Except for historical information contained in this report, the matters discussed are forward-looking statements that involve risks and uncertainties. When used in this report, words such as "anticipates", "believes", "could", "estimates", "expects", "may", "plans", "potential" and "intends" and similar expressions, as they relate to the Company or its management, identify forward-looking statements. Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. Such forward-looking statements are based on the beliefs of the Company's management, as well as assumptions made by and information currently available to the Company's management. Among the factors that could cause actual results to differ materially are the following: the effect of business and economic conditions; the impact of competitive products and their pricing; unexpected manufacturing or supplier problems; the Company's ability to maintain sufficient credit arrangements; changes in governmental standards by which our environmental control products are evaluated and the risk factors reported from time to time in the Company's SEC reports, including its recent report on Form 10-K. The Company undertakes no obligation to update forward-looking statements as a result of future events or developments.





General Overview

Cemtrex was incorporated in 1998, in the state of Delaware and has evolved through strategic acquisitions and internal growth into a leading multi-industry technology company. The Company has expanded in a wide range of sectors, including smart technologies, virtual and augmented realities, industrial solutions, and intelligent security systems. Unless the context requires otherwise, all references to "we", "our", "us", "Company", "registrant", "Cemtrex" or "management" refer to Cemtrex, Inc. and its subsidiaries.

The Company continuously assesses the composition of its portfolio businesses to ensure it is aligned with its strategic objectives and positioned to maximize growth and return in the coming years. During fiscal 2018, the Company made a strategic decision to exit its Electronics Manufacturing group by selling all companies in that business segment on August 15, 2019. Accordingly, the Company has reported the results of the Electronics Manufacturing business as discontinued operations in the Consolidated Statements of Operations and in the Consolidated Balance Sheets. These changes have been applied for all periods presented. During fiscal 2019, the Company also 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.

Now the Company has two business segments, consisting of (i) Advanced Technologies (AT) and (ii) Industrial Services (IS).





Advanced Technologies (AT)

Cemtrex's Advanced Technologies segment delivers cutting-edge technologies in the Internet of Things (IoT) and Smart Devices, such as the SmartDesk. Through the Company's advanced engineering and product design, the Company 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 its own virtual reality applications for commercialization over the next couple years.

The AT business segment also includes the Company's majority owned subsidiary, Vicon Industries, 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 cutting edge, mission critical security and video surveillance solutions utilizing Artificial Intelligence (AI) based data algorithms.





23







Industrial Services (IS)

Cemtrex's IS segment, offers single-source expertise and services for rigging, millwrighting, in plant maintenance, equipment erection, relocation, and disassembly to diversified customers. We install high precision equipment in a wide variety of industrial markets like automotive, printing & graphics, industrial automation, packaging, and chemicals, among others. We are a leading provider of reliability-driven maintenance and contracting solutions for the machinery, packaging, printing, chemical, and other manufacturing markets. The focus is on customers seeking to achieve greater asset utilization and reliability to cut costs and increase production from existing assets, including small projects, sustaining capital, turnarounds, maintenance, specialty welding services, and high-quality scaffolding.

Significant Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon the accompanying unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Although these estimates are based on our knowledge of current events, our actual amounts and results could differ from those estimates. The estimates made are based on historical factors, current circumstances, and the experience and judgment of our management, who continually evaluate the judgments, estimates and assumptions and may employ outside experts to assist in the evaluations.

Certain of our accounting policies are deemed "significant", as they are both most important to the financial statement presentation and require management's most difficult, subjective or complex judgments as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a discussion of our significant accounting policies, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended September 30, 2020.

Results of Operations - For the three months ending March 31, 2021, and 2020

Total revenue for the three months ended March 31, 2021, and 2020 was $9,260,385 and $12,113,847, respectively, a decrease of $2,853,462, or 24%. Loss from operations for the three months ended March 31, 2021, was $1,962,598 compared to $516,900 for the three months ended March 31, 2020, an increase on the loss of $1,445,698, or 280%. Total revenue for the quarter decreased, as compared to total revenue in the same period last year, due to shutdowns and limited operations of businesses due to the COVID-19 crisis. Loss from operations increased due to decreased revenues as a result of the COVID-19 crisis.





Revenues

Our Advanced Technologies segment revenues for the three months ended March 31, 2021, decreased by $698,986 or 11% to $5,487,414 from $6,186,400 for the three months ended March 31, 2020. This decrease is mainly due to the impact of the COVID-19 crisis.

