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.

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.





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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 June 30, 2021, and 2020

Total revenue for the three months ended June 30, 2021, and 2020 was $10,326,431 and $8,440,867, respectively, an increase of $1,885,564, or 22%. Loss from operations for the three months ended June 30, 2021, was $2,300,269 compared to $2,399,802 for the three months ended June 30, 2020, a decrease on the loss of $99,533, or 4%. Total revenue for the quarter increased, 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 decreased due to increased revenues as a result of the COVID-19 crisis during the same period last year.





Revenues

Our Advanced Technologies segment revenues for the three months ended June 30, 2021, increased by $868,534 or 17% to $5,845,958 from $4,977,424 for the three months ended June 30, 2020. This increase is mainly due to an improvement in economic climate from the impact of the COVID-19 crisis during the same period last year.

Our Industrial Services segment revenues for the three months ended June 30, 2021, increased by $1,017,030 or 29%, to $4,480,473 from $3,463,443 for the three months ended June 30, 2020. This increase is mainly due to an improvement in economic climate from the impact of the COVID-19 crisis during the same period last year.





Gross Profit

Gross Profit for the three months ended June 30, 2021, was $4,127,716 or 40% of revenues as compared to gross profit of $3,279,852 or 39% of revenues for the three months ended June 30, 2020. Gross profit increased in the three months ended June 30, 2021, compared to the three months ended June 30, 2020, due to increased revenues. The Company's gross profit margins vary from product to product and from customer to customer.





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General and Administrative Expenses

General and administrative expenses for the three months ended June 30, 2021, increased $322,301 or 6% to $5,670,019 from $5,347,718 for the three months ended June 30, 2031. General and administrative expenses as a percentage of revenue was 55% and 63% of revenues for the three-month periods ended June 30, 2021, and 2020. The decrease in General and Administrative Expenses as a percentage of revenue is the increase in revenues from the same quarter last year and the increase on a dollar per dollar basis is the result of increased legal, travel, marketing and sales expenses.

Research and Development Expenses

Research and Development expenses for the three months ended June 30, 2021, was $757,966 compared to $331,936 for the three months ended June 30, 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 third quarter of fiscal 2021, was $3,468,649 as compared to $(1,823,967) for the third quarter of fiscal 2020. Other income/(expense) for the three months ended June 30, 2021, included the following one-time items (i) other income resulting from the forgiveness of our PPP loans of $3,349,700. Additionally, the company had realized and unrealized gains on marketable securities of $538,281.





Provision for Income Taxes

During the third quarter of fiscal 2021, the Company recorded an income tax provision of $40,759 compared to $7,658 for the third 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 $1,098,013, or 11% of revenues, for the three-month period ended June 30, 2021, as compared to a net loss attributable to Cemtrex, Inc. shareholders of $4,195,676 or 50% of revenues, for the three months ended June 30, 2020. Net income/(loss) attributable to Cemtrex, Inc. shareholders increased in the third quarter as compared to the same period last year was primarily due to other income items mentioned above.

Results of Operations - For the nine months ending June 30, 2021, and 2020

Total revenue for the nine months ended June 30, 2021, and 2020 was $28,422,892 and $32,774,797, respectively, a decrease of $4,351,905, or 13%. Loss from operations for the nine months ended June 30, 2021, was $6,308,818 compared to $2,519,212 for the nine months ended June 30, 2020, an increase on the loss of $3,789,606, or 150%. 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 during the first two quarters of fiscal year 2021. Loss from operations increased due to decreased revenues due to shutdowns and limited operations of businesses due to the COVID-19 crisis during the first two quarters of fiscal year 2021.





Revenues

Our Advanced Technologies segment revenues for the nine months ended June 30, 2021, decreased by $2,382,816 or 13% to $16,006,241 from $18,389,057 for the nine months ended June 30, 2020. This decrease is mainly due to shutdowns and limited operations of businesses due to the COVID-19 crisis during the first two quarters of fiscal year 2021.





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Our Industrial Services segment revenues for the nine months ended June 30, 2021, decreased by $1,969,089 or 14%, to $12,416,651 from $14,385,740 for the nine months ended June 30, 2020. This decrease is mainly due to shutdowns and limited operations of businesses due to the COVID-19 crisis during the first two quarters of fiscal year 2021.





Gross Profit

Gross Profit for the nine months ended June 30, 2021, was $12,062,070 or 42% of revenues as compared to gross profit of $13,974,442 or 43% of revenues for the nine months ended June 30, 2020. Gross profit decreased in the nine months ended June 30, 2021, compared to the nine months ended June 30, 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 nine months ended June 30, 2021, increased $957,001 or 6% to $16,337,200 from $15,380,199 for the nine months ended June 30, 2020. General and administrative expenses as a percentage of revenue was 57% and 47% of revenues for the nine-month periods ended June 30, 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 nine months ended June 30, 2021, was $2,033,688 compared to $1,113,455 for the nine months ended June 30, 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 three quarters of fiscal 2021 was $8,315,729 as compared to $(2,982,670) for the first three quarters of fiscal 2020. Other income/(expense) for the nine months ended June 30, 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 (iii) other income resulting from the forgiveness of our PPP loans of $3,349,700. Additionally, the company had realized and unrealized gains on marketable securities of $2,407,647.





Provision for Income Taxes

During the first three quarters of fiscal 2021 the Company recorded an income tax provision of $168,190 compared to $197,201 for the first three quarters 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 $1,859,534, or 7% of revenues, for the nine-month period ended June 30, 2021, as compared to a net loss attributable to Cemtrex, Inc. shareholders of $5,850,395 or 18% of revenues, for the nine months ended June 30, 2020. Net income/(loss) attributable to Cemtrex, Inc. shareholders increased in the first three quarters as compared to the same period last year was primarily due to other income items mentioned above.





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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 $18,176,331 at June 30, 2021, compared to $23,285,122 at September 30, 2020. This includes cash and equivalents and restricted cash of $14,570,345 at June 30, 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 $1,452,581 or 22% to $5,234,216 at June 30, 2021, from $6,686,797 at September 30, 2020. The decrease in accounts receivable is attributable to lower revenues in the first three quarters of fiscal year 2021 due to the COVID-19 crisis.

Inventories increased $1,875,591 or 28% to $8,669,397 at June 30, 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 $6,178,550 cash for the nine months ended June 30, 2021, compared to using $3,385,727 cash for the nine months ended June 30, 2020. The decrease in operating cash flows was primarily due to the effect of the settlement agreement with Aron Govil and the discharge of the Company's PPP loans.

Investment activities provided $154,326 of cash for the nine months ended June 30, 2021, compared to using cash of $5,990,926 during the nine-month period ended June 30, 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 $180,219 of cash in the nine-month period ended June 30, 2021, as compared to providing cash of $20,663,535 in the nine-month period ended June 30, 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.

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