UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment
No. 2
to
FORM
S-1/A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CEMTREX,
INC.
(Exact name of Registrant as specified in its
charter)
| Delaware |
|
3829 |
|
30-0399914 |
(State
or other jurisdiction of
incorporation or organization) |
|
(Primary
Standard Industrial Classification Code Number) |
|
(I.R.S.
Employer
Identification No.) |
135
Fell Court
Hauppauge,
NY 11788
Tel.
no. (631) 756-9116
(Address and telephone number of principal executive offices)
The
Corporation Trust Company
Corporation
Trust Center
1209
Orange St.
Wilmington,
DE 19801
(302)
658-7581 (Tel.)
(Name, address and telephone number of agent for service)
Copies
to:
Scott
Doney, Esq.
The Doney Law Firm
4955 S. Durango Rd. Ste. 165
Las
Vegas, NV 89113
(702) 982-5686 |
Anthony
W. Basch, Esq.
J.
Britton Williston, Esq.
Shannon
M. McDonough, Esq.
Kaufman
& Canoles, P.C.
1021
E. Cary St., Suite 1400
Richmond,
Va. 23219
(804)
771-5700 |
Approximate
Date of Commencement of Proposed Sale to the Public: As soon as practicable after the effective date of this registration statement.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. ☒
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
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. (Check one):
| Large
accelerated filer |
|
☐ |
|
Accelerated
filer |
|
☐ |
| Non-accelerated
filer |
|
☒ |
|
Smaller
reporting company |
|
☒ |
| |
|
|
|
Emerging
growth company |
|
☐ |
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 7(a)(2)(B) of the Securities Act ☐
The
registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date
as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The
information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration
statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities
and it is not soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED April 30, 2024
PRELIMINARY
PROSPECTUS
Cemtrex,
Inc.
5,056,179 Units,
Each Unit Consisting of One Share of Common Stock or One Pre-Funded Warrant to Purchase One Share of Common Stock, One Series A
Warrant to Purchase One Share of Common Stock and One Series B Warrant to Purchase One Share of Common Stock
10,112,358
Shares of Common Stock Underlying the Series
A and Series B Warrants
We
are offering, on a firm commitment, underwritten basis, 5,056,179 units (the “Units”), each Unit consisting of one
share of our common stock, $0.001 par value per share, one Series A warrant (“Series A Warrant”) to purchase one share of
common stock and one Series B warrant (“Series B Warrant”) to purchase one share of common stock, at an assumed public offering
price of $1.78 per Unit, which was the last reported sale price of our common stock on The Nasdaq Capital Market, or Nasdaq, on
April 29, 2024.
The
Units have no stand-alone rights and will not be certificated or issued as stand-alone securities. Each Series A Warrant offered hereby
is immediately exercisable on the date of issuance at an exercise price of $1.78 (assuming an offering price of $1.78 per
Unit) per share of common stock, or pursuant to alternate cashless exercise option, and will expire two-and-a-half years from the closing
date of this public offering. Each Series B Warrant offered hereby is immediately exercisable on the date of issuance at an exercise
price of $1.78 (assuming an offering price of $1.78 per Unit) per share of common stock, and will expire five years from
the closing date of this public offering.
Under
the alternate cashless exercise option of the Series A Warrants, beginning on the date of the Warrant Stockholder Approval (described
below), the holder of the Series A Warrant, has the right to receive an aggregate number of shares equal to the product of (x) the aggregate
number of shares of common stock that would be issuable upon a cash exercise of the Series A Warrant and (y) 3.0. In addition, beginning
on the date of the Warrant Stockholder Approval, the Series A Warrants and Series B Warrants will contain a reset of the exercise price
to a price equal to the lesser of (i) the then exercise price and (ii) lowest volume weighted average price (VWAP) during the period
commencing five trading days immediately preceding and the five trading days commencing on the date we effect a reverse stock split in
the future with a proportionate adjustment to the number of shares underlying the Series A Warrants and Series B Warrants. Finally, beginning
on the date of the Warrant Stockholder Approval, with certain exceptions, the Series B Warrants will provide for an adjustment to the
exercise price and number of shares underlying the Series B Warrants upon our issuance of our common stock or common stock equivalents
at a price per share that is less than the exercise price of the Series B Warrant.
The
alternate cashless exercise option included in the Series A Warrants and the other adjustment provisions described in the above
paragraph included in the Series A Warrants and Series B Warrants will be available only upon receipt of such stockholder approval
as may be required by the applicable rules and regulations of the Nasdaq Capital Market to permit the alternate cashless exercise of
the Series A Warrants and the other adjustment provisions described in the above paragraph included in the Series A Warrants and
Series B Warrants (the “Warrant Stockholder Approval”). In the event that we are unable to obtain the Warrant
Stockholder Approval, the Series A Warrants will not be exercisable using the alternate cashless exercise option and the other
adjustment provisions described in the above paragraph included in the Series A Warrants and Series B Warrants will not be
effective, and therefore the Series A Warrants and Series B Warrants may have substantially less value. See the Risk Factor on page
12 relating to the Series A Warrants and Series B Warrants and Warrant Stockholder Approval, and see the section entitled
“Warrant Stockholder Approval” on page 43 for additional details regarding the Warrant Stockholder
Approval.
We
are also offering to each purchaser of Units that would otherwise result in the purchaser’s beneficial ownership exceeding 4.99%
of our outstanding common stock immediately following the consummation of this offering, the opportunity to purchase Units consisting
of one pre-funded warrant (in lieu of one share of common stock, each a “Pre-Funded Warrant”), one Series A Warrant and one
Series B Warrant. Subject to limited exceptions, a holder of Pre-Funded Warrants will not have the right to exercise any portion of its
Pre-Funded Warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the election of the
holder, such limit may be increased to up to 9.99%) of the number of shares of common stock outstanding immediately after giving effect
to such exercise. Each Pre-Funded Warrant will be exercisable for one share of common stock. The purchase price of each Unit including
a Pre-Funded Warrant will be equal to the price per Unit including one share of common stock, minus $0.001, and the remaining exercise
price of each Pre-Funded Warrant will equal $0.001 per share. The Pre-Funded Warrants will be immediately exercisable (subject to the
beneficial ownership cap) and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. For each Unit
including a Pre-Funded Warrant we sell (without regard to any limitation on exercise set forth therein), the number of Units including
a share of common stock we are offering will be decreased on a one-for-one basis.
This
prospectus also includes the shares of common stock issuable upon exercise of the Series A Warrants, Series B Warrants, and the Pre-Funded
Warrants.
The
common stock and Pre-Funded Warrants can each be purchased in this offering only with the accompanying Series A Warrants and Series B
Warrants that are part of a Unit, but the components of the Units will be immediately separable and will be issued separately in this
offering. See “Description of Capital Stock” in this prospectus for more information.
Our
common stock is listed on The Nasdaq Capital Market, or Nasdaq, under the symbol “CETX.” The last reported sale price of
our common stock on Nasdaq on April 29, 2024 was $1.78 per share. There is no established public trading market for the
Series A Warrants, Series B Warrants, or the Pre-Funded Warrants, and we do not intend to list the Series A Warrants, Series B Warrants,
or the Pre-Funded Warrants on any national securities exchange or trading system. Without an active trading market, the liquidity of
the Series A Warrants, Series B Warrants, and the Pre-Funded Warrants will be limited.
The
final public offering price of the Units will be determined through negotiation between us and the underwriter, based upon a number of
factors, including our history and our prospects, the industry in which we operate, our past and present operating results, the previous
experience of our executive officers and the general condition of the securities markets at the time of this offering.
We
have granted Aegis Capital Corp., as underwriter, an option, exercisable for 45 days from the closing date of this offering, to purchase
up to 758,427 additional shares of common stock and/or Pre-Funded Warrants, representing 15% of the shares of common stock and/or
Pre-Funded Warrants sold in the offering, and/or up to 758,427 Series A Warrants, representing 15% of the Series A Warrants sold
in the offering, and/or up to 758,427 Series B Warrants, representing 15% of the Series B Warrants sold in the offering. The underwriter
may exercise the over-allotment option with respect to shares of common stock only, Pre-Funded Warrants only, Series A Warrants only,
Series B Warrants only, or any combination thereof.
You
should read this prospectus, together with additional information described under the headings “Information Incorporated by Reference”
and “Where You Can Find Additional Information,” carefully before you invest in any of our securities.
Investing
in our securities involves a high degree of risk. See “Risk Factors” beginning on page 12 of this prospectus for a discussion
of risks that should be considered in connection with an investment in our securities.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed
upon the adequacy or the accuracy of this prospectus. Any representation to the contrary is a criminal offense.
| | |
Per Unit | | |
Total | |
| Public offering price | |
$ | 1.78 | | |
$ | 9,000,000 | |
| Underwriting
discounts and commissions (7.0%)(1) | |
$ | 0.12 | | |
$ | 630,000 | |
| Proceeds before expenses | |
$ | 1.66 | | |
$ | 8,370,000 | |
| (1) |
Does
not include a non-accountable expense allowance equal to 0.5% of the public offering price. See “Underwriting” for a
description of compensation payable to the underwriter. |
The
underwriter expects to deliver our securities to purchasers in the offering on
or about May [*], 2024.
Aegis
Capital Corp.
The
date of this prospectus is April 30, 2024
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
We
incorporate by reference important information into this prospectus. You may obtain the information incorporated by reference without
charge by following the instructions under “Where You Can Find More Information.” You should carefully read this prospectus
as well as additional information described under “Incorporation of Certain Information by Reference,” before deciding to
invest in our securities.
We
have not, and the underwriter has not, authorized anyone to provide any information or to make any representations other than
those contained in this prospectus or in any free writing prospectuses prepared by or on behalf of us or to which we have referred you.
We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you.
This prospectus is an offer to sell only the securities offered hereby, and only under circumstances and in jurisdictions where it is
lawful to do so. The information contained in this prospectus or in any applicable free writing prospectus is current only as of its
date, regardless of its time of delivery or any sale of our securities. Our business, financial condition, results of operations and
prospects may have changed since that date.
The
information incorporated by reference or provided in this prospectus contains statistical data and estimates, including those relating
to market size and competitive position of the markets in which we participate, that we obtained from our own internal estimates and
research, as well as from industry and general publications and research, surveys and studies conducted by third parties. Industry publications,
studies and surveys generally state that they have been obtained from sources believed to be reliable. While we believe our internal
company research is reliable and the definitions of our market and industry are appropriate, neither this research nor these definitions
have been verified by any independent source.
For
investors outside the United States: We have not, and the underwriter has not, done anything that would permit this offering or
possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United
States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions
relating to, the offering of the securities and the distribution of this prospectus outside the United States.
This
prospectus and the information incorporated by reference into this prospectus may contain references to our trademarks and to trademarks
belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus and the information incorporated
by reference into this prospectus, including logos, artwork, and other visual displays, may appear without the ® or TM symbols, but
such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights
or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’
trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other company.
This
prospectus is an offer to sell only the securities offered hereby, and only under circumstances and in jurisdictions where it is lawful
to do so. We are not, and the underwriter is not, making an offer to sell these securities in any state or jurisdiction where
the offer or sale is not permitted.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus, and any documents we incorporate by reference, contain certain forward-looking statements that involve substantial risks
and uncertainties. All statements contained in this prospectus and any documents we incorporate by reference, other than statements of
historical facts, are forward-looking statements including statements regarding our strategy, future operations, future financial position,
future revenue, projected costs, prospects, plans, objectives of management and expected market growth. These statements involve known
and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or implied by the forward-looking statements.
The
words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “may”,
“plan”, “predict”, “project”, “target”, “potential”, “will”,
“would”, “could”, “should”, “continue” and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements
include, among other things, statements about: our business plans, strategies and objectives; our expectations regarding our liquidity
and performance, including our expense levels, sources of capital and ability to maintain our operations; the competitive landscape of
our industry; and general market, economic and political conditions.
These
forward-looking statements are only predictions and we may not actually achieve the plans, intentions or expectations disclosed in our
forward-looking statements, so you should not place undue reliance on our forward-looking statements. Actual results or events could
differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. 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 business, financial condition and operating results. We have included important factors in the cautionary statements included in
this prospectus that could cause actual future results or events to differ materially from the forward-looking statements that we make.
Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures
or investments we may make.
You
should read this prospectus with the understanding that our actual future results may be materially different from what we expect. We
do not assume any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise,
except as required by applicable law.
PROSPECTUS
SUMMARY
This
summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information that you
should consider before deciding to invest in our securities. You should read this entire prospectus carefully, including the “Risk
Factors” section in this prospectus and under similar captions in the documents incorporated by reference into this prospectus.
In this prospectus, unless otherwise noted, the terms “the Company,” “Cemtrex” “we,” “us,”
and “our” refer to Cemtrex, Inc.
Business
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
company.
During
the first quarter of fiscal year 2023, the Company reorganized its reporting segments to be in line with its current structure, consisting
of (i) Security, (ii) Industrial Services, and (iii) Cemtrex Corporate.
Security
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.
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. 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.
Cemtrex
Corporate
Cemtrex’s
Corporate segment is the holding company of our other two segments.
Business
Strategy
Our
focus is to utilize our resources and capabilities to build brands and businesses in areas where we see unique opportunities to create
exceptional value for our customers, shareholders, and employees over the long term. We aim to grow in markets where we see significant
long-term opportunity to create an attractive return on shareholder equity. Generally, these markets are high growth markets that are
changing due to innovation, new technologies, or other industry shifts taking place. In these markets we seek to build or acquire businesses
that have attractive gross margins, strong opportunities for customer retention, and are asset light. We take a long-term approach with
our strategies and seek returns over five years or longer time horizons.
We
believe our ability to attract and retain new customers comes from our ongoing commitment to understanding our customers’ business
performance requirements and our expertise in meeting or exceeding these requirements and enhancing their competitive advantage 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 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 income and 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.
Recent
Developments
Sale
of Former Cemtrex Brands
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
November 22, 2022, the Company completed the above disposition for the following consideration.
| |
■ |
$75,000
in cash payable at Closing; and |
| |
■ |
5%
royalty of all revenues on the Business to be paid 90 days after the end of each calendar year for the next three years; and should
the total sum of royalties due be less than $820,000 at the end of the three-year period, Purchaser shall be obligated to pay the
difference between $820,000 and the royalties paid. |
| |
● |
Cemtrex
Advanced Technologies, Inc. |
| |
○ |
$10,000
in cash payable at Closing; and |
| |
○ |
5%
royalty of all revenues on the Business to be paid 90 days after the end of each calendar year for the next 5 years; and |
| |
○ |
$1,600,000
in SAFE (common equity) at any subsequent fundraising or exit above $5M with a $10M cap. |
The
Company’s Board of Directors, excluding Saagar Govil who abstained from all voting on these agreements, approved these actions
and agreements.
Acquisition
of Heisey Mechanical
On
July 1, 2023, the Company under AIS, completed the acquisition of a leading service contractor and steel fabricator that specializes
in industrial and water treatment markets, Heisey Mechanical, Ltd. (“Heisey”) based in Columbia, Pennsylvania for $2,400,000
plus adjustments for the outstanding contract assets and liabilities of $393,291. The real estate of the business was purchased at fair
market value on August 30, 2023, for $1,500,000 in a separate transaction.
Heisey
provides the water treatment industry with a variety of fabricated vessels and equipment including ASME pressure vessels, heat exchangers,
mix tanks, reactors, and other specialized fabricated equipment. Additionally, the contracting team assists with installation and service
of fabricated items. The company has over 33,000 square feet of manufacturing floor space in its facility and an experienced staff of
fabricators, welders, and field mechanics.
The
purchase price allocation presented below is still preliminary but has been developed based on an estimate of fair values of Heisey’s
identifiable tangible and intangible assets acquired and liabilities assumed as of July 1, 2023. The final allocation of the purchase
price will be determined within one year from the closing date of the Heisey acquisition.
The
consideration transferred and preliminary allocation of Heisey’s tangible and intangible assets and liabilities, are as follows:
| Consideration Transferred: | |
| |
| Cash | |
$ | 393,291 | |
| Seller’s note | |
| 240,000 | |
| Financed
amount | |
| 2,160,000 | |
| Total
consideration transferred | |
$ | 2,793,291 | |
| | |
| | |
| Purchase Price Allocation: | |
| | |
| Inventory | |
| 300,000 | |
| Contract assets | |
| 667,259 | |
| Machinery and equipment | |
| 1,625,000 | |
| Contract liabilities | |
| (216,469 | ) |
| Accrued expenses | |
| (57,499 | ) |
| Goodwill | |
| 475,000 | |
| Total
consideration transferred | |
$ | 2,793,291 | |
The
unaudited pro forma summary below presents the results of operations as if the Heisey acquisition occurred on October 1, 2021. Unaudited
proforma adjustments for the twelve months ended September 30, 2023, includes $127,800 of depreciation expense from acquired fixed assets,
$127,883 of interest expense on the debt used in the acquisition. Unaudited proforma adjustments for the twelve months ended September
30, 2022, includes $255,600 of depreciation expense from acquired fixed assets, $81,140 of interest expense on the debt used in the acquisition.
The unaudited pro forma summary uses estimates and assumptions based on information available at the time. Management believes the estimates
and assumptions to be reasonable; however, actual results may have differed significantly from this pro forma financial information.
The unaudited pro forma information does not reflect any cost savings, operating synergies or revenue enhancements that might have been
achieved from combining the operations. The unaudited pro forma summary is provided for illustrative purposes only and does not purport
to represent the Company’s actual consolidated results of operations had the acquisition been completed as of the date presented,
nor should it be considered indicative of Cemtrex’s future consolidated results of operations.
| | |
Unaudited | |
| | |
For the year ended | |
| | |
September
30, 2023 | | |
September
30, 2022 | |
| | |
| | |
| |
| Revenues | |
$ | 66,274,838 | | |
$ | 53,970,595 | |
| Net loss | |
| (9,173,748 | ) | |
| (13,038,817 | ) |
Proforma
adjustments for the three months ended December 31, 2022, includes $63,900 of depreciation expense from acquired fixed assets, $33,400
of interest expense on the debt used in the acquisition.
| | |
Unaudited | |
| | |
for the three months ended | |
| | |
December
31, 2022 | |
| | |
| |
| Revenues | |
$ | 13,173,838 | |
| Net loss | |
| (6,440,203 | ) |
On
August 30, 2023, the Company acquired a mortgage in the amount of $1,200,000 from Fulton Bank to finance the purchase of the properties
formerly owned by Heisey Mechanical Ltd. The mortgage carries interest at the Secured Overnight Financing Rate (SOFR) plus 2.8% and matures
on September 30, 2043.
Common
Stock Reverse Stock Split
On
January 25, 2023, the company completed a 35:1 reverse stock split on its common stock. All share and per share data have been retroactively
adjusted for this reverse split.
Nasdaq
Deficiencies and Actions on Company Securities
Series
1 Preferred Stock
On
July 29, 2022, the Company received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”)
notifying the Company that, because the closing bid price for the Company’s Series 1 preferred stock listed on Nasdaq was below
$1.00 for 30 consecutive trading days, the Company no longer met 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 “Minimum Bid Price
Requirement”).
On
January 26, 2023, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company
that, it had been granted an additional 180 days or until July 24, 2023, to regain compliance with the Minimum Bid Price Requirement
based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements
for initial listing on the Capital Market with the exception of the bid price requirement, and the Company’s written notice of
its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
On
July 25, 2023, the Company received a Notice of Staff Determination from the Listing Qualifications Department of Nasdaq notifying the
Company that its Series 1 Preferred Stock had not gained compliance and would be suspended from trading at the opening of business on
August 3, 2023. The Company thereafter requested a hearing.
On
July 25, 2023, the Company received notification that it had been granted a hearing on September 14, 2023.
On
September 8, 2023, the Company received a letter from the Nasdaq Hearings Panel (“Panel”) informing the Company that the
Panel has granted the Company a temporary exception to regain compliance with the Minimum Bid Price Rule.
The
Company had represented that it intends to effect a reverse stock split if necessary to regain compliance no later than January 5, 2024,
and described the actions it intends to take to be able to meet that timeline. Accordingly, the Company has been granted an exception
until January 19, 2024, to effect the reverse stock split and thereafter regain compliance with the Minimum Bid Price Rule.
On
December 29, 2023, the Company had reconvened a special meeting of stockholders of the Series 1 Preferred Stock (the “Special Meeting”)
to gain shareholder approval to effect the reverse stock split. At the time of the reconvened Special Meeting, there were insufficient
votes represented by proxy or virtually in person to constitute a quorum for the transaction of business at the Special Meeting. Pursuant
to the Company’s Bylaws, the meeting will not be further adjourned and thus the resolution did not pass.
On
January 3, 2024, the Company received a letter from The Nasdaq Stock Market LLC’s Hearings Panel notifying the Company that it
has made the following amendments to the exception granted on September 8, 2023.
| ■ | On
January 8, 2024, the Company’s Series 1 Preferred Stock shall close at a minimum bid
price of at least $1 per share and maintain such closing bid price for a minimum of ten consecutive
business days; and |
| ■ | On
January 22, 2024, the Company shall have demonstrated compliance with Listing Rule 5555(a)(1),
by evidencing a closing bid price of $1 or more per share for a minimum of ten consecutive
trading sessions. |
The
Company has bought back 71,951 shares for $69,705 under the Share Repurchase Program approved on August 22, 2023, that
allows the Company to repurchase shares of the Series 1 Preferred Stock through various means, including through privately negotiated
transactions and through an open market program. This action proved ineffective to meet the Minimum Bid Price Requirement.
On
January 18, 2024, the Company received a letter from The Nasdaq Stock Market LLC’s Hearings Panel notifying the Company that it
has determined to delist the Company’s shares of Series 1 Preferred Stock from the Exchange, due to the Company’s inability
to meet the terms of the exception granted by the Panel on September 8, 2023, as amended.
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 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 will be effective for 90 days, or such shorter period as the SEC may determine, after filing of the Form 25.
Common
Stock
On
January 24, 2022, 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 met 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 “Minimum Bid Price Requirement”).
On
July 26, 2022, the Company received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC Nasdaq
notifying the Company that, it had been granted an additional 180 days or until January 23, 2023, to regain compliance with the Minimum
Bid Price Requirement based on the Company meeting the continued listing requirement for market value of publicly held shares and all
other applicable requirements for initial listing on the Capital Market with the exception of the bid price requirement, and the Company’s
written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
On
January 26, 2023, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company
that it has not regained compliance with Listing Rule 5550(a)(2) and accordingly would be delisted from the Capital Market. The Company
then requested and had been granted a hearing to occur on March 16, 2023, appealing this determination to a Hearings Panel (the “Panel”),
pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series.
On
February 8, 2023, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company
that it has regained compliance with Listing Rule 5550(a)(2) and is in compliance with all applicable listing standards.
The
Company’s common stock is presently listed and traded on The Nasdaq Stock Market, subject to compliance with Nasdaq’s continued
listing requirements.
Settlement
with the Securities and Exchange Commission
On
September 30, 2022, acting pursuant to an offer of settlement submitted by the Company, the U.S. Securities and Exchange Commission (“SEC”)
issued an order pursuant to Section 8A of the Securities Act, directing the Company to cease and desist from committing or causing any
violations and any future violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder
(the “SEC Order”).
The
SEC Order also directed Mr. Saagar Govil to cease and desist from committing or causing any violations and any future violations of Section
17(a)(3) of the Securities Act.
The
SEC found that, as a result of its conduct, which was neither admitted nor denied, the Company violated Section 17(a) of the Securities
Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, which prohibit fraudulent conduct in the offer or sale of securities
and in connection with the purchase or sale of securities.
The
SEC also found that, as a result of his conduct, which was neither admitted nor denied, Mr. Govil violated Section 17(a)(3) of the Securities
Act, which makes it illegal to engage in any transaction, practice, or course of business which operates or would operate as a fraud
or deceit upon the purchaser.
In
addition to the above cease and desists, the Company undertook to not publicly announce that it has partnered with another company or
that another company has become a customer of the Company without providing prior written notice, including a copy of the announcement
text, to the businessperson at the other company responsible for that company’s relationship with the Company.
Also,
the Company received a civil monetary penalty of two million two hundred thousand dollars ($2,200,000) in the aggregate that must be
paid to the SEC. Mr. Govil also received a civil monetary penalty of three hundred and fifty thousand dollars ($350,000) in the aggregate
that must be paid to the SEC. The company and Mr. Govil have remitted the payments as of September 30, 2022. The SEC Order can be accessed
at www.sec.gov.
Going
Concern Considerations
The
Company has incurred substantial losses of $9,196,875 and $13,020,958 for fiscal years 2023 and 2022, respectively, and has losses
on continuing operations for the three months ending December 31, 2023, of $1,314,395 and has current liabilities of $28,696,123
and working capital deficit of $2,284,787, that raise substantial doubt with respect to the Company’s ability to continue
as a going concern.
While
the working capital deficit 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 approximately
$2.84 million in cash as of December 31, 2023. Additionally, the Company has (i) secured a line of credit for its Vicon brand to fund
operations, which as of December 31, 2023, has available capacity of $1,642,676, (ii) sold unprofitable brands, reducing the cash
required to maintain those brands, (iii) continually reevaluate our pricing model on our Vicon brand to improve margins on those
products, and (iv) has effected a 35:1 reverse stock split 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 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.
Potential
Impacts of COVID-19 on our Business
The
COVID-19 pandemic impacted our business operations and the results of our operations during fiscal years 2022 and 2021, primarily with
delays in orders by many customers and new product development, including newer versions of surveillance software since our technical
facility in Pune, India had been under lock down on multiple occasions. Overall bookings level in our business were down by more than
20%, compared to fiscal 2021 levels during certain periods. Bookings and revenue have largely recovered in this calendar year compared
to last year. However, due to ongoing delays in certain supply chain areas, the expected launch times of our new products and new versions
has resulted in delays of several months. These supply chain issues have also affected the Company’s ability to obtain inventory
for our current bookings, and the Company has implemented a buildup of inventory levels to remain competitive and keep backlog orders
at a minimum. Additionally, increased costs and the need to increase wages to retain talent may cause our gross margin percentages to
shrink and our operational costs to rise. In response to these increased costs, the Company has implemented an ongoing review of our
pricing to cover these additional costs while remaining competitive.
The
broader implications of COVID-19 on our results from operations going forward remains uncertain. The COVID-19 pandemic and the resulting
supply chain issues and inflation 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, 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 emergence of new virus variants that are more contagious
or harmful than prior variants, 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.
Risks
Associated with Our Business
Our
business is subject to a number of risks of which you should be aware before making an investment decision. These risks and others are
discussed more fully in the “Risk Factors” section of this prospectus immediately following this prospectus summary and in
Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, which is incorporated
by reference in this prospectus. These risks include the following:
| ■ | Our
operations and performance depend significantly on global and regional economic conditions
and adverse economic conditions can materially adversely affect our business, results of
operations and financial condition. |
| ■ | The
report of our independent registered public accounting firm contains an explanatory paragraph
that expresses substantial doubt about our ability to continue as a going concern. |
| ■ | There
is no guarantee that cash flow from operations and/or debt and equity financings will provide
sufficient capital to meet our expansion goals working capital needs or fund our operations. |
| ■ | We
have a history of losses and may experience losses in the future, which could result in the
market price of our common stock declining. |
| ■ | We
have substantial debt which could adversely affect our ability to raise additional capital
to fund operations and prevent us from meeting our obligations under outstanding indebtedness. |
| ■ | Our
ability to secure and maintain sufficient credit arrangements is key to our continued operations
and there is no assurance we will be able to obtain sufficient additional equity or debt
financing in the future. |
| ■ | We
are substantially dependent upon the success and continued market acceptance of our technology,
the absence of which may significantly reduce our sales, profits and cash flow and adversely
impact our financial condition. |
| ■ | We
have taken a multi-operational approach, and some of our business segments have historically
failed to benefit our company to date, and there remains a risk that our remaining segments
may not prove to be successful. We may divest or expand into new areas that are outside of
our current business activities and those activities may not prove to be successful. |
| ■ | Our
future operating results depend in part on continued successful research, development and
marketing of new and improved products and services through our Security segment, and there
can be no assurance that we will successfully introduce new products and services into the
market. |
| ■ | Our
future operating results depends in part on the continued successful operation of our Industrial
Services segment, and there can be no assurance that we will be successful in this business. |
| ■ | Our
products face intense competitive challenges, including rapid technological changes, and
pricing pressure from competitors, which could adversely affect our business. |
| ■ | We
could be subject to additional civil penalties or face criminal penalties and sanctions if
we violate the terms of settlement with the SEC. |
| ■ | We
have grown through acquisitions and are continuously looking to fund other acquisitions;
our failure to raise funds for acquisitions may have the effect of slowing down our growth
and our use of funds for acquisitions subjects us to acquisition-related risks. |
| ■ | The
loss of the services of Saagar Govil for any reason would materially and adversely affect
our business operations and prospects. |
| ■ | Our
management stockholders have significant stockholdings in and influence over our company
which could make it impossible for public stockholders to influence the affairs of our company. |
| ■ | Sales
of substantial amounts of our common stock in the public market could depress the market
price of our common stock. |
| ■ | Our
securities may experience extreme price and volume fluctuations, which could lead to costly
litigation for us and make an investment in us less appealing. |
The
Offering
| Units
to be Offered |
|
5,056,179
Units based on assumed public offering price
of $1.78 per Unit on a firm commitment basis. Each Unit will consist of one share of common stock (or Pre-Funded Warrant to
purchase one share of our common stock in lieu thereof), one Series A Warrant to purchase one share of common stock and one Series
B Warrant to purchase one share of common stock. The Units have no stand-alone rights and will not be certificated or issued as stand-alone
securities. The shares of common stock and Pre-Funded Warrants, if any, can each be purchased in this offering only with the accompanying
Series A Warrants and Series B Warrants as part of Units (other than pursuant to the underwriter’s option to purchase additional
shares of Common Stock and/or Pre-Funded Warrants and/or Series A Warrants and/or Series B Warrants), but the components of the Units
will be immediately separable and will be issued separately in this offering. |
| |
|
|
| Prefunded
Warrants to be Offered |
|
We
are also offering to certain purchasers whose purchase of Units in this offering would
otherwise result in the purchaser, together with its affiliates and certain related parties,
beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our
outstanding common stock immediately following the consummation of this offering, the opportunity
to purchase, if such purchasers so choose, Units including Prefunded Warrants to purchase
shares of common stock, in lieu of Units including shares of common stock that would
otherwise result in any such purchaser’s beneficial ownership exceeding 4.99% (or,
at the election of the purchaser, 9.99%) of our outstanding common stock. The purchase price
of each Unit including a Pre-Funded Warrant will be equal to the price
at which a Unit is sold to the public in this offering, minus $0.001, and the exercise
price of each Pre-Funded Warrant will be $0.001 per share.
Each
Pre-Funded Warrant will be exercisable for one share of our common stock and will be exercisable at any time after its original issuance
until exercised in full, provided that the purchaser will be prohibited from exercising Pre-Funded Warrants for shares of our common
stock if, as a result of such exercise, the purchaser, together with its affiliates and certain related parties, would own more than
4.99% of the total number of shares of our common stock then issued and outstanding. However, any holder may increase such percentage
to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days
after such notice to us.
