UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q
For the quarterly period ended June 30, 2025
OR
For the transition period from ___________to ____________
Commission File Number 001-37464
CEMTREX, INC.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
Securities registered pursuant to Section 12(b) of the Act:
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
As of August 12, 2025, the issuer had 5,678,183 shares of common stock issued and outstanding.
CEMTREX, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information
Item 1. Financial Statements
Cemtrex, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Operations
(Unaudited)
Condensed Consolidated Statements of Comprehensive Loss
Condensed Consolidated Statement of Stockholders’ Equity
Number
of
Condensed Consolidated Statement of Stockholders’ Equity (Continued)
Condensed Consolidated Statements of Cash Flows
Condensed Consolidated Statements of Cash Flows (Continued)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND PLAN OF OPERATIONS
Cemtrex was incorporated in 1998 in the state of Delaware and has evolved through strategic acquisitions and internal growth into a leading multi-industry company. Unless the context requires otherwise, all references to “we”, “our”, “us”, “Company”, “registrant”, “Cemtrex” or “management” refer to Cemtrex, Inc. and its subsidiaries.
The Company’s reporting segments consist of Security and Industrial Services. Additionally, the Company’s operational structure also reports unallocated corporate expenses.
Security
Cemtrex’s Security segment operates under the brand of its subsidiary, Vicon Industries, Inc. (“Vicon”), which provides end-to-end security solutions to meet the toughest corporate, industrial, and governmental security challenges. Vicon’s products include browser-based video monitoring systems and analytics-based recognition systems, cameras, servers, and access control systems for every aspect of security and surveillance in industrial and commercial facilities, federal prisons, hospitals, universities, schools, and federal and state government offices. Vicon provides innovative, mission critical security and video surveillance solutions utilizing Artificial Intelligence (AI) based data algorithms.
Industrial Services
Cemtrex’s Industrial Services segment operates under the brand, Advanced Industrial Services (“AIS”), which offers single-source expertise and services for rigging, millwrighting, in plant maintenance, equipment erection, relocation, and disassembly to diversified customers. AIS installs high precision equipment in a wide variety of industrial markets like automotive, printing & graphics, industrial automation, packaging, and chemicals, among others. AIS is a leading provider of reliability-driven maintenance and contracting solutions for machinery, packaging, printing, chemical, and other manufacturing markets. We help customers seeking to achieve greater asset utilization and reliability to cut costs and increase production from existing assets, including small projects, sustaining capital, turnarounds, maintenance, specialty welding services, and high-quality scaffolding.
Common Stock Reverse Stock Split
On October 2, 2024, the Company completed a 60:1 reverse stock split on its common stock, and on November 26, 2024, the Company completed a 35:1 reverse stock split on its common stock. All share and per share data have been retroactively adjusted for the reverse splits.
Nasdaq Notices for Listing Deficiencies
On June 14, 2024, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company that, because the closing bid price for the Company’s common stock listed on Nasdaq was below $1.00 for 30 consecutive trading days, the Company no longer meets the minimum bid price requirement for continued listing on The Nasdaq Capital Market under Nasdaq Marketplace Rule 5550(a)(2), requiring a minimum bid price of $1.00 per share. The notification letter also disclosed that in the event the Company does not regain compliance with the Minimum Bid Price Requirement by December 11, 2024. On December 11, 2024, we received a notification letter from the Nasdaq notifying us that we have regained compliance with the Minimum Bid Requirement.
Although we currently meet the Nasdaq Minimum Bid Requirement, out of abundance of caution, we believe that a future reverse split may be necessary in the future if we were to fall short of the Minimum Bid Price Requirement. A Reverse Stock Split would potentially increase our bid price such that we maintain the Minimum Bid Requirement required for maintaining the listing requirements for the Nasdaq Capital Market.
On August 21, 2024, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company that, because the stockholder’s equity for the Company was below $2,500,000 as reported on our Form 10-Q for the period ended June 30, 2024, the Company no longer meets the minimum shareholder’s equity requirement for continued listing on The Nasdaq Capital Market under Nasdaq Marketplace Rule 5550(b)(1), requiring a minimum stockholder’s equity of $2,500,000 (the “Minimum Stockholder’s Equity Requirement”).
On October 23, 2024, the Company received a letter from Nasdaq that it had been granted an extension to February 17, 2025, to regain compliance with the Minimum Stockholder’s Equity Requirement.
On January 2, 2025, the Company received a letter from Nasdaq notifying the Company that based on the Company’s Form 10-K filed on December 30, 2024, evidencing stockholders’ equity of $4,710,677, Nasdaq has determined that the Company complies with the Minimum Stockholder’s Equity Requirement and this matter is now closed.
On February 24, 2025, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company that, because the stockholder’s equity for the Company was below $2,500,000 as reported on our Form 10-Q for the period ended December 31, 2024, the Company no longer meets the minimum shareholder’s equity requirement for continued listing on The Nasdaq Capital Market under Nasdaq Marketplace Rule 5550(b)(1), requiring a minimum stockholder’s equity of $2,500,000 (the “Minimum Stockholder’s Equity Requirement”).
On April 22, 2025, the Company received a letter from Nasdaq that it had been granted an extension to August 20, 2025, to regain compliance with the Minimum Stockholder’s Equity Requirement.
On June 4, 2025, the Company received a letter from Nasdaq notifying the Company that based on the Company’s Form 10-Q for the period ended March 31, 2025, filed on May 15, 2025, evidencing stockholders’ equity of $6,403,022, Nasdaq has determined that the Company complies with the Minimum Stockholder’s Equity Requirement and this matter is now closed.
Going Concern Considerations
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern and in accordance with generally accepted accounting principles in the United States of America. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. Pursuant to the requirements of the ASC 205, management must evaluate whether there are conditions or events, considered in the aggregate, which raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date these financial statements are issued.
This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.
The Company has incurred substantial operational losses of $5,269,745 and $1,511,508 for fiscal years 2024 and 2023, respectively, and an operational gain of $1,692,987 for the nine months ended June 30, 2025. Additionally, the Company has debt obligations over the next fiscal year of $12,067,849 and working capital of $4,916,624, that raise substantial doubt with respect to the Company’s ability to continue as a going concern.
