,022,537 provided in the year ended September 30, 2022. In fiscal 2023 our financing activities were mainly comprised of financing of the acquisition of Heisey and the building purchase. In fiscal 2022 our financing activities were mainly comprised of the proceeds on new debt.
Biggest changeInvesting activities for fiscal year 2023 were mainly driven by the purchase of property and equipment and the acquisition of Heisey Mechanical. Financing activities provided $4,398,599 of cash for the year ended September 30, 2024, as compared to $2,036,655 provided in the year ended September 30, 2023.
The Company accounts for business combinations under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business Combinations” using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition.
Business Combinations The Company accounts for business combinations under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business Combinations” using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition.
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements.
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated financial statements is not required in those statements.
Gross profit in our Security segment was $17,106,300 or 50% of the segment’s revenues for the year ended September 30, 2023, as compared to gross profit of $10,223,704 or 43% of the segment’s revenues for the year ended September 30, 2022.
Gross profit in our Security segment was $16,167,339 or 50% of the segment’s revenues for the year ended September 30, 2024, as compared to gross profit of $17,106,300 or 50% of the segment’s revenues for the year ended September 30, 2023.
Gross Profit Gross Profit for the year ended September 30, 2023, was $25,685,826 or 43% of revenues as compared to gross profit of $16,565,928 or 37% of revenues for the year ended September 30, 2022.
Gross Profit Gross profit for the year ended September 30, 2024, was $27,478,204 or 41% of revenues as compared to gross profit of $25,685,826 or 43% of revenues for the year ended September 30, 2023.
Liquidity and Capital Resources Working capital was $1,948,923 at September 30, 2023, compared to $6,252,972 at September 30, 2022. This includes cash and cash equivalents and restricted cash of $6,349,562 at September 30, 2023, and $11,473,676 at September 30, 2022, respectively.
Liquidity and Capital Resources Working capital was $8,103,457 at September 30, 2024, compared to $1,948,923 at September 30, 2023. This includes cash and cash equivalents and restricted cash of $5,420,392 at September 30, 2024, and $6,349,562 at September 30, 2023, respectively.
Gross profit in our Industrial Services segment was $8,579,526 or 34% of the segment’s revenues for the year ended September 30, 2023, as compared to gross profit of $6,342,224 or 30% of the segment’s revenues for the year ended September 30, 2022.
Gross profit as a percentage of revenues remained consistent in the years ended September 30, 2024, compared to the year ended September 30, 2023. 32 Gross profit in our Industrial Services segment was $11,310,865 or 32% of the segment’s revenues for the year ended September 30, 2024, as compared to gross profit of $8,579,526 or 34% of the segment’s revenues for the year ended September 30, 2023.
This increase is mainly due to an increased demand for the segment’s products and services and $2,316,000 of additional revenue from the business related to the acquisition of Heisey Mechanical.
This increase is mainly due to an increased demand for the segment’s products and services and additional revenue related to the acquisition of Heisey Mechanical completed in the fourth quarter of fiscal year 2023.
Other Income/(Expense) Other income/(expense) for the year ended September 30, 2023, was $(4,489,605) as compared to $3,302,035 for the year ended 2022. Other income/(expense) for the year ended September 30, 2023, was mainly driven by interest expense on the Company’s debt and included an employee retention credit of $416,502.
Other expense for the year ended September 30, 2023, was mainly driven by interest expense on the Company’s debt and included an employee retention credit of $416,502. Income Tax Benefit/(Expense) During the fiscal year of 2024 we recorded an income tax expense of $202,280 compared to $394,272 for fiscal year 2023.
The Company undertakes no obligation to update forward-looking statements as a result of future events or developments. Significant Accounting Policies and Estimates The Company’s accounting policies are more fully described in Note 2 of the Consolidated Financial Statements.
The Company undertakes no obligation to update forward-looking statements as a result of future events or developments.
Research and Development Expenses Research and Development expenses for the year ended September 30, 2023, and 2022 were $3,267,994 and $4,444,488, respectively. The decrease in Research and Development expenses are primarily related to the Security Segment’s development of proprietary technology and next generation solutions associated with security and surveillance systems software which are nearing the production phase.
