UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
  Washington,
D.C. 20549
 FORM
10-Q
 
 x     
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d)
 OF THE
SECURITIES ACT OF 1934
 
 For
the quarterly period ended March 31, 2010
 OR
  ̈     
     TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d)
 OF THE
SECURITIES ACT OF 1934
 
 For
the transition period from ___________to ____________
 
 Commission File Number
000-53238
 CEMTREX,INC.
  (Exact
name of small business issuer as specified in its charter)
  Delaware
                (State
      or other jurisdiction of incorporation or
                organization)
              30-0399914
                (I.R.S.
      Employer Identification No.)
 
 19
Engineers Lane,
 Farmingdale,
New York 11735
 (Address,
including zip code, of principal executive offices)
 
 631-756-9116
 (Issuer’s
telephone number)
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
 
 x
                Yes
                
                
                No
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
  Large
      accelerated filer
                Accelerated
      filerNon-accelerated
      filer
                Smaller
      reporting company  x
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
 -
                Yes
                
                x
                No
  Indicate the number of shares
outstanding of each of the issuer’s classes of common stock, as of the latest
practicable date: As of
February 12, 2010, the issuer the registrant had 39,722,862shares of common stock issued and
outstanding.
  
  Table of
Contents
  CEMTREX,
INC.
  INDEX
  PagePART
      I. FINANCIAL INFORMATIONItem
      1.               Condensed
      Financial Statements
                      
                      3Consolidated
      Balance Sheets as of March 31, 2010 (Unaudited) and September 30,
      2008
                      
                      4Consolidated
      Statements of Operations for the Six Months Ended March 31, 2009 and March
      31, 2010 (Unaudited)
                      
                      5Consolidated
      Statements of Cash Flows for the Six Months Ended March 31, 2009 and March
      31, 2010 (Unaudited)
                      
                      6Notes
      to Unaudited Condensed Consolidated Financial Statements
                      
                      7Item
      2.
                      Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                      
                      15Item
      3.
                      Quantitative
      and Qualitative Disclosures about Market Risk
                      
                      27Item
      4.
                      Controls
      and Procedures
                      
                      28PART
      II.
                      OTHER
      INFORMATIONItem
      1.
                      Legal
      Proceedings
                      
                      29Item
      2.
                      Unregistered
      Sales of Equity Securities and Use of Proceeds
                      
                      33Item
      3.
                      Defaults
      Upon Senior Securities
                      
                      33Item
      5.
                      Other
      Information
                      
                      33Item
      6.
                      Exhibits
                      
                      33SIGNATURES
                      
                      34
  2
  Part I. Financial
Information
  Item
1.  Financial Statements
  3
  Cemtrex,
Inc. and Subsidiary
 Consolidated
Balance Sheets
  (UNAUDITED)March
      31,
                                    
                                    
                                    September
      30,2010
                                    
                                    
                                    2009AssetsCurrent
      AssetsCash
      & Equivalents
                                    
                                    $
                                    25,083
                                    
                                    
                                    $
                                    356,552Accounts
      Receivable
                                    
                                    
                                    1,285,736
                                    
                                    
                                    
                                    948,815Inventory
                                    
                                    
                                    282,498
                                    
                                    
                                    
                                    334,102Prepaid
      Expenses & Other Assets
                                    
                                    
                                    9,194
                                    
                                    
                                    
                                    14,650Total
      Current Assets
                                    
                                    
                                    1,602,511
                                    
                                    
                                    
                                    1,654,119Property
      & Equipment, Net
                                    
                                    
                                    73,354
                                    
                                    
                                    
                                    85,138Other
                                    
                                    
                                    4,225
                                    
                                    
                                    
                                    4,225Total
      Assets
                                    
                                    $
                                    1,680,090
                                    
                                    
                                    $
                                    1,743,482Liabilities & Stockholders' Equity
      (Deficit)Current
      LiabilitiesAccounts
      Payable
                                    
                                    $
                                    830,592
                                    
                                    
                                    $
                                    876,799Accrued
      Expenses
                                    
                                    
                                    352,264
                                    
                                    
                                    
                                    387,877Bank
      Line of Credit
                                    
                                    
                                    250,000
                                    
                                    
                                    
                                    -Convertible
      Note, net of discount
                                    
                                    
                                    23,283
                                    
                                    
                                    
                                    -Derivative
      Liability
                                    
                                    
                                    32,655
                                    
                                    
                                    
                                    -Total
      Current Liabilities
                                    
                                    
                                    1,488,794
                                    
                                    
                                    
                                    1,264,676Non-Current
      LiabilitiesNotes
      Payable-Related Party
                                    
                                    
                                    269,226
                                    
                                    
                                    
                                    390,520Total
      Non-Current Liabilities
                                    
                                    
                                    269,226
                                    
                                    
                                    
                                    390,520Total
      Liabilities
                                    
                                    $
                                    1,758,020
                                    
                                    
                                    $
                                    1,655,196Commitments
      & Contingencies
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Stockholders'
      Equity (Deficit)Preferred
      Stock Series A, $0.001 par value, 10,000,000 shares
      authorized,1,000,000
      shares issued and outstanding, respectively
                                    
                                    $
                                    1,000
                                    
                                    
                                    $
                                    1,000Common
      Stock, $0.001 par value, 60,000,000 shares authorized,39,722,862
      shares issued and outstanding
                                    
                                    
                                    39,823
                                    
                                    
                                    
                                    39,723Additional
      Paid-in Capital
                                    
                                    
                                    66,506
                                    
                                    
                                    
                                    42,606Retained
      Earnings (Accumulated Deficit)
                                    
