What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-02-14 compared with 2023-08-10 · 87 added, 143 removed, 80 unchanged (74% of the section changed)

26 unchanged sentences

and its subsidiaries.

the first quarter of fiscal year 2023, the Company reorganized its reporting segments to be in line with its current structure, consisting

of (i) Security, (ii) Industrial Services, and (iii) Cemtrex Corporate.

Company’s reporting segments consist of Security and Industrial Services.

Security segment operates under the brand of its majority owned subsidiary, Vicon Industries, Inc.

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maintenance, specialty welding services, and high-quality scaffolding.

Corporate segment is the holding company of our other two segments.

Accounting Policies and Estimates

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and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended September 30,

of Operations – For the three months ending June 30, 2023, and 2022

revenue for the three months ended June 30, 2023, and 2022 was $14,730,140 and $12,108,904, respectively, an increase of $2,621,236,

Loss from continuing operations for the three months ended June 30, 2023, was $1,185,400 compared to income of $106,599 for the

three months ended June 30, 2022, a decrease of $1,291,999, or 1,212%.

Total revenue for the quarter increased, as compared to total

revenue in the same period last year, due to increased demand for the Company’s products and services.

Income from continuing operations

became a loss due to other income related to realized and unrealized gain on marketable securities during the same period in the prior

Security segment revenues for the three months ended June 30, 2023, increased by $2,374,366 or 36% to $9,015,279 from $6,640,913 for

the three months ended June 30, 2022.

This increase is due to an increased demand for the Security segment’s products and services.

Industrial Services segment revenues for the three months ended June 30, 2023, increased by $246,870 or 5%, to $5,714,861 from $5,467,991

for the three months ended June 30, 2022.

This increase is mainly due to increased demand for the segment’s products and services.

Profit for the three months ended June 30, 2023, was $6,480,643 or 44% of revenues as compared to gross profit of $5,040,107 or 42% of

revenues for the three months ended June 30, 2022.

profit in our Security segment was $4,404,836 or 49% of the segment’s revenues for the three months ended June 30, 2023, as compared

to gross profit of $3,383,241 or 51% of the segment’s revenues for the period ended June 30, 2022.

Gross profit as a percentage

of revenues decreased in the three months ended June 30, 2023, compared to the three months ended June 30, 2022, due to negotiated terms

on some sales.

profit in our Industrial Services segment was $2,075,807 or 36% of the segment’s revenues for the three months ended June 30, 2023,

as compared to gross profit of $1,656,866 or 30% of the segment’s revenues for the period ended June 30, 2022.

of Operations – For the three months ended December 31, 2023, and 2022

Security segment revenues for the three months ended December 31, 2023, increased by $2,163,057 or 31% to $9,167,801 from $7,004,744

for the three months ended December 31, 2022.

This increase is due to an increased demand for the Security segment’s products and

Industrial Services segment revenues for the three months ended December 31, 2023, increased by $2,744,867 or 55%, to $7,710,365 from

$4,965,498 for the three months ended December 31, 2022.

This increase is mainly due to increased demand for the segment’s services

and the additional business from the Heisey acquisition.

Corporate segment is the holding company for the other two segments and did not generate any revenue for the three months ended December

31, 2023 or 2022.

Profit for the three months ended December 31, 2023, was $7,082,399 or 42% of revenues as compared to gross profit of $5,042,615 or 42%

of revenues for the three months ended December 31, 2022.

profit in our Security segment was $4,516,947 or 49% of the segment’s revenues for the three months ended December 31, 2023, as

compared to gross profit of $3,403,690 or 49% of the segment’s revenues for the period ended December 31, 2022.

Gross profit as

a percentage of revenues increased in the three months ended June 30, 2023, compared to the three months ended June 30, 2022, was primarily

due to lower subcontractor costs.

a percentage of revenues remained constant in the three months ended December 31, 2023, compared to the three months ended December 31,

profit in our Industrial Services segment was $2,565,452 or 33% of the segment’s revenues for the three months ended December 31,

2023, as compared to gross profit of $1,638,925 or 33% of the segment’s revenues for the period ended December 31, 2022.

profit as a percentage of revenues remained constant in the three months ended December 31, 2023, compared to the three months ended

December 31, 2022.

and Administrative Expenses

and administrative expenses for the three months ended June 30, 2023, decreased $4,569 or less than 1% to $5,376,960 from $5,381,529

for the three months ended June 30, 2022.

