AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22,
2008
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10/A
(Amendment
No. 1 to Form 10 Filed on May 14, 2008)
GENERAL
FORM FOR REGISTRATION OF SECURITIES
Pursuant
to Section 12(b) or (g) of the Securities Exchange Act of
1934
CEMTREX,
INC.
(Exact
name of registrant as specified in its charter)
Delaware
(State
or other jurisdiction of
incorporation
or organization)
|
|
30-0399914
(I.R.S.
Employer
Identification
No.)
|
CEMTREX,
INC.
19
Engineers Lane,
Farmingdale,
New York 11735
631-756-9116
(Address
of principal executive offices)
Registrant’s
telephone number, including area code:
631-756-9116
x 324
Securities
to be registered pursuant to Section 12(b) of the Act:
None
Securities
to be registered pursuant to Section 12(g) of the Act:
Common
Stock, $0.001 par value per share
REGISTRATION
NO. ________
TABLE
OF CONTENTS
PAGE
|
DESCRIPTION
|
PAGE
|
ITEM
1
|
Business
|
1
|
ITEM
1A
|
Risk
Factors
|
8
|
ITEM
2
|
Financial
Information
|
11
|
ITEM
3
|
Properties
|
15
|
ITEM
4
|
Security
Ownership of Certain Beneficial Owners and Management
|
15
|
ITEM
5
|
Directors
and Executive Officers
|
16
|
ITEM
6
|
Executive
Compensation
|
17
|
ITEM
7
|
Certain
Relations and Related Transactions, and Director
Independence
|
18
|
ITEM
8.
|
Legal
Proceedings
|
19
|
ITEM
9.
|
Market
Price of and Dividends on the Registrant's Common Equity and Related
Stockholder Matters
|
19
|
ITEM
10
|
Recent
Sales of Unregistered Securities
|
19
|
ITEM
11
|
Description
of Registrant’s Securities to be Registered
|
20
|
ITEM
12
|
Indemnification
of Directors and Officers
|
21
|
ITEM
13
|
Financial
Statements and Supplementary Data
|
22
|
ITEM
14
|
Changes
in and Disagreements with Accountants
|
22
|
ITEM
15
|
Financial
Statements and Exhibits
|
22
|
SIGNATURES
|
|
23
|
FORWARD-LOOKING
STATEMENTS
In
this
prospectus, we include some forward-looking statements that involve substantial
risks and uncertainties and other factors which may cause our operational and
financial activity and results to differ from those expressed or implied by
these forward-looking statements. In many cases, you can identify these
statements by forward-looking words such as "may," "expect," "anticipate,"
"believe," "estimate," "plan," "intend" and "continue," or similar words. You
should read statements that contain these words carefully because they discuss
our future expectations, contain projections of our future results of operations
or of our financial condition, or state other "forward-looking" information.
You
should not place undue reliance on these forward-looking statements. The
sections captioned "Risk Factors" and "Management's Discussion and Analysis
of
Financial Condition and Plan of Operations," as well as any cautionary language
in this prospectus, provide examples of risks, uncertainties and events that
may
cause our actual results to differ materially from the expectations.
Although
we believe that the expectations reflected in the forward-looking statements
are
reasonable, we cannot guarantee future results, levels of activity, performance,
or achievements.
Cemtrex
Inc. ("Cemtrex" or the "Company") is a Delaware corporation that designs,
engineers, assembles and sells emission monitoring equipment and instruments
to
the chemicals, pulp and paper, steel, power, coal and petrochemical industries,
as well as to municipalities, hospitals, and state and federal governments.
The
Company's current products include the following:
|
o
|
Opacity
monitor: Compliance & non-compliance
types
|
|
o
|
Extractive
Continuous Emission Monitors
|
|
o
|
Insitu
Process Analyzers
|
We
experienced increased revenues (and expenses) in each year as compared to the
preceding year. For the fiscal year ended September 30, 2007, we incurred
revenues of $3,533,621 which is an increase $2,809,412 from the fiscal year
ended September 30, 2006. For the fiscal year ended, September 30, 2007, we
incurred a net loss of $123,565. For the fiscal year ended September 30, 2006,
we generated a net income of $2,222. The following table summarizes these
results:
|
|
Year Ended September 30,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
3,533,621
|
|
$
|
724,209
|
|
Operating
Expenses
|
|
$
|
1,253,417
|
|
|
444,718
|
|
Net
Income (Loss)
|
|
|
($
123,565
|
)
|
$
|
2,222
|
|
Net
Income Per Common Share, Basic and Diluted
|
|
$
|
0.0002
|
|
$
|
0.0001
|
|
Weighted
Average Number of Shares
|
|
|
24,024,912
|
|
|
6,584,323
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
$
|
1,180,972
|
|
$
|
332,451
|
|
Total
Assets
|
|
$
|
4,238,532
|
|
$
|
607,333
|
|
Total
Liabilities
|
|
$
|
2,758,046
|
|
$
|
131,782
|
|
Total
Stockholders' Equity
|
|
$
|
1,480,486
|
|
$
|
475,551
|
|
On
April
27, 1998, the Company was incorporated in the state of Delaware under the name
“Diversified American Holdings, Inc.” On November 13, 1998, the Company’s name
was changed to “Strateginet, Inc.” The Company subsequently changed its name to
“Cemtrex Inc.” on December 16, 2004.
On
December 30, 2004, the Company purchased certain assets from Ducon Technologies,
Inc., which related to a business engaged in designing, assembling, selling
and
maintaining emission monitors to utilities and industries. Ducon Technologies
Inc. is owned by Texxar Inc. a private corporation. The sole owner of Texxar,
Inc. is Arun Govil, the Chairman, Chief Executive Officer, Treasurer and
President of the Company. In consideration for the asset purchase, the Company
issued to Ducon Technologies, Inc. 3,250,000 shares of its common stock. The
shares were issued under Section 4(2) of the Securities Act of 1933, as amended,
and/or Regulation D promulgated by the Securities and Exchange Commission.
On
April
30, 2007, the Company purchased all of the issued and outstanding membership
interests of Griffin Filters LLC, (“Griffin”) a company established since 1971
and engaged in the design, engineering & supplying of industrial air
filtration equipment from its President. Arun Govil, the Chairman, Chief
Executive Officer, Treasurer and President of the Company, was the owner of
100%
of the issued and outstanding membership interests of Griffin. The Company
purchased 100% ownership in Griffin for a purchase price of $ 2,750,000.00.
The
Company completed the Griffin purchase by (i) paying cash of $700,000.00, (ii)
issuing 20,000,000 shares of common stock valued at $750,000.00 and (iii)
issuing a four year convertible debenture in the amount of $1,300,000.00, paying
interest of 8.0% per year and convertible into 30,000,000 shares of common
stock. Griffin had sales and net income of $3,297,409 and $145, 981 respectively
for fiscal year ended September 30, 2006. Griffin is now a wholly-owned
subsidiary of the Company.
The
Company designs, engineers, assembles and sells emission monitoring equipment
and instruments to the chemicals, pulp and paper, steel, power, coal and
petrochemical industries, as well as to municipalities, hospitals, and state
and
federal governments. Our emission monitoring systems are installed at the
exhaust stacks of industrial facilities and are used to measure the outlet
flue
gas concentrations of regulated pollutants, such as sulfur dioxide, hydrogen
chloride, hydrogen sulfide, nitrous oxides, ammonia, nitrogen oxide, carbon
dioxide, carbon monoxide and other regulated pollutants. Through use of our
equipment and instrumentation, our clients can monitor the exhausts to the
atmosphere from their facilities and comply with Environmental Protection Agency
and state and local emission regulations on dust, particulate, fumes, acid
gases
and other regulated pollutants into the atmosphere.
The
Company is also getting involved in providing turnkey services for carbon credit
projects from abatement of greenhouse gases pursuant to Kyoto protocol and
assists project owners in selling of carbon credits globally.
Carbon
Credits are emission offsets that are generated from greenhouse gases abatement,
renewable energy such as solar & wind, and energy efficiency projects which
displace carbon emissions from traditional fossil fuel sources like coal, oil
or
gas with the subsequent reduction in greenhouse gas emissions. Companies,
agencies and governments buy, sell, bank and trade Carbon Credits called
Certified Emission Reductions or CERs.
Cemtrex
provides consulting services for such projects and arranges for investment
equity and the sales of CERs for its customers.
INDUSTRY
BACKGROUND
The
market for environmental control systems and technologies is directly dependent
upon governmental regulations and their enforcement. During the past three
decades, federal, state and local governments have realized the contaminated
air
poses significant threats to public health and safety, and, in response, have
enacted legislation designed to curb emissions of a variety of air pollutants.
Management believes that the existence of governmental regulations creates
demand for Company’s emission monitoring equipment and environmental control
systems.
These
governmental regulations affect nearly every industrial activity. The principal
federal legislation that was created is the Clean Air Act of 1970, as amended
9th Clean Air Act). This legislation requires compliance with ambient air
quality standards and empowers the Environmental Protection Agency (EPA) to
establish and enforce limits on the emissions of various pollutants from
specific types of facilities. The states have primary responsibility for
implementing these standards and, in some cases, have adopted standards more
stringent than those established by the EPA. In 1990, amendments to the Clean
Air Act were adopted which address, among other things, the country acid rain
problem by imposing strict control on the emissions of sulfur dioxide from
power
plants. During 1997, EPA approved regulations for ozone related emissions and
in
1998 EPA issued regulations requiring utilities in 22 states to significantly
reduce Nitrogen oxides emissions.
According
to scientists, the Earth's surface has risen in temperature by about 1 degree
Fahrenheit in the past century. There is increasing evidence that certain human
activities are contributing to this change in temperature through activities
that increase the levels of greenhouse gases, primarily carbon dioxide, methane,
and nitrous oxide, in the atmosphere. Greenhouse gases trap heat that would
normally escape back into the atmosphere, thus increasing the Earth's natural
greenhouse effect and increasing temperature over time.
The
Earth's climate is predicted to change because human activities are altering
the
chemical composition of the atmosphere through the buildup of greenhouse
gases—primarily carbon dioxide (CO
2
),
methane (CH
4
),
and
nitrous oxide (NO
x
).
The
heat-trapping property of these gases is undisputed. Although uncertainty exists
about exactly how Earth's climate responds to these gases, global temperatures
are rising.
EPA
Clean Air market Programs
EPA’s
Clean air market programs include various market-based regulatory programs
designed to improve air quality. Clean air markets include various market-based
regulatory programs designed to improve air quality by reducing outdoor
concentrations of fine particles, sulfur dioxide, nitrogen oxides, mercury,
ozone and other significant air emissions. The most well-known of these programs
are EPA’s
Acid
Rain Program
and the
NO
x
Trading Programs
,
which
reduce emissions of sulfur dioxide (SO
2
)
and
nitrogen oxides (NO
x
)–compounds
produced by fossil fuel combustion.
Acid
Rain Program
The
goal
of the Acid Rain Program is to achieve significant environmental and public
health benefits through reductions in emissions of sulfur dioxide
(SO
2
)
and
nitrogen oxides (NO
x
),
the
primary causes of acid rain. To achieve this goal at the lowest cost to society,
the program employs both traditional and innovative, market-based approaches
for
controlling air pollution. In addition, the program encourages energy efficiency
and pollution prevention.
"Acid
rain" is a broad term referring to a mixture of wet and dry deposition
(deposited material) from the atmosphere containing higher than normal amounts
of nitric and sulfuric acids. The precursors, or chemical forerunners, of acid
rain formation result from both natural sources, such as volcanoes and decaying
vegetation, and man-made sources, primarily emissions of
SO
2
and
NO
x
resulting
from fossil fuel combustion. In the United States, roughly 2/3 of all
SO
2
and 1/4
of all NO
x
come
from electric power generation that relies on burning fossil fuels, like
coal. Acid rain occurs when these gases react in the atmosphere with
water, oxygen, and other chemicals to form various acidic compounds. The result
is a mild solution of sulfuric acid and nitric acid. When sulfur dioxide and
nitrogen oxides are released from power plants and other sources, prevailing
winds blow these compounds across state and national borders, sometimes over
hundreds of miles.
NOx
Trading Program
The
goal
of the NOx Trading Program is to reduce the transport of ground-level ozone
across large distances. The
Ozone
Transport Commission (OTC) NO
x
Budget Program
was
implemented from 1999 to 2002 and was replaced by the
NO
x
Budget Trading Program
—also
known as the “NO
x
SIP
Call”—in 2003. The
NO
x
SIP
Call
Program
is a market-based cap and trade program created to reduce emissions of nitrogen
oxides (NO
x
)
from
power plants and other large combustion sources in the eastern United States.
NOx is a prime ingredient in the formation of ground-level ozone (smog), a
pervasive air pollution problem in many areas of the eastern United States.
The
NO
x
Budget
Trading Program was designed to reduce NO
x
emissions during the warm summer months, referred to as the ozone season, when
ground-level ozone concentrations are highest.
Clean
Air Interstate Rule (CAIR)
On
March
10, 2005, EPA issued the Clean Air Interstate Rule (CAIR). This rule provides
states with a solution to the problem of power plant pollution that drifts
from
one state to another. CAIR covers 28 eastern states and the District of
Columbia. The rule uses a cap and trade system to reduce the target
pollutants—sulfur dioxide (SO
2
)
and
nitrogen oxides (NO
x
)—by
70
percent.
The
goal
of the Clean Air Interstate Rule (CAIR) is to permanently cap emissions of
SO
2
and
NO
x
in the
eastern U.S. States must achieve the required emission reductions using one
of
two compliance options: (1) meet the state’s emission budget by requiring power
plants to participate in an EPA-administered interstate cap and trade system,
or
(2) meet an individual state emissions budget through measures of the state’s
choosing.
Clean
Air Mercury Rule (CAMR)
On
March
15, 2005, EPA issued the Clean Air Mercury Rule (CAMR) to permanently cap and
reduce mercury emissions from coal-fired power plants for the first time ever.
This rule makes the United States the first country in the world to regulate
mercury emissions from utilities.
The
goal
of the Clean Air Mercury Rule (CAMR) is to reduce mercury emissions from
coal-fired power plants through “standards of performance” for new and existing
utilities and a market-based cap and trade program.
CAMR
establishes “standards of performance” limiting mercury emissions from new and
existing coal-fired power plants, and creates a market-based cap and trade
program that will reduce nationwide utility emissions of mercury in two distinct
phases. The first phase cap is 38 tons and emissions will be reduced by taking
advantage of “co-benefit” reductions—that is, mercury reductions achieved by
reducing sulfur dioxide (SO
2
)
and
nitrogen oxides (NO
x
)
emissions under
Clean
Air Interstate Rule (CAIR)
.
In the
second phase, due in 2018, coal-fired power plants will be subject to a second
cap, which will reduce emissions to 15 tons upon full
implementation.
EPA
Emission Monitoring Requirements
EPA’s
emissions monitoring requirements are designed to ensure the compliance with
its
current regulations pursuant to various programs. The emission monitoring
requirements ensure that the emissions data collected is of a known, consistent,
and high quality, and that the mass emissions data from source to source are
collected in an equitable manner. This is essential to support the Clean Air
Markets Program’s mission of promoting market-based trading programs as a means
for solving air quality problems
Continuous
emissions monitoring (CEM) is instrumental in ensuring that the mandated
reductions of SO
2
,
NO
x
mercury
and other pollutants are achieved. While traditional emissions limitation
programs have required facilities to meet specific emissions rates, the current
Program requires an accounting of each ton of emissions from each regulated
unit. Compliance is then determined through a direct comparison of total annual
emissions reported by CEM and allowances held for the unit.
CEM
is
the continuous measurement of pollutants emitted into the atmosphere in exhaust
gases from combustion or industrial processes. EPA has established requirements
for the continuous monitoring of SO
2
,
volumetric flow, NO
x
,
diluent
gas, and opacity for units regulated under the Acid Rain Program. In addition,
procedures for monitoring or estimating carbon dioxide (CO
2
)
are
specified. The CEM rule also contains requirements for equipment performance
specifications, certification procedures, and recordkeeping and reporting.
The
Acid
Rain Program uses a market-based approach to reduce SO
2
emissions in a cost-effective manner. (One allowance is an authorization to
emit
1 ton of SO
2
during
or after a specified calendar year; a utility may buy, sell, or hold allowances
as part of its compliance strategy.) Complete and accurate emissions data are
key to implementing this market-based approach.
