CEMTREX INC 10-K

ITEM 9A. CONTROLS AND PROCEDURES Disclosure Controls and Procedures We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable assurance of achieving the desired control objectives, and we necessarily are required to apply our judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. 30 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). Based on its evaluation, our management concluded that as of September 30, 2021, there are material weaknesses in our internal control over financial reporting. The material weaknesses relates to the Company lacking sufficient, qualified, accounting personnel and the associated sufficient processes and systems. The shortage of qualified accounting personal resulted in the Company lacking entity level controls around the review of period-end reporting processes, accounting policies and public disclosures. Additionally, the Company’s current processes and systems do not provide for necessary, timely reconciliation of certain accounts and sufficient consideration regarding recoverability of certain assets. These deficiencies are common in small companies, similar to us, with limited personnel. Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with GAAP. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Additionally, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 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). Based on its evaluation, our management concluded that as of September 30, 2021, there is a material weakness in our internal control over financial reporting. The material weakness relates to the Company lacking sufficient, qualified, accounting personnel. The shortage of qualified accounting personal resulted in the Company lacking entity level controls around the review of period-end reporting processes, accounting policies and public disclosures. This deficiency is common in small companies, similar to us, with limited personnel. In order to mitigate the material weakness, the Board of Directors has assigned a priority to the short-term and long-term improvement of our internal control over financial reporting. Our Board of Directors will work with management to continuously review controls and procedures to identified deficiencies and implement remediation within our internal controls over financial reporting and our disclosure controls and procedures. This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to Commission rules that permit the Company to provide only management’s report in this annual report. This report shall not be deemed to be filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. Changes in Internal Control Over Financial Reporting There was no change in our internal control over financial reporting that occurred in the year ended September 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. 31 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE We incorporate the information this item requires by referring to the information under the captions Proposal No. 1: Election of Directors and Corporate Governance in our proxy statement for our 2022 annual stockholders’ meeting (“2022 Proxy Statement”), which we will file with the SEC pursuant to Regulation 14A. ITEM 11. EXECUTIVE COMPENSATION We incorporate the information this item requires by referring to the information under the caption Executive Compensation in our 2022 Proxy Statement, which we will file with the SEC pursuant to Regulation 14A. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS We incorporate the information this item requires by referring to the information under the caption Security Ownership of Certain Beneficial Owners and Management in our 2022 Proxy Statement, which we will file with the SEC pursuant to Regulation 14A. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE We incorporate the information this item requires by referring to the information under the captions Proposal No. 1: Election of Directors and Corporate Governance in our 2022 Proxy Statement, which we will file with the SEC pursuant to Regulation 14A. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES We incorporate the information this item requires by referring to the information under the caption Proposal No. 2: Ratification of Appointment of Independent Registered Public Accounting Firm in our 2022 Proxy Statement, which we will file with the SEC pursuant to Regulation 14A. 32 PART IV ITEM 15 EXHIBITS AND FINANCIAL STATEMENTS (a) Financial Statements and Notes to the Consolidated Financial Statements See Index to Consolidated Financial Statements on page F-1 at beginning of attached financial statements. (b) Exhibits Exhibit No. Description 2.2 Stock Purchase Agreement regarding the stock of Advanced Industrial Services, Inc., AIS Leasing Company, AIS Graphic Services, Inc., and AIS Energy Services, LLC, Dated December 15, 2015. (8) 2.3 Asset Purchase agreement between Periscope GmbH and ROB Centrex Assets UG, ROB Cemtrex Automotive GmbH, and ROB Cemtrex Logistics GmbH. (7) 3.1 Certificate of Incorporation of the Company.(1) 3.2 By Laws of the Company.(1) 3.3 Certificate of Amendment of Certificate of Incorporation, dated September 29, 2006.(1) 3.4 Certificate of Amendment of Certificate of Incorporation, dated March 30, 2007.(1) 3.5 Certificate of Amendment of Certificate of Incorporation, dated May 16, 2007.(1) 3.6 Certificate of Amendment of Certificate of Incorporation, dated August 21, 2007.(1) 3.7 Certificate of Amendment of Certificate of Incorporation, dated April 3, 2015.(3) 3.8 Certificate of Designation of the Series A Preferred Shares, dated September 8, 2009.(2) 3.9 Certificate of Designation of the Series 1 Preferred Stock.(11) 3.10 Certificate of Amendment of Certificate of Incorporation, dated September 7, 2017 (12) 3.11 Certificate of Correction to the Certificate of Amendment to the Amended and Restated Certificate of Incorporation, as amended, of Cemtrex, Inc (6) 3.12 Amended Certificate of Designation of the Series 1 Preferred Shares, dated March 30, 2020.(16) 3.13 Certificate of Amendment of Certificate of Incorporation, dated July 29, 2020 (20) 3.14 Certificate of Correction of Certificate of Incorporation, dated July 29, 2021, filed October 7, 2020 (9) 4.1 Form of Subscription Rights Certificate. (10) 4.2 Form of Series 1 Preferred Stock Certificate. (10) 4.3 Form of Series 1 Warrant. (10) 4.4 Form of Common Stock Purchase Warrant, dated March 22, 2019. (14) 10.1 Amendment of the Term Loan Agreement between Vicon and NIL Funding, dated March 4, 2020.(17) 10.2 Consulting Agreement, dated April 22, 2020 between Centrex, Inc. and Adtron, Inc. (5) 10.3 Securities Purchase Agreement dated June 1, 2020 (18) 10.4 Securities Purchase Agreement dated June 9, 2020 (19) 10.5 Settlement Agreement and Release between Cemtrex, Inc. and Aron Govil dated February 26, 2021 (13) 14.1 Corporate Code of Business Ethics.(4) 21.1* Subsidiaries of the Registrant 23.1* Consent of Grassi & Co, CPAs, P.C., Independent Registered Public Accounting Firm 31.1* Certification of Chief Executive Officer as required by Rule 13a-14 or 15d-14 of the Exchange Act, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Vice President of Finance and Principal Financial Officer as required by Rule 13a-14 or 15d-14 of the Exchange Act, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1* Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act 0f of 2002. 32.2* Certification of Vice President of Finance and Principal Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act 0f of 2002. 101.INS* XBRL Instance Document 101.SCH* XBRL Taxonomy Extension Schema 101.CAL* XBRL Taxonomy Extension Calculation Linkbase 101.DEF* XBRL Taxonomy Extension Definition Linkbase 101.LAB* XBRL Taxonomy Extension Label Linkbase 101.PRE* XBRL Taxonomy Extension Presentation Linkbase * Filed herewith 1 Incorporated by reference from Form 10-12G filed on May 22, 2008. 2 Incorporated by reference from Form 8-K filed on September 10, 2009. 3 Incorporated by reference from Form 8-K filed on August 22, 2016. 4 Incorporated by reference from Form 8-K filed on July 1, 2016. 5 Incorporated by reference from Form S-8 filed on May 1, 20120 6 Incorporated by reference from Form 8-K filed on June 12, 2019. 7 Incorporated by reference from Form 8-K/A filed on November 24, 2017. 8 Incorporated by reference from Form 8-K/A filed on September 26, 2016. 9 Incorporated by reference from Form 10-Q filed on May 28, 2021. 10 Incorporated by reference from Form S-1 filed on August 29, 2016 and as amended on November 4, 2016, November 23, 2016, and December 7, 2016. 11 Incorporated by reference from Form 8-K filed on January 24, 2017. 12 Incorporated by reference from Form 8-K filed on September 8, 2017. 13 Incorporated by reference from Form 8-K filed on February 26, 2021. 14 Incorporated by reference from Form 8-K filed on March 22, 2019. 15 Intentionally left blank 16 Incorporated by reference from Form 8-K filed on April 1, 2020. 17 Incorporated by reference from Form 8-K filed on March 9, 2020. 18 Incorporated by reference from Form 8-K filed on June 4, 2020. 19 Incorporated by reference from Form 8-K filed on June 12, 2020. 20 Incorporated by reference from Form 10-K filed on January 5, 2021. ITEM 16. FORM 10-K SUMMARY Not applicable. 33 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CEMTREX, INC. January 21, 2022 By: /s/ Saagar Govil Saagar Govil, Chairman of the Board, CEO, President & Secretary (Principal Executive Officer) January 21, 2022 By: /s/ Christopher C. Moore Christopher C. Moore, CFO (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. January 21, 2022 By: /s/ Saagar Govil Saagar Govil, Chairman of the Board, CEO, President & Secretary (Principal Executive Officer) January 21, 2022 By: /s/ Christopher C. Moore Christopher C. Moore, CFO (Principal Financial and Accounting Officer) January 21, 2022 By: /s/ Brian Kwon Brian Kwon, Director January 21, 2022 By: /s/ Manpreet Singh Manpreet Singh, Director January 21, 2022 By: /s/ Metodi Filipov Metodi Filipov, Director January 21, 2022 By: /s/ Chris Wagner Chris Wagner, Director 34 Index to the Consolidated Financial Statements Contents Page(s) Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets at September 30, 2021 and 2020 (Restated) F-5 Consolidated Statements of Operations and Comprehensive Income for the Fiscal Years Ended September 30, 2021 and 2020 (Restated) F- 6 Consolidated Statements of Shareholders’ Equity for the Fiscal Years Ended September 30, 2021 and 2020 (Restated) F-7 Consolidated Statement of Cash Flows for Fiscal Years Ended September 30, 2021 and 2020 (Restated) F-8 Notes to the Consolidated Financial Statements F-11 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Cemtrex Inc. and Subsidiaries Opinion on the Financial Statements We have audited the accompanying balance sheets of Cemtrex, Inc. and Subsidiaries (the Company) as of September 30, 2021 and 2020 (restated), and the related statements of operations and comprehensive income, shareholders’ equity, and cash flows for each of the years in the two-year period ended September 30, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2021 and 2020 (restated), and the results of its operations and its cash flows for each of the years in the two-year period ended September 30, 2021, in conformity with accounting principles generally accepted in the United States of America. Restatement of Financial Statements As discussed in Note 2 to the financial statements, the Company’s financial statements as of and for the year ended September 30, 2020 have been restated to correct certain misstatements. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Valuation of Goodwill Description of the matter At September 30, 2021, the Company had approximately $7.8 million of goodwill. As discussed in Note 1 to the consolidated financial statements, goodwill is tested annually for impairment at the reporting unit level, or more frequently if impairment indicators arise. In accordance with the FASB revised guidance on “Testing of Goodwill for Impairment,” a company first has the option to assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the company decides, as a result of its qualitative assessment, that it is more-likely-than- not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is mandatory. Otherwise, no further testing is required. The quantitative impairment test consists of a two- step goodwill impairment test. The first step compares the fair value of each reporting unit to its carrying amount. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value of goodwill. F- 2 Auditing the Company’s goodwill impairment analyses was complex and highly judgmental due to the nature of qualitive assessment and, where necessary, the significant estimation required to determine the fair value of the reporting units. In particular, the fair value estimate was sensitive to significant assumptions, such as future operating results, cash flows and the weighted average cost of capital. These significant assumptions are forward looking and could be materially affected by future market or economic conditions. How we addressed the matter We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment evaluation process, including controls over management’s review of the significant assumptions described above. Our audit procedures to test the Company’s goodwill impairment analyses included evaluating the reasonableness of management’s qualitative assessments and in certain instances the estimated fair value of the Company’s reporting units. In evaluating estimated fair value of reporting units we, among others, evaluated management’s significant assumptions described above and used within the fair value method, and tested the completeness and accuracy of the underlying data. We engaged our valuation specialists to assist in assessing fair valuation methodologies utilized in the Company’s goodwill impairment analyses. We compared certain significant assumptions to existing market information and, where relevant, to the plans of the Company, including management’s expectations with regard to the Company’s business model, customer base, product mix and other relevant factors. We assessed the historical accuracy of management’s projected cash flows, where applicable, and performed sensitivity analyses of the significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in the assumptions. We involved our valuation specialists to assist in evaluating the discount rates, which included comparison of the selected discount rates to the Company’s weighted average cost of capital and the risk associated with projected cash flows. Finally, we assessed the adequacy of the disclosures in the consolidated financial statements. Valuation of Long-lived assets Description of the matter During the fourth quarter of 2021, the Company made the strategic decision to abandon certain assets that were held for sale associated with its fiscal 2019 decision to exit the environmental products business. As further described in note 5, the Company recorded a long-lived asset impairment charge of $8.3M. Auditing the Company’s long-lived asset impairment analysis was complex and highly judgmental due to the significant qualitative judgment required to determine the realization of the long-lived asset group. How we addressed the matter We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s long-lived asset impairment evaluation process, including controls over management’s review of the significant assumptions described above. Our audit procedures to evaluate the measurement of the Company’s long-lived asset impairment loss included, among others, evaluating the reasonableness of management’s significant assumptions. We also reviewed historical reports of a third-party valuation specialists to establish an understanding of the assets being considered and their ability to be marketed for sale given the length of time such assets have been idle, the geography of such assets and the current economic and social conditions in that environment. In addition, we evaluated the Company’s disclosures related to the matters described above. Valuation of Inventory Description of the matter As of September 30, 2021, the Company has approximately $5.6M of inventory. As discussed in note 1, inventory is valued at the lower of cost or market. The Company reduces inventory for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability. We determined valuation of inventory to be a critical audit matter based on the high degree of management judgment necessary is assessing allowances for obsolesce. F- 3 How we addressed the matter We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s inventory valuation process, including controls over management’s review of the significant assumptions described above. Our audit procedures included: ● Physical observation of inventory in the Company’s warehouse locations; ● Examined company’s analysis on a sample basis of parts of inventory in the context of the company’s valuation assertion. ● Reviewing correspondence and other documentation with respect to inventory disposal/destruction. ● Validating cost assertions by review source documentation of inventory purchases; ● Reviewing slow-moving reports provided by management; ● Reviewing subsequent sales data; ● Retrospective review of prior year estimates; and ● Analytical procedures including margin analyses. Finally, we evaluated the Company’s disclosures related to the matters described above. /s/ Grassi & Co, CPAs, P.C. We have served as the Company’s auditor since 2021. Jericho, New York January 21, 2022 F- 4 Cemtrex Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (Restated) September 30, 2021 September 30, 2020 Assets Current assets Cash and equivalents $ 15,426,976 $ 19,487,023 Restricted cash 1,759,347 1,582,798 Short-term investments 14,981 887,746 Trade receivables, net 7,810,896 6,686,797 Trade receivables - related party 1,487,155 1,432,209 Inventory –net of allowance for inventory obsolescence 5,657,287 4,946,457 Prepaid expenses and other assets 2,585,652 1,175,775 Total current assets 34,742,294 36,198,805 Property and equipment, net 6,738,944 5,973,850 Right-of-use assets 2,940,127 2,728,380 Assets held for sale - 8,323,321 Goodwill 7,821,283 7,222,892 Other 697,240 381,900 Total Assets $ 52,939,888 $ 60,829,148 Liabilities & Stockholders’ Equity (Deficit) Current liabilities Accounts payable $ 4,235,002 $ 4,811,217 Short-term liabilities 9,977,972 7,034,510 Lease liabilities - short-term 830,791 721,036 Deposits from customers 62,970 29,660 Accrued expenses 2,094,303 2,107,027 Deferred revenue 2,004,170 1,497,826 Accrued income taxes 448,194 89,318 Total current liabilities 19,653,402 16,290,594 Long-term liabilities Loans payable to bank 767,279 1,871,201 Long-term lease liabilities 2,017,408 2,027,406 Notes payable 2,350,000 6,029,999 Mortgage payable 2,257,785 2,355,542 Other long-term liabilities 839,171 768,595 Paycheck Protection Program Loans 1,032,200 2,169,437 Deferred Revenue - long-term 467,967 467,329 Total long-term liabilities 9,731,810 15,689,509 Total liabilities 29,385,212 31,980,103 Commitments and contingencies - - Shareholders’ equity Preferred stock , $ 0.001 par value, 10,000,000 shares authorized, Series 1, 3,000,000 shares authorized, 1,885,151 shares issued and outstanding as of September 30, 2021 and 2,156,784 shares issued and outstanding as of September 30, 2020 (liquidation value of $ 10 per share) 1,885 2,157 Series A, 1,000,000 shares authorized, zero shares issued and outstanding at September 30, 2021 and 1,000,000 shares issued and outstanding at September 30, 2020 - 1,000 Series C, 100,000 shares authorized, 50,000 shares issued and outstanding at September 30, 2021 and 100,000 shares issued and outstanding at September 30, 2020 50 100 Preferred stock, value Common stock, $ 0.001 par value, 50,000,000 shares authorized, 20,782,194 shares issued and outstanding at September 30, 2021 and 17,622,539 shares issued and outstanding at September 30, 2020 20,782 17,623 Additional paid-in capital 61,727,834 60,221,766 Retained earnings (accumulated deficit) ( 41,908,062 ) ( 34,100,067 ) Treasury stock at cost ( 148,291 ) ( 148,291 ) Accumulated other comprehensive income (loss) 2,896,452 1,812,457 Total Cemtrex stockholders’ equity 22,590,650 27,806,745 Non-controlling interest 964,026 1,042,300 Total liabilities and shareholders’ equity $ 52,939,888 $ 60,829,148 The accompanying notes are an integral part of these consolidated financial statements. F- 5 Cemtrex Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME For the year ended September 30, 2021 September 30, 2020 Restated Revenues 43,130,934 43,518,384 Cost of revenues 26,162,582 25,897,181 Gross profit 16,968,352 17,621,203 Operating expenses General and administrative 22,538,496 20,363,728 Research and development 3,171,676 1,827,286 Total operating expenses 25,710,172 22,191,014 Operating income/(loss) ( 8,741,820 ) ( 4,569,811 ) Other income/(expense) Other income/(expense) 8,758,212 1,821,029 Settlement Agreement - Related Party 3,674,165 - Interest Expense ( 2,921,345 ) ( 4,607,453 ) Total other income/(expense), net 9,511,032 ( 2,786,424 ) Net loss before income taxes 769,212 ( 7,356,235 ) Income tax benefit/(expense) ( 375,434 ) ( 2,073,835 ) Income/Loss from Continuing operations 393,778 ( 9,430,070 ) Loss from discontinued operations, net of tax ( 8,280,047 ) ( 812,895 ) Net income/(loss) ( 7,886,269 ) ( 10,242,965 ) Less income/(loss) in noncontrolling interest ( 78,274 ) 227,116 Net income/(loss) attributable to Cemtrex, Inc. shareholders $ ( 7,807,995 ) $ ( 10,470,081 ) Net income/(loss) $ ( 7,886,269 ) $ ( 10,242,965 ) Other comprehensive income/(loss) Foreign currency translation gain/(loss) 996,100 57,639 Defined benefit plan actuarial gain/(loss) 87,895 - Comprehensive income/(loss) ( 6,802,274 ) ( 10,185,326 ) Less Other Comprehensive income (Loss) attributable to noncontrolling interest Less comprehensive income/(loss) attributable to noncontrolling interest 78,274 ( 227,116 ) Comprehensive income/(loss) attributable to Cemtrex, Inc. shareholders $ ( 6,880,548 ) $ ( 9,958,210 ) Income/(loss) Per Share-Basic Income/(loss) Per Share-Basic- Continuing operations $ 0.02 $ ( 1.00 ) Income/(loss) Per Share-Basic - Discontinued operations $ ( 0.44 ) $ ( 0.08 ) Income/(loss) Per Share-Diluted- Continuing operations Income/(loss) Per Share-Diluted $ 0.02 $ ( 1.00 ) Income/(loss) Per Share-Diluted - Discontinued operations $ ( 0.44 ) $ ( 0.08 ) Weighted Average Number of Shares-Basic 18,911,746 9,611,516 Weighted Average Number of Shares-Diluted 18,911,746 9,611,516 The accompanying notes are an integral part of these consolidated financial statements. F- 6 Cemtrex Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY Preferred Stock Series 1 Preferred Stock Series A Preferred Stock Series C Common Stock Par Retained Accumulated Par Value $0.001 Par Value $0.001 Par Value $0.001 Value $0.01 Additional Earnings Treasury other Cemtrex Non- Number of Number of Number of Number of Paid-in (Accumulated Stock, Comprehensive Stockholders’ controlling Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit) At cost Income(loss) Equity interest Balance at September 30, 2020, as reported 2,156,784 $ 2,157 1,000,000 $ 1,000 100,000 $ 100 17,622,539 $ 17,623 $ 63,313,336 $ ( 33,172,690 ) $ ( 148,291 ) $ 853,643 $ 28,996,207 $ 1,077,645 Adjustment - - - - - - - - ( 3,091,570 ) 297,430 - 923,469 ( 1,870,671 ) - Balance at September 30, 2020, as restated 2,156,784 $ 2,157 1,000,000 $ 1,000 100,000 $ 100 17,622,539 $ 17,623 $ 60,221,766 $ ( 34,100,067 ) $ ( 148,291 ) $ 1,812,457 $ 27,806,745 $ 1,042,300 Foreign currency translation gain/(loss) 996,100 996,100 Defined benefit plan actuarial gain/(loss) 87,895 87,895 Share-based compensation 156,419 156,419 Share-based compensation, shares Shares issued for goods and services Shares issued for goods and services, shares Shares sold in Securities Purchase Agreements, net of offering costs Shares sold in Securities Purchase Agreement net of offering costs, shares Purchase of treasury stock Cancellation of Shares not issued in 2019 ATM offering Cancellation of Shares not issued in 2019 ATM offering, shares Retirement of treasury stock Retirement of treasury stock, shares Shares issued to pay notes payable 3,159,655 3,159 5,022,492 5,025,651 Dividends paid in Series 1 preferred shares 198,316 198 ( 198 ) - Income/(loss) attributable to noncontrolling interest - ( 78,274 ) Shares and options surrendered in settelment agreement ( 469,949 ) ( 470 ) ( 1,000,000.00 ) ( 1,000 ) ( 50,000 ) ( 50 ) ( 3,672,645 ) ( 3,674,165 ) Net loss ( 7,807,995 ) - ( 7,807,995 ) Balance at September 30, 2021 1,885,151 $ 1,885 - $ - 50 , 000 $ 50 20,782,194 $ 20,782 $ 61,727,834 $ ( 41,908,062 ) $ ( 148,291 ) $ 2,896,452 $ 22,590,650 $ 964,026 The accompanying notes are an integral part of these consolidated financial statements. F- 7 Cemtrex Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit) At cost Income(loss) Equity interest Preferred Stock Series 1 Preferred Stock Series A Preferred Stock Series C Common Stock Retained Accumulated Par Value $0.001 Par Value $0.001 Par Value $0.001 Par Value $0.01 Additional Earnings Treasury other Cemtrex Non- Number of Number of Number of Number of Paid-in (Accumulated Stock, Comprehensive Stockholders’ controlling Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit) At cost Income(loss) Equity interest Balance at September 30, 2019, as reported 2,110,718 $ 2,111 1,000,000 $ 1,000 - $ - 3,962,790 $ 3,963 $ 40,344,837 $ ( 20,067,685 ) $ - $ 796,004 $ 21,080,230 $ 885,874 Adjustment - - - - - - - - $ ( 1,002,030 ) $ ( 3,562,301 ) - $ 958,814 $ ( 3,605,517 ) $ ( 70,690 ) Balance at September 30, 2019, as restated 2,110,718 $ 2,111 1,000,000 $ 1,000 - $ - 3,962,790 $ 3,963 $ 39,342,807 $ ( 23,629,986 ) $ - $ 1,754,818 $ 17,474,713 $ 815,184 Foreign currency translation gain 57,639 57,639 - Share-based compensation 100,000 100 191,316 191,416 Shares issued for goods and services 513,358 513 532,275 532,788 Shares sold in Securities Purchase Agreements, net of offering costs - - 6,643,872 6,644 11,615,276 11,621,920 Shares issued to pay notes payable 6,530,473 