General and administrative expenses as a percentage of revenues were 37% and 44% of revenues

for the three-month periods ended June 30, 2023, and 2022, respectively.

The decrease in general and administrative expenses is mainly

related to decreased general and administrative expenses and professional fees expenses offset by increased personnel and insurance expenses.

and administrative expenses for the three months ended December 31, 2023, increased $1,516,133 or 28% to $6,971,966 from $5,455,833 for

the three months ended December 31, 2022.

The increase in general and administrative expenses is mainly

related to increased payroll, insurance, office supplies and repairs and maintenance expenses offset by decreased depreciation, professional

fees, rent, and travel expenses.

One-time fees in the current quarter include approximately $155,000 in severance payments.

and Development Expenses

and Development expenses for the three months ended June 30, 2023, were $1,049,909 compared to $1,189,875 for the three months ended

June 30, 2022, a decrease of $139,966 or 12%.

and Development expenses for the three months ended December 31, 2023, were $848,805 compared to $1,538,218 for the three months ended

December 31, 2022, a decrease of $689,413 or 45%.

Research and Development expenses are primarily related to the Security Segment’s

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Income/Expense

expense for the three months ended June 30, 2023, was $1,219,533, as compared to other income of $1,389,955 for the three months

ended June 30, 2022.

Other expense for the three months ended June 30, 2023, was mainly driven by interest on the Company’s

Other income for the three months ended June 30, 2022, included one-time realized and unrealized gain on marketable securities

of $2,075,125.

expense for the three months ended December 31, 2023, was $505,272, as compared to $1,145,317 for the three months ended December 31,

Other expense for the three months ended December 31, 2023, and 2022, was mainly driven by interest on the Company’s debt.

Decreases in interest expense relate to $221,831 in deferral charges and $441,733 of amortization of original issue discounts in the

three months ended December 31, 2022, that did not occur in the current period.

for Income Taxes

the three months ended June 30, 2023, the Company had income tax expense of $19,641 and a benefit of $247,941 for the three months ended

June 30, 2022.

The provision for income tax is based upon the projected income tax from the Company’s various U.S.

and international

subsidiaries that are subject to their respective income tax jurisdictions and the Company’s projected ability to utilize net loss

carryforwards.

the three months ended December 31, 2023 and 2022, the Company had income tax expense from continuing operations of $70,751 and $0.

provision for income tax is based upon the current income tax from the Company’s various U.S.

and international subsidiaries that

are subject to their respective income tax jurisdictions and the Company’s current ability to utilize net loss carryforwards.

Income/(loss)

from Discontinued Operations

the three months ended June 30, 2023, the Company had income on discontinued operations of $13,281.

This income is mainly related to

the recognition of the royalties due from CXR, Inc.

Losses on discontinued operations for the three months ended June 30, 2022, were

$838,301 attributable to the operations of the Cemtrex brands discussed in Note 3.

of Operations – For the nine months ending June 30, 2023, and 2022

revenue for the nine months ended June 30, 2023, and 2022 was $42,773,779 and $33,268,316, respectively, an increase of $9,505,463, or

Loss from continuing operations for the nine months ended June 30, 2023, was $4,835,914 compared to $7,781,049 for the nine months

ended June 30, 2022, a decrease on the loss of $2,945,135, or 38%.

Total revenue for the period increased, as compared to total revenue

in the same period last year, due to increased demand for the Company’s products and services.

Loss from continuing operations

decreased due to increased revenues and improved gross profit margins as compared to the same period in the prior year.

Security segment revenues for the nine months ended June 30, 2023, increased by $8,193,476 or 46% to $25,933,921 from $17,740,445 for

the nine months ended June 30, 2022.

This increase is due to an increased demand for the Security segment’s products and services.

Industrial Services segment revenues for the nine months ended June 30, 2023, increased by $1,311,987 or 8%, to $16,839,858 from $15,527,871

for the nine months ended June 30, 2022.

This increase is mainly due to increased demand for the segment’s products and services.

Profit for the nine months ended June 30, 2023, was $18,859,530 or 44% of revenues as compared to gross profit of $12,032,138 or 36%

of revenues for the nine months ended June 30, 2022.

profit in our Security segment was $12,928,607 or 50% of the segment’s revenues for the nine months ended June 30, 2023, as

compared to gross profit of $7,479,069 or 42% of the segment’s revenues for the nine-month period ended June 30, 2022.

profit as a percentage of revenues increased in the nine months ended June 30, 2023, compared to the nine months ended June 30,

2022, due to price increases implemented throughout the segment in January 2023 in response to rising costs of our goods and a

reduction in transportation costs in 2023, compared to the same period in 2022.

profit in our Industrial Services segment was $5,930,923 or 35% of the segment’s revenues for the nine months ended June 30, 2023,

as compared to gross profit of $4,553,069 or 29% of the segment’s revenues for the period ended June 30, 2022.