While our working capital and current debt indicate a substantial doubt regarding the Company’s ability to continue as a going concern, the Company has historically, from time to time, satisfied and may continue to satisfy certain short-term liabilities through the issuance of common stock, thus reducing our cash requirement to meet our operating needs. The Company has $7,032,530in cash as of June 30, 2025. Additionally, the Company has (i) secured a line of credit for its Vicon brand to fund operations, which as of June 30, 2025, has available capacity of approximately $936,000, (ii) continually reevaluate our pricing model on our Vicon brand to improve margins on those products and introducing new innovative products to grow revenues, (iii) raised $9,039,959in net proceeds through our May 2024 equity financing, raised an additional $1,307,354through exercise of our Series B Warrants, and anticipate up to $4million of Series B warrants may be exercised, (iv) raised $1,231,450 through a private equity offering on May 29, 2025, and (v) on October 2, 2024, and November 26, 2024 has effected a 60:1and a 35:1reverse stock split, respectively, on our common stock to remain trading on the Nasdaq Capital Markets, and improve our ability to potentially raise capital through equity offerings that we may use to satisfy debt. In the event additional capital is raised through equity offerings and/or debt is satisfied with equity, it may have a dilutive effect on our existing stockholders. While the Company believes these plans, if successful, would be sufficient to meet the capital demands of our current operations for at least the next twelve months, there is no guarantee that we will succeed.
Overall, there is no guarantee that cash flow from our existing or future operations and any external capital that we may be able to raise will be sufficient to meet our working capital needs. The Company currently does not have adequate cash or available liquidity/available capacity on our lines of credit to meet our long-term needs and our above plans in the short term may prove to be inadequate to continue as a going concern. Thus, despite our cash on hand, our ability to draw on our credit line, or changes to our pricing models, and other safeguards, we may be unable to meet our obligations as they become due over the next twelve months beyond the issuance date. The unaudited condensed consolidated financial statements do not include any adjustments relating to this uncertainty.
NOTE 2 – INTERIM STATEMENT PRESENTATION
Basis of Presentation and Use of Estimates
The accompanying unaudited condensed consolidated financial information should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2024.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the Unites States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X pursuant to the requirements of the U.S. Securities and Exchange Commission (‘SEC”). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the interim periods are not necessarily indicative of the results of operations for the entire year.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated financial statements, the disclosure of contingent assets and liabilities in the condensed consolidated financial statements and the accompanying notes, and the reported amounts of revenues, expenses and cash flows during the periods presented. Actual amounts and results could differ from those estimates. The estimates and assumptions the Company makes are based on historical factors, current circumstances and the experience and judgment of the Company’s management. The Company evaluates its estimates and assumptions on an ongoing basis.
Significant Accounting Policies
Note 2 of the Notes to Consolidated Financial Statements, included in the annual report on Form 10-K for the year ended September 30, 2024, includes a summary of the significant accounting policies used in the preparation of the unaudited condensed consolidated financial statements.
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which enhances the disclosures required for operating segments in the Company’s annual and interim consolidated financial statements. ASU 2023-07 is effective for the Company for annual reporting for fiscal 2025 and for interim period reporting beginning in fiscal 2026 on a retrospective basis. Early adoption is permitted. On October 1, 2024, the Company implemented this standard and there has been no material change to the unaudited condensed consolidated financial statements.
On June 30, 2022, the FASB issued ASU 2022-03 Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”), which (1) clarifies the guidance in ASC 820 on the fair value measurement of an equity security that is subject to a contractual sale restriction and (2) requires specific disclosures related to such an equity security. Under current guidance, stakeholders have observed diversity in practice related to whether contractual sale restrictions should be considered in the measurement of the fair value of equity securities that are subject to such restrictions. On the basis of interpretations of existing guidance and the current illustrative example in ASC 820-10-55-52 of a restriction on the sale of an equity instrument, some entities use a discount for contractual sale restrictions when measuring fair value, while others view the application of such a discount to be inconsistent with the principles of ASC 820. To reduce the diversity in practice and increase the comparability of reported financial information, ASU 2022-03 clarifies this guidance and amends the illustrative example. ASU No. 2022-03 is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. On October 1, 2024, the Company implemented this standard and there has been no material change to the unaudited condensed consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Effective
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires public entities to disclose consistent categories and greater disaggregation of information in the rate reconciliation and for income taxes paid. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is required to adopt this standard prospectively in fiscal year 2026 for the annual reporting period ending September 30, 2026. The Company is currently in the process of evaluating the impact of adoption on the unaudited condensed consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, “Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses”, that requires public companies to disclose, in interim and reporting periods, additional information about certain expenses in the financial statements. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. The Company is currently assessing the potential impacts of adoption on the unaudited condensed consolidated financial statements.
In November 2024, the FASB issued ASU 2024-04, “Debt with Conversion and Other Options (Subtopic 470-20), which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. ASU 2024-04 is effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06. Adoption can be on a prospective or retrospective basis. The Company is currently in the process of evaluating the impact of adoption on the unaudited condensed consolidated financial statements.
The Company does not believe that any other recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying unaudited condensed consolidated financial statements.
NOTE 3 – REVENUE
The following table illustrates the approximate disaggregation of the Company’s revenue based off timing of revenue recognition for the three and nine months ended June 30, 2025 and 2024:
SCHEDULE OF DISAGGREGATION OF REVENUE RECOGNITION
NOTE 4 – INCOME/(LOSS) PER COMMON SHARE
Basic net income/(loss) per common share is computed by dividing net income/(loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income/(loss) per common share is computed by dividing net income by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants. For the three and nine months ended June 30, 2025, and 2024, the following items were excluded from the computation of diluted net income/(loss) per common share as their effect is anti-dilutive:
SCHEDULE OF COMPUTATION OF DILUTED NET LOSS PER COMMON SHARE AS ANTI-DILUTIVE EFFECT
For the three and nine months ended June 30, 2025, and 2024, income/(loss) per share basic and diluted for continuing operations are calculated as follows:
SCHEDULE OF LOSS PER SHARE BASIC AND DILUTED FOR CONTINUING OPERATIONS
In accordance with ASC 260-45-13, the common shares underlying the Series A Warrants under the alternative cashless exercise have been included in the calculation of the weighted average shares.
NOTE 5 – SEGMENT INFORMATION
The Company reports and evaluates financial information for two reportable segments: the Security segment and the Industrial Services segment. The Chief Operating Decision Maker (“CODM”) for all segments is Saagar Govil, the CEO of the Company.
The following tables summarize the Company’s reportable segment information and unallocated corporate expenses:
SCHEDULE OF SEGMENT INFORMATION
Unallocated corporate expenses mainly relate to payroll and benefits for corporate officers, investor relation expenses, accounting expenses related to audit and taxes, legal expenses related to corporate matters, interest expense on notes payable, and Series A and B Warrants transaction losses.