This
prospectus also relates to the offering of the common stock issuable upon exercise of the Pre-Funded Warrants. See “Description
of Securities We Are Offering—Pre-Funded Warrants” |
| |
|
|
| Series
A Warrants and Series B Warrants to be Offered |
|
5,056,179
Series A Warrants and 5,056,179 Series
B Warrants. Each Unit includes one share of common stock, one Series A Warrant and one Series B Warrant. Each Series A Warrant is
exercisable at a price of $1.78 per share (assuming an offering price of $1.78 per Unit), or pursuant to an alternate
cashless exercise option, and each Series B Warrant is exercisable at a price of $1.78 per share (assuming an offering price
of $1.78 per Unit). The Series A Warrants and Series B Warrants will be immediately exercisable and will expire two-and-a-half
years (with respect to the Series A Warrants) or five years (with respect to the Series B Warrants) from the closing date of this
public offering. See “Description of Securities We Are Offering—Series A Warrants and Series B Warrants.” |
| Over-allotment option |
|
The offering
is being underwritten on a firm commitment basis. We have granted the underwriter a 45-day option to purchase up to 758,427
additional shares of common stock, representing 15% of the Common Units sold in the offering (at an assumed public offering price
of $1.78 per Common Unit, which is the last reported sales price of our common stock on the Nasdaq Capital Market on April
29, 2024), and/or up to 758,427 additional Pre-Funded Warrants, representing 15% of the Pre-funded Warrants sold in the
offering, and/or up to 758,427 additional Series A Warrants, representing 15% of the Series A Warrants sold in the offering,
and/or up to 758,427 additional Series B Warrants, representing 15% of the Series B Warrants sold in the offering, on the
same terms and conditions set forth above solely to cover over-allotments. The underwriter may exercise the over-allotment option
with respect to shares of common stock only, Pre-Funded Warrants only, Series A Warrants only, Series B Warrants only, or any combination
thereof. |
| |
|
|
| Common Stock Outstanding After This Offering (1) |
|
6,113,060
shares (or 6,871,587 shares of common stock if the underwriters exercise their option in full) (assuming we sell only shares
of common stock and no Prefunded Warrants and assuming no exercise of the Series A Warrant or Series B Warrant). |
| |
|
|
| Use of Proceeds |
|
We currently intend to
use the net proceeds from the offering to conduct operations, increase marketing efforts, and investments in our existing business
initiatives and products, a partial repayment of existing indebtedness to Streeterville Capital, LLC in an amount up to $ [*], as well as general working capital. We may also use a portion of the net proceeds to acquire or
invest in complementary businesses, products and technologies or to fund the development of any such complementary businesses, products
or technologies. We currently have no plans for any such acquisitions or investments. See “Use of Proceeds” |
| |
|
|
| Risk Factors |
|
See “Risk Factors”
beginning on page 12 of this prospectus and other information included and incorporated by reference in this prospectus for
a discussion of the risk factors you should consider carefully when making an investment decision. |
| |
|
|
| Nasdaq/OTC Symbol |
|
Our common stock is listed
on Nasdaq under the symbol “CETX” and our Series 1 Preferred Stock is quoted on the OTC Markets under the
symbol “CETXP.” There is no established public trading market for the Series A Warrants, Series B Warrants,
or Pre-Funded Warrants, and we do not intend to list the Series A Warrants, Series B Warrants, or the Pre-Funded
Warrants on any national securities exchange or trading system. |
| (1) | The
number of shares of our common stock to be outstanding after this offering is based on 1,056,981
shares of our common stock outstanding as of April 29, 2024, and, unless otherwise
indicated, excludes, as of that date: |
| ■ | 28,796
shares of Common Stock issuable upon the exercise of outstanding stock options having a weighted
average exercise price of $50.76 per share; and |
| ■ | 1,991,207
shares of Common Stock reserved for future issuance under the Company’s 2020 Equity
Compensation Plan. |
Except
as otherwise indicated, the information in this prospectus assumes: (i) no sale of the Prefunded Warrants in this offering, which, if
sold, would reduce the number of shares of common stock that we are offering on an one-for-one basis; (ii) no exercise of any Series
A Warrants or Series B Warrants; and (iii) no exercise of the options described above.
RISK
FACTORS
An
investment in our securities involves a high degree of risk. Before deciding whether to purchase our securities, including the securities
offered by this prospectus, you should carefully consider the risks and uncertainties described under “Risk Factors” in our
Annual Report on Form 10-K for the fiscal year ended September 30, 2022, any subsequent Quarterly Report on Form 10-Q and our other filings
with the SEC, all of which are incorporated by reference herein. If any of these risks actually occur, our business, financial condition
and results of operations could be materially and adversely affected and we may not be able to achieve our goals, the value of our securities
could decline and you could lose some or all of your investment. Additional risks not presently known to us or that we currently believe
are immaterial may also significantly impair our business operations. If any of these risks occur, our business, results of operations
or financial condition and prospects could be harmed. In that event, the market price of our common stock could decline, and you could
lose all or part of your investment.
Risks
Related to Macroeconomics Conditions and International Operations
Our
operations and performance depend significantly on global and regional economic conditions and adverse economic conditions can materially
adversely affect our business, results of operations and financial condition.
Adverse
macroeconomic conditions, including slow growth or recession, high unemployment, inflation, tighter credit, higher interest rates, and
currency fluctuations, can adversely impact consumer confidence and spending and materially adversely affect demand for our products
and services. In addition, consumer confidence and spending can be materially adversely affected in response to changes in fiscal and
monetary policy, financial market volatility, declines in income or asset values, and other economic factors.
In
addition to an adverse impact on demand for our products and services, uncertainty about, or a decline in, global or regional economic
conditions can have a significant impact on our suppliers, contract manufacturers, logistics providers, distributors, and other channel
partners, and developers. Potential outcomes include financial instability; inability to obtain credit to finance business operations;
and insolvency.
Adverse
economic conditions can also lead to increased credit and collectability risk on our trade receivables; the failure of derivative counterparties
and other financial institutions; limitations on our ability to issue new debt; reduced liquidity; and declines in the fair values of
our financial instruments. These and other impacts can materially adversely affect our business, results of operations, financial condition
and stock price.
Our
business can be impacted by political events, trade and other international disputes, war, terrorism, natural disasters, public health
issues, industrial accidents and other business interruptions.
Political
events, trade and other international disputes, war, terrorism, natural disasters, public health issues (such as COVID-19), industrial
accidents and other business interruptions can harm or disrupt international commerce and the global economy and could have a material
adverse effect on us and our customers, suppliers, contract manufacturers, logistics providers, distributors, and other channel partners.
Restrictions
on international trade, such as tariffs and other controls on imports or exports of goods, technology or data, can materially adversely
affect our operations and supply chain and limit our ability to offer and distribute products and services to customers. The impact can
be particularly significant if these restrictive measures apply to countries and regions where we derive a significant portion of our
revenues and/or have significant supply chain operations. Restrictive measures can require us to take various actions, including changing
suppliers and restructuring business relationships. Changing our operations in accordance with new or changed restrictions on international
trade can be expensive, time-consuming and disruptive to our operations. Such restrictions can be announced with little or no advance
notice and we may not be able to effectively mitigate all adverse impacts from such measures. For example, tensions between governments,
including the U.S. and China, have in the past led to tariffs and other restrictions being imposed on our business. If disputes and conflicts
further escalate in the future, actions by governments in response could be significantly more severe and restrictive and could materially
adversely affect our business. Political uncertainty surrounding trade and other international disputes could also have a negative effect
on consumer confidence and spending, which could adversely affect our business.
Many
of our operations and facilities, as well as critical business operations of our suppliers and contract manufacturers, are in locations
that are prone to earthquakes and other natural disasters. In addition, such operations and facilities are subject to the risk of interruption
by fire, power shortages, nuclear power plant accidents and other industrial accidents, terrorist attacks and other hostile acts, ransomware
and other cybersecurity attacks, labor disputes, public health issues, including pandemics such as the COVID-19 pandemic, and other events
beyond our control. Global climate change is resulting in certain types of natural disasters, such as droughts, floods, hurricanes and
wildfires, occurring more frequently or with more intense effects. Such events can make it difficult or impossible for us to manufacture
and deliver products to our customers, create delays and inefficiencies in our supply and manufacturing chain, and result in slowdowns
and outages to our product and service offerings, and negatively impact consumer spending and demand in affected areas. Following an
interruption to our business, we can require substantial recovery time, experience significant expenditures to resume operations, and
lose significant sales.
Our
operations are also subject to the risks of industrial accidents at our suppliers and contract manufacturers. While our suppliers are
required to maintain safe working environments and operations, an industrial accident could occur and could result in serious injuries
or loss of life, disruption to our business, and harm to our reputation. Major public health issues, including pandemics such as the
COVID-19 pandemic, have adversely affected, and could in the future materially adversely affect, us due to their impact on the global
economy and demand for consumer products; the imposition of protective public safety measures, such as stringent employee travel restrictions
and limitations on freight services and the movement of products between regions; and disruptions in our operations, supply chain and
sales and distribution channels, resulting in interruptions to the supply of current products and offering of existing services, and
delays in production ramps of new products and development of new services.
Volatility
in currency exchange rates may adversely affect our financial condition, results of operations and cash flows.
Our
international operations accounted for approximately 9.2% of our net sales in 2023. We are exposed to the effects (both positive and
negative) that fluctuating exchange rates have on translating the financial statements of our international operations, most of which
are denominated in local currencies, into the U.S. dollar. Fluctuations in exchange rates may affect product demand and reported profits
in our international operations. In addition, currency fluctuations may affect the prices we pay suppliers for materials used in our
products, along with other local costs incurred in foreign countries for foreign entities with U.S. dollar functional currency. As a
result, fluctuating exchange rates may adversely impact our results of operations and cash flows.
Our
business and results of operations may be materially adversely affected by compliance with import and export laws.
We
must comply with various laws and regulations relating to the import and export of products, services and technology from the U.S. and
other countries having jurisdiction over our operations, which may affect our transactions with certain customers, business partners
and other persons. In certain circumstances, export control and economic sanctions regulations may prohibit the export of certain products,
services, and technologies and in other circumstances, we may be required to obtain an export license before exporting a controlled item.
The length of time required by the licensing processes can vary, potentially delaying the shipment of products or performance of services
and the recognition of the corresponding revenue. In addition, failure to comply with any of these regulations could result in civil
and criminal, monetary and non-monetary penalties, disruptions to our business, limitations on our ability to import and export products
and services and damage to our reputation. Moreover, any changes in export control or sanctions regulations may further restrict the
export of our products or services, and the possibility of such changes requires constant monitoring to ensure we remain compliant. Any
restrictions on the export of our products or product lines could have a material adverse effect on our competitive position, results
of operations, cash flows or financial condition.
Risks
Related to Covid-19
The
global pandemic may disrupt our business or the business of our customers.
In
December 2019, a novel strain of corona virus, which causes the infectious disease known as COVID-19 was reported. The World Health Organization
declared COVID-19 a Public Health Emergency and Global Pandemic. COVID-19 has severely impacted economies around the world.
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 on multiple occasions. Bookings and revenue have largely recovered in this
calendar year compared to last year. 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.
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
emergence of new virus variants that are more contagious or harmful than prior variants, 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.
This could materially impact our results of operations, cash flows, and financial condition.
Risks
Related to our Financial Condition
The
report of our independent registered public accounting firm contains an explanatory paragraph that expresses substantial doubt about
our ability to continue as a going concern.
The
Company has incurred substantial losses of $9,196,875 and $13,020,958 for fiscal years 2023 and 2022, respectively, and has losses
on continuing operations for the three months ending December 31, 2023, of $1,314,395 and has current liabilities of $28,696,123
and working capital deficit of $2,284,787, that raise substantial doubt with respect to the Company’s ability
to continue as a going concern.
While
our working capital deficit 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 approximately
$2.84 million in cash as of December 31, 2023. Additionally, the Company has (i) secured a line of credit for its Vicon brand to fund
operations, which as of December 31, 2023, has available capacity of $1,642,676, (ii) sold unprofitable brands, reducing the cash
required to maintain those brands, (iii) continually reevaluate our pricing model on our Vicon brand to improve margins on those
products, and (iv) has effected a 35:1 reverse stock split 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 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.
There
is no guarantee that cash flow from operations and/or debt and equity financings will provide sufficient capital to meet our expansion
goals working capital needs or fund our operations.
Our
current strategic plan includes the expansion of our company both organically and through acquisitions if market conditions and competitive
conditions allow. Due to the long-term nature of investments in acquisitions and other financial needs to support organic growth, including
working capital, we expect our long-term and working capital needs to periodically exceed the short-term fluctuations in cash flow from
operations. We anticipate that we may need to raise additional external capital from the sale of common stock, preferred stock and debt
instruments as market conditions may allow, in addition to cash flow from operations (which may not always be sufficient), to fund our
growth and working capital needs.
In
the event that we need to raise significant amounts of external capital at any time or over an extended period, we face a risk that we
may need to do so under adverse capital market conditions with the result that our existing shareholders, as well as persons who acquire
our common stock, may incur significant and immediate dilution should we raise capital from the sale of our common or preferred stock.
Similarly, we may need to meet our external capital needs from the sale of secured or unsecured debt instruments at interest rates and
with such other debt covenants and conditions as the market then requires. However, there can be no guarantee that we will be able to
raise external capital on terms that are reasonable in light of current market conditions. In the event that we are not able to do so,
those who acquire our common stock may face significant and immediate dilution and other adverse consequences. Further, debt covenants
contained in debt instruments that we issue may limit our financial and operating flexibility with consequent adverse impact on our common
stock market price.
We
have a history of losses and may experience losses in the future, which could result in the market price of our common stock declining.
We
have incurred net losses, including net losses attributable to Cemtrex, Inc. shareholders of $9.2 million in 2023, $13.0 million in 2022,
and $7.8 million in 2021. We had a loss of $1,303,903 for the quarter ended December 31, 2023. We have an accumulated deficit
of $65.3 million as of December 31, 2023. We expect to continue to incur significant product development, sales and marketing
and administrative expenses. As a result, we will need to generate significant revenues to achieve profitability. We cannot be certain
that we will achieve profitability in the future or, if we achieve profitability, to sustain it. If we do not achieve and maintain profitability,
the market price for our common stock may decline, perhaps substantially.
The
Company is exposed to credit risk, market risk, and fluctuations in the value of its investment portfolio.
The
Company may, from time to time invest excess cash that the Company has on hand in large cap securities listed on major exchanges, including
stocks and options. The Company’s investments can be negatively affected by liquidity, credit deterioration, financial results,
market and economic conditions, political risk, sovereign risk, interest rate fluctuations or other factors.
Although
we have not recognized any material losses related to our cash equivalents, short-term investments, or long-term investments, future
declines in the market values of such investments could have an adverse effect on our financial condition and operating results. As a
result, the value and liquidity of the Company’s cash, cash equivalents, and marketable securities may fluctuate substantially.
Therefore, although the Company has not realized any significant losses on its cash, cash equivalents, and marketable securities, future
fluctuations in their value could result in significant losses and could have an adverse impact on the Company’s financial condition
and operating results.
We
have substantial debt which could adversely affect our ability to raise additional capital to fund operations and prevent us from meeting
our obligations under outstanding indebtedness.
As
of December 31, 2023, our total indebtedness was approximately $22.5 million, including notes payable of $16.4 million, mortgage payable
of $3.4 million, vendor financed purchase of $0.5 million, and bank loans of $2.2 million.
As
of September 30, 2023, our total indebtedness was approximately $24.4 million, including notes payable of $18.1 million, mortgage payable
of $3.4 million, vendor financed purchase of $0.7 million, and bank loans of $2.2 million, including $0.9 million of PPP loans that the
Company expects to be forgiven. By comparison, as of September 30, 2022, our total indebtedness was approximately $20.6 million, including
notes payable of $17.7 million, mortgage payable of $2.3 million, and bank loans of $0.6 million, including $0.1 million of PPP loans.
For 2023 and 2022 approximately $14.5 million and $16.9 million, respectively, of such debt is classified as current. This substantial
debt could have important consequences, including the following: (i) a substantial portion of our cash flow from operations may be dedicated
to the payment of principal and interest on indebtedness, thereby reducing the funds available for operations, future business opportunities
and capital expenditures; (ii) our ability to obtain additional financing for working capital, debt service requirements and general
corporate purposes in the future may be limited; (iii) we may face a competitive disadvantage to lesser leveraged competitors; (iv) our
debt service requirements could make it more difficult to satisfy other financial obligations; and (v) we may be vulnerable in a downturn
in general economic conditions or in our business and we may be unable to carry out activities that are important to our growth.
Our
ability to make scheduled payments of the principal of, or to pay interest on, or to refinance our indebtedness depends on and is subject
to our financial and operating performance, which in turn is affected by general and regional economic, financial, competitive, business
and other factors beyond management’s control. If we are unable to generate sufficient cash flow to service our debt or to fund
our other liquidity needs, we will need to restructure or refinance all or a portion of our debt, which could impair our liquidity. Any
refinancing of indebtedness, if available at all, could be at higher interest rates and may require us to comply with more onerous covenants
that could further restrict our business operations. Despite our significant amount of indebtedness, we may need to incur significant
additional amounts of debt, which could further exacerbate the risks associated with our substantial debt.
Our
ability to secure and maintain sufficient credit arrangements is key to our continued operations and there is no assurance we will be
able to obtain sufficient additional equity or debt financing in the future.
There
is no assurance that we will be able to retain or renew our credit agreements and other finance agreements in the future. In the event
our company grows rapidly, the uncertain economic climate continues, or we acquire one or more other companies, additional financing
resources will likely be necessary in the current or future fiscal years. As a smaller public company with a limited ability to attract
and obtain financing, there is no assurance that we will be able to obtain sufficient additional equity or debt financing in the future
on terms that are reasonable in light of current market conditions.
Risks
Related to our Business
We
are substantially dependent upon the success and continued market acceptance of our technology, the absence of which may significantly
reduce our sales, profits and cash flow and adversely impact our financial condition.
Competing
technologies may be offered by both existing competitors or by those that enter the market, and these competing technologies may offer
a better cost-benefit ratio than our products and/or at lower prices with the result that our sales, profits, and cash flow may suffer
significantly over an extended period with serious adverse impact on our financial condition.
We
have taken a multi-operational approach, and some of our business segments have historically failed to benefit our company to date, and
there remains a risk that our remaining segments may not prove to be successful. We may divest or expand into new areas that are outside
of our current business activities and those activities may not prove to be successful.
We
continuously assess the composition of our portfolio businesses to ensure it is aligned with our strategic objectives and positioned
to maximize growth and return in the coming years. Since our business concerns new and developing technologies, and many of these endeavors
fail, some of the businesses in our portfolio may not be successful in generating sufficient revenue to be a viable option for our company.
Currently,
the Company has the following business segments, consisting of (i) Security, (ii) Industrial Services, and (iii) Cemtrex Corporate. Within
these segments there are a number of technologies that we are pursuing, as discussed in this annual report under “Item 1. Business.”
There is a risk that one or more of our technologies will not be successful in generating revenue to sustain the expenditures associated
with its existence. Moreover, having multiple business segments may present challenges, such as fluctuations in our operating results,
using the company’s limited resources on less worthy business pursuits, and distracting management from obtaining its goals with
respect to our overall operations. If we are unable to establish our technologies in the market, and overcome the challenges of doing
so, we could go out of business.
As
we continuously review our portfolio of businesses we may exit or enter into new business activities which may ultimately prove to be
unsuccessful.
Our
future operating results depend in part on continued successful research, development and marketing of new and improved products and
services through our Security segment, and there can be no assurance that we will successfully introduce new products and services into
the market.
The
success of new and improved products and services through our Security segment depends on our research and development efforts and the
initial acceptance of our products and solutions by consumers. Our business is affected by varying degrees of technological change and
corresponding shifts in customer demand, which result in unpredictable product transitions, shortened life cycles and increased importance
of being first to market with new products and services. We may experience difficulties or delays in the research and development, production
and/or marketing of new products and services due to lack of capital, which may negatively impact our operating results and prevent us
from recouping or realizing a return on the investments required to continue to bring new products and services to market.
Our
future operating results depends in part on the continued successful operation of our Industrial Services segment, and there can be no
assurance that we will be successful in this business.
The
success of selling services through our Industrial Services segment depends on our ability to hire and retain talent, our ability to
market these services successfully to clients, the overall demand for these services, and the quality of our workmanship by our customers,
among other factors. Our business is affected by varying degrees of technological change and corresponding shifts in customer demand,
which result in unpredictable product transitions, shortened life cycles and increased importance of being first to market with new products
and services. We may experience difficulties or delays in the delivery of services due to lack of capital or lack of adequate talent,
which may negatively impact our operating results and prevent us from recouping or realizing a return on the investments required to
continue to compete in our markets.
Our
operating results may fluctuate, which could have a negative impact on our ability to grow our client base, establish sustainable revenues
and succeed overall.
Our
results of operations may fluctuate as a result of a number of factors, some of which are beyond our control including but not limited
to:
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■ |
general
economic conditions in the geographies and industries where we sell our services and conduct operations; legislative policies where
we sell our services and conduct operations; |
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the
budgetary constraints of our customers; seasonality; |
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success
of our strategic growth initiatives; |
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■ |
costs
associated with the launching or integration of new or acquired businesses; |
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■ |
timing
of new product introductions by us, our suppliers and our competitors; product and service mix, availability, utilization and pricing; |
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■ |
the
mix, by state and country, of our revenues, personnel and assets; |
| |
■ |
movements
in interest rates or tax rates; |
| |
■ |
changes
in, and application of, accounting rules; |
| |
■ |
changes
in the regulations applicable to us; and |
| |
■ |
litigation
matters. |
As
a result of these factors, we may not succeed in our business, and we could go out of business.
We
operate in a cyclical business, which could result in significant fluctuations in demand for our products.
Cyclical
changes in our customers’ businesses have, in the past, resulted in, and may in the future result in, significant fluctuations
in demand for our products, selling prices, and our profitability. Most of our customers operate in cyclical industries. Their requirements
for our technologies fluctuate significantly as a result of changes in general economic conditions, technological changes, customer demand,
and other factors. During periods of increasing demand, our customers typically seek to increase their inventory of our products to avoid
production bottlenecks. When demand for their products peaks and begins to decline, as has happened in the past, they tend to reduce
or cancel orders for our products while they use up accumulated inventory. Business cycles vary somewhat in different geographical regions
and customer industries. Significant fluctuations in sales of our products affect our unit manufacturing costs and affect our profitability
by making it more difficult for us to predict our production, raw materials, and shipping needs. Changes in demand mix, needed technologies,
and end-use markets may adversely affect our ability to match our products, inventory, and capacity to meet customer demand and could
adversely affect our operating results and financial condition. We are also vulnerable to general economic events or trends beyond our
control, and our sales and profits may suffer in periods of weak demand.
Our
sales and gross margins depend significantly on market demand for our products, as to which there can be no assurance.
The
uncertainty in the United States and in the international economic and political environment could result in a decline in demand for
our products in any industry. Our gross margins are dependent upon our ability to maintain sales volumes at levels that allow us to cover
our fixed costs and variable costs per unit. To the extent that one or more product lines experience a significant and protracted decline
in sales volume, we may experience significant declines in our gross margins that may result in losses. Further, any adverse changes
in tax rates and laws affecting our customers could result in decreases in demand of our products and thus decrease our gross margins.
Any of these factors could negatively impact our business, results of operations and financial condition.
In
these circumstances, we anticipate that we could be required to increase or decrease staffing and more closely manage other expenses
in order to meet the anticipated demand of our existing and future customers. Orders from our customers are subject to cancellation,
and delivery schedules from our customers fluctuate as a result of changes in our customers’ demand, thereby adversely affecting
our results of operations, and may result in higher inventory levels. Higher inventory levels may cause us to need greater external financing,
which adversely affects our financial performance.
Our
products face intense competitive challenges, including rapid technological changes, and pricing pressure from competitors, which could
adversely affect our business.
All
of our product lines are subject to significant competition from existing and future competitors, market conditions and technological
change, or a combination of them, and our sales revenues and gross margins may suffer protracted and serious declines with the result
that we would likely incur protracted losses. Further, the barriers to entry in several of our lines of business are not so significant
that we may be facing competition from others who see significant opportunities to enter the market and undercut our prices with products
that possess superior technological attributes at prices that offer our customers a better value. In this instance, we could incur protracted
and significant losses and persons who acquire our common stock would suffer losses thereby.
From
time to time, we may need to reduce our prices in response to competitive and customer pressures and to maintain our market share. Competition
and customer pressures may also restrict our ability to increase prices in response to commodity and other input cost increases. Our
results of operations will suffer if profit margins decrease, as a result of a reduction in prices, increased input costs or other factors,
and if we are unable to increase sales volumes to offset those profit margin decreases. We may also need to increase spending on marketing,
advertising and new product innovation to protect existing market share or increase market share. The success of our investments is subject
to risks, including uncertainties about trade and consumer acceptance. As a result, our increased expenditures may not maintain or enhance
market share and could result in lower profitability.
Factors
affecting the industries that utilize our products could negatively impact our customers and us.
We
have no real control over factors affecting the industries that utilize our products and to the extent that any one or more of these
industries change dramatically, we may be facing significant financial challenges that are in excess of our existing capabilities. These
factors include:
| |
● |
increased
competition among our customers and their competitors; |
| |
● |
the
inability of our customers to develop and market their products; |
| |
● |
recessionary
periods in our customers’ markets; |
| |
● |
the
potential that our customers’ products become obsolete; |
| |
● |
our
customers’ inability to react to rapidly changing technology; and |
| |
● |
our
customers’ inability to pay for our products, which could, in turn, affect the company’s results of operations. |
If
we are unable to develop new products, our competitors may develop and market products with better features that may reduce demand for
our existing and potential products or otherwise result in our products becoming obsolete and could materially and adversely affect our
ability to sustain profitability.
There
are many larger competitors who compete directly with us and who have significantly greater financial, technological and research resources.
This may serve to severely damage our ability to market and sell our products at price levels that would allow us to achieve and maintain
profit margins and positive cash flow.
We
are a smaller public company, and we face rapid technological change in many of our product markets and we may not be able to introduce
any successful new products or any enhancements to our existing products on a timely basis, or at all. This could result in prolonged
and significant losses. In addition, our introduction of new products could adversely affect sales of certain of our existing products
if these new products directly compete with our existing products. If our competitors develop innovative technologies that are superior
to our products or if we fail to accurately anticipate market trends and respond on a timely basis with our own innovations, we may not
achieve sufficient growth in its revenues to attain profitability or if we do, we may not be able sustain profitability.
The
success of new product introductions is dependent on a number of factors, including, but not limited to, timely and successful development
of new products, including software development, market acceptance of these products and our ability to manage the risks associated with
these introductions. These risks include development and production capabilities, management of inventory levels to support anticipated
demand, the risk that new products may have quality defects in the early stages of introduction, and obsolescence risk of existing products.
Developing
and maintaining a patent portfolio is an expensive and time-consuming process and there is no assurance the Company will successfully
develop patents to protect the intellectual property it is working on.
We
are increasingly dependent on information technology, and if we are unable to protect against service interruptions, data corruption,
cyber-based attacks, or network security breaches our operations could be disrupted and we could incur significant costs and reputational
harm as a result
We
rely on information technology networks and systems, including the Internet, to process, transmit, and store electronic and financial
information; to manage a variety of business processes and activities; and to comply with regulatory, legal, and tax requirements. We
also depend on our information technology infrastructure for digital marketing and sales activities and for electronic communications
among our locations, personnel, customers, and suppliers around the world. Many of the information technology systems used by us globally
have been in place for many years and not all hardware and software is currently supported by vendors. These information technology systems
are susceptible to damage, disruptions, or shutdowns due to failures during the process of upgrading or replacing software, databases
or components thereof, power outages, hardware failures, computer viruses, cyber-attacks, telecommunication failures, user errors, or
catastrophic events. If our information technology systems suffer severe damage, disruption, or shutdown and our business continuity
plans do not effectively resolve the issues in a timely manner, our product sales, financial condition, and results of operations may
be materially affected, and we could experience delays in reporting our financial results.
We
have been, and likely will continue to be, subject to various cyber-attacks. To date, we have seen no material impact on our business
or operations from these attacks or events. Any future significant compromise, breach, or misuse of our data security could result in
significant costs and damage to our reputation. The ever-evolving threats mean us and our third-party service providers must continually
evaluate and adapt our respective systems and processes and overall security environment, as well as those of any companies we acquire.
There is no guarantee that these measures will be adequate to safeguard against all data security compromises, breaches, or misuses.
In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly
rigorous, compliance with those requirements could also result in additional costs.
Third-party
service providers, such as distributors, subcontractors, vendors, and data processors have access to certain portions of our sensitive
data. In the event that these service providers do not appropriately protect our data, the result could be a security breach or loss
of our data. Any such loss of data by our third-party service providers could have a material adverse impact on our business and results
of operations.
In
addition, if we are unable to prevent security breaches, we may suffer financial and reputational damage or penalties because of the
unauthorized disclosure of confidential information belonging to us or to our customers or suppliers. Furthermore, the disclosure of
non-public sensitive information through external media channels could lead to the loss of intellectual property or damage our reputation
and brand image.
We
are also in the process of converting certain information technology networks and systems and consolidating certain global systems. If
such projects fail, or if unexpected technical difficulties arise, our operations and financial systems could be adversely affected.
Further, we could incur additional costs or require additional technical support to resolve such difficulties.
Our
operating results are sensitive to raw material and resale product availability, quality, and cost
We
seek to have many sources of supply for each of our major requirements in order to avoid significant dependence on any one or a few suppliers.
However, the supply of materials or other items could be disrupted by natural disasters, international trade tariffs, wars, pandemics,
disputes and or other events. Despite market price volatility for certain requirements and materials pricing pressures at some of our
businesses, the raw materials and various purchased components needed for our products have generally been available in sufficient quantities.
In some instances, lead times have extended beyond normal due to logistic delays and labor shortages occurring globally. Some of our
products, however, require the use of raw materials that are available from only a limited number of regions around the world, are available
from only a limited number of suppliers, or may be subject to significant fluctuations in market prices. Our results of operations may
be adversely affected if we have difficulty obtaining these raw materials, our key suppliers experience financial difficulties, the quality
of available raw materials deteriorates, or there are significant price increases for these raw materials. Our inability to recover increased
costs through increased sales prices could have an adverse impact on our results of operations. For periods in which the prices for these
raw materials rise, we may be unable to pass on the increased cost to our customers, which would result in decreased sales margins for
the products in which they are used. For periods in which prices for these raw materials decline, we may be required, as has occurred
in the past, to write down our inventory carrying cost of these raw materials and products. Depending on the extent of the difference
between market price and our carrying cost, the write-down could have a significant adverse effect on our results of operations.
We
resell products manufactured by other component and interconnect product manufacturers. Should these manufacturers experience difficulties
supplying the products that we resell, or such suppliers use other channels to market their products, we could experience lower sales,
which could have an adverse effect on our results of operations.
Risks
Related to Legal Uncertainty
We
could be subject to additional civil penalties or face criminal penalties and sanctions if we violate the terms of settlement with the
SEC.
On
September 30, 2022, acting pursuant to an offer of settlement submitted by the Company, the SEC issued an order pursuant to Section 8A
of the Securities Act, directing the Company to cease and desist from committing or causing any violations and any future violations
of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder (the “SEC Order”).
While
we have already paid the penalties imposed by the order into which we entered pursuant to the SEC Order, it contains ongoing and continuing
requirements that we refrain from violating the Securities Act. Any future violation of applicable securities laws by us or management
could result in harsher sanctions and fines, which would have a material adverse effect on our ability to implement our business plans.
SEC staff can make reasonable requests from us for further evidence of compliance. Such requests for further information, record-keeping
requirements and others generally could divert management’s attention from implementing its business plans and could require additional
material expenditures by us to legal counsel or other advisors and service providers. Further issues could reduce investor and shareholder
confidence in our company and could result in a failure to execute on our business plan, which would negatively impact our business.
A copy of the SEC Order can be found at www.sec.gov.
Our
global operations subject us to many different and complex laws and rules, and we may face difficulty in compliance.
Due
to our global operations, we are subject to many laws governing international relations (including but not limited to the Foreign Corrupt
Practices Act, the U.S. Export Administration Act the EU General Data Protection Regulation, and the U.K. Modern Anti-Slavery Act); which
prohibit improper payments to government officials and restrict where and how we can do business, what information or products we can
supply to certain countries, what personal information we can transfer, and what information we can provide to a non-U.S. government.
Although we have procedures and policies in place that should mitigate the risk of violations of these laws, there is no guarantee that
they will be sufficiently effective. If, and when we acquire new businesses, we may not be able to ensure that the pre-existing controls
and procedures meant to prevent violations of the rules and laws were effective, and we may not be able to implement effective controls
and procedures to prevent violations quickly enough when integrating newly acquired businesses. Acquisitions of new businesses in new
non-U.S. jurisdictions may also subject us to new regulations and laws, and we may face difficulties ensuring compliance with these new
requirements.
Provisions
in the Delaware law and our Bylaws could make it very difficult for an investor to bring any legal actions against our directors or officers
for violations of their fiduciary duties or could require us to pay any amounts incurred by our directors or officers in any such actions.
Members
of our board of directors and our officers will have no liability for breaches of their fiduciary duty of care as a director or officer,
except in limited circumstances, pursuant to provisions in the Delaware law and our Bylaws. Accordingly, you may be unable to prevail
in a legal action against our directors or officers even if they have breached their fiduciary duty of care. In addition, our Bylaws
allow us to indemnify our directors and officers from and against any and all costs, charges and expenses resulting from their acting
in such capacities with us. This means that if you were able to enforce an action against our directors or officers, in all likelihood,
we would be required to pay any expenses they incurred in defending the lawsuit and any judgment or settlement they otherwise would be
required to pay. Accordingly, our indemnification obligations could divert needed financial resources and may adversely affect our business,
financial condition, results of operations and cash flows, and adversely affect prevailing market prices for our common stock.
