CEMTREX INC - Quarter Report: 2014 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES ACT OF 1934

For the quarterly period ended June 30, 2014

OR

¨           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES ACT OF 1934

For the transition period from ___________to ____________

Commission File Number 000-53238

CEMTREX, INC.

(Exact name of small business issuer as specified in its charter)

19 Engineers Lane 

Farmingdale, New York 11735

(Address, including zip code, of principal executive offices)

631-756-9116

  (Issuer’s telephone number)

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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 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 July 31, 2014 , the issuer had 40,599,129 shares of common stock issued and outstanding. 

Table of Contents

CEMTREX, INC. AND SUBSIDIARIES

INDEX

Part I. Financial Information 

Item 1.   Financial Statements  

Cemtrex, Inc. and Subsidiaries

Consolidated Balance Sheets

The accompanying notes are an integral part of these financial statements

Cemtrex, Inc. and Subsidiaries 

Consolidated Statements of Operations

(Unaudited)

The accompanying notes are an integral part of these financial statements

Cemtrex, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

The accompanying notes are an integral part of these financial statements

Cemtrex Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – ORGANIZATION AND PLAN OF OPERATIONS

Cemtrex Inc. ("Cemtrex" or the "Company") is a diversified international technology company offering a range of products, systems, and solutions to meet today’s industrial and manufacturing challenges. Cemtrex, through its wholly owned subsidiaries provides electronic manufacturing services of custom engineered printed circuit board assemblies, emission monitors & instruments for industrial processes, and environmental control & air filtration systems for industries & utilities.

Cemtrex’s Electronic Manufacturing Services (EMS) business includes printed circuit board assemblies and completely assembled electronic products along with custom manufactured cable system. The Company’s EMS business also provides engineering services to develop prototypes for new printed circuit board manufacturing requirements. Cemtrex’s Environmental Products & Systems (EPS) business includes complete line of air filtration and environmental control products such as baghouse filters and precipitators to control particulate in a wide variety of industries and utilities worldwide. The Company’s EPS business also sells, and services instruments, software and systems for industrial process optimization and emission monitoring of Greenhouse gases, hazardous gases, particulate and other regulated pollutants discharging from industrial and utility stacks.

Cemtrex, Inc. was incorporated as Diversified American Holding, Inc. on April 27, 1998. On December 16, 2004, the Company changed its name to Cemtrex, Inc.

On October 31, 2013, the Company completed the acquisition of the privately held ROB Group, a leader in electronics manufacturing solutions located in Neulingen, Germany. The ROB Group, founded in 1989, consisted of 4 distinct operating companies, forming a complete electronics design, manufacturing, assembly, and cabling solutions provider that serves the electronics and cabling needs of some of the largest companies in the world in the Medical, Automation, Industrial, and Renewable Energy industries. The ROB Group also has a manufacturing facility in Sibiu, Romania. ROB Cemtrex GmbH now operates as a subsidiary of Cemtrex, Inc. (see NOTE 7).

NOTE 2 – BASIS OF PRESENTATION AND CRITICAL ACCOUNTING POLICIES

Basis of Presentation and Use of Estimates

The accompanying unaudited financial information should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K for the year ended September 30, 2013 (“2013 Annual Report”) of Cemtrex Inc. (“Cemtrex” or the “Company”). A summary of the Company’s significant accounting policies is identified in Note 1 of the notes to the consolidated financial statements included in the Company’s 2013 Annual Report. There have been no changes in the Company’s significant accounting policies subsequent to September 30, 2013.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the Unites States (“US 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 consolidated financial statements, the disclosure of contingent assets and liabilities in the 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.

The consolidated financial statements of the Company include the accounts of Cemtrex and its 100 % owned subsidiaries as listed below.   All significant intercompany balances and transactions have been eliminated.

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, 2013, includes a summary of the significant accounting policies used in the preparation of the consolidated financial statements.

Revenue recognition for ROB Cemtrex GmbH

The revenues of ROB Cemtrex GmbH are generated principally from the sale of its products. Revenue from the sale of products is recognized at the time title, risks and rewards of ownership pass. This is generally when the products reach the freight-on-board shipping point, the sales price is fixed and determinable and collection is reasonably assured.