NOTE 6 – RESTRICTED CASH
A subsidiary of the Company participates in a consortium in order to self-insure group care coverage for its employees. The plan is administrated by Benecon Group and the Company makes monthly deposits in a trust account to cover medical claims and any administrative costs associated with the plan. These funds, as required by the plan, are restricted in nature and amounted to $899,008 at June 30, 2025, and $1,030,606at September 30, 2024. Additionally, there was $100,000 of restricted cash in escrow per the purchase agreement with Heisey Mechanical, Ltd, as of June 30, 2025 and September 30, 2024, an additional $45,256 and $325,340 in escrow related to bond requirements on certain public projects as of June 30, 2025, and September 30, 2024, respectively, and $68,565 and $66,935 in deposit guarantees as of June 30, 2025, and September 30, 2024, respectively.
NOTE 7 – FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level hierarchy is applied to prioritize the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
The three levels of the fair value hierarchy under the guidance for fair value measurements are described below:
Level 1 — Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Our Level 1 assets include cash equivalents, banker’s acceptances, trading securities investments and investment funds. The Company measures trading securities investments and investment funds at quoted market prices as they are traded in an active market with sufficient volume and frequency of transactions.
Level 2 — Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified contractual term, a Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3 — Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. Level 3 assets and liabilities include cost method investments. Quantitative information for Level 3 assets and liabilities reviewed at each reporting period includes indicators of significant deterioration in the earnings performance, credit rating, asset quality, business prospects of the investee, and financial indicators of the investee’s ability to continue as a going concern.
The Company’s fair value liabilities at June 30, 2025, and September 30, 2024, are as follows.
SCHEDULE OF FAIR VALUE OF LIABILITIES
A summary of the warrant liabilities activity, per the valuation inputs disclosed in NOTE 20 - STOCKHOLDERS’ EQUITY, for the nine months ended June 30, 2025, is as follows:
SCHEDULE OF WARRANT LIABILITIES ACTIVITY
NOTE 8 – TRADE RECEIVABLES, NET
Trade receivables, net consisted of the following:
SCHEDULE OF TRADE RECEIVABLES, NET
Trade receivables include amounts due for shipped products and services rendered.
Allowance for credit losses include estimated losses resulting from the inability of our customers to make the required payments.
NOTE 9 – PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following:
SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS
June 30,
2025
September 30,
2024
NOTE 10 – INVENTORY, NET
Inventory, net consisted of the following:
SCHEDULE OF INVENTORY, NET
The Company maintained an allowance for obsolete inventories of $954,997 and $1,044,530 at June 30, 2025, and September 30, 2024, respectively.
NOTE 11 – PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
SCHEDULE OF PROPERTY AND EQUIPMENT
Depreciation expense for the three and nine months ended June 30, 2025 and 2024, was $312,905 and $960,930, and $325,451 and $998,641, respectively, and is recorded in cost of revenues and general and administrative expenses on the Company’s unaudited condensed consolidated statements of operations.
NOTE 12 – GOODWILL
Changes in the carrying amount of goodwill, by segment, were as follows:
SCHEDULE OF GOODWILL BY SEGMENT
As of June 30, 2025, and September 30, 2024, accumulated impairment losses of $3,846,475 have been recorded related to the Security segment.
NOTE 13 – OTHER ASSETS
On November 13, 2020, and January 19, 2022, Cemtrex made $500,000 in investments, on July 18, 2023, and October 5, 2023, made additional $100,000 in investments, and on October 17, 2024, and November 18, 2024, made additional $50,000 in investments on each respective date, via a simple agreement for future equity (“SAFE”) in MasterpieceVR. The SAFE provides that the Company will automatically receive shares of the entity based on the conversion rate of future equity rounds up to a valuation cap, as defined. MasterpieceVR is a software company that is developing software for content creation using virtual reality. The investment is included in other assets in the accompanying consolidated balance sheet and the Company accounts for this investment and records it at cost. No impairment has been recorded for the three and nine months ended June 30, 2025, and 2024.
Other assets consisted of the following:
SCHEDULE OF OTHER ASSETS
NOTE 14 – ACCRUED EXPENSES
Accrued expenses consisted of the following:
SCHEDULE OF ACCRUED EXPENSES
NOTE 15 – DEFERRED REVENUE
The Company’s deferred revenue for the three and nine months ended June 30, 2025, and 2024, were as follows:
SCHEDULE OF DEFERRED REVENUE
For the three months ended June 30, 2025, and 2024, the Company recognized revenue of $453,205, and $571,660, respectively. For the nine months ended June 30, 2025, and 2024, the Company recognized revenue of $1,167,080 and $1,364,475, respectively, that was previously included in the beginning balance of deferred revenues.
NOTE 16 – CONTRACT ASSETS AND LIABILITIES
Project contracts typically provide for a schedule of billings on percentage of completion of specific tasks inherent in the fulfillment of the Company’s performance obligation(s). The schedules for such billings usually do not precisely match the schedule on which costs are incurred. As a result, contract revenue recognized in the statements of operations can and usually does differ from amounts that can be billed to the customer at any point during the contract. Amounts by which cumulative contract revenue recognized on a contract as of a given date exceeds cumulative billings and unbilled receivables to the customer under the contract are reflected as a current asset in the unaudited condensed consolidated balance sheets under the caption “Contract assets.” Amounts by which cumulative billings to the customer under a contract as of a given date exceed cumulative contract revenue recognized are reflected as a current liability in the unaudited condensed consolidated balance sheets under the caption “Contract liabilities.” Conditional retainage represents the portion of the contract price withheld until the work is substantially complete for assurance of the Company’s obligations to complete the job.
The following is a summary of the Company’s uncompleted contracts:
SCHEDULE OF CONTRACT ASSETS AND LIABILITIES
For the three and nine months ended June 30, 2025 and 2024, the Company recognized revenue of $0 and $18,625, and $1,103,156 and $905,319, respectively, that was previously included in the beginning balance of contract liabilities.
The following table summarizes the net activity of the contract assets and contract liabilities for the three and nine months ended June 30, 2025, and 2024.
SCHEDULE OF CONTRACT ASSETS AND CONTACT LIABILITIES
NOTE 17 – RELATED PARTY TRANSACTIONS
On November 22, 2022, the Company entered into two Asset Purchase Agreements and one Simple Agreement for Future Equity (“SAFE”) with the Company’s CEO, Saagar Govil, to secure the sale of the subsidiaries Cemtrex Advanced Technologies, Inc, which include the brand SmartDesk, and Cemtrex XR, Inc., which include the brands Cemtrex XR, Virtual Driver Interactive, Bravo Strong, and good tech (formerly Cemtrex Labs), to Mr. Govil.