Gross profit as

a percentage of revenues increased in the nine months ended June 30, 2023, compared to the nine months ended June 30, 2022, was primarily

due to lower subcontractor costs.

and Administrative Expenses

and administrative expenses for the nine months ended June 30, 2023, increased $361,229 or 2% to $16,456,602 from $16,095,373 for the

nine months ended June 30, 2022.

General and administrative expenses as a percentage of revenues were 38% and 48% of revenues for the

nine-month periods ended June 30, 2023, and 2022, respectively.

The increase in general and administrative expenses is mainly related

to increased employee costs and insurance expenses.

and Development Expenses

and Development expenses for the nine months ended June 30, 2023, were $3,895,717 compared to $3,660,883 for the nine months ended June

30, 2022, an increase of $234,834 or 6%.

Research and Development expenses are primarily related to the Security Segment’s development

of next generation solutions associated with security and surveillance systems software.

expense for the nine months ended June 30, 2023, was $3,323,484, as compared to an expense of $304,872 for the nine months ended June

Other expense for the nine months ended June 30, 2023, was mainly driven by interest on the Company’s debt, offset by

a one-time income related to employee retention credits of $416,502.

Other expense for the nine months ended June 30, 2022, included

the gain on the forgiveness of our PPP loans of $971,500 and the realized and unrealized gain on marketable securities of $2,235,738.

for Income Taxes

the nine months ended June 30, 2023, and 2022, the Company had income tax expense of $19,641 and a benefit of $247,941 on income taxes.

The provision for income tax is based upon the projected income tax from the Company’s various U.S.

and international subsidiaries

that are subject to their respective income tax jurisdictions and the Company’s projected ability to utilize net loss carryforwards.

from Discontinued Operations

Company had losses on discontinued operations of $3,212,108.

The losses are comprised of the $2,455,341 loss on the sale of Cemtrex Advanced

Technologies, and Cemtrex XR, Inc.

The net loss of $879,727 attributable to the operations of the Cemtrex brands, the recognition of

discounted royalties of $33,875, and the net gain on the recovery of cash from Vicon Industries Ltd.

Losses on discontinued

operations for the nine months ended June 30, 2022, were $2,282,399 attributable to the operations of the Cemtrex brands discussed in

the three months ended December 31, 2023, the Company had income on discontinued operations, net of tax of $10,492.

This income is mainly related

to the recognition of the royalties due from CXR, Inc.

Losses on discontinued operations for the three months ended December 31, 2022,

were $3,239,621 attributable to the operations and sale of the Cemtrex brands discussed in Note 3 to the financial statements included

Company’s business and operations have been affected by inflation during the periods for which financial information is presented.

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and Capital Resources

capital deficit was $967,489 at June 30, 2023, compared to working capital of $6,252,972 at September 30, 2022.

This includes cash and

equivalents and restricted cash of $6,434,112 at June 30, 2023, and $11,473,676 at September 30, 2022.

The decrease in working capital

was primarily due to the Company’s sale of assets and liabilities of discontinued operations and an increase in accounts payable,

accrued expenses, and deferred revenue during the nine months ended June 30, 2023.

used by operating activities for continuing operations for the six months ended June 30, 2023, and 2022 was $5,394,048 and $10,669,927,

capital deficit was $2,284,787 at December 31, 2023, compared to working capital of $1,948,923 at September 30, 2023.

This includes cash

and equivalents and restricted cash of $4,016,732 at December 31, 2023, and $6,349,562 at September 30, 2022.

The decrease in working

capital was primarily due to the Company’s payment of accounts payable and accrued expenses.

used by operating activities for continuing operations for the three months ended December 31, 2023, and 2022 was $3,139,073 and $5,872,310,

respectively.

Cash provided by operating activities for discontinued operations for the nine months ended June 30, 2023, was $2,474,863,

compared to providing cash of $41,562 for the nine months ended June 30, 2022.

receivables increased by $2,108,539 or 39% to $7,507,755 at June 30, 2023, from $5,399,216 at September 30, 2022.

Cash provided by operating activities for discontinued operations for the three months ended December 31, 2022, was $2,501,426.

receivables increased by $694,860 or 8% to $9,904,555 at December 31, 2023, from $9,209,695 at September 30, 2023.