Foreign Currency Translation Gain and Comprehensive Income (Loss)

In countries in which the Company operates, and the functional currency is other than the U.S. dollar, assets and liabilities are translated using published exchange rates in effect at the consolidated balance sheet date. Revenues and expenses and cash flows are translated using an approximate weighted average exchange rate for the period. Resulting translation adjustments are recorded as a component of accumulated other comprehensive income on the accompanying consolidated balance sheet. For the June 30, 2014 and September 30, 2013, comprehensive income includes gains of $249,311 and $0, respectively, which were entirely from foreign currency translation.

Reclassifications

Certain reclassifications have been made to prior period amounts to conform to the current period presentation.

NOTE 3 – TRADE RECEIVABLES, NET

Trade receivables, net consist of the following:

Trade receivables include amounts due for shipped products and services rendered.

Allowance for doubtful accounts include estimated losses resulting from the inability of our customers to make required payments.

NOTE 4 – INVENTORY, NET

Inventory, net of reserves, consist of the following:

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment are summarized as follows:

NOTE 6 – LONG-TERM LIABILITIES

Loan payable to bank

On October 31, 2013, the company acquired a loan from Sparkasse Bank of Germany in the amount of €3,000,000 ($4,006,500, based upon exchange rate on October 31, 2013) in order to fund the purchase of ROB Cemtrex GmbH. $3,133,286 of the proceeds went to direct purchase of ROB Cemtrex GmbH and $873,214 funded beginning operations. This loan carries interest of 4.95% per annum and is payable on October 30, 2021.

On October 31, 2013, the company acquired a loan from Sparkasse Bank of Germany in the amount of €1,000,000 ($1,335,500, based upon exchange rate on October 31, 2013) in order to further fund the operations of ROB Cemtrex GmbH. This loan carries interest of 4.00% per annum and is payable on October 30, 2015.

On March 1, 2014 the Company completed the purchase of the building that ROB Cemtrex GmbH occupies in Neulingen, Germany. The purchase was fully financed through Sparkasse Bank of Germany for €4,000,000 ($5,500,400 based upon the exchange rate on March 1, 2014). This mortgage carries interest of 3.00% and is payable over 17 years.

Loan payable to Shareholder

Please see Note 8 – Related Party Transactions for details on loans payable to Arun Govil.

NOTE 7 – BUSINESS COMBINATION

On October 31, 2013, the Company completed the acquisition of the privately held ROB Group, a leader in electronics manufacturing solutions located in Neulingen, Germany. The ROB Group, founded in 1989, consisted of 4 distinct operating companies, forming a complete electronics design, manufacturing, assembly, and cabling solutions provider that serves the electronics and cabling needs of some of the largest companies in the world in the Medical, Automation, Industrial, and Renewable Energy industries. ROB Group also has a manufacturing facility in Sibiu, Romania. ROB Cemtrex GmbH now operates as a subsidiary of Cemtrex, Inc..

The operating results of ROB Cemtrex GmbH from October 31, 2013 to June 30, 2014 are included in the accompanying Consolidated Statement of Operations. The Consolidated Balance Sheet as of June 30, 2014 reflects the acquisition of ROB Cemtrex GmbH, effective October 31, 2013. The acquisition date fair value of the total consideration transferred was $6.27 million, which consisted of the following:

In accordance with Accounting Standards Codification ("ASC") 805, Business Combinations ("ASC 805"), the total purchase consideration is allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of October 31, 2013 (the acquisition date). The purchase price was allocated based on the information currently available, and may be adjusted after obtaining more information regarding, among other things, asset valuations, liabilities assumed, and revisions of preliminary estimates.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:

The following unaudited supplemental proforma information presents the financial results of ROB group of companies as if the acquisition of ROB Cemtrex GmbH occurred on October 1, 2012:

NOTE 8 – RELATED PARTY TRANSACTIONS

The Company had sales to Ducon Technologies, Inc., a related party, totaling $0 and $4,409,520 for the three months ended June 30, 2014 and 2013, respectively and $319,053 and $9,268,852 for the nine months ended June 30, 2014 and 2013, respectively. The accounts receivable from Ducon Technologies, Inc. totaled $272,029 at June 30, 2014 and $1,078,352 at June 30, 2013.

