Item 1. Business
ITEM
1. BUSINESS
Overview
Cemtrex,
Inc. was incorporated in 1998 in the state of Delaware and has evolved through strategic acquisitions and internal growth into a leading
multi-industry company. Unless the context requires otherwise, all references to “we”, “our”, “us”,
“Company”, “registrant”, “Cemtrex” or “management” refer to Cemtrex, Inc. and its subsidiaries.
Security
Cemtrex’s
Security segment operates under the brand of its majority owned subsidiary, Vicon Industries, Inc. (“Vicon”), which provides
end-to-end security solutions to meet the toughest corporate, industrial, and governmental security challenges. Vicon’s products
include browser-based video monitoring systems and analytics-based recognition systems, cameras, servers, and access control systems
for every aspect of security and surveillance in industrial and commercial facilities, federal prisons, hospitals, universities, schools,
and federal and state government offices. Vicon provides innovative, mission critical security and video surveillance solutions utilizing
Artificial Intelligence (AI) based data algorithms.
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Industrial
Services
Cemtrex’s
Industrial Services segment operates under the brand, Advanced Industrial Services (“AIS”), which offers single-source expertise
and services for rigging, millwrighting, in plant maintenance, equipment erection, relocation, and disassembly to diversified customers.
AIS installs high precision equipment in a wide variety of industrial markets like automotive, printing and graphics, industrial automation,
packaging, and chemicals, among others. AIS is a leading provider of reliability-driven maintenance and contracting solutions for machinery,
packaging, printing, chemical, and other manufacturing markets. The focus is on customers seeking to achieve greater asset utilization
and reliability to cut costs and increase production from existing assets, including small projects, sustaining capital, turnarounds,
maintenance, specialty welding services, and high-quality scaffolding.
Recent
Developments
Common
Stock Reverse Stock Split
On
October 2, 2024, the Company completed a 60:1 reverse stock split on its common stock, on November 26, 2024, The Company completed a
35:1 reverse stock split on its common stock, and on September 29, 2025, the Company completed a 15:1 reverse stock split on its common
stock. All share and per share data have been retroactively adjusted for the reverse splits.
Nasdaq
Notices for Listing Deficiencies
On
June 14, 2024, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company
that, because the closing bid price for the Company’s common stock listed on Nasdaq was below $1.00 for 30 consecutive trading
days, the Company no longer meets the minimum bid price requirement for continued listing on The Nasdaq Capital Market under Nasdaq Marketplace
Rule 5550(a)(2), requiring a minimum bid price of $1.00 per share. The notification letter also disclosed that in the event the Company
does not regain compliance with the Minimum Bid Price Requirement by December 11, 2024. On December 11, 2024, we received a notification
letter from the Nasdaq notifying us that we have regained compliance with the Minimum Bid Requirement.
Although
we currently meet the Nasdaq Minimum Bid Requirement, out of abundance of caution, we believe that a future reverse split may be necessary
in the future if we were to fall short of the Minimum Bid Price Requirement. A Reverse Stock Split would potentially increase our bid
price such that we maintain the Minimum Bid Requirement required for maintaining the listing requirements for the Nasdaq Capital Market.
On
August 21, 2024, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company
that, because the stockholder’s equity for the Company was below $2,500,000 as reported on our Form 10-Q for the period ended June
30, 2024, the Company no longer meets the minimum shareholder’s equity requirement for continued listing on The Nasdaq Capital
Market under Nasdaq Marketplace Rule 5550(b)(1), requiring a minimum stockholder’s equity of $2,500,000 (the “Minimum Stockholder’s
Equity Requirement”).
On
October 23, 2024, the Company received a letter from Nasdaq that it had been granted an extension to February 17, 2025, to regain compliance
with the Minimum Stockholder’s Equity Requirement.
On
January 2, 2025, the Company received a letter from Nasdaq notifying the Company that based on the Company’s Form 10-K filed on
December 30, 2024, evidencing stockholders’ equity of $4,710,677, Nasdaq has determined that the Company complies with the Minimum
Stockholder’s Equity Requirement and this matter is now closed.