An
essential feature of smoothly operating markets is a method for measuring the
commodity being traded. The CEM data supplies the gold standard to back up
the
paper currency of emissions allowances. The CEM requirements, therefore,
management believes instills confidence in the market-based approach by
verifying the existence and value of the traded allowance.
The
owner
or operator of a unit regulated under the Acid Rain Program must install CEM
systems on the unit unless otherwise specified in the regulation. CEM systems
include:
|
·
|
An
SO
2
pollutant concentration monitor.
|
|
·
|
A
NO
x
pollutant concentration monitor.
|
|
·
|
A
volumetric flow monitor.
|
|
·
|
A
diluent gas (O
2
or
CO
2
)
monitor.
|
|
·
|
A
computer-based data acquisition and handling system (DAHS) for recording
and performing calculations with the data.
|
All
CEM
systems must be in continuous operation and must be able to sample, analyze,
and
record data at least every 15 minutes. All emissions and flow data will be
reduced to 1-hour averages. The rule specifies procedures for converting the
hourly emissions data into the appropriate units of measure.
The
following is a summary of monitoring method requirements and options:
|
·
|
All
existing coal-fired units serving a generator greater than 25 megawatts
and all new coal units must use CEMs for SO
2
,
NO
x
,
flow, and opacity.
|
|
·
|
Units
burning natural gas may determine SO
2
mass emissions by: (1) measuring heat input with a gas flowmeter
and using
a default emission rate; or (2) sampling and analyzing gas daily
for
sulfur and using the volume of gas combusted; or (3) using CEMs.
|
|
·
|
Units
burning oil may monitor SO
2
mass emissions by one of the following methods:
|
|
1.
|
daily
manual oil sampling and analysis plus oil flow meter (to continuously
monitor oil usage)
|
|
2.
|
sampling
and analysis of diesel fuel oil as-delivered plus oil flow meter
|
|
3.
|
automatic
continuous oil sampling plus oil flow meter
|
|
·
|
Gas-fired
and oil-fired base-loaded units must use NO
x
CEMs.
|
|
·
|
Gas-fired
peaking units and oil-fired peaking units may either estimate
NO
x
emissions by using site-specific emission correlations and periodic
stack
testing to verify continued representativeness of the correlations,
or use
NO
x
CEMS. The emission correlation method has been significantly streamlined
in the revised rule.
|
|
·
|
All
gas-fired units using natural gas for at least 90 percent of their
annual
heat input and units burning diesel fuel oil are exempt from opacity
monitoring.
|
|
·
|
For
CO
2
all units can use either (1) a mass balance estimation, or (2)
CO
2
CEMs, or (3) O
2
CEMs in order to estimate CO
2
emissions.
|
PRODUCTS
The
Company offers a range of products and systems, incorporating diverse
technologies, to address the needs of a wide variety of industries and their
environmental regulations. Management believes that the Company provides a
single source responsibility for design, engineering, assembly, installation
and
maintenance of systems to its customers.
The
Company’s products are designed to operate so as to allow its users to determine
their compliance with the latest governmental emissions regulations. The
Company’s products measure the concentrations of various regulated pollutants in
the flue gases discharging the exhaust stacks at various utilities and
industries.
The
Company's current products include the following:
Opacity
monitor: Compliance & non-compliance types
Management
believes that the Company’s Laser Opacity monitor provides the highest accuracy
and long-term reliability available for stack opacity and dust measurements.
An
EPA-compliant monitoring system, the monitor is a lightweight, efficient
solution for determining opacity or dust concentration in stack gases. Proven
in
many installations worldwide, it advances the state of opacity monitoring with
higher levels of accuracy, flexible installation and reduced long-term
maintenance
Extractive
Continuous Emission Monitors (CEMS)
Cemtrex
provides
direct-extractive
and
dilution-extractive
CEMS
equipment & systems that are applicable for utilities, industrial boilers,
FGD systems, SCR-NOx control, furnaces, gas turbines, process heaters,
incinerators, and process controls. In addition to traditional CEMS designed
for
maximum reliability and minimal maintenance in monitoring criteria pollutants,
the Company can also accurately quantify other gaseous compounds through in-situ
or extractive FTIR systems. The Company’s Extractive CEMS can be configured to
monitor for one or all of the following: • NOx • SO2 • CO2 • O2 • CO • THC •
Mercury • H2S • HCl & HF Acid • NH3 • Particulate • Opacity • Volumetric
Flow and Moisture.
Ammonia
Analyzer
The
flue
gas stream which contain ammonia, nitrogen oxides and in some cases sulfur
dioxide utilize Ultra Violet radiation techniques for measurements. All these
components absorb UV radiation, and therefore can be monitored by process
analyzers that utilize UV absorbance techniques for detection.
Mercury
Analyzer
The
EPA
Clean Air Mercury rule requires that all coal fired power plants must provide
continuous mercury monitoring by 2009. Management believes that Cemtrex's SM4
mercury monitor, a result of 10 years experience in mercury monitoring business,
provides reliable online measurements at a much lower cost than any other
competing model in the market. Cemtrex SM4 is the first instrument working
on a
thermo catalytic principle avoiding wet chemical sample treatment. As a
consequence, the Company has found that maintenance demand has been drastically
minimized. We believe that it is the only monitor that required no maintenance
at a coal fired utility wet stack, no carrier gases, no water and 95% data
availabilitySM4 uses straight extractive Teflon sheathed Hastelloy probe with
no
plugging or corrosion.
PRODUCT
DEVELOPMENT
There
are
no products under development at the present time.
The
Company is not dependent on, nor expects to become dependent on, any one or
a
limited number of suppliers. The Company buys parts and components to assemble
its equipment and products. The Company does not manufacture or fabricate its
own products or systems. The Company relies on 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 Company manages all
technical, physical and commercial aspects of the performance of the Company
contracts. To date, the Company has not experienced difficulties either in
obtaining fabricated components and other materials and parts or in obtaining
qualified subcontractors for installation work.
PARTS,
REPAIR AND REFURBISHMENT SERVICES
The
Company also provide replacement and spare parts and repair and refurbishment
services for our emission monitoring systems following the expiration of our
warranties which generally range up to 12 months. The Company has experienced
only minimal costs from its warranties.
The
Company’s standard terms of sale disclaim any liability for consequential or
indirect losses or damages stemming from any failure of our products or systems
or any component thereof. The Company seeks indemnification from its
subcontractors for any loss, damage or claim arising from the subcontractors'
failure to perform.
COMPETITION
The
Company faces substantial competition in each of its principal markets. Most
of
its competitors are larger and have greater financial resources than the
Company; several are divisions of multi-national companies. The Company competes
on the basis of price, engineering and technological expertise, know-how and
the
quality of our products, systems and services. Additionally, the Company’s
management believes that the successful performance of the Company’s installed
products and systems is a key factor in gaining business as customers typically
prefer to make significant purchases from a company with a solid performance
history.
We
obtain
virtually all our 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 the engineering and technical expertise of the
bidder.
Several
companies market products that compete directly with our
products. Other companies offer products that potential customers may
consider to be acceptable alternatives to our products and
services. We face direct competition from companies with far greater
financial, technological, manufacturing and personnel resources, including
Thermo Fisher Scientific Inc., Tekran Instruments Corporation, Altech
Environment USA, Shaw Group, and Horiba Instruments Inc. in the emissions
monitoring business.
INTELLECTUAL
PROPERTY
Over
the
years, the Company has developed proprietary technologies that give us 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
has
not filed any patents.
MARKETING
The
Company relies on manufacturing representatives, distributors, direct
salespersons, magazine advertisements, internet advertising, trade shows, trade
directories and catalogue listings to market our products and services. The
Company uses more than eight manufacturing sales representatives in the United
States backed by our senior management and technical professionals. The
Company’s arrangements with independent sales representatives accord each a
defined territory within which to sell some or all of our products and systems,
provide for the payment of agreed-upon sales commissions 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 ongoing liaison function between
us and our customers during the installation phase of our 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 our engineering
personnel. Thereafter, the Company’s sales and engineering personnel jointly
prepare a budget for future planning, a 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 are engaged in refining, power, chemical, mining
and metallurgical processing. Historically, most of our customers have purchased
individual products or systems which, in many instances, operate in conjunction
with products and systems supplied by others. For several years, the Company
has
marketed its products as integrated custom engineered emission monitoring
systems and environmental management solutions. No one single customer accounts
for a large percentage of our annual sales.
On
most
projects, the Company is responsible to its customers for all phases of the
design, assembly, supply and, if included, field installation of its products
and systems. The successful completion of a project is generally determined
by a
successful operational test of the supplied equipment conducted by our field
service technician in the presence of the customer.
TECHNOLOGY
The
Company has developed a broad range of emission monitoring technological base.
The Company’s equipment and instruments are used: (i) to measure particulate,
carbon dioxide, nitrogen oxides, mercury and sulfur dioxide from coal-fired
power plants, (ii) to measure particulate from cement plants, (iii) to measure
hydrocarbons, particulate and sulfur dioxide from refineries, (iv) to measure
hydrogen sulfide, carbon monoxide, ammonia, hydrocarbons and other regulated
pollutants from chemical plants, steel plants, incinerators and other industrial
exhausts. Our emission monitors are capable of meeting all current federal
and
local emission monitoring standards. The Company has not filed any patents
with
respect to its technology.
BONDING
AND INSURANCE
While
only a very few of our contracts require the Company to procure bid and
performance bonds, such requirements are prevalent for large projects or
projects partially or fully funded by federal, state or local governments.
A bid
bond guarantees that a bidder will execute a contract if it is awarded the
job
and a performance bond guarantees performance of the contract. The Company
does
not presently have a bank credit line to back bid or performance bonds. Thus,
the Company cannot bid on certain contracts.
In
certain cases, the Company is able to secure large contracts by accepting
progress payments with retention provisions in lieu of bonds.
The
Company currently maintains different types of insurance, including general
liability and property coverage. The Company does not maintain product liability
insurance with respect to its products and equipment. Management believes that
the insurance coverage that it is adequate for our current business
needs.
GOVERNMENT
REGULATION
Significant
environmental laws, particularly the Federal Clean Air Act, have been enacted
in
response to public concern about the environment. The Company believe that
compliance with and enforcement of these laws and regulations create the demand
for our products and systems and largely determine the level of expenditures
that customers will make to monitor the emissions from their facilities. The
Federal Clean Air Act, initially adopted in 1970 and extensively amended in
1990, requires compliance with ambient air quality standards and empowers the
EPA to establish and enforce limits on the emission of various pollutants from
specific types of industrial facilities. States have primary responsibility
for
implementing these standards, and, in some cases, have adopted more stringent
standards.
The
1990
amendments to the Federal Clean Air Act require, among other matters, reductions
in the emission of sulfur oxides, believed to be the cause of "acid rain,"
in
the emission of 189 identified hazardous air pollutants and toxic substances
and
the installation of equipment and systems which will contain certain named
toxic
substances used in industrial processes in the event of sudden, accidental,
high-volume releases. Such amendments also extend regulatory coverage to many
facilities previously exempt due to their small size and require the EPA to
identify those industries which will be required to install the mandated control
technology for the industry to reduce the emission of hazardous air pollutants
from their respective plants and facilities. The Montreal Protocol, adopted
in
1987, as well as EPA regulations issued in 1992, call for the phase-out of
CFCs.
In addition, regulations promulgated by the EPA in 1993 further limit the
concentration of pollutants, such as hydrogen chloride, sulfur dioxide,
chlorine, heavy metals and hazardous solid substances in the form of extremely
fine dust, from sewage sludge incinerators. Sewage sludge facilities are
required to comply with these regulations. Compliance with all these regulations
can only be achieved by first monitoring the pertinent emission
levels.
EMPLOYEES
The
Company employs 21 full time and three part time employees, consisting of one
executive officer, five managers, ten technical engineers, and five clerical
and
administrative support persons. None of our employees are represented by a
labor
union. In addition, the Company utilizes commission sales personnel and contract
design engineers, on an as needed basis. There are no employment
agreements.
The
Company does not own any real estate.
The
Company leases its principal office at Farmingdale, New York, 4000 square feet
of office and warehouse/shop space in a single story commercial structure on
a
month to month lease from Ducon Technologies Inc., at a monthly rental of
2,157.00. The Company’s subsidiary Griffin Filters LLC leases approx. 10,000 sq.
ft. of office and warehouse space in Liverpool, New York from a third party
in a
five year lease at a monthly rent of $ 4,225.00 expiring on March 30, 2012.
The
Company has no plans to acquire any property in the immediate future. The
Company believes that its current facilities are adequate for its needs through
the next six months, and that, should it be needed, suitable additional space
will be available to accommodate expansion of the Company's operations on
commercially reasonable terms, although there can be no assurance in this
regard. There are no written agreements.
An
Investment in our common stock involves risks. You should carefully consider
the
following risks, as well as the other information contained in this prospectus.
If any of the following risks actually occur, our business could be materially
harmed.
RISKS
RELATED TO OUR BUSINESS
o
We are
substantially dependent
upon
the
success and market acceptance of our technology. The failure of the emissions
monitoring and controls market to develop as we anticipate, would adversely
affect our business
.
The
Company's success is largely dependent on increased market acceptance of our
emission monitoring equipment and control systems.
.
If
acceptance of emissions monitoring equipment does not continue to grow, then
the
Company’s revenues may be significantly reduced
.
o
If
we are
unable to develop new products, our competitors may develop and market products
with better features that may reduce demand for our potential
products
.
The
Company may not be able to introduce any new products or any enhancements to
its
existing products on a timely basis, or at all. In addition, the introduction
by
the Company of any new products could adversely affect the sales of certain
of
its existing products. If the Company's competitors develop innovative emissions
testing technology that are superior to the Company's products or if the Company
fails to accurately anticipate market trends and respond on a timely basis
with
its own innovations, the Company may not achieve sufficient growth in its
revenues to attain profitability.
o
We
have
incurred losses for the fiscal year ending September 30, 2007, and we may incur
losses for the foreseeable future.
We
had
net loss of $123,565 for the fiscal year ended September 30, 2007. These losses
have resulted principally from expenses incurred in the extensive demonstration
testing of its new SM4 compliance mercury monitors at various utility sites
and
the low gross margin product line of Griffin Filters. We may continue to incur
significant expenditures related to research and development, selling and
marketing and general and administrative activities as well as capital
expenditures and anticipate that our expenses and losses may increase in the
foreseeable future as we expand our business. Further, as a public company
we
will also incur significant legal, accounting and other expenses that we did
not
incur as a private company. To achieve profitability, we will need to generate
significant additional revenues with significantly improved gross margins.
It is
uncertain when, if ever, we will return to profitability. Even if we were to
become profitable, we might not be able to sustain or increase profitability
on
a quarterly or annual basis.
o
The
Company faces constant changes in governmental standards by which our products
are evaluated.
The
Company believes that, due to the constant focus on the environment and clean
air standards throughout the world, a requirement in the future to adhere to
new
and more stringent regulations both domestically and abroad is possible as
governmental agencies seek to improve standards required for certification
of
products intended to promote clean air. In the event our products
fail to meet these ever-changing standards, some or all of our products may
become obsolete.
o
The
future
growth of our business depends, in part, on enforcement of existing
emissions-related environmental regulations and further tightening of emission
standards worldwide.
The
Company expects that the future business growth will be driven, in part, by
the
enforcement of existing emissions-related environmental regulations and
tightening of emissions standards worldwide. If such standards do not
continue to become stricter or are loosened or are not enforced by governmental
authorities, it could have a material adverse effect on our business, operating
results, financial condition and long-term prospects.
o
We
may
incur substantial costs enforcing our proprietary information, defending against
third-party patents, invalidating third-party patents or licensing third-party
intellectual property, as a result of litigation or other proceedings relating
to patent and other intellectual property rights
.
The
Company considers its technology and procedures proprietary. In particular,
the
Company depends substantially on its flexibility to develop custom engineered
solutions for various applications and be responsive to customer needs. The
Company has not filed for any patents for its technologies.