                                    
                                    (185,259
                                    )
                                    
                                    
                                    4,957Total
      Stockholders' Equity (Deficit)
                                    
                                    
                                    (77,930
                                    )
                                    
                                    
                                    88,286Total
      Liabilities & Stockholders' Equity (Deficit)
                                    
                                    $
                                    1,680,090
                                    
                                    
                                    $
                                    1,743,482
 
 The
accompanying notes are an integral part of these financial
statements
  4
  Cemtrex,
Inc. and Subsidiary
 Consolidated
Statements of Operations
 (UNAUDITED)
  For
      the Three Months Ended
                                
                                
                                For
      the Six Months EndedMarch
      31,
                                
                                
                                March
      31,2010
                                
                                
                                2009
                                
                                
                                2010
                                
                                
                                2009Revenues
                                
                                $
                                1,015,177
                                
                                
                                $
                                1,753,662
                                
                                
                                $
                                1,906,631
                                
                                
                                $
                                3,974,623Cost
      of Goods Sold
                                
                                
                                474,228
                                
                                
                                
                                931,018
                                
                                
                                
                                893,727
                                
                                
                                
                                2,246,536Gross
      Profit
                                
                                
                                540,949
                                
                                
                                
                                822,644
                                
                                
                                
                                1,012,904
                                
                                
                                
                                1,728,087Operating
      ExpensesResearch
      and Development
                                
                                
                                (5,535
                                )
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -General
      and Administrative
                                
                                
                                689,519
                                
                                
                                
                                620,558
                                
                                
                                
                                1,187,945
                                
                                
                                
                                1,386,250Total
      Operating Expenses
                                
                                
                                683,984
                                
                                
                                
                                620,558
                                
                                
                                
                                1,187,945
                                
                                
                                
                                1,386,250Operating
      Income (Loss)
                                
                                
                                (143,035
                                )
                                
                                
                                202,086
                                
                                
                                
                                (175,041
                                )
                                
                                
                                341,837Other
      Income (Expense)Other
      Income
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Interest
      Expense
                                
                                
                                (10,820
                                )
                                
                                
                                (26,000
                                )
                                
                                
                                (15,175
                                )
                                
                                
                                (55,746
                                )Total
      Other Income (Expense)
                                
                                
                                (10,820
                                )
                                
                                
                                (26,000
                                )
                                
                                
                                (15,175
                                )
                                
                                
                                (55,746
                                )Net
      Income (Loss) Before Income Taxes
                                
                                
                                (153,855
                                )
                                
                                
                                176,086
                                
                                
                                
                                (190,216
                                )
                                
                                
                                286,091Provision
      for Income Taxes
                                
                                
                                (3,445
                                )
                                
                                
                                (54,415
                                )
                                
                                
                                -
                                
                                
                                
                                (54,415
                                )Net
      Income (Loss)
                                
                                $
                                (157,300
                                )
                                
                                $
                                121,671
                                
                                
                                $
                                (190,216
                                )
                                
                                $
                                231,676Income
      (Loss) Per Share-Basic
                                
                                $
                                (0.00
                                )
                                
                                $
                                0.00
                                
                                
                                $
                                (0.00
                                )
                                
                                $
                                0.01Income
      (Loss) Per Share-Diluted
                                
                                $
                                (0.00
                                )
                                
                                $
                                0.00
                                
                                
                                $
                                (0.00
                                )
                                
                                $
                                0.01Weighted
      Average Number of Shares-Basic
                                
                                
                                39,822,862
                                
                                
                                
                                34,327,862
                                
                                
                                
                                39,872,862
                                
                                
                                
                                34,327,862Weighted
      Average Number of Shares-Diluted
                                
                                
                                39,822,862
                                
                                
                                
                                34,328,862
                                
                                
                                
                                39,872,862
                                
                                
                                
                                34,328,862
 
 The
accompanying notes are an integral part of these financial
statements
  5
  Cemtrex,
Inc. and Subsidiary
 Consolidated
Statements of Cash Flows
 (UNAUDITED)
  For
      the Six Months EndedMarch
      31,2010
                                    
                                    
                                    2009Cash Flows from Operating
      ActivitiesNet
      Income (Loss)
                                    
                                    $
                                    (190,216
                                    )
                                    
                                    $
                                    231,676Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      & Amortization
                                    
                                    
                                    11,784
                                    
                                    
                                    
                                    14,247Amortization
      of Debt Discount
                                    
                                    
                                    5,938
                                    
                                    
                                    
                                    -Stock
      Issued for Services
                                    
                                    
                                    24,000
                                    
                                    
                                    
                                    -Reserve
      for Doubtful Accounts
                                    
                                    
                                    150,000
                                    
                                    
                                    
                                    -Changes
      in operating assets and liabilities:Accounts
      Receivable
                                    
                                    
                                    (486,921
                                    )
                                    
                                    
                                    271,914Inventory
                                    
                                    
                                    51,604
                                    
                                    
                                    
                                    18,773Prepaid
      Expenses & Other Assets
                                    
                                    
                                    5,456
                                    
                                    
                                    
                                    (1,030
                                    )Other
      Assets
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (230,259
                                    )Accounts
      Payable
                                    
                                    
                                    (46,207
                                    )
                                    
                                    
                                    (100,472
                                    )Accrued
      Expenses
                                    
                                    
                                    (35,613
                                    )
                                    
                                    
                                    (186,894
                                    )Income
      Taxes Payable
                                    
                                    
                                    -
                                    
                                    
                                    
                                    54,415Net
      Cash Used in Operating Activities
                                    
                                    
                                    (510,175
                                    )
                                    