On
February 24, 2025, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company
that, because the stockholder’s equity for the Company was below $2,500,000 as reported on our Form 10-Q for the period ended December
31, 2024, the Company no longer meets the minimum shareholder’s equity requirement for continued listing on The Nasdaq Capital
Market under Nasdaq Marketplace Rule 5550(b)(1), requiring a minimum stockholder’s equity of $2,500,000 (the “Minimum Stockholder’s
Equity Requirement”).
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On
April 22, 2025, the Company received a letter from Nasdaq that it had been granted an extension to August 20, 2025, to regain compliance
with the Minimum Stockholder’s Equity Requirement.
On
June 4, 2025, the Company received a letter from Nasdaq notifying the Company that based on the Company’s Form 10-Q for the period
ended March 31, 2025, filed on May 15, 2025, evidencing stockholders’ equity of $6,403,022, Nasdaq has determined that the Company
complies with the Minimum Stockholder’s Equity Requirement and this matter is now closed.
May
2024 Equity Financing
On
May 1, 2024, the Company entered into an underwriting agreement with Aegis Capital Corp., in connection with a firm commitment underwritten
public offering (the “Offering”), providing for the issuance of (i) 554,705 units (the “Common Units”), each
consisting of one share of common stock of the Company (“Common Stock”), a warrant to purchase one share of common stock
at an exercise price of $0.85 per share, which warrant will expire on the two-and-a-half year anniversary of the original issuance date
(the “Series A Warrants”), and a warrant to purchase one share of common stock at an exercise price of $0.85 per share, which
warrant will expire on the five-year anniversary of the original issuance date (the “Series B Warrants”); and (ii) 11,210,000
pre-funded units (the “Pre-funded Units”), each consisting of one pre-funded warrant to purchase one share of common stock
(the “Pre-funded Warrants”), a Series A Warrant and a Series B Warrant. The purchase price of each Unit was $0.85, and the
purchase price of each Pre-Funded Unit was $0.849. The Pre-Funded Warrants were immediately exercisable and all of the Pre-Funded Warrants
were exercised in full.
In
addition, the Company granted the Underwriter a 45-day option to purchase additional 1,764,705 shares of common stock and/or Pre-Funded
Warrants, representing up to 15% of the number of common stock and Pre-Funded Warrants sold in the Offering, and/or additional 1,764,705
Series A Warrants representing up to 15% of the Series A Warrants sold in the Offering, and/or additional 1,764,705 Series B Warrants
representing up to 15% of the Series B Warrants sold in the Offering to cover over-allotments, if any. The Offering closed on May 3,
2024. An aggregate of 11,764,705 Units (which includes 554,705 shares of common stock) and 11,210,000 Pre-Funded Units (which includes
11,210,000 Pre-Funded Warrants) were sold in the Offering. On May 3, 2024, the Underwriter partially exercised its over-allotment option
with respect to 1,764,705 Series A Warrants and 1,764,705 Series B Warrants. The aggregate gross proceeds to the Company were $10,035,293,
before deducting underwriting discounts and other issuance expenses of $995,333 recorded under the caption “General and administrative”
on the Company’s Consolidated Statements of Operations. The underwriting discounts and other issuance expenses were expensed since
the Series A, Series B, and Pre-Funded Warrants were each determined to be liabilities and recorded at their fair value.
May
2024 Warrants
The
Company evaluated the Series A, Series B, and Prefunded Warrants (collectively, the “Warrants”) in accordance with the guidance
at ASC 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging, and determined that the Warrants did not
meet the definition a liability under ASC 480, and the warrants are precluded from being considered indexed to the entity’s own
stock under ASC 815, resulting in the Warrants being classified as a liability. The fair value of the Series A Warrants was determined
based on the stock price on issuance of $0.277 multiplied by the total number of shares of common stock issuable upon exercise of the
Series A alternative cashless exercise. Under the alternative cashless exercise, the Holder is entitled to receive three times the normal
number of shares issued in a cash exercise. The Series A Holder may only execute the alternative cashless exercise after Stockholder
Approval (and received June 17, 2024); at the time of issuance, Stockholder Approval was deemed perfunctory and almost certain to occur,
and the most likely settlement option would be through the alternative cashless exercise. In addition, beginning on the date of the Warrant
Stockholder Approval, the Warrants will contain a reset of the exercise price to a price equal to the lesser of (i) the then-current
exercise price and (ii) lowest volume weighted average price for the five trading days immediately preceding and immediately following
the date we effect a reverse stock split in the future with a proportionate adjustment to the number of shares underlying the Warrants.