The
Company may be notified of claims that it has infringed a third party's
intellectual property. Even if such claims are not valid, they could subject
the
Company to significant costs. In addition, it may be necessary in the future
to
enforce the Company's intellectual property rights to determine the validity
and
scope of the proprietary rights of others. Litigation may also be necessary
to
defend against claims of infringement or invalidity by others. An adverse
outcome in litigation or any similar proceedings could force the Company to
take
actions that could harm its business. These include: (i) ceasing to sell
products that contain allegedly infringing property; (ii) obtaining licenses
to
the relevant intellectual property which the Company may not be able to obtain
on terms that are acceptable, or at all; (iii) indemnifying certain customers
or
strategic partners if it is determined that the Company has infringed upon
or
misappropriated another party's intellectual property; and (iv) redesigning
products that embody allegedly infringing intellectual property. Any of these
results could adversely affect the Company's business, financial condition
and
results of operations. In addition, the cost of defending or asserting any
intellectual property claim, both in legal fees and expenses, and the diversion
of management resources, regardless of whether the claim is valid, could be
significant.
o
Product
defects could cause the Company to incur significant product liability,
warranty, repair and support costs and damage its reputation which would have
a
material adverse effect on its business.
Although
the Company rigorously tests its products, defects may be discovered in future
or existing products. These defects could cause the Company to incur significant
warranty, support and repair costs and divert the attention of its research
and
development personnel. It could also significantly damage the Company's
reputation and relationship with its distributors and customers which would
adversely affect its business. In addition, such defects could result in
personal injury or financial or other damages to customers who may seek damages
with respect to such losses. A product liability claim against the Company,
even
if unsuccessful, would likely be time consuming and costly to defend.
o
The
markets in which we operate are highly competitive, and many of our competitors
have significantly greater resources than we do.
There
is
significant competition among companies that provide emissions monitoring
systems. Several companies market products that compete directly with
our products. Other companies offer products that potential customers
may consider to be acceptable alternatives to our products and
services. We face direct competition from companies with far greater
financial, technological, manufacturing and personnel resources, including
Thermo Fisher Scientific Inc., Tekran Instruments Corporation, Altech
Environment USA, Shaw Group, and Horiba Instruments Inc. in the emissions
monitoring business. Newly developed products could be more effective and cost
efficient than our current or future products. Many of the current
and potential future competitors have substantially more engineering, sales
and
marketing capabilities and broader product lines than we
have.
o
The
Company’s results may fluctuate due to certain regulatory, marketing and
competitive factors over which we have little or no control.
The
factors listed below, some of which we cannot control, may cause our revenue
and
results of operations to fluctuate significantly:
|
·
|
the
existence and
enforcement of government environmental regulations. If these regulations
are not maintained or enforced then the market for Company’s products
could deteriorate;
|
|
·
|
Retaining
and keeping qualified employees and management
personnel;
|
|
·
|
Ability
to upgrade our products to keep up with the changing market place
requirements;
|
|
·
|
Ability
to keep up with our competitors who have much higher resources than
us;
|
|
·
|
Ability
to find sub suppliers and sub contractors to assemble and install
our
products;
|
|
·
|
General
economic conditions of the industry and the ability of potential
customers
to spend money on setting up new industries that require our
products;
|
|
·
|
Ability
to maintain or raise adequate working capital required for the operations
and future growth; and
|
|
·
|
Ability
to retain our CEO and other senior key
personnel.
|
o
The
loss of our senior management and failure to attract and retain qualified
personnel in a competitive labor market could limit our ability to execute
our
growth strategy, resulting a slower rate of growth.
We
depend
on the continued service of our senior management. Due to the nature of our
business, we may have difficulty locating and hiring qualified personnel and
retaining such personnel once hired. The loss of the services of any of our
key
personnel, or our failure to attract and retain other qualified and experienced
personnel on acceptable terms, could limit our ability to execute our growth
strategy resulting in a slower rate of growth.
o
General
economic downturns in general would have a material adverse effect on the
Company's business, operating results and financial condition.
The
Company's operations may in the future experience substantial fluctuations
from
period to period as a consequence of general economic conditions affecting
consumer spending. Therefore, any economic downturns in general would have
a
material adverse effect on the Company's business, operating results and
financial condition.
o
A
demand for payment of the outstanding loan or the conversion into non-assessable
share of common stock of the Company may have an adverse effect on the Company.
On
April
30, 2007, the Company issued a $1,300,000 Convertible Debenture to Arun Govil,
the Company’s Chairman, CEO, President and Treasurer, in conjunction with the
purchase of Griffin Filters, Inc. pursuant to the Agreement and Assignment
of
Membership Interests between Arun Govil and Cemtrex, Inc. The debenture carries
an 8% annual interest rate with interest payable semiannually in arrears on
the
first business day of January and July each year. The debenture principle is
due
and payable on April 30, 2011.
The
debenture has the right of conversion into 30,000,000 non-assessable shares
of
common stock of the Company at $0.001 (par value) per share. Conversion is
not
exercisable prior to December 31, 2007. Commencing December 31, 2007 and
continuing to April 30, 2011, the Debenture Holder shall have the right of
conversion subject o the terms and conditions of the debenture. In the event
the
face amount of the debenture is not fully converted on or before April 30,
2011,
the conversion rights will lapse.
Risks
related to investment in the common stock of the Company
o
We may
need additional funds in the future. We may be unable to obtain additional
funds
or if we obtain financing it may not be on terms favorable to us. You may lose
your entire investment.
Based
on
our current plans, we believe our existing cash and cash equivalents along
with
cash generated from operations will be sufficient to fund our operating expenses
and capital requirements through December 31, 2008, although there is no
assurance of this result, we may need funds in the future. If our capital
resources are insufficient to meet future capital requirements, we will have
to
raise additional funds. If we are unable to obtain additional funds on terms
favorable to us, we may be required to cease or reduce our operating activities.
o
If we
raise additional funds by selling additional shares of our capital stock, the
ownership interests of our stockholders will be diluted.
o
Our
stock trades on the Pink Sheets electronic quotation system.
The
Company’s Common Stock currently trades on the Pink Sheets electronic quotation
system under the symbol “CTEI.PK”. The Pink Sheets is a decentralized market
regulated by the Financial Industry Regulatory Authority in which securities
are
traded via an electronic quotation system. There can be no assurance that a
trading market for the Company's shares will continue to exist in the future,
and there can be no assurance that an active trading market will develop or
be
sustained. The market price of the shares of Common Stock is likely to be highly
volatile and may be significantly affected by factors such as actual or
anticipated fluctuations in the Company's operating results, announcements
of
technological innovations, new products or new contracts by the Company or
its
competitors, developments with respect to proprietary rights, adoption of new
government regulations affecting the environment, general market conditions
and
other factors. In addition, the stock market has from time to time experienced
significant price and volume fluctuations that have particularly affected the
market price for the common stocks of technology companies. These types of
broad
market fluctuations may adversely affect the market price of the Company's
common stock.
See
Risk
Factor “Our stock price may be highly volatile” below.
o
Our
shares of common stock are thinly traded, so stockholders may be unable to
sell
at or near ask prices or at all if they need to sell shares to raise money
or
otherwise desire to liquidate their shares.
Our
common stock has from time to time been “thinly-traded,” meaning that the number
of persons interested in purchasing our common stock at or near ask prices
at
any given time may be relatively small or non-existent. This situation is
attributable to a number of factors, including the fact that we are a small
company that is relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community that generate
or
influence sales volume, and that even if we came to the attention of such
persons, they tend to be risk-averse and would be reluctant to follow an
unproven company such as ours or purchase or recommend the purchase of our
shares until such time as we become more seasoned and viable. As a consequence,
there may be periods of several days or more when trading activity in our shares
is minimal or non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support continuous
sales without an adverse effect on share price. We cannot give stockholders
any
assurance that a broader or more active public trading market for our common
shares will develop or be sustained, or that current trading levels will be
sustained.
o
Our
common stock will be subject to “penny stock” rules which may be detrimental to
investors.
If
our
common stock is not listed on a national exchange or market, the trading market
for our common stock may become illiquid. Our common stock trades on the
over-the-counter electronic bulletin board and, therefore, is subject to the
requirements of certain rules promulgated under the Securities Exchange Act
of
1934, which require additional disclosure by broker-dealers in connection with
any trades involving a stock defined as a "penny stock". The Securities and
Exchange Commission has adopted regulations which generally define "penny stock"
to be any equity security that has a market price (as defined) of less than
$5.00 per share or an exercise price of less than $5.00 per share. The
securities will become subject to rules that impose additional sales practice
requirements on broker-dealers who sell such securities. For transactions
covered by these rules, the broker-dealer must make a special suitability
determination for the purchaser of such securities and have received the
purchaser's written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the transaction, of a disclosure schedule
prepared by the Securities and Exchange Commission relating to the penny stock
market. The broker-dealer also must disclose the commissions payable to both
the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market-maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, among other requirements, monthly statements must be sent
disclosing recent price information for the penny stock held in the account
and
information on the limited market in penny stocks. Consequently, the "penny
stock" rules may restrict the ability of purchasers in this offering to sell
the
Common Stock offered hereby in the secondary market.
o
We do
not anticipate paying any dividends.
No
dividends have been paid on the common stock of the Company. The Company does
not intend to pay cash dividends on its common stock in the foreseeable future,
and anticipates that profits, if any, received from operations will be devoted
to the Company's future operations. Any decision to pay dividends will depend
upon the Company's profitability at the time, cash available and other relevant
factors.
o
Our
stock price may be highly volatile.
The
market price of our common stock, like that of many other technology companies,
has been highly volatile and may continue to be so in the future due to a wide
variety of factors, including:
|
·
|
announcements
of technological innovations by us, our collaborative partners or
our
present or potential competitors;
|
|
·
|
our
quarterly operating results and performance;
|
|
·
|
developments
or disputes concerning patents or other proprietary
rights;
|
|
·
|
litigation
and government proceedings;
|
|
·
|
changes
in government regulations;
|
|
·
|
economic
and other external factors; and
|
|
·
|
general
market conditions.
|
In
addition, potential dilutive effects of future sales of shares of common stock
by shareholders
and
by
the Company could have an adverse effect on the market price of our
shares.
o
Our
principal shareholder has significant influence over our company which could
make it impossible for the public stockholders to influence the affairs of
the
Company.
Approximately
74% of our outstanding voting capital stock is beneficially held by Arun Govil
the Company’s Chairman, Chief executive officer, President and Treasurer. In
addition, Mr. Govil holds a promissory note that may be convertible into
30,000,000 shares of common stock of the Company at his option. Consequently,
Mr. Govil will be able to control substantially all matters requiring approval
by the stockholders of the Company, including the election of all directors
and
approval of significant corporate transactions. This could make it impossible
for the public stockholders to influence the affairs of the Company.
The
following discussion of the financial condition and plan of operations contains
forward-looking statements that involve risks and uncertainties. Please see
“Risk Factors” and Forward-Looking Statements” elsewhere in this registration
statement.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ON PLAN OF OPERATION
The
following discussion of our financial condition and plan of operations should
be
read in conjunction with the consolidated financial statements and the notes
to
those statements included elsewhere in this prospectus. This discussion includes
forward-looking statements that involve risks and uncertainties. As a result
of
many factors, such as those set forth under "risk factors" and elsewhere in
this
prospectus, our actual results may differ materially from those anticipated
in
these forward-looking statements.
OVERVIEW
Cemtrex
is a full-range of emission monitoring and air filtration Products Company
engaged in designing, manufacturing and marketing emissions monitors and air
filtration products and providing certain services for green house gases carbon
credit generation projects. Our focus has evolved from expansion through
acquisition to increasing the market share of products more effectively in
the
marketplace
Financial
condition
The
following table sets forth selected historical consolidated financial data
from
our consolidated financial statements and should be read in conjunction with
our
consolidated financial statements including the related notes and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” which
are included below.
|
|
Year Ended September 30,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
3,533,621
|
|
$
|
724,209
|
|
Operating
Expenses
|
|
$
|
1,253,417
|
|
|
444,718
|
|
Net
Income (Loss)
|
|
|
($
123,565
|
)
|
$
|
2,222
|
|
Net
Income Per Common Share, Basic and Diluted
|
|
$
|
0.0002
|
|
$
|
0.0001
|
|
Weighted
Average Number of Shares
|
|
|
24,024,912
|
|
|
6,584,323
|
|
|
|
September 30,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Current
Assets
|
|
$
|
1,180,972
|
|
$
|
332,451
|
|
Total
Assets
|
|
$
|
4,238,532
|
|
$
|
607,333
|
|
|
|
$
|
2,758,046
|
|
$
|
131,782
|
|
Total
Stockholders' Equity
|
|
$
|
1,480,486
|
|
$
|
475,551
|
|
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
The
following discussion and analysis is based upon our consolidated financial
statements which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of our
financial statements requires management to make estimates and assumptions
that
affect the reported amounts of revenues and expenses, and assets and liabilities
during the periods reported. Estimates are used when accounting for certain
items such as revenues, allowances for returns, early payment discounts,
customer discounts, doubtful accounts, employee compensation programs,
depreciation and amortization periods, taxes, inventory values, and valuations
of investments, goodwill, other intangible assets and long-lived assets. We
base
our estimates on historical experience, where applicable and other assumptions
that we believe are reasonable under the circumstances. Actual results may
differ from our estimates under different assumptions or conditions. We believe
that the following critical accounting policies affect our more significant
judgments and estimates used in preparation of our consolidated financial
statements.
We
maintain allowances for doubtful accounts for estimated losses resulting from
the inability of our customers to make required payments. We base our estimates
on the aging of our accounts receivable balances and our historical write-off
experience, net of recoveries.
We
value
our inventories at the lower of cost or market. We write down inventory balances
for estimated obsolescence or unmarketable inventory equal to the difference
between the cost of the inventory and the estimated market value based upon
assumptions about future demand and market conditions.
Goodwill
is reviewed for possible impairment at least annually or more frequently upon
the occurrence of an event or when circumstances indicate that the Company’s
carrying amount is greater than the fair value. In accordance with SFAS 142,
the
Company examined goodwill for impairment and determined that the Company’s
carrying amount did not exceed the fair value, thus, there was no impairment.
Generally,
sales are recognized when shipments are made to customers. Rebates, allowances
for damaged goods and other advertising and marketing program rebates are
accrued pursuant to contractual provisions and included in accrued expenses.
Certain amount of our revenues fall under the percentage-of-completion method
of
accounting used for long-term contracts. Under this method, sales and gross
profit are recognized as work is performed based on the relationship between
actual costs incurred and total estimated costs at completion. Sales and gross
profit are adjusted prospectively for revisions in estimated total contract
costs and contract values. Estimated losses are recorded when identified.
|
Net
Sales:
Net
sales for 2007 increased by $2,809,412 or 388%, to $3,533,621,
from
$724,209 for 2006. Sales growth increased during the year of 2007
primarily due to the acquisition of Griffin Filters in April 2007.
The
overall market demand for our existing business increased during
the last
year.
|
|
|
|
Gross
Profit
:
Gross profit for 2007 increased $721,972 or 161%, to $1,169,344
which made
up 33.1% of net sales, from $447,372 for 2006, which made up 61.8%
of net
sales. The lower gross margin in 2007 was a direct result of the
low gross
margin product line of Griffin Filters. In addition, gross profit
in the
existing product line decreased due to the extensive demonstration
testing
of its new SM4 compliance mercury monitors at various utility sites.
|
|
Operating
Expenses:
Operating
expenses for 2007 increased $808,699, or 182%, to $1,253,417 from
$444,718
in 2006. Operating expenses as a percentage of sales decreased
in 2007 to
35.5% from 61.4% in 2006. The decrease in operating expenses was
primarily
due to acquisition of Griffin Filters and having a larger sales
volume in
relation to the same operating expenses for the existing product
line.
|
|
|
Net
Income/Loss:
The
Company had a
net
loss of ($123, 565) for 2007 as compared to a net income of $2,222
for
2006. The net loss in 2007 was a result of several factors including:
(i)
increased expenses in demonstration testing of the new SM4 mercury
product
line, (ii) low bookings and sales of the acquired business of griffin
Filters.
|
|
|
Provision
for Income Taxes:
Our
effective state and federal tax rate, adjusted for the effect of
certain
credits and adjustments, was approximately 38% and 38% for 2007
and 2006,
respectively.
|
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.
Working
capital was ($277,074) at September 30, 2007, compared to $200,669 at September
30, 2006. This included cash and cash equivalents of $143,830 and $29,279 at
September 30, 2007 and 2006, respectively. The reason for the decrease in
working capital was the acquisition of Griffin Filters and the cash flow of
certain ongoing projects at Griffin Filters where by costs have been incurred
prior to shipping and recognizing the related sale revenue.