If
we fail to establish, maintain, and enforce intellectual property rights with respect to our technology, our financial condition, results
of operations and business could be negatively impacted.
Our
ability to establish, maintain and enforce intellectual property rights with respect to our proprietary technologies, patents, patent
applications, software and other rights will be a significant factor in determining our future financial and operating performance. We
seek to protect our intellectual property rights by relying on a combination of patent, trade secret and copyright laws. We also use
confidentiality and other provisions in our agreements that restrict access to and disclosure of our confidential know-how and trade
secrets.
We
have filed patent applications with respect to many aspects of our technologies. However, we cannot provide any assurances that any of
these applications will ultimately result in issued patents or, if patents are issued, that they will provide sufficient protections
for our technology against competitors. Although we have filed various patent applications for some of our core technologies, we currently
hold only six issued patents, with two in the United States and four in Canada, and we may face delays and difficulties in obtaining
our other filed patents, or we may not be able to obtain such patents at all.
Outside
of these patent applications, we seek to protect our technology as trade secrets and technical know-how. However, trade secrets and technical
know-how are difficult to maintain and do not provide the same legal protections provided by patents. In particular, only patents will
allow us to prohibit others from using independently developed technology that are similar. If competitors develop knowledge substantially
equivalent or superior to our trade secrets and technical know-how or gain access to our knowledge through other means such as observation
of our technology that embodies trade secrets at customer sites which we do not control, the value of our trade secrets and technical
know-how would be diminished.
While
we strive to maintain systems and procedures to protect the confidentiality and security of our trade secrets and technical know-how,
these systems and procedures may fail to provide an adequate degree of protection. For example, although we generally enter into agreements
with our employees, consultants, advisors, and strategic partners restricting the disclosure and use of trade secrets, technical know-how
and confidential information, we cannot provide any assurance that these agreements will be sufficient to prevent unauthorized use or
disclosure. In addition, some of the technology deployed at customer sites in the future, which we do not control, may be readily observable
by third parties who are not under contractual obligations of non-disclosure, which may limit or compromise our ability to continue to
protect such technology as a trade secret.
Monitoring
and policing unauthorized use and disclosure of intellectual property is difficult. If we learned that a third party was in fact infringing
or otherwise violating our intellectual property, we may need to enforce our intellectual property rights through litigation. Litigation
relating to our intellectual property may not prove successful and might result in substantial costs and diversion of resources and management
attention.
From
our customers’ standpoint, the strength of the intellectual property under which we control can be a critical determinant of the
value of our products and services. If we are unable to secure, protect and enforce our intellectual property, it may become more difficult
for us to attract new customers. Any such development could have a material adverse effect on our business, prospects, financial condition
and results of operations.
We
may not have sufficient financial resources to defend our intellectual property rights or otherwise successfully defend against claims
that we have infringed on a third party’s intellectual property and, as a result, it may adversely affect our business, financial
condition and results of operations.
Even
if such claims are not valid, they could subject us to significant costs. In addition, it may be necessary in the future to enforce our
intellectual property rights to determine the validity and scope of the proprietary rights of others. Litigation may also be necessary
to defend against claims of infringement or invalidity by others. We may not have sufficient financial resources to defend our intellectual
property rights or otherwise to successfully defend the company against valid or spurious claims that we have infringed upon the intellectual
property rights of others. An adverse outcome in litigation or any similar proceedings could force us to take actions that could harm
its business. These include: (i) ceasing to sell products that contain allegedly infringing property; (ii) obtaining licenses to the
relevant intellectual property which we may not be able to obtain on terms that are acceptable, or at all; (iii) indemnifying certain
customers or strategic partners if it is determined that we have infringed upon or misappropriated another party’s intellectual
property; and (iv) redesigning products that embody allegedly infringing intellectual property. Any of these results could adversely
and significantly affect our business, financial condition and results of operations. In addition, the cost of defending or asserting
any intellectual property claim, both in legal fees and expenses, and the diversion of management resources, regardless of whether the
claim is valid, could be significant and lead to significant and protracted losses.
Product
liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of our product or any future
products that we may develop.
We
face an inherent risk of product liability exposure related to the sale of our products and the future sale of planned products. We may
be sued if any of our products allegedly causes injury. Any such product liability claims may include allegations of defects in manufacturing,
defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, and a breach of warranties. We
may also be subject to liability for a misunderstanding of, or inappropriate reliance upon, the information we provide. If we cannot
successfully defend ourselves against claims that our product or planned products caused injuries, we may incur substantial liabilities.
Regardless of merit or eventual outcome, liability claims may result in:
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decreased
demand for our product or any planned products that we may develop; |
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■ |
injury
to our reputation and significant negative media attention; |
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significant
costs to defend the related litigation and distraction to our management team; |
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substantial
monetary awards to plaintiffs; |
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loss
of revenue; and |
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the
inability to commercialize any future products that we may develop. |
Such
events could subject us to costly litigation, require us to pay substantial amounts of money to injured parties, delay, negatively impact,
or end our opportunity to market those products, or require us to suspend or abandon our commercialization efforts. Even in a circumstance
in which we do not believe that an adverse event is related to our product, the investigation into the circumstance may be time-consuming
or inconclusive. These investigations may interrupt our sales efforts. As a result of these factors, a product liability claim, even
if successfully defended, could harm our business.
We
currently maintain product liability insurance coverage, which may not be adequate to cover all liabilities that we may incur. Insurance
coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to
satisfy any liability that may arise.
If
we experience material weaknesses in the future or otherwise fail to maintain an effective system of internal control over financial
reporting in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may
adversely affect investor confidence in us and, as a result, the value of our common stock.
As
a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such
internal controls. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control
over financial reporting and provide a management report on internal control over financial reporting. A material weakness is a deficiency,
or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material
misstatement of our financial statements will not be prevented or detected on a timely basis. Ensuring that we have adequate internal
financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a
costly and time-consuming effort. Our internal control over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements in accordance with Generally Accepted Accounting Principles.
We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing
process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert
that our internal controls are effective. The identification of one or more material weaknesses would preclude a conclusion that we maintain
effective internal control over financial reporting. Accordingly, there could continue to be a reasonable possibility that a material
misstatement of our financial statements would not be prevented or detected on a timely basis.
Our
management, including our principal executive officer and principal accounting officer, conducted an evaluation of the effectiveness
of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) in Internal Control—Integrated Framework (2013). Based on its evaluation, our management concluded
that as of September 30, 2023, that our internal control over financial reporting were effective.
We
are required to disclose changes made in our internal control and procedures on a quarterly basis. However, our independent registered
public accounting firm will not be required to report on the effectiveness of our internal control over financial reporting pursuant
to Section 404 of the Sarbanes-Oxley Act until we are no longer an “smaller reporting company.” At such time, our independent
registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls
are documented, designed or operating. Our remediation efforts may not enable us to avoid a material weakness in the future. If we are
unable to assert that our internal control over financial reporting is effective, or when required in the future, if our independent
registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial
reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common
stock could be adversely affected, and we could become subject to investigations by the stock exchange on which our securities are listed,
the SEC, or other regulatory authorities, which could require additional financial and management resources.
Risks
Related to Acquisitions
We
have grown through acquisitions and are continuously looking to fund other acquisitions; our failure to raise funds for acquisitions
may have the effect of slowing down our growth and our use of funds for acquisitions subjects us to acquisition-related risks.
We
intend to make acquisitions of complementary (including competitive) businesses, products and technologies. However, any future acquisitions
may result in material transaction costs, increased interest and amortization expenses related to goodwill and other intangible assets,
increased depreciation expense and increased operating expenses, any of which could have an adverse effect on our operating results and
financial position. Acquisitions will require integration of acquired assets and management into our operations to realize economies
of scale and control costs. Acquisitions may involve other risks, including diversion of management attention that would otherwise be
available for ongoing internal development of our business and risks inherent in entering markets in which we have no or limited prior
experience. In connection with future acquisitions, we may make potentially dilutive issuances of equity securities. In addition, consummation
of acquisitions may subject us to unanticipated business uncertainties, contingent liabilities or legal matters relating to those acquired
businesses for which the sellers of the acquired businesses may not fully indemnify us. There can be no assurance that our business will
grow through acquisitions, as anticipated.
We
may fail to successfully integrate our acquisitions or otherwise be unable to benefit from pursuing acquisitions.
We
believe there are meaningful opportunities to grow through acquisitions and joint ventures across all product categories and we expect
to continue a strategy of selectively identifying and acquiring businesses with complementary products. We may be unable to identify,
negotiate, and complete suitable acquisition opportunities on reasonable terms. There can be no assurance that any business acquired
by us will be successfully integrated with our operations or prove to be profitable to us. We may incur future liabilities related to
acquisitions. Should any of the following problems, or others, occur as a result of our acquisition strategy, the impact could be material:
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difficulties
integrating personnel from acquired entities and other corporate cultures into our business; |
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difficulties
integrating information systems; |
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the
potential loss of key employees of acquired companies; |
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the
assumption of liabilities and exposure to undisclosed or unknown liabilities of acquired companies; or |
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the
diversion of management attention from existing operations. |
Risks
Related to Our Management and Control Persons
The
loss of the services of Saagar Govil for any reason would materially and adversely affect our business operations and prospects.
Our
financial success is dependent to a significant degree upon the efforts of Saagar Govil, our Chairman, President and Chief Executive
Officer. Saagar Govil possesses management, financial expertise, engineering, sales and marketing experience concerning our company that
our other officers do not have. We have not entered into an employment arrangement with Mr. Govil, and we have not obtained key man insurance
over him. There can be no assurance that Saagar Govil will continue to provide services to us. A voluntary or involuntary departure by
Saagar Govil could have a materially adverse effect on our business operations if we were not able to attract a qualified replacement
for them in a timely manner.
If
we are unable to attract and retain qualified personnel, especially our design and technical personnel, we may not be able to execute
our business strategy effectively.
Our
future success depends on our ability to retain, attract and motivate qualified personnel, including our management, sales and marketing,
finance, and especially our design and technical personnel. As the source of our technological and product innovations, our design and
technical personnel represent a significant asset. Any inability to retain, attract or motivate such personnel could have a material
adverse effect on our business and results of operations.
Our
management stockholders have significant stockholdings in and influence over our company which could make it impossible for public stockholders
to influence the affairs of our company.
We
are a “controlled company” under Nasdaq Listing Rules. Approximately 90% of our outstanding voting shares, which includes
our common stock, Series C preferred stock and Series 1 preferred stock, are beneficially held by Saagar Govil, our Chairman, President
and Chief Executive Officer. Pursuant to certificate of designation for our Series C preferred, each outstanding share of Series C Preferred
Stock is entitled to the number of votes equal to the result of (i) the total number of shares of Common Stock outstanding at the time
of such vote multiplied by 10.01, and divided by (ii) the total number of shares of Series C Preferred Stock outstanding at the time
of such vote, at each meeting of our shareholders with respect to any and all matters presented to our shareholders for their action
or consideration, including the election of directors. As a result of Saagar Govil’s ownership of our common stock, Series C preferred
stock, and Series 1 preferred stock, he controls, and will control in the future, substantially all matters requiring approval by the
stockholders of our company, including the election of all directors and approval of significant corporate transactions. This could make
it impossible for public stockholders to influence the affairs of our company.
Liability
of directors for breach of duty is limited under Delaware law.
Our
certificate of incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides
that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors,
except for liability for any:
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breach of their duty of loyalty
to us or our stockholders; |
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act or omission not in good
faith or that involves intentional misconduct or a knowing violation of law; |
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unlawful payments of dividends
or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or |
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transaction from which the
directors derived an improper personal benefit. |
These
limitations of liability do not apply to liabilities arising under the federal or state securities laws and do not affect the availability
of equitable remedies such as injunctive relief or rescission.
Our
bylaws provide that we will indemnify for our directors and officers to the fullest extent permitted by law, and may indemnify employees
and other agents. Our bylaws also provide that we are obligated to advance expenses incurred by a director or officer in advance of the
final disposition of any action or proceeding.
The
limitation of liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation
against directors and officers, even though an action, if successful, might provide a benefit to us and our stockholders. Our results
of operations and financial condition may be harmed to the extent we pay the costs of settlement and damage awards against directors
and officers pursuant to these indemnification provisions.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us,
we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
At
present, there is no pending litigation or proceeding involving any of our directors or officers as to which indemnification is required
or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
Risks
Related to Our Securities and the Offering
Sales
of substantial amounts of our securities in the public market could depress the market price of our common stock.
Our
common stock is listed for trading on the Nasdaq Capital Market and our Seies 1 Preferred Stock is quoted on the OTC Markets.
If our stockholders sell substantial amounts of our securities in the public market, including the shares of common stock issuable upon
the exercise of our stock options, those under our 2020 Equity Compensation Plan, and shares issued as consideration in future
acquisitions, or the market perceives that such sales may occur, the market price of our securities could fall and we may be unable to
sell our securities in the future.
Our
securities may experience extreme price and volume fluctuations, which could lead to costly litigation for us and make an investment
in us less appealing.
The
market price of our securities may fluctuate substantially due to a variety of factors, including:
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our
business strategy and plans; |
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changing
factors related to doing business in various jurisdictions within the United States; |
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new
regulatory pronouncements and changes in regulatory guidelines and timing of regulatory approvals; |
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general
and industry-specific economic conditions; |
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additions
to or departures of our key personnel; |
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variations
in our quarterly financial and operating results; |
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changes
in market valuations of other companies that operate in our business segments or in our industry; |
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lack
of trading liquidity; |
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announcements
about our business partners; |
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Intellectual
property disputes; |
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Operating
results below or exceeding expectations or period-to-period fluctuations in our financial results; |
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Whether
we achieve profits or not; |
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changes
in accounting principles; and |
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general
market conditions, economic and other external factors. |
The
market prices of the securities of early-stage companies, particularly companies like ours without consistent product revenues and earnings,
have been highly volatile and are likely to remain highly volatile in the future. This volatility has often been unrelated to the operating
performance of particular companies. In the past, companies that experience volatility in the market price of their securities have often
faced securities class action litigation. Whether or not meritorious, litigation brought against us could result in substantial costs,
divert our management’s attention and resources and harm our financial condition and results of operations.
Our
Series 1 preferred stock and all of our existing and future indebtedness rank senior to our common stock in the event of a liquidation,
winding up or dissolution of our business.
In
the event of our liquidation, winding up or dissolution, our assets would be available to make payments to holders of all existing and
future indebtedness and Series 1 preferred stock before payments to holders of our common stock. In the event of our bankruptcy, liquidation
or winding up, there may not be sufficient assets remaining, after paying amounts to the holders of our indebtedness and Series 1 preferred
stock, to pay anything to common stockholders. As of December 31, 2023, we had total consolidated liabilities of approximately
$38.0 million and 2,408,053 shares issued and 2,343,953 shares of Series 1 preferred stock outstanding. Any liquidation,
winding up or dissolution of our company or of any of our wholly or partially owned subsidiaries would have a material adverse effect
on holders of our common stock.
Our
common stockholders may be adversely affected by the issuance of any subsequent series of preferred stock.
Our
certificate of incorporation does not restrict our ability to offer one or more additional new series of preferred stock, any or all
of which may rank equally with or have preferences over our common stock as to dividend payments, voting rights, rights upon liquidation
or other types of rights. We would have no obligation to consider the specific interests of the holders of common stock in creating any
such new series of preferred stock or engaging in any such offering or transaction. Our creation of any new series of preferred stock
or our engaging in any such offering or transaction could have a material adverse effect on holders of our common stock.
The
public trading market for the common stock may be limited in the future.
Our
common stock is listed for trading on the Nasdaq Capital Market under the symbol CETX. The trading volume fluctuates and there have been
time periods during which the common stock trading volume has been limited. Management can make no assurances that trading volume will
not be similarly limited in the future. Without an active trading market, there can be no assurance of any liquidity or resale value
of the common stock, and stockholders may be required to hold their shares of common stock for an indefinite period of time.
We
may not pay cash dividends on our common stock.
Our
board of directors declared a one-time cash dividend on our common stock in April 2017. The terms of our series 1 preferred stock provide
for the payment of semiannual dividends on the last day of March and September in each year, which began in March 2017. No other cash
dividends have been declared or paid by us on our stock during either of the two most recent fiscal years or the period through the date
of this prospectus. Other than with respect to our series 1 preferred stock, our board of directors declares dividends when, in its discretion,
it determines that a dividend payment, as opposed to another use of cash, is in the best interests of the stockholders. Such decisions
are based on the facts and circumstances then existing including, without limitation, our results of operations, financial condition,
contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant. As a result,
we cannot predict when, or whether, another dividend on our common stock will be declared in the future.
The
offering price of our Units may not be indicative of the value of our assets or the price at which shares can be resold. The offering
price of the Units may not be an indication of our actual value.
The
public offering price per share of our Units was determined based upon negotiations between the Company and the underwriter.
Factors taken into consideration include the trading volume of our Common Stock prior to this offering, the historical prices at which
our shares of Common Stock have recently traded, the history and prospects of our Company, the stage of development of our business,
our business plans for the future and the extent to which they have been implemented, an assessment of our management, general conditions
of the securities markets at the time of the offering, and such other factors as were deemed relevant. No assurance can be given that
our Common Stock can be resold at the public offering price for the Units.
For
these reasons, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on past results
as an indication of future performance. In the past, following periods of volatility in the market price of a public company’s
securities, securities class action litigation has often been instituted against the public company. Regardless of its outcome, this
type of litigation could result in substantial costs to us and a likely diversion of our management’s attention. You may not receive
a positive return on your investment when you sell your shares and you may lose the entire amount of your investment.
If
securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price
and trading volume could decline.
The
trading market for our Common Stock will depend in part on the research and reports that securities or industry analysts publish about
us or our business. Securities and industry analysts do not currently, and may never, publish research on our Company. If no securities
or industry analysts commence coverage of our Company, the trading price for our stock would likely be negatively impacted. In the event
securities or industry analysts initiate coverage, if one or more of the analysts who covers us downgrades our stock or publishes inaccurate
or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our Company
or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume
to decline.
If
our shares become subject to the penny stock rules, it would become more difficult to trade our shares.
The
SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally
equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized
for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions
in such securities is provided by the exchange or system. If the price of our Common Stock is less than $5.00, our Common Stock will
be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from
those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules
require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special
written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment
of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and
dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in
the secondary market for our Common Stock, and therefore shareholders may have difficulty selling their shares.
FINRA
sales practice requirements may limit a stockholder’s ability to buy and sell our securities.
Effective
June 30, 2020, the SEC implemented Regulation Best Interest requiring that “A broker, dealer, or a natural person who is an associated
person of a broker or dealer, when making a recommendation of any securities transaction or investment strategy involving securities
(including account recommendations) to a retail customer, shall act in the best interest of the retail customer at the time the recommendation
is made, without placing the financial or other interest of the broker, dealer, or natural person who is an associated person of a broker
or dealer making the recommendation ahead of the interest of the retail customer.” This is a significantly higher standard for
broker-dealers to recommend securities to retail customers than before under FINRA “suitability rules. FINRA suitability rules
do still apply to institutional investors and require that in recommending an investment to a customer, a broker-dealer must have reasonable
grounds for believing that the investment is suitable for that customer. Prior to recommending securities to their customers, broker-dealers
must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and
other information, and for retail customers determine the investment is in the customer’s “best interest” and meet
other SEC requirements. Both SEC Regulation Best Interest and FINRA’s suitability requirements may make it more difficult for broker-dealers
to recommend that their customers buy speculative, low-priced securities. They may affect investing in our common stock or our preferred
stock, which may have the effect of reducing the level of trading activity in our securities. As a result, fewer broker-dealers may be
willing to make a market in our common stock or our preferred stock, reducing a stockholder’s ability to resell shares of our common
stock or our preferred stock.
Future
sales and issuances of our Common Stock or rights to purchase Common Stock, including pursuant to our equity incentive plans and outstanding
options could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.
We
expect that significant additional capital may be needed in the future to continue our planned operations, expanded research and development
activities and costs associated with operating a public company. The Company may also require capital to acquire or invest in complementary
businesses, products, or technologies, or to obtain the right to use such complementary technologies. We have no commitments with respect
to any acquisition or investment; however, we seek opportunities and transactions that management believes will be advantageous to the
Company and its operations or prospects. To raise capital, we may sell Common Stock, convertible securities or other equity securities
in one or more transactions at prices and in a manner we determine from time to time. If we sell Common Stock, convertible securities
or other equity securities, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution
to our existing stockholders, and new investors could gain rights, preferences and privileges senior to the holders of our Common Stock,
including the securities sold in this offering. The aggregate number of shares of our Common Stock that may be issued pursuant
to stock awards under our 2020 Equity Compensation Plan as of December 31, 2023, is 1,991,207 shares. Increases
in the number of shares available for future grant or purchase may result in additional dilution, which could cause our stock price to
decline.
The
Company will have broad discretion in the use of the net proceeds from this offering and may fail to apply these proceeds effectively.
The
Company’s management will have broad discretion in the application of the net proceeds of this offering, including using the proceeds
to conduct operations, increase marketing efforts, and investments in our existing business initiatives and products,
as well as general working capital. The Company may also use the net proceeds of this offering to acquire or invest in complementary
businesses, products, or technologies, or to obtain the right to use such complementary technologies. We have no commitments with respect
to any acquisition or investment; however, we seek opportunities and transactions that management believes will be advantageous to the
Company and its operations or prospects. We cannot specify with certainty the actual uses of the net proceeds of this offering. You may
not agree with the manner in which our management chooses to allocate and spend the net proceeds. We may invest the net proceeds from
this offering in a manner that does not produce income or that loses value. The failure by our management to apply these funds effectively
could harm our business, financial condition and results of operations.
Although
our Common Stock is listed on the Nasdaq Capital Market, the exchange may subsequently delist our Common Stock as it has with our Series
1 Preferred Stock if we fail to comply with ongoing listing standards.
We
previously received a deficiency letter from Nasdaq on our Series 1 Preferred Stock. Having failed to meet the ongoing listing requirements,
on January 18, 2024, the Company received a letter from The Nasdaq Stock Market LLC’s Hearings Panel notifying the Company that
it has determined to delist the Company’s shares of Series 1 Preferred Stock from the exchange, due to the Company’s inability
to meet the terms of the exception granted by the Panel on September 8, 2023, as amended. Suspension of trading in the Company’s
Series 1 Preferred Stock was effective at the open of business on January 22, 2024. The Series 1 Preferred Stock is now quoted on the
OTC Markets.
We
have also received a deficiency letter for our Common Stock. On January 24, 2022, 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 met 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 “Minimum Bid Price Requirement”).
On
February 8, 2023, the Company received a notification letter from the Listing Qualifications Department of Nasdaq notifying the Company
that it has regained compliance with Listing Rule 5550(a)(2) and is in compliance with all applicable listing standards. The Company’s
common stock continues to be listed and traded on The Nasdaq Stock Market.
Although
our Common Stock is listed on the Nasdaq Capital Market, the exchange will require us to meet certain financial, public float, bid price
and liquidity standards on an ongoing basis in order to continue the listing of our Common Stock. If we fail to meet these continued
listing requirements, our Common Stock may be subject to delisting. Delisting from the Nasdaq Capital Market could make trading our common
stock more difficult for investors, potentially leading to declines in our share price and liquidity. Without a Nasdaq Capital Market
listing, stockholders may have a difficult time getting a quote for the sale or purchase of our stock, the sale or purchase of our stock
would likely be made more difficult and the trading volume and liquidity of our stock could decline. Delisting from the Nasdaq Capital
Market could also result in negative publicity and could also make it more difficult for us to raise additional capital. The absence
of such a listing may adversely affect the acceptance of our common stock as currency or the value accorded by other parties. Further,
if we are delisted, we would also incur additional costs under state blue sky laws in connection with any sales of our securities. These
requirements could severely limit the market liquidity of our common stock and the ability of our stockholders to sell our common stock
in the secondary market. If our common stock is delisted by Nasdaq, our common stock may be eligible to trade on an over-the-counter
quotation system, such as the OTC Pink, OTCQB and OTCQX markets, where an investor may find it more difficult to sell our stock or obtain
accurate quotations as to the market value of our common stock. In the event our common stock is delisted from the Nasdaq Capital Market,
we may not be able to list our common stock on another national securities exchange or obtain quotation on an over-the counter quotation
system.
Trading
on the OTC Pink Market is volatile and sporadic, which could depress the market price of the Series 1 Preferred Stock and make it difficult
for the holders to resell their Series 1 Preferred Stock.
As
of January 22, 2024, the Series 1 Preferred Stock of the Company is quoted on the OTC Pink Market. Trading in securities quoted on the
OTC Pink Open Market is often thin and characterized by wide fluctuations in trading prices, due to many factors, some of which may have
little to do with our operations or business prospects. This volatility could depress the market price of the Series 1 Preferred Stock
for reasons unrelated to operating performance. Moreover, the OTC Pink Market is not a stock exchange, and trading of securities on the
OTC Pink Market is often more sporadic than the trading of securities listed on Nasdaq. These factors may result in shareholders having
difficulty reselling any Series 1 Preferred Stock.
The
Series A Warrants, Series B Warrants, and Pre-Funded Warrants will not be listed or quoted on any exchange.
There
is no established public trading market for the Series A Warrants Series B Warrants, or Pre-Funded Warrants being offered
in this offering, and we do not expect a market to develop. In addition, we do not intend to apply to list the Series A Warrants,
Series B Warrants, or Pre-Funded Warrants on any national securities exchange or other nationally recognized trading system,
including Nasdaq. Without an active market, the liquidity of the Series A Warrants, Series B Warrants, and Pre-Funded
Warrants will be limited.
Except
as otherwise provided in the Series A Warrants, Series B Warrants, and Pre-Funded Warrants, holders of Series A Warrants, Series B Warrants,
and Pre-Funded Warrants purchased in this offering will have no rights as stockholders until such holders exercise their Series A Warrants,
Series B Warrants, or Pre-Funded Warrants and acquire our common stock.
Except
as otherwise provided in the Series A Warrants, Series B Warrants, and Pre-Funded Warrants, until holders of Warrants or Pre-Funded Warrants
acquire our common stock upon exercise of the Series A Warrants, Series B Warrants, or Pre-Funded Warrants, holders of Series A Warrants,
Series B Warrants, and Pre-Funded Warrants will have no rights with respect to our common stock underlying such Series A Warrants, Series
B Warrants, and Pre-Funded Warrants. Upon exercise
of the Series A Warrants, Series B Warrants, and Pre-Funded Warrants, the holders will be entitled to exercise the
rights of a holder of our common stock only as to matters for which the record date occurs after the exercise date.
Purchasers
who purchase our securities in this offering pursuant to a securities purchase agreement may have rights not available to purchasers
that purchase without the benefit of a securities purchase agreement.
In
addition to rights and remedies available to all purchasers in this offering under federal securities and state law, the purchasers that
enter into a securities purchase agreement will also be able to bring claims of breach of contract against us. The ability to pursue
a claim for breach of contract provides those investors with the means to enforce the covenants uniquely available to them under the
securities purchase agreement including: (i) timely delivery of shares; (ii) agreement to not enter into any financings for 90 days from
closing, subject to certain exceptions; and (iii) indemnification for breach of contract.
This
offering may cause the trading price of our shares of common stock to decrease.
The
price per Unit, together with the number of shares of common stock and warrants we propose to issue and ultimately will
issue if this offering is completed, may result in an immediate decrease in the market price of our shares. This decrease may continue
after the completion of this offering.
Resales
of our shares of common stock in the public market by our stockholders as a result of this offering may cause the market price of our
shares of common stock to fall.
We
are registering 5,056,179 shares of common stock, and/or 5,056,179 shares of common stock, in the aggregate, issuable upon
the exercise of the Prefunded Warrants, as well as the Series A Warrants and the Series B Warrants offered under this prospectus. Sales
of substantial amounts of our shares of common stock in the public market, or the perception that such sales might occur, could adversely
affect the market price of our shares of common stock. The issuance of new shares of common stock could result in resales of our shares
of common stock by our current shareholders concerned about the potential ownership dilution of their holdings. Furthermore, in the future,
we may issue additional shares of common stock or other equity or debt securities exercisable or convertible into shares of common stock.
Any such issuance could result in substantial dilution to our existing shareholders and could cause our stock price to decline.
You
will experience immediate and substantial dilution as a result of this offering and may experience additional dilution in the future.
If
you purchase Units in this offering, the value of your securities based on our actual book value will immediately be less than the price
you paid. This reduction in the value of your equity is known as dilution. This dilution occurs in large part because our existing stockholders
paid less than the assumed public offering price when they acquired their shares of Common Stock. Based upon the issuance and sale of
5,056,179 Units by us in this offering at a public offering price of $1.78 per share, you will incur immediate dilution
of in the net tangible book value per share of Common Stock. If outstanding options to purchase our Common Stock are exercised, investors
will experience additional dilution. For more information, see “Dilution.”
Provisions
of the Series A Warrants and Series B Warrants offered pursuant to this prospectus could discourage an acquisition of us by a third-party.
Certain
provisions of the Series A Warrants and Series B Warrants offered pursuant to this prospectus could make it more difficult or expensive
for a third-party to acquire us. The Series A Warrants and Series B Warrants prohibit us from engaging in certain transactions constituting
“fundamental transactions” unless, among other things, the surviving entity assumes our obligations under the Series A Warrants
and Series B Warrants. These and other provisions of the Series A Warrants and Series B Warrants could prevent or deter a third-party
from acquiring us even where the acquisition could be beneficial to you.
The
Series A Warrants and Series B Warrants may have an adverse effect on the market price of our common stock and make it more difficult
to effect a business combination.
To
the extent we issue shares of common stock to effect a future business combination, the potential for the issuance of a substantial number
of additional shares of common stock upon exercise of the Series A Warrants and Series B Warrants could make us a less attractive acquisition
vehicle in the eyes of a target business. Such Series A Warrants and Series B Warrants, when exercised, will increase the number of issued
and outstanding shares of common stock and reduce the value of the shares issued to complete the business combination. Accordingly, the
Series A Warrants and Series B Warrants may make it more difficult to effectuate a business combination or increase the cost of acquiring
a target business. Additionally, the sale, or even the possibility of a sale, of the shares of common stock underlying the Series A Warrants
and Series B Warrants could have an adverse effect on the market price for our securities or on our ability to obtain future financing.
If and to the extent the Series A Warrants and Series B Warrants are exercised, you may experience dilution to your holdings.
We
will likely not receive any additional funds upon the exercise of the Series A Warrants.
If
we receive the Warrant Stockholder Approval, the Series A Warrants may be exercised by way of an alternative cashless exercise, meaning
that the holder may not pay a cash purchase price upon exercise, but instead would receive upon such exercise the net number of shares
of our common stock determined according to the formula set forth in the Series A Warrants. Accordingly, we will likely not receive any
additional funds upon the exercise of the Series A Warrants.
Certain
beneficial provisions in the Series A Warrants and Series B Warrants will not be effective until we are able to receive stockholder approval
of such provisions, and if we are unable to obtain such approval the Warrant will have significantly less value.
Under
Nasdaq listing rules, the alternative cashless exercise option in the Series A Warrants and certain anti-dilution provisions in the Series
B Warrants will not be effective until, and unless, we obtain the approval of our stockholders. While we intend to promptly seek stockholder
approval, there is no guarantee that the Warrant Stockholder Approval will ever be obtained. If we are unable to obtain the Warrant Stockholder
Approval, the foregoing provisions will not become effective and the Series A Warrants and Series B Warrants will have substantially
less value. In addition, we will incur substantial cost, and management will devote substantial time and attention, in attempting to
obtain the Warrant Stockholder Approval.
USE
OF PROCEEDS
We
estimate that the net proceeds from the sale of
the securities we are offering will be approximately $8.25 million (or approximately $9.5 million if the underwriter exercises
in full its over-allotment option), after deducting the estimated underwriting discounts and commissions and estimated offering
costs payable by us.
We
intend to use the net proceeds from this offering to conduct operations, increase marketing efforts, conduct investments in our
existing business initiatives and products, a partial repayment of existing indebtedness to Streeterville Capital, LLC in an amount up to $[*], as well as general working capital. We may also use a portion of the net proceeds
of this offering to acquire or invest in complementary businesses, products, or technologies, or to obtain the right to use such complementary
technologies. We have no commitments with respect to any acquisition or investment and are not currently involved in any negotiations
with respect to any such transactions.