On January 6, 2025, the Company and Saagar Govil signed an agreement to revise the purchase price structure and payment terms.
The Agreement’s Purchase Price provisions were amended to reflect that the Purchase Price will solely consist of the royalties based on the actual revenues generated in the three years following closing. The provision requiring the total sum of royalties to reach a minimum of $820,000, with any shortfall to be paid by Purchaser, was removed from the Agreement.
Additionally, it was agreed that the payment terms due under the royalties shall be as follows commencing on January 1, 2025:
This transaction was approved by the Board of Directors with Saagar Govil abstaining from the vote.
Based on the new payment terms, management determined that it was appropriate to remove the previously recognized royalty receivable of $280,545from the financial statements as of December 31, 2024.
As of June 30, 2025, there were royalties receivable from the sale of Cemtrex, XR, Inc. of $410,143, of which $130,000 is considered short-term and is presented on the Company’s unaudited Condensed Consolidated Balance Sheet under the caption “Trade receivables, net – related party. The Company has taken a $50,000 allowance for expected credit losses against these royalties.
As of June 30, 2025, there was $513,263 in trade receivables due from the Cemtrex XR successor company, CXR, Inc. Of these receivables $60,628are related to costs paid by Cemtrex and $130,000 is the short term due on the royalties on CXR, Inc.’s revenues. The remaining $322,635 is related to the services provided by Cemtrex Technologies Pvt. Ltd. in the normal course of business.
On May 5, 2025, Saagar Govil, CEO, made a short-term loan to the Company of $200,000 for certain operating needs. This loan was repaid on August 1, 2025.
NOTE 18 – LEASES
The Company is party to contracts where we lease property from others under contracts classified as operating leases. The Company primarily leases office and operating facilities, vehicles, and office equipment. The weighted average remaining term of our operating leases was approximately 2.91 years at June 30, 2025, and 3.30 years at September 30, 2024. The weighted average discount rate used to measure lease liabilities was approximately 6.56% at June 30, 2025, and 6.54% at September 30, 2024. The Company used the rate implicit in the lease, where known, or its incremental borrowing rate as the rate used to discount the future lease payments.
The Company has elected not to recognize lease assets and liabilities for leases with a term of 12 months or less.
The Company’s corporate segment leased approximately 100 square feet of office space in Brooklyn, NY on a month-to-month lease at a rent of $600 per month. Short-term rent expense was $5,400 for the nine months ended June 30, 2025, and 2024. The Company terminated this lease on June 30, 2025.
The Company’s security segment leases approximately 350 square feet of office space in Clovis, CA on a month-to-month lease at a rent of $1,933 per month. Short-term rent expense was $27,870 for the nine months ended June 30, 2025, and $43,941 for the nine months ended June 30, 2024.
A reconciliation of undiscounted cash flows to operating lease liabilities recognized in the unaudited condensed consolidated balance sheet at June 30, 2025, is set forth below:
SCHEDULE OF RECONCILIATION OF UNDISCOUNTED CASH FLOWS TO OPERATING LEASE LIABILITIES
Lease costs for the three and nine months ended June 30, 2025, and 2024 are set forth below:
SCHEDULE OF LEASE COSTS
For the three months ended
For the nine months ended
NOTE 19 – LINES OF CREDIT AND LONG-TERM LIABILITIES
Revolving line of credit
On October 5, 2023, the Company obtained a revolving line of credit in the amount of $5,000,000 from Pathward, N.A. The interest rate will be a rate which is equal to three percentage points (3%) in excess of that rate shown in the Wall Street Journal as the prime rate (the “Effective Rate”) and matures twenty-four24 months from the closing date. This loan is secured by the Company’s eligible accounts receivable and eligible finished goods inventory. The Company’s ability to borrow against the line of credit is limited by the value of the eligible assets. As of June 30, 2025, the Company had enough eligible assets to access approximately $3,000,000 of the credit line. The Company was in compliance with all loan covenants as of June 30, 2025. As of June 30, 2025, and September 30, 2024, this loan had a balance of $2,039,858, and $3,125,011, respectively.
Standstill Agreement
On April 30, 2024, the Company entered into a Standstill Agreement with Streeterville Capital, LLC (“Streeterville”) in which Streeterville agreed not to seek to redeem any portion of its two outstanding notes with the Company for a period of one year which expired on April 30, 2025 and in exchange, the Company agreed to pay to Streeterville the greater of $4,000,000 or fifty percent (50%) of the net proceeds the Company receives from the sale of any of its common stock or preferred stock during the Standstill Period. During fiscal year 2024, the Company paid Streeterville $4,588,897 under this agreement.
On May 29, 2025, the Company entered into a Standstill Agreement with Streeterville in which Streeterville agreed not to seek to redeem any portion of its two outstanding notes with the Company for a period of 60 days which expired on July 29, 2025 and in exchange, the Company agreed to pay to Streeterville the greater of $550,000 or fifty percent (50%) of the net proceeds the Company receives from the sale of any of its common stock or preferred stock during the Standstill Period. During the standstill period, the Company paid Streeterville $636,250 under this agreement.
Notes payable
On November 21, 2024, the Company issued a note payable to Streeterville Capital, LLC in the amount of $580,000. This note carries interest of 8% and matures on May 21, 2026. After deduction of an original issue discount of $75,000 and legal fees of $5,000, the Company received $500,000 in cash. As of June 30, 2025, this note had unamortized original issue discount balance of $45,833.
The following table outlines the Company’s secured liabilities:
SCHEDULE OF LINES OF CREDIT AND AND LONG TERM LIABILITIES
NOTE 20 – STOCKHOLDERS’ EQUITY
Series 1 Preferred Stock
The Company’s Series 1 Preferred Stock was suspended from the Nasdaq Capital Market on January 22, 2024. The Series 1 Preferred Stock is now quoted on the OTC Markets OTCID tier under the symbol “CETXP.”
Nasdaq filed a Form 25 on March 21, 2024. The deregistration of the Company’s Series 1 Preferred Stock under Section 12(b) of the Exchange Act became effective 90 days after filing of Form 25.
During the nine months ended June 30, 2025, 252,278 shares of Series 1 Preferred Stock were issued to pay dividends to holders of Series 1 Preferred Stock.
During the nine months ended June 30, 2025, 3,778 shares of Series 1 Preferred Stock were cancelled.
As of June 30, 2025, and September 30, 2024, there were 2,705,327 and 2,456,827 shares of Series 1 Preferred Stock issued and 2,641,227and 2,392,727 shares of Series 1 Preferred Stock outstanding, respectively.
Common Stock
On October 2, 2024, and November 26, 2024, the Company completed a 60:1 and 35:1, respectively, reverse stock split on its common stock. All share and per share data have been retroactively adjusted for the reverse splits.
During the nine months ended June 30, 2025, 1,436,749 shares of common stock were issued for the exercise of 3,946,790 Series A Warrants under the Alternative Cashless Exercise option as adjusted for reverse stock splits and exercise price adjustments. During the nine months ended June 30, 2025, there were 6 shares issued for rounding on November 26, 2024, reverse stock split.
During the nine months ended June 30, 2025, 621,175shares of common stock were issued for the exercise of 621,175Series B Warrants which generated $1,307,355 in proceeds.
May 2024 Equity Financing
On May 1, 2024, the Company entered into an underwriting agreement with Aegis Capital Corp., in connection with a firm commitment underwritten public offering (the “Offering”), providing for the issuance of (i) 554,705 units (the “Common Units”), each consisting of one share of common stock of the Company (“Common Stock”), a warrant to purchase one share of common stock at an exercise price of $0.85 per share, which warrant will expire on the two-and-a-half year anniversary of the original issuance date (the “Series A Warrants”), and a warrant to purchase one share of common stock at an exercise price of $0.85 per share, which warrant will expire on the five-year anniversary of the original issuance date (the “Series B Warrants”); and (ii) 11,210,000 pre-funded units (the “Pre-funded Units”), each consisting of one pre-funded warrant to purchase one share of common stock (the “Pre-funded Warrants”), a Series A Warrant and a Series B Warrant. The purchase price of each Unit was $0.85, and the purchase price of each Pre-Funded Unit was $0.849. The Pre-Funded Warrants are immediately exercisable and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.
In addition, the Company granted the Underwriter a 45-day option to purchase additional 1,764,705 shares of common stock and/or Pre-Funded Warrants, representing up to 15% of the number of common stock and Pre-Funded Warrants sold in the Offering, and/or additional 1,764,705Series A Warrants representing up to 15% of the Series A Warrants sold in the Offering, and/or additional 1,764,705 Series B Warrants representing up to 15% of the Series B Warrants sold in the Offering to cover over-allotments, if any. The Offering closed on May 3, 2024. An aggregate of 11,764,705 Units (which includes 554,705 shares of common stock), 11,210,000 Pre-Funded Units (which includes 11,210,000Pre-Funded Warrants), and a Series A Warrant and a Series B Warrant were sold in the Offering. On May 3, 2024, the Underwriter partially exercised its over-allotment option with respect to 1,764,705 Series A Warrants and 1,764,705 Series B Warrants. The aggregate gross proceeds to the Company were $10,035,293, before deducting underwriting discounts and other issuance expenses of $1,133,166. The underwriting discounts and other issuance expenses were expensed since the Series A, Series B, and Pre-Funded Warrants were each determined to be liabilities and recorded at their fair value.
May 2024 Warrants
The Company evaluated the Series A, Series B, and Prefunded Warrants (collectively, the “Warrants”) in accordance with the guidance at ASC 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging, and determined that the Warrants are precluded from being considered indexed to the entity’s own stock, resulting in the Warrants being classified as a liability. The fair value of the Series A Warrants was determined based on the stock price on issuance of $0.277 multiplied by the total number of shares of common stock issuable upon exercise of the Series A alternative cashless exercise. Under the alternative cashless exercise, the Holder is entitled to receive three times the normal amount of shares issued in a cashless exercise. The Series A Holder may only execute the alternative cashless exercise after Stockholder Approval (and received June 17, 2024); at the time of issuance, Stockholder Approval was deemed perfunctory and almost certain to occur, and the most likely settlement option would be through the alternative cashless exercise. As such, upon issuance, the total fair value of the Series A Warrants was $11,242,940, which was based on 40,588,230 units issued under the alternative cashless exercise. The measurement of fair value of the Series B Warrants were determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $0.277, exercise price of $0.85, term of five years, volatility of 132%, risk-free rate of 4.5%, and expected dividend rate of 0%). The grant date fair value of these Series B Warrants was estimated to be $2,942,711 on May 3, 2024, and such warrants were classified as liabilities. Due to the nominal exercise price, the fair value of the Prefunded Warrants was based on the intrinsic value of each Warrant on the grant date. The intrinsic value was calculated based on the May 3, 2024, stock price of $0.277 and the strike price of $0.001, resulting in a total fair value of $3,093,960. The total fair value of the Warrants upon issuance was $17,279,611. Given that the gross proceeds received of $10,024,083 was less than the total fair value of the liability classified Warrants, the Company recorded a loss on excess fair value of $7,255,528 at issuance.
The following table summarizes information about shares issuable under warrants outstanding as of June 30, 2025.
SCHEDULE SHARES ISSUABLE UNDER WARRANTS OUTSTANDING
On October 2, 2024, the Company completed a 60 for 1 reverse stock split. At the time, the Company had 12,059,879 Series A Warrants and13,529,410 Series B Warrants outstanding at an exercise price of $0.85. According to the terms of the Series A and Series B warrants, in the event of a reverse stock split, the exercise price resets to the lowest VWAP during the period commencing five (5) consecutive trading days immediately preceding and the five (5) consecutive trading days commencing on the reverse stock split effective date and the number of warrants are adjusted as to keep the aggregate value of the warrants then outstanding remains unchanged. On October 7, 2024, it was determined that the exercise price has reset to $0.7488.
The following table illustrates the adjustment.
SCHEDULE OF WARRANTS ADJUSTMENT
On November 26, 2024, the Company completed a 35 for 1 reverse stock split. At the time, the Company had 1,201,932 Series A Warrants and15,444,550 Series B Warrants outstanding at an exercise price of $0.7488. According to the terms of the Series A and Series B warrants, in the event of a reverse stock split, the exercise price resets to the lowest VWAP during the period commencing five (5) consecutive trading days immediately preceding and the five (5) consecutive trading days commencing on the reverse stock split effective date and the number of warrants are adjusted as to keep the aggregate value of the warrants then outstanding remains unchanged. On December 2, 2024, it was determined that the exercise price has reset to $3.1488.
On May 29, 2025, the Company completed an underwritten public offering of common stock. At the time, the Company had 248,166 Series A Warrants and 3,318,556 Series B Warrants outstanding at an exercise price of $3.1488. According to the terms of the Series A and Series B warrants, in the event of a public offering, the exercise price resets to the lower of (i) the public offering price, or (ii) the lowest VWAP during the period commencing five (5) consecutive trading days commencing on the republic offering effective date and the number of warrants are adjusted as to keep the aggregate value of the warrants then outstanding remains unchanged. On June 2, 2025, it was determined that the exercise price has reset to $0.893.
For the three and nine months ended June 30, 2025, the company recognized a gain on the fair value of the common shares issued for the exercised warrants of $74,008 and a loss of $15,722,097, respectively, which represents the difference between the fair value of the shares issued and the value of the warrants exercised.
For the three and nine months ended June 30, 2025, the company recognized a loss on changes in fair value of warrant liability of $3,615,437, and 8,928,275, respectively. For the three and nine months ended June 30, 2024, the company recognized a gain on changes in fair value of warrant liability of $2,807,890, which represents the change in the fair value of the of the warrants unexercised at the measurement period.
May 2025 Equity Offering
On May 28, 2025 the Company, entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp. (the “Underwriter”), pursuant to which the Company agreed to sell to the Underwriter, in a firm commitment public offering (the “Offering”), 1,250,000 shares of the Company’s common stock, par value $0.001 per share (the “Firm Shares”), for a public offering price of $1.00 per share. The Company also granted the Underwriter an over-allotment option to purchase up to 187,500shares of the Company’s common stock (the “Option Shares,” together with Firm Shares, the “Shares”).
The Company received $1,250,000 in gross proceeds from this Offering, before deducting underwriting discounts and other related offering expenses of $191,050. The Offering closed on May 29, 2025.
On June 2, 2025, the Underwriter fully exercised the option, and on June 3, 2025, the Company closed the offering of the Option Shares to the Underwriter, for aggregate gross proceeds of approximately $187,500 less applicable underwriter discounts and other offering fees and expenses of $15,000.
NOTE 21 – SHARE-BASED COMPENSATION
For the three and nine months ended June 30, 2025, and 2024, the Company recognized $3,097 and $10,280, and $7,559, and $22,675 of share-based compensation expense on its outstanding options, respectively. As of June 30, 2025, $3,955 of unrecognized share-based compensation expense is expected to be recognized over the next 3 months. Future compensation amounts will be adjusted for any change in estimated forfeitures.
During the three and nine months ended June 30, 2025, no options were granted, cancelled, or forfeited.
NOTE 22 – COMMITMENTS AND CONTINGENCIES
From time to time, the Company and its subsidiaries are involved in legal proceedings that are incidental to the operation of our business. The Company continues to defend vigorously against all claims. Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information, including assessment of the merits of the particular claim, as well as current accruals and insurance coverage, the Corporation does not expect that such legal proceedings will have a material adverse impact on its unaudited condensed consolidated financial statements.
NOTE 23 – INCOME TAXES
For the three and nine months ended June 30, 2025, and 2024, the Company recorded an income tax expense of approximately $14,035 and $245,098and $67,294 and $238,049 from continuing operations, respectively. These taxes are related to our international operations and state taxes of certain subsidiaries.
As of year-end 2024, the Company had federal, state, and UK net operating losses (“NOL”) of approximately $71.7 million, $5.2million, and $1.7 million respectively. The Company has pre 2018 TCJA NOLs and post 2017 TCJA NOLs. Pre 2018 NOLs will expire in 20 years with the first amount expiring in 2030 and the post 2017 NOLs can be carried forward indefinitely. Generally, state NOLs have different NOL carryforward rules, with some pre-2018 NOLs being able to be carried forward indefinitely. The first amount of state NOLs begin to expire in 2038. In accordance with Section 382 of the U.S. Internal Revenue Code, the usage of the Company’s NOL carryforwards is subject to annual limitations following greater than 50% ownership changes. Tax returns for the years ended 2021 through 2024 are subject to review by tax authorities.
The Company’s effective tax rates for the three months ended June 30, 2025, and 2024, were (0.17%) and (0.74%) respectively. For the nine months ended June 30, 2025, and 2024, the effective tax rates were (1.17%) and (2.02%) respectively.
NOTE 24 – SUBSEQUENT EVENTS
On Various dates in July and August 2025, 2,018,577 shares of common stock were issued in exchange for 2,018,577 Series B warrants. These exercises generated $1,802,590 in gross proceeds and generated a $532,844 gain on the fair value of the common shares issued for the exercised warrants, which represents the difference between the fair value of the shares issued and the value of the warrants exercised.
In July 2025, the Company acquired approximately 5,500 units of Solana (SOL) as part of its broader cryptocurrency strategy. This investment is intended to diversify the Company’s treasury holdings and provide potential exposure to blockchain-based technologies relevant to its long-term strategic initiatives.
On August 1, 2025, the Company issued 150,000 shares to settle $166,050 of debt due to Streeterville Capital, LLC. $2,814 was applied to accrued interest and $163,236 was applied to the principal on the note that matures on February 22, 2026.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Except for historical information contained in this report, the matters discussed are forward-looking statements that involve risks and uncertainties. When used in this report, words such as “anticipates”, “believes”, “could”, “estimates”, “expects”, “may”, “plans”, “potential” and “intends” and similar expressions, as they relate to the Company or its management, identify forward-looking statements. Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. Such forward-looking statements are based on the beliefs of the Company’s management, as well as assumptions made by and information currently available to the Company’s management. Among the factors that could cause actual results to differ materially are the following: the effect of business and economic conditions; the impact of competitive products and their pricing; unexpected manufacturing or supplier problems; the Company’s ability to maintain sufficient credit arrangements; changes in governmental standards by which our environmental control products are evaluated and the risk factors reported from time to time in the Company’s SEC reports, including its recent report on Form 10-K. The Company undertakes no obligation to update forward-looking statements as a result of future events or developments.
General Overview
Cemtrex’s Security segment operates under the brand of its majority owned subsidiary, Vicon Industries, Inc. (“Vicon”), which provides end-to-end security solutions to meet the toughest corporate, industrial, and governmental security challenges. Vicon’s products include browser-based video monitoring systems and analytics-based recognition systems, cameras, servers, and access control systems for every aspect of security and surveillance in industrial and commercial facilities, federal prisons, hospitals, universities, schools, and federal and state government offices. Vicon provides innovative, mission critical security and video surveillance solutions utilizing Artificial Intelligence (AI) based data algorithms.
Cemtrex’s Industrial Services segment operates under the brand, Advanced Industrial Services (“AIS”), which offers single-source expertise and services for rigging, millwrighting, in plant maintenance, equipment erection, relocation, and disassembly to diversified customers. AIS installs high precision equipment in a wide variety of industrial markets like automotive, printing & graphics, industrial automation, packaging, and chemicals, among others. AIS is a leading provider of reliability-driven maintenance and contracting solutions for machinery, packaging, printing, chemical, and other manufacturing markets. The focus is on customers seeking to achieve greater asset utilization and reliability to cut costs and increase production from existing assets, including small projects, sustaining capital, turnarounds, maintenance, specialty welding services, and high-quality scaffolding.
Significant Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon the accompanying unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Although these estimates are based on our knowledge of current events, our actual amounts and results could differ from those estimates. The estimates made are based on historical factors, current circumstances, and the experience and judgment of our management, who continually evaluate the judgments, estimates and assumptions and may employ outside experts to assist in the evaluations.
Certain of our accounting policies are deemed “significant”, as they are both most important to the financial statement presentation and require management’s most difficult, subjective, or complex judgments as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a discussion of our significant accounting policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended September 30, 2024.
Results of Operations – For the three months ended June 30, 2025, and 2024
Revenues
Our Security segment revenues for the three months ended June 30, 2025, increased by $1,388,327 or 22% to $7,581,814 from $6,193,487 for the three months ended June 30, 2024. This increase is mainly due to increased demand for the Company’s products.
Our Industrial Services segment revenues for the three months ended June 30, 2025, increased by $890,833 or 10%, to $9,383,844 from $8,492,911, for the three months ended June 30, 2024. This increase is mainly due to increased demand for the segment’s services.
Gross Profit
Gross Profit for the three months ended June 30, 2025, was $7,370,506 or 43% of revenues as compared to gross profit of $5,887,147 or 40% of revenues for the three months ended June 30, 2024.
Gross profit in our Security segment was $3,953,562 or 52% of the segment’s revenues for the three months ended June 30, 2025, as compared to gross profit of $3,223,091 or 52% of the segment’s revenues for the period ended June 30, 2024.
Gross profit in our Industrial Services segment was $3,416,944 or 36% of the segment’s revenues for the three months ended June 30, 2025, as compared to gross profit of $2,654,056 or 31% of the segment’s revenues for the period ended June 30, 2024. Gross profit as a percentage of revenues increased due to improved margins on projects in the three months ended June 30, 2025, compared to the three months ended June 30, 2024.
General and Administrative Expenses
General and administrative expenses for the three months ended June 30, 2025, decreased $565,838 or 7% to $7,626,342 from $8,192,180 for the three months ended June 30, 2024. The decrease in general and administrative expenses is mainly related to decreased general and administrative expenses, legal expenses, depreciation, and travel.
Research and Development Expenses
Research and Development expenses for the three months ended June 30, 2025, were $386,565 compared to $864,483 for the three months ended June 30, 2024, a decrease of $477,918 or 55%. Research and Development expenses are related to the Security Segment’s development of next generation solutions associated with security and surveillance systems software.
Other Income/Expense
Other expense for the three months ended June 30, 2025, was $3,934,931, as compared to expense of $5,902,493 for the three months ended June 30, 2024. Other expense for the three months ended June 30, 2025, was mainly driven by losses on changes in fair value of warrant liability of $3,615,437 which represents the change in the fair value of the of the warrants unexercised at the measurement period. Other expense for the three months ended June 30, 2024, was mainly driven by a loss on excess fair value of the warrants at issuance of $7,255,528.
Provision for Income Taxes
During the three months ended June 30, 2025, and 2024, the Company had income tax expense from continuing operations of $14,035 and $67,294, respectively. The provision for income tax is estimated based upon the current income projections of the Company, the effective rate of the prior year, and the Company’s current ability to utilize net loss carryforwards. The Company’s effective tax rate for the three months ended June 30, 2025, and 2024, was (0.17%) and (0.74%) respectively.
Results of Operations – For the nine months ended June 30, 2025, and 2024
Our Security segment revenues for the nine months ended June 30, 2025, increased by $6,570,445 or 28% to $30,016,665 from $23,446,220 for the nine months ended June 30, 2024. This increase is due to a large sale valued at $10,375,000 for security technology products under our Vicon brand. This sale represents 35% of the revenue for this segment for the nine months ended June 30, 2025.
Our Industrial Services segment revenues for the nine months ended June 30, 2025, increased by $2,661,222 or 11%, to $27,939,161 from $25,277,939, for the nine months ended June 30, 2024. This increase is mainly due to increased demand for the segment’s services.
Gross Profit for the nine months ended June 30, 2025, was $25,237,897 or 44% of revenues as compared to gross profit of $19,898,962 or 41% of revenues for the nine months ended June 30, 2024.
Gross profit in our Security segment was $15,597,177 or 52% of the segment’s revenues for the nine months ended June 30, 2025, as compared to gross profit of $11,853,007 or 51% of the segment’s revenues for the period ended June 30, 2024. Gross profit percentage was up due to the mix of products sold in the nine months ended June 30, 2025, compared to the nine months ended June 30, 2024.
Gross profit in our Industrial Services segment was $9,640,720 or 35% of the segment’s revenues for the nine months ended June 30, 2025, as compared to gross profit of $8,045,955 or 32% of the segment’s revenues for the period ended June 30, 2024. Gross profit as a percentage of revenues increased due to improved margins on projects in the nine months ended June 30, 2025, compared to the nine months ended June 30, 2024.
General and administrative expenses for the nine months ended June 30, 2025, decreased $693,930 or 3% to $21,490,373 from $22,184,303 for the nine months ended June 30, 2024. The decrease in general and administrative expenses is mainly related to decreased salaries, general and administrative expenses, legal expenses, depreciation, and other operating expenses.
Research and Development expenses for the nine months ended June 30, 2025, were $2,054,537 compared to $2,664,688 for the nine months ended June 30, 2024, a decrease of $610,151 or 23%. Research and Development expenses are related to the Security Segment’s development of next generation solutions associated with security and surveillance systems software.
Other expense for the nine months ended June 30, 2025, was $26,095,977, as compared to $6,855,804 for the nine months ended June 30, 2024. Other expense for the nine months ended June 30, 2025, was mainly driven by losses on excess fair value of the warrants of $15,722,097 which represents the difference between the fair value of the shares issued and the value of the warrants exercised and losses on changes in fair value of warrant liability of $8,928,275, which represents the change in the fair value of the of the warrants unexercised at the measurement period. Other expense for the nine months ended June 30, 2024, was mainly driven by the May 2024 Equity Financing expenses of $995,333, the loss on the excess fair value of the warrants issued in the May 2024 Equity Financing of $7,255,528, offset by the change in the fair value of the warrants of $2,807,890.