Trade
receivables increased $567,457, or 266% at September 30, 2007 to $780,474 at
September 30, 2007 from $213,017 at September 30, 2006. The increase in accounts
receivable is attributable to receivables of Griffin Filters.
Inventories
increased $177,512 or 237% to $252,443 at September 30, 2007 from $74,931 at
September 30, 2006. The increase inventory was due to acquisition of Griffin
Filters.
Continuing
operations used $443,017 of cash in 2007, compared to generating $4,343 of
cash
in 2006. The decrease in cash flows was primarily related to the increase in
inventory combined with increase in accounts payable. Investing activities
for
continuing operations used $2,765,949 of cash during 2007, compared to no
activity during 2006. The use of cash by investing activities was primarily
attributable to the purchase of griffin Filters in April, 2007. The financing
activities in 2007 generated $2,437,483 in cash from issuance of convertible
debenture in the amount of $1,300,000 and sale of common stock in the amount
of
$1,128,500.
We
believe that our cash on hand, cash generated by operations, is sufficient
to
meet the capital demands of our current operations during the 2008 fiscal year.
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.
Outlook
We
anticipate that the outlook for our products and services remains quite strong
and we are positioned well to take advantage of it.
We
believe there is currently a gradually increasing public awareness of the issues
surrounding air quality and that this trend will continue for the next several
years. We also believe there is an increase in public concern regarding the
effects of air quality on society and future generations, as well as an increase
in interest by standards-making bodies in creating specifications and techniques
for detecting, defining and solving air quality problems. As a result, we
believe there will be an increase in interest in our mercury monitors, opacity
monitors, carbon credits and air filtration products of subsidiary Griffin
Filters.
This
Outlook section, and other portions of this document, include certain
“forward-looking statements” within the meaning of that term in Section 27A of
the Securities Act of 1933, and Section 21E of the Securities Exchange Act
of
1934, including, among others, those statements preceded by, following or
including the words “believe,” “expect,” “intend,” “anticipate” or similar
expressions. These forward-looking statements are based largely on the current
expectations of management and are subject to a number of assumptions, risks
and
uncertainties. Our actual results could differ materially from these
forward-looking statements. Important factors to consider in evaluating such
forward-looking statements include those discussed in Item 1A. Risk Factors
as
well as:
|
|
|
|
•
|
the
shortage of reliable market data regarding the emission monitoring
&
air filtration market,
|
|
|
|
|
•
|
changes
in external competitive market factors or in our internal budgeting
process which might impact trends in our results of operations,
|
|
|
|
|
•
|
anticipated
working capital or other cash requirements,
|
|
|
|
|
•
|
changes
in our business strategy or an inability to execute our strategy
due to
unanticipated changes in the market,
|
|
|
|
|
•
|
product
obsolescence due to the development of new technologies, and
|
|
|
|
|
•
|
Various
competitive factors that may prevent us from competing successfully
in the
marketplace.
|
In
light
of these risks and uncertainties, there can be no assurance that the events
contemplated by the forward-looking statements contained in this Form 10/A
will
in fact occur.
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market
Risk
|
We
are
exposed to various market risks, primarily changes in interest rates. Market
risk is the potential loss arising from adverse change in market rates and
prices, such as foreign currency exchange and interest rates. For Cemtrex,
these
exposures are primarily related to changes in interest rates. We do not hold
any
derivatives or other financial instruments for trading or speculative purposes.
The
Company’s financial position is not materially affected by fluctuations in
currencies against the U.S. dollar, since there are no assets held outside
the
United States. Risks due to changes in foreign currency exchange rates are
negligible, as the preponderance of our foreign sales occur over short periods
of time or are demarcated in U.S. dollars.
The
Company does not own any real estate.
The
Company leases its principal office at Farmingdale, New York, 4000 square feet
of office and warehouse/shop space in a single story commercial structure on
a
month to month lease from Ducon Technologies Inc., at a monthly rental of
2,157.00. The Company’s subsidiary Griffin Filters LLC leases approx. 10,000 sq.
ft. of office and warehouse space in Liverpool, New York from a third party
in a
five year lease at a monthly rent of $ 4,225.00 expiring on March 30, 2012.
The
Company has no plans to acquire any property in the immediate future. The
Company believes that its current facilities are adequate for its needs through
the next six months, and that, should it be needed, suitable additional space
will be available to accommodate expansion of the Company's operations on
commercially reasonable terms, although there can be no assurance in this
regard. There are no written agreements.
ITEM
4
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
|
The
following table sets forth certain information known to us with respect to
the
beneficial ownership of our common stock as of March 31, 2008 by:
o
all
persons who are beneficial owners of five percent (5%) or more of our common
stock;
o
each of
our directors;
o
each of
our executive officers; and
o
all
current directors and executive officers as a group.
Except
as
otherwise indicated, and subject to applicable community property laws, the
persons named in the table below have sole voting and investment power with
respect to all shares of common stock held by them.
As
of
January 31, 2008, 34,327,862 shares of common stock are issued and outstanding.
Applicable percentage ownership in the following table is based on
64,327,862
shares
of
common stock outstanding as of January 31, 2008 which includes shares underlying
a convertible debenture held by Mr. Govil, the President ,Chief Executive
Officer and Chairman of the Board of the Company.
(1)
Beneficial
ownership is determined in accordance with the rules of the SEC. In computing
the number of shares beneficially owned by a person and the percentage ownership
of that person, shares of common stock subject to options held by that person
that are currently exercisable or exercisable within 60 days of January 31,
2008
are deemed outstanding. Such shares, however, are not deemed outstanding for
the
purpose of computing the percentage ownership of any other person.
|
|
Name and Address of
Owner
|
|
Title
|
|
Amount Owned
Before Offering
|
|
Percentage of Issued
Common Stock
(1)
|
|
Common
Stock
|
|
|
Arun
Govil
19
Engineers Lane
Farmingdale,
New York 11735
|
|
|
President
,Chief Executive Officer and Chairman of the Board
|
|
|
55,430,000
|
(2)(3)
|
|
86.2
|
%
|
Common
Stock
|
|
|
Renato
Dela Rama
19
Engineers Lane
Farmingdale,
New York 11735
|
|
|
Vice
President
|
|
|
0
|
|
|
0
|
|
Common
Stock
|
|
|
Vandana
Govil
19
Engineers Lane
Farmingdale,
New York 11735
|
|
|
Secretary,
Director
|
|
|
55,430,000
|
(2)(3)(4)
|
|
86.2
|
%
|
Common
Stock
|
|
|
All
directors and executive officers as a group (3 persons
)
|
|
|
|
|
|
55,430,000
|
|
|
86.2
|
%
|
|
(1)
|
Except
as otherwise noted herein, the percentage is determined on the basis
of
64,327,862 shares of our common stock outstanding plus securities
deemed
outstanding pursuant to Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Under
Rule 13d-3, a person is deemed to be a beneficial owner of any
security owned by certain family members and any security of which
that
person has the right to acquire beneficial ownership within 60 days,
including, without limitation, shares of our common stock subject
to
currently exercisable options.
|
|
(2)
|
Includes
the shares underlying the Convertible Debenture issued by the Company
to
Arun Govil the Company’s Chairman, CEO, President and Treasurer in
conjunction with the purchase of Griffin Filters, Inc. The debenture
has
the right of conversion into 30,000,000 non-assessable shares of
common
stock of the Company at $0.001 (par value) per share. The Debenture
Holder
has the right of conversion, subject to the terms and conditions
of the
debenture, commencing December 31, 2007 and continuing to April 30,
2011,
thus Arun Govil has the right to convert the 30,000,000 non-assessable
shares of common stock of the Company within 60 days. In the event
the face amount of the debenture is not fully converted on or before
April
30, 2011, the conversion rights will
lapse.
|
|
(3)
|
Includes
the shares owned by Ducon Technologies Inc. Duncon Technologies,
Inc. is
owned by Texxar Inc. a private corporation. The principal of Texxar,
Inc.
is Arun Govil the Chairman, Chief Executive Officer, Treasurer and
President of the Company.
|
|
(4)
|
Vanana
Govil is the spouse of Arun Govil, the President, Chief Executive
Officer
and Chairman of the Board of the Company and his shares are attributed
to
Ms. Govil.
|
ITEM
5
|
DIRECTORS
AND EXECUTIVE OFFICERS
|
The
following persons are our executive officers and directors. Directors are
elected to hold offices until the next annual meeting of Shareholders and until
their successors are elected or appointed and qualified. Officers are appointed
by the board of directors until a successor is elected and qualified or until
resignation, removal or death.
Name
and Address
|
|
Age
|
|
Positions
and Offices
|
|
|
|
|
|
Arun
Govil
19
Engineers Lane
Farmingdale,
New York 11735
|
|
51
|
|
President,
Chief Executive Officer, Treasurer, and Chairman of the Board of
Directors
|
|
|
|
|
|
Renato
Dela Rama
19
Engineers Lane
Farmingdale,
New York 11735
|
|
58
|
|
Vice
President of Finance
|
|
|
|
|
|
Vandana
Govil
19
Engineers Lane
Farmingdale,
New York 11735
|
|
46
|
|
Secretary
and Director
|
Arun
Govil has been our President since December 2004. Mr. Govil is also President
of
Ducon Technologies Inc., a privately held company engaged in air pollution
Control systems business since 1996. Prior to 1996 Mr. Govil, Mr. Govil worked
at various management and technical positions in the environmental industry.
Mr.
Govil holds a B.E. degree in Chemical Engineering and a M.B.A. in Finance.
He is
also a licensed Professional Engineer in New York State and New
Jersey.
Renato
Dela Rama has been our Vice President of Finance since December 2004. Mr. Dela
Rama is also the Controller of Ducon Technologies Inc. since 2004. Prior to
that
he worked in various accounting and financial management positions. Mr. Dela
Rama holds a B.S. degree in accounting.
Vandana
Govil has served as secretary and Director of the Company since December 2004.
Ms. Govil earned her B.S. in accounting and economics from State University
of
New York at Old Westbury in 2000. From 1987 to 1995, Ms. Govil was a realtor.
Arun Govil and Vandana Govil are husband and wife.
Except
for Mr. and Mrs. Govil, there are no family relationships among our directors
and officers. None of our directors or officers is a director in any other
reporting companies. None of our directors or officers has been affiliated
with
any company that has filed for bankruptcy within the last five
years.
The
Company is not aware of any proceedings to which any of the Company’s officers
or directors, or any associate of any such officer or director, is a party
adverse to the Company or any of the Company’s subsidiaries or has a material
interest adverse to it or any of its subsidiaries.
Each
director of the Company serves for a term of one year or until the successor
is
elected at the Company's annual shareholders' meeting and is qualified, subject
to removal by the Company's shareholders. Each officer serves, at the pleasure
of the board of directors, for a term of one year and until the successor is
elected at the annual meeting of the board of directors and is qualified.
The
Board
of Directors has not established an audit committee and does not have an audit
committee financial expert. The Board is of the opinion that an audit committee
is not necessary since the company has only two directors to date and such
directors have been performing the functions of an audit committee
The
business address for each of our officers and directors is 19 Engineers Lane,
Farmingdale, NY 11735
.
ITEM
6
|
EXECUTIVE
COMPENSATION
|
BOARD
OF DIRECTORS
All
of
our directors hold office until the next annual meeting of stockholders and
the
election and qualification of their successors. Our executive officers are
elected annually by the board of directors to hold office until the first
meeting of the board following the next annual meeting of stockholders and
until
their successors are chosen and qualified.
We
reimburse our directors for expenses incurred in connection with attending
board
meetings but we do not pay our directors fees or other cash compensation for
services rendered as a director.
EXECUTIVE
COMPENSATION
The
compensation discussion addresses all compensation awarded to, earned by, or
paid to the Cemtrex's named executive officers. As of March 31, 2007, two of
our
executive officers are currently earning compensation. Set forth below is the
aggregate compensation for services rendered in all capacities to us during
our
fiscal years ended September 30, 2004, 2005 and 2006 by our executive officers.
Except as indicated below, none of our executive officers were compensated
in
excess of $100,000.
|
|
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM
|
|
NAME AND PRINCIPAL
|
|
ANNUAL COMPENSATION TABLE
|
|
COMPENSATION AWARDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SECURITIES UNDERLYING
|
|
POSITION
|
|
YEAR
|
|
SALARY
|
|
BONUS
|
|
OTHER
|
|
OPTIONS/SARS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arun
Govil
|
|
|
2006
|
|
$
|
|
|
|
—
|
|
|
|
|
|
|
|
Chairman,
Chief Executive
Officer
and Treasurer and
President
|
|
|
2007
|
|
$
|
125,000
|
|
$
|
000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vandana
Govil
|
|
|
2006
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Secretary,
Director
|
|
|
2007
|
|
$
|
125,000
|
|
$
|
000
|
|
|
|
|
|
|
|
On
April
30, 2007, the Company issued a $1,300,000 Convertible Debenture to Arun Govil
the Company’s Chairman, CEO, President and Treasurer in conjunction with the
purchase of Griffin Filters, Inc. pursuant to the Agreement and Assignment
of
Membership Interests between Arun Govil and Cemtrex, Inc. The debenture carries
an 8% annual interest rate with interest payable semiannually in arrears on
the
first business day of January and July each year. The debenture principle is
due
and payable on April 30, 2011.
The
debenture has the right of conversion into 30,000,000 non-assessable shares
of
common stock of the Company at $0.001 (par value) per share. Conversion is
not
exercisable prior to December 31, 2007. Commencing December 31, 2007 and
continuing to April 30, 2011, the Debenture Holder shall have the right of
conversion subject to the terms and conditions of the debenture. In the event
the face amount of the debenture is not fully converted on or before April
30,
2011, the conversion rights will lapse.
AGGREGATED
OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION/SAR VALUES
None.
ITEM
7
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
On
December 30, 2004, the Company purchased certain assets from Ducon Technologies,
Inc., which related to a business engaged in designing, assembling, selling
and
maintaining emission monitors to utilities and industries. Ducon Technologies
Inc. is owned by Texxar Inc. a private corporation. The sole owner of Texxar,
Inc. is Arun Govil, the Chairman, Chief Executive Officer, Treasurer and
President of the Company. In consideration for the asset purchase, the Company
issued to Ducon Technologies, Inc. 3,250,000 shares of its common stock. The
shares were issued under Section 4(2) of the Securities Act of 1933, as amended,
and/or Regulation D promulgated by the Securities and Exchange Commission.
On
April
30, 2007, the Company purchased all of the issued and outstanding membership
interests of Griffin Filters LLC, (“Griffin”) a company established since 1971
and engaged in the design, engineering & supplying of industrial air
filtration equipment from its President. Arun Govil, the Chairman, Chief
Executive Officer, Treasurer and President of the Company, was the owner of
100%
of the issued and outstanding membership interests of Griffin. The Company
purchased 100% ownership in Griffin for a purchase price of $ 2,750,000.00.
The
Company completed the Griffin purchase by (i) paying cash of $700,000.00, (ii)
issuing 20,000,000 shares of common stock valued at $750,000.00 and (iii)
issuing a four year convertible debenture in the amount of $1,300,000.00, paying
interest of 8.0% per year and convertible into 30,000,000 shares of common
stock. Griffin had sales and net income of $3,297,409 and $145, 981 respectively
for fiscal year ended September 30, 2006. Griffin is now a wholly-owned
subsidiary of the Company.
Ducon
Technologies, Inc. is owned by Texxar Inc. a private corporation. Texxar Inc.
is
100% owned by Arun Govil the Chairman, Chief Executive Officer, Treasurer and
President of the Company.
Renato
Dela Rama the Vice President of Finance of the Company is also the Controller
of
Ducon Technologies Inc.
Mrs.
Vandana Govil, a director and the Secretary of the Company is the wife of Arun
Gonvil the Chairman, Chief Executive Officer, Treasurer and President of the
Company.
The
Company is not currently a party to any material legal action.
ITEM
9
|
MARKET
PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
|
On
January 31, 2008, there were 34,327,862
s
hares
of
common stock issued and outstanding and no shares of preferred stock issued
or
outstanding.
APPROXIMATE
NUMBER OF COMMON STOCK HOLDERS
As
of
January 31, 2008, there were approximately 84 holders of record of the Company's
common stock as determined from the Company’s transfer agent’s list. Such list
does not include beneficial owners of securities whose shares are held in the
names of various dealers and clearing agencies.
Of
the
34,327,862
shares
of
common stock outstanding, 25,430,000 shares of common stock are beneficially
held by "affiliates" of the company.