6,531 8,730,594 8,737,125 Dividends paid in Series 1 preferred shares 217,099 217 ( 217 ) - Income/(loss) attributable to noncontrolling interest - 227,116 Purchase of treasury stock ( 338,775 ) ( 338,775 ) Cancellation of Shares not issued in 2019 ATM offering ( 27,954 ) ( 28 ) 28 - Retirement of treasury stock ( 171,033 ) ( 171 ) ( 190,313 ) 190,484 - Net loss ( 10,470,081 ) ( 10,470,081 ) Balance at September 30, 2020, as restated 2,156,784 2,157 1,000,000 1,000 100,000 100 17,622,539 17,623 60,221,766 ( 34,100,067 ) ( 148,291 ) 1,812,457 27,806,745 1,042,300 The accompanying notes are an integral part of these consolidated financial statements. F- 8 Cemtrex Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS For the year ended September 30, Cash Flows from Operating Activities 2021 2020 (Restated) Net income/(loss) $ ( 7,886,269 ) $ ( 10,242,965 ) Net loss from discontinued operations ( 8,280,047 ) ( 812,895 ) Net loss from continuing operations 393,778 ( 9,430,070 ) Adjustments to reconcile net loss to net cash provided/(used) by operating activities: Depreciation and amortization 1,335,189 1,865,726 Gain on disposal of property and equipment 48,981 37,910 Amortization of right-of-use assets 870,860 816,550 Change in allowance for doubtful accounts ( 161,856 ) ( 265,203 ) Share-based compensation 156,418 191,416 Income tax expense/ (benefit) 375,434 2,073,835 Interest expense paid in equity shares 1,291,596 2,859,125 Accrued interest on notes payable 398,321 374,328 Amortization of original issue discounts on notes payable 675,000 944,778 Gain/loss on marketable securities ( 2,612,847 ) 52,695 Settlement Agreement - Related Party ( 3,674,165 ) - Discharge of Paycheck Protection Program Loans ( 5,320,485 ) - Changes in operating assets and liabilities net of effects from acquisition of subsidiaries: Accounts receivable ( 962,243 ) 37,390 Accounts receivable - related party ( 59,960 ) ( 660,690 ) Inventory ( 670,838 ) 156,593 Prepaid expenses and other current assets ( 1,411,653 ) 267,448 Other assets 110,534 ( 246,350 ) Other liabilities 70,576 ( 157,816 ) Accounts payable ( 512,138 ) ( 846,340 ) Operating lease liabilities ( 962,790 ) ( 816,549 ) Deposits from customers 33,310 ( 3,414 ) Accrued expenses 47,389 ( 673,792 ) Deferred revenue 506,982 195,775 Income taxes payable ( 16,558 ) ( 121,191 ) Net cash used by operating activities - continuing operations ( 10,051,165 ) ( 3,347,846 ) Net cash provided/(used) by operating activities - discontinued operations - ( 438,356 ) Net cash used by operating activities ( 10,051,165 ) ( 3,786,202 ) Cash Flows from Investing Activities Purchase of property and equipment ( 1,069,283 ) ( 1,566,014 ) Investment in Virtual Driver Interactive ( 1,075,428 ) - Investment in MasterpieceVR ( 500,000 ) - Proceeds from sale of marketable securities 11,477,321 30,080,220 Purchase of marketable securities ( 7,991,709 ) ( 30,607,931 ) Purchases of treasury stock - ( 338,775 ) Net cash provided/(used) by investing activities 840,901 ( 2,432,500 ) Cash Flows from Financing Activities Proceeds from notes payable 5,005,000 8,485,000 Payments on notes payable ( 2,220,257 ) ( 1,225,969 ) Payments received on notes receivable - 3,300,289 Proceeds on bank loans - 3,831,100 Payments on bank loans ( 1,261,035 ) ( 778,090 ) Proceeds from Paycheck Protection Program Loans 2,942,285 - Proceeds from securities purchase agreements - 12,462,648 Payments on capital lease liabilities ( 20,061 ) ( 22,718 ) Expenses on securities purchase agreements - ( 840,728 ) Revolving line of credit - ( 425,812 ) Net cash provided by financing activities - continuing operations 4,445,932 24,785,720 Net cash used by financing activities - discontinued operations - ( 374,538 ) Net cash provided by financing activities 4,445,932 24,411,182 Effect of currency translation 880,834 22,294 Net increase in cash, cash equivalents, and restricted cash ( 4,764,332 ) 18,192,480 Cash, cash equivalents, and restricted cash at beginning of period 21,069,821 2,855,047 Cash, cash equivalents, and restricted cash at end of period $ 17,186,323 $ 21,069,821 Balance Sheet Accounts Included in Cash, Cash Equivalents, and Restricted Cash Cash and equivalents $ 15,426,976 $ 19,487,023 Restricted cash 1,759,347 1,582,798 Total cash, cash equivalents, and restricted cash $ 17,186,323 $ 21,069,821 The accompanying notes are an integral part of these consolidated financial statements. F- 9 Cemtrex Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Supplemental Disclosure of Cash Flow Information: Cash paid during the period for interest $ 556,428 $ 429,222 Cash paid during the period for income taxes $ ( 358,876 ) $ 75,724 Supplemental Schedule of Non-Cash Investing and Financing Activities Investment in Virtual Driver Interactive $ 439,774 $ - Stock issued to pay for products and/or services $ - $ 532,788 Stock issued to pay notes payable $ 5,025,652 $ 8,737,125 Loan from bank to acquire building and land $ 2,476,000 The accompanying notes are an integral part of these consolidated financial statements. F- 10 Cemtrex Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – ORGANIZATION Cemtrex was incorporated in 1998, in the state of Delaware and has evolved through strategic acquisitions and internal growth into a leading multi-industry technology company. The Company has expanded in a wide range of sectors, including smart technologies, virtual and augmented realities, industrial solutions, and intelligent security systems. Unless the context requires otherwise, all references to “we”, “our”, “us”, “Company”, “registrant”, “Cemtrex” or “management” refer to Cemtrex, Inc. and its subsidiaries. During fiscal 2019, the Company reached a strategic decision to exit the environmental products business, which was part of the Industrial Services Segment. Accordingly, the Company has reported the results of the environmental control products business as discontinued operations in the Consolidated Statements of Operations and in the Consolidated Balance Sheets. The Company presently has two business segments, consisting of (i) Advanced Technologies (AT) and (ii) Industrial Services (IS). Advanced Technologies (AT) Cemtrex’s Advanced Technologies segment operates several brands that deliver cutting-edge software and hardware technologies: - Vicon Industries – Vicon Industries, a majority owned subsidiary, provides end-to-end video security solutions to meet the toughest corporate, industrial and governmental security challenges. Vicon’s products include browser-based video monitoring systems and analytics-based recognition systems, cameras, servers, and access control systems for every aspect of security and surveillance in industrial and commercial facilities, federal prisons, hospitals, universities, schools, and federal and state government offices. Vicon provides cutting edge, mission critical security and video surveillance solutions utilizing Artificial Intelligence (AI) based data algorithms. - SmartDesk – SmartDesk is focused on reinventing the workspace through developing state-of-the-art, modern, fully integrated, workplace solutions. - Cemtrex XR (“CXR”) – CXR is focused on realizing the potential of the metaverse. CXR delivers Virtual Reality (VR) and Augmented Reality (AR) solutions that provide higher productivity, progressive design and impactful experiences for consumer products, and various commercial and industrial applications. The Company is in the process of developing virtual reality applications for commercialization in the metaverse over the next couple years. CXR also invests in emerging startups focused on building best in class solutions for the metaverse. - Virtual Driver Interactive (“VDI”) – VDI provides innovative driver training simulation solutions for effective and engaging learning for all ages and skills. - Bravo Strong – Bravo Strong is a gaming and content studio working to building games and experiences for the metaverse. - good tech (formerly Cemtrex Labs) – good tech provides mobile, web, and enterprise software application development services for startups to large enterprises. F- 11 Cemtrex Inc. and Subsidiaries Industrial Services (IS) Cemtrex’s IS segment operates through a brand, Advanced Industrial Services (“AIS”), that offers single-source expertise and services for rigging, millwrighting, in plant maintenance, equipment erection, relocation, and disassembly to diversified customers. We install high precision equipment in a wide variety of industrial markets like automotive, printing & graphics, industrial automation, packaging, and chemicals among others. We are a leading provider of reliability-driven maintenance and contracting solutions for the machinery, packaging, printing, chemical, and other manufacturing markets. The focus is on customers seeking to achieve greater asset utilization and reliability to cut costs and increase production from existing assets, including small projects, sustaining capital, turnarounds, maintenance, specialty welding services, and high-quality scaffolding. Acquisition of Virtual Driver Interactive On October 26, 2020, the company acquired Virtual Driver Interactive (“VDI”), a California based provider of innovative driver training simulation solutions for a purchase price of $ 1,339,774 plus contingent consideration of $ 175,428 . For over 10 years, VDI has been known for its effective and engaging driver training systems, designed for users of all ages and skill levels. The Company offers comprehensive training for new teen and novice drivers, along with advanced training for corporate fleets and truck drivers. VDI’s wide range of training courses and system options provide customers with highly portable, affordable and effective solutions, all while focusing on the dangers of distracted driving. Results for VDI will be reported under the AT segment. The Company paid $ 900,000 in cash and issued a Note payable in the amount of $ 439,774 . This note carries interest of 5 % and is payable in two installments of $ 239,774 plus accumulated interest on October 26, 2021, and $ 200,000 plus accumulated interest on October 26, 2022. Additionally, the Company paid contingent consideration of $ 175,428 in May 2021. There is no further contingent consideration specified in the purchase agreement. The Company has accounted for this acquisition as a business combination and has allocated the purchase price as follows, $ 876,820 to proprietary software, $ 39,992 to inventory, and $ 598,391 to goodwill. Strategic Investment On November 13, 2020, Cemtrex made a $ 500,000 investment via a simple agreement for future equity(“SAFE”) in MasterpieceVR. The SAFE provides that the Company will automatically receive shares of the entity based on the conversion rate of future equity rounds up to a valuation cap, as defined. MasterpieceVR is a software company that is developing software for content creation using virtual reality. The investment is included in other assets in the accompanying balance sheet and the Company accounts for this investment and recorded at cost. No impairment has been recorded for the year ended September 30, 2021. Going Concern Considerations The Company has incurred substantial losses over the past two fiscal years and has debt obligations over the next fiscal year that raise substantial doubt with respect to the Company’s ability to continue as a going concern. The Company has raised capital and will continue to reduce expenses through (i) issuance of notes and subsequent settlement of such notes with equity, (ii) equity offering to qualified investors and at-the-market offerings, (iii) review and improvement of our business processes for more efficiency, (iv) sale or reallocation of fixed assets held from exited business segments to raise capital or increase revenue in continuing business segments, (v) development of additional products for the Advanced Technologies segment to increase revenues, (vi) cost reductions to improve overall profitability in all segments. The Company believes that substantial doubt has been alleviated by management’s plans and that it has sufficient working capital to sustain operations for at least the next twelve months. NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles. Basis of Presentation The accompanying consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). F- 12 Cemtrex Inc. and Subsidiaries Fiscal Year-End The Company elected September 30 as its fiscal year-end date. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, provisions for doubtful accounts receivable, net realizable value of inventory, warranty obligations, income tax accruals, deferred tax valuation and assessments of the recoverability of the Company’s long-lived assets. Actual results could differ from those estimates. Principles of Consolidation The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, Cemtrex Advanced Technologies Inc., Cemtrex XR Inc., Cemtrex Technologies Pvt. Ltd., and Advanced Industrial Services, Inc. and the Company’s majority owned subsidiary Vicon Industries, Inc. and its subsidiary, Vicon Systems, Ltd. All inter-company balances and transactions have been eliminated in consolidation. Carrying Value, Recoverability and Impairment of Long-Lived Assets The Company’s long-lived assets, which include property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. When long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The impairment charges, if any, is included in operating expenses in the accompanying statements of operations. Cash Equivalents The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and general economic conditions that may affect a client’s ability to pay. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company determines when receivables are past due or delinquent based on how recently payments have been received. F- 13 Cemtrex Inc. and Subsidiaries The Company has $ 178,992 and $ 340,848 allowance for doubtful accounts at September 30, 2021, and 2020, respectively. The Company does no t have any off-balance-sheet credit exposure to its customers at September 30, 2021, or 2020. Inventory and Cost of Goods Sold The Company values inventory, consisting of finished goods, at the lower of cost or market. Cost is determined on the first-in and first- out (“FIFO”) method. 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. 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. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations. There was $ 1,921,001 and $ 4,575,193 in inventory obsolescence reserve at September 30, 2021, and 2020, respectively. The decrease in inventory obsolescence is due to the disposal of out-of-date products. Property and Equipment Property and equipment is recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation of property and equipment is computed by the straight-line method over the estimated useful lives of the respective assets, shown in the table below; Estimated Useful Life (Years) Building 30 Furniture and office equipment 5 Computer software 7 Machinery and equipment 7 Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations. Goodwill Goodwill is tested for impairment annually as of September 30. If circumstances change during interim periods between annual tests that would more likely than not reduce the fair value of a reporting unit below its carrying value, the Company will test goodwill for impairment. Factors that would necessitate an interim goodwill impairment assessment include prolonged negative industry or economic trends, or significant under-performance relative to expected, historical or projected future operating results. Management uses judgment to determine whether to use a qualitative analysis or a quantitative fair value measurement for its goodwill impairment testing. The Company’s fair value measurement approach combines the income and market valuation techniques for each of the Company’s reporting units that carry goodwill. These valuation techniques use estimates and assumptions including, but not limited to, the determination of appropriate market comparables, projected future cash flows (including timing and profitability), discount rate reflecting the risk inherent in future cash flows, perpetual growth rate, and projected future economic and market conditions. As permitted, if the reporting unit fails the impairment test, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standard Update (“ASU”) removing step two from the goodwill impairment test. If a reporting unit fails the quantitative impairment test, impairment expense is immediately recorded as the difference between the reporting unit’s fair value and carrying value. The Company adopted this standard effective October 1, 2020. F- 14 Cemtrex Inc. and Subsidiaries For the years ended September 30, 2021, and 2020, there was no impairment of the Company’s goodwill. Leases On October 1, 2019, the Company adopted ASU 2016-02 (Topic 842), “Leases”. ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors may use the effective date method and elected certain practical expedients allowing the Company not to reassess: ● whether expired or existing contracts contain leases under the new definition of a lease; ● lease classification for expired or existing leases; and ● whether previously capitalized initial direct costs would qualify for capitalization under Topic 842. The Company also made the accounting policy decision not to recognize lease assets and liabilities for leases with a term of 12 months or less. Related Parties 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 disclosures shall include: a. the nature of the relationship(s) involved b. description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. Commitment and Contingencies The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. F- 15 Cemtrex Inc. and Subsidiaries Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows. 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. Management determined that there was no cumulative effect adjustment to the consolidated financial statements and the adoption of the standard did not require any adjustments to the consolidated financial statements for prior periods. Under the guidance of the standard, revenue represents the amount received or receivable for goods and services supplied by the Company to its customers. 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. Most of the Company’s sales arrangements with customers 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. 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. 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. 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. 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. 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. Timing of revenue recognition may differ from the timing of invoicing to customers. Billing terms vary by customer and product but generally do not exceed 90 days The Company records a liability when receiving cash in advance of delivering goods or services to the customer. This liability is reversed against the receivable recognized when those goods or services are delivered. The amounts were $ 2,472,137 , $ 1,965,155 , and $ 1,769,380 , for the years ended September 30, 2021, 2020, and 2019 respectively. Warranties The Company provides for the estimated cost of product warranties at the time revenue is recognized. While the Company engages in product quality programs and processes, including monitoring and evaluating the quality of its component suppliers, its warranty obligation is affected by product failure rates, material usage and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage or service delivery costs differ from its estimates, revisions to the estimated warranty liability may be required. F- 16 Cemtrex Inc. and Subsidiaries Income Tax Provision The Company accounts for income taxes under ASC 740-10, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statements of Operations and Comprehensive Income in the period that includes the enactment date. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty (50) percent likelihood of being realized upon ultimate settlement. The Company will accrue for interest and penalties on income taxes when there is a likelihood that they will occur and can be reasonably estimated. The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carrybacks and carryforwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions including the United States, India, and The United Kingdom, and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. Uncertain Tax Positions For the years ended September 30, 2021, and 2020, the Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits. The Company will record any interest and/or penalties arising from uncertain tax provisions when they are likely to occur and reasonably estimable. Accounting for Share-Based Compensation The Company follows ASC 718 (“Share-Based Payment”), which requires that all share-based payments to employees, including stock options, stock appreciation rights (SARs) and common stock share awards, be recognized as compensation expense in the consolidated financial statements based on their fair values and over the requisite service period. The fair value for options granted was determined at the date of grant using a Black-Scholes valuation model and the straight-line attribution approach using the following weighted average assumptions: The risk-free interest rate used in the Black-Scholes valuation method is based on the implied yield currently available in U.S. Treasury securities at maturity with an equivalent term. Other than a one-time dividend paid in fiscal year 2017, the Company never declared or paid any cash dividends and does not currently expect to do so in the future. Expected volatility is based on the annualized daily historical volatility of the Company’s stock over a representative period. The weighted-average expected life represents the period over which stock-based awards are expected to be outstanding and was determined based on a number of factors, including historical weighted average and projected holding periods for the remaining unexercised shares, the contractual terms of the Company’s stock-based awards, vesting schedules and expectations of future employee behavior. Net Income (Loss) per Common Share Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income per common share is computed by dividing net income by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants. As of September 30, 2021, and 2020, the following items were excluded from the computation of diluted net loss per common share as their effect is anti-dilutive: SCHEDULE OF COMPUTATION OF DILUTED NET LOSS PER COMMON SHARE AS ANTI-DILUTIVE EFFECT For the year ended September 30, 2021 2020 Warrants to purchase shares 433,965 433,965 Options 950,000 945,833 F- 17 Cemtrex Inc. and Subsidiaries Foreign Currency Translation Gain and Comprehensive Income (Loss) In countries in which the Company operates, and the functional currency is other than the U.S. dollar, assets and liabilities are translated using published exchange rates in effect at the consolidated balance sheet date. Revenues and expenses and cash flows are translated using an approximate weighted average exchange rate for the period. Resulting translation adjustments are recorded as a component of accumulated other comprehensive income on the accompanying consolidated balance sheet. For the years ending September 30, 2021, and September 30, 2020, comprehensive loss includes a gain of $ 996,100 and $ 57,639 , respectively, which were entirely from foreign currency translation. As of and for the year ended September 30, 2021, and 2020 the Company used the following exchange rates. SCHEDULE OF FOREIGN CURRENCY EXCHANGE RATE Approximate weighted Approximate weighted average exchange rate average exchange rate Exchange rate at For the three months ended Exchange rate at For the year ended Currency September 30, 2020 September 30, 2020 September 30, 2021 September 30, 2021 Indian Rupee 0.014 0.014 0.013 0.014 Great Britain Pound 1.287 1.248 1.346 1.358 Cash Flows Reporting The Company adopted uses the indirect or reconciliation method (“Indirect method”) as to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period. Subsequent Events The Company will evaluate subsequent events through the date when the financial statements were issued. It is the Company’s policy to disclose subsequent information that it feels is important to the context of the financial statements. F- 18 Cemtrex Inc. and Subsidiaries Recently Issued Accounting Pronouncements Not Yet Effective On August 5, 2020, the Financial Accounting Standards Board (FASB) issued accounting standards update (ASU) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) . The amendments in the ASU remove certain separation models for convertible debt instruments and convertible preferred stock that require the separation of a convertible debt instrument into a debt component and an equity or derivative component. The ASU also amends the derivative scope exception guidance for contracts in an entity’s own equity. The amendments remove three settlement conditions that are required for equity contracts to qualify for the derivative scope exception. In addition to the above, the ASU expands disclosure requirements for convertible instruments and simplifies areas of the guidance for diluted earnings-per-share calculations that are impacted by the amendments. The ASU is effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021. Early adoption is permitted. The FASB noted that an entity should adopt the guidance as of the beginning of its annual fiscal year. The standard is effective for the Company beginning in fiscal year October 1, 2022. Entities may elect to adopt the amendments through either a modified retrospective method of transition or a fully retrospective method of transition. If an entity has convertible instruments that include a down round feature, early adoption of the ASU is permitted for fiscal years beginning after December 15, 2020. ASU 2016-13 Measurement of Credit Losses on Financial Instrument is effective for fiscal years beginning after December 15, 2022. This is not