The increase in trade

receivables is attributable to increased sales in the Security segment.

used by investment activities for continuing operations for the nine months ended June 30, 2023, was $735,265 compared to providing cash

of $792,195 for the nine months ended June 30, 2022.

Cash used by investing activities for discontinued operations for the nine months

ended June 30, 2022, was $39,388.

Investing activities for the nine months ended June 30, 2023, were driven by the Company’s purchase

of property and equipment.

used by financing activities for the nine months ended June 30, 2023, was $1,280,991 compared to providing cash of $5,902,298 for the

nine months ended June 30, 2022.

Financing activities were primarily driven by payments on the Company’s debt.

Financing activities

for the nine months ended June 30, 2022, were primarily driven by proceeds from the note payable issued in February of 2022.

used by investing activities for continuing operations for the three months ended December 31, 2023, was $390,310 compared to $568,111

for the three months ended December 31, 2022.

Cash provided by investing activities for discontinued operations was $207,329 for the

three months ended December 31, 2022.

Investing activities for the three months ended December 31, 2023, were driven by the Company’s

purchase of property and equipment and investment in Masterpiece VR.

provided by financing activities for the three months ended December 31, 2023, was $998,099 compared to using cash of $600,920 for

the three months ended December 31, 2022.

Financing activities were primarily driven by proceeds and payments on the Company’s

revolving line of credit and payments on its secured debt.

Financing activities for the three months ended December 31, 2022, were primarily

driven by payments on the Company’s debt.

our working capital deficit and current debt indicate a substantial doubt regarding the Company’s ability to continue as a going

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the issuance of common stock, thus reducing our cash requirement to meet our operating needs.

Additionally, the Company has recently

sold unprofitable brands, reducing the cash required to maintain those brands, reevaluated our pricing model on our Vicon brand to improve

margins on those products, and has effected a reverse stock split on our common stock to remain trading on the Nasdaq Capital Markets,

and improved our ability to potentially raise capital through equity offerings that we may use to satisfy debt.

In the event additional

capital is raised through equity offerings and/or debt is satisfied with equity, it may have a dilutive effect on our existing stockholders.

While the Company believes these plans are sufficient to meet the capital demands of our current operations for at least the next twelve

months, there is no guarantee that we will succeed.

Overall, there is no guarantee that cash flow from our existing or future operations

and any external capital that we may be able to raise will be sufficient to meet our working capital needs.

We currently do not have

adequate cash to meet our short or long-term needs.

The consolidated financial statements do not include any adjustments relating to

this uncertainty.

The Company has approximately $2.84 million

in cash as of December 31, 2023.

Additionally, the Company has (i) secured a line of credit for its Vicon brand to fund operations, which

as of December 31, 2023, has available capacity of $1,642,676, (ii) sold unprofitable brands, reducing the cash required to maintain

those brands, (iii) continually reevaluate our pricing model on our Vicon brand to improve margins on those products, and (iv) has effected

a 35:1 reverse stock split on our common stock to remain trading on the Nasdaq Capital Markets, and improve our ability to potentially

raise capital through equity offerings that we may use to satisfy debt.

In the event additional capital is raised through equity offerings

and/or debt is satisfied with equity, it may have a dilutive effect on our existing stockholders.

While the Company believes these plans

if successful, would be sufficient to meet the capital demands of our current operations for at least the next twelve months, there is

no guarantee that we will succeed.

Overall, there is no guarantee that cash flow from our existing or future operations and any external

capital that we may be able to raise will be sufficient to meet our working capital needs.

The Company currently does not have adequate

cash or available liquidity/available capacity on our lines of credit to meet our short or long-term needs.

Absent an ability to raise

additional outside capital and restructure or refinance all or a portion of our debt, the Company will be unable to meet its obligations

as they become due over the next twelve months beyond the issuance date.

segment of the Company’s operations has positioned itself for growth and the Company’s long-term objectives include, increasing

marketing and sales for the Company’s products and services in each segment, increasing the Company’s presence through collaboration

partnerships in each segment and through strategic acquisitions of complementary businesses for each segment.

These long-term objectives

will require sufficient cash to complete, and the Company expects to fund these objectives with cash on hand, issuance of debt, and from

proceeds from the sale of the Company’s securities, which may not be sufficient to fully implement our growth initiatives.

condensed consolidated financial statements do not include any adjustments relating to this uncertainty.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis