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. 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 this report on Form 10-K. The Company undertakes no obligation to update forward-looking statements as a result of future events or developments.





Overview

Cemtrex was incorporated in 1998, in the state of Delaware and has evolved through strategic acquisitions and internal growth into a leading multi-industry technology company. The Company has expanded in a wide range of sectors, including smart technologies, virtual and augmented realities, industrial solutions, and intelligent security systems.

We are a diversified company that predominantly operates in the United States. We believe our diversity of business segments, and the breadth of our product and services portfolios, have helped mitigate the economic impact of any one particular industry sector or any single region on our consolidated operating results and we expect the same in the future. We believe growth for our products and services is driven by the increasing demand for newer technology products and overall industrial economic growth. These trends stimulate investment in new consumer and industrial products with related infrastructure, and in upgrades of existing facilities. We continue to focus on revenue growth, market expansion and increasing profitability by expanding our presence in emerging technologies. Our outlook is to continue expanding our scope of technology, products, and services horizontally through selective acquisitions and the formation of new business units by leveraging our technical and financial resources.

Potential Impacts of COVID-19 on our Business

The current COVID-19 pandemic has impacted our business operations and the results of our operations in this fiscal year, primarily with delays in expected orders by many customers and new product development, including newer versions of surveillance software since our technical facility in Pune, India has been under lock down. Overall bookings level in the IS segment of our business is down by more than 20%, however our AT segment has experienced relatively less slow down. In addition, due to delays in certain supply chain areas, the expected launch times of our new products and new versions has resulted in delays of several months.





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The broader implications of COVID-19 on our results from operations going forward remains uncertain. The COVID-19 pandemic has the potential to cause adverse effects to our customers, suppliers or business partners in locations that have or will experience more pronounced disruptions, which could result in a reduction to future revenue and manufacturing output as well as delays in our new product development activities. However, on the other hand, opportunities in the video surveillance field have been growing for Vicon products.

The extent of the pandemic's effect on our operational and financial performance will depend in large part on future developments, which cannot be reasonably estimated at this time. Future developments include the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact both within and outside the jurisdictions where we operate, the impact on governmental programs and budgets, the development of treatments or vaccines, and the resumption of widespread economic activity. Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we are unable to predict with any confidence the likely impact of the COVID-19 pandemic on our future operations.





Business Strategy

We intend to continue utilizing our resource capabilities to deliver exceptional value for our customers, shareholders, and employees. Our focus is to grow in markets where we see significant long-term opportunity to create an attractive return on shareholder equity. We leverage our engineering, manufacturing expertise and strong customer relationships to develop new cutting-edge technologies and advanced products that solve technological challenges faced by our customers. We thoroughly analyze new product opportunities by considering projected demand for the product or service, and expected operating costs, and then only pursue those opportunities which we believe will contribute to earnings growth in the future. In addition, we believe our senior management team has substantial business and technical experience to enable us to pursue our business strategies.

The Company believes its ability to attract and retain new customers comes from their ongoing commitment to understanding its customers' business performance requirements and our expertise in meeting or exceeding these requirements and enhancing their competitive edge through cutting edge technology. We work closely with our customers from an operational and senior executive level to achieve a deep understanding of our customer's goals, challenges, strategies, operations, and products to ultimately provide the best solutions for them.

We continue to seek and execute additional strategic acquisitions and focus on expanding our products and services as well as entering into new markets. We believe that the diversity of our products & services and our ability to deliver full solutions to a variety of end markets provides us with multiple sources of stable growth and a competitive advantage relative to other players in the industry. We constantly look for opportunities to gain new customers and penetrate geographic locations and end markets or acquire new product or service opportunities through acquisitions that are operationally and financially beneficial for the Company. However, there can be no assurance that we will succeed in our strategies.

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





Advanced Technologies (AT)

Cemtrex's Advanced Technologies segment delivers cutting-edge technologies in the Internet of Things (IoT) and Smart Devices, such as the SmartDesk. Through the Company's advanced engineering and product design, the Company delivers Virtual Reality (VR) and Augmented Reality (AR) solutions that provide higher productivity, progressive design and impactful experiences for consumer products, and various commercial and industrial applications. The Company is in the process of developing virtual reality applications for commercialization over the next couple years.

The AT business segment also includes the Company's majority owned subsidiary, Vicon Industries, which provides end-to-end security solutions to meet the toughest corporate, industrial and governmental security challenges. Vicon's products include browser-based Video monitoring systems and analytics-based recognition systems, cameras, servers, and access control systems for every aspect of security and surveillance in industrial and commercial facilities, federal prisons, hospitals, universities, schools, and federal and state government offices. Vicon provides cutting edge, mission critical security and video surveillance solutions utilizing Artificial Intelligence (AI) based data algorithms.





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Industrial Services (IS)

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

Significant Accounting Policies and Estimates

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.

Please see Note 2 for detailed information regarding our significant accounting policies and estimates in the Notes to Consolidated Financial Statements in this 2020 Form 10-K.


Results of Operations - For the fiscal years ending September 30, 2020 and 2019

Total revenue for the years ended September 30, 2020 and 2019 was $43,518,384 and $39,265,041, respectively, an increase of $4,253,343, or 11%. Comprehensive net loss for the years ended September 30, 2020 and 2019 was a $13,082,711 and $23,051,140, respectively, a decrease of $9,968,429 or 43%. Total revenue for the fiscal year increased, as compared to total revenue in the same period last year, due to sales increases in the Advanced Technology Segment. Net loss decreased due to the sale of discontinued operations of the Electronics Manufacturing Segment and our Environmental Products lines in fiscal year 2019. For the year ended September 30, 2020 the Company had a loss of $812,895 on discontinued operations and for the year ended September 30, 2019, the Company had a loss of $10,559,963 on discontinued operations.