The increase in Research and Development expenses are primarily related to the Security Segment’s development of proprietary technology and next generation solutions associated with security and surveillance systems software. Goodwill Impairment For the year ended September 30, 2024, the Company recognized a goodwill impairment charge of $530,475 related to its Security Segment.
The Company has incurred substantial losses of $9,196,875 and $13,020,958 for fiscal years 2023 and 2022, respectively, and has debt obligations over the next fiscal year of $14,507,711 and working capital of $1,948,923, that raise substantial doubt with respect to the Company’s ability to continue as a going concern.
In fiscal 2023 our financing activities were mainly comprised of financing of the acquisition of Heisey and the building purchase The Company has incurred substantial losses of $7,229,491 and $9,196,875 for fiscal years 2024 and 2023, respectively, and has debt obligations over the next fiscal year of $7,857,388 and working capital of $8,103,457, that raise substantial doubt with respect to the Company’s ability to continue as a going concern, as discussed in Item 1A of this Form 10-K.
Trade receivables increased by $3,810,479 or 71% to $9,209,695 at September 30, 2023, from $5,399,216 at September 30, 2022. The increase in trade receivables is mainly due to increased revenues and receivables related to the business generated by the acquisition of Heisey.
Cash provided by operating activities for discontinued operations for the year ended September 30, 2023, was $2,491,581. Trade receivables increased by $1,949,981 or 21% to $11,159,676 at September 30, 2024, from $9,209,695 at September 30, 2023. The increase in trade receivables is mainly due to increased revenues and receivables related to the business generated by the acquisition of Heisey.
Investing activities for continuing operations used $5,628,400 of cash during the year ended September 30, 2023, compared to $6,681,035 provided in the year ended September 30, 2022. Cash used by investing activities for discontinued operations for the year ended September 30, 2023, was $0, compared to using $70,908 for the year ended September 30, 2022.
Investing activities for continuing operations used $1,257,393 of cash during the year ended September 30, 2024, compared to $5,628,400 used in the year ended September 30, 2023. Investing activities for fiscal year 2024 were mainly driven by the purchase of property and equipment.
Gross profit as a percentage of revenues increased in the year ended September 30, 2023, compared to the year ended September 30, 2022, was primarily due to an increase in prices for our services and lower subcontractor costs.
Gross profit as a percentage of revenues decreased in the year ended September 30, 2024, compared to the year ended September 30, 2023, and was primarily due to lower margins related to Heisey projects that were in operation at the time of the Heisey acquisition.
As disclosed in Note 2, the preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates.
Critical Accounting Policies and Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Company’s management to make assumptions, estimates, and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any.
This increase is due to an increased demand for security technology products under our Vicon brand. Our Industrial Services segment revenues for the year ended September 30, 2023, increased by $3,803,076 or 18%, to $25,009,092 from $21,206,016 for the year ended September 30, 2022.
Our Industrial Services segment revenues for the year ended September 30, 2024, increased by $9,832,893 or 39%, to $34,841,985 from $25,009,092 for the year ended September 30, 2023.
General and Administrative Expenses General and Administrative Expenses for the year ended September 30, 2023, increased by $994,785 or 4% to $24,006,490 from $22,934,555 for the year ended September 30, 2022. The increase in general and administrative expenses is mainly due to increases in salaries and wages, travel, and utilities.
The increase in general and administrative expenses is mainly due to increases in salaries and wages, travel, and utilities as a result of the acquisition of Heisey completed in the fourth quarter of fiscal year 2023. Research and Development Expenses Research and Development expenses for the years ended September 30, 2024, and 2023 were $3,357,455 and $3,267,994, respectively.
The Company believes that the following discussion addresses the Company’s most critical accounting policies, which are those that are most important to the portrayal of the Company’s financial condition and results of operations and require management’s most difficult, subjective and complex judgments. Valuation of Goodwill At September 30, 2023, the Company had approximately $4,400,000 of goodwill.
Critical accounting policies are those that are most important to the portrayal of its financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.