The Company has prepaid Ducon Technologies, Inc. a related party in the amount of $0 and $340,000 for supplies at June 30, 2014 and June 30, 2013.

The Company leases its principal office at Farmingdale, New York, 4,000 square feet of office and warehouse/shop space in a single story commercial structure on a month to month lease from Ducon Technologies Inc., at a monthly rental of $4,000.

The company has made investments into Pluto Technologies, Inc. (Pluto) in order to potentially expand its product lines. Pluto is engaged in the business of developing applications for mobile devices and is fully owned and operated by Saagar Govil CEO of Cemtrex, Inc. Notes were issued in the amounts of $80,000, $274,150, and $81,842 all three with terms of 5% per annum, payable in full on October 1, 2015. These notes appear on our Consolidated Balance Sheets under “Due from related parties”.

Notes payable to Arun Govil, the Company’s former Chairman of the Board, total $1,590,134 and $1,106,166 at June 30, 2014 and September 30, 2013, respectively. These notes are unsecured and carry 5% interest per annum.

On September 8th, 2009, the Company issued 1,000,000 Series A Preferred Shares and 2,500,000 common shares to Arun Govil, former Chairman of the Company, in conjunction with the termination of a convertible note in the amount of $1,300,000 that was convertible into 30,000,000 non-assessable shares of common stock of the Company at $0.001 (par value) per share.

NOTE 9 – STOCKHOLDERS’ EQUITY

Series A Preferred Stock

The Company is authorized to issue 10,000,000 shares of Series A Preferred Stock, $0.001 par value. As of June 30, 2014 and September 30, 2013, there were 1,000,000 shares issued and outstanding, respectively.

Each issued and outstanding Series A Preferred Share shall be entitled to the number of votes equal to the result of: (i) the number of shares of common stock of the Company issued and outstanding at the time of such vote multiplied by 1.01; divided by (ii) the total number of Series A Preferred Shares issued and outstanding at the time of such vote, at each meeting of shareholders of the Company with respect to any and all matters presented to the shareholders of the Company for their action or consideration, including the election of directors. Holders of Series A Preferred Shares shall vote together with the holders of Common Shares as a single class.

During the three and nine month period ending June 30, 2014 and 2013, the Company did not issue any Series A Preferred Stock.

Common Stock

The Company is authorized to issue 60,000,000 shares of common stock, $0.001 par value. As of June 30, 2013and September 30, 2012, there were 40,599,129 shares issued and outstanding, respectively.

During the three and nine month periods ending June 30, 2014 and 2013, the Company did not issue any Common Stock.

During the nine month period ending June 30, 2014 the company issued stock options for 600,000 shares to three key executives of ROB Cemtrex GmbH. These options have a call price of $0.30 per share, vest over four years, and expire after six years.

NOTE 10 – COMMITMENTS AND CONTIGENCIES

The Company’s subsidiary Griffin Filters LLC leases approx. 5,000 sq. ft. of office and warehouse space in Liverpool, New York from a third party in a five year lease at a monthly rent of $2,200 expiring on March 31, 2018.

The Company’s subsidiary ROB Cemtrex GmbH owns and has a 17 year 3.00% interest mortgage on their 100,000 sq. ft. building in Neulingen, Germany. Monthly mortgage payments are €25,000 through March 2031.

NOTE 11 – RECENTLY ISSUED ACCOUNTING STANDARDS

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

NOTE 12 - SUBSEQUENT EVENTS

The Company evaluated subsequent events through the filing date of its Form 10-Q for the quarter ended June 30, 2014. The Company is not aware of any subsequent events that would require recognition or disclosure in the consolidated financial statements.

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. 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

The Company was incorporated on April 27, 1998, in the state of Delaware under the name "Diversified American Holdings, Inc." The Company subsequently changed its name to "Cemtrex Inc." on December 16, 2004. Unless the context requires otherwise, all references to “we”, “our”, “us”, “Company”, “registrant”, “Cemtrex” or “management” refer to Cemtrex, Inc. and its subsidiaries. Cemtrex is a technology company that operates in a wide array of business segments and provides solutions to meet today's industrial and manufacturing challenges. The Company provides electronic manufacturing services of printed circuit board assemblies, provides instruments & emission monitors for industrial processes, and provides industrial air filtration & environmental control systems.