                                    
                                    72,370Cash Flows from Investing
      ActivitiesCash
      Received on Sale of Equipment
                                    
                                    
                                    -
                                    
                                    
                                    
                                    68,048Net
      Cash Used in Investing Activities
                                    
                                    
                                    -
                                    
                                    
                                    
                                    68,048Cash Flows from Financing
      ActivitiesNet
      Notes from Related Party
                                    
                                    
                                    (121,294
                                    )
                                    
                                    
                                    (146,030
                                    )Proceeds
      from Line of Credit
                                    
                                    
                                    250,000
                                    
                                    
                                    
                                    -Proceeds
      from Convertible Notes
                                    
                                    
                                    50,000
                                    
                                    
                                    
                                    -Net
      Cash Provided by Financing Activities
                                    
                                    
                                    178,706
                                    
                                    
                                    
                                    (146,030
                                    )Net
      Increase (Decrease) in Cash
                                    
                                    
                                    (331,469
                                    )
                                    
                                    
                                    (5,612
                                    )Cash
      Beginning of Period
                                    
                                    
                                    356,552
                                    
                                    
                                    
                                    60,610Cash
      End of Period
                                    
                                    $
                                    25,083
                                    
                                    
                                    $
                                    54,998Supplemental
      Disclosure of Cash Flow Information:Cash
      Paid during the period for interest
                                    
                                    $
                                    1,354
                                    
                                    
                                    $
                                    -Cash
      Paid during the period for income taxes
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
 