As
of
January 31, 2008, there is a convertible debenture of value $1,300,000
outstanding that are convertible into 30,000,000 shares of our common stock.
Under
certain circumstances, restricted shares may be sold without registration,
pursuant to the provisions of rule 144. In general Rule 144 permits the sale
of
restricted securities without any quantity limitations by a person who is not
an
affiliate of ours and has satisfied a six month holding period under certain
circumstances (including the requirement that the Company has been subject
to
the reporting requirements of the Securities Act of 1934, as amended, for a
period of one year, and the Company is current with respect to such reporting
requirements). Any sales of shares by shareholders pursuant to rule 144 may
have
a depressive effect on the price of our common stock.
DETERMINATION
OF OFFERING PRICE
The
Company’s common stock currently trades on the pink sheets under the symbol:
CTEI.pk.
As
of
January 31, 2008, there were approximately 84 holders of record of the Company's
common stock as determined from the Company’s transfer agent’s list. Such list
does not include beneficial owners of securities whose shares are held in the
names of various dealers and clearing agencies.
No
shares
are being sold with this registration statement.
On
August
21, 2007 the Company completed a 1:25 reverse split of our common stock. The
Company is authorized to issue 60,000,000 shares of common stock, $0.001 par
value per share. On April 10, 2008, there were
34,327,861
s
hares
of
common stock issued and outstanding and no shares of preferred stock issued
or
outstanding.
The
Company's Common Stock trades on the over-the-counter Pink Sheets. The price
ranges presented below represent the highest and lowest quoted bid prices during
the third and fourth quarter for 2006 and the first and second quarters of
2007
reported by Pink Sheets. The quotes represent prices between dealers and do
not
reflect mark-ups, markdowns or commissions and therefore may not necessarily
represent actual transactions.
Common
Stock
Year
|
|
Period
|
|
Stock Price
|
|
|
|
|
|
High
|
|
Low
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
3
rd
Quarter
|
|
$
|
0.80
|
|
$
|
0.70
|
|
|
|
|
4
th
Quarter
|
|
$
|
0.75
|
|
$
|
0.19
|
|
2007
|
|
|
1
st
Quarter
|
|
$
|
0.25
|
|
$
|
0.12
|
|
|
|
|
2
nd
Quarter
|
|
$
|
0.11
|
|
$
|
0.03
|
|
|
|
|
3
rd
Quarter
|
|
$
|
0.03
|
|
$
|
0.02
|
|
|
|
|
4
th
Quarter
|
|
$
|
0.01
|
|
$
|
0.005
|
|
As
reported by the over-the-counter Pink Sheets, on April 8, 2008 the closing
sales
price of the Company’s Common Stock was $0.006 per share.
We
will
bear all expenses in connection with the registration.
ITEM
10
|
RECENT
SALES OF UNREGISTERED
SECURITIES
|
Names/Identities of Persons
to
whom Securities Issued
|
|
Title of
Security
|
|
Amount of
Securities Issued
|
|
Issue Date
|
|
Aggregate
Price
of
Security ($)
|
|
Mazuma
Corp.
|
|
Common
|
|
|
300,000
|
|
|
9/25/2006
|
|
|
50,000
|
|
Mazuma
Corp.
|
|
Common
|
|
|
280,000
|
|
|
11/15/2006
|
|
|
25,000
|
|
Mazuma
Corp.
|
|
Common
|
|
|
280,000
|
|
|
12/1/2006
|
|
|
25,000
|
|
Mazuma
Corp.
|
|
Common
|
|
|
400,000
|
|
|
12/12/2006
|
|
|
25,000
|
|
Mazuma
Corp.
|
|
Common
|
|
|
363,636
|
|
|
1/12/2007
|
|
|
25,000
|
|
Mazuma
Corp.
|
|
Common
|
|
|
400,000
|
|
|
1/22/2007
|
|
|
20,000
|
|
Mazuma
Corp.
|
|
Common
|
|
|
400,000
|
|
|
2/2/2007
|
|
|
30,000
|
|
Mazuma
Corp.
|
|
Common
|
|
|
400,000
|
|
|
2/12/2007
|
|
|
27,500
|
|
Mazuma
Corp.
|
|
Common
|
|
|
800,000
|
|
|
3/5/2007
|
|
|
40,000
|
|
Mazuma
Corp.
|
|
Common
|
|
|
457,143
|
|
|
3/27/2007
|
|
|
20,000
|
|
Mazuma
Corp.
|
|
Common
|
|
|
800,000
|
|
|
4/25/2007
|
|
|
26,000
|
|
Prye
Funding Corp.
|
|
Common
|
|
|
789,091
|
|
|
5/3/2007
|
|
|
25,000
|
|
*Arun
Govil
|
|
Common
|
|
|
20,000,000
|
|
|
4/19/2007
|
|
|
750,000
|
|
Mazuma
Corp.
|
|
Common
|
|
|
1,777,778
|
|
|
5/16/2007
|
|
|
40,000
|
|
The
transactions described above (other than the transaction marked with an “*”)
were exempt from registration pursuant to Section 3(b) of the Securities Act
of
1933, as amended, and Rule 504 of Regulation D promulgated thereunder.
The
transaction marked with an “*” to Mr. Govil, the Company’s President, Chief
Executive Officer, Treasurer, and Chairman of the Board of Directors, was exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933 by
reason that: (i) no commissions were paid for the issuance of security; (ii)
the
issuance of such security by the Company did not involve a "public offering";
(iii) the purchaser was sophisticated and accredited investors; (iv) the
offerings were not a "public offering" as defined in Section 4(2) due to the
insubstantial numbers of persons involved in such sales, size of the offering,
manner of the offering and number of securities offered; and (v) in addition,
the purchaser had the necessary investment intent as required by Section 4(2)
since the purchaser agreed to and received security bearing a legend stating
that such security is restricted pursuant to Rule 144 of the 1933 Securities
Act. (These restrictions ensure that this security would not be immediately
redistributed into the market and therefore not be part of a "public
offering").
Authorized
Capital Stock
On
August
21, 2007 the Company completed a 1:25 reverse split of our common
stock.
The
Company is authorized to issue 60,000,000 shares of common stock, $0.001 par
value per share. On April 10, 2008, there were
34,327,861
s
hares
of
common stock issued and outstanding and no shares of preferred stock issued
or
outstanding.
Our
Common Stock
Holders
of our common stock are entitled to one vote for each share held of record
on
all matters to be submitted to a vote of the stockholders and do not have
pre-emptive rights. Cumulative voting is not permitted. This means that the
holders of shares entitled to exercise more than 50% of the voting rights in
the
election of directors, for example, will be able to elect all of our directors.
The
holders of our common stock are entitled to dividends and other distributions
as
and if declared by our board of directors out of funds legally available
therefor. All outstanding shares of our common stock are, and the shares to
be
issued in the merger will be, when issued pursuant to the merger agreement,
fully paid and nonassessable. Upon our liquidation, dissolution or winding
up,
the holders of our common stock would be entitled to share pro rata in the
distribution of all of our assets, if any, remaining after payment or provision
for payment of all our debts and obligations and preferred liquidation payments,
if any, to holders of any outstanding shares of preferred stock. Shares of
our
common stock are not subject to any redemption provisions and are not
convertible into any other security or other property of us. No share of our
common stock is subject to any call or assessment.
Certain
Provisions of Our Certificate of Incorporation and Delaware
Law
No
Classified Board of Directors.
Our
Certificate of Incorporation and Bylaws provide for our directors to be elected
annually for a term of one year.
Advance
Notice Provisions for Stockholder Proposals and Stockholder Nominations of
Directors.
Our
Certificate of Incorporation provides that at an annual meeting of stockholders,
only such business will be conducted as will have been properly brought before
the meeting. To be properly brought before an annual meeting, business must
be
(a) specified in the notice of such meeting (or any supplement thereof,
given by or at the direction of the board of directors of us),
(b) otherwise properly brought before the meeting by or at the direction of
the board of directors of us, or (c) otherwise properly brought before the
meeting by a stockholder. For business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice thereto
in writing to our Secretary.
Delaware
Takeover Statute
.
We are
subject to Section 203 of the
Delaware
General
Corporation Law which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any of a broad range of business combinations
with
any “interested stockholder” for a period of three years following the date that
such stockholder became an interested stockholder, unless:
|
•
|
|
before
that date, our board of directors has approved either the business
combination or the transaction which resulted in the stockholder
becoming
an interested stockholder;
|
|
•
|
|
upon
consummation of the transaction which resulted in the stockholder
becoming
an “interested stockholder,” the interested stockholder owned at least 85%
of our voting stock outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares outstanding
those shares owned:
|
|
•
|
|
by
persons who are directors and also officers; and
|
|
•
|
|
by
employee stock plans in which employee participants do not have
the right
to determine confidentially whether shares held subject to the
plan will
be tendered in a tender or exchange offer; or
|
|
•
|
|
on
or after such date, the business combination is approved by our
board of
directors and authorized at an annual or special meeting of stockholders,
and not by written consent, by the affirmative vote of at least
66-2/3% of
the outstanding voting stock which is not owned by the interested
stockholder.
|
An
“interested stockholder” is defined as any person that is (a) the owner of
15% or more of the outstanding voting stock of the corporation or (b) an
affiliate or associate of the corporation and was the owner of 15% or more
of
our outstanding voting stock at any time within the three-year period
immediately prior to the date on which it is sought to be determined whether
such person is an interested stockholder.
Transfer
Agent and Registrar
The
transfer agent and registrar for our common stock is First American Stock
Transfer Company, 706 E. Bell Road, Suite 202, Phoenix, AZ 85022. Telephone
number:
(602)485-1346.
ITEM
12
|
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
|
Cemtrex,
as a Delaware corporation, are empowered by the Delaware General Corporation
Law
(“DGCL”), subject to the procedures and limitations stated therein, to indemnify
any person against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person
in
connection with any threatened, pending or completed action, suit or proceeding
in which such person is made a party by reason of his being or having been
our
director, officer, employee or agent. The statute provides that indemnification
pursuant to its provisions is not exclusive of other rights of indemnification
to which a person may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors, or otherwise. Cemtrex pursuant to
the
DGCL indemnifies a director, provided that such indemnity shall not apply on
account of:
(a)
any
breach of the director's duty of loyalty to us or our stockholders;
(b)
acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; or
(c) unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in the DGCL.
Our
Bylaws provide that we will indemnify our officers and directors for costs
and
expenses incurred in connection with the defense of actions, suits, or
proceedings against them on account of their being or having been directors
or
officers of Cemtrex, absent a finding of negligence or misconduct in office.
Our
Bylaws also permit us to maintain insurance on behalf of our officers,
directors, employees and agents against any liability asserted against and
incurred by that person whether or not we have the power to indemnify such
person against liability for any of those acts.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to directors, officers, or persons controlling us pursuant to
the
foregoing provisions, we have been informed that, in the opinion of the SEC,
that type of indemnification is against public policy as expressed in the Act
and is therefore unenforceable.
ITEM
13
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY
DATA
|
The
financial statements required to be included in this registration statement
appear at the end of the registration statement beginning on page F-1. The
following information sets forth certain quarterly data over the last two years,
2007 and 2006.
ITEM
14
|
CHANGES
IN AND DISAGREEMENTS WITH
ACCOUNTANTS
|
There
have been no changes in and/or disagreements with
Gruber
& Company, LLC, our independent registered public accountants, on accounting
and financial disclosure matters.
ITEM
15
|
FINANCIAL
STATEMENTS AND EXHIBITS
|
Report
of Independent Registered Public Accounting Firm – September
2007
|
F-1
|
|
|
Audited
Consolidated Balance Sheets as of September 30, 2006 and September
30,
2007
|
F-2
|
|
|
Audited
Consolidated Statements of Operations for the Year Ended September,
2007
and 2006
|
F-3
|
|
|
Audited
Consolidated Statements of Stockholders’ Equity (Deficit) for the Years
Ended September 30, 2007, 2006 and 2005
|
F-4
|
|
|
Audited
Consolidated Statements of Cash Flows for the Year Ended September
30,
2007 and 2006
|
F-5
|
|
|
Notes
to Audited Consolidated Financial Statements
|
F-6
|
|
|
Consolidated
Balance Sheets as of December 31, 2007
|
F-12
|
|
|
Consolidated
Statements of Operations for the Three Months Ended December 31,
2007 and
2006
|
F-13
|
|
|
Consolidated
Statements of Stockholders’ Equity (Deficit) for the Three Months Ended
December 31, 2007
|
F-14
|
|
|
Consolidated
Statements of Cash Flows for the Three Months Ended December 31,
2007 and
2006
|
F-15
|
|
|
Notes
to Consolidated Financial Statements
|
F-16
|
REPORTS
TO SECURITIES HOLDERS
We
have
filed with the SEC a registration statement on Form 10 under the Securities
Act
with respect to the issuance of shares of our common stock being offered by
this
registration statement. We are not currently subject to the informational
requirements of the Securities Exchange Act of 1934. As a result of the offering
of the shares of our common stock, we will become subject to the informational
requirements of the Exchange Act, and, in accordance therewith, will file
quarterly and annual reports and other information with the SEC; and send a
copy
of our annual report together with audited consolidated financial statements
to
each of our shareholders. The registration statement, such reports and other
information can be inspected and copied at the Public Reference Room of the
SEC
located at 100 F Street N.E., Washington D.C. 20549. Copies of such materials,
including copies of all or any portion of the registration statement, can be
obtained from the Public Reference Room of the SEC at prescribed rates. You
can
call the SEC at 1-800-SEC-0330 to obtain information on the operation of the
Public Reference Room. Such materials may also be accessed electronically by
means of the SEC's home page on the internet (
http://www.sec.gov
).
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE
BOARD OF CEMTREX, INC.
We
have
audited the accompanying consolidated balance sheet of Cemtrex, Inc. and
Subsidiary as of September 30, 2007 and 2006, and the related consolidated
statements of operations, stockholders equity and cash flows for the periods
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform our audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required
to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control
over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, 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. An audit includes examining
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the
overall financial statement presentation. We believe that our audit provides
a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Cemtrex, Inc. and Subsidiary
at
September 30, 2007 and 2006 and the results of its’ consolidated operations and
its’ stockholders equity and cash flows for the periods then ended in conformity
with accounting principles generally accepted in the United States of
America.