Removed
Business Combinations During fiscal year 2023, The Company acquired Heisey Mechanical, Ltd. As discussed in Note 1 of the consolidated financial statements.
Added
Company management has identified certain accounting policies that are significant to the preparation of its financial statements. These accounting policies are important for an understanding of the Company’s financial condition and results of operations.
Removed
Please see Note 2 for detailed information regarding our significant accounting policies and estimates in the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for the year ended September 30, 2023. 25 Results of Operations - For the fiscal years ending September 30, 2023 and 2022 Total revenue for the year ended September 30, 2023, increased by $14,341,782 or 32% to $59,368,562 from $45,026,780 for the year ended September 30, 2022.
Added
Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. Company management believes the following critical accounting policies involve the most significant estimates and judgments used in the preparation of its financial statements.
Removed
Net loss for the year ended September 30, 2023, decreased by $3,981,654 to $9,310,588 from $13,292,242 for the year ended September 30, 2022.
Added
Company management has reviewed the critical accounting policies and estimates with the Audit Committee of our Board of Directors. Inventory and Cost of Goods Sold The Company values inventory, consisting of finished goods, at the lower of cost or net realizable value. Cost is determined on the average cost method.
Removed
Total revenue for the period increased, as compared to total revenue in the same period last year, due to increased demand for the Company’s products and services and $2,316,000 of additional revenue from the business related to the acquisition of Heisey Mechanical.
Added
The Company reduces inventory for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its estimated market value.
Removed
Net loss decreased due to the increase in revenue, an impairment of goodwill and the write-off of related party receivables in the prior year. Revenues Our Security segment revenues for the years ended September 30, 2023, increased by $10,538,706 or 44%, to $34,359,470 from $23,820,764 for the year ended September 30, 2022.
Added
Factors utilized in the determination of estimated market value include (i) current sales data and historical return rates, (ii) estimates of future demand, and (iii) competitive pricing pressures. The Company classifies inventory markdowns in the income statement as a component of cost of goods sold.
Removed
Gross profit as a percentage of revenues increased in the year ended September 30, 2023, compared to the year ended September 30, 2022, due to price increases implemented throughout the segment in January 2023 in response to rising costs of our goods and a reduction in transportation costs in 2023, compared to 2022.
Added
These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations. There was $1,044,530 and $618,021 in inventory obsolescence reserve at September 30, 2024, and 2023, respectively.
Removed
Other income/(expense) for the year ended September 30, 2022, included the following one-time items (i) the settlement with Securities and Exchange Commission, generated other expense of $2,200,000, (ii) other income resulting from the forgiveness of our PPP loans of $971,500.
Added
Revenue Recognition On October 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective transition method. Under the guidance of the standard, revenue represents the amount received or receivable for goods and services supplied by the Company to its customers.
Removed
Additionally, the company had realized gains on marketable securities of $8,402,125. 26 Income Tax Benefit/(Expense) During the fiscal year of 2023 we recorded an income tax expense of $394,272 compared to a benefit of $208,545 for the fiscal year of 2022.
Added
Company recognizes revenue at the time a good or service is transferred to a customer and the customer obtains control of that good or receives the service performed.
Removed
The decrease in working capital was primarily due to the decrease in the Company’s current assets of $2,474,726 and an increase in the Company’s current liabilities of $1,906,473.
Added
Most of the Company’s sales arrangements with customers in the Security segment are short-term in nature involving single performance obligations related to the delivery of goods or repair of equipment and generally provide for transfer of control at the time of shipment to the customer.
Removed
The primary reason for the decrease in current assets was the cash used for operations during the fiscal year and the decrease in assets of discontinued operations, while the primary reason for the increase in current liabilities was the increase in the Company’s accounts payable.
Added
The Company generally permits returns of product or repaired equipment due to defects; however, returns are historically insignificant. Billing terms vary by customer and product but generally do not exceed 90 days.
Removed
Operating activities for continuing operations used $4,724,305 for the year ended September 30, 2023, compared to using $16,262,531 of cash for the year ended September 30, 2022. Cash provided by operating activities for discontinued operations for the year ended September 30, 2023, was $2,491,581, compared to providing cash of $169,027 for the year ended September 30, 2022.