 The
accompanying notes are an integral part of these financial
statements
  6
  Note
1 – Organization, Business & Operations
  Cemtrex,
Inc. and its wholly-owned subsidiary Griffin Filters, LLC (collectively the
“Company”), is engaged in manufacturing and selling the most advanced
instruments for emission monitoring of particulate, opacity, mercury, sulfur
dioxide, nitrogen oxides, etc. Cemtrex also provides turnkey services for carbon
creation projects from abatement of greenhouse gases pursuant to Kyoto protocol
and assists project owners in selling of carbon credits globally. Company's
products are sold to power plants, refineries, chemical plants, cement plants
& other industries including federal and state governmental agencies.
Through its wholly-owned subsidiary, Griffin Filters, the Company designs,
manufactures and sells air filtration equipment and systems to control
particulate emissions in a variety of industries.
  Cemtrex,
Inc. was incorporated as Diversified American Holding, Inc. on April 27, 1998.
On December 16, 2004, the Company changed its name to Cemtrex, Inc. On April 30,
2007, Cemtrex, Inc. acquired Griffin Filters, LLC (see Note 5 – Business
Combination and Related Party Transactions).
  Note
2 - Going Concern and Management's Plans
  The
accompanying consolidated financial statements have been prepared in conformity
with generally accepted   accounting principles which contemplate
continuation of the company as a going concern. However, as of March 31, 2010,
the Company has an accumulated deficit of $185,259 and has losses year to date
totaling $190,216. The Company’s current business plan requires additional
funding beyond its anticipated cash flows from operations. These and other
factors raise substantial doubt about the Company's ability to continue as a
going concern.
  The
ability of the Company to continue as a going concern is dependent upon its
ability to raise additional capital and achieve profitable operations. The
accompanying consolidated financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going
concern.
  Note
3 - Summary of Significant Accounting Policies
  Interim
financial statements
  The
accompanying unaudited condensed financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
(“SEC”) and should be read in conjunction with the Company’s audited financial
statements and footnotes thereto for the year ended September 30, 2009 included
in the Company’s Form 10-K filed on January 22, 2010.  Certain information
and footnote disclosures normally included in the financial statements prepared
in accordance with accounting principles generally accepted in the United States
of America have been omitted pursuant to such rules and regulations. 
However, the Company believes that the disclosures are adequate to make the
information presented not misleading.  The financial statements reflect all
adjustments (consisting primarily of normal recurring adjustments) that are, in
the opinion of management necessary for a fair presentation of the Company’s
financial position and results of operations.  The operating results for
the three and nine  months ended March 31, 2010 are not necessarily
indicative of the results to be expected for any other interim period of any
future year.
  Principles
of Consolidation
  The
accompanying consolidated financial statements include the accounts of Cemtrex,
Inc. and its wholly subsidiary Griffin Filters, LLC (collectively the
“Company”). All significant inter-company accounts and transactions have been
eliminated in consolidation.
  7
 The
acquisition of Griffin Filters, LLC by Cemtrex, Inc. was treated as a business
combination due to the fact that the acquired entity and purchased entity were
owned by the same individual. Therefore, these consolidated financial statements
have been retrospectively adjusted for all periods presented.
  Accounting
Method
  The
Company’s financial statements are prepared using the accrual method of
accounting. The Company has elected a September 30 year-end.
  Cash
and cash equivalents
  The
Company considers all liquid investments with a maturity of three months or less
from the date of purchase that are readily convertible into cash to be cash
equivalents.
  Concentrations
of Credit Risk - Cash
  The
Company maintains its cash with various financial institutions, which may exceed
federally insured limits throughout the period.
  Inventories
  Inventories
are comprised of replacement parts, system components and finished systems,
which are stated at lower of cost or market. Cost is determined on a first-in,
first-out (FIFO) basis.
  Property
and Equipment
  Property
and equipment are stated at cost and are depreciated using the straight-line
method over their estimated useful lives, generally five to seven years.
Leasehold improvements are amortized over the shorter of the useful life or the
remaining lease term. Upon retirement or other disposition of these assets, the
cost and related accumulated depreciation are removed from the accounts and the
resulting gains or losses are reflected in operations. Expenditures for
maintenance and repairs are charged to operations as incurred. Renewals and
betterments are capitalized.
  Impairment
of long-lived assets
  In July
2009, the Company adopted FASB ASC Topic 360, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (previously "SFAS 144"). This topic addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. The Company periodically evaluates the carrying value of long-lived
assets to be held and used in accordance with this topic. This topic requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amounts. In
that event, a loss is recognized based on the amount by which the carrying
amount exceeds the fair market value of the long-lived assets. Loss on
long-lived assets to be disposed of is determined in a similar manner, except
that fair market values are reduced for the cost of disposal.
  Basic
and Diluted Net Income per Share
  Basic
earnings per share is calculated using the weighted-average number of common
shares outstanding during the period without consideration of the dilutive
effect of stock warrants and convertible notes. Diluted earnings per share is
calculated using the weighted-average number of common shares outstanding during
the period after consideration of the dilutive effect of stock warrants and
convertible notes.
  8
  Revenue
recognition
  Sales of
products and related costs of products sold are recognized when (i) persuasive
evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price
is fixed or determinable and (iv) collectability is reasonably assured. These
terms are typically met upon shipment of finished goods to the
customer.
  Allowance
for doubtful accounts
  We
provide an allowance for estimated uncollectible accounts receivable balances
based on historical experience and the aging of the related accounts receivable.
As of March 31, 2010 and September 30, 2009, the Company has reserved $350,000
and $200,000 for doubtful accounts, respectively.
  Advertising
  The
Company expenses advertising costs as incurred. The Company incurred $9,404 and
$0 in advertising costs for the six months ended March 31, 2010 and 2009,
respectively.
  Income
Taxes
  In July
2009, the Company adopted FASB ASC 749 "Accounting for Income Taxes" (previously
SFAS 109). Under this topic the Company accounts for income taxes using the
liability method where deferred tax assets and liabilities are determined based
on differences between their financial reporting and tax basis of assets and
liabilities.
  Significant
judgment is required in determining any valuation allowance recorded against
deferred tax assets. In assessing the need for a valuation allowance, the
Company considers all available evidence including past operating results,
estimates of future taxable income, and the feasibility of tax planning