Gruber
& Company, LLC Saint Louis, Missouri
March
10, 2008
Cemtrex,
Inc. and Subsidiary
Consolidated
Balance Sheets
|
|
September 30,
|
|
|
|
2007
|
|
2006
|
|
Assets
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
Cash
& Equivalents
|
|
$
|
143,830
|
|
$
|
29,279
|
|
Accounts
Receivable
|
|
|
780,474
|
|
|
213,017
|
|
Inventory
|
|
|
252,443
|
|
|
74,931
|
|
Prepaid
Expenses & Other Assets
|
|
|
4,225
|
|
|
15,224
|
|
Total
Current Assets
|
|
|
1,180,972
|
|
|
332,451
|
|
|
|
|
|
|
|
|
|
Property
& Equipment, Net
|
|
|
61,723
|
|
|
-
|
|
Other
|
|
|
22,024
|
|
|
-
|
|
Goodwill,
Net
|
|
|
2,973,813
|
|
|
274,882
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
4,238,532
|
|
$
|
607,333
|
|
|
|
|
|
|
|
|
|
Liabilities
& Stockholders' Equity (Deficit)
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
Accounts
Payable
|
|
$
|
914,907
|
|
$
|
131,782
|
|
Accrued
Expenses
|
|
|
448,640
|
|
|
-
|
|
Customer
Deposits
|
|
|
85,516
|
|
|
-
|
|
Notes
Payable-Shareholder
|
|
|
8,983
|
|
|
-
|
|
Total
Current Liabilities
|
|
|
1,458,046
|
|
|
131,782
|
|
|
|
|
|
|
|
|
|
Convertible
Debenture
|
|
|
1,300,000
|
|
|
-
|
|
Total
Liabilities
|
|
|
2,758,046
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
& Contingencies
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity (Deficit)
|
|
|
|
|
|
|
|
Preferred
Stock, $0.001 par value, 10,000,000 shares authorized, no shares
issued
and outstanding
|
|
$
|
-
|
|
$
|
-
|
|
Common
Stock, $0.001 par value, 60,000,000 shares authorized; 34,327,862
and
6,880,213 shares issued and outstanding, respectively.
|
|
|
34,328
|
|
|
6,880
|
|
Additional
Paid-in Capital
|
|
|
1,644,172
|
|
|
543,120
|
|
Accumulated
Deficit
|
|
|
(198,014
|
)
|
|
(74,449
|
)
|
Total
Stockholders' Equity (Deficit)
|
|
|
1,480,486
|
|
|
475,551
|
|
|
|
|
|
|
|
|
|
Total
Liabilities & Stockholders' Equity (Deficit)
|
|
$
|
4,238,532
|
|
$
|
607,333
|
|
The
accompanying notes are an integral part of these financial
statements
Cemtrex,
Inc. and Subsidiary
Consolidated
Statements of Operations
|
|
For the Year Ended September 30,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
3,533,621
|
|
$
|
724,209
|
|
|
|
|
|
|
|
|
|
Cost
of Goods Sold
|
|
|
2,364,277
|
|
|
276,837
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
1,169,344
|
|
|
447,372
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
1,253,417
|
|
|
444,718
|
|
|
|
|
|
|
|
|
|
Operating
Income (Loss)
|
|
|
(84,073
|
)
|
|
2,654
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense)
|
|
|
|
|
|
|
|
Other
Income
|
|
|
4,290
|
|
|
-
|
|
Interest
Income
|
|
|
-
|
|
|
-
|
|
Interest
Expense
|
|
|
(43,782
|
)
|
|
-
|
|
Total
Other Income (Expense)
|
|
|
(39,492
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
Income (Loss) Before Income Taxes
|
|
|
(123,565
|
)
|
|
2,654
|
|
|
|
|
|
|
|
|
|
Provision
for Income Taxes
|
|
|
-
|
|
|
(432
|
)
|
|
|
|
|
|
|
|
|
Net
Income (Loss)
|
|
$
|
(123,565
|
)
|
$
|
2,222
|
|
|
|
|
|
|
|
|
|
Income
(Loss) Per Share-Basic
|
|
$
|
(0.01
|
)
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
Weighted
Average Number of Shares
|
|
|
24,024,912
|
|
|
6,584,323
|
|
The
accompanying notes are an integral part of these financial
statements
Cemtrex,
Inc. and Subsidiary
Consolidated
Statements of Stockholders' Equity (Deficit)
|
|
Preferre
d Stock
|
|
Common Stock
|
|
|
|
|
|
Total
|
|
|
|
Number of
|
|
Par Value
|
|
Number of
|
|
Par Value
|
|
Additional Paid-
|
|
Accumulated
|
|
Stockholders'
|
|
|
|
Shares
|
|
($0.001) Amount
|
|
Shares
|
|
($0.001) Amount
|
|
In-Capital
|
|
Deficit
|
|
Equity (Deficit)
|
|
Balance at
September 30, 2005
|
|
|
-
|
|
$
|
-
|
|
|
6,280,213
|
|
$
|
6,280
|
|
$
|
493,720
|
|
$
|
(76,671
|
)
|
$
|
423,329
|
|
Common
Stock Issued to Investors for Cash
|
|
|
-
|
|
|
-
|
|
|
600,000
|
|
|
600
|
|
|
49,400
|
|
|
-
|
|
|
50,000
|
|
Capital
Contributed by Officers
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,222
|
|
|
2,222
|
|
Balance
at September 30, 2006
|
|
|
-
|
|
$
|
-
|
|
|
6,880,213
|
|
$
|
6,880
|
|
$
|
543,120
|
|
$
|
(74,449
|
)
|
$
|
475,551
|
|
Common
Stock Issued to Investors for Cash
|
|
|
-
|
|
|
-
|
|
|
7,447,649
|
|
|
7,448
|
|
|
371,052
|
|
|
-
|
|
|
378,500
|
|
Common
Stock Issued for Purchase of Assets
|
|
|
-
|
|
|
-
|
|
|
20,000,000
|
|
|
20,000
|
|
|
730,000
|
|
|
-
|
|
|
750,000
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(123,565
|
)
|
|
(123,565
|
)
|
Balance
at September 30, 2007
|
|
|
-
|
|
$
|
-
|
|
|
34,327,862
|
|
$
|
34,328
|
|
$
|
1,644,172
|
|
$
|
(198,014
|
)
|
$
|
1,480,486
|
|
The
accompanying
notes
are an integral part of these financial statements
Cemtrex,
Inc. and Subsidiary
Consolidated
Statements of Cash Flows
|
|
For the Year Ended September 30,
|
|
|
|
2007
|
|
2006
|
|
Cash
Flows from Operating Activities
|
|
|
|
|
|
Net
Income (Loss)
|
|
$
|
(123,565
|
)
|
$
|
2,222
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
Depreciation
& Amortization
|
|
|
5,295
|
|
|
7,186
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
Receivable
|
|
|
(567,457
|
)
|
|
(94,833
|
)
|
Inventory
|
|
|
(177,512
|
)
|
|
29,518
|
|
Prepaid
Expenses & Other Assets
|
|
|
10,999
|
|
|
(15,224
|
)
|
Other
Assets
|
|
|
(22,024
|
)
|
|
-
|
|
Accounts
Payable
|
|
|
783,125
|
|
|
66,788
|
|
Accrued
Expenses
|
|
|
448,640
|
|
|
-
|
|
Customer
Deposits
|
|
|
85,516
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
Cash Used in Operating Activities
|
|
|
443,017
|
|
|
(4,343
|
)
|
|
|
|
|
|
|
|
|
Cash
Flows from Investing Activities
|
|
|
|
|
|
|
|
Purchase
of Property and Equipment
|
|
|
(67,018
|
)
|
|
-
|
|
Net
Purchase of Griffin Filters
|
|
|
(2,556,430
|
)
|
|
|
|
Goodwill
from Ducon
|
|
|
(142,501
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
Cash Used in Investing Activities
|
|
|
(2,765,949
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities
|
|
|
|
|
|
|
|
Repayment
of Notes Payable
|
|
|
|
|
|
(45,000
|
)
|
Net
Loans from Shareholders
|
|
|
8,983
|
|
|
(54,863
|
)
|
Convertible
Debentures issued for Griffin Purchase
|
|
|
1,300,000
|
|
|
-
|
|
Common
Stock Issued for Griffin Purchase
|
|
|
750,000
|
|
|
-
|
|
Common
Stock Issued for Cash
|
|
|
378,500
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Financing Activities
|
|
|
2,437,483
|
|
|
(49,863
|
)
|
|
|
|
|
|
|
|
|
Net
Increase (Decrease) in Cash
|
|
|
114,551
|
|
|
(54,206
|
)
|
|
|
|
|
|
|
|
|
Cash
Beginning of Period
|
|
|
29,279
|
|
|
83,485
|
|
|
|
|
|
|
|
|
|
Cash
End of Year
|
|
$
|
143,830
|
|
$
|
29,279
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
Cash
Paid during the period for interest
|
|
$
|
-
|
|
$
|
-
|
|
Cash
Paid during the period for income taxes
|
|
|
-
|
|
|
432
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Non-Cash Items:
|
|
|
|
|
|
|
|
Convertible
Debentures issued for Griffin Purchase
|
|
$
|
1,300,000
|
|
$
|
-
|
|
Common
Stock Issued for Griffin Acquisition
|
|
|
750,000
|
|
|
-
|
|
The
accompanying notes are an integral part of these financial
statements
CEMTREX,
INC.
(A
Development Stage Enterprise)
NOTES
TO FINANCIAL STATEMENTS
Note
1 – Organization, Business & Operations
Cemtrex,
Inc. and its Subsidiary is engaged in manufacturing and selling the most
advanced instruments for emission monitoring of particulate, opacity, mercury,
sulfur dioxide, nitrogen oxides, etc. Cemtrex also provides turnkey services
for
carbon creation projects from abatement of greenhouse gases pursuant to Kyoto
protocol and assists project owners in selling of carbon credits globally.
Company's
products are sold to power plants, refineries, chemical plants, cement plants
& other industries including federal and state Governmental agencies.
Through its wholly-owned subsidiary Griffin Filters, Company designs,
manufactures and sells air filtration equipment and systems to control
particulate emissions from a variety of industries.
Cemtrex,
Inc. was incorporated as Diversified American Holding, Inc. on April 27,
1998.
On December 16, 2004 the Company changed its name to Cemtrex, Inc. On April
30,
2007, Cemtrex, Inc. acquired Griffin Filters, LLC (see Note 4 Acquisitions
and
Goodwill).
Note
2 - Summary of Significant Accounting Policies
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to
make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of
expenses during the reporting period. Actual results could differ from those
estimates.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with a maturity of three
months
or less when purchased to be cash equivalents.
Concentrations
of Credit Risk - Cash
The
Company maintains its cash with various financial institutions, which may
exceed
federally insured limits throughout the period.
Marketable
Securities Available for Sale
The
Company evaluates its investment policies and the appropriate classification
of
securities at the time of purchase consistent with Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain investments
in
Debt and Equity Securities," at each balance sheet date and determined that
all
of its investment securities are to be classified as available-for-sale.
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses, net of tax, reported in stockholders' deficiency under
the
caption "Accumulated Other Comprehensive Loss". Realized gains and losses
and
declines in value judged to be other than-temporary on available-for-sale
securities are included in net gain on sale of marketable securities. The
cost
of securities sold is based on the specific identification method.
Inventories
Inventories
are comprised of replacement parts, system components and finished systems,
which are stated at lower of cost or market. Cost is determined on a first-in,
first-out (FIFO) basis.
Property
and Equipment
Property
and equipment are stated at cost and are depreciated using the straight-line
method over their estimated useful lives, generally five to seven years.
Leasehold improvements are amortized over the shorter of the useful life
or the
remaining lease term. Upon retirement or other disposition of these assets,
the
cost and related accumulated depreciation are removed from the accounts and
the
resulting gains or losses are reflected in operations. Expenditures for
maintenance and repairs are charged to operations as incurred. Renewals and
betterments are capitalized.
CEMTREX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Revenue
Recognition
Revenue
is recognized in accordance with SEC Staff Accounting Bulletin No. 101, “Revenue
Recognition in Financial Statements.” The Company recognizes revenue when the
significant risks and rewards of ownership have been transferred to the customer
pursuant to applicable laws and regulations, including factors such as when
there has been evidence of a sales arrangement, delivery has occurred, or
service have been rendered, the price to the buyer is fixed or determinable,
and
collectibility is reasonably assured.
Income
Taxes
The
Company accounts for income taxes using the liability method as required
by
Statement of Financial Accounting Standards ("FASB") No. 109, Accounting
for
Income Taxes ("SFAS 109"). Under this method, deferred tax assets and
liabilities are determined based on differences between their financial
reporting and tax basis of assets and liabilities. The Company was not required
to provide for a provision for income taxes for the periods ended September
30,
2007 and 2006, as a result of net operating losses incurred during the periods.
As of September 30, 2007, the Company has available approximately $198,000
of
net operating losses ("NOL") available for income tax purposes that may be
carried forward to offset future taxable income, if any. These carryforwards
expire in various years through 2026. At September 31, 2007 and 2006, the
Company has a deferred tax asset of approximately $82,000 and $31,000, relating
to the Company's net operating losses., respectively. The Company's deferred
tax
asset has been fully reserved by a valuation allowance since realization
of its
benefit is uncertain. The Company's ability to utilize its NOL carryforwards
may
be subject to an annual limitation in future periods pursuant to Section
382 of
the Internal Revenue Code of 1986, as amended.
The
provision for income taxes using the federal and state tax rates as compared
to
the Company's effective tax rate is summarized as follows:
|
|
September 30,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Statutory
Federal Tax (Benefit) Rate
|
|
|
-34.0
|
%
|
|
-34.0
|
%
|
Statutory
State Tax (Benefit) Rate
|
|
|
-7.5
|
%
|
|
-7.5
|
%
|
Effective
Tax (Benefit) Rate
|
|
|
-41.5
|
%
|
|
-41.5
|
%
|
|
|
|
|
|
|
|
|
Valuation
Allowance
|
|
|
41.5
|
%
|
|
41.5
|
%
|
|
|
|
|
|
|
|
|
Effective
Income Tax
|
|
|
0.0
|
%
|
|
0.0
|
%
|
Significant
components of the Company's deferred tax assets at September 30, 2007
and 2006
are as follows:
|
|
September 30,
|
|
|
|
2007
|
|
2006
|
|
Deferred
Tax Asset
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Operating Loss Carryforward
|
|
$
|
82,176
|
|
|
30,896
|
|
|
|
|
|
|
|
|
|
Valuation
Allowance
|
|
|
(82,176
|
)
|
|
(30,896
|
)
|
|
|
|
|
|
|
|
|
Net
Deferred Tax Asset
|
|
$
|
-
|
|
|
-
|
|
Guarantee
Expense
In
accordance with FASB Interpretation No. 45 ("Fin 45"), the Company recognizes,
at the inception of a guarantee, the cost of the fair value of the obligation
undertaken in issuing the guarantee.
CEMTREX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Fair
Value of Financial Instruments
The
reported amounts of the Company's financial instruments, including accounts
payable and accrued liabilities, approximate their fair value due to their
short
maturities. The carrying amounts of debt approximate fair value since the
debt
agreements provide for interest rates that approximate market.
Stock
Based Compensation
Effective
January 1, 2006, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 123R, "Share Based Payment," using the
modified-prospective-transition method. There was no effect to the accompanying
financial statements pursuant to the adoption of SFAS No. 123R. SFAS No.
123R is
a revision of SFAS No. 123, and supersedes APB Opinion No. 25, and its related
implementation guidance. SFAS No. 123R addresses all forms of share-based
payment awards including shares issued under employee stock purchase plans,
stock options, restricted stock and stock appreciation rights. Under SFAS
No.
123R, stock based awards result in a cost that will be measured at fair value
on
the award's grant date, based on the estimated number of awards that are
expected to vest that will result in a charge to operations.
Prior
to
January 1, 2006, the Company accounted for employee stock transactions in
accordance with Accounting Principles Board ("APB") Opinion No. 25. "Accounting
for Stock Issued to Employees." The Company had adopted the pro forma disclosure
requirements of SFAS No. 123, "Accounting for Stock-Based
Compensation."
Prior
to
the Company's adoption of SFAS No. 123R, SFAS No. 123 required that the Company
provide pro forma information regarding net earnings and net earnings per
share
as if the Company's stock-based awards had been determined in accordance
with
the fair value method prescribed therein. The Company had previously adopted
the
disclosure portion of SFAS No. 148 "Accounting for Stock-based Compensation
-
Transition and Disclosure," requiring quarterly SFAS No. 123 pro-forma
disclosures. The pro-forma charge for compensation cost related to stock-based
awards granted was recognized over the service period. For stock options,
the
service period represents the period of time between the date of grant and
the
date each option becomes exercisable without consideration of acceleration
provisions (e.g., retirement, change of control, etc.).
There
were no stock options granted to employees during the year ended December
31,
2007 and 2006, accordingly, there was no difference between the reported net
income (loss) and pro forma net income (loss).
The
cost
of stock-based compensation awards issued to non-employees for services is
recorded at either the fair value of the services rendered or of the instruments
issued in exchange for such services, whichever is more readily determinable,
using the measurement date guidelines enumerated in Emerging Issues Task
Force
("EITF") Issue No. 96-18, "Accounting for Equity Instruments That Are Issued
to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods
or
Services.
Recently
Issued Accounting Pronouncements
In
February 2007, the FASS issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Liabilities" ("SFAS No. 159"). SFAS No. 159 provides
companies with an option to report selected financial assets and liabilities
at
fair value, and establishes presentation and disclosure requirements designed
to
facilitate comparisons between companies that choose different measurement
attributes for similar types of assets and liabilities. The new guidance
is
effective for fiscal years beginning after November 15, 2007. The Company
is
currently evaluating the potential impact of the adoption of SFAS No. 159
on its
financial position and results of operations.
In
December 2006, the FASS approved FASS Staff Position (FSP) No. EITF 00-19-2,
"Accounting for Registration Payment Arrangements" ("FSP EITF 00-19-2"),
which
specifies that the contingent obligation to make future payments or otherwise
transfer consideration under a registration payment arrangement, whether
issued
as a separate agreement or included as a provision of a financial instrument
or
other agreement, should be separately recognized and measured in accordance
with
SFAS No.5, "Accounting for Contingencies". FSP EITF 00- I9-2 also requires
additional disclosure regarding the nature of any registration payment
arrangements, alternative settlement methods, the maximum potential amount
of
consideration and the current carrying amount of the liability, if any. The
guidance in FSP EITF 00-19-2 amends FASB Statements No. 133, "Accounting
for
Derivative Instruments and Hedging Activities", and No. 150, "Accounting
for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity", and FASS Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of
Others", to include scope exceptions for registration payment arrangements.