Cemtrex’s Electronic Manufacturing Services (EMS) business includes printed circuit board assemblies and completely assembled electronic products along with custom manufactured cable system. The Company’s EMS business also provides engineering services to develop prototypes for new printed circuit board manufacturing requirements. Cemtrex’s Environmental Products & Systems (EPS) business includes complete line of air filtration and environmental control products such as baghouse filters and precipitators to control particulate in a wide variety of industries and utilities worldwide. The Company’s EPS business also sells, and services instruments, software and systems for industrial process optimization and emission monitoring of Greenhouse gases, hazardous gases, particulate and other regulated pollutants discharging from industrial and utility stacks.

Critical 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 “critical”, 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 critical 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, 2013. 

Results of Operations - For the three Months ending June 30, 2014 and 2013 

Total revenue for the three months ended June 30, 2014 and 2013 was $13,453,734 and $5,332,157, respectively, an increase of $8,121,577, or 152%. Net income for the three months ended June 30, 2014 and 2013 was $716,100 and $7,668, respectively, an increase of $708,432, or 9,239%. The net income percentage in the period as compared to the previous one was higher as a result of the acquisition of ROB Cemtrex GmbH and execution of more profitable environmental and filtration projects.

Revenues

Environmental products and systems revenues for three months ended June 30, 2014 increased by $180,980 or 3%, to $5,513,137 from $5,332,157 for the three months ended June 30, 2013. The increase was primarily due to an increased demand for environmental control equipment in foreign markets.

Electronics manufacturing services revenues for three months ended June 30, 2014 was $7,940,597 as compared to $0 for the three months ended June 30, 2013. The increase was primarily due to the acquisition of ROB Cemtrex GmbH.

Gross Profit 

Gross Profit for the three months ended June 30, 2014 was $4,199,962 or 31% of revenues as compared to gross profit of $327,023 or 6% of revenues for the three months ended June 30, 2013. The increase in gross profit percentage in the three months ended June 30, 2014 was a direct result of high profit margin jobs shipped during this period as compared to the same quarter in the prior year. The higher dollar amount of gross profit was due to the ROB Cemtrex GmbH acquisition.

Operating Expenses

 Operating expenses for the three months ended June 30, 2014 increased $3,061,031 or 1,008% to $3,364,778 from $286,529 for the three months ended June 30, 2013. Operating expenses as a percentage of revenue increased in the three month period ended June 30, 2014 to 25% from 6% in the three month period ended June 30, 2013. The increase in operating expenses were primarily due to the acquisition of ROB Cemtrex GmbH.

Other Income/(Expense)

Interest and other income/(expense) for the third quarter of 2014 was $(102,660) as compared to $(12,308) for the third quarter of 2013. The increase was due primarily to interest expense recognition on loans used to acquire ROB Cemtrex GmbH.

Provision for Income Taxes

During the third quarter of 2014 we recorded an income tax benefit/provision of $16,424 compared to $3,300 for the second quarter of 2013. The provision for income tax is based upon the projected income tax from the Company’s various international subsidiaries that are subject to foreign income taxes.

Net Income/Loss

The Company had net income of $716,100 or 5% of revenues, for the three month period ended June 30, 2014 as compared to a net income of $7,668 or .1% of revenues, for the three months ended June 30, 2013. Net income in the third quarter increased, as compared to net income in the same period last year, due to higher overall sales due to the acquisition of ROB Cemtrex GmbH. The net income percentage in the period as compared to the previous one was higher as a result of the acquisition of ROB Cemtrex GmbH and execution of profitable environmental and filtration projects.

Results of Operations - For the nine Months ending June 30, 2014 and 2013 

Total revenue for the nine months ended June 30, 2014 and 2013 was $33,966,686 and $11,138,665, respectively, an increase of $22,828,021, or 205%. Net income for the nine months ended June 30, 2014 and 2013 was $1,902,267 and $231,010, respectively, an increase of $1,671,257, or 723%. The improvement was primarily due to the acquisition of Rob Cemtrex GmbH and execution of more profitable environmental and filtration projects.

Revenues

Environmental products and systems revenues for nine months ended June 30, 2014 increased by $894,464 or 8%, to $12,033,129 from $11,138,665 for the nine months ended June 30, 2013. The increase was primarily due to an increased demand for environmental control equipment in foreign markets.