The
following table presents our use of proceeds if 100%, 75%, 50% or 25% of the securities in this offering are sold. This expected use
of the net proceeds from this offering represents our intentions based upon our current plans and business conditions.
| | |
| | |
% of | | |
| | |
% of | | |
| | |
% of | | |
| | |
% of | |
| | |
100% | | |
Total | | |
75% | | |
Total | | |
50% | | |
Total | | |
25% | | |
Total | |
| Gross Proceeds from Offering | |
$ | 9,000,000 | | |
| 100.00 | % | |
$ | 6,750,000 | | |
| 100.00 | % | |
$ | 4,500,000 | | |
| 100.00 | % | |
$ | 2,250,000 | | |
| 100.00 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Use of Proceeds | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Underwriter Fees and Expenses | |
$ | 675,000 | | |
| 7.50 | % | |
$ | 506,250 | | |
| 7.50 | % | |
$ | 337,500 | | |
| 7.50 | % | |
$ | 168,750 | | |
| 7.50 | % |
| Offering Expenses | |
$ | 75,360 | | |
| 0.84 | % | |
$ | 75,360 | | |
| 1.12 | % | |
$ | 75,360 | | |
| 1.67 | % | |
$ | 75,360 | | |
| 3.35 | % |
| Investments | |
$ | 1,000,000 | | |
| 11.11 | % | |
$ | 1,000,000 | | |
| 14.81 | % | |
$ | 1,000,000 | | |
| 22.22 | % | |
$ | 880,890 | | |
| 39.15 | % |
| Repayment of Existing Debt | |
$ | 4,124,820 | | |
| 45.83 | % | |
$ | 3,084,195 | | |
| 45.69 | % | |
$ | 2,043,570 | | |
| 45.41 | % | |
$ | 1,002,945 | | |
| 44.58 | % |
| Working capital | |
$ | 3,124,820 | | |
| 34.72 | % | |
$ | 2,084,195 | | |
| 30.88 | % | |
$ | 1,043,570 | | |
| 23.19 | % | |
$ | 122,055 | | |
| 5.42 | % |
| Total Use of Proceeds | |
$ | 9,000,000 | | |
| 100.00 | % | |
$ | 6,750,000 | | |
| 100.00 | % | |
$ | 4,500,000.00 | | |
| 100.00 | % | |
$ | 2,250,000 | | |
| 100.00 | % |
As
of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to be received upon
the completion of this offering. The amounts and timing of its actual expenditures will depend on numerous factors, including the status
of its product development efforts, sales and marketing activities, technological advances, amount of cash generated or used by its operations
and competition. Accordingly, our management will have broad discretion in the application of the net proceeds and investors will be
relying on the judgment of its management regarding the application of the proceeds of this offering.
Pending
our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments,
including short-term, investment grade, interest bearing instruments and U.S. government securities.
DILUTION
If
you invest in our securities in this offering, your interest will be diluted immediately to the extent of the difference
between the public offering price per share of our common stock underlying the units and the as adjusted net tangible book
value per share of our common stock immediately after this offering.
The
historical net tangible book value (deficit) of our Common Stock as of December 31, 2023, was approximately $2,933,320
or $2.78 per share based upon shares of Common Stock outstanding on such date. Historical net tangible book value (deficit) per
share represents the amount of its total tangible assets reduced by the amount of its total liabilities, divided by the total number
of shares of Common Stock outstanding.
After
giving effect to the issuance of 5,056,179 shares of our common stock underlying the Common Units to be sold in this offering at the
assumed public offering price of $1.78 per share (which is the last reported sales price of our common stock on the Nasdaq Capital Market
on April 29, 2024), attributing no value to the Warrants included in the Common Units, and after deducting the underwriting discount
and estimated offering expenses payable by us, our as adjusted net tangible book value as of December 31, 2023, would have been $11,182,960
or $1.83 per share. This represents an immediate decrease in net tangible book value of $0.95 per share, to the existing stockholders,
and an immediate dilution in net tangible book value of $(0.05) per share to new investors.
The
following table illustrates this per share dilution of shares of Common Stock sold in this offering:
| Assumed public offering price per share | |
$ | 1.78 | |
| Historical net tangible book value (deficit) per share as of
December 31, 2023 | |
$ | 2.78 | |
| Decrease in pro forma net tangible book value per share as of
December 31, 2023 attributable to the pro forma transactions described above | |
$ | (0.95 | ) |
| Pro forma net tangible book value per share as of December 31,
2023 | |
$ | 1.83 | |
| Dilution per share to new investors in this offering | |
$ | (0.05 | ) |
If
the underwriter exercises its option to purchase an additional 758,427 Common Units in full, our as adjusted net tangible book value
after giving effect to this offering, would have been approximately 1.81 per share, representing an decrease in net tangible book value
of approximately $0.97 per share to existing stockholders and immediate dilution in net tangible book value of approximately $(0.03)
per share to new investors purchasing shares in this offering.
The
information discussed above is illustrative only and will adjust based on the actual offering price, the actual number of shares we offer
in this offering, and any other terms of this offering determined at pricing.
The
number of shares of Common Stock outstanding is based on 1,056,981 shares of Common Stock issued and outstanding as of December
31, 2023, and excludes the following:
| |
● |
28,796 shares of Common Stock
issuable upon the exercise of outstanding stock options having a weighted average exercise price of $50.67 per share; and |
| |
● |
1,991,207 shares of Common
Stock reserved for future issuance under the Company’s 2020 Equity Compensation Plan. |
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information known to us with respect to the beneficial ownership of our common stock as of April
29, 2024, by:
| ■ | all
persons who are beneficial owners of five percent (5%) or more of our voting stock; |
| ■ | each
of our executive officers; and |
| ■ | all
current directors and executive officers as a group. |
Except
as otherwise indicated, and subject to applicable community property laws, the persons named in the table below have sole voting and
investment power with respect to all shares of common stock held by them.
Beneficial
ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and
the percentage ownership of that person, shares of common stock subject to options held by that person that are currently exercisable
or exercisable within 60 days of April 29, 2024, are deemed outstanding. Such shares, however, are not deemed as of April 29,
2024, outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise stated, the address
for each beneficial owner is at 135 Fell Court, Hauppauge, Ny 11788.
| Name and Address of Beneficial Owner | |
Common Stock | | |
Series 1 Preferred Stock | | |
Series C Preferred Stock | |
| | |
Number of | | |
Percent of | | |
Number of | | |
Percent of | | |
Number of | | |
Percent of | |
| | |
Shares Owned | | |
Class(1) | | |
Shares Owned | | |
Class(1)(2) | | |
Shares Owned | | |
Class(1)(3) | |
| Saagar Govil | |
| 59,012 | | |
| 5.58 | % | |
| 132,298 | | |
| 5.53 | % | |
| 50,000 | | |
| 100 | % |
| Paul J. Wyckoff | |
| - | | |
| * | | |
| - | | |
| * | | |
| - | | |
| * | |
| Brian Kwon | |
| 2,858 | | |
| * | | |
| - | | |
| * | | |
| - | | |
| * | |
| Manpreet Singh | |
| 2,858 | | |
| * | | |
| - | | |
| * | | |
| - | | |
| * | |
| Metodi Filipov | |
| 2,858 | | |
| * | | |
| - | | |
| * | | |
| - | | |
| * | |
| All Directors and Executive Officers as a Group (5 persons) | |
| 67,586 | | |
| 6.39 | % | |
| 132,298 | | |
| 5.53 | % | |
| 50,000 | | |
| 100.00 | % |
| 5% Holders | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| * |
Less
than one percent of outstanding shares. |
| (1) |
As
of April 29, 2024, 1,056,981 shares of Common Stock were issued and outstanding. In addition, there were 50,000 shares of
Series C Preferred Stock outstanding which are entitled to vote 10,580,380 shares in the aggregate, all of which is held by
Saagar Govil and 2,392,727 shares of Series 1 Preferred Stock outstanding which are entitled to vote 4,785,454 shares
in the aggregate. Accordingly, there are a total of 16,422,815 voting shares outstanding. |
| |
|
| (2) |
Pursuant
to the Certificate of Designation of the Series 1 Preferred Stock, each issued and outstanding share is entitled to two votes per
share of Series 1 Preferred Stock at each meeting of our shareholders with respect to any and all matters presented to our shareholders
for their action or consideration, including the election of directors. |
| |
|
| (3) |
Pursuant
to the Certificate of Designation of the Series C Preferred Stock, each issued and outstanding share of Series C Preferred Stock
are entitled to the number of votes per share equal to the result of (i) the total number of shares of Common Stock outstanding at
the time of such vote multiplied by 10.01, and divided by (ii) the total number of shares of Series C Preferred Stock outstanding
at the time of such vote, at each meeting of our shareholders with respect to any and all matters presented to our shareholders for
their action or consideration, including the election of directors. |
UNDERWRITING
Aegis
Capital Corp., (“Aegis” or the “underwriter”), is the underwriter and the book-running manager of this offering.
Under the terms of an underwriting agreement, which is filed as an exhibit to the registration statement, we have agreed to sell to the
underwriter and the underwriter has agreed to purchase, at the public offering price less the underwriting discounts and commissions
set forth on the cover page of this prospectus, the following number of Units:
| Underwriter | |
Number
of
Units including
Common Stock | | |
Number
of
Units including
Pre-Funded Warrant | |
| Aegis Capital Corp. | |
| 5,056,179 | | |
| 5,056,179 | |
The
underwriting agreement provides that the underwriter’s obligation to purchase Units depends on the satisfaction of the conditions
contained in the underwriting agreement including:
| ● | the
representations and warranties made by us to the underwriter are true; |
| ● | there
is no material change in our business or the financial markets; and |
| ● | we
deliver customary closing documents to the underwriter. |
The
underwriter has agreed to purchase all of the Units offered by this prospectus (other than those covered by the over-allotment option
described below), if any are purchased under the underwriting agreement.
The
underwriter is offering the Units subject to various conditions and may reject all or part of any order. The underwriter has advised
us that it proposes to offer the units directly to the public at the public offering price per Unit that appears on the cover page of
this prospectus. In addition, the underwriter may offer some of the Units to other securities dealers at such price less a concession
of $[●] per Unit. After the Units are released for sale to the public, the underwriter may change the offering price and
other selling terms at various times.
Over-Allotment
Option
We
have granted to the underwriter an option to purchase up to 758,427 additional shares of Common Stock (representing 15.0% of the
Units sold in the offering), and/or up to an additional 758,427 Series A Warrants to purchase an aggregate of an additional 758,427
shares of Common Stock, representing 15.0% of the Closing Units sold in the offering from the Company; and 758,427 Series
B Warrants to purchase an aggregate of an additional 758,427 shares of Common Stock, representing 15.0% of the Closing Units sold
in the offering from the Company) at the public offering price less underwriting discounts and commissions. The underwriter may exercise
this option in whole or in part at any time within forty-five (45) days after the date of the offering. The underwriter may exercise
the over-allotment option with respect to shares of Common Stock only, Warrants only, or any combination thereof. The purchase price
to be paid per additional share of Common Stock will be equal to the public offering price of one Unit (less $0.01 allocated to each
full Warrant), as applicable, less the underwriting discount, and the purchase price to be paid per over-allotment Warrant will be $0.01.
We will be obligated, pursuant to the option, to sell these additional shares of Common Stock, or Warrants to the underwriter to the
extent the option is exercised. If any additional shares of Common Stock, or Warrants are purchased, the underwriter will offer the additional
shares of Common Stock, and Warrants on the same terms as those on which the other shares of Common Stock, and Warrants are being offered
hereunder. No underwriting discounts or commissions will be paid on any Warrants purchased pursuant to the underwriter’s over-allotment
option. If this over-allotment option is exercised in full, the total offering price to the public will be approximately $10.35 million,
and the total net proceeds, before expenses and after deducting the underwriting discounts described above, to us will be approximately
$9.5 million (based upon a public offering price of $1.78 per share of Common Stock).
Underwriting
Discounts and Expenses
The
following table shows the per Unit and total underwriting discounts we will pay to Aegis. These amounts are shown assuming both no exercise
and full exercise of the underwriter’s option to purchase additional securities.
| | |
| | |
Total | |
| | |
| | |
No | | |
Full | |
| | |
Per Unit | | |
Exercise | | |
Exercise(2) | |
| Public offering price | |
$ | 1.78 | | |
$ | 1.78 | | |
| | |
| Underwriting discounts to be paid by us (7.0%): | |
$ | 0.12 | | |
$ | 0.12 | | |
| | |
| Non-accountable
expense allowance (0.5%)(1) | |
$ | 0.01 | | |
$ | 0.01 | | |
| | |
| Proceeds, before expenses, to us | |
$ | 1.65 | | |
$ | 1.65 | | |
| | |
| (1) | We
have agreed to pay a non-accountable expense allowance to Aegis equal to 0.5% of the gross
proceeds received in this offering. |
| | |
| (2) | Assumes
exercise for Units only. The underwriter will not receive any discounts or commissions upon
exercise of the underwriter’s option to purchase Warrants. |
We
have also agreed to reimburse the underwriter for certain of its expenses, including “roadshow,” diligence, and reasonable
legal fees and disbursements, in an amount not to exceed $100,000 in the aggregate. We estimate that the total expenses of the offering
payable by us, excluding underwriting discounts, will be approximately $75,360.
Stabilization
In
accordance with Regulation M under the Exchange Act, the underwriter may engage in activities that stabilize, maintain or otherwise affect
the price of our Common Stock, including short sales and purchases to cover positions created by short positions, stabilizing transactions,
syndicate covering transactions, penalty bids and passive market making.
| ● | Short
positions involve sales by the underwriter of shares of Common Stock in excess of the number
of shares the underwriter is obligated to purchase, which creates a syndicate short position.
The short position may be either a covered short position or a naked short position. In a
covered short position, the number of shares involved in the sales made by the underwriter
in excess of the number of shares they are obligated to purchase is not greater than the
number of shares that they may purchase by exercising their option to purchase additional
shares. In a naked short position, the number of shares involved is greater than the number
of shares in their option to purchase additional shares. The underwriter may close out any
short position by either exercising their option to purchase additional shares or purchasing
shares in the open market. |
| ● | Stabilizing
transactions permit bids to purchase the underlying security as long as the stabilizing bids
do not exceed a specific maximum price. |
| ● | Syndicate
covering transactions involve purchases of our shares of Common Stock in the open market
after the distribution has been completed to cover syndicate short positions. In determining
the source of shares to close out the short position, the underwriter will consider, among
other things, the price of shares available for purchase in the open market as compared to
the price at which they may purchase shares through the underwriter’s option to purchase
additional shares. If the underwriter sells more shares than could be covered by the underwriter’s
option to purchase additional shares, thereby creating a naked short position, the position
can only be closed out by buying shares in the open market. A naked short position is more
likely to be created if the underwriter is concerned that there could be downward pressure
on the price of the shares in the open market after pricing that could adversely affect investors
who purchase in the offering. |
| ● | Penalty
bids permit the underwriter to reclaim a selling concession from a syndicate member when
the shares of Common Stock originally sold by the syndicate member is purchased in a stabilizing
or syndicate covering transaction to cover syndicate short positions. |
| ● | In
passive market making, market makers in our Common Stock who are underwriters or prospective
underwriters may, subject to limitations, make bids for or purchase our Common Stock until
the time, if any, at which a stabilizing bid is made. |
These
activities may have the effect of raising or maintaining the market price of our Common Stock or preventing or retarding a decline in
the market price of our Common Stock. As a result of these activities, the price of our Common Stock may be higher than the price that
might otherwise exist in the open market. These transactions may be effected on NASDAQ or otherwise and, if commenced, may be discontinued
at any time.
Neither
we nor the underwriter makes any representation or prediction as to the direction or magnitude of any effect that the transactions described
above may have on the price of our Common Stock. In addition, neither we nor the underwriter makes any representation that Aegis will
engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.
Discretionary
Accounts
The
underwriter has informed us that they do not expect to make sales to accounts over which they exercise discretionary authority in excess
of five percent (5%) of the securities being offered in this offering.
Indemnification
We
have agreed to indemnify Aegis, its affiliates, and each person controlling Aegis against any losses, claims, damages, judgments, assessments,
costs, and other liabilities, as the same are incurred (including the reasonable fees and expenses of counsel), relating to or arising
out of the offering, undertaken in good faith.
Lock-Up
Agreements
Pursuant
to certain “lock-up” agreements, our executive officers, directors, employees and holders of at least 5% of our Company’s
Common Stock and securities exercisable for or convertible into Common Stock outstanding immediately upon the closing of this offering,
have agreed, subject to certain exceptions, not to offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of or
announce the intention to otherwise dispose of, or enter into any swap, hedge or similar agreement or arrangement that transfers, in
whole or in part, the economic risk of ownership of, directly or indirectly, engage in any short selling of any shares of Common Stock
or securities convertible into or exchangeable or exercisable for any shares of Common Stock (“Lock-Up Securities”), whether
currently owned or subsequently acquired, without the prior written consent of the underwriter, for a period of ninety (90) days after
the closing date of the offering. See “Shares Eligible for Future Sale – Lock-Up Agreements.”
The
underwriter, in its sole discretion, may release the Common Stock and other securities subject to the lock-up agreements described above
in whole or in part at any time. When determining whether or not to release Common Stock and other securities from lock-up agreements,
the underwriter will consider, among other factors, the holder’s reasons for requesting the release, the number of shares of Common
Stock and other securities for which the release is being requested and market conditions at the time.
Company
Standstill
We
have agreed, for a period of ninety (90) days after the closing date of the offering (the “Standstill Period”), that without
the prior written consent of Aegis, we will not (a) offer, sell, issue, or otherwise transfer or dispose of, directly or indirectly,
any equity of our Company or any securities convertible into or exercisable or exchangeable for equity of our Company; (b) file or caused
to be filed any registration statement with the Commission relating to the offering of any equity of our Company or any securities convertible
into or exercisable or exchangeable for equity of our Company; or (c) enter into any agreement or announce the intention to effect any
of the actions described in subsections (a) or (b) hereof (all of such matters, the “Standstill Restrictions”). So long as
none of such equity securities shall be saleable in the public market until the expiration of the Standstill Period, the following matters
shall not be prohibited by the Standstill Restrictions: (i) the adoption of an equity incentive plan and the grant of awards or equity
pursuant to any equity incentive plan, and the filing of a registration statement on Form S-8; and (ii) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the disinterested directors of our Company, provided that such securities
are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that require or permit the
filing of any registration statement in connection therewith during the Standstill Period, and provided that any such issuance shall
only be to a person or entity (or to the equityholders of an entity) which is, itself or through its subsidiaries, an operating company
or an owner of an asset in a business synergistic with the business of our Company and shall provide to our Company additional benefits
in addition to the investment of funds, but shall not include a transaction in which our Company is issuing securities primarily for
the purpose of raising capital or to an entity whose primary business is investing in securities. In no event should any equity transaction
during the Standstill Period result in the sale of equity at an offering price to the public less than that of this offering.
Right
of First Refusal
If,
for the period beginning on the Closing and ending fifteen (15) months after the commencement of sales in the offering,
we or any of our subsidiaries (a) decides to finance or refinance any indebtedness, Aegis (or any affiliate designated by Aegis) shall
have the right to act as sole book-runner, sole manager, sole placement agent or sole agent with respect to such financing
or refinancing; or (b) decides to raise funds by means of a public offering (including at-the-market facility) or a private placement
or any other capital raising financing of equity, equity-linked or debt securities, Aegis (or any affiliate designated by Aegis) shall
have the right to act as sole book-running manager, sole underwriter or sole placement agent for such financing. If Aegis or one of its
affiliates decides to accept any such engagement, the agreement governing such engagement will contain, among other things, provisions
for customary fees and terms for transactions of similar size and nature, including indemnification, which are appropriate to such a
transaction.
Notwithstanding
the foregoing, the decision to accept our engagement shall be made by Aegis or one of its affiliates, by a written notice to us, within
ten (10) days of the receipt of our notification of financing needs, including a detailed term sheet. Aegis’s determination of
whether in any case to exercise its right of first refusal will be strictly limited to the terms on such term sheet, and any waiver of
such right of first refusal shall apply only to such specific terms. If Aegis waives its right of first refusal, any deviation from such
terms shall void the waiver and require us to seek a new waiver from the right of first refusal.
Other
Relationships
The
underwriter is a full service financial institution engaged in various activities, which may include sales and trading, commercial and
investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and
other financial and non-financial activities and services. The underwriter may in the future provide various investment banking, commercial
banking and other financial services for us and our affiliates for which they may in the future receive customary fees.
In
the ordinary course of its business activities, the underwriter and its affiliates, officers, directors and employees may purchase, sell
or hold a broad array of investments and actively traded securities, derivatives, loans, commodities, currencies, credit default swaps
and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities
may involve or relate to assets, securities and/or instruments of the issuer (directly, as collateral securing other obligation or otherwise)
publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend
to clients that they should acquire, long and/or short positions in such assets, securities and instruments.
Electronic
Offer, Sale and Distribution of Securities
A
prospectus in electronic format may be made available
on the websites maintained by the underwriter, if any, participating in this offering and the underwriter participating in
this offering may distribute prospectuses electronically. The underwriter may agree to allocate a number of Units for sale to its online
brokerage account holders. Internet distributions will be allocated by the underwriter that will make internet distributions on the same
basis as other allocations. Other than the prospectus in electronic format, the information on these websites is not part
of, nor incorporated by reference into, this prospectus or the registration statement of which this prospectus forms a part, has
not been approved or endorsed by us or the underwriter in its capacity as underwriter, and should not be relied upon by investors.
Offer
Restrictions Outside the United States
Other
than in the United States, no action has been taken by us or the underwriter that would permit a public offering of the securities offered
by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be
offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with
the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result
in compliance with the applicable rules and regulations of that jurisdiction. Persons who come into possession of this prospectus are
advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus.
This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in
any jurisdiction in which such an offer or a solicitation is unlawful.
Transfer
Agent and Registrar
The
transfer agent and registrar for our Common Stock is Clear Trust LLC.
Trading
Market
Our
Common Stock Common Stock is listed on the Nasdaq Capital Market under the symbol “CETX.” We do not intend to apply for listing
of the Pre-funded Warrants or the Warrants on any securities exchange or other nationally recognized trading system.
DESCRIPTION
OF SECURITIES
General
Our
authorized capital stock consists of 50,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred
stock, par value $0.001 per share, of which 1,000,000 shares are designated as series A preferred stock, 100,000 are designated as series
C preferred stock and 3,000,000 shares are designated as series 1 preferred stock. As of April 29, 2024, 1,056,981 shares of common
stock were issued and outstanding, 50,000 shares of Series C preferred stock issued and outstanding and 2,392,727 shares of series
1 preferred stock were issued and 2,392,727 outstanding.
In
addition, as of April 29, 2024, there were an aggregate of 28,796 shares of our common stock reserved for issuance upon the exercise
of our outstanding stock options at a weighted average exercise price of $50.67 per share.
Common
Stock
Voting
Power; Dividends. Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote
of stockholders and have the right to vote cumulatively for the election of directors. This means that in the voting at our annual meeting,
each stockholder or his proxy, may multiply the number of his shares by the number of directors to be elected then cast the resulting
total number of votes for a single nominee, or distribute such votes on the ballot among the nominees as desired. Holders of our common
stock are entitled to receive ratably such dividends, if any, as may be declared by our board of directors out of funds legally available
therefor, subject to any preferential dividend rights for our outstanding preferred stock.
Liquidation,
Dissolution and Winding Up. Upon our liquidation, dissolution or winding up, the holders of our common stock are entitled to
receive ratably our net assets available after the payment of all debts and other liabilities and subject to the prior rights of holders
of any of our outstanding preferred stock.
Preemptive
and Other Rights. Holders of our common stock have no preemptive, subscription, redemption or conversion rights. The rights,
preferences and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of the holders
of shares of any series of our preferred stock that we may designate and issue in the future.
Our
common stockholders may not receive any assets or funds until our creditors have been paid in full and the preferential or participating
rights of our preferred stockholders have been satisfied. If we participate in a corporate merger, consolidation, purchase or acquisition
of property or stock, or other reorganization, any payments or shares of stock allocated to our common stockholders will be distributed
pro-rata to holders of our common stock on a per share basis. If we redeem, repurchase or otherwise acquire for payment any shares of
our common stock, we will treat each share of common stock identically.
We
may issue additional shares of our common stock and our preferred stock, if authorized by the board, without the common stockholders’
approval, unless required by Delaware law or a stock exchange on which our securities are traded. If we receive the appropriate payment,
shares of our common stock that we issue will be fully paid and nonassessable.
Nasdaq
Capital Market. Our shares of common stock are traded on the Nasdaq Capital Market under the symbol CETX.
Transfer
Agent and Registrar. The transfer agent and registrar for our common stock is Clear Trust LLC, Lutz, Florida.
Preferred
Stock
Under
our certificate of incorporation, our board of directors is authorized, without further stockholder action, to issue up to 10,000,000
shares of preferred stock in one or more series, with such powers, designations, preferences and relative, participating, optional and
other rights and such qualifications, limitations and restrictions thereof as shall be set forth in the resolutions providing therefor.
We have no present plans to issue any additional shares of preferred stock.
Series
A Preferred Stock
Pursuant
to the certificate of designation relating to those shares, each issued and outstanding share of series A preferred stock is entitled
to the number of votes equal to the result of (i) the total number of shares of common stock outstanding at the time of such vote multiplied
by 1.01, and divided by (ii) the total number of shares of series A preferred stock outstanding at the time of such vote, at each meeting
of our stockholders with respect to any and all matters presented to our stockholders for their action or consideration, including the
election of directors.
Our
series A preferred stock has equal distribution rights with our common stockholders upon liquidation, dissolution or winding-up of our
company, and otherwise has no pre-emptive, subscription, conversion or redemption rights.
Series
C Preferred Stock
On
October 3, 2019, pursuant to Article IV of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred
stock entitled Series C Preferred Stock, consisting of up to one hundred thousand (100,000) shares, par value $0.001. Under the Certificate
of Designation, holders of Series C Preferred Stock are entitled to the number of votes per share equal to the result of (i) the total
number of shares of Common Stock outstanding at the time of such vote multiplied by 10.01, and divided by (ii) the total number of shares
of Series C Preferred Stock outstanding at the time of such vote, at each meeting of our shareholders with respect to any and all matters
presented to our shareholders for their action or consideration, including the election of directors.
Series
1 Preferred
As
of April 29, 2024, 2,392,727 shares of series 1 preferred stock (the “series 1 preferred”), were issued and
2,392,727 outstanding having the following powers, preferences and rights:
Dividends.
Holders of the series 1 preferred are entitled to receive cumulative cash dividends at the rate of 10% of the purchase price
per year, payable semiannually on the last day of March and September in each year. Dividends may also be paid, at our option, in additional
shares of series 1 preferred, valued at their liquidation preference. The series 1 preferred ranks senior to the common stock with respect
to dividends. Dividends will be entitled to be paid prior to any dividend to the holders of our common stock.
Liquidation
Preference. The series 1 preferred has a liquidation preference of $10.00 per share, equal to its purchase price. In the event
of any liquidation, dissolution or winding up of our company, any amounts remaining available for distribution to stockholders after
payment of all liabilities of our company will be distributed first to the holders of series 1 preferred, and then pari passu to the
holders of the series A preferred stock and our common stock. The holders of series 1 preferred have preference over the holders of our
common stock on any liquidation, dissolution or winding up of our company. The holders of series 1 preferred also have preference over
the holders of our series A preferred stock.
Voting
Rights. Except as otherwise provided in the certificate of designation, preferences and rights or as required by law, the series
1 preferred vote together with the shares of our common stock (and not as a separate class) at any annual or special meeting of stockholders.
Except as required by law, each holder of shares of series 1 preferred is entitled to two votes for each share of series 1 preferred
held on the record date as though each share of series 1 preferred were two shares of our common stock. Holders of the series 1 preferred
vote as a class on any amendment altering or changing the powers, preferences or rights of the series 1 preferred so as to affect them
adversely.
No
Conversion. The series 1 preferred are not convertible into or exchangeable for shares of our common stock or any other security.
Rank.
The series 1 preferred ranks with respect to distribution rights upon our liquidation, winding-up or dissolution and dividend
rights, as applicable:
| |
● |
senior
to our series A preferred stock, common stock and any other class of capital stock we issue in the future unless the terms of that
stock provide that it ranks senior to any or all of the series 1 preferred; |
| |
● |
on
a parity with any class of capital stock we issue in the future the terms of which provide that it will rank on a parity with any
or all of the series 1 preferred; |
| |
● |
junior
to each class of capital stock issued in the future the terms of which expressly provide that such capital stock will rank senior
to the series 1 preferred and the common stock; and |
| |
● |
junior
to all of our existing and future indebtedness. |
In
addition, the series 1 preferred, with respect to rights upon our liquidation, winding-up or dissolution, will be structurally subordinated
to existing and future indebtedness of our company and subsidiaries, as well as the capital stock of our subsidiaries held by third parties.
Redemption.
We may mandatorily redeem any or all of the series 1 preferred at any time and from time to time at our option, by giving notice
(by issuing a press release or otherwise making a public announcement, by mailing a notice of redemption or otherwise). If we redeem
fewer than all of the outstanding shares of series 1 preferred, we may select the shares to be redeemed by redeeming shares proportionally,
by lot, or by any other equitable method. The mandatory redemption price for any shares of series 1 preferred is an amount equal to the
$10.00 purchase price per share plus any accrued but unpaid dividends to the date fixed for redemption.
From
and after any applicable redemption date, if funds necessary for the redemption are available and have been irrevocably deposited or
set aside, then:
| |
● |
the
shares will no longer be deemed outstanding; |
| |
● |
the
holders of the shares, as such, will cease to be stockholders; and |
| |
● |
all
rights with respect to the shares of series 1 preferred will terminate except the right of the holders to receive the redemption
price, without interest. |
We
may also repurchase, outside of our mandatory redemption rights, any shares of series 1 preferred in privately-negotiated transactions
or in open market purchases on Nasdaq, subject to applicable regulations regarding issuer repurchases of their capital stock. In such
cases, we would most likely do so at prices lower than the price at which we are entitled to mandatorily redeem the shares.
No
Other Rights. The holders of the series 1 preferred have no preemptive or preferential or other rights to purchase or subscribe
to any stock, obligations, warrants or other securities of ours.
Trading.
The series 1 preferred is quoted on the OTC Markets under the symbol CETXP.
Transfer
Agent and Registrar. Clear Trust, LLC, Florida, is the transfer agent and registrar for our series 1 preferred.
Anti-Takeover
Provisions
The
terms of our shares of series A, none are issued and outstanding at this time, and series C preferred stock, held by Saagar Govil, our
CEO, may also have the effect of discouraging a takeover of our company. Pursuant to the certificate of designation for our Series A
preferred stock, each outstanding share of Series A preferred stock is entitled to the number of votes equal to the result of (i) the
total number of shares of our common stock outstanding at the time of such vote multiplied by 1.01, divided by (ii) the total number
of shares of our series A preferred stock outstanding at the time of such vote, at each meeting of stockholders of our company with respect
to any and all matters presented to our stockholders for their action or consideration, including the election of directors. Pursuant
to the certificate of designation for our Series C preferred stock, each issued and outstanding Series C 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 (The “Common Shares”)
issued and outstanding at the time of such vote multiplied by 10.01; divided by (ii) the total number of Series C 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 C Preferred
Shares shall vote together with the holders of Common Shares as a single class. As a result of Saagar Govil’s ownership of our
Series C preferred stock, our management stockholders control, and will control in the future, substantially all matters requiring approval
by the stockholders of our company, including the election of all directors and approval of significant corporate transactions. Given
this continuing voting interest of our series A preferred stock and series C preferred stock, its holder will be able to exert significant
influence over all corporate activities including the outcome of tender offers, mergers, proxy contests or other purchases of common
stock, which could discourage others from initiating changes of control.
Our
certificate of incorporation, in order to combat “greenmail,” provides in general that any direct or indirect purchase by
us of any of our voting stock or rights to acquire voting stock known to be beneficially owned by any person or group which holds more
than 5% of a class of our voting stock and which has owned the securities being purchased for less than two years must be approved by
the affirmative vote of at least two-thirds of the votes entitled to be cast by the holders of voting stock, subject to certain exceptions.
The prohibition of “greenmail” may tend to discourage or foreclose certain acquisitions of our securities, which might temporarily
increase the price of our securities. Discouraging the acquisition of a large block of our securities by an outside party may also have
a potential negative effect on takeovers. Parties seeking control of our company through large acquisitions of our securities will not
be able to resort to “greenmail” should their bid fail, thus making such a bid less attractive to persons seeking to initiate
a takeover effort.