As such, upon issuance, the total fair value of the Series A Warrants was $11,242,940, which was based on 40,588,230 common shares issuable
under the alternative cashless exercise. The measurement of fair value of the Series B Warrants were determined utilizing a Black-Scholes
model considering all relevant assumptions current at the date of issuance (i.e., share price of $0.277, exercise price of $0.85, term
of five years, volatility of 132%, risk-free rate of 4.5%, and expected dividend rate of 0%). The grant date fair value of these Series
B Warrants was estimated to be $2,942,711 on May 3, 2024, and such
warrants were classified as liabilities. Due to the nominal exercise price, the fair value of the Prefunded Warrants was based
on the intrinsic value of each Warrant on the grant date. The intrinsic value was calculated based on the May 3, 2024, stock price of
$0.277 and the strike price of $0.001, resulting in a total fair value of $3,105,170. The total fair value of the Warrants upon issuance
was $17,290,821. Given that the gross proceeds received of $10,035,293 was less than the total fair value of the liability classified
Warrants, the Company recorded a loss on excess fair value of $7,255,528 at issuance.
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May
2025 Equity Offering
On
May 28, 2025 the Company, entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp.
(the “Underwriter”), pursuant to which the Company agreed to sell to the Underwriter, in a firm commitment public offering
(the “Offering”), 1,250,000 shares of the Company’s common stock, par value $0.001 per share (the “Firm Shares”),
for a public offering price of $1.00 per share. The Company also granted the Underwriter an over-allotment option to purchase up to 187,500
shares of the Company’s common stock (the “Option Shares,” together with Firm Shares, the “Shares”).
The
Company received $1,250,000 in gross proceeds from this Offering, before deducting underwriting discounts and other related offering
expenses of $191,050. The Offering closed on May 29, 2025.
On
June 2, 2025, the Underwriter fully exercised the option, and on June 3, 2025, the Company closed the offering of the Option Shares to
the Underwriter, for aggregate gross proceeds of approximately $187,500 less applicable underwriter discounts and other offering fees
and expenses of $15,000.
Issuance
of Note payable
On
November 7, 2025, the Company issued a Promissory Note with Streeterville Capital, LLC in the original principal amount of $7,025,000.
From November 7, 2025, until December 31, 2025, interest will accrue on the outstanding balance of this Note at a per annum rate of interest
equal to the daily Secured Overnight Financing Rate (SOFR) as quoted by the Federal Reserve Bank of New York. From January 1, 2026, until
this Note is paid in full, interest will accrue at the rate of eight percent (8%) per annum. After original issuance fees of $25,000,
the Company received cash of $7,000,000 for this agreement. If this Note is outstanding on January 1, 2026, a one-time additional interest
fee of $1,050,000.00 will automatically be added to the outstanding balance. This Note matures eighteen (18) months from the issuance
date with redemptions beginning at six (6) months from the issuance date. The Company intends to use the cash proceeds to complete potential
acquisitions.
Share
Purchase to Acquire Invocon, Inc.
On
November 13, 2025, the Company entered into a Share Purchase Agreement with Karl F. Kiefer and Invocon, Inc., a Texas-based systems-engineering
firm specializing in mission-critical instrumentation, wireless sensing systems, and flight hardware for aerospace, defense, and civil
structure monitoring applications. The agreement provides for the acquisition of 100% of the issued and outstanding shares of Invocon
for a purchase price of $7,060,000. The transaction is expected to close on or around January 1, 2026, subject to customary closing conditions.