Added
In accordance with the authoritative guidance issued by the FASB on revenue recognition, the Company recognizes revenue from cost reimbursable contracts based on the services provided, typically represented by man-hours worked, and is measured by reference to agreed charge-out rates or to the estimated total contract revenue.
Removed
Investing activities for fiscal year 2023 were mainly driven by the purchase of property and equipment and the acquisition of Heisey Mechanical. Investing activities for fiscal year 2022 were mainly driven by the sale and purchase of marketable securities.
Added
Revenue from long-term fixed price contracts is recognized using the percentage-of-completion method, measured by reference to physical completion or the ratio of costs incurred to total estimated contract costs.
Removed
While the Company’s working capital and current debt indicate a substantial doubt regarding the Company’s ability to continue as a going concern, the Company has historically, from time to time, satisfied and may continue to satisfy certain short-term liabilities through the issuance of common stock, thus reducing our cash requirement to meet our operating needs.
Added
If the outcome of a contract cannot be estimated reliably, as may be the case in the initial stages of completion of the contract, revenue is recognized only to the extent of the costs incurred that are expected to be recoverable.
Removed
Additionally, the Company has recently sold unprofitable brands, reducing the cash required to maintain those brands, implemented a new pricing model on our Vicon brand which has improved margins on those products, has refinanced some debt to provide the Company with additional capital when needed, has effected a reverse stock split on our common stock to remain trading on the Nasdaq Capital Markets, and improve our ability to raise capital through equity offerings and reduce the number of shares the Company may use to satisfy debt.
Added
If a contract is expected to be loss-making, the expected amount of the loss is recognized immediately in the income statement. Revenue from short-term contracts is recognized when delivery has occurred, and collection of the resulting receivable is deemed probable.
Removed
In the event additional capital is raised through equity offerings and/or debt is satisfied with equity, it may have a dilutive effect on our existing stockholders. While the Company believes these plans are sufficient to meet the capital demands of our current operations for at least the next twelve months, the is no guarantee that we will succeed.
Added
Timing of revenue recognition may differ from the timing of invoicing to customers. 30 The Company records deferred revenue when receiving cash in advance of delivering services to the customer. The deferred revenue is reversed, and revenue is recognized when those services are delivered.
Added
The amounts were $1,955,635, $2,311,334, and $1,788,507 as of September 30, 2024, 2023, and 2022 respectively, recorded as Deferred revenue. Short-term deferred revenue of $1,297,616 is expected to be recognized over the next 12 months The Company records a liability when receiving cash in advance of delivering goods to the customer.
Added
The revenue is recognized, and the deposit is applied to the invoice for those goods when those goods are delivered. The company recorded Deposits from customers of $408,415, $57,434, and $73,144 as of September 30, 2024, 2023, and 2022 respectively. These amounts are short-term and are expected to be recognized over the next 12 months.
Added
Contracts The Company’s industrial services segment’s revenue is derived from contracts with customers. These contracts fall into two categories, “Fixed Price” and “Time and Material Price” contracts. The Company determines the appropriate accounting treatment for each contract at its inception. Generally, contracts have a period from six months to two years.
Added
The Company accounts for a contract when: (i) it has approval and commitment from both parties, (ii) the rights of the parties are identified, (iii) payment terms are identified, (iv) the contract has commercial substance, and (v) collectability of consideration is probable.
Added
The Company considers the start of a project to be when the above criteria have been met and it has written authorization from the customer to proceed. Fixed price contracts The Company’s revenue from fixed price contracts is recognized on the percentage-of-completion method, measured by the percentage of costs incurred to estimated total costs for each contract.
Added
When the job is started and in process, all actual costs incurred (labor and materials) are processed and reconciled at month end. The percentage of completion and revenue earned is calculated at month end.
Added
Billings are created based on contract criteria agreed upon and reconciled to determine if any costs in excess of billing or billings in excess of costs exist. Changes in job performance, job conditions, estimated contract costs and profitability, and final contract settlements may result in revisions to costs and income.