We
are subject to the provisions of Section 203 of the General Corporation Law of Delaware. Section 203 prohibits certain publicly held
Delaware corporations from engaging in a “business combination” with an “interested stockholder” for a period
of three years after the date of the transaction in which the person became an “interested stockholder,” unless the business
combination is approved in a prescribed manner. A “business combination” includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an “interested stockholder”
is a person or entity who, together with affiliates and associates, owns (or within the preceding three years, did own) 15% or more of
the corporation’s voting stock. The statute contains provisions enabling a corporation to avoid the statute’s restrictions
if the stockholders holding a majority of the corporation’s voting stock approve.
Indemnification
of Directors and Officers
Our
certificate of incorporation provides that any person who was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (whether or not by or in the right
of the company) by reason of the fact that he is or was a director, officer, incorporator, employee or agent of the company, or is or
was serving at the request of the company as a director, officer, incorporator, employee or agent of another company, partnership, joint
venture, trust or other enterprise, shall be entitled to be indemnified by the company to the full extent then permitted by law or to
the extent that a court of competent jurisdiction shall deem proper or permissible under the circumstance, whichever is greater, against
expenses (including attorneys’ fees), judgments, fines and amount paid in settlement incurred by such person in connection with
such action, suit or proceeding. Such right of indemnification shall inure whether or not the claim asserted is based on matters which
pre-date the company’s adoption of the indemnification provisions in its certificate of incorporation. Furthermore, such right
of indemnification will continue as to a person who has ceased to be a director, officer, incorporator, employee or agent and will inure
to the benefit of the heirs and personal representatives of such person.
DESCRIPTION
OF SECURITIES WE ARE OFFERING
We
are offering 5,056,179 Units based on assumed public offering price of $1.78 per Unit on a firm commitment basis. Each
Unit will consist of one share of common stock (or Pre-Funded Warrant to purchase one share of our common stock in lieu thereof), one
Series A Warrant to purchase one share of common stock and one Series B Warrant to purchase one share of common stock. The Units have
no stand-alone rights and will not be certificated or issued as stand-alone securities. The shares of common stock and Pre-Funded Warrants,
if any, can each be purchased in this offering only with the accompanying Series A Warrants and Series B Warrants as part of Units (other
than pursuant to the underwriter’s option to purchase additional shares of Common Stock and/or Pre-Funded Warrants and/or Series
A Warrants and/or Series B Warrants), but the components of the Units will be immediately separable and will be issued separately in
this offering.
Common
Stock
The
material terms and provisions of our common stock are described under the caption “Description of Securities” in this
prospectus.
Pre-Funded
Warrants
The
following summary of certain terms and provisions of the Pre-Funded Warrants that are being offered hereby is not complete and
is subject to, and qualified in its entirety by the provisions of, the Pre-Funded Warrant. Prospective investors should carefully
review the terms and provisions of the form of Pre-Funded Warrant for a complete description of the terms and conditions of the Pre-Funded
Warrants.
The
term “pre-funded” refers to the fact that the purchase price of our common stock in this offering includes almost the entire
exercise price that will be paid under the Pre-Funded Warrants, except for a nominal remaining exercise price of $0.001. The purpose
of the Pre-Funded Warrants is to enable investors that may have restrictions on their ability to beneficially own more than 4.99% (or,
upon election of the holder, 9.99%) of our outstanding shares of common stock following the consummation of this offering the opportunity
to make an investment in the Company without triggering their ownership restrictions, by receiving Pre-Funded Warrants in lieu of our
common stock which would result in such ownership of more than 4.99% (or 9.99%), and receive the ability to exercise their option to
purchase the shares underlying the Pre-Funded Warrants at such nominal price at a later date.
Duration.
The Pre-Funded Warrants offered hereby will entitle the holders thereof to purchase our shares of common stock at a nominal exercise
price of $0.001 per share, commencing immediately on the date of issuance. There is no expiration date for the Pre-Funded Warrants.
Exercise
Limitation. A holder will not have the right to exercise any portion of the Pre-Funded Warrant if the holder (together with its affiliates)
would beneficially own in excess of 4.99% (or, upon election of the holder, 9.99%) of the number of our shares of common stock outstanding
immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Pre-Funded
Warrants. However, any holder may increase or decrease such percentage (up to 9.99%), provided that any increase will not be effective
until the 61st day after such election. It is the responsibility of the holder to determine whether any exercise would exceed the exercise
limitation.
Exercise
Price. The Pre-Funded Warrants will have an exercise price of $0.001 per share. The exercise price is subject to appropriate adjustment
in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting
our common stock and also upon any distributions of assets, including cash, stock or other property to our shareholders.
Transferability.
Subject to applicable laws, the Pre-Funded Warrants may be offered for sale, sold, transferred or assigned without our consent.
Absence
of Trading Market. There is no established
trading market for the Pre-Funded Warrants and we do not expect a market to develop. In addition, we do not intend to apply
for the listing of the Pre-Funded Warrants on any national securities exchange or other trading market. Without
an active trading market, the liquidity of the Pre-Funded Warrants will be limited.
Fundamental
Transactions. In the event of a fundamental transaction, generally including any reorganization, recapitalization or reclassification
of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation,
merger, amalgamation or arrangement with or into another person, the acquisition of more than 50% of our outstanding common stock, or
any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common stock, the holder
will have the right to receive, for each share of common stock that would have been issuable upon such exercise immediately prior to
the occurrence of such fundamental transaction, the number of shares of the successor or acquiring corporation or of us if we are the
surviving corporation, and any additional consideration receivable as a result of such fundamental transaction by a holder of the number
of shares for which the Pre-Funded Warrant was exercisable immediately prior to such fundamental transaction. The holders of the Pre-Funded
Warrants may also require us to purchase the Pre-Funded Warrants from the holders by paying to each holder an amount equal to the Black
Scholes value of the remaining unexercised portion of the Pre-Funded Warrants on the date of the fundamental transaction.
No
Rights as a Shareholder.
Except as otherwise provided in the Pre-Funded Warrants or by virtue of such holder’s ownership of our shares
of common stock, the holder of Pre-Funded Warrants does not have the rights or privileges of a holder of our common stock,
including any voting rights, until the holder exercises the Pre-Funded Warrant.
Warrant
Stockholder Approval
Under
Nasdaq listing rules, the alternative cashless exercise option (described below) in the Series A Warrants, certain anti-dilution provisions
in the Series B Warrants (described below), and the reverse stock split provision in both Series A Warrants and Series B Warrants (each
described below) will not be effective until, and unless, we obtain the approval of our stockholders. While we intend to promptly seek
stockholder approval, there is no guarantee that the Warrant Stockholder Approval will ever be obtained. If we are unable to obtain the
Warrant Stockholder Approval, the foregoing provisions will not become effective and the Series A Warrants and Series B Warrants will
have substantially less value. In addition, we will incur substantial costs, and management will devote substantial time and attention,
in attempting to obtain the Warrant Stockholder Approval.
Series
A Warrants and Series B Warrants
The
following summary of certain terms and provisions of the Series A Warrants and Series B Warrants included in the Units and Pre-offered
hereby is not complete and is subject to, and qualified in its entirety by the provisions of the forms of Series A Warrant
and Series B Warrant, which are filed as an exhibit to the registration statement of which this prospectus is a part.
Prospective investors should carefully review the terms and provisions set forth in the forms of Series A Warrant and Series
B Warrant.
Exercisability.
The Series A Warrants and Series B Warrants are exercisable immediately and at any time up to the date that is two-and-a-half years
(with respect to the Series A Warrants) or five years (with respect to the Series B Warrants) after their original issuance. The Series
A Warrants and Series B Warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly
executed exercise notice and, at any time a registration statement registering the issuance of the shares of common stock underlying
the Series A Warrants and Series B Warrants under the Securities Act is effective and available for the issuance of such
shares, by payment in full in immediately available funds for the number of shares of common stock purchased upon such exercise. If
a registration statement registering the issuance of the shares of common stock underlying the Series A Warrants or Series B Warrants
under the Securities Act is not effective, the holder may elect to exercise the Series A Warrants or Series B Warrants through a cashless
exercise, in which case the holder would receive upon such exercise the net number of shares of common stock determined according to
the formula set forth in the warrant. No fractional shares of common stock will be issued in connection with the exercise of Series A
Warrants or Series B Warrants. In lieu of fractional shares, we will pay the holder an amount in cash equal to the fractional amount
multiplied by the exercise price.
On
or after receipt of the Warrant Stockholder Approval, a holder may also effect an “alternative cashless exercise” at any
time while the Series A Warrants are outstanding. In such event, the aggregate number of shares issuable in such alternative cashless
exercise will be equal to the number of Series A Warrants being exercised multiplied by three.
Exercise
Limitation. A holder will not have the right to exercise any portion of the Series A Warrants or Series B Warrants if the holder
(together with its affiliates) would beneficially own in excess of 4.99% of the number of shares of our common stock outstanding immediately
after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Series A Warrants
and Series B Warrants. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99%, provided
that any increase in such percentage shall not be effective until 61 days following notice from the holder to us.
Exercise
Price. The exercise price per whole share of common stock purchasable upon exercise of the Series A Warrants is $1.78, and
the exercise price per whole share of common stock purchasable upon exercise of the Series B Warrants is $1.78. The exercise price
is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications
or similar events affecting our common stock and also upon any distributions of assets, including cash, stock or other property to our
stockholders.
Subsequent
Financing. In addition, conditioned upon the receipt of the Warrant Stockholder Approval, and subject to certain exemptions, if we
sell, enter into an agreement to sell, or grant any option to purchase, or sell, enter into an agreement to sell, or grant any right
to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any
shares of common stock, at an effective price per share less than the exercise price of the Series B Warrants then in effect, the exercise
price of the Series B Warrants will be reduced to the lower of such price or the lowest volume weighted average price (VWAP) during the
five consecutive trading days immediately following such dilutive issuance or announcement thereof (subject to a floor of $[*] prior
to the Warrant Stockholder Approval), and the number of shares issuable upon exercise will be proportionately adjusted such that the
aggregate exercise price will remain unchanged.
Reverse
Stock Split. Conditioned upon the receipt of the Warrant Stockholder Approval, if at any time on or after the date of issuance there
occurs any share split, share dividend, share combination recapitalization or other similar transaction involving our common stock and
the lowest daily volume weighted average price during the period commencing five consecutive trading days immediately preceding and the
five consecutive trading days commencing on the date of such event is less than the exercise price of the Series A Warrants or Series
B Warrants then in effect, then the exercise price of the Series A Warrants and Series B Warrants will be reduced to the lowest daily
volume weighted average price during such period and the number of shares issuable upon exercise will be proportionately adjusted such
that the aggregate price will remain unchanged.
Transferability.
Subject to applicable laws, the Series A Warrants and Series B Warrants may be offered for sale, sold, transferred or
assigned without our consent.
Fundamental
Transactions. In the event of a fundamental transaction, as described in the Series A Warrants and Series B Warrants and generally
including any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all
or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than
50% of our outstanding common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our
outstanding common stock, the holders of the Series A Warrants and Series B Warrants will be entitled to receive upon exercise of the
Series A Warrants and Series B Warrants the kind and amount of securities, cash or other property that the holders would have received
had they exercised the Series A Warrants and Series B Warrants immediately prior to such fundamental transaction. The holders of the
Series A Warrants and Series B Warrants may also require us to purchase the Series A Warrants and Series B Warrants from the holders
by paying to each holder an amount equal to the Black Scholes value of the remaining unexercised portion of the Series A Warrants and
Series B Warrants on the date of the fundamental transaction.
Rights
as a Stockholder. Except as otherwise
provided in the Series A Warrants or Series B Warrants or by virtue of such holder’s ownership of shares of our common
stock, the holder of a Series A Warrants or Series B Warrants does not have the rights or privileges of a holder
of our common stock, including any voting rights, until the holder exercises the Series A Warrant or Series B Warrants.
Governing
Law. The Series A Warrants and the Series
B Warrants are governed by New York law.
LEGAL
MATTERS
The
validity of the Common Stock offered by us in this offering will be passed upon for us by The Doney Law Firm, Las Vegas, Nevada. Certain
legal matters in connection with this offering have been passed upon for the underwriter by Kaufman & Canoles, P.C., Richmond, Virginia.
EXPERTS
The
financial statements of Cemtrex, Inc. as of September 30, 2023 and 2022 and for each of the years in the two year period ended September
30, 2023 have been incorporated by reference in this Registration Statement and have been so incorporated in reliance on the report of
Grassi & Co., CPAs, P.C., an independent registered public accounting firm, given on the authority of said firm as experts in auditing
and accounting.
WHERE
YOU CAN FIND MORE INFORMATION
We
file annual, quarterly and current reports, proxy statements and other information with the SEC. We have filed with the SEC a registration
statement on Form S-1 under the Securities Act, with respect to the shares being offered under this prospectus. This prospectus does
not contain all of the information set forth in the registration statement and the exhibits to the registration statement. For further
information with respect to the Company and the securities being offered under this prospectus, please refer to the complete registration
statement and the exhibits and schedules filed as a part of the registration statement.
You
may read and copy the registration statement, as well as our reports, proxy statements and other information, at the SEC’s Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more information about the operation
of the Public Reference Room. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The SEC’s Internet site can be found at http://www.sec.gov. You
may access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge on the SEC’s website.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
SEC
rules allow us to “incorporate by reference” into this prospectus much of the information we file with the SEC, which means
that we can disclose important information to you by referring you to those publicly available documents. The information that we incorporate
by reference into this prospectus, including the consolidated financial statements, is considered to be part of this prospectus. These
documents may include Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy statements.
You should read the information incorporated by reference because it is an important part of this prospectus.
This
prospectus incorporates by reference the documents listed below, other than those documents or the portions of those documents deemed
to be furnished and not filed in accordance with SEC rules:
| ■ | our
Annual Report on Form 10-K for the fiscal year ended September 30, 2023 filed with the SEC
on December 28, 2023; |
| ■ | our
Quarterly Report on Form 10-Q for the three months ended December 31, 2023 filed with the
SEC on February 14, 2024. |
| ■ | our
Current Reports on Form 8-K (or Form 8-K/A) filed with the SEC on January
22, 2024, January
3, 2024, December
26, 2023, December
6, 2023, September
19, 2023, September
12, 2023 and August
23, 2023, August
4, 2023, July
28, 2023, July
7, 2023 May
26, 2023; March
23, 2023, March
20, 2023, February
9, 2023, January
30 2023, January
23, 2023, January
20, 2023, November
29, 2022, November
10, 2022, October
4, 2022, September
30, 2022, September
20, 2022, August
3, 2022, July
27, 2022, March
22, 2022, February
1, 2022, January
26, 2022 and January
26, 2022; |
| ■ | our
2020 Equity Compensation Plan on Form S-8 filed with the SEC August 17, 2020; |
All
documents we file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, except as to any portion of any report
or document that is not deemed filed under such provisions, (i) on or after the date of filing of the registration statement containing
this prospectus and prior to the effectiveness of the registration statement and (ii) on or after the date of this prospectus until the
earlier of the date on which all of the securities registered hereunder have been sold or this prospectus has been withdrawn, shall be
deemed incorporated by reference in this prospectus and to be a part of this prospectus from the date of filing of those documents. The
information in documents that we file in the future will update and supersede the information currently included and incorporated by
reference in this prospectus. Nothing in this prospectus shall be deemed to incorporate information furnished but not filed with the
SEC pursuant to Item 2.02, 7.01 or 8.01 of Form 8-K.
These
documents may also be accessed on our website at https://www.Cemtrex.com/. Information contained in, or accessible through, our
website is not a part of this prospectus.
We
will provide without charge to each person, including any beneficial owners, to whom this prospectus is delivered, upon his or her written
or oral request, a copy of any or all reports or documents referred to above which have been or may be incorporated by reference into
this prospectus but not delivered with this prospectus, excluding exhibits to those reports or documents unless they are specifically
incorporated by reference into those documents. You may request a copy of these documents by writing or telephoning us at the following
address:
Saagar
Govil
Chief
Executive Officer
Cemtrex, Inc.
135 Fell Court
Hauppauge,
NY 11788
Tel.
no. (631) 756-9116
CEMTREX,
INC.
PRELIMINARY
PROSPECTUS
April
30, 2024
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The
following table sets forth the expenses in connection with this registration statement. All of such expenses are estimates, other than
the filing fees payable to the Securities and Exchange Commission and to FINRA.
| | |
Amount | |
| | |
to be paid | |
| SEC registration fee | |
$ | 4,582.98 | |
| FINRA filing fee | |
$ | 2,052.50 | |
| Accounting fees and expenses | |
$ | 10,275.00 | |
| Legal fees and expenses | |
$ | 42,500.00 | |
| Miscellaneous | |
$ | 15,950.00 | |
| Total | |
$ | 75,360.48 | |
| * |
To
be provided by amendment. |
ITEM
14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The
Company is incorporated under the laws of the State of Delaware. Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to include in its certificate of incorporation a provision eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision shall
not eliminate or limit the liability of a director: (i) for any breach of the director’s duty of loyalty to the corporation or
its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
(iii) under Section 174 of the Delaware General Corporation Law, which relates to unlawful payment of dividends and unlawful stock purchases
and redemptions; or (iv) for any transaction from which the director derived an improper personal benefit.
Section
145 of the Delaware General Corporation Law provides that a corporation may indemnify any persons who were, are or are threatened to
be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer, director,
employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise. The indemnity may include expenses (including attorneys’
fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation’s
best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful.
Section
145 of the Delaware General Corporation Law further authorizes a corporation to purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise, against any liability asserted against him and incurred by
him in any such capacity, arising out of his status as such, whether or not the corporation would otherwise have the power to indemnify
him under Section 145 of the Delaware General Corporation Law.
Our
certificate of incorporation provides that any person who was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (whether or not by or in the right
of the company) by reason of the fact that he is or was a director, officer, incorporator, employee or agent of the company, or is or
was serving at the request of the company as a director, officer, incorporator, employee or agent of another company, partnership, joint
venture, trust or other enterprise, shall be entitled to be indemnified by the company to the full extent then permitted by law or to
the extent that a court of competent jurisdiction shall deem proper or permissible under the circumstance, whichever is greater, against
expenses (including attorneys’ fees), judgments, fines and amount paid in settlement incurred by such person in connection with
such action, suit or proceeding. Such right of indemnification shall inure whether or not the claim asserted is based on matters which
pre-date the company’s adoption of the indemnification provisions in its certificate of incorporation. Furthermore, such right
of indemnification will continue as to a person who has ceased to be a director, officer, incorporator, employee or agent and will inure
to the benefit of the heirs and personal representatives of such person.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or person controlling
us, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy
as expressed in the act and is therefore unenforceable.
ITEM
15. RECENT SALES OF UNREGISTERED SECURITIES.
The
following sets forth information regarding all unregistered securities sold by the registrant in the two years preceding the date of
this registration statement;
For
the fiscal year ended September 30, 2022, 193,971 shares of Series 1 Preferred Stock were issued to pay dividends to holders of Series
1 Preferred Stock.
For
the fiscal year ended September 30, 2022, we issued 5,481,102 shares of common stock to satisfy $4,688,524 of notes payable and accumulated
interest.
For
the fiscal year ended September 30, 2023, 213,894 shares of Series 1 Preferred Stock were issued to pay dividends to holders of Series
1 Preferred Stock.
For
the fiscal year ended September 30, 2023, we issued 241,655 shares of common stock to satisfy $1,917,873 of notes payable and accumulated
interest.
For
the fiscal year ended September 30, 2023, we issued 30,103 shares of common stock in exchange for $215,800 of services to the Company.
On
October 6, 2022, 115,037 shares of Series 1 Preferred Stock were issued to pay dividends to holders of Series 1 Preferred Stock.
During
the three months ended December 31, 2023, 9,853 shares of common stock have been issued in exchange for services valued at $40,000.
These
issuances were made in reliance on an exemption from registration set forth in Section 4(a)(2) of the Securities Act, as transactions
by an issuer not involving a public offering.
ITEM
17. UNDERTAKINGS.
The
undersigned registrant hereby undertakes:
| (1) | To
file, during any period in which offers or sales are being made, a post-effective amendment
to this registration statement: |
| (i) | To
include any prospectus required by section 10(a)(3) of the Securities Act; |
| (ii) | To
reflect in the prospectus any facts or events arising after the effective date of the registration
statement (or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change
in the maximum aggregate offering price set forth in the “Calculation of Registration
Fee” table in the effective registration statement. |
| (iii) | To
include any material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such information in the
registration statement; |
| (2) | That,
for the purpose of determining any liability under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof. |
| (3) | To
remove from registration by means of a post-effective amendment any of the securities being
registered which remain unsold at the termination of the offering. |
| (4) | That,
for the purpose of determining liability under the Securities Act of 1933 to any purchaser,
if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b)
as part of a registration statement relating to an offering, other than registration statements
relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be
deemed to be part of and included in the registration statement as of the date it is first
used after effectiveness. Provided, however, that no statement made in a registration statement
or prospectus that is part of the registration statement or made in a document incorporated
or deemed incorporated by reference into the registration statement or prospectus that is
part of the registration statement will, as to a purchaser with a time of contract of sale
prior to such first use, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in any such document
immediately prior to such date of first use. |
| (5) | That,
for the purpose of determining liability of the registrant under the Securities Act to any
purchaser in the initial distribution of the securities, the undersigned registrant undertakes
that in a primary offering of securities of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the securities to the purchaser,
if the securities are offered or sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to the purchaser and will be
considered to offer or sell such securities to such purchaser: |
| (i) | Any
preliminary prospectus or prospectus of the undersigned registrant relating to the offering
required to be filed pursuant to Rule 424; |
| (ii) | Any
free writing prospectus relating to the offering prepared by or on behalf of the undersigned
registrant or used or referred to by the undersigned registrant; |
| (iii) | The
portion of any other free writing prospectus relating to the offering containing material
information about the undersigned registrant or its securities provided by or on behalf of
the undersigned registrant; and |
| (iv) | Any
other communication that is an offer in the offering made by the undersigned registrant to
the purchaser. |
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The
undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements certificates
in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
The
undersigned registrant hereby undertakes that:
| (1) | For
purposes of determining any liability under the Securities Act, the information omitted from
the form of prospectus filed as part of this registration statement in reliance upon Rule
430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)
(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective. |
| (2) | For
the purpose of determining any liability under the Securities Act, each post-effective amendment
that contains a form of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof. |
ITEM
16. Exhibits.
The
following exhibits are filed as part of this registration statement:
| Exhibit
|
|
|
|
Incorporated
by Reference |
|
Filed
or
Furnished |
|
|
| Number |
|
Exhibit
Description |
|
Form |
|
Filing
Date |
|
Herewith |
| 1.1 |
|
Form of Underwriting Agreement |
|
Form S-1/A |
|
4/23/24 |
|
|
| 2.1 |
|
Stock
Purchase Agreement, dated December 15, 2015 |
|
Form
8-K/A |
|
9/26/2016 |
|
|
| 3.1 |
|
Certificate
of Incorporation filed with the State of Delaware. |
|
Form
10-12G |
|
5/22/2008 |
|
|
| 3.2 |
|
Bylaws |
|
Form
10-12G |
|
5/22/2008 |
|
|
| 3.3 |
|
Amendment
to Certificate of Incorporation |
|
Form
10-12G |
|
5/22/2008 |
|
|
| 3.4 |
|
Amendment
to Certificate of Incorporation |
|
Form
10-12G |
|
5/22/2008 |
|
|
| 3.5 |
|
Amendment
to Certificate of Incorporation |
|
Form
10-12G |
|
5/22/2008 |
|
|
| 3.6 |
|
Amendment
to Certificate of Incorporation |
|
Form
10-12G |
|
5/22/2008 |
|
|
| 3.7 |
|
Amendment
to Certificate of Incorporation |
|
Form
8-K |
|
8/22/2016 |
|
|
| 3.8 |
|
Certificate
of Designation of the Series A Preferred Shares |
|
Form
8-K |
|
9/10/2009 |
|
|
| 3.9 |
|
Certificate
of Designation of the Series 1 Preferred Shares |
|
Form
8-K |
|
1/24/2017 |
|
|
| 3.10 |
|
Amendment
to Certificate of Incorporation |
|
Form
8-K |
|
9/8/2017 |
|
|
| 3.11 |
|
Certificate
of Correction to the Certificate of Amendment |
|
Form
8-K |
|
6/12/2019 |
|
|
| 3.12 |
|
Amended
Certificate of Designation of the Series 1 Preferred Shares |
|
Form
8-K |
|
4/1/2020 |
|
|
| 3.13 |
|
Amendment
to Certificate of Incorporation |
|
Form
8-K |
|
1/5/2021 |
|
|
| 3.14 |
|
Certificate
of Correction to the Certificate of Amendment |
|
Form
8-K |
|
5/28/2021 |
|
|
| 3.15 |
|
Amendment
to Certificate of Incorporation |
|
Form
8-K |
|
1/12/2023 |
|
|
| 4.1 |
|
Form
of Subscription Rights Certificate |
|
Form
S-1 |
|
8/29/2016 |
|
|
| 4.2 |
|
Form
of Series 1 Preferred Stock Certificate |
|
Form
S-1 |
|
8/29/2016 |
|
|
| 4.3 |
|
Form
of Series 1 Warrant |
|
Form
S-1 |
|
8/29/2016 |
|
|
| 4.4 |
|
Form
of Common Stock Purchase Warrant |
|
Form
8-K |
|
3/22/2019 |
|
|
| 4.5 |
|
Form of Prefunded Warrant |
|
Form
S-1/A |
|
4/23/24 |
|
|
| 4.6 |
|
Form of Series A Common Stock Purchase Warrant |
|
Form
S-1/A |
|
4/23/24 |
|
|
| 4.7 |
|
Form of Series B Common Stock Purchase Warrant |
|
Form
S-1/A |
|
4/23/24 |
|
|
| 5.1 |
|
Opinion of the Doney Law Firm |
|
Form
S-1/A |
|
4/23/24 |
|
|
| 10.1 |
|
Amendment
of the Term Loan Agreement between Vicon and NIL Funding, dated March 3, 2023 |
|
Form
10-Q |
|
5/11/2023 |
|
|
| 10.2 |
|
Amendment
to Loan Documents Between Advanced Industrial Services, Inc. and Fulton Bank, N.A. |
|
Form
10-Q |
|
5/11/2023 |
|
|
| 10.3 |
|
Amendment
to Promissory Note Between Cemtrex, Inc. and Streeterville Capital, LLC |
|
Form
10-Q |
|
5/11/2023 |
|
|
| 10.4 |
|
Securities
Purchase Agreement dated June 1, 2020 |
|
Form
8-K |
|
6/4/2020 |
|
|
| 10.5 |
|
Securities
Purchase Agreement dated June 9, 2020 |
|
Form
8-K |
|
6/12/2020 |
|
|
| 10.6 |
|
Settlement
Agreement and Release between Cemtrex, Inc. and Aron Govil dated February 26, 2021 |
|
Form
8-K |
|
2/26/2021 |
|
|
| 10.7 |
|
Securities
Purchase Agreement dated February 22, 2022 |
|
Form
8-K |
|
5/16/2022 |
|
|
| 10.8 |
|
Amendment
of the Term Loan Agreement between Vicon and NIL Funding, dated March 30, 2022 |
|
Form
8-K |
|
5/16/2022 |
|
|
| 10.9 |
|
Asset
Purchase agreement between Cemtrex, Inc. and Saagar Govil, dated November 22, 2022 |
|
Form
8-K |
|
11/29/2022 |
|
|
| 10.1 |
|
Asset
Purchase agreement between Cemtrex, Inc. and Saagar Govil, dated November 22, 2022 |
|
Form
8-K |
|
11/29/2022 |
|
|
| 10.11 |
|
Simple
Agreement for Future Equity (SAFE) between Cemtrex, Inc. and Saagar Govil, dated November 18, 2022 |
|
Form
8-K |
|
11/29/2022 |
|
|
| 10.12 |
|
2020
Equity Compensation Plan |
|
Form
S-8 |
|
8/17/2020 |
|
|
| 10.13 |
|
Asset
Purchase Agreement, dated as of June 7, 2023 |
|
Form
8-K |
|
12/6/2023 |
|
|
| 10.14 |
|
Form of Lock-Up Agreement |
|
Form
S-1/A |
|
4/23/24 |
|
|
| 10.15 |
|
Note Purchase Agreement between Cemtrex Inc. and Streeterville Capital, LLC, dated September 30, 2021 |
|
|
|
|
|
X |
| 10.16 |
|
Amendment to Promissory Note between Cemtrex Inc. and Streeterville Capital, LLC, dated September 14, 2022 |
|
|
|
|
|
X |
| 10.17 |
|
Amendment to Promissory Note between Cemtrex Inc. and Streeterville Capital, LLC, dated August 30, 2023 |
|
|
|
|
|
X |
| 10.18 |
|
Standstill Agreement between Cemtrex Inc. and Streeterville Capital, LLC dated January 12, 2023 |
|
|
|
|
|
X |
| 14.1 |
|
Corporate
Code of Business Ethics |
|
Form
8-K |
|
7/1/2016 |
|
|
| 21.1 |
|
Subsidiaries
of Registrant |
|
Form
S-1 |
|
12/29/2023 |
|
|
| 23.1 |
|
Consent of Grassi & Co, CPAs, P.C. |
|
|
|
|
|
X |
| 23.2 |
|
Consent of The Doney Law Firm (included as Exhibit 5.1) |
|
Form
S-1/A |
|
4/23/24 |
|
|
| 24+ |
|
Power of Attorney (included in the signature page of this Registration Statement) |
|
|
|
|
|
X |
| 99.1 |
|
Order
pursuant to Section 8A of the Securities Act – dated September 30, 2022 |
|
Form
8-K |
|
10/4/2022 |
|
|
| 107 |
|
Filing Fee Table |
|
Form
S-1/A |
|
4/23/24 |
|
|
+
To be filed by amendment
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the hamlet of Hauppauge, New York, on the 30th day of April 2024.
| |
Cemtrex,
Inc. |
| |
|
|
| |
By: |
/s/
Saagar Govil. |
| |
|
Saagar
Govil |
| |
|
Chairman
of the Board, CEO, |
| |
|
President
& Secretary (Principal Executive Officer) |
| |
|
|
| |
|
/s/
Paul J. Wyckoff. |
| |
|
Paul
J. Wyckoff |
| |
|
Interim
Chief Financial Officer |
| |
|
(Principal
Financial Officer and Principal Accounting Officer) |
KNOW
ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Saagar Govil and Paul Wyckoff, and each
of them, as his true and lawful attorneys-in-fact and agents, each with the full power of substitution, for him and in his name, place
or stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments),
and to sign any registration statement for the same offering covered by this registration statement that is to be effective upon filing
pursuant to Rule 462(b) promulgated under the Securities Act of 1933, as amended, and all post-effective amendments thereto, and to file
the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or their, his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
| April
30, 2024 |
By: |
/s/
Saagar Govil |
| |
|
Saagar
Govil, |
| |
|
Chairman
of the Board, CEO, |
| |
|
President
& Secretary (Principal Executive Officer) |
| |
|
|
| April
30, 2024 |
By: |
/s/
Paul J. Wyckoff |
| |
|
Paul
J. Wyckoff |
| |
|
Interim
Chief Financial Officer |
| |
|
(Principal
Financial Officer and Principal Accounting Officer) |
| |
|
|
| April
30, 2024 |
By: |
/s/
Manpreet Singh |
| |
|
Manpreet
Singh, |
| |
|
Director |
| |
|
|
| April
30, 2024 |
By: |
/s/
Brian Kwon |
| |
|
Brian
Kwon, |
| |
|
Director |
| |
|
|
| April
30, 2024 |
By: |
/s/
Metodi Filipov |
| |
|
Metodi
Filipov, Director |
Exhibit
10.15
N o t e P u
r c h a s e A g r e e m e n t
THIS
NOTE PURCHASE AGREEMENT (this “Agreement”), dated as of September 30, 2021, is entered into by and between CEMTREX
INC., a Delaware corporation (“Company”), and STREETERVILLE CAPITAL, LLC, a Utah limited liability company, its successors
and/or assigns (“Investor”).
A. Company
and Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the
Securities Act of 1933, as amended (the “1933 Act”), and the rules and regulations promulgated thereunder by the United
States Securities and Exchange Commission (the “SEC”).
B. Investor
desires to purchase and Company desires to issue and sell, upon the terms and conditions set forth in this Agreement, a Promissory Note,
in the form attached hereto as Exhibit A, in the original principal amount of $5,755,000.00 (the “Note”).
C. This
Agreement, the Note, and all other certificates, documents, agreements, resolutions and instruments delivered to any party under or in
connection with this Agreement, as the same may be amended from time to time, are collectively referred to herein as the “Transaction
Documents”.