Invocon
has a 40-year history supplying turnkey solutions to major corporations, government entities, and universities, with technologies deployed
in satellites, launch vehicles, space shuttles, the International Space Station, and other extreme-environment programs. Upon closing,
the Company plans to establish a new reporting segment, Aerospace & Defense, with Invocon as its cornerstone.
December
2025 Debt Exchange and Warrant Exercises
On
December 8, 2025, the Company issued 2,500,609 shares of its common stock pursuant to exchange agreements with certain lenders to satisfy
$6,084,000 of outstanding debt. Additionally, during December 2025, the Company issued 29,943 shares of common stock upon the exercise
of 9,981 Series A Warrants and 2,234,247 shares of common stock upon the exercise of 2,234,247 Series B Warrants. The Company received
approximately $5.5 million in gross proceeds from the Series B Warrant exercises.
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December
2025 Equity Offerings
On
December 11, 2025, the Company entered into a Securities Purchase Agreement with a single accredited institutional investor, pursuant
to which the Company issued and sold, in a registered direct offering, 310,000 shares of common stock at $3.00 per share and pre-funded
warrants to purchase 356,667 shares of common stock at $2.999 per warrant (with a $0.001 exercise price per underlying share), for aggregate
gross proceeds of $2,000,000 (net proceeds approximately $1,950,000 after estimated expenses). The pre-funded warrants are immediately
exercisable, have no expiration date, and include a 4.99% beneficial ownership limitation (which may be increased or decreased upon notice).
The offering was made pursuant to the Company’s effective shelf registration statement on Form S-3 (File No. 333-283995) and closed
on December 11, 2025. The Company intends to use the net proceeds for working capital and general corporate purposes, which may include
potential future acquisitions. No underwriter or placement agent was involved.
On
December 23, 2025, the Company entered into a Securities Purchase Agreement with a single accredited institutional investor, pursuant
to which the Company issued and sold, in a registered direct offering, 330,000 shares of common stock at $2.50 per share and pre-funded
warrants to purchase 470,000 shares of common stock at $2.499 per warrant (with a $0.001 exercise price per underlying share), for aggregate
gross proceeds of $2,000,000 (net proceeds approximately $1,950,000 after estimated expenses). The pre-funded warrants are immediately
exercisable, have no expiration date, and include a 4.99% beneficial ownership limitation (which may be increased or decreased upon notice).
The offering was made pursuant to the Company’s effective shelf registration statement on Form S-3 (File No. 333-283995) and closed
on December 23, 2025. The Company intends to use the net proceeds for working capital and general corporate purposes, which may include
potential future acquisitions. No underwriter or placement agent was involved.
Business
Strategy
Our
focus is to utilize our resources and capabilities to build brands and businesses in areas where we see unique opportunities to create
exceptional value for our customers, shareholders, and employees over the long term. We aim to grow in markets where we see significant
long-term opportunity to create an attractive return on shareholder equity. Generally, these markets are high growth markets that are
changing due to innovation, new technologies, or other industry shifts taking place. In these markets we seek to build or acquire businesses
that have attractive gross margins, strong opportunities for customer retention, and are not capital intensive. We take a long-term approach
with our strategies and seek returns over five years or longer time horizons.
We
believe our ability to attract and retain new customers comes from our ongoing commitment to understanding our customers’ business
performance requirements and our expertise in meeting or exceeding these requirements and enhancing their competitive advantage through
cutting edge technology. We work closely with our customers from an operational and senior executive level to achieve a deep understanding
of our customer’s goals, challenges, strategies, operations, and products to ultimately provide the best solutions for them.
We
continue to seek and execute additional strategic acquisitions and focus on expanding our products and services as well as entering new
markets. We believe that the diversity of our products and services and our ability to deliver full solutions to a variety of end markets
provides us with multiple sources of income and growth and a competitive advantage relative to other players in the industry. We constantly
look for opportunities to gain new customers and penetrate geographic locations and end markets or acquire new product or service opportunities
through acquisitions that are operationally and financially beneficial for the Company.