Revenues

Our Advanced Technologies segment revenues for the years ended September 30, 2020 and 2019 were $25,750,684 and $19,268,687, respectively, an increase of $6,481,997 or 34%. This increase represents the increase in demand for technology and security products during the fiscal year as well as the consolidation of Vicon.

Our Industrial Services segment revenues for the year ended September 30, 2020 decreased by $2,228,654 or 11%, to $17,767,700 from $19,996,354 for the year ended September 30, 2019. The decrease was primarily due to the decrease in demand for services due to the COVID-19 crisis.





Gross Profit

Gross Profit for the year ended September 30, 2020 was $19,364,447 or 44% of revenues as compared to gross profit of $15,562,674 or 40% of revenues for the year ended September 30, 2019. The increase in gross profit percentage in the year ended September 30, 2020, as compared to the prior year, was a result of the sale of products and services with higher profit margins.





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General and Administrative Expenses

General and Administrative Expenses for the year ended September 30, 2020 increased $42,521 or less than 1% to $21,570,666 from $21,528,145 for the year ended September 30, 2019. The increases in General and Administrative Expenses in dollars is the result of increases in personnel costs and insurance, offset by savings measures enacted during the fiscal year.

Research and Development Expenses

Research and Development expenses for the year ended September 30, 2020 and 2019 were $1,827,286 and $1,481,879, respectively. Research and Development expenses have increased with the increased capital resources of the Company and focus on new product development.





Other Income/(Expense)

Interest and other income/(expense) for fiscal 2020 was $(2,786,424) as compared to $(5,190,987) for fiscal 2019. For fiscal year 2020 other income/(expense) was due was primarily due to interest on notes payable offset by income on the sale of marketable securities.





Provision for Income Taxes

During the fiscal year of 2020 we recorded an income tax expense of $2,073,835 compared to a benefit of $1,335,584 for the fiscal year of 2019. The increase in the provision for income tax is mainly due to the increase in the valuation allowance in the Company's deferred taxes.





Net Income/(Loss)

The Company had a net loss of $9,933,775 or 23% of revenues, for the year ended September 30, 2020 as compared to a net loss of $22,364,941 or 57% of revenues, for the year ended September 30, 2019. Net loss in this period as compared to the previous period was lower due to the discontinued operations of the Environmental Products business and its Electronics Manufacturing Segment. For the year ended September 30, 2020 the Company had a loss of $812,895 on discontinued operations and for the year ended September 30, 2019, the Company had a gain of $10,559,963 on discontinued operations.





Effects of Inflation

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

Liquidity and Capital Resources

Working capital was $23,285,122 at September 30, 2020 compared to $3,240,348 at September 30, 2019. This includes cash and cash equivalents and restricted cash of $21,072,859 at September 30, 2020 and $2,858,085 at September 30, 2019, respectively. The increase in working capital was primarily due to the increase in the Company's current assets of $19,184,125 and a decrease in the Company's current liabilities of $860,649. The primary reason for the increase in current assets was the cash raised by equity offerings during the fiscal year and the primary reason for the decrease in current liabilities was the decrease in the Company's accounts payable balance.

Accounts receivable increased by $277,813 or 4% to $6,686,797 at September 30, 2020 from $6,458,984 at September 30, 2019. The increase in accounts receivable is mainly due to the increase in revenue over that past fiscal year.

Inventories increased by $1,586,651 or 30% to $6,793,806 at September 30, 2020 from $5,207,155 at September 30, 2019. The increase in inventories is attributable to the company's purchase of inventory for its security business to maintain sufficient stock on hand for sale.





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Operating activities for continuing operations used $3,280,162 for the year ended September 30, 2020 compared to using $3,571,616 of cash for the year ended September 30, 2019. Operating activities for discontinued operations used $812,895 and provided $7,507,090 of cash for the year ended September 30, 2020 and 2019, respectively.

Investing activities for continuing operations provided $764,552 of cash during the year ended September 30, 2020 compared to using $2,043,771 during the year ended September 30, 2019. In fiscal 2019 discontinued operations provided $8,883,541 of cash.

Financing activities for continuing operations provided $21,520,985 for the year ended September 30, 2020 as compared to using $2,391,839 in the year ended September 30, 2019. In fiscal 2020 our financing activities were mainly comprised of the proceeds from subscription rights offering and notes payable offset by payments on our debt. In fiscal 2019 discontinued operations used $9,465,508.

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

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

We have on file with the SEC a shelf registration statement that became effective on August 3, 2020. The universal shelf registration statement permits the Company to offer and sell, from time to time, on a continuous or delayed basis in the future, up to $50 million of equity, debt or other types of securities described in the shelf registration statement, or any combination of such securities, in one or more future public offerings, along with a sales agreement prospectus covering the offer, issuance and sale by us of up to a maximum aggregate offering price of up to $20,000,000 of our common stock that may be issued and sold from time to time under a Sales Agreement. We have sold no shares under this registration statement and there is no guarantee that we will be able to or raise capital in such amounts as is necessary for our existing or future operations.

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