strategies. In the event that the Company changes its determination as to the
amount of deferred tax assets that can be realized, the Company will adjust its
valuation allowance with a corresponding impact to the provision for income
taxes in the period in which such determination is made.
  As of
March 31, 2010, The Company has a net operating loss carryforward of $185,259
expiring in the year 2024.  The Company has reserved against any tax
benefit in full as it is unsure if it can ultimately benefit from the
loss.  Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
  Research
and development costs
  Expenditures
for research & development are expenses as incurred. Such costs are required
to be expensed until the point that technological feasibility is established.
The Company incurred $5,535 and $0 in research and development costs for the six
months ended March 31, 2010 and 2009, respectively.
  Stock-based
compensation
  In July
2009, the Company adopted FASB ASC Topic 718, "Share-Based Payment" (previously
"SFAS 123(R)"). This topic requires that companies account for awards of equity
instruments issued to employees under the fair value method of accounting and
recognize such amounts in their statements of operations. Under this topic, we
are required to measure compensation cost for all stock-based awards at fair
value on the date of grant and recognize compensation expense in our
consolidated statements of operations over the service period that the awards
are expected to vest.
  The
Company accounts for stock-based compensation issued to non-employees and
consultants in accordance with the provisions of FASB ASC Topic 718,
"Share-Based Payment" (previously "SFAS 123(R)").  Under this topic Common
stock issued to non-employees in exchange for services is accounted for based on
the fair value of the services received.
  9
 Fair
value of financial instruments
 In July
2009, the Company adopted FASB ASC Topic 825, "Disclosures about Fair Value of
Financial Instruments" (previously SFAS No. 107). This topic requires that the
Company disclose estimated fair values of financial instruments. The carrying
amounts reported in the statements of financial position for current assets and
current liabilities qualifying as financial instruments are a reasonable
estimate of fair value.
  Reclassifications
  Certain
items in the prior year financial statements have been reclassified for
comparative purposes to conform to the presentation in the current period’s
presentation. These reclassifications have no effect on the previously reported
income (loss).
  Recently
Issued Accounting Pronouncements
  The
adoption of these accounting standards had the following impact on the Company’s
statements of income and financial condition:
  ·
              FASB
      ASC Topic 855, “Subsequent Events”. In May 2009, the FASB issued FASB ASC
      Topic 855, which establishes general standards of accounting and
      disclosure of events that occur after the balance sheet date but before
      financial statements are issued or are available to be issued. In
      particular, this Statement sets forth : (i) the period after the balance
      sheet date during which management of a reporting entity should evaluate
      events or transactions that may occur for potential recognition or
      disclosure in the financial statements, (ii) the circumstances under which
      an entity should recognize events or transactions occurring after the
      balance sheet date in its financial statements, (iii) the disclosures that
      an entity should make about events or transactions that occurred after the
      balance sheet date. This FASB ASC Topic should be applied to the
      accounting and disclosure of subsequent events. This FASB ASC Topic does
      not apply to subsequent events or transactions that are within the scope
      of other applicable accounting standards that provide different guidance
      on the accounting treatment for subsequent events or transactions. This
      FASB ASC Topic was effective for interim and annual periods ending after
      June 15, 2009, which was June 30, 2009 for the Corporation. The adoption
      of this Topic did not have a material impact on the Company’s financial
      statements and disclosures.
  ·
              FASB
      ASC Topic 105, “The FASB Accounting Standard Codification and the
      Hierarchy of Generally Accepted Accounting Principles”. In June 2009, the
      FASB issued FASB ASC Topic 105, which became the source of authoritative
      GAAP recognized by the FASB to be applied by nongovernmental entities.
      Rules and interpretive releases of the SEC under authority of federal
      securities laws are also sources of authoritative GAAP for SEC
      registrants. On the effective date of this FASB ASC Topic, the
      Codification will supersede all then-existing non-SEC accounting and
      reporting standards. All other non-SEC accounting literature not included
      in the Codification will become non-authoritative. This FASB ASC Topic
      identify the sources of accounting principles and the framework for
      selecting the principles used in preparing the financial statements of
      nongovernmental entities that are presented in conformity with GAAP. Also,
      arranged these sources of GAAP in a hierarchy for users to apply
      accordingly. In other words, the GAAP hierarchy will be modified to
      include only two levels of GAAP: authoritative and non-authoritative. This
      FASB ASC Topic is effective for financial statements issued for interim
      and annual periods ending after September 15, 2009. The adoption of this
      topic did not have a material impact on the Company’s disclosure of the
      financial statements
  ·
              FASB
      ASC Topic 320, “Recognition and Presentation of Other-Than-Temporary
      Impairments”. In April 2009, the FASB issued FASB ASC Topic 320 amends the
      other-than-temporary impairment guidance in GAAP for debt securities to
      make the guidance more operational and to improve the presentation and
      disclosure of other-than-temporary impairments on debt and equity
      securities in the financial statements. This FASB ASC Topic does not amend
      existing recognition and measurement guidance related to
      other-than-temporary impairments of equity securities. The FASB ASC Topic
      shall be effective for interim and annual reporting periods ending after
      June 15, 2009, with early adoption permitted for periods ending after
      March 15, 2009. Earlier adoption for periods ending before March 15, 2009,
      is not permitted. This FASB ASC Topic does not require disclosures for
      earlier periods presented for comparative purposes at initial adoption. In
      periods after initial adoption, this FASB ASC Topic requires comparative
      disclosures only for periods ending after initial adoption. The adoption
      of this Topic did not have a material impact on the Company’s financial
      statements and disclosures.
  10
  The
Company is evaluating the impact that the following recently issued accounting
pronouncements may have on its financial statements and
disclosures.
  ·
              FASB
      ASC Topic 860, “Accounting for Transfer of Financial Asset”., In June
      2009, the FASB issued additional guidance under FASB ASC Topic 860,
      “Accounting for Transfer and Servicing of Financial Assets and
      Extinguishment of Liabilities", which improves the relevance,
      representational faithfulness, and comparability of the information that a
      reporting entity provides in its financial statements about a transfer of
      financial assets; the effects of a transfer on its financial position,
      financial performance, and cash flows; and a transferor’s continuing
      involvement, if any, in transferred financial assets. The Board undertook