The
adoption of this pronouncement did not have an impact on the company's financial
position, results or operations or cash flows.
CEMTREX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
In
September 2006, the FASB issued Statement of Financial Accounting Standard
No.
157, "Fair Value Measurements." This statement defines fair value, establishes
a
fair value hierarchy to be used in generally accepted accounting principles
and
expands disclosures about fair value measurements. Although this statement
does
not require any new fair value measurements, the application could change
current practice. The statement is effective for fiscal years beginning after
November 15, 2007. The Company is currently evaluating the impact of this
statement to its financial position and results of operations.
In
September 2006, the staff of the Securities and Exchange Commission issued
SAB
No. 108 which provides interpretive guidance on how the effects of the carryover
or reversal of prior year misstatements should be considered in quantifying
a
current year misstatement. SAS 108 becomes effective in fiscal 2007. The
adoption of this pronouncement is not expected to have an impact on the
Company's financial position, results of operation or cash flows.
In
July
2006, the Financial Accounting Standards Board issued Interpretation No.
48,
"Accounting for Uncertainty in Income Taxes - an Interpretation of FASS
Statement No. 109" (the "Interpretation"). The Interpretation establishes
for
all entities a minimum threshold for financial statement recognition of the
benefit of tax positions, and requires certain expanded disclosures. The
Interpretation is effective for fiscal years beginning after December 31,
2006,
and is to be applied to all open tax years as of the date of effectiveness.
The
Company is in the process of evaluating the impact of the application of
the
Interpretation to its financial statements.
In
March
2006, the FASS issued SFAS 156 - "Accounting for Servicing of Financial Assets
-
an amendment of FASS Statement No. 140" ("SFAS 156"). SFAS 156 is effective
for
the first fiscal year beginning after September 15, 2006. SFAS 156 changes
the
way entities account for servicing assets and obligations associated with
financial assets acquired or disposed of. The Company has not yet completed
its
evaluation of the impact of adopting SFAS 156 on its results of operations
or
financial position, but does not expect that the adoption of SFAS 156 will
have
a material impact.
In
February 2006, the FASB issued SFAS No. 155 "Accounting for Certain Hybrid
Financial Instruments-an amendment of FASB Statements No. 133 and 140" ("FAS
155"). FAS 155 addresses the following: a) permits fair value re-measurement
for
any hybrid financial instrument that contains an embedded derivative that
otherwise would require bifurcation; b) clarifies which interest-only strips
and
principal-only strips are not subject to the requirements of Statement 133;
c)
establishes a requirement to evaluate interests in securitized financial
assets
to identify interests that are freestanding derivatives or that are hybrid
financial instruments that contain an embedded derivative requiring bifurcation;
d) clarifies that concentrations of credit risk in the form of subordination
are
not embedded derivatives; and e) amends Statement 140 to eliminate the
prohibition on a qualifying special-purpose entity from holding a derivative
financial instrument that pertains to a beneficial interest other than another
derivative financial instrument. FAS 155 is effective for all financial
instruments acquired or issued after the beginning of an entity's first fiscal
year that begins after September 15, 2006. The Company has not yet completed
its
evaluation of the impact of adopting SFAS 155 on its results of operations
or
financial position, but does not expect that the adoption of SFAS 155 will
have
a material impact.
CEMTREX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
3 - Property and Equipment
At
September 30, 2007 and 2006, property and equipment are comprised of the
following:
|
|
September
30,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Furniture
and Office Equipment
|
|
$
|
62,993
|
|
$
|
-
|
|
Computer
Software
|
|
|
4,025
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Less:
Accumulated Depreciation
|
|
|
(5,295
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
Property & Equipment
|
|
$
|
61,723
|
|
$
|
-
|
|
Depreciation
for the year ended September 30, 2007 and 2006 was $5,295 and $0,
respectively.
Note
4
–
Acquisitions and Goodwill
On
May 1,
2007, Cemtrex, Inc. purchased Griffin Filters, LLC for $2,750,000 for a
combination of stock ($750,000), a convertible debenture ($1,300,000) and
cash
of $700,000.
Note
5
–
Customer Deposits
The
Company accounts for payments received prior to shipment as a liability and
recognizes revenue when the products are shipped.
Note
6
–
Note Payable Shareholder
A
Note
Payable to a shareholder is due within the next year and accrues interest at
5%.
Note
7 – Convertible Debenture
On
April
30, 2007, the Company issued a $1,300,000 Convertible Debenture to an Officer
of
the Company in conjunction with the Purchase of Griffin Filters, Inc. The
debenture caries an 8% annual interest rate with interest payable semiannually
in arrears on the first business day of January and July each year. The
debenture principle is due and payable on April 30, 2011.
The
debenture has the right of conversion into non-assessable shares of common
stock
of the Company at $0.001 (par value) per share. Conversion is not exercisable
prior to December 31, 2007. Commencing December 31, 2007 and continuing to
April
30, 2011, the Debenture Holder shall have the right of conversion subject
o the
terms and conditions of the debenture. In the event the face amount of the
debenture is not fully converted on or before April 30, 2011, the conversion
rights will lapse.
Note
8 – Stockholders’ Equity
Preferred
Stock
The
Company is authorized to issue 10,000,000 shares of preferred stock, $0.001
par
value. As of September 30, 2007 and 2006, there were no shares issued and
outstanding.
Common
Stock
The
Company is authorized to issue 60,000,000 shares of common stock, $0.001
par
value. As of September 30, 2007 and 2006, there were 34,327,862 and 6,880,213
shares issued and outstanding, respectively.
2006
For
the
year ended September 30, 2006, the Company issued 600,000 shares of Common
Stock
to investors for cash totaling $50,000.
2007
For
the
year ended September 30, 2007, the Company issued 7,447,649 shares of Common
Stock to investors for cash totaling $378,500. In addition, the Company issued
20,000,000 shares of Common Stock to an Officer in conjunction with the
acquisition of Griffin Filters totaling $750,000.
CEMTREX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
9
–
Commitments & Contingencies
Lease
Obligations
The
Company leases its Corporate office space on a month-to-month basis with
minimum
monthly payments of $2,157.
The
Company leases its Manufacturing office space on a 5 year lease agreement
with
minimum monthly payments of $4.225. This lease expires March 30,
2012.
Legal
Proceedings
The
Company is not currently involved in any lawsuits or litigation.
Note
10 - Subsequent Events
There
are
no material subsequent events.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE
BOARD OF CEMTREX, INC.
We
have
audited the accompanying consolidated balance sheets of Cemtrex, Inc. and
Subsidiary as of December 31, 2007 and September 30, 2007, and the related
consolidated statements of operations, stockholders equity and cash flows
for
the periods then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an
opinion on these financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform our audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The
Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration
of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, 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. An audit
includes examining on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the
accounting principles used and significant estimates made by management,
as well
as evaluating the overall financial statement presentation. We believe that
our
audit provides a reasonable basis for our opinion.
In
our
opinion, the consolidated financial statements referred to above present
fairly,
in all material respects, the consolidated financial position of Cemtrex,
Inc.
and Subsidiary at December 31, 2007 and September 30, 2007, and the results
of
its’ consolidated operations and its’ stockholders equity and cash flows for the
periods then ended in conformity with accounting principles generally accepted
in the United States of America.
Gruber
& Company, LLC Saint Louis, Missouri
May
2, 2008
Cemtrex,
Inc. and Subsidiary
Consolidated
Balance Sheets
|
|
December 31,
2007
|
|
September 30,
2007
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
Cash
& Equivalents
|
|
$
|
133,861
|
|
$
|
143,830
|
|
Accounts
Receivable
|
|
|
896,597
|
|
|
780,474
|
|
Inventory
|
|
|
314,937
|
|
|
252,443
|
|
Prepaid
Expenses & Other Assets
|
|
|
4,225
|
|
|
4,225
|
|
Total
Current Assets
|
|
|
1,349,620
|
|
|
1,180,972
|
|
|
|
|
|
|
|
|
|
Property
& Equipment, Net
|
|
|
59,816
|
|
|
61,723
|
|
Other
|
|
|
23,334
|
|
|
22,024
|
|
Goodwill,
Net
|
|
|
2,973,813
|
|
|
2,973,813
|
|
Total
Assets
|
|
$
|
4,406,583
|
|
$
|
4,238,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
& Stockholders' Equity (Deficit)
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
Accounts
Payable
|
|
$
|
960,208
|
|
$
|
914,907
|
|
Accrued
Expenses
|
|
|
31,635
|
|
|
448,640
|
|
Customer
Deposits
|
|
|
52,392
|
|
|
85,516
|
|
Notes
Payable-Shareholder
|
|
|
450,825
|
|
|
8,983
|
|
Total
Current Liabilities
|
|
|
1,495,060
|
|
|
1,458,046
|
|
|
|
|
|
|
|
|
|
Convertible
Debenture
|
|
|
1,300,000
|
|
|
1,300,000
|
|
Total
Liabilities
|
|
|
2,795,060
|
|
|
2,758,046
|
|
|
|
|
|
|
|
|
|
Commitments
& Contingencies
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity (Deficit)
|
|
|
|
|
|
|
|
Common
Stock, $0.001 par value, 60,000,000 shares
authorized;
34,327,862 shares issued and outstanding.
|
|
|
34,328
|
|
|
34,328
|
|
Additional
Paid-in Capital
|
|
|
1,644,172
|
|
|
1,644,172
|
|
Accumulated
Deficit
|
|
|
(66,977
|
)
|
|
(198,014
|
)
|
Total
Stockholders' Equity (Deficit)
|
|
|
1,611,523
|
|
|
1,480,486
|
|
Total
Liabilities & Stockholders' Equity (Deficit)
|
|
$
|
4,406,583
|
|
$
|
4,238,532
|
|
The
accompanying notes are an integral part of these financial
statements
Cemtrex,
Inc. and Subsidiary
Consolidated
Statements of Operations
|
|
For
the Three Months Ended
December
31,
|
|
|
|
2007
|
|
2006
|
|
Revenues
|
|
$
|
1,238,435
|
|
$
|
237,332
|
|
|
|
|
|
|
|
|
|
Cost
of Goods Sold
|
|
|
560,219
|
|
|
160,663
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
678,216
|
|
|
76,669
|
|
Operating
Expenses
|
|
|
516,114
|
|
|
71,929
|
|
|
|
|
|
|
|
|
|
Operating
Income (Loss)
|
|
|
162,102
|
|
|
4,740
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense)
|
|
|
|
|
|
|
|
Other
Income
|
|
|
570
|
|
|
6,056
|
|
Interest
Expense
|
|
|
(31,635
|
)
|
|
-
|
|
Total
Other Income (Expense)
|
|
|
(31,065
|
)
|
|
6,056
|
|
Net
Income (Loss) Before Income Taxes
|
|
|
131,037
|
|
|
10,796
|
|
|
|
|
|
|
|
|
|
Provision
for Income Taxes
|
|
|
-
|
|
|
-
|
|
Net
Income (Loss)
|
|
$
|
131,037
|
|
$
|
10,796
|
|
|
|
|
|
|
|
|
|
Income
(Loss) Per Share-Basic and Diluted
|
|
$
|
0.00
|
|
$
|
0.00
|
|
Weighted
Average Number of Shares
|
|
|
|
|
|
|
|
|
|
|
34,327,862
|
|
|
6,880,213
|
|
The
accompanying notes are an integral part of these financial
statements
Cemtrex,
Inc. and Subsidiary
Consolidated
Statements of Stockholders' Equity (Deficit)
|
|
Common Stock
|
|
|
|
|
|
Total
|
|
|
|
Number of
|
|
Par Value
|
|
Additional Paid-
|
|
Accumulated
|
|
Stockholders'
|
|
|
|
Shares
|
|
($0.001) Amount
|
|
In-Capital
|
|
Deficit
|
|
Equity (Deficit)
|
|
Balance
at September 30, 2005
|
|
|
6,280,213
|
|
$
|
6,280
|
|
$
|
493,720
|
|
$
|
(76,671
|
)
|
$
|
423,329
|
|
Common
Stock Issued to Investors for Cash
|
|
|
600,000
|
|
|
600
|
|
|
49,400
|
|
|
-
|
|
|
50,000
|
|
Capital
Contributed by Officers
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,222
|
|
|
2,222
|
|
Balance
at September 30, 2006
|
|
|
6,880,213
|
|
$
|
6,880
|
|
$
|
543,120
|
|
$
|
(74,449
|
)
|
$
|
475,551
|
|
Common
Stock Issued to Investors for Cash
|
|
|
7,447,649
|
|
|
7,448
|
|
|
371,052
|
|
|
-
|
|
|
378,500
|
|
Common
Stock Issued for Purchase of Assets
|
|
|
20,000,000
|
|
|
20,000
|
|
|
730,000
|
|
|
-
|
|
|
750,000
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(123,565
|
)
|
|
(123,565
|
)
|
Balance
at September 30, 2007
|
|
|
34,327,862
|
|
$
|
34,328
|
|
$
|
1,644,172
|
|
$
|
(198,014
|
)
|
$
|
1,480,486
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
131,037
|
|
|
131,037
|
|
Balance
at December 31, 2007
|
|
|
34,327,862
|
|
$
|
34,328
|
|
$
|
1,644,172
|
|
$
|
(66,977
|
)
|
$
|
1,611,523
|
|
The
accompanying notes are an integral part of these financial
statements
Cemtrex,
Inc. and Subsidiary
Consolidated
Statements of Cash Flows
|
|
For the Three Months Ended
December 31,
|
|
|
|
2007
|
|
2006
|
|
Cash
Flows from Operating Activities
|
|
|
|
|
|
Net
Income (Loss)
|
|
$
|
131,037
|
|
$
|
10,796
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
Depreciation
& Amortization
|
|
|
1,907
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
Receivable
|
|
|
(116,123
|
)
|
|
(115,575
|
)
|
Inventory
|
|
|
(62,494
|
)
|
|
74,931
|
|
Prepaid
Expenses & Other Assets
|
|
|
-
|
|
|
15,224
|
|
Other
Assets
|
|
|
(1,310
|
)
|
|
(15,425
|
)
|
Accounts
Payable
|
|
|
45,301
|
|
|
(46,928
|
)
|
Accrued
Expenses
|
|
|
(417,005
|
)
|
|
4,832
|
|
Customer
Deposits
|
|
|
(33,124
|
)
|
|
692
|
|
|
|
|
|
|
|
|
|
Net
Cash Used in Operating Activities
|
|
|
(451,811
|
)
|
|
(71,453
|
)
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities
|
|
|
|
|
|
|
|
Net
Loans from Shareholders
|
|
|
441,842
|
|
|
-
|
|
APIC
Error
|
|
|
-
|
|
|
-
|
|
Common
Stock Issued for Cash
|
|
|
-
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Financing Activities
|
|
|
441,842
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
Net
Increase (Decrease) in Cash
|
|
|
(9,969
|
)
|
|
3,547
|
|
|
|
|
|
|
|
|
|
Cash
Beginning of Period
|
|
|
143,830
|
|
|
29,279
|
|
|
|
|
|
|
|
|
|
Cash
End of Year
|
|
$
|
133,861
|
|
$
|
32,826
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
Cash
Paid during the period for interest
|
|
$
|
-
|
|
$
|
-
|
|
Cash
Paid during the period for income taxes
|
|
|
-
|
|
|
-
|
|
The
accompanying notes are an integral part of these financial
statements
CEMTREX,
INC.
(A
Development Stage Enterprise)
NOTES
TO FINANCIAL STATEMENTS
Note
1 – Organization, Business & Operations
Cemtrex,
Inc. and its Subsidiary is engaged in manufacturing and selling the most
advanced instruments for emission monitoring of particulate, opacity, mercury,
sulfur dioxide, nitrogen oxides, etc. Cemtrex also provides turnkey services
for
carbon creation projects from abatement of greenhouse gases pursuant to Kyoto
protocol and assists project owners in selling of carbon credits globally.
Company's
products are sold to power plants, refineries, chemical plants, cement plants
& other industries including federal and state Governmental agencies.