expected to apply to the Company as financial instruments giving rise to credit risk are not utilized by the Company. In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The new ASU addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact this new guidance will have on its financial statements The Company does not believe that any other recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements. NOTE 3 – RESTATEMENTS OF FINANCIAL STATEMENTS Background On February 23, 2021, Cemtrex’s Board of Directors determined that certain transactions between Cemtrex Inc. and First Commercial, a company owned by former Executive Director, former Controlling Shareholder and former CFO, Aron Govil, were incorrectly handled and accounted for. The total amount of disputed transfers was approximately $ 7,100,000 and occurred in fiscal year 2017 in the amount of $ 5,600,000 and in fiscal year 2018 in the amount of $ 1,500,000 . Cemtrex did not find any other such transfers during this period or thereafter, upon further review of the Company’s records. Upon the Company’s investigation into this matter, the Company has determined that there were inaccuracies in the Company’s financial statements. The financials for the periods 2017 and 2018 were incorrect corresponding to the amounts that were incorrectly accounted for, and subsequent years were affected by the roll forward effects of these entries. The Company found unsupported advertising expenses in the amount of approximately $ 400,000 on Cemtrex Inc’s income statement for fiscal year 2018 and found that approximately $ 5,700,000 of intangible assets and $ 975,000 of research and development expenses, as translated at from Indian Rupee at the time, were recorded on Cemtrex India’s financial statements in fiscal year 2018 and could not be substantiated. The total amount of unsubstantiated transfers recorded by Cemtrex India, and the unsupported advertising expense recorded by Cemtrex, Inc. sums to $ 7,100,000 , corresponding with the total amount in question regarding First Commercial transfers during fiscal years 2017 and 2018. F- 19 Cemtrex Inc. and Subsidiaries As part of the restatement investigation, it was determined that the Company did not follow GAAP in the treatment of its Series 1 Preferred dividends. The Company currently has a deficit in retained earnings and in accordance with guidance has reversed the accrual for dividends payable and placed the amount of the accrual back into retained earnings. In response to the above discussed restatements, the Company revisited its fiscal year 2020 financial statements. As a result, the following items have been restated, (i) inventory valuation, recognition of discontinued operations, accrued expenses, and accounts payable of the Company’s subsidiary Vicon Industries, Inc., (ii) fixed asset valuation and deferred revenue of the Company’s subsidiary Advanced Industrial Services, Inc., some of these valuation error dates to prior to acquisition of each entity. Position and Adjusting Entries The Company has determined that these transactions are not material in the years that they occurred and conclude that prior financial reports can be relied upon. The Company’s determination is based on the following: The adjustments do not cause any changes to the previously reported cash and debt balances as of the end of each of the periods in FY 2019 and 2020. The adjustments also do not cause any changes to revenues in any of the prior periods. In addition, the Company expects to maintain compliance with its debt covenants based on a preliminary review of the covenants for all the impacted periods. The Company has also determined that the adjustments have little effect on the trend of earnings over the last three fiscal years. In 2017 the operations of the Company were vastly different with both the environmental and circuit board manufacturing segments accounting for approximately 75% of revenues. These businesses are now either sold or discontinued. The current reported 2017 financial statements of the Company do not give an accurate representation of the Company today because only 16% of the $120M business operations are still a part of current operations. The table below represents the balances of the affected accounts on the Condensed Consolidated Balance Sheets as of September 30, 2020, the Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss) for the year ended September 30, 2020, Condensed Consolidated Statement of Stockholders’ Equity, and the Condensed Consolidated Statements of Cash Flows for the year ended September 30, 2020. Condensed Consolidated Balance Sheets SCHEDULE OF CONDENSED CONSOLIDATED BALANCE SHEETS Balance as reported on September 30, 2020 Adjustment of net value of intangible assets Adjustment resulting from reaudit of Fiscal Year 2020 Financial Statements Adjustment of net value of inventory Adjustment of net value of fixed assets Cumulative effect of restatement adjustments Loss on amounts transferred to First Commercial Restatement on Dividends Cumulative effect of currency translation Adjusted balance at September 30, 2020 Cash and equivalents $ 19,490,061 $ ( 3,038 ) $ 19,487,023 Prepaid expenses and other assets $ 1,188,317 $ ( 12,542 ) $ 1,175,775 Other Assets $ 744,207 $ ( 362,307 ) $ 381,900 Property and equipment, net $ 9,558,936 $ ( 2,597,185 ) $ ( 987,901 ) $ 5,973,850 Inventory –net of allowance for inventory obsolescence $ 6,793,806 $ ( 1,847,349 ) $ 4,946,457 Goodwill $ 4,370,894 $ 2,851,998 $ 7,222,892 Accounts payable $ 2,857,817 $ 1,953,400 $ 4,811,217 Accrued expenses $ 2,392,487 $ ( 285,460 ) $ 2,107,027 Deferred revenue $ 1,651,784 $ ( 153,958 ) $ 1,497,826 Other long-term liabilities $ 1,063,733 $ ( 295,138 ) $ 768,595 Series 1 preferred stock dividends payable $ 1,081,690 $ ( 1,081,690 ) $ - Additional paid-in capital $ 63,313,336 $ ( 3,091,570 ) $ 60,221,766 Retained earnings (accumulated deficit) $ ( 33,172,690 ) $ 1,999,363 $ ( 7,100,000 ) $ 4,173,260 $ $( 34,100,067 ) Accumulated other comprehensive income $ 853,643 $ 958,814 $ 1,812,457 Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss) SCHEDULE OF CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS) For the year ended September 30, 2020 Previously reported Adjustments Adjusted Net loss available to Cemtrex, Inc. shareholders $ ( 13,105,005 ) $ 2,634,924 $ ( 10,470,081 ) Cost of revenues $ 24,153,937 $ 1,743,244 $ 25,897,181 General and administrative $ 21,570,666 $ ( 1,206,938 ) $ 20,363,728 Preferred dividends $ 3,171,230 $ ( 3,171,230 ) $ - Loss Per Share-Basic $ ( 1.28 ) $ 0.27 $ ( 1.01 ) Loss Per Share-Diluted $ ( 1.28 ) $ 0.27 $ ( 1.01 ) F- 20 Cemtrex Inc. and Subsidiaries Condensed Consolidated Statement of Stockholders’ Equity SCHEDULE OF CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY For the year ended September 30, 2020 Previously reported Adjustments Adjusted Retained earnings (accumulated deficit) at September 30, 2019 $ ( 20,067,685 ) $ ( 3,562,301 ) $ ( 23,629,986 ) Dividends pad in series preferred shares $ ( 2,089,540 ) $ 2,089,540 $ - Accrued dividends $ ( 1,081,690 ) $ 1,081,690 $ - Net income/(loss) $ ( 9,706,659 ) $ ( 763,422 ) $ ( 10,470,081 ) Retained earnings (accumulated deficit) at September 30, 2020 $ ( 33,172,690 ) $ ( 927,377 ) $ ( 34,100,067 ) Accumulated other comprehensive income/(loss)at September 30, 2019 $ 796,004 $ 958,814 $ 1,754,818 Foreign currency translation gain $ 22,294 $ 35,345 $ 57,639 Income in noncontrolling interest $ 35,345 $ ( 35,345 ) $ - Accumulated other comprehensive income/(loss) at September 30, 2020 $ 853,643 $ 958,814 $ 1,812,457 Additional paid-in capital at September 30, 2019 $ 40,344,837 $ ( 1,002,030 ) $ 39,342,807 Additional paid-in capital at September 30, 2020 $ 63,313,336 $ ( 3,091,570 ) $ 60,221,766 Non-controlling interst of Vicon at September 30, 2019 $ 885,874 $ ( 70,690 ) $ 815,184 Income in noncontrolling interest $ 191,771 $ 35,345 $ 227,116 Non-controlling interst of Vicon at September 30, 2020 $ 1,077,645 $ ( 35,345 ) $ 1,042,300 Condensed Consolidated Statements of Cash Flows SCHEDULE OF CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the year ended September 30, 2020 Previously reported Adjustments Adjusted Net loss $ ( 9,706,659 ) $ ( 536,306 ) $ ( 10,242,965 ) Depreciation and amortization $ 2,460,043 $ ( 594,317 ) $ 1,865,726 Inventory $ ( 1,586,651 ) $ 1,743,244 $ 156,593 Accrued expenses $ ( 499,527 ) $ ( 174,265 ) $ ( 673,792 ) Net cash used by operating activities - continuing operations $ ( 3,786,202 ) $ 438,356 $ ( 3,347,846 ) On February 26, 2021, the Company entered into a Settlement Agreement and Release with Aron Govil regarding these transactions. As part of the Settlement Agreement, Mr. Govil was required to pay the Company consideration with a total value of $ 7,100,000 (the “Settlement Amount”) by entering into the Agreement. The Settlement Amount was satisfied in a combination of Mr. Govil forfeiting certain Preferred Stock and outstanding options and executing a secured note in the amount of $ 1,533,280 . The Independent Board of Directors in coordination with Management concluded the settlement represented fair value. In March 2021, Mr. Govil returned to the Company 1,000,000 shares of Series A Preferred Stock, 50,000 Shares of Series C Preferred Stock, 469,949 shares of Series 1 Preferred Stock, and forfeited all outstanding options to purchase shares of commons stock (collectively, the “Securities”). For the purposes of accounting recognition, the Company determined the fair value of the Series A, Series C, and Series 1 Preferred stock based on the closing trading value of the Series 1 Preferred Stock on the date of the agreement. The options surrendered were valued using the Black-Scholes option pricing model. The Company recognized the gain with respect to the surrendered Securities during this reporting period. The gain of $ 3,674,165 is reported as Settlement Agreement - Related Party on the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss). As discussed above, Mr. Govil also executed a secured promissory note (the “Note”) in the amount of $ 1,533,280 . The Note matures and is due in full in two years and bears interest at 9% per annum and is secured by all of Mr. Govil’s assets. Mr. Govil also agreed to sign an affidavit confessing judgment in the event of a default on the Note. While the Company believes the note is fully collectible, in accordance with ASC 450-30, Gain Contingencies, the Company determined the gain will not be recognized until the note is paid. Accordingly, the note and associated gain is not presented on the Company’s Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss). F- 21 Cemtrex Inc. and Subsidiaries NOTE 4 PURCHASED ASSETS AND INVESTMENTS On February 21, 2020, the Company purchased 71,429 shares for $ 500,000 . The Company now owns approximately 95% of Vicon’s outstanding shares of common stock . NOTE 5 – DISCONTINUED OPERATIONS During fiscal 2019, the Company reached a strategic decision to exit the environmental products business, which was part of Industrial Services group. Accordingly, the Company has reported the results of the environmental control products business as discontinued operations in the Consolidated Statements of Operations and in the Consolidated Balance Sheets. During fiscal 2021, the Company made the final determination on it inactive entities and have written off all assets and liabilities of these entities Assets and liabilities included within discontinued operations on the Company’s Consolidated Balance Sheets at September 30, 2021 and 2020 are as follows; SCHEDULE OF DISPOSAL GROUPS, INCLUDING DISCONTINUED OPERATIONS September 30, September 30, 2021 2020 Assets Current assets Trade receivables - related party - 544,500 Total current assets - 544,500 Property and equipment, net Assetss held for sale - 8,323,321 Total Assets $ - $ 8,867,821 Liabilities Current liabilities Accounts payable $ - $ - Total liabilities $ - $ 263,832 F- 22 Cemtrex Inc. and Subsidiaries Loss from discontinued operations, net of tax and the loss on sale of discontinued operations, net of tax, of Centrex, LTD, IQInVision, Vicon Deutschland GmbH, Vicon Systems Ltd., and Griffin Filters are presented in total as discontinued operations, net of tax in the Company’s Consolidated Statements of Operations for the years ended September 30, are as follows: 2021 2020 Year ended September 30, 2021 2020 Total net sales $ - $ - Cost of sales - - Operating, selling, general and administrative expenses 8,280,047 812,895 Other expenses - - Income (loss) from discontinued operations ( 8,280,047 ) ( 812,895 ) Loss on sale of discontinued operations - - Income tax provision - - Discontinued operations, net of tax $ ( 8,280,047 ) $ ( 812,895 ) NOTE 6 – SEGMENT AND GEOGRAPHIC INFORMATION The Company reports and evaluates financial information for two segments: Advanced Technologies (AT) segment, and the Industrial Services (IS) segment. The AT segment develops smart devices and provides progressive design and development solutions to create impactful experiences for mobile, web, virtual and augmented reality, wearables