      this project to address (i) practices that have developed since the
      issuance of FASB ASC Topic 860, that are not consistent with the original
      intent and key requirements of that statement and (ii) concerns of
      financial statement users that many of the financial assets (and related
      obligations) that have been derecognized should continue to be reported in
      the financial statements of transferors. This additional guidance requires
      that a transferor recognize and initially measure at fair value all assets
      obtained (including a transferor’s beneficial interest) and liabilities
      incurred as a result of a transfer of financial assets accounted for as a
      sale. Enhanced disclosures are required to provide financial statement
      users with greater transparency about transfers of financial assets and a
      transferor’s continuing involvement with transferred financial assets.
      This additional guidance must be applied as of the beginning of each
      reporting entity’s first annual reporting period that begins after
      November 15, 2009, for interim periods within that first annual reporting
      period and for interim and annual reporting periods thereafter. Earlier
      application is prohibited. This additional guidance must be applied to
      transfers occurring on or after the effective
  date.
  ·
              FASB
      ASC Topic 810, “Variables Interest Entities”. In June 2009, the FASB
      issued FASB ASC Topic 810, which requires an enterprise to perform an
      analysis to determine whether the enterprise’s variable interest or
      interests give it a controlling financial interest in a variable interest
      entity. This analysis identifies the primary beneficiary of a variable
      interest entity as the enterprise that has both of the following
      characteristics: (i)The power to direct the activities of a variable
      interest entity that most significantly impact the entity’s economic
      performance and (ii)The obligation to absorb losses of the entity that
      could potentially be significant to the variable interest entity or the
      right to receive benefits from the entity that could potentially be
      significant to the variable interest entity. Additionally, an enterprise
      is required to assess whether it has an implicit financial responsibility
      to ensure that a variable interest entity operates as designed when
      determining whether it has the power to direct the activities of the
      variable interest entity that most significantly impact the entity’s
      economic performance. This FASB Topic requires ongoing reassessments of
      whether an enterprise is the primary beneficiary of a variable interest
      entity and eliminate the quantitative approach previously required for
      determining the primary beneficiary of a variable interest entity, which
      was based on determining which enterprise absorbs the majority of the
      entity’s expected losses, receives a majority of the entity’s expected
      residual returns, or both. This FASB ASC Topic shall be effective as of
      the beginning of each reporting entity’s first annual reporting period
      that begins after November 15, 2009, for interim periods within that first
      annual reporting period, and for interim and annual reporting periods
      thereafter. Earlier application is
prohibited.
  ·
              FASB
      ASC Topic 820, “Fair Value measurement and Disclosures”, an Accounting
      Standard Update. In September 2009, the FASB issued this Update to
      amendments to Subtopic 82010, “Fair Value Measurements and Disclosures”.
      Overall, for the fair value measurement of investments in certain entities
      that calculates net asset value per share (or its equivalent). The
      amendments in this Update permit, as a practical expedient, a reporting
      entity to measure the fair value of an investment that is within the scope
      of the amendments in this Update on the basis of the net asset value per
      share of the investment (or its equivalent) if the net asset value of the
      investment (or its equivalent) is calculated in a manner consistent with
      the measurement principles of Topic 946 as of the reporting entity’s
      measurement date, including measurement of all or substantially all of the
      underlying investments of the investee in accordance with Topic 820. The
      amendments in this Update also require disclosures by major category of
      investment about the attributes of investments within the scope of the
      amendments in this Update, such as the nature of any restrictions on the
      investor’s ability to redeem its investments at the measurement date, any
      unfunded commitments (for example, a contractual commitment by the
      investor to invest a specified amount of additional capital at a future
      date to fund investments that will be made by the investee), and the
      investment strategies of the investees. The major category of investment
      is required to be determined on the basis of the nature and risks of the
      investment in a manner consistent with the guidance for major security
      types in GAAP on investments in debt and equity securities in paragraph
      320-10-50-lB. The disclosures are required for all investments within the
      scope of the amendments in this Update regardless of whether the fair
      value of the investment is measured using the practical expedient. The
      amendments in this Update apply to all reporting entities that hold an
      investment that is required or permitted to be measured or disclosed at
      fair value on a recurring or non recurring basis and, as of the reporting
      entity’s measurement date, if the investment meets certain criteria The
      amendments in this Update are effective for the interim and annual periods
      ending after December 15, 2009. Early application is permitted in
      financial statements for earlier interim and annual periods that have not
      been issued.
  11
  ·
              FASB
      ASC Topic 740, “Income Taxes”, an Accounting Standard Update. In September
      2009, the FASB issued this Update to address the need for additional
      implementation guidance on accounting for uncertainty in income taxes. The
      guidance answers the following questions: (i) Is the income tax paid by
      the entity attributable to the entity or its owners? (ii) What constitutes
      a tax position for a pass-through entity or a tax-exempt not-for-profit
      entity? (iii) How should accounting for uncertainty in income taxes be
      applied when a group of related entities comprise both taxable and
      nontaxable entities? In addition, this Updated decided to eliminate the
      disclosures required by paragraph 740-10-50-15(a) through (b) for
      nonpublic entities. The implementation guidance will apply to financial
      statements of nongovernmental entities that are presented in conformity
      with GAAP. The disclosure amendments will apply only to nonpublic entities
      as defined in Section 740-10-20. For entities that are currently applying
      the standards for accounting for uncertainty in income taxes, the guidance
      and disclosure amendments are effective for financial statements issued
      for interim and annual periods ending after September 15,
      2009.
  Note
4 - Inventory
  The
Company values its inventory under the FIFO method of costing under the lower of
cost or market pricing model. The Company reviews its product for old and or
obsolete items and adjusts accordingly. The Company’s inventory consists of
finished and raw material product.
  Note
5- Property and Equipment
  At March
31, 2010 and September 30, 2009, property and equipment are comprised of the
following:
  (UNAUDITED)March
      31,
                      
