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CEMTREX INC - 10-K/A - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

June 13, 2014

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated audited financial statements and the notes to those financial statements included elsewhere in this report. This discussion includes forward- looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under "risk factors" and elsewhere in this report, our actual results may differ materially from those anticipated in these forward-looking statements.

OVERVIEW



Cemtrex Inc. is a technology company that operates in a wide array of business segments and provides solutions to meet today's industrial challenges. The Company provides electronic manufacturing services of printed circuit board assemblies, provides instruments & emission monitors for industrial processes, and provides industrial air filtration & environmental control systems..

Financial condition



The following table sets forth selected historical consolidated financial data from our consolidated financial statements and should be read in conjunction with our consolidated financial statements including the related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" which are included below.

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FISCAL YEAR ENDED SEPTEMBER 30, 2013

Year Ended September 30, 2013 2012 Revenues $ 13,673,531$ 12,162,046 Operating Expenses $ 798,135$ 683,372 Net Income (Loss) $ 288,497$ 648,199



Net Income (Loss) Per Common Share, $ 0.01$ 0.02 Basic and Diluted

$ 0.01$ 0.02



Weighted Average Number of Shares 40,599,129 39,823,129

September 30, 2013 2012 Current Assets $ 2,506,078$ 1,571,638 Total Assets $ 2,873,776$ 1,678,374 Total Liabilities $ 1,742,594$ 835,689



Total Stockholders' Equity(Deficit) $ 1,131,182$ 842,685

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The following discussion and analysis is based upon our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses, and assets and liabilities during the periods reported. Estimates are used when accounting for certain items such as revenues, allowances for returns, early payment discounts, customer discounts, doubtful accounts, employee compensation programs, depreciation and amortization periods, taxes, inventory values, and valuations of investments, goodwill, other intangible assets and long-lived assets. We base our estimates on historical experience, where applicable and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions. We believe that the following critical accounting policies affect our more significant judgments and estimates used in preparation of our consolidated financial statements.

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15We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We base our estimates on the aging of our accounts receivable balances and our historical write-off experience, net of recoveries.

We value our inventories at the lower of cost or market. We write down inventory balances for estimated obsolescence or unmarketable inventory equal to the difference between the cost of the inventory and the estimated market value based upon assumptions about future demand and market conditions.

Goodwill is reviewed for possible impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the Company's carrying amount is greater than the fair value. In accordance with SFAS 142, the Company examined goodwill for impairment and determined that the Company's carrying amount did not exceed the fair value, thus, there was no impairment.

Generally, sales are recognized when shipments are made to customers. Rebates, allowances for damaged goods and other advertising and marketing program rebates are accrued pursuant to contractual provisions and included in accrued expenses. Certain amount of our revenues fall under the percentage-of-completion method of accounting used for long-term contracts. Under this method, sales and gross profit are recognized as work is performed based on the relationship between actual costs incurred and total estimated costs at completion. Sales and gross profit are adjusted prospectively for revisions in estimated total contract costs and contract values. Estimated losses are recorded when identified.

RESULTS OF OPERATIONS



Net Sales :. Net sales for 2013 increased by $1,511,485 or 12.43%, to $13,673,531, from $12,162,046 in 2012. Sales increased during the year of 2013 primarily due to a higher amount of bookings and projects executed by the Company during the year and overall increase in market demand during the year.

Gross Profit : Gross profits for 2013 decreased $231,146 or 16.79% to $1,144,982, which was 8.37% of net sales, from $1,376,128 in 2012, which was 11.31% of net sales. The decrease in gross margin in 2013 was a direct results of the lower gross margin projects executed by the Company in this fiscal year. In 2012, the higher gross margin was a result of the higher gross margin of projects executed during that year. Market conditions dictate the gross margins of projects booked by the Company every year.

Operating Expenses : Operating expenses for 2013 increased $114,763 or 16.79%, to $798,135 from $683,372 in 2012. Operating expenses as percentage of sales increased in 2013 to 5.83% from 5.61% in 2012. The percentage increase in operating expenses percentage was primarily due to higher sales in 2013 as compared to 2012. The 16.79% increase in operating expenses in 2013 was due to more selling and general expenses as a result of greater activity in the market.

Net Income/Loss : The Company had a net income of $288,497 as compared to net income of $648,199 in 2012 after provision of income tax of $ 12,500. The net income in 2013 was a direct result of less profitable projects executed by the Company.

Provision for Income Taxes : The income tax provision for this year is $12,500 after Net operating loss carry forward in 2013

16 EFFECTS OF INFLATION



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

LIQUIDITY AND CAPITAL RESOURCES

Working capital was $1,870,968 at September 30, 2013, compared to $1,212,407 at September 30, 2012 This included cash and cash equivalents of $66,963 and $333,045 at September 30,2013 and 2012 respectively.

Trade receivables increased by $348,109 or 118.74% at September 30, 2013 to $641,264, from $293,155 as at September 30, 2012. The increase in accounts receivable is attributable to the timing of the shipments and completion of the projects.

Inventories decreased $37,496 or 19.04% to $159,348 at September 30, 2013 from $ 196,844 as at September 30, 2012. The decrease in inventory was due to relatively less purchase of inventory and more shipments of ongoing jobs and contracts.

Continuing operations used $622,958 of cash for the fiscal year ended September 30, 2013, compared to using $941,396 of cash for the fiscal year ended September 30, 2012. The increase in cash flows was primarily related to the decrease in inventory combined with increase in accounts receivable. Investing activities for continuing operations used $0 of cash during 2013, compared to providing $0 during 2012. The Financing activities in 2013 generated $356,876. We believe that our cash on hand, cash generated by operations, may be sufficient to meet the capital demands of our current operations during 2014 fiscal year. Any major increases in sales, or big contract may require substantial capital investment. Failure to obtain sufficient capital could materially impact the growth potential.

Outlook



We anticipate that the outlook for our products and services remains fairly strong and we are positioned well to take advantage of it.

We believe there is currently a gradually increasing public awareness of the issues surrounding air quality and that this trend will continue for the next several years. We also believe there is an increase in public concern regarding the effects of air quality on society and future generations, as well as an increase in interest by standards-making bodies in creating specifications and techniques for detecting, defining and solving air quality problems. As a result, we believe there will be an increase in interest in our emission monitors, and environmental control products of subsidiary Griffin Filters.

This Outlook section, and other portions of this document, include certain "forward-looking statements" within the meaning of that term in Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, including, among others, those statements preceded by, following or including the words "believe," "expect," "intend," "anticipate" or similar expressions. These forward-looking statements are based largely on the current expectations of management and are subject to a number of assumptions, risks and uncertainties. Our actual results could differ materially from these forward-looking statements. Important factors to consider in evaluating such forward-looking statements include those discussed in Item 1A. Risk Factors as well as:

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the shortage of reliable market data regarding the emission monitoring & air filtration market;

changes in external competitive market factors or in our internal budgeting process which might impact trends in our results of operations;

anticipated working capital or other cash requirements;

changes in our business strategy or an inability to execute our strategy due to unanticipated changes in the market;

product obsolescence due to the development of new technologies; and

Various competitive factors that may prevent us from competing successfully in the marketplace.

In light of these risks and uncertainties, there can be no assurance that the events contemplated by the forward-looking statements contained in this Form 10-K will in fact occur.


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Source: Edgar Glimpses


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