and television as well as providing cutting edge, mission critical security and video surveillance. The IS segment offers single-source expertise and services for rigging, millwrighting, in plant maintenance, equipment erection, relocation, and disassembly to diversified customers in USA in industries such as: chemical, steel, printing, construction, & petrochemical. F- 23 Cemtrex Inc. and Subsidiaries The following tables summarize the Company’s segment information: SCHEDULE OF SEGMENT INFORMATION For the years ended September 30, 2021 2020 Revenues from external customers Advanced Technologies $ 24,154,488 $ 25,750,684 Industrial Services 18,976,446 17,767,700 Total revenues $ 43,130,934 $ 43,518,384 Gross profit (restated) Advanced Technologies $ 10,591,956 $ 11,181,127 Industrial Services 6,376,396 6,440,076 Total gross profit $ 16,968,352 $ 17,621,203 Operating loss (restated) Advanced Technologies $ ( 9,793,851 ) $ ( 3,278,873 ) Industrial Services 1,052,031 ( 1,290,938 ) Total operating loss $ ( 8,741,820 ) $ ( 4,569,811 ) Other income/(expense) Advanced Technologies $ 4,891,984 $ ( 2,588,609 ) Industrial Services 4,619,048 ( 197,815 ) Total other expense $ 9,511,032 $ ( 2,786,424 ) Depreciation and Amortization (restated) Advanced Technologies $ 515,465 $ 643,427 Industrial Services 819,724 1,222,299 Total depreciation and amortization $ 1,335,189 $ 1,865,726 September 30, September 30, 2021 2020 (restated) Identifiable Assets Advanced Technologies $ 33,850,496 $ 37,311,047 Industrial Services 19,089,392 14,650,280 Discontinued operations - 8,867,821 Total Assets $ 52,939,888 $ 60,829,148 F- 24 Cemtrex Inc. and Subsidiaries The Company generates revenue from product sales and services from its subsidiaries located in the United States, The United Kingdom, and India. Revenue and long-lived asset information for the Company is as follows: SCHEDULE OF REVENUE FROM PRODUCT SALES AND SERVICES FROM ITS SUBSIDIARIES September 30, September 30, Revenues 2021 2020 U.S. Operations $ 39,081,703 $ 40,211,773 Non-U.S. Operations 4,049,231 3,306,611 $ 43,130,934 $ 43,518,384 September 30, September 30, Long-lived Assets 2021 2020 (restated) U.S. Operations $ 6,584,161 $ 5,805,696 Non-U.S. Operations 154,783 168,154 $ 6,738,944 $ 5,973,850 NOTE 7 – FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level hierarchy is applied to prioritize the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under the guidance for fair value measurements are described below: Level 1 — Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Our Level 1 assets include cash equivalents, banker’s acceptances, trading securities investments and investment funds. We measure trading securities investments and investment funds at quoted market prices as they are traded in an active market with sufficient volume and frequency of transactions. Level 2 — Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified contractual term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 — Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. Level 3 assets and liabilities include cost method investments, goodwill, intangible assets, and property, plant and equipment, which are measured at fair value using a discounted cash flow approach when they are impaired. Quantitative information for Level 3 assets and liabilities reviewed at each reporting period includes indicators of significant deterioration in the earnings performance, credit rating, asset quality, business prospects of the investee, and financial indicators of the investee’s ability to continue as a going concern. F- 25 Cemtrex Inc. and Subsidiaries The Company’s fair value assets for the years ended September 30, 2021, and 2020, are as follows; SCHEDULE OF FAIR VALUE OF ASSETS Quoted Prices in Active Significant Markets for Other Significant Balance Identical Observable Unobservable as of Assets Inputs Inputs June 30, (Level 1) (Level 2) (Level 3) 2021 Assets Investment in marketable securities (included in short-term investments) $ 14,981 $ - $ - $ 14,981 $ 14,981 $ - $ - $ 14,981 Quoted Prices in Active Significant Markets for Other Significant Balance Identical Observable Unobservable as of Assets Inputs Inputs September 30, (Level 1) (Level 2) (Level 3) 2020 Assets Investment in marketable securities (included in short-term investments) $ 887,746 $ - $ - $ 887,746 $ 887,746 $ - $ - $ 887,746 NOTE 8 – RESTRICTED CASH A subsidiary of the Company participates in a consortium in order to self-insure group care coverage for its employees. The plan is administrated by Benecon Group and the Company makes monthly deposits in a trust account to cover medical claims and any administrative costs associated with the plan. These funds, as required by the plan are restricted in nature and amounted to $ 1,601,932 as of September 30, 2021. Additionally, the Company has a standby letter of credit for deposit on a building lease and payable against. a money market account, the amount of the standby letter of credit is $ 157,415 . NOTE 9 – ACCOUNTS RECEIVABLE, NET Accounts receivable, net consists of the following: SCHEDULE OF ACCOUNTS RECEIVABLE, NET September 30, September 30, September 30, 2021 2020 2019 Accounts receivable $ 7,989,888 $ 7,027,645 $ 7,065,035 Allowance for doubtful accounts ( 178,992 ) ( 340,848 ) ( 606,051 ) Accounts receivables, net, total $ 7,810,896 $ 6,686,797 $ 6,458,984 Accounts receivable include amounts due for shipped products and services rendered. Allowance for doubtful accounts include estimated losses resulting from the inability of our customers to make required payments. NOTE 10 – INVENTORY, NET Inventory, net of reserves, consist of the following: SCHEDULE OF INVENTORY, NET September 30, September 30, 2021 2020 Restated Raw materials $ 1,957,410 $ 3,959,888 Work in progress 429,871 1,069,050 Finished goods 5,191,007 5,717,519 Inventory, gross 7,578,288 10,746,457 Less: Allowance for inventory obsolescence ( 1,921,001 ) ( 5,800,000 ) Inventory –net of allowance for inventory obsolescence $ 5,657,287 $ 4,946,457 F- 26 Cemtrex Inc. and Subsidiaries NOTE 11 – PROPERTY AND EQUIPMENT Property and equipment are summarized as follows: SUMMARY OF PROPERTY AND EQUIPMENT September 30, September 30, 2021 2020 (restated) Land $ 790,373 $ 790,373 Building and leasehold improvements 2,892,900 2,935,628 Furniture and office equipment 501,885 621,790 Computers and software 1,105,681 264,940 Trade show display - 89,330 Machinery and equipment 12,984,959 13,620,530 18,275,798 18,322,591 Less: Accumulated depreciation ( 11,536,854 ) ( 12,348,741 ) Property and equipment, net $ 6,738,944 $ 5,973,850 The Company completed the annual impairment test of property and equipment and determined that there was no impairment as the fair value of property and equipment, substantially exceeded their carrying values at September 30, 2021. Depreciation and amortization of property and equipment totaled approximately $ 1,335,189 and $ 1,865,726 for fiscal years ended September 30, 2021, and 2020, respectively. NOTE 12 – LEASES ASC 842, “Leases”, requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at either the effective date (the “effective date method”) or the beginning of the earliest period presented (the “comparative method”) using a modified retrospective approach. Under the effective date method, the Company’s comparative period reporting is unchanged. In contrast, under the comparative method, the Company’s date of initial application is the beginning of the earliest comparative period presented, and the Topic 842 transition guidance is then applied to all comparative periods presented. Further, under either transition method, the standard includes certain practical expedients intended to ease the burden of adoption. The Company adopted ASC 842 October 1, 2019, using the effective date method and elected certain practical expedients allowing the Company not to reassess: ● whether expired or existing contracts contain leases under the new definition of a lease; ● lease classification for expired or existing leases; and ● whether previously capitalized initial direct costs would qualify for capitalization under Topic 842. The Company also made the accounting policy decision not to recognize lease assets and liabilities for leases with a term of 12 months or less . The Company entered into a financing lease for a single vehicle in the Industrial services segment with a term of 3 years. The Company enters into operating leases for its facilities in New York, United Kingdom, and India, as well as for vehicles for use in our Industrial Services segment. The operating lease terms range from 2 to 7 years. The Company excluded the renewal option on its applicable facility leases from the calculation of its right-of-use assets and lease liabilities. F- 27 Cemtrex Inc. and Subsidiaries Finance and operating lease liabilities consist of the following: SUMMARY OF FINANCE AND OPERATING LEASE LIABILITIES September 30, September 30, 2021 2020 Lease liabilities - current Finance leases $ - $ 20,061 Operating leases 830,791 700,975 830,791 721,036 Lease liabilities - net of current portion Finance leases $ - $ - Operating leases 2,017,408 2,027,406 $ 2,017,408 $ 2,027,406 A reconciliation of undiscounted cash flows to finance and operating lease liabilities recognized in the condensed consolidated balance sheet at September 30, 2021, is set forth below: SCHEDULE OF RECONCILIATION OF UNDISCOUNTED CASH FLOWS TO FINANCE AND OPERATING LEASE LIABILITIES Years ending September 30, Finance leases Operating Leases Total 2022 - 912,755 912,755 2023 - 725,207 725,207 2024 - 588,454 588,454 2025 - 565,431 565,431 2026 & Thereafter - 668,292 668,292 Undiscounted lease payments - 3,460,139 3,460,139 Amount representing interest - ( 611,940 ) ( 611,940 ) Discounted lease payments $ - $ 2,848,199 $ 2,848,199 Additional disclosures of lease data are set forth below: SCHEDULE OF LEASE COSTS For the year ended September 30, 2021 September 30, 2020 Lease costs: Finance lease costs: Depreciation of finance lease assets $ 17,184 $ 22,912 Interest on lease liabilities 88 832 Operating lease costs: Amortization of right-of-use assets 870,860 816,550 Interest on lease liabilities 91,930 59,122 Total lease cost $ 980,062 $ 899,416 Other information: Cash paid for amounts included in the measurement of lease liabilities: Operating leases $ 962,790 $ 816,549 Finance leases 20,061 22,718 $ 982,851 $ 839,267 Weighted-average remaining lease term - finance leases (months) 0 10 Weighted-average remaining lease term - operating leases (months) 55 51 Weighted-average discount rate - finance leases 3.63 % 3.63 % Weighted-average discount rate - operating leases 6.85 % 6.64 % F- 28 Cemtrex Inc. and Subsidiaries The Company used the rate implicit in the lease, where known, or its incremental borrowing rate as the rate used to discount the future lease payments. NOTE 13 – PREPAID AND OTHER CURRENT ASSETS On September 30, 2021, the Company had prepaid and other current assets consisting of prepayments on inventory purchases of $ 298,707 , and other current assets of $ 2,286,945 . On September 30, 2020, the Company had prepaid and other current assets consisting of prepayments on inventory purchases of $ 101,308 , and other current assets of $ 1,074,467 . NOTE 14 - OTHER ASSETS As of September 30, 2021, the Company had other assets of $ 697,240 which was comprised of rent security deposits of $ 84,362 , Investment in Masterpiece VR valued at $ 500,000 , and other assets of $ 112,878 . As of September 30, 2020, the Company had other assets of $ 381,900 which was comprised of rent security deposits. NOTE 15 – LINES OF CREDIT AND LONG-TERM LIABILITIES Lines of credit The Company currently has a line of credit with Fulton Bank for $ 3,500,000 . The line carries an interest of LIBOR plus 2.00 % per annum ( 2.075 % as of September 30, 2021). At September 30, 2021, there was no outstanding balance on this line of credit. The terms of this line of credit are subject to the bank’s review annually on February1. Loans payable to bank On December15, 2015, the Company acquired a loan from Fulton Bank in the amount of $ 5,250,000 in order to fund the purchase of Advanced Industrial Services, Inc. $ 5,000,000 of the proceeds went to direct purchase of AIS. This loan carries interest of LIBOR plus 2.25 % per annum ( 2.325 % as of September 30, 2021, and 4.23 % as of September 30, 2020) and is payable on December 15, 2022 . This loan carries loan covenants which the Company was in compliance with as of September 30, 2021. The outstanding balance on this loan was $ 1,218,680 and $ 2,164,584 , on September 30, 2021, and 2020, respectively. This loan is secured by the assets of the Company. On May 1, 2018, the Company acquired a loan from Fulton Bank in the amount of $ 400,000 in order to fund new equipment for Advanced Industrial Services, Inc. This loan carries interest of LIBOR plus 2.00 % per annum ( 3.98 % as of September 30, 2020) and is payable on May 1, 2023 . This loan carries loan covenants which the Company was in compliance with as of September 30, 2020. The outstanding balance