                      
                      September
      30,2010
                      
                      
                      2009Furniture
      and Office Equipment
                      
                      $
                      97,611
                      
                      
                      $
                      97,611Computer
      Software
                      
                      
                      13,609
                      
                      
                      
                      13,609Machinery
      and Equipment
                      
                      
                      68,942
                      
                      
                      
                      68,942Less:
      Accumulated Depreciation
                      
                      
                      (106,808
                      )
                      
                      
                      (95,024
                      )Net
      Property & Equipment
                      
                      $
                      73,354
                      
                      
                      $
                      85,138
  Depreciation
for the six months ended March 31, 2010 and 2009 was $11,784 and $14,247,
respectively.
  Note
6 – Business Combination and Related Party Transactions
  On April
30, 2007, the Company purchased, though a business combination, all of the
issued and outstanding membership interests of Griffin Filters LLC, (“Griffin”)
a company established since 1971 and engaged in the design, engineering &
supplying of industrial air filtration equipment from its President. Aron Govil,
the Chairman, Chief Executive Officer, Treasurer and President of the Company,
was the owner of 100% of the issued and outstanding membership interests of
Griffin. The Company purchased 100% ownership in Griffin for a purchase price of
$2,750,000.00. The Company completed the Griffin purchase by (i) paying cash of
$700,000; (ii) issuing 20,000,000 shares of common stock valued at $750,000; and
(iii) issuing a four year convertible debenture in the amount of $1,300,000 (see
Note 7). Griffin had sales and net income of $3,297,409 and $145,981
respectively for fiscal year ended September 30, 2006. Griffin is now a
wholly-owned subsidiary of the Company.
  The
Company recorded the combination of Griffin Filters, LLC as a “As is Pooling”
because of the related party interest as follows:
  12
  Accounts
      Receivable
                    