Our Industrial Services segment revenues for the three months ended March 31, 2021, decreased by $2,154,476 or 36%, to $3,772,971 from $5,927,447 for the three months ended March 31, 2020. This decrease is mainly due to the impact of the COVID-19 crisis.





Gross Profit

Gross Profit for the three months ended March 31, 2021, was $3,928,884 or 42% of revenues as compared to gross profit of $5,346,104 or 44% of revenues for the three months ended March 31, 2020. Gross profit decreased in the three months ended March 31, 2021, compared to the three months ended March 31, 2020, due to lower revenues. The Company's gross profit margins vary from product to product and from customer to customer.





24

General and Administrative Expenses

General and administrative expenses for the three months ended March 31, 2021, decreased $208,086 or 4% to $5,249,985 from $5,458,071 for the three months ended March 31, 2031. General and administrative expenses as a percentage of revenue was 57% and 45% of revenues for the three-month periods ended March 31, 2021, and 2020. The increase in General and Administrative Expenses as a percentage of revenue is the reduction in revenues from the same quarter last year and the decrease on a dollar per dollar basis is the result of decreased travel, marketing and sales expenses.

Research and Development Expenses

Research and Development expenses for the three months ended March 31, 2021, was $641,497 compared to $404,933 for the three months ended March 31, 2020. Research and Development expenses are primarily related to the Advanced Technologies Segment's development of proprietary technology and further developments of the SmartDesk and Artificial Intelligence (AI) and next generation solutions associated with security and surveillance systems software.





Other Income/(Expense)

Other income/(expense) for the second quarter of fiscal 2021, was $4,505,033 as compared to $(900,506) for the first quarter of fiscal 2020. Other income/(expense) for the three months ended March 31, 2021, included the following one-time items (i) the settlement with Aron Govil (see Note 2), generated other income of $3,674,165, (ii) employee retention credits of $736,899. Additionally, the company had realized and unrealized gains on marketable securities of $926,622.





Provision for Income Taxes

During the second quarter of fiscal 2021, the Company recorded an income tax provision of $98,477compared to $189,543 for the second quarter of fiscal 2020. The provision for income tax is based upon the projected income tax from the Company's various U.S. and international subsidiaries that are subject to their respective income tax jurisdictions and the Company's projected ability to utilize net loss carryforwards.

Net income/(loss) attributable to Cemtrex, Inc. shareholders

The Company had a net income attributable to Cemtrex, Inc. shareholders of $2,454,132, or 27% of revenues, for the three-month period ended March 31, 2021 as compared to a net loss attributable to Cemtrex, Inc. shareholders of $1,599,101 or 13% of revenues, for the three months ended March 31, 2020. Net income/(loss) attributable to Cemtrex, Inc. shareholders increased in the second quarter as compared to the same period last year was primarily due to other income items mentioned above.

Results of Operations - For the six months ending March 31, 2021, and 2020

Total revenue for the six months ended March 31, 2021, and 2020 was $18,096,461 and $24,333,930, respectively, a decrease of $6,237,469, or 26%. Loss from operations for the six months ended March 31, 2021, was $4,008,549 compared to $119,410 for the six months ended March 31, 2020, an increase on the loss of $3,889,139, or 3,257%. Total revenue for the period decreased, as compared to total revenue in the same period last year, due to shutdowns and limited operations of businesses due to the COVID-19 crisis. Loss from operations increased due to decreased revenues as a result of the COVID-19 crisis.





25







Revenues

Our Advanced Technologies segment revenues for the six months ended March 31, 2021, decreased by $3,251,350 or 24% to $10,160,283 from $13,411,633 for the six months ended March 31, 2020. This decrease is mainly due to the impact of the COVID-19 crisis.

Our Industrial Services segment revenues for the six months ended March 31, 2021, decreased by $2,986,119 or 27%, to $7,936,178 from $10,922,297 for the six months ended March 31, 2020. This decrease is mainly due to the impact of the COVID-19 crisis.





Gross Profit

Gross Profit for the six months ended March 31, 2021, was $7,934,354 or 44% of revenues as compared to gross profit of $10,694,590 or 44% of revenues for the six months ended March 31, 2020. Gross profit decreased in the six months ended March 31, 2021, compared to the six months ended March 31, 2020, due to lower revenues. The Company's gross profit margins vary from product to product and from customer to customer.