Through its wholly-owned subsidiary Griffin Filters, Company designs,
manufactures and sells air filtration equipment and systems to control
particulate emissions from a variety of industries.
Cemtrex,
Inc. was incorporated as Diversified American Holding, Inc. on April 27,
1998.
On December 16, 2004 the Company changed its name to Cemtrex, Inc. On April
30,
2007, Cemtrex, Inc. acquired Griffin Filters, LLC (see Note 4 Acquisitions
and
Goodwill).
Note
2 - Summary of Significant Accounting Policies
Accounting
Method
The
Company’s financial statements are prepared using the accrual method of
accounting. The Company has elected a September 30 year-end.
Principles
of Consolidation
The
accompanying consolidated financial statements for the periods ended December
31, 2007 and September 30, 2007, include the accounts of Cemtrex, Inc and
its
wholly owned subsidiary Griffin Filters, LLC, (collectively the “Company”). All
significant inter-company accounts and transactions have been eliminated
in
consolidation.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to
make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of
expenses during the reporting period. Actual results could differ from those
estimates.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with a maturity of three
months
or less when purchased to be cash equivalents.
Concentrations
of Credit Risk - Cash
The
Company maintains its cash with various financial institutions, which may
exceed
federally insured limits throughout the period.
Marketable
Securities Available for Sale
The
Company evaluates its investment policies and the appropriate classification
of
securities at the time of purchase consistent with Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain investments
in
Debt and Equity Securities," at each balance sheet date and determined that
all
of its investment securities are to be classified as available-for-sale.
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses, net of tax, reported in stockholders' deficiency under
the
caption "Accumulated Other Comprehensive Loss". Realized gains and losses
and
declines in value judged to be other than-temporary on available-for-sale
securities are included in net gain on sale of marketable securities. The
cost
of securities sold is based on the specific identification method.
CEMTREX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Inventories
Inventories
are comprised of replacement parts and system, which are stated at lower
of cost
or market. Cost is determined on a first-in, first-out (FIFO)
basis.
Property
and Equipment
Property
and equipment are stated at cost and are depreciated using the straight-line
method over their estimated useful lives, generally five to seven years.
Leasehold improvements are amortized over the shorter of the useful life
or the
remaining lease term. Upon retirement or other disposition of these assets,
the
cost and related accumulated depreciation are removed from the accounts and
the
resulting gains or losses are reflected in operations. Expenditures for
maintenance and repairs are charged to operations as incurred. Renewals and
betterments are capitalized.
Revenue
Recognition
Revenue
is recognized in accordance with SEC Staff Accounting Bulletin No. 101, “Revenue
Recognition in Financial Statements.” The Company recognizes revenue when the
significant risks and rewards of ownership have been transferred to the customer
pursuant to applicable laws and regulations, including factors such as when
there has been evidence of a sales arrangement, delivery has occurred, or
service have been rendered, the price to the buyer is fixed or determinable,
and
collectibility is reasonably assured.
Income
Taxes
The
Company accounts for income taxes using the liability method as required
by
Statement of Financial Accounting Standards ("FASB") No. 109, Accounting
for
Income Taxes ("SFAS 109"). Under this method, deferred tax assets and
liabilities are determined based on differences between their financial
reporting and tax basis of assets and liabilities. The Company was not required
to provide for a provision for income taxes for the periods ended December
31,
2007 and September 30, 2007, as a result of net operating losses incurred
during
the periods. As of September 30, 2007, the Company has available approximately
$67,000 of net operating losses ("NOL") available for income tax purposes
that
may be carried forward to offset future taxable income, if any. These
carryforwards expire in various years through 2026. At December 31, 2007,
the
Company has a deferred tax asset of approximately $28,000 relating to the
Company's net operating losses, respectively. The Company's deferred tax
asset
has been fully reserved by a valuation allowance since realization of its
benefit is uncertain. The Company's ability to utilize its NOL carryforwards
may
be subject to an annual limitation in future periods pursuant to Section
382 of
the Internal Revenue Code of 1986, as amended.
The
provision for income taxes using the federal and state tax rates as compared
to
the Company's effective tax rate is summarized as follows:
|
|
December 31,
|
|
September 30,
|
|
|
|
2007
|
|
2007
|
|
Statutory
Federal Tax (Benefit) Rate
|
|
|
-34.0
|
%
|
|
-34.0
|
%
|
Statutory
State Tax (Benefit) Rate
|
|
|
-7.5
|
%
|
|
-7.5
|
%
|
Effective
Tax (Benefit) Rate
|
|
|
-41.5
|
%
|
|
-41.5
|
%
|
|
|
|
|
|
|
|
|
Valuation
Allowance
|
|
|
41.5
|
%
|
|
41.5
|
%
|
|
|
|
|
|
|
|
|
Effective
Income Tax
|
|
|
0.0
|
%
|
|
0.0
|
%
|
Significant
components of the Company's deferred tax assets at December 31, 2007 and
September 30, 2007, are as follows:
CEMTREX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
December 31,
|
|
September 30,
|
|
Deferred
Tax Asset
|
|
2007
|
|
2007
|
|
|
|
|
|
|
|
|
|
Net
Operating Loss Carryforward
|
|
$
|
27,795
|
|
$
|
82,176
|
|
|
|
|
|
|
|
|
|
Valuation
Allowance
|
|
|
(27,795
|
)
|
|
(82,176
|
)
|
|
|
|
|
|
|
|
|
Net
Deferred Tax Asset
|
|
$
|
-
|
|
$
|
-
|
|
Guarantee
Expense
In
accordance with FASB Interpretation No. 45 ("Fin 45"), the Company recognizes,
at the inception of a guarantee, the cost of the fair value of the obligation
undertaken in issuing the guarantee.
Fair
Value of Financial Instruments
The
reported amounts of the Company's financial instruments, including accounts
payable and accrued liabilities, approximate their fair value due to their
short
maturities. The carrying amounts of debt approximate fair value since the
debt
agreements provide for interest rates that approximate market.
Stock
Based Compensation
The
Company has adopted the disclosure provisions only of SFAS 123 and continues
to
account for stock based compensation using the intrinsic value method prescribed
in accordance with the provisions of APB No. 25, Accounting for Stock Issued
to
Employees, and related interpretations. Common stock issued to employees
for
compensation is accounted for based on the market price of the underlying
stock,
generally the average low bid price.
The
Company accounts for stock-based compensation issued to non-employees and
consultants in accordance with the provisions of SFAS 123 and the Emerging
Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting
for
Equity Instruments that are Issued to Other Than Employees for Acquiring
or in
Conjunction with Selling, Goods or Services". Common stock issued to
non-employees in exchange for services is accounted for based on the fair
value
of the services received.
Allowance
for doubtful accounts
In
determining the allowance to be maintained, management evaluates many factors
including industry and historical loss experience. The allowance for doubtful
accounts is maintained at an amount management deems adequate to cover estimated
losses. At December 31, 2007 and September 30. 2007, the Company has reserved
$100,000 for doubtful accounts.
Advertising
The
Company incurred no advertising expenses for the periods ended December 31,
2007
and September 30, 2007.
Research
and development costs
Expenditures
for research & development are expensed as incurred. Such costs are required
to be expensed until the point that technological feasibility is established.
The Company incurred no research and development costs for the periods ended
December 31, 2007 and September 30, 2007.
Reclassifications
Certain
items in the prior year financial statements have been reclassified for
comparative purposes to conform to the presentation in the current period’s
presentation. These reclassifications have no effect on the previously reported
income (loss).
CEMTREX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Recently
Issued Accounting Pronouncements
In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations (FAS
141(R)). This Statement provides greater consistency in the accounting and
financial reporting of business combinations. It requires the acquiring entity
in a business combination to recognize all assets acquired and liabilities
assumed in the transaction, establishes the acquisition-date fair value as
the
measurement objective for all assets acquired and liabilities assumed, and
requires the acquirer to disclose the nature and financial effect of the
business combination. FAS 141(R) is effective for fiscal years beginning
after
December 15, 2008. We will adopt FAS 141(R) no later than the first quarter
of
fiscal 2010 and are currently assessing the impact the adoption will have
on our
financial position and results of operations.
In
December 2007, the FASB issued SFAS No. 160. Noncontrolling Interests in
Consolidated Financial Statements (FAS 160). This Statement amends Accounting
Research Bulletin No. 51, Consolidated Financial Statements, to establish
accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary. FAS 160 is effective
for
fiscal years beginning after December 15, 2008. We will adopt FAS 160 no
later
than the first quarter of fiscal 2010 and are currently assessing the impact
the
adoption will have on our financial position and results of operations.
In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities , which permits entities to choose to measure
at fair value eligible financial instruments and certain other items that
are
not currently required to be measured at fair value. The standard requires
that
unrealized gains and losses on items for which the fair value option has
been
elected be reported in earnings at each subsequent reporting date. SFAS No.
159
is effective for fiscal years beginning after November 15, 2007. We will
adopt
SFAS No. 159 no later than the first quarter of fiscal 2009. We are currently
assessing the impact the adoption of SFAS No. 159 will have on our financial
position and results of operations.
In
September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R) . SFAS No. 158 requires company plan sponsors
to
display the net over- or under-funded position of a defined benefit
postretirement plan as an asset or liability, with any unrecognized prior
service costs, transition obligations or actuarial gains/losses reported
as a
component of other comprehensive income in shareholders’ equity. SFAS No. 158 is
effective for fiscal years ending after December 15, 2006. We adopted the
recognition provisions of SFAS No. 158 as of the end of fiscal 2007. The
adoption of SFAS No. 158 did not have an effect on the Company’s financial
position or results of operations.
In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements . SFAS
No.
157 establishes a framework for measuring fair value in generally accepted
accounting principles, clarifies the definition of fair value and expands
disclosures about fair value measurements. SFAS No. 157 does not require
any new
fair value measurements. However, the application of SFAS No. 157 may change
current practice for some entities. SFAS No. 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years. We will adopt SFAS No. 157 in
the
first quarter of fiscal 2009. We are currently assessing the impact that
the
adoption of SFAS No. 157 will have on our financial position and results
of
operations.
In
July
2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in
Income Taxes — an interpretation of FASB Statement No. 109 (FIN 48). This
interpretation clarifies the application of SFAS No. 109, Accounting for
Income
Taxes , by defining a criterion that an individual tax position must meet
for
any part of the benefit of that position to be recognized in an enterprise’s
financial statements and also provides guidance on measurement, derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. FIN 48 is effective for fiscal years beginning
after
December 15, 2006, but earlier adoption is permitted. The Company is in the
process of evaluating the impact of the application of the Interpretation
to its
financial statements. In February 2007, the FASS issued SFAS No. 159, "The
Fair
Value Option for Financial Assets and Liabilities" ("SFAS No. 159"). SFAS
No.
159 provides companies with an option to report selected financial assets
and
liabilities at fair value, and establishes presentation and disclosure
requirements designed to facilitate comparisons between companies that choose
different measurement attributes for similar types of assets and liabilities.
The new guidance is effective for fiscal years beginning after November 15,
2007. The Company is currently evaluating the potential impact of the adoption
of SFAS No. 159 on its financial position and results of
operations.
CEMTREX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
3 - Property and Equipment
At
December 31, 2007 and September 30, 2007, property and equipment are comprised
of the following:
|
|
December 31,
|
|
September 30,
|
|
|
|
2007
|
|
2007
|
|
|
|
|
|
|
|
|
|
Furniture
and Office Equipment
|
|
$
|
82,590
|
|
$
|
82,590
|
|
Computer
Software
|
|
|
4,550
|
|
|
4,550
|
|
|
|
|
|
|
|
|
|
Less:
Accumulated Depreciation
|
|
|
(27,324
|
)
|
|
(25,417
|
)
|
|
|
|
|
|
|
|
|
Net
Property & Equipment
|
|
$
|
59,816
|
|
$
|
61,723
|
|
Depreciation
for the three months ended December 31, 2007 and 2006 was $1,907 and $0,
respectively.
Note
4
–
Acquisitions and Goodwill
On
May 1,
2007, Cemtrex, Inc. purchased Griffin Filters, LLC for $2,750,000 for a
combination of stock ($750,000), a convertible debenture ($1,300,000) and
cash
of $700,000.
Note
5
–
Customer Deposits
The
Company accounts for payments received prior to shipment as a liability and
recognizes revenue when the products are shipped.
Note
6
–
Note Payable Shareholder
A
Note
Payable to a shareholder is due within the next year and accrues interest
at
5%.
Note7
– Convertible Debenture
On
April
30, 2007, the Company issued a $1,300,000 Convertible Debenture to an Officer
of
the Company in conjunction with the Purchase of Griffin Filters, Inc. The
debenture caries an 8% annual interest rate with interest payable semiannually
in arrears on the first business day of January and July each year. The
debenture principle is due and payable on April 30, 2011.
The
debenture has the right of conversion into non-assessable shares of common
stock
of the Company at $0.001 (par value) per share. Conversion is not exercisable
prior to December 31, 2007. Commencing January 1, 2008 and continuing to
April
30, 2011, the Debenture Holder shall have the right of conversion subject
o the
terms and conditions of the debenture. In the event the face amount of the
debenture is not fully converted on or before April 30, 2011, the conversion
rights will lapse.
Note
8 – Stockholders’ Equity
Preferred
Stock
The
Company is authorized to issue 10,000,000 shares of preferred stock, $0.001
par
value. As of December 31, 2007 and September 30, 2007, there were no shares
issued and outstanding.
Common
Stock
The
Company is authorized to issue 60,000,000 shares of common stock, $0.001
par
value. As of December 31, 2007 and September 30, 2007, there were 34,327,862
shares issued and outstanding..
CEMTREX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
2007
No
shares
were issued during the three months ended December 31, 2007.
For
the
year ended September 30, 2007, the Company issued 7,447,649 shares of Common
Stock to investors for cash totaling $378,500. In addition, the Company issued
20,000,000 shares of Common Stock to an Officer in conjunction with the
acquisition of Griffin Filters totaling $750,000.
Note
9
–
Commitments & Contingencies
Lease
Obligations
The
Company leases its Corporate office space on a month-to-month basis with
minimum
monthly payments of $2,157.
The
Company leases its Manufacturing office space on a 5 year lease agreement
with
minimum monthly payments of $4.225. This lease expires March 30,
2012.
Legal
Proceedings
The
Company is not currently involved in any lawsuits or litigation.
Note
10
- Subsequent Events
There
are
no material subsequent events.
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, Cemtrex, Inc.
certifies that we have reasonable grounds to believe that we meets all of the
requirements for filing on Form 10 and authorized this registration statement
to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York, United States of America on May 22, 2008.
CEMTREX,
INC
DATE:
May 22, 2008
|
BY:
|
/s/
Arun Govil
|
|
|
CHAIRMAN
OF THE BOARD
|
|
|
CHIEF
EXECUTIVE OFFICER
|
|
|
AND
PRESIDENT
|
In
accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
and
on the dates stated.
/s/
Arun Govil
|
|
Chairman
of the Board, Chief
|
|
May
22, 2008
|
|
|
Executive
Officer and
|
|
|
|
|
President
|
|
|
|
|
|
|
|
/s/
Renato Dela Rama
|
|
Vice
President of Finance
|
|
May
22, 2008
|
|
|
|
|
|
|
|
|
|
|
/s/
Vandana Govil
|
|
Secretary,
Director
|
|
May
22, 2008
|
Exhibit
Number
|
|
Description
of Exhibit
|
3.1
3.2
3.3
3.4
3.5
3.6
|
|
Certificate
of Incorporation of the Company
By
Laws of the Company
Certificate
of Amendment of Certificate of Incorporation dated September 29,
2006
Certificate
of Amendment of Certificate of Incorporation dated March 30,
2007
Certificate
of Amendment of Certificate of Incorporation dated May 16,
2007
Certificate
of Amendment of Certificate of Incorporation dated August 21,
2007
|
10.1
10.2
|
|
Cemtrex
Lease Agreement-Duncon Technologies, Inc.
Lease
Agreement between Daniel L. Canino and Griffin Filters,
LLC
|
10.3
10.4
10.5
|
|
Asset
Purchase Agreement between Duncon Technologies, Inc. and Cemtrex
Inc.
Agreement
and Assignment of Membership Interests between Arun Govil and Cemtrex,
Inc.
8.0%
Convertible Subordinated Debenture
|
21.1
23.1
|
|
Subsidiaries
Consent
of Independent Registered Public Accounting Firm.
|