During the nine months ended June 30, 2025, and 2024, the Company had income tax expense from continuing operations of $245,098 and $238,049, respectively. The provision for income tax is estimated based upon the current income projections of the Company, the effective rate of the prior year, and the Company’s current ability to utilize net loss carryforwards. The Company’s effective tax rate for the nine months ended June 30, 2025, and 2024, was (0.87%) and (2.02%) respectively.
Effects of Inflation
The Company’s business and operations have been affected by inflation during the periods for which financial information is presented. In response, the Company has instituted price increases and initiated cost-saving measures to mitigate the effects of inflation on operations.
Liquidity and Capital Resources
Working capital was $4,916,624 at June 30, 2025, compared to working capital of $8,103,457 at September 30, 2024. This includes cash and equivalents and restricted cash of $8,145,359 at June 30, 2025, and $5,420,392 at September 30, 2024. The decrease in working capital was primarily due to the increase in the current maturities of long-term liabilities and decreases in inventory and contract assets.
Cash provided by operating activities for the nine months ended June 30, 2025, was $3,410,782 and used $2,076,477 of cash for the nine-month period ended June 30, 2024. Our operating cash flow was mainly the result of our net loss, less the non-cash adjustments, combined with operating changes in inventory, contract assets, and contract liabilities.
Trade receivables increased by $1,519,252 or 14% to $12,678,928 at June 30, 2025, from $11,159,676 at September 30, 2024. The increase in trade receivables is attributable to the remaining balance on the large sale in the Security segment, which was collected in July 2025.
Cash used by investing activities for the nine months ended June 30, 2025, was $1,482,232 compared to $406,224 used for the nine months ended June 30, 2024. Investing activities for the nine months ended June 30, 2025, and 2024, were driven by the Company’s purchase of property and equipment and investment in Masterpiece VR.
Cash provided by financing activities for the nine months ended June 30, 2025, was $1,117,811 compared to $3,867,544 for the nine months ended June 30, 2024. Financing activities for the nine months ended June 30, 2025, were primarily driven by the proceeds from the Company’s revolving line of credit, note payable, proceeds from offerings, and the exercise of Series B Warrants. Financing activities for the nine months ended June 30, 2024, were primarily driven by the proceeds from the Company’s revolving line of credit, proceeds from offerings, and payments on the Company’s debt.
The Company’s working capital may not be sufficient to cover operating costs which indicates substantial doubt regarding the Company’s ability to continue as a going concern, the Company has historically, from time to time, satisfied and may continue to satisfy certain short-term liabilities through the issuance of common stock, thus reducing our cash requirement to meet our operating needs. The Company has $8,145,359 in cash and cash equivalents and restricted cash as of June 30, 2025. Additionally, the Company has (i) secured a line of credit for its Vicon brand to fund operations, which as of June 30, 2025, has available capacity of approximately 936,000, (ii) continually reevaluated its pricing model on our Vicon brand to improve margins on those products, (iii) entered into a Standstill Agreement with Streeterville Capital, LLC (“Streeterville”) in which Streeterville agreed not to seek to redeem any portion of its two outstanding notes with the Company expiring on April 30, 2025 in exchange, the Company agreed to pay to Streeterville the greater of $4,000,000 or fifty percent (50%) of the net proceeds the Company receives from the sale of any of its common stock or preferred stock during the Standstill Period. To date, the company has paid Streeterville $4,588,897 under this agreement, (iv) entered into a Standstill Agreement with Streeterville in which Streeterville agreed not to seek to redeem any portion of its two outstanding notes with the Company for a period of 60 days which expired on July 29, 2025 and in exchange, the Company agreed to pay to Streeterville the greater of $550,000 or fifty percent (50%) of the net proceeds the Company receives from the sale of any of its common stock or preferred stock during the Standstill Period. During the standstill period, the Company paid Streeterville $636,250 under this agreement.
In the event additional capital is raised through equity offerings and/or debt is satisfied with equity, it may have a dilutive effect on our existing stockholders. While the Company believes these plans, if successful, would be sufficient to meet the capital demands of our current operations for at least the next twelve months, there is no guarantee that we will succeed. Overall, there is no guarantee that cash flow from our existing or future operations and any external capital that we may be able to raise will be sufficient to meet our working capital needs. The Company currently does not have adequate cash or available liquidity/available capacity on our lines of credit to meet our short or long-term needs. Absent an ability to raise additional outside capital and restructure or refinance all or a portion of our debt, the Company will be unable to meet its obligations as they become due over the next twelve months beyond the issuance date.
Each segment of the Company’s operations has positioned itself for growth and the Company’s long-term objectives include increasing marketing and sales for the Company’s products and services in each segment, increasing the Company’s presence through collaboration partnerships in each segment and through strategic acquisitions of complementary businesses for each segment. These long-term objectives will require sufficient cash to complete, and the Company expects to fund these objectives with cash on hand, issuance of debt, and from proceeds from the sale of the Company’s securities, which may not be sufficient to fully implement our growth initiatives.
The unaudited condensed consolidated financial statements do not include any adjustments relating to this uncertainty.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures reporting as promulgated under the Exchange Act is defined as controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our CEO and our CFO have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2025. Based on their evaluation, our management has concluded that as of June 30, 2025, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) that occurred during the nine months ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
Part II Other Information
Item 1. Legal Proceedings.
To the Company’s knowledge, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 1A. Risk Factors
Our business faces many risks, a number of which are described in the section captioned “Risk Factors” in our Annual Report for the year ended September 30, 2024, filed with the SEC on December 30, 2024 and amended on January 10, 2025 and April 11, 2025, and in our Quarterly Report for the quarter ended March 31, 2025, filed with the SEC on May 15, 2025. The risks described may not be the only risks we face. Other risks of which we are not yet aware, or that we currently believe are not material, may also materially and adversely impact our business operations or financial results. If any of the events or circumstances described in the risk factors contained in our Annual Report or Quarterly Report occur, our business, financial condition or results of operations could be adversely impacted and the value of an investment in our securities could decline. Investors and prospective investors should consider the risks described in our Annual Report and Quarterly Reports, and the information contained in the section captioned “Forward-Looking Statements” and elsewhere in this Quarterly Report before deciding whether to invest in our securities.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Preferred Stock
During the nine months ended June 30, 2025, 621,175 shares of common stock were issued for the exercise of 621,175 Series B Warrants which generated $1,307,355 in proceeds.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
N/A
Item 5. Other Information
Item 6. Exhibits
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Chief Financial Officer
and Principal Financial Officer