NOW,
THEREFORE, in consideration of the above recitals and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Company and Investor hereby agree as follows:
1. Purchase and Sale of Note.
1.1. Purchase
of Note. Company shall issue and sell to Investor and Investor shall purchase from Company the Note. In consideration thereof, Investor
shall pay the Purchase Price (as defined below) to Company.
1.2. Form
of Payment. On the Closing Date (as defined below), Investor shall pay the Purchase Price to Company via wire transfer of immediately
available funds against delivery of the Note.
1.3. Closing
Date. Subject to the satisfaction (or written waiver) of the conditions set forth in Section 5 and Section 6 below, the date of the
issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be September 30, 2021, or such
other mutually agreed upon date. The closing of the transactions contemplated by this Agreement (the “Closing”) shall
occur on the Closing Date by means of the exchange by email of .pdf documents, but shall be deemed for all purposes to have occurred
at the offices of Hansen Black Anderson Ashcraft PLLC in Lehi, Utah.
1.4. Collateral for the Note. The Note shall not be secured.
1.5. Original
Issue Discount; Transaction Expense Amount. The Note carries an original issue discount of $750,000.00 (the “OID”).
In addition, Company agrees to pay $5,000.00 to Investor to cover Investor’s legal fees, accounting costs, due diligence, monitoring
and other transaction costs incurred in connection with the purchase and sale of the Note (the “Transaction Expense Amount”),
all of which amount is included in the initial principal balance of the Note. The “Purchase Price”, therefore, shall
be $5,000,000.00, computed as follows: $5,755,000.00 initial principal balance, less the OID, less the Transaction Expense Amount.
2. Investor’s
Representations and Warranties. Investor represents and warrants to Company that as of the Closing Date: (i) this Agreement has been
duly and validly authorized; (ii) this Agreement constitutes a valid and binding agreement of Investor enforceable in accordance with
its terms; and (iii) Investor is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D of the 1933
Act.
3. Company’s
Representations and Warranties. Company represents and warrants to Investor that as of the Closing Date: (i) Company is a corporation
duly organized, validly existing and in good standing under the laws of its state of incorporation and has the requisite corporate power
to own its properties and to carry on its business as now being conducted; (ii) Company is duly qualified as a foreign corporation to
do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such
qualification necessary; (iii) Company has registered its shares of common stock, $0.001 par value per share (the “Common Stock”),
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and is obligated to file
reports pursuant to Section 13 or Section 15(d) of the 1934 Act; (iv) each of the Transaction Documents and the transactions contemplated
hereby and thereby, have been duly and validly authorized by Company and all necessary actions have been taken; (v) this Agreement, the
Note, and the other Transaction Documents have been duly executed and delivered by Company and constitute the valid and binding obligations
of Company enforceable in accordance with their terms; (vi) the execution and delivery of the Transaction Documents by Company and the
consummation by Company of the other transactions contemplated by the Transaction Documents do not and will not conflict with or result
in a breach by Company of any of the terms or provisions of, or constitute a default under (a) Company’s formation documents or
bylaws, each as currently in effect, (b) any indenture, mortgage, deed of trust, or other material agreement or instrument to which Company
is a party or by which it or any of its properties or assets are bound, including, without limitation, any listing agreement for the
Common Stock, or (c) any existing applicable law, rule, or regulation or any applicable decree, judgment, or order of any court, United
States federal, state or foreign regulatory body, administrative agency, or other governmental body having jurisdiction over Company
or any of Company’s properties or assets; (vii) no further authorization, approval or consent of any court, governmental body,
regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders or any lender of Company is required
to be obtained by Company for the issuance of the Note to Investor or the entering into of the Transaction Documents; (viii) none of
Company’s filings with the SEC contained, at the time they were filed, any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under
which they were made, not misleading; (ix) Company has filed all reports, schedules, forms, statements and other documents required to
be filed by Company with the SEC under the 1934 Act on a timely basis or has received a valid extension of such time of filing and has
filed any such report, schedule, form, statement or other document prior to the expiration of any such extension; (x) there is no action,
suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of Company, threatened
against or affecting Company before or by any governmental authority or non- governmental department, commission, board, bureau, agency
or instrumentality or any other person, wherein an unfavorable decision, ruling or finding would have a material adverse effect on Company
or which would adversely affect the validity or enforceability of, or the authority or ability of Company to perform its obligations
under, any of the Transaction Documents; (xi) Company has not consummated any financing transaction that has not been disclosed in a
periodic filing or current report with the SEC under the 1934 Act; (xii) Company is not, nor has it been at any time in the previous
twelve (12) months, a “Shell Company,” as such type of “issuer” is described in Rule 144(i)(1) under the 1933
Act; (xiii) with respect to any commissions, placement agent or finder’s fees or similar payments that will or would become due
and owing by Company to any person or entity as a result of this Agreement or the transactions contemplated hereby (“Broker
Fees”), any such Broker Fees will be made in full compliance with all applicable laws and regulations and only to a person
or entity that is a registered investment adviser or registered broker-dealer; (xiv) Investor shall have no obligation with respect to
any Broker Fees or with respect to any claims made by or on behalf of other persons for fees of a type contemplated in this subsection
that may be due in connection with the transactions contemplated hereby and Company shall indemnify and hold harmless each of Investor,
Investor’s employees, officers, directors, stockholders, managers, agents, and partners, and their respective affiliates, from
and against all claims, losses, damages, costs (including the costs of preparation and attorneys’ fees) and expenses suffered in
respect of any such claimed or existing Broker Fees; (xv) neither Investor nor any of its officers, directors, members, managers, employees,
agents or representatives has made any representations or warranties to Company or any of its officers, directors, employees, agents
or representatives except as expressly set forth in the Transaction Documents and, in making its decision to enter into the transactions
contemplated by the Transaction Documents, Company is not relying on any representation, warranty, covenant or promise of Investor or
its officers, directors, members, managers, employees, agents or representatives other than as set forth in the Transaction Documents;
(xvi) Company acknowledges that the State of Utah has a reasonable relationship and sufficient contacts to the transactions contemplated
by the Transaction Documents and any dispute that may arise related thereto such that the laws and venue of the State of Utah, as set
forth more specifically in Section 8.3 below, shall be applicable to the Transaction Documents and the transactions contemplated therein;
and (xvii) Company has performed due diligence and background research on Investor and its affiliates, including, without limitation,
John M. Fife, and, to its satisfaction, has made inquiries with respect to all matters Company may consider relevant to the undertakings
and relationships contemplated by the Transaction Documents, including, among other things, the following: http://investing.businessweek.com/research/stocks/people/person.asp?personId=7505107&ticker=UAHC;
SEC Civil Case No. 07-C-0347 (N.D. Ill.); SEC Civil Action No. 07-CV-347 (N.D. Ill.); and FINRA Case #2011029203701. In addition, various
affiliates of Investor are involved in ongoing litigation with the SEC regarding broker-dealer registration (see SEC Civil Case
No. 1:20-cv-05227 (N.D. Ill.)). Company, being aware of the matters described in subsection (xvii) above, acknowledges and agrees that
such matters, or any similar matters, have no bearing on the transactions contemplated by the Transaction Documents and covenants and
agrees it will not use any such information as a defense to performance of its obligations under the Transaction Documents or in any
attempt to avoid, modify or reduce such obligations.
4. Company
Covenants. Until all of Company’s obligations under the Note are paid and performed in full, or within the timeframes otherwise
specifically set forth below, Company will at all times comply with the following covenants: (i) Company will timely file on the applicable
deadline all reports required to be filed with the SEC pursuant to Sections 13 or 15(d) of the 1934 Act, and will take all reasonable
action under its control to ensure that adequate current public information with respect to Company, as required in accordance with Rule
144 of the 1933 Act, is publicly available, and will not terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such termination; (ii) the Common Stock shall be listed or
quoted for trading on any of (a) NYSE, (b) NASDAQ, (c) OTCQX, or (d) OTCQB; (iii) trading in Company’s Common Stock will not be
suspended, halted, chilled, frozen, reach zero bid or otherwise cease on Company’s principal trading market; and (iv) Company will
not make any Variable Security Issuance (as defined below) without Investor’s prior written consent, which consent may be granted
or withheld in Investor’s sole and absolute discretion. For purposes hereof, the term “Variable Security Issuance”
means any issuance of Company securities that (A) have or may have conversion rights of any kind, contingent, conditional or otherwise,
in which the number of shares that may be issued pursuant to such conversion right varies with the market price of Company’s Common
Stock, or (B) are or may become convertible into Company’s Common Stock (including without limitation convertible debt, warrants
or convertible preferred stock), with a conversion price that varies with the market price of Company’s Common Stock, even if such
security only becomes convertible following an event of default, the passage of time, or another trigger event or condition. For avoidance
of doubt, the issuance of shares of Company’s Common Stock under, pursuant to, in exchange for or in connection with any contract
or instrument, whether convertible or not, is deemed a Variable Security Issuance for purposes hereof if the number of shares of Company
Common Stock to be issued is based upon or related in any way to the market price of Company’s Common Stock, including, but not
limited to, Company’s Common Stock issued in connection with a Section 3(a)(9) exchange, a Section 3(a)(10) settlement, or any
other similar settlement or exchange.
5. Conditions
to Company’s Obligation to Sell. The obligation of Company hereunder to issue and sell the Note to Investor at the Closing
is subject to the satisfaction, on or before the Closing Date, of each of the following conditions:
5.1. Investor shall have executed this Agreement and delivered the same to Company.
5.2. Investor
shall have delivered the Purchase Price to Company in accordance with Section 1.2 above.
6. Conditions
to Investor’s Obligation to Purchase. The obligation of Investor hereunder to purchase the Note at the Closing is subject to
the satisfaction, on or before the Closing Date, of each of the following conditions, provided that these conditions are for Investor’s
sole benefit and may be waived by Investor at any time in its sole discretion:
6.1.
Company shall have executed this Agreement and the Note and delivered the same to Investor.
6.2. Company
shall have delivered to Investor a fully executed Secretary’s Certificate substantially in the form attached hereto as Exhibit
B evidencing Company’s approval of the Transaction Documents.
6.3. Company
shall have delivered to Investor fully executed copies of all other Transaction Documents required to be executed by Company herein or
therein.
7. Terms
of Future Financings. So long as the Note is outstanding, upon any Variable Security Issuance by Company in any private transaction
(e.g., a transaction not involving an offering of Company securities to the general public), then Company shall notify Investor of such
Variable Security Issuance and the terms of such Variable Security Issuance, at Investor’s option, shall become a part of the Transaction
Documents for the benefit of Investor. Additionally, if Company fails to notify Investor of any such Variable Security Issuance, but
Investor becomes aware of such Variable Security Issuance, Investor may notify Company of such Variable Security Issuance and the terms
of such Variable Security Issuance shall become a part of the Transaction Documents retroactive to the date on which such Variable Security
Issuance was made to the applicable third party.
8. Miscellaneous.
The provisions set forth in this Section 8 shall apply to this Agreement, as well as all other Transaction Documents as if these terms
were fully set forth therein; provided, however, that in the event there is a conflict between any provision set forth in this Section
8 and any provision in any other Transaction Document, the provision in such other Transaction Document shall govern.
8.1. Certain
Capitalized Terms. To the extent any capitalized term used in any Transaction Document is defined in any other Transaction Document
(as noted therein), such capitalized term shall remain applicable in the Transaction Document in which it is so used even if the other
Transaction Document (wherein such term is defined) has been released, satisfied, or is otherwise cancelled or terminated.
8.2. Arbitration
of Claims. The parties shall submit all Claims (as defined in Exhibit C) arising under this Agreement or any other Transaction
Document or any other agreement between the parties and their affiliates or any Claim relating to the relationship of the parties to
binding arbitration pursuant to the arbitration provisions set forth in Exhibit C attached hereto (the “Arbitration Provisions”).
The parties hereby acknowledge and agree that the Arbitration Provisions are unconditionally binding on the parties hereto and are severable
from all other provisions of this Agreement. By executing this Agreement, Company represents, warrants and covenants that Company has
reviewed the Arbitration Provisions carefully, consulted with legal counsel about such provisions (or waived its right to do so), understands
that the Arbitration Provisions are intended to allow for the expeditious and efficient resolution of any dispute hereunder, agrees to
the terms and limitations set forth in the Arbitration Provisions, and that Company will not take a position contrary to the foregoing
representations. Company acknowledges and agrees that Investor may rely upon the foregoing representations and covenants of Company regarding
the Arbitration Provisions.
8.3. Governing
Law; Venue. This Agreement shall be construed and enforced in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, the internal laws of the State of Utah, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Utah. Each party consents to and expressly agrees that the exclusive
venue for arbitration of any dispute arising out of or relating to any Transaction Document or the relationship of the parties or their
affiliates shall be in Salt Lake County, Utah. Without modifying the parties’ obligations to resolve disputes hereunder pursuant
to the Arbitration Provisions, for any litigation arising in connection with any of the Transaction Documents, each party hereto hereby
(i) consents to and expressly submits to the exclusive personal jurisdiction of any state or federal court sitting in Salt Lake County,
Utah, (ii) expressly submits to the exclusive venue of any such court for the purposes hereof, and (iii) waives any claim of improper
venue and any claim or objection that such courts are an inconvenient forum or any other claim, defense or objection to the bringing
of any such proceeding in such jurisdiction or to any claim that such venue of the suit, action or proceeding is improper.
8.4. Specific
Performance. Company acknowledges and agrees that irreparable damage may occur to Investor in the event that Company fails to perform
any material provision of this Agreement or any of the other Transaction Documents in accordance with its specific terms. It is accordingly
agreed that Investor shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement
or such other Transaction Document and to enforce specifically the terms and provisions hereof or thereof, this being in addition to
any other remedy to which any Investor may be entitled under the Transaction Documents, at law or in equity. For the avoidance of doubt,
in the event Investor seeks to obtain an injunction against Company or specific performance of any provision of any Transaction Document,
such action shall not be a waiver of any right of Investor under any Transaction Document, at law, or in equity, including without limitation
its rights to arbitrate any Claim pursuant to the terms of the Transaction Documents.
8.5. Calculation
Disputes. Notwithstanding the Arbitration Provisions, in the case of a dispute as to any determination or arithmetic calculation
under the Transaction Documents (each, a “Calculation”), Company or Investor (as the case may be) shall submit any
disputed Calculation via email or facsimile with confirmation of receipt (i) within two (2) business days after receipt of the applicable
notice giving rise to such dispute to Company or Investor (as the case may be) or (ii) if no notice gave rise to such dispute, at any
time after Investor learned of the circumstances giving rise to such dispute. If Investor and Company are unable to agree upon such Calculation
within two (2) business days of such disputed Calculation being submitted to Company or Investor (as the case may be), then Investor
will promptly submit via email or facsimile the disputed Calculation to Unkar Systems Inc. (“Unkar Systems”). Investor
shall cause Unkar Systems to perform the Calculation and notify Company and Investor of the results no later than ten (10) business days
from the time it receives such disputed Calculation. Unkar Systems’ determination of the disputed Calculation shall be binding
upon all parties absent demonstrable error. Unkar Systems’ fee for performing such Calculation shall be paid by the incorrect party,
or if both parties are incorrect, by the party whose Calculation is furthest from the correct Calculation as determined by Unkar Systems.
Notwithstanding the foregoing, Investor may, in its sole discretion, designate an independent, reputable investment bank or accounting
firm other than Unkar Systems to resolve any such dispute and in such event, all references to “Unkar Systems” herein will
be replaced with references to such independent, reputable investment bank or accounting firm so designated by Investor.
8.6. Counterparts.
Each Transaction Document may be executed in any number of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument. The parties hereto confirm that any electronic copy of another party’s executed counterpart
of a Transaction Document (or such party’s signature page thereof) will be deemed to be an executed original thereof.
8.7. Document
Imaging. Investor shall be entitled, in its sole discretion, to image or make copies of all or any selection of the agreements,
instruments, documents, and items and records governing, arising from or relating to any of Company’s loans, including,
without limitation, this Agreement and the other Transaction Documents, and Investor may destroy or archive the paper originals. The
parties hereto (i) waive any right to insist or require that Investor produce paper originals, (ii) agree that such images
shall be accorded the same force and effect as the paper originals, (iii) agree that Investor is entitled to use such images in lieu
of destroyed or archived originals for any purpose, including as admissible evidence in any demand, presentment or other
proceedings, and (iv) further agree that any executed facsimile (faxed), scanned, emailed, or other imaged copy of this Agreement or
any other Transaction Document shall be deemed to be of the same force and effect as the original manually executed document.
8.8. Headings.
The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this
Agreement.
8.9. Severability.
In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform to such statute
or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability
of any other provision hereof.
8.10. Entire
Agreement. This Agreement, together with the other Transaction Documents, contains the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth herein or therein, neither Company nor Investor makes
any representation, warranty, covenant or undertaking with respect to such matters. For the avoidance of doubt, all prior term sheets
or other documents between Company and Investor, or any affiliate thereof, related to the transactions contemplated by the Transaction
Documents (collectively, “Prior Agreements”), that may have been entered into between Company and Investor, or any
affiliate thereof, are hereby null and void and deemed to be replaced in their entirety by the Transaction Documents. To the extent there
is a conflict between any term set forth in any Prior Agreement and the term(s) of the Transaction Documents, the Transaction Documents
shall govern.
8.11. No
Reliance. Company acknowledges and agrees that neither Investor nor any of its officers, directors, members, managers, representatives
or agents has made any representations or warranties to Company or any of its officers, directors, representatives, agents or employees
except as expressly set forth in the Transaction Documents and, in making its decision to enter into the transactions contemplated by
the Transaction Documents, Company is not relying on any representation, warranty, covenant or promise of Investor or its officers, directors,
members, managers, agents or representatives other than as set forth in the Transaction Documents.
8.12. Amendments.
No provision of this Agreement may be waived or amended other than by an instrument in writing signed by both parties hereto.
8.13. Notices.
Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of: (i) the date delivered, if delivered by personal delivery as against written receipt therefor or by email to
an executive officer, or by facsimile (with successful transmission confirmation), (ii) the earlier of the date delivered or the third
business day after deposit, postage prepaid, in the United States Postal Service by certified mail, or (iii) the earlier of the date
delivered or the third business day after mailing by express courier, with delivery costs and fees prepaid, in each case, addressed to
each of the other parties thereunto entitled at the following addresses (or at such other addresses as such party may designate by five
(5) calendar days’ advance written notice similarly given to each of the other parties hereto):
If
to Company:
Cemtrex
Inc.
Attn:
Saagar Govil
276
Greenpoint Ave. Bld 8 Suite 208
Brooklyn, New York 11222
Email:
sgovil@cemtrex.com
If
to Investor:
Streeterville
Capital, LLC
Attn: John Fife
303
East Wacker Drive, Suite 1040
Chicago,
Illinois 60601
Email:
jfife@chicagoventure.com
With
a copy to (which copy shall not constitute notice):
Hansen
Black Anderson Ashcraft PLLC
Attn:
Jonathan K. Hansen
3051
West Maple Loop Drive, Suite 325
Lehi,
Utah 84043
Email:
jhansen@hbaalaw.com
8.14. Successors
and Assigns. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by Investor
hereunder may be assigned by Investor to a third party, including its affiliates, in whole or in part, without the need to obtain Company’s
consent thereto. Company may not assign its rights or obligations under this Agreement or delegate its duties hereunder without the prior
written consent of Investor.
8.15. Survival.
The representations and warranties of Company and the agreements and covenants set forth in this Agreement shall survive the Closing
hereunder notwithstanding any due diligence investigation conducted by or on behalf of Investor. Company agrees to indemnify and hold
harmless Investor and all its officers, directors, employees, attorneys, and agents for loss or damage arising as a result of or related
to any breach or alleged breach by Company of any of its representations, warranties and covenants set forth in this Agreement or any
of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.
8.16. Further
Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
8.17. Investor’s
Rights and Remedies Cumulative; Liquidated Damages. All rights, remedies, and powers conferred in this Agreement and the Transaction
Documents are cumulative and not exclusive of any other rights or remedies, and shall be in addition to every other right, power, and
remedy that Investor may have, whether specifically granted in this Agreement or any other Transaction Document, or existing at law,
in equity, or by statute, and any and all such rights and remedies may be exercised from time to time and as often and in such order
as Investor may deem expedient. The parties acknowledge and agree that upon Company’s failure to comply with the provisions of
the Transaction Documents, Investor’s damages would be uncertain and difficult (if not impossible) to accurately estimate because
of the parties’ inability to predict future interest rates, Investor’s increased risk, and the uncertainty of the availability
of a suitable substitute investment opportunity for Investor, among other reasons. Accordingly, any fees, charges, and default interest
due under the Note and the other Transaction Documents are intended by the parties to be, and shall be deemed, liquidated damages. The
parties agree that such liquidated damages are a reasonable estimate of Investor’s actual damages and not a penalty, and shall
not be deemed in any way to limit any other right or remedy Investor may have hereunder, at law or in equity. The parties acknowledge
and agree that under the circumstances existing at the time this Agreement is entered into, such liquidated damages are fair and reasonable
and are not penalties. All fees, charges, and default interest provided for in the Transaction Documents are agreed to by the parties
to be based upon the obligations and the risks assumed by the parties as of the Closing Date and are consistent with investments of this
type. The liquidated damages provisions of the Transaction Documents shall not limit or preclude a party from pursuing any other remedy
available at law or in equity; provided, however, that the liquidated damages provided for in the Transaction Documents are intended
to be in lieu of actual damages.
8.18. Attorneys’
Fees and Cost of Collection. In the event of any arbitration or action at law or in equity to enforce or interpret the terms of
this Agreement or any of the other Transaction Documents, the parties agree that the party who is awarded the most money (which, for
the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded to any
party) shall be deemed the prevailing party for all purposes and shall therefore be entitled to an additional award of the full
amount of the attorneys’ fees, deposition costs, and expenses paid by such prevailing party in connection with arbitration or
litigation without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses.
Nothing herein shall restrict or impair an arbitrator’s or a court’s power to award fees and expenses for frivolous or
bad faith pleading. If (i) the Note is placed in the hands of an attorney for collection or enforcement prior to commencing
arbitration or legal proceedings, or is collected or enforced through any arbitration or legal proceeding, or Investor otherwise
takes action to collect amounts due under the Note or to enforce the provisions of the Note, or (ii) there occurs any
bankruptcy, reorganization, receivership of Company or other proceedings affecting Company’s creditors’ rights and
involving a claim under the Note; then Company shall pay the costs incurred by Investor for such collection, enforcement or action
or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation,
attorneys’ fees, expenses, deposition costs, and disbursements.
8.19. Waiver.
No waiver of any provision of this Agreement shall be effective unless it is in the form of a writing signed by the party granting the
waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to
any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a
party to provide a waiver or consent in the future except to the extent specifically set forth in writing.
8.20. Waiver
of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR THE RELATIONSHIPS
OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW
OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY
WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.
8.21. Time
is of the Essence. Time is expressly made of the essence with respect to each and every provision of this Agreement and the other
Transaction Documents.
8.22. No
Changes; Signature Pages. Company, as well as the person signing each Transaction Document on behalf of Company, represents and warrants
to Investor that it has not made any changes to this Agreement or any other Transaction Document except those that have been conspicuously
disclosed to Investor in a “redline” or similar draft of the applicable Transaction Document, which clearly marks all changes
Company has made to the applicable Transaction Document. Moreover, the versions of the Transaction Documents signed by Company are the
same versions Investor delivered to Company as being the “final” versions of the Transaction Documents and Company represents
and warrants that it has not made any changes to such “final” versions of the Transaction Documents and that the versions
Company signed are the same versions Investor delivered to it. In the event Company has made any changes to any Transaction Document
that are not conspicuously disclosed to Investor in a “redline” or similar draft of the applicable Transaction Document and
that have not been explicitly accepted and agreed upon by Investor, Company acknowledges and agrees that any such changes shall not be
considered part of the final document set. Finally, and in furtherance of the foregoing, Company agrees and authorizes Investor to compile
the “final” versions of the Transaction Documents, which shall consist of Company’s executed signature pages for all
Transaction Documents being applied to the last set of the Transaction Documents that Investor delivered to Company, and Company agrees
that such versions of the Transaction Documents that have been collated by Investor shall be deemed to be the final versions of the Transaction
Documents for all purposes.
8.23. Voluntary
Agreement. Company has carefully read this Agreement and each of the other Transaction Documents and has asked any questions needed
for Company to understand the terms, consequences and binding effect of this Agreement and each of the other Transaction Documents and
fully understand them. Company has had the opportunity to seek the advice of an attorney of Company’s choosing, or has waived the
right to do so, and is executing this Agreement and each of the other Transaction Documents voluntarily and without any duress or undue
influence by Investor or anyone else.
[Remainder
of page intentionally left blank; signature page follows]
IN
WITNESS WHEREOF, the undersigned Investor and Company have caused this Agreement to be duly executed as of the date first above written.
SUBSCRIPTION
AMOUNT:
| Principal
Amount of Note: |
$5,755,000.00 |
| |
|
| Purchase
Price: |
$5,000,000.00 |
| |
INVESTOR: |
| |
|
|
| |
Streeterville
Capital, LLC |
| |
|
|
| |
By:
|
/s/
John M. Fife |
| |
|
John
M. Fife, President |
| |
|
|
| |
COMPANY: |
| |
|
|
| |
Cemtrex
Inc. |
| |
|
|
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By
: |
/s/
Saagar Govil |
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Name: |
Saagar
Govil |
| |
Title: |
CEO |
| ATTACHED
EXHIBITS: |
| |
|
| Exhibit
A |
Note |
| Exhibit
B |
Secretary’s
Certificate |
| Exhibit
C |
Arbitration
Provisions |
[Signature
Page to Note Purchase Agreement]
EXHIBIT
C
ARBITRATION
PROVISIONS
1. Dispute
Resolution. For purposes of this Exhibit C, the term “Claims” means any disputes, claims, demands, causes
of action, requests for injunctive relief, requests for specific performance, liabilities, damages, losses, or controversies whatsoever
arising from, related to, or connected with the transactions contemplated in the Transaction Documents and any communications between
the parties related thereto, including without limitation any claims of mutual mistake, mistake, fraud, misrepresentation, failure of
formation, failure of consideration, promissory estoppel, unconscionability, failure of condition precedent, rescission, and any statutory
claims, tort claims, contract claims, or claims to void, invalidate or terminate the Agreement (or these Arbitration Provisions (defined
below)) or any of the other Transaction Documents. The term “Claims” specifically excludes a dispute over Calculations. The
parties to the Agreement (the “parties”) hereby agree that the arbitration provisions set forth in this Exhibit
C (“Arbitration Provisions”) are binding on each of them. As a result, any attempt to rescind the Agreement (or
these Arbitration Provisions) or declare the Agreement (or these Arbitration Provisions) or any other Transaction Document invalid or
unenforceable for any reason is subject to these Arbitration Provisions. These Arbitration Provisions shall also survive any termination
or expiration of the Agreement. Any capitalized term not defined in these Arbitration Provisions shall have the meaning set forth in
the Agreement.
2. Arbitration.
Except as otherwise provided herein, all Claims must be submitted to arbitration (“Arbitration”) to be conducted exclusively
in Salt Lake County, Utah and pursuant to the terms set forth in these Arbitration Provisions. Subject to the arbitration appeal right
provided for in Paragraph 5 below (the “Appeal Right”), the parties agree that the award of the arbitrator rendered
pursuant to Paragraph 4 below (the “Arbitration Award”) shall be (a) final and binding upon the parties, (b) the sole
and exclusive remedy between them regarding any Claims, counterclaims, issues, or accountings presented or pleaded to the arbitrator,
and (c) promptly payable in United States dollars free of any tax, deduction or offset (with respect to monetary awards). Subject to
the Appeal Right, any costs or fees, including without limitation attorneys’ fees, incurred in connection with or incident to enforcing
the Arbitration Award shall, to the maximum extent permitted by law, be charged against the party resisting such enforcement. The Arbitration
Award shall include default interest (as defined or otherwise provided for in the Note, “Default Interest”) (with
respect to monetary awards) at the rate specified in the Note for Default Interest both before and after the Arbitration Award. Judgment
upon the Arbitration Award will be entered and enforced by any state or federal court sitting in Salt Lake County, Utah.
3. The
Arbitration Act. The parties hereby incorporate herein the provisions and procedures set forth in the Utah Uniform Arbitration Act,
U.C.A. § 78B-11-101 et seq. (as amended or superseded from time to time, the “Arbitration Act”). Notwithstanding
the foregoing, pursuant to, and to the maximum extent permitted by, Section 105 of the Arbitration Act, in the event of conflict or variation
between the terms of these Arbitration Provisions and the provisions of the Arbitration Act, the terms of these Arbitration Provisions
shall control and the parties hereby waive or otherwise agree to vary the effect of all requirements of the Arbitration Act that may
conflict with or vary from these Arbitration Provisions.
4. Arbitration Proceedings. Arbitration between the parties will be subject to the following:
4.1 Initiation
of Arbitration. Pursuant to Section 110 of the Arbitration Act, the parties agree that a party may initiate Arbitration by giving
written notice to the other party (“Arbitration Notice”) in the same manner that notice is permitted under Section
8.13 of the Agreement; provided, however, that the Arbitration Notice may not be given by email or fax. Arbitration will be deemed
initiated as of the date that the Arbitration Notice is deemed delivered to such other party under Section 8.13 of the Agreement (the
“Service Date”). After the Service Date, information may be delivered, and notices may be given, by email or fax pursuant
to Section 8.13 of the Agreement or any other method permitted thereunder. The Arbitration Notice must describe the nature of the controversy,
the remedies sought, and the election to commence Arbitration proceedings. All Claims in the Arbitration Notice must be pleaded consistent
with the Utah Rules of Civil Procedure.
4.2 Selection and Payment of Arbitrator.
(a) Within
ten (10) calendar days after the Service Date, Investor shall select and submit to Company the names of three (3) arbitrators that are
designated as “neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com)
(such three (3) designated persons hereunder are referred to herein as the “Proposed Arbitrators”). For the avoidance
of doubt, each Proposed Arbitrator must be qualified as a “neutral” with Utah ADR Services. Within five (5) calendar days
after Investor has submitted to Company the names of the Proposed Arbitrators, Company must select, by written notice to Investor, one
(1) of the Proposed Arbitrators to act as the arbitrator for the parties under these Arbitration Provisions. If Company fails to select
one of the Proposed Arbitrators in writing within such 5-day period, then Investor may select the arbitrator from the Proposed Arbitrators
by providing written notice of such selection to Company.
| Arbitration Provisions, Page 1 |
(b)
If Investor fails to submit to Company the Proposed Arbitrators within ten (10) calendar days after the Service Date pursuant to
subparagraph (a) above, then Company may at any time prior to Investor so designating the Proposed Arbitrators, identify the names
of three (3) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Service by written
notice to Investor. Investor may then, within five (5) calendar days after Company has submitted notice of its Proposed Arbitrators
to Investor, select, by written notice to Company, one (1) of the Proposed Arbitrators to act as the arbitrator for the parties
under these Arbitration Provisions. If Investor fails to select in writing and within such 5-day period one (1) of the three (3)
Proposed Arbitrators selected by Company, then Company may select the arbitrator from its three (3) previously selected
Proposed Arbitrators by providing written notice of such selection to Investor.
(c) If
a Proposed Arbitrator chosen to serve as arbitrator declines or is otherwise unable to serve as arbitrator, then the party that selected
such Proposed Arbitrator may select one (1) of the other three (3) Proposed Arbitrators within three (3) calendar days of the date the
chosen Proposed Arbitrator declines or notifies the parties he or she is unable to serve as arbitrator. If all three (3) Proposed Arbitrators
decline or are otherwise unable to serve as arbitrator, then the arbitrator selection process shall begin again in accordance with this
Paragraph 4.2.
(d) The
date that the Proposed Arbitrator selected pursuant to this Paragraph 4.2 agrees in writing (including via email) delivered to both parties
to serve as the arbitrator hereunder is referred to herein as the “Arbitration Commencement Date”. If an arbitrator
resigns or is unable to act during the Arbitration, a replacement arbitrator shall be chosen in accordance with this Paragraph 4.2 to
continue the Arbitration. If Utah ADR Services ceases to exist or to provide a list of neutrals and there is no successor thereto, then
the arbitrator shall be selected under the then prevailing rules of the American Arbitration Association.
(e) Subject
to Paragraph 4.10 below, the cost of the arbitrator must be paid equally by both parties. Subject to Paragraph 4.10 below, if one party
refuses or fails to pay its portion of the arbitrator fee, then the other party can advance such unpaid amount (subject to the accrual
of Default Interest thereupon), with such amount being added to or subtracted from, as applicable, the Arbitration Award.