General and Administrative Expenses

General and administrative expenses for the six months ended March 31, 2021, increased $634,700 or 6% to $10,667,181 from $10,032,481 for the six months ended March 31, 2020. General and administrative expenses as a percentage of revenue was 59% and 41% of revenues for the six-month periods ended March 31, 2021, and 2020. The increase in General and Administrative Expenses as a percentage of revenue is the reduction in revenues from the same period last year and the increase on a dollar per dollar basis is the result of increased personnel, legal and accounting fees, and marketing and sales expenses.

Research and Development Expenses

Research and Development expenses for the six months ended March 31, 2021, was $1,275,722 compared to $781,519 for the six months ended March 31, 2020. Research and Development expenses are primarily related to the Advanced Technologies Segment's development of proprietary technology and further developments of the SmartDesk and Artificial Intelligence (AI) and next generation solutions associated with security and surveillance systems software.





Other Income/(Expense)

Other income/(expense) for the first and second quarters of fiscal 2021 was $4,847,080 as compared to $(1,158,703) for the first and second quarters of fiscal 2020. Other income/(expense) for the six months ended March 31, 2021, included the following one-time items (i) the settlement with Aron Govil (see Note 2), generated other income of $3,674,165, (ii) employee retention credits of $736,899. Additionally, the company had realized and unrealized gains on marketable securities of $1,869,366.





Provision for Income Taxes

During the first and second quarters of fiscal 2021 the Company recorded an income tax provision of $127,431 compared to $189,543 for the second quarter of fiscal 2020. The provision for income tax is based upon the projected income tax from the Company's various U.S. and international subsidiaries that are subject to their respective income tax jurisdictions and the Company's projected ability to utilize net loss carryforwards.

Net income/(loss) attributable to Cemtrex, Inc. shareholders

The Company had a net income attributable to Cemtrex, Inc. shareholders of $711,100, or 4% of revenues, for the six-month period ended March 31, 2021, as compared to a net loss attributable to Cemtrex, Inc. shareholders of $1,654,719 or 7% of revenues, for the three months ended March 31, 2020. Net income/(loss) attributable to Cemtrex, Inc. shareholders increased in the first and second quarters as compared to the same period last year was primarily due to other income items mentioned above.





26







Effects of Inflation

The Company's business and operations have not been materially affected by inflation during the periods for which financial information is presented.

Liquidity and Capital Resources

Working capital was $19,962,805 at March 31, 2021, compared to $23,285,122 at September 30, 2020. This includes cash and equivalents and restricted cash of $17,280,660 at March 31, 2021, and $21,072,859 at September 30, 2020, respectively. The decrease in working capital was primarily due to the reduction of the Company's cash and equivalents, and trade receivables during the first and second quarters of fiscal year 2021.

Accounts receivable decreased $1,283,505 or 19% to $5,403,292 at March 31, 2021, from $6,686,797 at September 30, 2020. The decrease in accounts receivable is attributable to lower revenues in the first and second quarters of fiscal year 2021 due to the COVID-19 crisis.

Inventories increased $565,002 or 8% to $7,358,808 at March 31, 2021, from $6,793,806 at September 30, 2020. The increase inventories is attributable to the purchase of inventories for new products the Company plans to ship in the future.

Operating activities used $2,856,654 cash for the six months ended March 31, 2021, compared to using $1,370,703 cash for the six months ended March 31, 2020. The increase in operating cash flows was primarily due to the decrease in the Company's accounts receivable, as compared to the same period a year ago.

Investment activities used $110,129 of cash for the six months ended March 31, 2021, compared to using cash of $3,794,158 during the six-month period ended March 31, 2020. Investing activities for the first quarter of fiscal year 2021 were driven by the Company's investment in Virtual Driver Interactive, MasterpieceVR Software, purchase of fixed assets, and marketable securities transactions.

Financing activities used $754,748 of cash in the six-month period ended March 31, 2021, as compared to providing cash of $6,564,694 in the six-month period ended March 31, 2020. Financing activities were primarily driven by payments on bank loans and notes payable and proceeds from the second round of Paycheck Protection Program loans.

We believe that our cash on hand and cash generated by operations is sufficient to meet the capital demands of our current operations during the 2021 fiscal year (ending September 30, 2021). Any major increases in sales, particularly in new products, may require substantial capital investment. Failure to obtain sufficient capital could materially adversely impact our growth potential.

Overall, there is no guarantee that cash flow from our existing or future operations and any external capital that we may be able to raise will be sufficient to meet our expansion goals and working capital needs.

27

© Edgar Online, source Glimpses