on this loan was $ 58,897 on September 30, 2020. On September 30, 2021, this loan was fully paid. This loan was secured by the assets of the Company. On May 1, 2018, the Company acquired a loan from Fulton Bank in the amount of $ 400,000 in order to fund new equipment for Advanced Industrial Services, Inc. This loan carries interest of LIBOR plus 2.00 % per annum ( 2.075 % as of September 30, 2021, and 3.98 % as of September 30, 2020) and is payable on May 1, 2023 . This loan carries loan covenants which the Company was in compliance with as of September 30, 2021. The outstanding balance on this loan was $ 149,914 and $ 246,673 , on September 30, 2021, and 2020, respectively. This loan is secured by the assets of the Company. On January 28, 2020, the Company acquired a loan from Fulton Bank in the amount of $ 360,000 in order to fund new equipment for Advanced Industrial Services, Inc. This loan carries interest of LIBOR plus 2.25 % per annum ( 2.325 % as of September 30, 2021, and 4.23 % as of September 30, 2020) and is payable on May 1, 2023 . This loan carries loan covenants which the Company was in compliance with as of September 30, 2021. The outstanding balance on this loan was $ 258,060 and $ 331,535 , on September 30, 2021, and 2020, respectively. This loan is secured by the assets of the Company. Notes payable On December 23, 2019, the Company, issued a note payable to an independent private lender in the amount of $ 1,725,000 . This note carries interest of 8 % and matures on June 23, 2021 . After deduction of an original issue discount of $ 225,000 and legal fees of $ 5,000 , the Company received $ 1,495,000 in cash. As of September 30, 2021, this note was fully satisfied. As of September 30, 2020, the balance on this note was $ 620,754 . On April 24, 2020, the Company, issued a note payable to an independent private lender in the amount of $ 1,725,000 . This note carries interest of 8 % and matures on October 24, 2021 . After deduction of an original issue discount of $ 225,000 and legal fees of $ 5,000 , the Company received $ 1,495,000 in cash. As of September 30, 2021, this note was fully satisfied. As of September 30, 2020, this note had a balance of $ 1,787,033 . F- 29 Cemtrex Inc. and Subsidiaries On September 30, 2020, the Company, issued a note payable to an independent private lender in the amount of $ 4,605,000 . This note carries interest of 8 % and matures on March 30, 2022 . After deduction of an original issue discount of 600,000 and legal fees of $ 5,000 , the Company received $ 4,000,000 in cash. As of September 30, 2021, and 2020, this note had a balance of $ 2,456,448 , and $ 4,605,000 , respectively. On September 30, 2021, the Company, issued a note payable to an independent private lender in the amount of $ 5,755,000 . This note carries interest of 8 % and matures on March 30, 2023 . After deduction of an original issue discount of 750,000 and legal fees of $ 5,000 , the Company received $ 5,000,000 in cash. One September 30, 2021, this note had a balance of 5,775,000 . On March 3, 2020, Vicon, a subsidiary of the Company amended the $ 5,600,000 Term Loan Agreement with NIL Funding Corporation (“NIL”). Upon closing, $ 500,000 of outstanding borrowings were repaid to NIL, additionally, another $ 500,000 is to be paid in one year. The Agreement requires monthly payments of accrued interest that began on October 1, 2018. This note carries interest of 8.85 % and matures on March 30, 2022 . This note carries loan covenants which the Company is in compliance with as of September 30, 2021. On September 30, 2021, and 2020, this note had a balance of $ 3,604,743 , and 4,625,000 , respectively. Mortgage Payable On January 28, 2020, the Company’s subsidiary, Advanced Industrial Services, Inc., completed the purchase of two buildings for a total purchase price of $ 3,381,433 . The Company paid $ 905,433 in cash and acquired a mortgage from Fulton Bank in the amount of $ 2,476,000 . This mortgage carries interest of LIBOR plus 2.50 % per annum and is payable on January 28, 2040 . This loan carries loan covenants similar to covenants on The Company’s other loans from Fulton Bank. As of September 30, 2021, the Company was in compliance with these covenants. The outstanding balance on this mortgage was $ 2,339,114 and $ 2,355,542 , on September 30, 2021, and 2020, respectively. Paycheck Protection Program Loans In April and May of 2020, and January and April of 2021, the Company and its subsidiaries applied for and were granted $ 6,413,385 in Paycheck Protection Program loans under the CARES Act. These loans bear interest of 2 % and mature in two years. The Company has applied for and received loan forgiveness under the provisions of the CARES Act for $ 6,291,985 with $ 971,500 being subsequent to September 30, 2021. These loans are recorded under Paycheck Protection Program Loans on our Condensed Consolidated Balance Sheet as of September 30, 2020, net of the short-term portion of $ 1,032,200 , of which $ 971,500 has been forgiven. Estimated maturities of our long-term debt over the next 5 years are as follows; SCHEDULE OF ESTIMATED MATURITIES OF LONG TERM DEBT 2022 2023 2024 2025 2026 Thereafter Total 713,548 505,132 - - - - $ 1,218,680 Fulton Bank - $ 5,250,000 713,548 505,132 - - - $ 1,218,680 Fulton Bank - $ 400,000 78,995 70,919 - - - $ 149,914 Fulton Bank - $ 360,000 66,831 69,484 49,502 - - $ 258,060 Fulton Bank - Mortgage payable 81,329 88,266 92,120 96,142 102,521 1,878,736 $ 2,339,114 NIL Funding 3,604,743 - - - - $ 3,604,743 PPP Loans 60,700 1,032,200 - - - $ 1,092,900 Notes Payable (1) 5,371,825 2,350,000 - - - $ 7,721,825 TOTAL $ 9,977,971 $ 4,116,001 $ 141,622 $ 96,142 $ 102,521 $ 1,878,736 $ 16,385,236 (1) Net of unamortized original issue discounts of $ 950,000 NOTE 16 – RELATED PARTY TRANSACTIONS On August 31, 2019, the Company entered into an Asset Purchase Agreement for the sale of Griffin Filters, LLC to Ducon Technologies, Inc., which Aron Govil, the Company’s Founder and Former CFO, is President, for total consideration of $ 550,000 . As of September 30, 2021, and September 30, 2020, there was $ 1,487,155 and $ 1,432,209 in receivables due from Ducon Technologies, Inc., respectively. At September 30, 2021, $500,000 of the balance due is for the sale of Griffin, which was due in February 2021, and the remaining balance are various receivables with various due dates within the next fiscal year. The Company is currently negotiating a payment agreement surrounding all these amounts due. F- 30 Cemtrex Inc. and Subsidiaries Please see Note 3 for further transactions relating to Aron Govil. On May 1, 2020, Company invested $ 500,000 in a registered S-1 stock offering of Telidyne Inc., an OTC listed company, by purchasing 166,667 shares of common stock at $ 3.00 per share. Telidyne Inc. is controlled by the Company’s former CFO and Executive Director, Aron Govil. On September 30, 2020, the Company decided to withdraw its investment, the transaction was cancelled, and all proceeds were returned. NOTE 17 – SHAREHOLDERS’ EQUITY On July 27, 2020, the Company amended the Company’s Certificate of Incorporation (the “Amended Certificate of Incorporation”) which was duly approved by the Company’s Board of Directors and duly adopted by the Company’s shareholders increasing the number of authorized shares of all classes of stock from 30,000,000 shares to 60,000,000 shares with 50,000,000 designated as Common Stock and 10,000,000 designated as Preferred Stock. Preferred Stock The Company is authorized to issue 10,000,000 shares of Preferred Stock, $ 0.001 par value. As of September 30, 2021, and September 30, 2020, there were 1,935,151 and 3,256,784 shares issued and outstanding, respectively. Series A Preferred stock Each issued and outstanding Series A Preferred Share shall be entitled to the number of votes per share equal to the result of: (i) the number of shares of common stock of the Company issued and outstanding at the time of such vote multiplied by 1.01; divided by (ii) the total number of Series A Preferred Shares issued and outstanding at the time of such vote, at each meeting of shareholders of the Company with respect to any and all matters presented to the shareholders of the Company for their action or consideration, including the election of directors. Holders of Series A Preferred Shares shall vote together with the holders of Common Shares as a single class. The Series A Preferred Stock has no liquidation value or preference. During the twelve-month periods ended September 30, 2021, the Company retired 1,000,000 shares of Series A Preferred Stock. As of September 30, 2021, and September 30, 2020, there were zero and 1,000,000 shares of Series A Preferred Stock issued and outstanding, respectively. Series C Preferred Stock On October 3, 2019, pursuant to Article IV of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled Series C Preferred Stock, consisting of up to one hundred thousand ( 100,000 ) shares, par value $ 0.001 . Under the Certificate of Designation, holders of Series C Preferred Stock are entitled to the number of votes per share equal to the result of (i) the total number of shares of Common Stock outstanding at the time of such vote multiplied by 10.01, and divided by (ii) the total number of shares of Series C Preferred Stock outstanding at the time of such vote, at each meeting of our shareholders with respect to any and all matters presented to our shareholders for their action or consideration, including the election of directors. For the year ended September 30, 2020, 100,000 shares of Series C Preferred Stock were issued to Aron Govil, Executive former Director and CFO of the Company as part of his employment agreement. In order to determine the fair market value of these shares the Company used the closing price of its Series 1 preferred stock of $ 0.95 on October 3, 2019. On July 10, 2020, Aron Govil transferred 50,000 shares of the Series C Preferred Stock to Saagar Govil. F- 31 Cemtrex Inc. and Subsidiaries During the year ended September 30, 2021, the Company retired 50,000 shares of Series C Preferred Stock surrendered by Aron Govil as part of the settlement agreement (see Note 3). As of September 30, 2021, and September 30, 2020, there were 50,000 and 100,000 shares of Series C Preferred Stock issued and outstanding, respectively. Series 1 Preferred Stock Dividends Holders of the Series 1 Preferred will be entitled to receive cumulative cash dividends at the rate of 10% of the purchase price per year, payable semiannually on the last day of March and September in each year. Dividends may also be paid, at our option, in additional shares of Series 1 Preferred, valued at their liquidation preference. The Series 1 Preferred will rank senior to the common stock with respect to dividends. Dividends will be entitled to be paid prior to any dividend to the holders of our common stock. Liquidation Preference The Series 1 Preferred will have a liquidation preference of $ 10 per share, equal to its purchase price. In the event of any liquidation, dissolution or winding up of our company, any amounts remaining available for distribution to stockholders after payment of all liabilities of our company will be distributed first to the holders of Series 1 Preferred, and then pari passu to the holders of the Series A preferred stock and our common stock. The holders of Series 1 Preferred will have preference over the holders of our common stock on any liquidation, dissolution or winding up of our company. The holders of Series 1 Preferred will also have preference over the holders of our Series A preferred stock. Voting Rights Except as otherwise provided in the certificate of designation, preferences and rights or as required by law, the Series 1 Preferred will vote together with the shares of our common stock (and not as a separate class) at any annual or special meeting of stockholders. Except as required by law, each holder of shares of Series 1 Preferred will be entitled to two votes for each share of Series 1 Preferred held on the record date as though each share of Series 1 Preferred were 2 shares of our common stock. Holders of the Series 1 Preferred will vote as a class on any amendment altering or changing the powers, preferences or special rights of the Series 1 Preferred so as to affect them adversely. No Conversion The Series 1 Preferred will not be convertible into or exchangeable for shares of our common stock or any other security. Rank The Series 1 Preferred will rank with respect to distribution rights upon our liquidation, winding-up or dissolution and dividend rights, as applicable: ● senior to our Series A preferred stock, common stock and any other class of capital stock we issue in the future unless the terms of that stock provide that it ranks senior to any or all of the Series 1 Preferred; ● on a parity with any class of capital stock we issue in the future the terms of which provide that it will rank on a parity with any or all of the Series 1 Preferred; ● junior to each class of capital stock issued in the future the terms of which expressly provide that such