Added
The effects of these revisions are recognized in the period in which the revisions are determined. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. This measurement and comparison process requires updates to the estimate of total costs to complete the contract, and these updates may include subjective assessments and judgments.
Added
Time and material price contracts Revenue from time and material price contracts is recognized based on costs incurred and projected markup on costs. Revenue from these contracts will vary based on actual labor, materials and overhead costs charged to the job and the negotiated billing rates. Contracts are initiated by customers or through bids if with a municipality.
Added
Any materials used and time spent within the shop on the job is assigned to the appropriate job and reconciliated monthly. Management bills the customer and records the revenue earned from contract. Depending on the contract terms, billings could be based on certain milestones stipulated in the contract.
Added
If this is the case, unbilled revenue is recorded at month end based on time and materials incurred and markup. Performance Obligations Generally, the Company’s contracts contain one performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account.
Added
The Company’s performance of the contracts with customers typically provides a significant service of integrating a complex set of tasks and components into a single project or capability (even if that single project results in the delivery of multiple units), and as such, the entire contract and/or purchase order is accounted for as one performance obligation.
Added
The transaction price is allocated to the performance obligation and recognized as revenue when, or as, the performance obligation is satisfied with the continuous transfer of control to the customer. Less commonly, a contract may be considered to have multiple performance obligations even when they are part of a single contract.
Added
For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in the contract.
Added
The Company recognizes revenue over time for the majority of the services it performs as (i) control continuously transfers to the customer as work progresses at a project location controlled by the customer and (ii) the Company has the right to bill the customer as costs are incurred.
Added
Warrants The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 (Topic 480, Distinguishing Liabilities from Equity) and ASC 815 (Topic 815, Derivatives and Hedging).
Added
The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of our control, among other conditions for equity classification.
Added
This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
Added
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance.
Added
For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as a liability at their initial fair value on the date of issuance, and each balance sheet date thereafter.
Added
Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss in the Company’s Consolidated Statements of Operations.
Added
Valuation of Goodwill The Company accounts for business combinations under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business Combinations” using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition.
Added
The excess of the purchase price over the estimated fair value is recorded as goodwill. All acquisition costs are expensed as incurred. Upon acquisition, the accounts and results of operations are consolidated as of and subsequent to the acquisition date. 31 At September 30, 2024, the Company had $3,708,347 of goodwill.
Added
For the year ended September 30, 2024, the Company recorded $530,475 of impairment for Goodwill in the Security Segment. For the year September 30, 2023, no impairment of the Company’s goodwill was recorded.
Added
Results of Operations - For the fiscal years ending September 30, 2024, and 2023 Revenues Our Security segment revenues for the year ended September 30, 2024, decreased by $2,337,571 or 7%, to $32,021,899 from $34,359,470 for the year ended September 30, 2023. This decrease is due to decreased demand for security technology products under our Vicon brand.
Added
General and Administrative Expenses General and Administrative Expenses for the year ended September 30, 2024, increased by $4,930,679 or 21% to $28,860,019 from $23,929,340 for the year ended September 30, 2023.
Added
Goodwill is tested annually for impairment or if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Other Expense, net Other expense for the year ended September 30, 2024, was $2,206,604 as compared to $4,489,605 for the year ended 2023.
Added
Other expense for the year ended September 30, 2024, was mainly driven by interest expense on the Company’s debt, issuance costs of $995,333, related to the May 2024 Equity Financing, and loss on the excess fair value of certain prefunded warrants issued in May 2024, offset by the changes in the fair value of the Series A and Series B warrants outstanding at September 30, 2024.
Added
The increase in working capital was primarily due to the decrease in the Company’s current maturities of long-term liabilities of $9,775,334, a result of the standstill agreement with the holder of $12,440,555 of notes payable and a decrease in the Company’s cash and cash equivalents of $1,432,399 and a decrease inventory of $1,750,690. 33 Operating activities for continuing operations used $3,949,360 of cash for the year ended September 30, 2024, compared to using $4,724,305 of cash for the year ended September 30, 2023.
Added
In fiscal 2024 our financing activities were mainly comprised of proceeds from the Company’s equity public offering, payments on debt, and activity on the revolving line of credit.

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