4.3 Applicability
of Certain Utah Rules. The parties agree that the Arbitration shall be conducted generally in accordance with the Utah Rules of Civil
Procedure and the Utah Rules of Evidence. More specifically, the Utah Rules of Civil Procedure shall apply, without limitation, to the
filing of any pleadings, motions or memoranda, the conducting of discovery, and the taking of any depositions. The Utah Rules of Evidence
shall apply to any hearings, whether telephonic or in person, held by the arbitrator. Notwithstanding the foregoing, it is the parties’
intent that the incorporation of such rules will in no event supersede these Arbitration Provisions. In the event of any conflict between
the Utah Rules of Civil Procedure or the Utah Rules of Evidence and these Arbitration Provisions, these Arbitration Provisions shall
control.
4.4 Answer
and Default. An answer and any counterclaims to the Arbitration Notice shall be required to be delivered to the party initiating
the Arbitration within twenty (20) calendar days after the Arbitration Commencement Date. If an answer is not delivered by the required
deadline, the arbitrator must provide written notice to the defaulting party stating that the arbitrator will enter a default award against
such party if such party does not file an answer within five (5) calendar days of receipt of such notice. If an answer is not filed within
the five (5) day extension period, the arbitrator must render a default award, consistent with the relief requested in the Arbitration
Notice, against a party that fails to submit an answer within such time period.
4.5 Related
Litigation. The party that delivers the Arbitration Notice to the other party shall have the option to also commence concurrent legal
proceedings with any state or federal court sitting in Salt Lake County, Utah (“Litigation Proceedings”), subject
to the following: (a) the complaint in the Litigation Proceedings is to be substantially similar to the claims set forth in the Arbitration
Notice, provided that an additional cause of action to compel arbitration will also be included therein, (b) so long as the other party
files an answer to the complaint in the Litigation Proceedings and an answer to the Arbitration Notice, the Litigation Proceedings will
be stayed pending an Arbitration Award (or Appeal Panel Award (defined below), as applicable) hereunder, (c) if the other party fails
to file an answer in the Litigation Proceedings or an answer in the Arbitration proceedings, then the party initiating Arbitration shall
be entitled to a default judgment consistent with the relief requested, to be entered in the Litigation Proceedings, and (d) any legal
or procedural issue arising under the Arbitration Act that requires a decision of a court of competent jurisdiction may be determined
in the Litigation Proceedings. Any award of the arbitrator (or of the Appeal Panel (defined below)) may be entered in such Litigation
Proceedings pursuant to the Arbitration Act.
| Arbitration Provisions, Page 2 |
4.6 Discovery.
Pursuant to Section 118(8) of the Arbitration Act, the parties agree that discovery shall be conducted as follows:
(a) Written
discovery will only be allowed if the likely benefits of the proposed written discovery outweigh the burden or expense thereof, and the
written discovery sought is likely to reveal information that will satisfy a specific element of a claim or defense already pleaded in
the Arbitration. The party seeking written discovery shall always have the burden of showing that all of the standards and limitations
set forth in these Arbitration Provisions are satisfied. The scope of discovery in the Arbitration proceedings shall also be limited
as follows:
(i) To facts directly connected with the transactions contemplated by the Agreement.
(ii) To
facts and information that cannot be obtained from another source or in another manner that is more convenient, less burdensome or less
expensive than in the manner requested.
(b) No party shall be allowed (i) more than fifteen (15) interrogatories (including discrete subparts), (ii) more than fifteen (15) requests for admission (including discrete subparts), (iii) more than ten (10) document requests (including discrete subparts), or (iv) more than three (3) depositions (excluding expert depositions) for a maximum of seven (7) hours per deposition. The costs associated with depositions will be borne by the party taking the deposition. The party defending the deposition will submit a notice to the party taking the deposition of the estimated attorneys’ fees that such party expects to incur in connection with defending the deposition. If the party defending the deposition fails to submit an estimate of attorneys’ fees within five (5) calendar days of its receipt of a deposition notice, then such party shall be deemed to have waived its right to the estimated attorneys’ fees. The party taking the deposition must pay the party defending the deposition the estimated attorneys’ fees prior to taking the deposition, unless such obligation is deemed to be waived as set forth in the immediately preceding sentence. If the party taking the deposition believes that the estimated attorneys’ fees are unreasonable, such party may submit the issue to the arbitrator for a decision. All depositions will be taken in Utah.
(c) All
discovery requests (including document production requests included in deposition notices) must be submitted in writing to the arbitrator
and the other party. The party submitting the written discovery requests must include with such discovery requests a detailed explanation
of how the proposed discovery requests satisfy the requirements of these Arbitration Provisions and the Utah Rules of Civil Procedure.
The receiving party will then be allowed, within five (5) calendar days of receiving the proposed discovery requests, to submit to the
arbitrator an estimate of the attorneys’ fees and costs associated with responding to such written discovery requests and a written
challenge to each applicable discovery request. After receipt of an estimate of attorneys’ fees and costs and/or challenge(s) to
one or more discovery requests, consistent with subparagraph (c) above, the arbitrator will within three (3) calendar days make a finding
as to the likely attorneys’ fees and costs associated with responding to the discovery requests and issue an order that (i) requires
the requesting party to prepay the attorneys’ fees and costs associated with responding to the discovery requests, and (ii) requires
the responding party to respond to the discovery requests as limited by the arbitrator within twenty-five (25) calendar days of the arbitrator’s
finding with respect to such discovery requests. If a party entitled to submit an estimate of attorneys’ fees and costs and/or
a challenge to discovery requests fails to do so within such 5-day period, the arbitrator will make a finding that (A) there are no attorneys’
fees or costs associated with responding to such discovery requests, and (B) the responding party must respond to such discovery requests
(as may be limited by the arbitrator) within twenty-five (25) calendar days of the arbitrator’s finding with respect to such discovery
requests. Any party submitting any written discovery requests, including without limitation interrogatories, requests for production
subpoenas to a party or a third party, or requests for admissions, must prepay the estimated attorneys’ fees and costs, before
the responding party has any obligation to produce or respond to the same, unless such obligation is deemed waived as set forth above.
| Arbitration Provisions, Page 3 |
(d) In
order to allow a written discovery request, the arbitrator must find that the discovery request satisfies the standards set forth in
these Arbitration Provisions and the Utah Rules of Civil Procedure. The arbitrator must strictly enforce these standards. If a discovery
request does not satisfy any of the standards set forth in these Arbitration Provisions or the Utah Rules of Civil Procedure, the arbitrator
may modify such discovery request to satisfy the applicable standards, or strike such discovery request in whole or in part.
(e) Each
party may submit expert reports (and rebuttals thereto), provided that such reports must be submitted within sixty (60) days of the Arbitration
Commencement Date. Each party will be allowed a maximum of two (2) experts. Expert reports must contain the following: (i) a complete
statement of all opinions the expert will offer at trial and the basis and reasons for them; (ii) the expert’s name and qualifications,
including a list of all the expert’s publications within the preceding ten (10) years, and a list of any other cases in which the
expert has testified at trial or in a deposition or prepared a report within the preceding ten (10) years; and (iii) the compensation
to be paid for the expert’s report and testimony. The parties are entitled to depose any other party’s expert witness one
(1) time for no more than four (4) hours. An expert may not testify in a party’s case-in-chief concerning any matter not fairly
disclosed in the expert report.
4.6 Dispositive
Motions. Each party shall have the right to submit dispositive motions pursuant Rule 12 or Rule 56 of the Utah Rules of Civil Procedure
(a “Dispositive Motion”). The party submitting the Dispositive Motion may, but is not required to, deliver to the
arbitrator and to the other party a memorandum in support (the “Memorandum in Support”) of the Dispositive Motion.
Within seven (7) calendar days of delivery of the Memorandum in Support, the other party shall deliver to the arbitrator and to the other
party a memorandum in opposition to the Memorandum in Support (the “Memorandum in Opposition”). Within seven (7) calendar
days of delivery of the Memorandum in Opposition, as applicable, the party that submitted the Memorandum in Support shall deliver to
the arbitrator and to the other party a reply memorandum to the Memorandum in Opposition (“Reply Memorandum”). If
the applicable party shall fail to deliver the Memorandum in Opposition as required above, or if the other party fails to deliver the
Reply Memorandum as required above, then the applicable party shall lose its right to so deliver the same, and the Dispositive Motion
shall proceed regardless.
4.7 Confidentiality.
All information disclosed by either party (or such party’s agents) during the Arbitration process (including without limitation
information disclosed during the discovery process or any Appeal (defined below)) shall be considered confidential in nature. Each party
agrees not to disclose any confidential information received from the other party (or its agents) during the Arbitration process (including
without limitation during the discovery process or any Appeal) unless (a) prior to or after the time of disclosure such information becomes
public knowledge or part of the public domain, not as a result of any inaction or action of the receiving party or its agents, (b) such
information is required by a court order, subpoena or similar legal duress to be disclosed if such receiving party has notified the other
party thereof in writing and given it a reasonable opportunity to obtain a protective order from a court of competent jurisdiction prior
to disclosure, or (c) such information is disclosed to the receiving party’s agents, representatives and legal counsel on a need
to know basis who each agree in writing not to disclose such information to any third party. Pursuant to Section 118(5) of the Arbitration
Act, the arbitrator is hereby authorized and directed to issue a protective order to prevent the disclosure of privileged information
and confidential information upon the written request of either party.
4.8 Authorization;
Timing; Scheduling Order. Subject to all other portions of these Arbitration Provisions, the parties hereby authorize and direct
the arbitrator to take such actions and make such rulings as may be necessary to carry out the parties’ intent for the Arbitration
proceedings to be efficient and expeditious. Pursuant to Section 120 of the Arbitration Act, the parties hereby agree that an Arbitration
Award must be made within one hundred twenty (120) calendar days after the Arbitration Commencement Date. The arbitrator is hereby authorized
and directed to hold a scheduling conference within ten (10) calendar days after the Arbitration Commencement Date in order to establish
a scheduling order with various binding deadlines for discovery, expert testimony, and the submission of documents by the parties to
enable the arbitrator to render a decision prior to the end of such 120-day period.
4.9 Relief.
The arbitrator shall have the right to award or include in the Arbitration Award (or in a preliminary ruling) any relief which the arbitrator
deems proper under the circumstances, including, without limitation, specific performance and injunctive relief, provided that the arbitrator
may not award exemplary or punitive damages.
4.10 Fees
and Costs. As part of the Arbitration Award, the arbitrator is hereby directed to require the losing party (the party being awarded
the least amount of money by the arbitrator, which, for the avoidance of doubt, shall be determined without regard to any statutory fines,
penalties, fees, or other charges awarded to any party) to (a) pay the full amount of any unpaid costs and fees of the Arbitration, and
(b) reimburse the prevailing party for all reasonable attorneys’ fees, arbitrator costs and fees, deposition costs, other discovery
costs, and other expenses, costs or fees paid or otherwise incurred by the prevailing party in connection with the Arbitration.
| Arbitration Provisions, Page 4 |
5. Arbitration Appeal.
5.1 Initiation
of Appeal. Following the entry of the Arbitration Award, either party (the “Appellant”) shall have a period of
thirty (30) calendar days in which to notify the other party (the “Appellee”), in writing, that the Appellant elects
to appeal (the “Appeal”) the Arbitration Award (such notice, an “Appeal Notice”) to a panel of
arbitrators as provided in Paragraph 5.2 below. The date the Appellant delivers an Appeal Notice to the Appellee is referred to herein
as the “Appeal Date”. The Appeal Notice must be delivered to the Appellee in accordance with the provisions of Paragraph
4.1 above with respect to delivery of an Arbitration Notice. In addition, together with delivery of the Appeal Notice to the Appellee,
the Appellant must also pay for (and provide proof of such payment to the Appellee together with delivery of the Appeal Notice) a bond
in the amount of 110% of the sum the Appellant owes to the Appellee as a result of the Arbitration Award the Appellant is appealing.
In the event an Appellant delivers an Appeal Notice to the Appellee (together with proof of payment of the applicable bond) in compliance
with the provisions of this Paragraph 5.1, the Appeal will occur as a matter of right and, except as specifically set forth herein, will
not be further conditioned. In the event a party does not deliver an Appeal Notice (along with proof of payment of the applicable bond)
to the other party within the deadline prescribed in this Paragraph 5.1, such party shall lose its right to appeal the Arbitration Award.
If no party delivers an Appeal Notice (along with proof of payment of the applicable bond) to the other party within the deadline described
in this Paragraph 5.1, the Arbitration Award shall be final. The parties acknowledge and agree that any Appeal shall be deemed part of
the parties’ agreement to arbitrate for purposes of these Arbitration Provisions and the Arbitration Act.
5.2 Selection
and Payment of Appeal Panel. In the event an Appellant delivers an Appeal Notice to the Appellee (together with proof of payment
of the applicable bond) in compliance with the provisions of Paragraph 5.1 above, the Appeal will be heard by a three (3) person arbitration
panel (the “Appeal Panel”).
(a) Within
ten (10) calendar days after the Appeal Date, the Appellee shall select and submit to the Appellant the names of five (5) arbitrators
that are designated as “neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com)
(such five (5) designated persons hereunder are referred to herein as the “Proposed Appeal Arbitrators”). For the
avoidance of doubt, each Proposed Appeal Arbitrator must be qualified as a “neutral” with Utah ADR Services, and shall not
be the arbitrator who rendered the Arbitration Award being appealed (the “Original Arbitrator”). Within five (5) calendar
days after the Appellee has submitted to the Appellant the names of the Proposed Appeal Arbitrators, the Appellant must select, by written
notice to the Appellee, three (3) of the Proposed Appeal Arbitrators to act as the members of the Appeal Panel. If the Appellant fails
to select three (3) of the Proposed Appeal Arbitrators in writing within such 5-day period, then the Appellee may select such three (3)
arbitrators from the Proposed Appeal Arbitrators by providing written notice of such selection to the Appellant.
(b)
If the Appellee fails to submit to the Appellant the names of the Proposed Appeal Arbitrators within ten (10) calendar days after
the Appeal Date pursuant to subparagraph (a) above, then the Appellant may at any time prior to the Appellee so designating the
Proposed Appeal Arbitrators, identify the names of five (5) arbitrators that are designated as “neutrals” or qualified
arbitrators by Utah ADR Service (none of whom may be the Original Arbitrator) by written notice to the Appellee. The Appellee may
then, within five (5) calendar days after the Appellant has submitted notice of its selected arbitrators to the Appellee,
select, by written notice to the Appellant, three (3) of such selected arbitrators to serve on the Appeal Panel. If the Appellee
fails to select in writing within such 5-day period three (3) of the arbitrators selected by the Appellant to serve as the members
of the Appeal Panel, then the Appellant may select the three (3) members of the Appeal Panel from the Appellant’s list of five
(5) arbitrators by providing written notice of such selection to the Appellee.
(c) If
a selected Proposed Appeal Arbitrator declines or is otherwise unable to serve, then the party that selected such Proposed Appeal Arbitrator
may select one (1) of the other five (5) designated Proposed Appeal Arbitrators within three (3) calendar days of the date a chosen Proposed
Appeal Arbitrator declines or notifies the parties he or she is unable to serve as an arbitrator. If at least three (3) of the five (5)
designated Proposed Appeal Arbitrators decline or are otherwise unable to serve, then the Proposed Appeal Arbitrator selection process
shall begin again in accordance with this Paragraph 5.2; provided, however, that any Proposed Appeal Arbitrators who have already
agreed to serve shall remain on the Appeal Panel.
| Arbitration Provisions, Page 5 |
(d)
The date that all three (3) Proposed Appeal Arbitrators selected pursuant to this Paragraph 5.2 agree in writing (including
via email) delivered to both the Appellant and the Appellee to serve as members of the Appeal Panel hereunder is referred to herein
as the “Appeal Commencement Date”. No later than five (5) calendar days after the Appeal Commencement Date, the
Appellee shall designate in writing (including via email) to the Appellant and the Appeal Panel the name of one (1) of the three (3)
members of the Appeal Panel to serve as the lead arbitrator in the Appeal proceedings. Each member of the Appeal Panel shall be
deemed an arbitrator for purposes of these Arbitration Provisions and the Arbitration Act, provided that, in conducting the Appeal,
the Appeal Panel may only act or make determinations upon the approval or vote of no less than the majority vote of its members, as
announced or communicated by the lead arbitrator on the Appeal Panel. If an arbitrator on the Appeal Panel ceases or is unable to
act during the Appeal proceedings, a replacement arbitrator shall be chosen in accordance with Paragraph 5.2 above to continue the
Appeal as a member of the Appeal Panel. If Utah ADR Services ceases to exist or to provide a list of neutrals, then the arbitrators
for the Appeal Panel shall be selected under the then prevailing rules of the American Arbitration Association.
(d)
Subject to Paragraph 5.7 below, the cost of the Appeal Panel must be paid entirely by the Appellant.
5.3 Appeal
Procedure. The Appeal will be deemed an appeal of the entire Arbitration Award. In conducting the Appeal, the Appeal Panel shall
conduct a de novo review of all Claims described or otherwise set forth in the Arbitration Notice. Subject to the foregoing and all other
provisions of this Paragraph 5, the Appeal Panel shall conduct the Appeal in a manner the Appeal Panel considers appropriate for a fair
and expeditious disposition of the Appeal, may hold one or more hearings and permit oral argument, and may review all previous evidence
and discovery, together with all briefs, pleadings and other documents filed with the Original Arbitrator (as well as any documents filed
with the Appeal Panel pursuant to Paragraph 5.4(a) below). Notwithstanding the foregoing, in connection with the Appeal, the Appeal Panel
shall not permit the parties to conduct any additional discovery or raise any new Claims to be arbitrated, shall not permit new witnesses
or affidavits, and shall not base any of its findings or determinations on the Original Arbitrator’s findings or the Arbitration
Award.
5.4 Timing.
(a) Within
seven (7) calendar days of the Appeal Commencement Date, the Appellant (i) shall deliver or cause to be delivered to the Appeal Panel
copies of the Appeal Notice, all discovery conducted in connection with the Arbitration, and all briefs, pleadings and other documents
filed with the Original Arbitrator (which material Appellee shall have the right to review and supplement if necessary), and (ii) may,
but is not required to, deliver to the Appeal Panel and to the Appellee a Memorandum in Support of the Appellant’s arguments concerning
or position with respect to all Claims, counterclaims, issues, or accountings presented or pleaded in the Arbitration. Within seven (7)
calendar days of the Appellant’s delivery of the Memorandum in Support, as applicable, the Appellee shall deliver to the Appeal
Panel and to the Appellant a Memorandum in Opposition to the Memorandum in Support. Within seven (7) calendar days of the Appellee’s
delivery of the Memorandum in Opposition, as applicable, the Appellant shall deliver to the Appeal Panel and to the Appellee a Reply
Memorandum to the Memorandum in Opposition. If the Appellant shall fail to substantially comply with the requirements of clause (i) of
this subparagraph (a), the Appellant shall lose its right to appeal the Arbitration Award, and the Arbitration Award shall be final.
If the Appellee shall fail to deliver the Memorandum in Opposition as required above, or if the Appellant shall fail to deliver the Reply
Memorandum as required above, then the Appellee or the Appellant, as the case may be, shall lose its right to so deliver the same, and
the Appeal shall proceed regardless.
(b) Subject
to subparagraph (a) above, the parties hereby agree that the Appeal must be heard by the Appeal Panel within thirty (30) calendar days
of the Appeal Commencement Date, and that the Appeal Panel must render its decision within thirty (30) calendar days after the Appeal
is heard (and in no event later than sixty (60) calendar days after the Appeal Commencement Date).
5.5 Appeal
Panel Award. The Appeal Panel shall issue its decision (the “Appeal Panel Award”) through the lead arbitrator
on the Appeal Panel. Notwithstanding any other provision contained herein, the Appeal Panel Award shall (a) supersede in its entirety
and make of no further force or effect the Arbitration Award (provided that any protective orders issued by the Original Arbitrator shall
remain in full force and effect), (b) be final and binding upon the parties, with no further rights of appeal, (c) be the sole and exclusive
remedy between the parties regarding any Claims, counterclaims, issues, or accountings presented or pleaded in the Arbitration, and (d)
be promptly payable in United States dollars free of any tax, deduction or offset (with respect to monetary awards). Any costs or fees,
including without limitation attorneys’ fees, incurred in connection with or incident to enforcing the Appeal Panel Award shall,
to the maximum extent permitted by law, be charged against the party resisting such enforcement. The Appeal Panel Award shall include
Default Interest (with respect to monetary awards) at the rate specified in the Note for Default Interest both before and after the Arbitration
Award. Judgment upon the Appeal Panel Award will be entered and enforced by a state or federal court sitting in Salt Lake County, Utah.
| Arbitration Provisions, Page 6 |
5.6 Relief.
The Appeal Panel shall have the right to award or include in the Appeal Panel Award any relief which the Appeal Panel deems proper
under the circumstances, including, without limitation, specific performance and injunctive relief, provided that the Appeal Panel may
not award exemplary or punitive damages.
5.7 Fees
and Costs. As part of the Appeal Panel Award, the Appeal Panel is hereby directed to require the losing party (the party being
awarded the least amount of money by the arbitrator, which, for the avoidance of doubt, shall be determined without regard to any
statutory fines, penalties, fees, or other charges awarded to any party) to (a) pay the full amount of any unpaid costs and fees of
the Arbitration and the Appeal Panel, and (b) reimburse the prevailing party (the party being awarded the most amount of
money by the Appeal Panel, which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties,
fees, or other charges awarded to any part) the reasonable attorneys’ fees, arbitrator and Appeal Panel costs and fees,
deposition costs, other discovery costs, and other expenses, costs or fees paid or otherwise incurred by the prevailing party in
connection with the Arbitration (including without limitation in connection with the Appeal).
6. Miscellaneous.
6.1 Severability.
If any part of these Arbitration Provisions is found to violate or be illegal under applicable law, then such provision shall be
modified to the minimum extent necessary to make such provision enforceable under applicable law, and the remainder of the Arbitration
Provisions shall remain unaffected and in full force and effect.
6.2 Governing
Law. These Arbitration Provisions shall be governed by the laws of the State of Utah without regard to the conflict of laws principles
therein.
6.3 Interpretation.
The headings of these Arbitration Provisions are for convenience of reference only and shall not form part of, or affect the interpretation
of, these Arbitration Provisions.
6.4 Waiver.
No waiver of any provision of these Arbitration Provisions shall be effective unless it is in the form of a writing signed by the party
granting the waiver.
6.5 Time
is of the Essence. Time is expressly made of the essence with respect to each and every provision of these Arbitration Provisions.
[Remainder
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| Arbitration Provisions, Page 7 |
PROMISSORY
NOTE
| U.S.
$5,755,000.00 |
September 30, 2021 |
FOR
VALUE RECEIVED, Cemtrex Inc., a Delaware corporation (“Borrower”), promises to pay in lawful money of the United States
of America to the order of Streeterville Capital, LLC, a Utah limited liability company, or its successors or assigns (“Lender”),
the principal sum of $5,755,000.00, together with all other amounts due under this Promissory Note (this “Note”).
This Note is issued pursuant to that certain Note Purchase Agreement of even date herewith between Borrower and Lender (the “Purchase
Agreement”).
1. PAYMENT.
Borrower shall pay to Lender the entire outstanding balance of this Note on or before the date that is eighteen (18) months from the
date hereof (the “Maturity Date”). Borrower will make all payments of sums due hereunder to Lender at Lender’s
address set forth in the Purchase Agreement, or at such other place as Lender may designate in writing. Unless otherwise agreed or required
by applicable law, payments will be applied first to any unpaid collection costs and late charges, then to accrued interest and finally
to principal.
2. INTEREST.
Interest shall accrue on the outstanding balance of this Note at the rate of eight percent (8%) per annum from the date hereof until
this Note is paid in full. Upon the occurrence of an Event of Default (as defined below), interest shall accrue on the outstanding balance
of this Note at the lesser of the rate of eighteen percent (18%) per annum or the maximum rate permitted by applicable law. All interest
calculations hereunder shall be computed on the basis of a 360-day year comprised of twelve (12) thirty (30) day months, shall compound
daily and shall be payable in accordance with the terms of this Note.
3. ORIGINAL
ISSUE DISCOUNT; TRANSACTION EXPENSES. This Note carries an original issue discount of $750,000.00. In addition, Borrower
agrees to pay $5,000.00 to Lender to cover Lender’s legal fees, accounting costs, due diligence, monitoring and other
transaction costs incurred in connection with the purchase and sale of this Note, all of which amounts are included in the initial
principal balance of this Note and are fully earned and payable as of the date hereof.
4. PREPAYMENT.
Borrower may pay all or any portion of the amount owed earlier than it is due; provided that in the event Borrower elects to prepay
all or any portion of the outstanding balance, it shall pay to Lender 115% of the portion of the outstanding balance Borrower elects
to prepay. Early payments of less than all principal, fees and interest outstanding will not, unless agreed to by Lender in writing,
relieve Borrower of Borrower’s remaining obligations hereunder.
5. REDEMPTIONS.
Beginning on the date that is six (6) months from the date hereof and at any time thereafter until this Note is paid in full, Lender
shall have the right to redeem up to $500,000.00 of the outstanding balance of this Note per calendar month (the amount of each exercise,
the “Redemption Amount”) by providing written notice (each, a “Redemption Notice”) delivered to
Borrower by facsimile, email, mail, overnight courier, or personal delivery. Upon receipt of any Redemption Notice, Borrower shall pay
the applicable Redemption Amount in cash to Lender within five (5) business days of Borrower’s receipt of such Redemption Notice.
6. EVENT
OF DEFAULT. The occurrence of any of the following shall constitute an “Event of Default” under this Note:
(a) Failure
to Pay. Borrower shall fail to pay when due, whether at stated maturity, upon acceleration or otherwise, any principal or interest
payment, or any other payment required under the terms of this Note on the date due.
(b) Breaches
of Covenants. Borrower or any other person or entity defaults or otherwise fails to observe or perform any covenant, obligation,
condition or agreement of Borrower contained herein or in any other Transaction Document (as defined in the Purchase Agreement).
(c) Representations
and Warranties. Any representation or warranty made by Borrower to Lender in this Note, the Purchase Agreement, any other Transaction
Document, or any related agreement shall be false, incorrect, incomplete or misleading in any material respect when made or furnished.
(d) Voluntary
Bankruptcy or Insolvency Proceedings. Borrower shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator
or custodian of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of its or any
of its creditors, (iii) be dissolved or liquidated, or (iv) commence a voluntary case or other proceeding seeking liquidation, reorganization
or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or
other proceeding commenced against it.
(e) Involuntary
Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator, or custodian of Borrower
or of all or a substantial part of its property, or an involuntary case or other proceedings seeking liquidation, reorganization, or
other relief with respect to Borrower or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect shall
be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within sixty (60) days of commencement.
(f) Government
Action. If any governmental or regulatory authority takes or institutes any action that will materially affect Borrower’s financial
condition, operations or ability to pay or perform Borrower’s obligations under this Note.
(g) Judgment.
A judgment or judgments for the payment of money in excess of the sum of $100,000.00 in the aggregate shall be rendered against Borrower
and either (i) the judgment creditor executes on such judgment or (ii) such judgment remains unpaid or undischarged for more than sixty
(60) days from the date of entry thereof or such longer period during which execution of such judgment shall be stayed during an appeal
from such judgment.
(h) Attachment.
Any execution or attachment shall be issued whereby any substantial part of the property of Borrower shall be taken and the same shall
not have been vacated or stayed within thirty (30) days after the issuance thereof.
(i) Cross
Default. Borrower breaches or any event of default occurs under any term or provision of any Other Agreement (as defined hereafter).
For purposes hereof, “Other Agreement” means collectively, (i) all existing and future agreements and instruments
between, among or by Borrower (or an affiliate), on the one hand, and Lender (or an affiliate), on the other hand, and (ii) any financing
agreement or a material agreement that affects Borrower’s ongoing business operations.
7. ACCELERATION; REMEDIES.
(a) At
any time following the occurrence of an Event of Default (other than an Event of Default referred to in Sections 6(d) and 6(e)),
Lender may, by written notice to Borrower, declare all unpaid principal, plus all accrued interest and other amounts due hereunder to
be immediately due and payable at the Mandatory Default Amount (as defined below) without presentment, demand, protest or any other notice
of any kind, all of which are hereby expressly waived, anything contained herein to the contrary notwithstanding. Upon the occurrence
or existence of any Event of Default described in Sections 6(d) and 6(e), immediately and without notice, all outstanding unpaid
principal, plus all accrued interest and other amounts due hereunder shall automatically become immediately due and payable at the Mandatory
Default Amount, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything
contained herein to the contrary notwithstanding. In addition to the foregoing remedies, upon the occurrence or existence of any Event
of Default, Lender may exercise any other right, power or remedy permitted to it by law, either by suit in equity or by action at law,
or both. For purposes hereof, the term “Mandatory Default Amount” means an amount equal to 115% (the “Default
Premium”) of the outstanding balance of this Note (which outstanding balance, for avoidance of doubt, shall include principal,
interest, fees and any previously incurred prepayment premium) as of the date the applicable Event of Default occurred, plus all interest,
fees, and charges that may accrue on such outstanding balance thereafter.
(b) Upon
the occurrence of a Change in Control (as defined below), and without further notice to Borrower, all unpaid principal, plus all accrued
interest and other amounts due hereunder, shall become immediately due and payable. For purposes hereof, a “Change in Control”
means a sale of all or substantially all of Borrower’s assets, or a merger, consolidation, significant equity financing, or other
capital reorganization of Borrower with or into another company; provided however that a merger, consolidation, significant
equity financing, or other capital reorganization in which the holders of the equity of Borrower outstanding immediately prior to such
transaction continue to hold (either by the voting securities remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the total voting power represented by the voting securities of Borrower, or such surviving
entity, outstanding immediately after such transaction shall not constitute a Change in Control.
8. UNCONDITIONAL
OBLIGATION; NO OFFSET. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower
not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter
against Lender, its successors and assigns, and agrees to make all payments due hereunder in accordance with the terms of this Note.
9. NO
USURY. Notwithstanding any other provision contained in this Note or in any instrument given to evidence the obligations evidenced
hereby: (a) the rates of interest and charges provided for herein and therein shall in no event exceed the rates and charges which result
in interest being charged at a rate equaling the maximum allowed by law; and (b) if, for any reason whatsoever, Lender ever receives
as interest in connection with the transaction of which this Note is a part an amount which would result in interest being charged at
a rate exceeding the maximum allowed by law, such amount or portion thereof as would otherwise be excessive interest shall automatically
be applied toward reduction of the unpaid principal balance then outstanding hereunder and not toward payment of interest.
10. ATTORNEYS’
FEES. If this Note is placed in the hands of an attorney for collection or enforcement prior to commencing arbitration or legal proceedings,
or is collected or enforced through any arbitration or legal proceeding, or Lender otherwise takes action to collect amounts due under
this Note or to enforce the provisions of this Note, then Borrower shall pay the costs incurred by Lender for such collection, enforcement
or action including, without limitation, reasonable attorneys’ fees and disbursements.
11. GOVERNING
LAW; VENUE. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal laws of the State of Utah, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of Utah. The provisions set forth in the Purchase Agreement to determine the proper
venue for any disputes are incorporated herein by this reference.
12. ARBITRATION
OF DISPUTES. Borrower agrees that any dispute arising under this Note shall be subject to the Arbitration Provisions (as defined
in the Purchase Agreement) set forth as an exhibit to the Purchase Agreement.
13. WAIVERS.
Borrower hereby waives presentment, notice of nonpayment, notice of dishonor, protest, demand and diligence.
14. LOSS
OR MUTILATION. On receipt by Borrower of evidence reasonably satisfactory to Borrower of the loss, theft, destruction or mutilation
of this Note and, in the case of any such loss, theft or destruction of this Note, on delivery of an indemnity agreement reasonably satisfactory
in form and amount to Borrower or, in the case of any such mutilation, on surrender and cancellation of such Note, Borrower at its expense
will execute and deliver, in lieu thereof, a new Note of like tenor.
15. NOTICES.
Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the
Purchase Agreement, the terms of which are incorporated herein by this reference.
16. AMENDMENT
AND WAIVER. This Note and its terms and conditions may be amended, waived or modified only in writing by Borrower and Lender.
17. SEVERABILITY.
If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of the parties
to the fullest extent permitted and the balance of this Note shall remain in full force and effect.
18. ASSIGNMENTS.
Borrower may not assign this Note without the prior written consent of Lender. This Note may be offered, sold, assigned or transferred
by Lender without the consent of Borrower.