capital stock will rank senior to the Series 1 Preferred and the common stock; and ● junior to all of our existing and future indebtedness. F- 32 Cemtrex Inc. and Subsidiaries On March 30, 2020, the Company amended the Certificate of Designation (the “Amended Certificate of Designation”) for our Series 1 Preferred Stock (the “Series 1 Stock”). The Amended Certificate of Designation increased the number of authorized preferred shares under the designation for our Series 1 Preferred Stock from 3,000,000 shares to 4,000,000 shares. During the year ended September 30, 2021, 198,316 shares of Series 1 Preferred Stock were issued to pay dividends to holders of Series 1 Preferred Stock. During the year ended September 30, 2021, the Company retired 469,949 shares of Series 1 Preferred Stock surrendered by Aron Govil as part of the settlement agreement (see Note 3). As of September 30, 2021, and September 30, 2020, there were 1,885,151 and 2,156,784 shares of Series 1 Preferred Stock issued and outstanding, respectively. During the fiscal year ended September 30, 2020, the Company purchased 235,133 shares of its Series 1 Preferred Stock on the open market at an average price per share of $ 1.92 , for an aggregate cost of approximately $ 338,775 , as part of its ongoing share repurchase program announced earlier. The Company retired 171,033 shares worth $ 190,484 during fiscal 2020. Common Stock The Company is authorized to issue 50,000,000 shares of common stock, $ 0.001 par value. As of September 30, 2021, there were 20,782,194 shares issued and outstanding and at September 30, 2020, there were 17,622,539 shares issued and outstanding. During the fiscal year ended September 30, 2021, we issued 3,159,655 shares of common stock to satisfy $ 5,025,651 of notes payable and accumulated interest. During the fiscal years ended September 30, 2020, 6,530,473 shares of the Company’s common stock have been issued to satisfy $ 8,737,125 of notes payable and accumulated interest. During fiscal year 2020, the Company issued 6,643,872 shares of the Company’s common stock for $ 12,462,648 in gross proceeds in various subscription rights offerings. After deducting offering expenses of $ 840,728 the Company received $ 11,621,920 in net proceeds (see below). During fiscal year 2020, the Company issued 513,358 shares in exchange for $ 532,788 worth of goods and services. During fiscal year 2020, the Company cancelled 27,954 shares that were issued in trust for an ATM offering in the prior fiscal year that were not sold. Series 1 Warrants There are currently 433,965 shares of our common stock issuable upon the exercise of our publicly traded Series 1 warrants that have an exercise price of $ 50.48 per share. During the years ended September 30, 2021, and 2020, none of our outstanding Series 1 Warrants have been exercised. Subscription Rights Offering On January 24, 2020, the “Company entered into a Subscription Agreement relating to the public offering of 500,000 shares (the “Shares”) of the Company’s common stock, par value $ 0.001 per share, all of which were sold by the Company (the “Offering”) to an accredited investor. The Offering price of the Shares was $ 1.50 per share for gross proceeds of $ 750,000 . After deducting offering expenses of $ 37,500 the Company received $ 712,500 in net proceeds. F- 33 Cemtrex Inc. and Subsidiaries On February 26, 2020, the “Company entered into a Subscription Agreement relating to the public offering of 347,000 shares (the “Shares”) of the Company’s common stock, par value $ 0.001 per share, all of which were sold by the Company (the “Offering”) to an accredited investor. The Offering price of the Shares was $ 1.30 per share for gross proceeds of $ 451,100 . After deducting offering expenses of $ 2,500 the Company received $ 448,600 in net proceeds. On June 1, 2020, the “Company entered into a Subscription Agreement relating to the public offering of 3,055,556 shares (the “Shares”) of the Company’s common stock, par value $ 0.001 per share, all of which were sold by the Company (the “Offering”) to accredited investors. The Offering price of the Shares was $ 1.80 per share for gross proceeds of $ 5,500,000 . After deducting offering expenses of $ 395,000 the Company received $ 5,105,000 in net proceeds. On June 9, 2020, the “Company entered into a Subscription Agreement relating to the public offering of 2,402,923 shares (the “Shares”) of the Company’s common stock, par value $ 0.001 per share, all of which were sold by the Company (the “Offering”) to accredited investors. The Offering price of the Shares was $ 2.24 per share for gross proceeds of $ 5,382,548 . After deducting offering expenses of $ 386,778 the Company received $ 4,995,769 in net proceeds. NOTE 18 – SHARE-BASED COMPENSATION On September 25, 2019, the Company cancelled all outstanding options granted to Saagar Govil, the Company’s Chairman and CEO and granted a stock option for 400,000 shares. These options have an exercise price of $ 1.90 per share, which vested upon grant and they expire after seven years . Additionally, Mr. Govil was granted additional future options; (i) 100,000 shares of the Corporation’s common stock, CETX at an exercise price of $ 1.92 per share on September 25, 2021 ; (ii) 100,000 shares of the Corporation’s common stock, CETX at an exercise price of $ 2.30 per share on September 25, 2023 ; and (iii) 100,000 shares of the Corporation’s common stock, CETX at an exercise price of $ 2.76 per share on September 25, 2025 . On September 25, 2019, the Company granted to Aron Govil, the Company’s former Executive Director and CFO, a stock option for 200,000 shares. These options have an exercise price of $ 1.90 per share, which vested upon grant and they expire after seven years . (i) 25,000 shares of the Corporation’s common stock, CETX at an exercise price of $ 1.92 per share on September 25, 2021 ; (ii) 12,500 shares of the Corporation’s common stock, CETX at an exercise price of $ 2.30 per share on September 25, 2023 ; and (iii) 8,333 shares of the Corporation’s common stock, CETX at an exercise price of $ 2.76 per share on September 25, 2025 . As part of the settlement agreement with Mr. Govil, all his options were cancelled. On January 6, 2021, the Company granted to Christopher C. Moore, the Company’s CFO, a stock option for 150,000 shares. These options have an exercise price of $ 1.58 per share, which vest over five years , and they expire after five years. The following weighted-average assumptions were used to estimate the fair value of the common stock option liability for the options granted to Christopher C. Moore; SCHEDULE OF FAIR VALUE STOCK OPTION WEIGHTED AVERAGE ASSUMPTIONS January 6, 2021 Expected term 5 Years Risk-free interest rate 0.41 % Expected volatility 111.47 % Expected dividend yield 0 % F- 34 Cemtrex Inc. and Subsidiaries During the years ended September 30, 2021, and 2020 the Company recognized $ 156,419 and $ 191,416 of share-based compensation expense on its outstanding options, respectively. As of September 30, 2021, there was $ 359,415 of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of 4 years. SCHEDULE OF STOCK OPTIONS ACTIVITY Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Outstanding at September 30, 2019 1,050,000 $ - Options granted - Options exercised - Options forfeited - Options cancelled ( 104,167 ) Outstanding at September 30, 2020 945,833 Options granted 250,000 Options exercised Options forfeited Options cancelled ( 245,833 ) Outstanding at September 30, 2021 950,000 Exercisable at September 30, 2021 583,333 $ 1.78 0.40 $ - NOTE 19 – COMMITMENTS AND CONTINGENCIES The Company has moved its corporate activities to New York City with a month-to-month lease of 2,500 square feet of office space at a rate of $ 13,000 per month. The Company’s IS segment owns approximately 25,000 square feet of warehouse space in Manchester, PA and approximately 43,000 square feet of office and warehouse space in York, PA. The IS segment also leases approximately 15,500 square feet of warehouse space in Emigsville, PA from a third party in a three-year lease at a monthly rent of $ 4,555 expiring on August 31, 2022 . The Company’s AT segment leases (i) approximately 6,700 square feet of office and warehouse space in Pune, India from a third party in an five year lease at a monthly rent of $ 6,453 (INR 456,972 ) expiring on February 28, 2024 , (ii) approximately 30,000 square feet of office and warehouse space in Hauppauge, New York from a third party in a seven-year lease at a monthly rent of $ 28,719 expiring on March 31, 2027 , (iii) approximately 4,570 square feet of office space in El Dorado Hills, California in a 63 month lease assumed by the company upon the acquisition of VDI expiring on November 30, 2022 , 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 $ 7,329 (£ 5,771 ) which expires on March 24, 2031 and contains provisions to terminate in 2026 . NOTE 20 – INCOME TAXES The Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017. The Tax Act reduces the maximum U.S. federal corporate tax rate from 35 % to 21 % , allows net operating losses incurred in 2018 and beyond to be carried forward indefinitely, allows alternative minimum tax carryforwards to be partially refunded, beginning in 2018, and fully refunded by 2021, and creates new taxes on certain foreign sourced earnings. At September 30, 2021, the Company had approximately $ 37,099,262 of federal and $ 13,726,364 of state net operating losses. The net operating loss carryforwards, if not utilized, will begin to expire in 2036 for federal purposes and in 2036 for state purposes. The company is currently reviewing net operating losses for Section 382 limitation purposes and will make any required adjustments to the net operating losses at the completion of the study. The following is a geographical breakdown of loss before the provision for income taxes: SCHEDULE OF (LOSS) INCOME BEFORE PROVISION FOR TAX Year ended September 30, 2021 2020 Restated Domestic $ 30,957 $ ( 6,422,704 ) Foreign 738,255 ( 933,531 ) Loss before provision for income taxes $ 769,212 $ ( 7,356,235 ) F- 35 Cemtrex Inc. and Subsidiaries The provision for income taxes consisted of the following: SCHEDULE OF PROVISION FOR INCOME TAXES September 30, 2021 September 30, 2020 Restated Current (benefit)/provision Federal $ - $ - State 375,434 ( 209,032 ) Foreign - - Total current (benefit)/provision 375,434 ( 209,032 ) Deferred provision Federal - 2,282,867 State - - Foreign - - Total deferred provision $ - $ 2,282,867 Total (benefit)/provision for income taxes $ 375,434 $ 2,073,835 Effective Income tax rate 48.81 % - 28.19 % The following is a reconciliation of the effective income tax rate to the federal and state statutory rates: SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION For the Fiscal Year For the Fiscal Year Ended Ended September 30, 2021 September 30, 2020 Restated U.S. statutory rate 21.00 % 21.00 % State statutory rate 6.50 % 6.50 % Foreign tax rate differential 0.00 % 0.00 % Change in valuation allowance 0.00 % - 30.78 % Effect of change in rates 0.00 % 0.00 % Permanent differences 21.31 % - 24.91 % Effective rate 48.81 % - 28.19 % F- 36 Cemtrex Inc. and Subsidiaries The components of our deferred tax assets and liabilities are summarized as follows: SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES September 30, 2021 September 30, 2020 Restated Deferred Tax Assets: Net operating loss carryforwards $ 8,702,738 $ 20,482,973 Inventory 1,405,057 - Prepaid expenses - - Allowance for bad debt 35,345 3,491 Fixed Assets - 19,271 Goodwill amortization - - Non-qualified stock options - - Warrants (interest expense) 1,155,642 - Accruals 280,447 2,699,246 Warranty Reserve 28,002 - Foreign Tax Credits - 354,000 Other 4,358 - Total gross deferred taxes 11,611,589 23,558,981 Valuation allowance ( 9,491,650 ) ( 22,720,711 ) Net deferred tax assets 2,119,939 838,270 Deferred Tax Liabilities: Inventory and other Reserves ( 638,230 ) - Inventory - ( 2,277 ) Prepaid expenses ( 87,934 ) ( 45,563 ) Goodwill amortization ( 557,074 ) ( 428,395 ) Research and development expenses - - Depreciation ( 836,701 ) ( 319,090 ) Gain/loss on fixed asset disposal - - Other - ( 42,945 ) Total deferred tax liabilities ( 2,119,939 ) ( 838,270 ) Total deferred tax assets (liabilities) $ - $ - NOTE 21– SUBSEQUENT EVENTS Cemtrex has evaluated subsequent events up to the date the consolidated financial statements were issued. Centrex concluded that the following subsequent events have occurred and require recognition or disclosure in the consolidated financial statements. Forgiveness of Payroll Protection Plan Loan In November 2021, $ 971,500 in Payroll Protection Plan Loans were forgiven. Preferred shares issued for dividend On October 18, 2021, the Company issued 94,602 shares of its Series 1 Preferred Stock for dividends. The dividend was paid to shareholders of record as of September 30, 2021 . Common shares issued subsequent to financial statements date. During October 2021, 2,891,016 shares of common stock were issued to satisfy $ 2,466,478 of notes payable and accumulated interest. F- 37