Electronics manufacturing services revenues for nine months ended June 30, 2014 was $21,933,557 as compared to $0 for the nine months ended June 30, 2013. The increase was primarily due to the acquisition of ROB Cemtrex GmbH.

Gross Profit 

Gross Profit for the nine months ended June 30, 2014 was $11,069,826 or 33% of revenues as compared to gross profit of $1,214,667 or 11% of revenues for the nine months ended June 30, 2013. The increase in gross profit percentage in the nine months ended June 30, 2014 was a direct result of high profit margin jobs shipped during this period as compared to the same period in the prior year. The higher dollar amount of gross profit was due to the ROB Cemtrex GmbH acquisition.

Operating Expenses

 Operating expenses for the nine months ended June 30, 2014 increased $8,092,498 or 949% to $8,944,826 from $852,328 for the nine months ended June 30, 2013. Operating expenses as a percentage of revenue increased in the nine month period ended June 30, 2014 to 26% from 8% in the nine month period ended June 30, 2013. The increase in operating expenses was primarily due to the acquisition of ROB Cemtrex GmbH.

Other Income/(Expense)

Interest and other income/(expense) for the first three quarters of 2014 was $(189,033) as compared to $(32,329) for the first three quarters of 2013. The increase was due primarily to interest expense recognition on loans used to acquire ROB Cemtrex GmbH.

Provision for Income Taxes

During the first three quarters of 2014 we recorded an income tax provision of $33,700 compared to $99,000 for the first three quarters of 2013. The provision for income tax is based upon the projected income tax from the Company’s various international subsidiaries that are subject to foreign income taxes.

Net Income/Loss

The Company had net income of $1,902,267 or 6% of revenues, for the nine month period ended June 30, 2014 as compared to a net income of $231,010 or 2% of revenues, for the nine months ended June 30, 2013. Net income in the first three quarters increased, as compared to net income in the same period last year, due to higher overall sales due to the acquisition of ROB Cemtrex GmbH. The net income percentage in the period as compared to the previous one was higher as a result of the acquisition of Rob Cemtrex GmbH and execution of profitable environmental and filtration projects.

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 $10,795,524 at June 30, 2014 compared to $1,870,968 at September 30, 2013. This includes cash and cash equivalent of $1,310,238 at June 30, 2014 and $66,963 at September 30, 2013, respectively. The reason for the increase in working capital was due to the acquisition of Rob Cemtrex GmbH.

Trade receivables increased $2,756,515 or 149% to $4,604,151 at March 31, 2014 from $1,847,636 at September 30, 2013. The increased in trade receivables is attributable to larger operation as a result of acquisition of Rob Cemtrex GmbH.

Inventories increased $7,423,055 or 4,658% to $7,582,403 at June 30, 2014 from $159,348 at September 30, 2013. The increase in inventories was due to acquisition of Rob Cemtrex GmbH and inventory purchases of $2,481,705.

Operating activities used $1,336,662 for the nine months ended June 30, 2014 compared to using $740,560 of cash for the nine months ended June 30, 2013. The increase in operating cash flows was primarily due to increase in sales and inventory due to the acquisition of ROB Cemtrex-GmbH.

Investment activities used $13,434,392 of cash compared to using $145,504 during the nine month period ended June 30, 2014. The increase was primarily due to the acquisition of Rob Cemtrex GmbH, and the purchase of the building in Neulingen, Germany (see NOTE 6).

Financing activities provided $16,014,329 for the nine month period ended June 30, 2014 as compared to providing $622,630 in the nine month period ended June 30, 2014. The increase is primarily related to loans received by the Company for Rob Cemtrex GmbH acquisition and the mortgage on the building and land in Neulingen, Germany (see NOTE 6).

We believe that our cash on hand, cash generated by operations, is sufficient to meet the capital demands of our current operations during the 2014 fiscal year (ending September 30, 2014). Any major increases in sales, particularly in new products, may require substantial capital investment. Failure to obtain sufficient capital could materially adversely impact our growth potential.

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, 2014 and have concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2014.

Changes in Internal Control Over Financial Reporting

There was no change in the Company’s internal control over financial reporting during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II 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.