Suppliers
The
Company is not solely dependent on, nor expects to become overly dependent on, any one or a limited number of suppliers. The Company
also utilizes sub-suppliers and third-party vendors to procure from or fabricate its components based on its design, engineering, and
specifications. The Company also enters into subcontracts for field installation, which the Company supervises; and the Company manages
all technical, physical, and commercial aspects of the performance of the Company contracts.
Competition
The
Company competes on the basis of price, engineering and technological expertise, know-how and the quality of its products, systems, and
services. Additionally, the Company’s management believes that the successful delivery, installation and performance of the Company’s
products and services is a key factor in gaining business as customers typically prefer to make significant purchases from a company
with a solid performance history.
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The
Company obtains virtually all its contracts through competitive bidding. Although price is an important factor and may in some cases
be the governing factor, it is not always determinative, and contracts are often awarded on the basis of the efficiency or reliability
of products and services, past performance records, and the engineering and technical expertise of the bidder. Several companies market
products that compete directly with Company’s products. Other companies offer products that potential customers may consider to
be acceptable alternatives to Company’s products and services.
Intellectual
Property
Over
the years, the Company has developed proprietary technologies that give it an edge in competing with its competitors. Thus, the Company
relies on a combination of trade secrets and know-how to protect its intellectual property. The Company currently has multiple patents
and patent claims that it owns. Cemtrex continues to invest in research and development with the intention of developing proprietary
technology and intellectual property as allowed by its financial resources.
Sales
and Marketing
The
Company sales strategies vary across its businesses and depending on the brand, relies on direct sales force, manufacturing representatives,
distributors, integrators and installers, word of mouth or referrals, commission sales agents, magazine advertisements, internet advertising,
trade shows, trade directories and catalogue listings, e-commerce, to market its products and services. Our sales are global in nature
but predominantly focused on the US market presently. The Company’s arrangements with sales representatives accord each a defined
territory or market within which to sell some or all of its products and systems, provide for the payment of agreed-upon sales commissions
or wholesale pricing and are terminable at will. The Company’s sales representatives do not have authority to execute contracts
on the Company’s behalf.
The
Company’s sales representatives also serve as an ongoing liaison function between the Company and its customers during the installation
phase of the products and systems and address customers’ questions or concerns arising thereafter. The Company selects representatives
based upon industry reputation, prior sales performance including number of prospective leads generated and sales closure rates, and
the breadth of territorial coverage, among other criteria.
Technical
inquiries received from potential customers are referred to the engineering personnel. Thereafter, the Company’s sales and engineering
personnel jointly prepare a budget proposal, or a final bid. The period between initial customer contact and issuance of an order is
generally between two and twelve months.
Customers
The
Company’s principal customers in its Security segment are generally system integrators or channel partners who then sell our products
and solutions to our end customers, including government agencies or commercial businesses. Historically, most of the customers have
purchased individual products or systems which, in many instances, operate in conjunction with products and systems supplied by others.
The Company is responsible for the design, production, supply, and delivery of products to its customers. In order to satisfy customer
orders, in both segments, the Company must consistently meet production deadlines and maintain a high standard of quality.
The
Company’s principal customers in its Industrial Services segment include businesses engaged in manufacturing, chemical, packaging,
printing, electronics, automotive, construction, and metallurgical processing. No one single customer accounts for more than 10% of its
annual sales.
Insurance
The
Company currently maintains different types of insurance, including general property coverage, and directors’ and officers’
insurance. The Company also maintains product liability insurance with respect to its products and equipment. Management believes that
the insurance coverage that it has is adequate for its current business needs.
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Employees
The
Company employs approximately 240 full-time employees and approximately 4 part-time employees as of the date of this Annual Report, including
34 engaged in engineering, 128 in manufacturing and field service and 82 in administrative, sales and marketing functions.
Government
Regulation
The
Company’s operations are subject to certain foreign, federal, state, and local regulatory requirements relating to, among others,
environmental, waste management, labor and health and safety matters. Management believes that the Company’s business is operated
in material compliance with all such regulations.