19. FINAL
NOTE. This Note, together with the other Transaction Documents, contains the complete understanding and agreement of Borrower and
Lender and supersedes all prior representations, warranties, agreements, arrangements, understandings, and negotiations. THIS NOTE, TOGETHER
WITH THE OTHER TRANSACTION DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY
ALLEGED PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
20. WAIVER
OF JURY TRIAL. BORROWER IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR IN ANY WAY RELATED TO THIS NOTE OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND
ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, BORROWER ACKNOWLEDGES
THAT IT KNOWINGLY AND VOLUNTARILY IS WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.
21. TIME
IS OF THE ESSENCE. Time is of the essence of this Note and each and every provision hereof in which time is an element.
22. LIQUIDATED
DAMAGES. Lender and Borrower agree that in the event Borrower fails to comply with any of the terms or provisions of this Note, Lender’s
damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict
future interest rates and other relevant factors. Accordingly, Lender and Borrower agree that any fees, balance adjustments, default
interest or other charges assessed under this Note are not penalties but instead are intended by the parties to be, and shall be deemed,
liquidated damages.
[Remainder
of page intentionally left blank]
IN
WITNESS WHEREOF, Borrower has caused this Note to be issued as of the date first set forth above.
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BORROWER: |
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CEMTREX
INC. |
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By: |
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Name: |
Saagar
Govil |
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Title: |
CEO |
[Signature
Page to Promissory Note]
Exhibit
10.16
AMENDMENT
TO PROMISSORY NOTE
This
Amendment to Promissory Note (this “Amendment”) is entered into as of September 14, 2022, by and between Streeterville
Capital, LLC, a Utah limited liability company (“Lender”), and Cemtrex Inc., a Delaware corporation (“Borrower”).
Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Note (as defined below).
A.
Borrower previously issued to Lender that certain Promissory Note in the original principal amount of $5,755,000.00 dated September 30,
2021 (the “Note”) pursuant to that the certain Securities Purchase Agreement between Borrower and Lender (the “Purchase
Agreement,” and together with the Note and all documents entered into in connection therewith, the “Transaction Documents”).
B.
Lender and Borrower have agreed, subject to the terms, amendments, conditions and understandings expressed in this Amendment, to allow
Borrower to request deferrals of its redemption obligations under the Note.
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1.
Recitals. Each of the parties hereto acknowledges and agrees that the recitals set forth above in this Amendment are true and
accurate and are hereby incorporated into and made a part of this Amendment.
2.
Amendment to Note. Borrower and Lender agree that Borrower may request a deferral of its monthly redemption payment obligation
under Section 5 of the Note by providing Lender with written notice at least three (3) calendar days prior to the beginning of the month
that Borrower desires to defer its redemption payment obligation. Upon receiving a deferral request, Lender in its sole and absolute
discretion may accept or reject the deferral request. In the event Lender accepts a deferral request, Borrower will not be obligated
to pay the Redemption Amount for such month and the Outstanding Balance of the Note will automatically increase by 0.75%.
3.
Representations and Warranties. In order to induce Lender to enter into this Amendment, Borrower, for itself, and for its affiliates,
successors and assigns, hereby acknowledges, represents, warrants and agrees as follows:
(a)
Borrower has full power and authority to enter into this Amendment and to incur and perform all obligations and covenants contained herein,
all of which have been duly authorized by all proper and necessary action. No consent, approval, filing or registration with or notice
to any governmental authority is required as a condition to the validity of this Amendment or the performance of any of the obligations
of Borrower hereunder.
(b)
There is no fact known to Borrower which Borrower has not disclosed to Lender on or prior to the date of this Amendment which would materially
and adversely affect the understanding of Lender expressed in this Amendment or any representation, warranty, or recital contained in
this Amendment.
(c)
Except as expressly set forth in this Amendment, Borrower acknowledges and agrees that neither the execution and delivery of this Amendment
nor any of the terms, provisions, covenants, or agreements contained in this Amendment shall in any manner release, impair, lessen, modify,
waive, or otherwise affect the liability and obligations of Borrower under the terms of the Transaction Documents.
(d)
Borrower has no defenses, affirmative or otherwise, rights of setoff, rights of recoupment, claims, counterclaims, actions or causes
of action of any kind or nature whatsoever against Lender, directly or indirectly, arising out of, based upon, or in any manner connected
with, the transactions contemplated hereby, whether known or unknown, which occurred, existed, was taken, permitted, or begun prior to
the execution of this Amendment and occurred, existed, was taken, permitted or begun in accordance with, pursuant to, or by virtue of
any of the terms or conditions of the Transaction Documents. To the extent any such defenses, affirmative or otherwise, rights of setoff,
rights of recoupment, claims, counterclaims, actions or causes of action exist or existed, such defenses, rights, claims, counterclaims,
actions and causes of action are hereby waived, discharged and released. Borrower hereby acknowledges and agrees that the execution of
this Amendment by Lender shall not constitute an acknowledgment of or admission by Lender of the existence of any claims or of liability
for any matter or precedent upon which any claim or liability may be asserted.
4.
Certain Acknowledgments. Each of the parties acknowledges and agrees that no property or cash consideration of any kind whatsoever
has been or shall be given by Lender to Borrower in connection with the amendment to the Note granted herein.
5.
Other Terms Unchanged. The Note, as amended by this Amendment remains and continues in full force and effect, constitutes legal,
valid, and binding obligations of each of the parties, and is in all respects agreed to, ratified, and confirmed. Any reference to the
Note after the date of this Amendment is deemed to be a reference to the Note as amended by this Amendment. If there is a conflict between
the terms of this Amendment and the Note, the terms of this Amendment shall control. No forbearance or waiver may be implied by this
Amendment. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver
of, or as an amendment to, any right, power, or remedy of Lender under the Note, as in effect prior to the date hereof. For the avoidance
of doubt, this Amendment shall be subject to the governing law, venue, and Arbitration Provisions, as set forth in the Note.
6.
No Reliance. Borrower acknowledges and agrees that neither Lender nor any of its officers, directors, members, managers, equity
holders, representatives or agents has made any representations or warranties to Borrower or any of its agents, representatives, officers,
directors, or employees except as expressly set forth in this Amendment and the Transaction Documents and, in making its decision to
enter into the transactions contemplated by this Amendment, Borrower is not relying on any representation, warranty, covenant or promise
of Lender or its officers, directors, members, managers, equity holders, agents or representatives other than as set forth in this Amendment.
7.
Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including
pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method
and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
8.
Further Assurances. Each party shall do and perform or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Amendment and the consummation of the transactions contemplated hereby.
[Remainder
of page intentionally left blank; signature page follows]
IN
WITNESS WHEREOF, the undersigned have executed this Amendment as of the date set forth above.
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LENDER: |
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Streeterville
Capital, LLC |
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By: |
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John M. Fife, President |
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BORROWER: |
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Cemtrex
Inc. |
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By: |
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Saagar Govil, CEO |
[Signature
Page to Amendment to Promissory Note]
AMENDMENT
TO PROMISSORY NOTE
This
Amendment to Promissory Note (this “Amendment”) is entered into as of September 14, 2022, by and between Streeterville
Capital, LLC, a Utah limited liability company (“Lender”), and Cemtrex Inc., a Delaware corporation (“Borrower”).
Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Note (as defined below).
A.
Borrower previously issued to Lender that certain Promissory Note in the original principal amount of $9,205,000.00 dated February 22,
2022 (the “Note”) pursuant to that the certain Securities Purchase Agreement between Borrower and Lender (the “Purchase
Agreement,” and together with the Note and all documents entered into in connection therewith, the “Transaction Documents”).
B.
Lender and Borrower have agreed, subject to the terms, amendments, conditions and understandings expressed in this Amendment, to allow
Borrower to request deferrals of its redemption obligations under the Note.
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1.
Recitals. Each of the parties hereto acknowledges and agrees that the recitals set forth above in this Amendment are true and
accurate and are hereby incorporated into and made a part of this Amendment.
2.
Amendment to Note. Borrower and Lender agree that Borrower may request a deferral of its monthly redemption payment obligation
under Section 5 of the Note by providing Lender with written notice at least three (3) calendar days prior to the beginning of the month
that Borrower desires to defer its redemption payment obligation. Upon receiving a deferral request, Lender in its sole and absolute
discretion may accept or reject the deferral request. In the event Lender accepts a deferral request, Borrower will not be obligated
to pay the Redemption Amount for such month and the Outstanding Balance of the Note will automatically increase by 0.75%.
3.
Representations and Warranties. In order to induce Lender to enter into this Amendment, Borrower, for itself, and for its affiliates,
successors and assigns, hereby acknowledges, represents, warrants and agrees as follows:
(a)
Borrower has full power and authority to enter into this Amendment and to incur and perform all obligations and covenants contained herein,
all of which have been duly authorized by all proper and necessary action. No consent, approval, filing or registration with or notice
to any governmental authority is required as a condition to the validity of this Amendment or the performance of any of the obligations
of Borrower hereunder.
(b)
There is no fact known to Borrower which Borrower has not disclosed to Lender on or prior to the date of this Amendment which would materially
and adversely affect the understanding of Lender expressed in this Amendment or any representation, warranty, or recital contained in
this Amendment.
(c)
Except as expressly set forth in this Amendment, Borrower acknowledges and agrees that neither the execution and delivery of this Amendment
nor any of the terms, provisions, covenants, or agreements contained in this Amendment shall in any manner release, impair, lessen, modify,
waive, or otherwise affect the liability and obligations of Borrower under the terms of the Transaction Documents.
(d)
Borrower has no defenses, affirmative or otherwise, rights of setoff, rights of recoupment, claims, counterclaims, actions or causes
of action of any kind or nature whatsoever against Lender, directly or indirectly, arising out of, based upon, or in any manner connected
with, the transactions contemplated hereby, whether known or unknown, which occurred, existed, was taken, permitted, or begun prior to
the execution of this Amendment and occurred, existed, was taken, permitted or begun in accordance with, pursuant to, or by virtue of
any of the terms or conditions of the Transaction Documents. To the extent any such defenses, affirmative or otherwise, rights of setoff,
rights of recoupment, claims, counterclaims, actions or causes of action exist or existed, such defenses, rights, claims, counterclaims,
actions and causes of action are hereby waived, discharged and released. Borrower hereby acknowledges and agrees that the execution of
this Amendment by Lender shall not constitute an acknowledgment of or admission by Lender of the existence of any claims or of liability
for any matter or precedent upon which any claim or liability may be asserted.
4.
Certain Acknowledgments. Each of the parties acknowledges and agrees that no property or cash consideration of any kind whatsoever
has been or shall be given by Lender to Borrower in connection with the amendment to the Note granted herein.
5.
Other Terms Unchanged. The Note, as amended by this Amendment remains and continues in full force and effect, constitutes legal,
valid, and binding obligations of each of the parties, and is in all respects agreed to, ratified, and confirmed. Any reference to the
Note after the date of this Amendment is deemed to be a reference to the Note as amended by this Amendment. If there is a conflict between
the terms of this Amendment and the Note, the terms of this Amendment shall control. No forbearance or waiver may be implied by this
Amendment. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver
of, or as an amendment to, any right, power, or remedy of Lender under the Note, as in effect prior to the date hereof. For the avoidance
of doubt, this Amendment shall be subject to the governing law, venue, and Arbitration Provisions, as set forth in the Note.
6.
No Reliance. Borrower acknowledges and agrees that neither Lender nor any of its officers, directors, members, managers, equity
holders, representatives or agents has made any representations or warranties to Borrower or any of its agents, representatives, officers,
directors, or employees except as expressly set forth in this Amendment and the Transaction Documents and, in making its decision to
enter into the transactions contemplated by this Amendment, Borrower is not relying on any representation, warranty, covenant or promise
of Lender or its officers, directors, members, managers, equity holders, agents or representatives other than as set forth in this Amendment.
7.
Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including
pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method
and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
8.
Further Assurances. Each party shall do and perform or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Amendment and the consummation of the transactions contemplated hereby.
[Remainder
of page intentionally left blank; signature page follows]
IN
WITNESS WHEREOF, the undersigned have executed this Amendment as of the date set forth above.
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LENDER: |
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Streeterville
Capital, LLC |
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By: |
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John M. Fife, President |
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BORROWER: |
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Cemtrex
Inc. |
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By: |
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Saagar Govil, CEO |
[Signature
Page to Amendment to Promissory Note]
Exhibit
10.17
AMENDMENT
#2 TO PROMISSORY NOTE
This
Amendment #2 to Promissory Note (this “Amendment #2”) is entered into as of August 30, 2023, by and between STREETERVILLE
CAPITAL, LLC, a Utah limited liability company (“Lender”), and CEMTREX, INC., a Delaware corporation (“Borrower”).
Capitalized terms used in this Amendment #2 without definition shall have the meanings given to them in the Note (as defined below).
A.
Borrower previously issued to Lender a Promissory Note dated February 22, 2022 in the principal amount of $9,205,000.00 (the “Note”).
B.
Effective as of September 14, 2022, Borrower and Lender entered into that certain Amendment to Promissory Note (the “Prior Amendment”).
C.
Borrower has requested that Lender extend the Maturity Date of the Note (the “Extension”).
D.
Lender has agreed, subject to the terms, amendments, conditions and understandings expressed in this Amendment #2, to grant the Extension.
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
1.
Recitals. Each of the parties hereto acknowledges and agrees that the recitals set forth above in this Amendment #2 are true and
accurate and are hereby incorporated into and made a part of this Amendment #2.
2.
Extension. The Maturity Date for the Note is hereby extended until February 22, 2025.
3.
Extension Fee. In consideration of Lender’s grant of the Extension, its fees incurred in preparing this Amendment #2 and
other accommodations set forth herein, Borrower agrees to pay to Lender an extension fee equal to five percent (5%) of the outstanding
balance of the Note (the “Extension Fee”). The Extension Fee is hereby added to the outstanding balance as of the
date of this Amendment #2. Lender and Borrower further agree that the Extension Fee is deemed to be fully earned as of the date hereof,
is nonrefundable under any circumstance, and that the Extension Fee tacks back to the date of the Note for Rule 144 purposes. Borrower
represents and warrants that as of the date hereof the outstanding balance of the Note, following the application of the Extension Fee,
is $11,166,054.67.
4.
Representations and Warranties. In order to induce Lender to enter into this Amendment #2, Borrower, for itself, and for its affiliates,
successors and assigns, hereby acknowledges, represents, warrants and agrees as follows:
(a)
Borrower has full power and authority to enter into this Amendment #2 and to incur and perform all obligations and covenants contained
herein, all of which have been duly authorized by all proper and necessary action. No consent, approval, filing or registration with
or notice to any governmental authority is required as a condition to the validity of this Amendment #2 or the performance of any of
the obligations of Borrower hereunder.
(b)
There is no fact known to Borrower or which should be known to Borrower which Borrower has not disclosed to Lender on or prior to the
date of this Amendment #2 which would or could materially and adversely affect the understanding of Lender expressed in this Amendment
#2 or any representation, warranty, or recital contained in this Amendment #2.
(c)
Except as expressly set forth in this Amendment #2, Borrower acknowledges and agrees that neither the execution and delivery of this
Amendment #2 nor any of the terms, provisions, covenants, or agreements contained in this Amendment #2 shall in any manner release, impair,
lessen, modify, waive, or otherwise affect the liability and obligations of Borrower under the terms of the Transaction Documents.
(d)
Borrower has no defenses, affirmative or otherwise, rights of setoff, rights of recoupment, claims, counterclaims, actions or causes
of action of any kind or nature whatsoever against Lender, directly or indirectly, arising out of, based upon, or in any manner connected
with, the transactions contemplated hereby, whether known or unknown, which occurred, existed, was taken, permitted, or begun prior to
the execution of this Amendment #2 and occurred, existed, was taken, permitted or begun in accordance with, pursuant to, or by virtue
of any of the terms or conditions of the Transaction Documents. To the extent any such defenses, affirmative or otherwise, rights of
setoff, rights of recoupment, claims, counterclaims, actions or causes of action exist or existed, such defenses, rights, claims, counterclaims,
actions and causes of action are hereby waived, discharged and released. Borrower hereby acknowledges and agrees that the execution of
this Amendment #2 by Lender shall not constitute an acknowledgment of or admission by Lender of the existence of any claims or of liability
for any matter or precedent upon which any claim or liability may be asserted.
(e)
Borrower represents and warrants that as of the date hereof no Events of Default or other material breaches exist under the Transaction
Documents or have occurred prior to the date hereof.
5.
Certain Acknowledgments. Each of the parties acknowledges and agrees that no property or cash consideration of any kind whatsoever
has been or shall be given by Lender to Borrower in connection with the Extension or any other amendment to the Note granted herein.
6.
Other Terms Unchanged. The Note, as amended by this Amendment #2 and the Prior Amendment, remains and continues in full force
and effect, constitutes legal, valid, and binding obligations of each of the parties, and is in all respects agreed to, ratified, and
confirmed. Any reference to the Note after the date of this Amendment #2 is deemed to be a reference to the Note as amended by this Amendment
#2 and the Prior Amendment. If there is a conflict between the terms of this Amendment #2 and the Note, the terms of this Amendment #2
shall control. No forbearance or waiver may be implied by this Amendment #2. Except as expressly set forth herein, the execution, delivery,
and performance of this Amendment #2 shall not operate as a waiver of, or as an amendment to, any right, power, or remedy of Lender under
the Note, as in effect prior to the date hereof. For the avoidance of doubt, this Amendment #2 shall be subject to the governing law,
venue, and Arbitration Provisions, as set forth in the Note.
7.
No Reliance. Borrower acknowledges and agrees that neither Lender nor any of its officers, directors, members, managers, equity
holders, representatives or agents has made any representations or warranties to Borrower or any of its agents, representatives, officers,
directors, or employees except as expressly set forth in this Amendment #2 and the Transaction Documents and, in making its decision
to enter into the transactions contemplated by this Amendment #2, Borrower is not relying on any representation, warranty, covenant or
promise of Lender or its officers, directors, members, managers, equity holders, agents or representatives other than as set forth in
this Amendment #2.
8.
Counterparts. This Amendment #2 may be executed in any number of counterparts, each of which shall be deemed an original, but
all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of another party’s executed
counterpart of this Amendment #2 (or such party’s signature page thereof) will be deemed to be an executed original thereof.
9.
Further Assurances. Each party shall do and perform or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Amendment #2 and the consummation of the transactions contemplated
hereby.
[Remainder
of page intentionally left blank]
IN
WITNESS WHEREOF, the undersigned have executed this Amendment #2 as of the date set forth above.
| |
LENDER: |
| |
|
| |
Streeterville
Capital, LLC |
| |
|
|
| |
By:
|
 |
| |
|
John
M. Fife, President |
| |
BORROWER: |
| |
|
| |
Cemtrex,
Inc. |
| |
|
|
| |
By: |
 |
| |
Name:
|
Saagar
Govil |
| |
Title: |
CEO |
[Signature
Page to Amendment #2 to Promissory Note]
Exhibit
10.18
STANDSTILL
AGREEMENT
This
Standstill Agreement (this “Agreement”) is entered into as of January 12, 2023 (the “Effective Date”)
by and between Streeterville Capital, LLC, a Utah limited liability company (“Lender”), and Cemtrex, Inc., a Delaware
corporation (“Borrower”). Capitalized terms used in this Agreement without definition shall have the meanings given
to them in the Notes (defined below).
A.
Borrower previously sold and issued to Lender that certain Promissory Note, as amended, dated September 30, 2021 in the original principal
amount of $5,755,000.00 (the “September Note”) pursuant to that certain Note Purchase Agreement dated September 30,
2021 by and between Lender and Borrower (the “September Purchase Agreement,” and together with the September Note
and all other documents entered into in conjunction therewith, the “September Transaction Documents”).
B.
Borrower also previously sold and issued to Lender that certain Promissory Note, as amended, dated February 22, 2022 in the original
principal amount of $9,205,000.00 (the “February Note,” and together with the September Note, the “Notes”)
pursuant to that certain Note Purchase Agreement dated February 22, 2022 by and between Lender and Borrower (the “February Purchase
Agreement,” and together with all other documents entered into in conjunction therewith, the “February Transaction
Documents,” and together with the September Transaction Documents, the “Transaction Documents”).
C.
Borrower has requested and Lender has agreed, subject to the terms, conditions and understandings expressed in this Agreement, to refrain
and forbear temporarily from making redemptions under the Notes.
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1.
Recitals and Definitions. Each of the parties hereto acknowledges and agrees that the recitals set forth above in this Agreement
are true and accurate, are contractual in nature, and are hereby incorporated into and made a part of this Agreement.
2.
Standstill. Subject to the terms, conditions and understandings contained in this Agreement, for the period beginning on the date
hereof and ending on April 12, 2023 (the “Standstill Period”), Lender will not seek to redeem any portion of the Notes
(the “Standstill”). Notwithstanding the foregoing, the Standstill shall immediately and automatically terminate upon
the occurrence of an Event of Default under the Notes or Borrower’s breach of this Agreement or the Transaction Documents.
3.
Standstill Fee. As a material inducement and partial consideration for Lender’s agreement to enter into this Agreement,
each of Borrower and Lender acknowledges and agrees that: (i) the Outstanding Balance of the September Note shall be increased by $147,999.65
(the “September Note Standstill Fee”) as of the date hereof, and (ii) the Outstanding Balance of the February Note
shall be increased by $303,422.15 (the “February Note Standstill Fee,” and together with the September Note Standstill
Fee, the “Standstill Fee”) as of the date hereof. Following the application of the Standstill Fee, each of Borrower
and Lender acknowledges and agrees that: (i) the Outstanding Balance of the September Note is $5,082,417.62 as of the date hereof, and
(ii) the Outstanding Balance of the February Note is $10,419,741.52 as of the date hereof.
4.
Ratification of the Notes. The Notes shall be and remain in full force and effect in accordance with their terms, and are hereby
ratified and confirmed in all respects. Borrower acknowledges that it is unconditionally obligated to pay the remaining balance of the
Notes and represents that such obligation is not subject to any defenses, rights of offset or counterclaims. No forbearance or waiver
other than as expressly set forth herein may be implied by this Agreement. Except as expressly set forth herein, the execution, delivery,
and performance of this Agreement shall not operate as a waiver of, or as an amendment to, any right, power or remedy of Lender under
the Notes or the Transaction Documents, as in effect prior to the date hereof.
5.
Failure to Comply. Borrower understands that the Standstill shall terminate immediately upon the earliest occurrence of (a) any
breach of this Agreement, or (b) any Event of Default after the date hereof (or any Event of Default that occurred prior to the date
hereof), and that in any such case, Lender may seek all recourse available to it under the terms of the Notes, this Agreement, any other
Transaction Document, or applicable law. Upon the termination of this Agreement or the expiration of the Standstill Period, among other
rights, Lender shall have the right to redeem all or any portion of the Outstanding Balance in accordance with the terms of the Notes.
For the avoidance of doubt, the termination of the Standstill pursuant to this Section shall not terminate, limit or modify any other
provision of this Agreement (including without limitation the application of the Standstill Fee).
6.
Representations, Warranties and Agreements. In order to induce Lender to enter into this Agreement, Borrower, for itself, and
for its affiliates, successors and assigns, hereby acknowledges, represents, warrants and agrees as follows:
(a)
Borrower has full power and authority to enter into this Agreement and to incur and perform all obligations and covenants contained herein,
all of which have been duly authorized by all proper and necessary action. No consent, approval, filing or registration with or notice
to any governmental authority is required as a condition to the validity of this Agreement or the performance of any of the obligations
of Borrower hereunder.
(b)
Any Event of Default which may have occurred under the Notes has not been, is not hereby, and shall not be deemed to be waived by Lender,
expressly, impliedly, through course of conduct or otherwise except upon full satisfaction of Borrower’s obligations under this
Agreement. The agreement of Lender to refrain and forbear from exercising any rights and remedies by reason of any existing default or
any future default shall not constitute a waiver of, consent to, or condoning of, any other existing or future default.
(c)
All understandings, representations, warranties and recitals contained or expressed in this Agreement are true, accurate, complete, and
correct in all respects; and no such understanding, representation, warranty, or recital fails or omits to state or otherwise disclose
any material fact or information necessary to prevent such understanding, representation, warranty, or recital from being misleading.
Borrower acknowledges and agrees that Lender has been induced in part to enter into this Agreement based upon Lender’s justifiable
reliance on the truth, accuracy, and completeness of all understandings, representations, warranties, and recitals contained in this
Agreement. There is no fact known to Borrower or which should be known to Borrower which Borrower has not disclosed to Lender on or prior
to the date hereof which would or could materially and adversely affect the understandings of Lender expressed in this Agreement or any
representation, warranty, or recital contained in this Agreement.
(d)
Except as expressly set forth in this Agreement, Borrower acknowledges and agrees that neither the execution and delivery of this Agreement
nor any of the terms, provisions, covenants, or agreements contained in this Agreement shall in any manner release, impair, lessen, modify,
waive, or otherwise affect the liability and obligations of Borrower under the terms of the Notes or any of the other Transaction Documents.
(e)
Borrower has no defenses, affirmative or otherwise, rights of setoff, rights of recoupment, claims, counterclaims, actions or causes
of action of any kind or nature whatsoever against Lender, directly or indirectly, arising out of, based upon, or in any manner connected
with, the transactions contemplated hereby, whether known or unknown, which occurred, existed, was taken, permitted, or begun prior to
the execution of this Agreement and occurred, existed, was taken, permitted or begun in accordance with, pursuant to, or by virtue of
any of the terms or conditions of the Transaction Documents. To the extent any such defenses, affirmative or otherwise, rights of setoff,
rights of recoupment, claims, counterclaims, actions or causes of action exist or existed, such defenses, rights, claims, counterclaims,
actions and causes of action are hereby waived, discharged and released. Borrower hereby acknowledges and agrees that the execution of
this Agreement by Lender shall not constitute an acknowledgment of or admission by Lender of the existence of any claims or of liability
for any matter or precedent upon which any claim or liability may be asserted.
(f)
Borrower hereby acknowledges that it has freely and voluntarily entered into this Agreement after an adequate opportunity and sufficient
period of time to review, analyze, and discuss (i) all terms and conditions of this Agreement, (ii) any and all other documents executed
and delivered in connection with the transactions contemplated by this Agreement, and (iii) all factual and legal matters relevant to
this Agreement and/or any and all such other documents, with counsel freely and independently selected by Borrower (or had the opportunity
to be represented by counsel). Borrower further acknowledges and agrees that it has actively and with full understanding participated
in the negotiation of this Agreement and all other documents executed and delivered in connection with this Agreement after consultation
and review with its counsel (or had the opportunity to be represented by counsel), that all of the terms and conditions of this Agreement
and the other documents executed and delivered in connection with this Agreement have been negotiated at arm’s-length, and that
this Agreement and all such other documents have been negotiated, prepared, and executed without fraud, duress, undue influence, or coercion
of any kind or nature whatsoever having been exerted by or imposed upon any party by any other party. No provision of this Agreement
or such other documents shall be construed against or interpreted to the disadvantage of any party by any court or other governmental
or judicial authority by reason of such party having or being deemed to have structured, dictated, or drafted such provision.
(g)
There are no proceedings or investigations pending or threatened before any court or arbitrator or before or by, any governmental, administrative,
or judicial authority or agency, or arbitrator, against Borrower.
(h)
There is no statute, regulation, rule, order or judgment and no provision of any mortgage, indenture, contract or other agreement binding
on Borrower, which would prohibit or cause a default under or in any way prevent the execution, delivery, performance, compliance or
observance of any of the terms and conditions of this Agreement and/or any of the other documents executed and delivered in connection
with this Agreement.
(i)
Borrower is solvent as of the date of this Agreement, and none of the terms or provisions of this Agreement shall have the effect of
rendering Borrower insolvent. The terms and provisions of this Agreement and all other instruments and agreements entered into in connection
herewith are being given for full and fair consideration and exchange of value.
(j)
To the best of its belief, after diligent inquiry, Borrower represents and warrants that, as of the date hereof, no Event of Default
under the Notes (nor any breach by Borrower under any of the other Transaction Documents) exists.
8.
Certain Acknowledgments. Each of the parties acknowledges and agrees that no property or cash consideration of any kind whatsoever
has been or shall be given by Lender to Borrower in connection with the Standstill or any other amendment to the Notes granted herein.
9.
Arbitration. Each party agrees that any dispute arising out of or relating to this Agreement shall be subject to the Arbitration
Provisions (as defined in the Transaction Documents).
10.
Governing Law; Venue. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Utah without
regard to the principles of conflict of laws. Each party agrees that the proper venue for any dispute arising out of or relating to this
Agreement shall be determined in accordance with the provisions of the Transaction Documents. BORROWER HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
11.
Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all signing parties had
signed the same document. All counterparts shall be construed together and constitute the same instrument. The exchange of copies of
this Agreement and of signature pages by facsimile transmission or other electronic transmission (including email) shall constitute effective
execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures
of the parties transmitted by facsimile transmission or other electronic transmission (including email) shall be deemed to be their original
signatures for all purposes.
12.
Attorneys’ Fees. In the event of any arbitration or action at law or in equity to enforce or interpret the terms of this
Agreement, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the attorneys’
fees and expenses paid by such prevailing party in connection with the arbitration, litigation and/or dispute without reduction or apportionment
based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair an arbitrator’s
or a court’s power to award fees and expenses for frivolous or bad faith pleading.
13.
Severability. If any part of this Agreement is construed to be in violation of any law, such part shall be modified to achieve
the objective of the parties to the fullest extent permitted and the balance of this Agreement shall remain in full force and effect.
14.
Entire Agreement. This Agreement, together with the Transaction Documents, and all other documents referred to herein, supersedes
all other prior oral or written agreements between Borrower, Lender, its affiliates and persons acting on its behalf with respect to
the matters discussed herein, and this Agreement and the instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither Lender nor Borrower
makes any representation, warranty, covenant or undertaking with respect to such matters.
15.
No Reliance. Borrower acknowledges and agrees that neither Lender nor any of its officers, directors, members, managers, representatives
or agents has made any representations or warranties to Borrower or any of its agents, representatives, officers, directors, stockholders,
or employees except as expressly set forth in this Agreement and the Transaction Documents and, in making its decision to enter into
the transactions contemplated by this Agreement and the Transaction Documents, Borrower is not relying on any representation, warranty,
covenant or promise of Lender or its officers, directors, members, managers, agents or representatives other than as set forth in this
Agreement and in the Transaction Documents.
16.
Amendments. This Agreement may be amended, modified, or supplemented only by written agreement of the parties. No provision of
this Agreement may be waived except in writing signed by the party against whom such waiver is sought to be enforced.
17.
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors
and assigns. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by Lender hereunder
may be assigned by Lender to a third party, including its financing sources, in whole or in part. Borrower may not assign this Agreement
or any of its obligations herein without the prior written consent of Lender.
18.
Continuing Enforceability; Conflict Between Documents. Except as otherwise modified by this Agreement, the Notes and each of the
other Transaction Documents shall remain in full force and effect, enforceable in accordance with all of their original terms and provisions.
This Agreement shall not be effective or binding unless and until it is fully executed and delivered by Lender and Borrower. If there
is any conflict between the terms of this Agreement, on the one hand, and the Notes or any other Transaction Document, on the other hand,
the terms of this Agreement shall prevail.
19.
Time is of Essence. Time is of the essence with respect to each and every provision of this Agreement.
20.
Notices. Unless otherwise specifically provided for herein, all notices, demands or requests required or permitted under this
Agreement to be given to Borrower or Lender shall be given as set forth in the “Notices” section of the Transaction Documents.
21.
Further Assurances. Each party shall do and perform or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
[Remainder
of page intentionally left blank]
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above.
| |
BORROWER: |
| |
|
|
| |
CEMTREX,
INC., a Delaware corporation |
| |
|
|
| |
By:
|
 |
| |
Name:
|
Saagar
Govil |
| |
Title:
|
CEO |
| |
|
|
| |
LENDER: |
| |
|
|
| |
STREETERVILLE
CAPITAL, LLC, a Utah limited liability company |
| |
|
|
| |
By:
|
 |
| |
Name:
|
John
Fife |
| |
Title:
|
President |
[Signature
Page to Standstill Agreement]
Exhibit 23.1
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
hereby consent to the incorporation by reference in this Registration Statement on Form S-1/A (File No. 333-276556) of our report dated
December 28, 2023, with respect to the consolidated financial statements of Cemtrex, Inc., included in its Annual Report on Form 10-K
for the year ended September 30, 2023. Our opinion includes an explanatory paragraph as to Cemtrex, Inc.’s ability to continue
as a going concern. We also consent to the reference to our firm under the heading “Experts” in such Registration Statement.
/s/
Grassi & Co., CPAs, P.C.
Jericho,
New York
April
30, 2024
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