                    $
                    530,506Inventory
                    
                    
                    49,668Property
      & Equipment, Net
                    
                    
                    67,018Other
      Assets
                    
                    
                    4,225Accounts
      Payable
                    
                    
                    (600,348
                    )Additional
      Paid-in-Capital
                    
                    
                    2,698,931Total
                    
                    $
                    2,750,000
  These
consolidated financial statements have been retrospectively adjusted for all
periods presented.
  In
addition, the Company had the following related party transactions:
  ·
              The
      Company sold to Ducon Technologies India product totaling $450,000. Ducon
      is an enterprise owned by the majority stockholder of the
      Company.
  ·
              The
      Company leases space from Ducon Technologies, a related party, on a month
      to month basis.
  Note
7 – Note Payable Related Party
  Note
Payables to a shareholder and related entity totaling $269,226 is due October 1,
2011 and accrues interest at 5% per annum.
  Note
8 – Bank Line of Credit
  On Feb 1,
2010, Cemtrex entered into a $250,000 Commercial line of Credit with JP Morgan
Chase Bank. The note carries a variable interest rate at 3.75% over the LIBOR
rate.  Accrued interest and fees are payable monthly, with the entire
principle balance due at maturity on February 1, 2011.
  Note
9 – Convertible Note, net of Discount and Derivative Liability
  On Feb
12, 2010, Cemtrex issued a $50,000 convertible debenture to an unrelated third
party, Asher Enterprises Inc., that bears interest at 8% per year and matures on
December 12, 2010 at which time it is convertible into Cemtrex common shares at
a conversion price equaling 65% of the average trading price during the past ten
days from the maturity date.
  Per EITF
00-19, paragraph 4, this convertible note does not meet the definition of a
“conventional convertible debt instrument” since the debt is not convertible
into a fixed number of shares.  The debt can be converted into common stock
at a conversion price that is a percentage of the market price; therefore, the
number of shares that could be required to be delivered upon “net-share
settlement” is essentially indeterminate.  Therefore, the convertible
debenture is considered “non-conventional,” which means that the conversion
feature must be bifurcated from the debt and shown as a separate derivative
liability. The Company recognized a derivative liability of $32,655 on February
12, 2010, with an offset to debt discount in the same amount.
  Note
10– Stockholders’ Equity
  Series
A Preferred Stock
  The
Company is authorized to issue 10,000,000 shares of Series A Preferred Stock,
$0.001 par value. As of March 31, 2010 and September 30, 2009, there were
1,000,000 shares issued and outstanding.
  13
 Each
issued and outstanding Series A Preferred Share shall be entitled to the number
of votes equal to the result of: (i) the number of shares of common stock of the
Company issued and outstanding at the time of such vote multiplied by 1.01;
divided by (ii) the total number of Series A Preferred Shares issued and
outstanding at the time of such vote, at each meeting of shareholders of the
Company with respect to any and all matters presented to the shareholders of the
Company for their action or consideration, including the election of directors.
Holders of Series A Preferred Shares shall vote together with the holders of
Common Shares as a single class.
  On
September 8th, 2009, the Company issued 1,000,000 Series A Preferred Shares to
Arun Govil, the Chairman, Chief Executive Officer, Treasurer and President of
the Company, in conjunction with the of the conversion of a convertible note
(see Note 7).
  Common
Stock
  The
Company is authorized to issue 60,000,000 shares of common stock, $0.001 par
value. As of March 31, 2010 and September 30, 2009, there were 39,822,862 and
39,722,862 shares issued and outstanding, respectively.
  During
the six months March 31, 2010, the Company issued 100,000 common shares for
marketing services totaling $24,000.
  On
September 8th , 2009, the Company issued 2,500,000 common shares to Arun Govil,
the Chairman, Chief Executive Officer, Treasurer and President of the Company,
in conjunction with the of the conversion of a convertible note (see Note
7).  In addition, the Company issued 2,895,000 common shares for cash
totaling $8,525.
  Note
11 – Commitments & Contingencies
  Lease
Obligations
  The
Company leases its principal office at Farmingdale, New York, 4000 square feet
of office and warehouse/shop space in a single story commercial structure on a
month to month lease from Ducon Technologies Inc., at a monthly rental of
$2,157.
  The
Company’s subsidiary Griffin Filters LLC leases approx. 10,000 sq. ft. of office
and warehouse space in Liverpool, New York from a third party in a five year
lease at a monthly rent of $4,225 expiring on March 31, 2012.
  Legal
Proceedings
  A Demand
for Arbitration was filed on December 19, 2009 by Sindicatum Carbon Technology
Limited, a U.K. company before the JAMS arbitration and mediation society in New
York City.  In the SCT claim, SCT alleges breaches of contract by the
Company.  The Company has filed counter claims against SCT for breaches of
contract. Currently SCT’s counsel is drafting a motion to dismiss the Company’s
counterclaims, and the Company anticipates that such motion shall be served on
or about May 24, 1010.  The Company has approximately $488,000 in a
receivable due from SCT relating to this contract and has provided a reserve for
doubtful accounts of $250,000 to cover, what management believes to be the
expected loss.
  Note
12 - Subsequent Events
  The
Company has evaluated all subsequent events through May 19, 2010, the date this
Quarterly Report on Form 10-Q was filed with the SEC. There were no recognized
or unrecognized events requiring disclosure as significant subsequent
events.
  14
  Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
  FORWARD-LOOKING
STATEMENTS
  Statements
in this report may be "forward-looking statements." Forward-looking statements
include, but are not limited to, statements that express our intentions,
beliefs, expectations, strategies, predictions or any other statements relating
to our future activities or other future events or conditions. These statements
are based on current expectations, estimates and projections about our business
based, in part, on assumptions made by management. These statements are not
guarantees of future performance and involve risks, uncertainties and
assumptions that are difficult to predict. Therefore, actual outcomes and
results may, and are likely to, differ materially from what is expressed or
forecasted in the forward-looking statements due to numerous factors, including
those described above and those risks discussed from time to time in this
report, including the risks described under "Risk Factors" in our Form 10 filed
June 19, 2008 and any risks described in any other filings we make with
the SEC. Any forward-looking statements speak only as of the date on which
they are made, and we do not undertake any obligation to update any
forward-looking statement to reflect events or circumstances after the date of
this report.
  Our
discussion and analysis of our financial condition and results of operations are
based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses. On an
on-going basis, we evaluate these estimates, including those related to useful
lives of real estate assets, cost reimbursement income, bad debts, impairment,
net lease intangibles, contingencies and litigation. We base our estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. There can be no assurance that actual
results will not differ from those estimates.
  OVERVIEW
  Cemtrex
Inc. ("Cemtrex" or the "Company") is a Delaware corporation that designs,
engineers, assembles and sells emission monitoring equipment and instruments
through its MIP division to measure opacity, mercury, sulfur oxides,
hydrocarbons, nitrogen oxides, ammonia, carbon dioxide and oxygen in flue gases
discharging the stacks in industries such as:  chemicals,  pulp and
paper, steel, power, cement, coal  and  petrochemical. 
 Cemtrex provides consulting services on projects that create carbon
credits, and also markets technologies for controlling greenhouse gases such as
Methane from coal mines. The Company sells energy efficiency product called
Green DCV, which creates energy efficiency in an existing HVAC system in
commercial and industrial facilities by monitoring carbon dioxide levels. 
The Company through its Griffin Filters subsidiary, supplies air filtration and
environmental control systems for industrial applications.
  On April
27, 1998, the Company was incorporated in the state of Delaware under the name
“Diversified American Holdings, Inc.”  The Company subsequently changed its
name to “Cemtrex Inc.” on December 16, 2004.
  On April 30, 2007, the Company
purchased all of the issued and outstanding membership interests of Griffin
Filters LLC, (“Griffin”) a company established since 1971 and engaged in the
design, engineering & supplying of industrial air filtration equipment from
Arun Govil, the Chairman, Chief Executive Officer, Treasurer and President of
the Company, who was the 100% owner of the issued and outstanding membership
interests of Griffin.  The purchase price of $ 2,750,000.00 was paid by (i)
paying cash of $700,000.00, (ii) issuing 20,000,000 shares of common stock
valued at $750,000.00 and (iii) issuing a four year convertible debenture in the
amount of $1,300,000.00, paying interest of 8.0% per year and convertible into
30,000,000 shares of common stock. Griffin had sales and net income of
$3,297,409 and $145, 981 respectively for
fiscal year ended As of September 30, 2006. Griffin is now a wholly-owned
subsidiary of the Company.
  15
 On
September 8, 2009, the Company entered into a letter agreement with Arun Govil,
the Chairman, Chief Executive Officer, Treasurer and President of the Company.
Pursuant to the letter agreement Arun Govil agreed to cancel the convertible
promissory note, held by him, dated April 30, 2007 (the " Note ").  The
principal balance of the Note was $1,300,000. Pursuant to the terms of the Note,
the outstanding amount was convertible into 30,000,000 shares of our common
stock. Pursuant to the letter agreement, in return for cancelling the Note, the
Company issued Arun Govil 2,500,000 shares of our common stock and 1,000,000
shares of our Series A Preferred Stock.  Pursuant to the Certificate of
Designation of the Preferred Stock, each issued and outstanding Preferred Stock
shall be entitled to the number of votes equal to the result of: (i) the number
of shares of Common Stock issued and outstanding at the time of such vote
multiplied by 1.01; divided by (ii) the total number of Preferred Stock 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.
In consideration of the issuance of the Common Stock and Preferred Stock
described above pursuant to the letter agreement, Mr. Govil agreed to forfeit
27,500,000 shares of our common stock issuable as per the original terms of the
Note.
  The
Company designs,  engineers, assembles and sells emission monitoring
equipment and instruments to the chemicals,  pulp and paper, steel,
power,  coal  and  petrochemical industries,  as 
well  as  to municipalities,  hospitals,  and 
state  and  federal governments.  Our emission monitoring systems
are installed at the exhaust stacks of industrial facilities and are used to
measure the outlet flue gas concentrations of regulated pollutants, such as
sulfur dioxide, hydrogen chloride, hydrogen sulfide, nitrous oxides, ammonia,
nitrogen oxide, carbon dioxide, carbon monoxide and other regulated pollutants.
Through use of our equipment and instrumentation, our clients can monitor the
exhausts to the atmosphere from their facilities and comply with Environmental
Protection Agency and state and local emission regulations on dust, particulate,
fumes, acid gases and other regulated pollutants into the
atmosphere.
  The
Company is also involved in providing turnkey services for carbon credit
projects from abatement of greenhouse gases pursuant to Kyoto protocol and
assists project owners in selling of carbon credits globally. Carbon Credits are
emission offsets that are generated from greenhouse gases abatement, renewable
energy such as solar & wind, and energy efficiency projects which displace
carbon emissions from traditional fossil fuel sources like coal, oil or gas with
the subsequent reduction in greenhouse gas emissions. Companies, agencies and
governments buy, sell, bank and trade Carbon Credits called Certified Emission
Reductions or CERs.   Cemtrex provides consulting services for such
projects and arranges for investment equity and the sales of CERs for its
customers. Company also markets MCDR technology for generating carbon credits
from control of Methane from coal mines.
 
 The
Company has recently developed an energy efficiency product line named Green
DCV, which provides  energy efficiency in HVAC systems for commercial
buildings and industrial installations. Cemtrex’s Green-DCV system uses carbon
dioxide (CO2) sensors to monitor CO2 levels inside a building, and then regulate
the HVAC air-handling system to save energy and improve air quality. Cemtrex’s
Green-DCV can provide significant energy savings in buildings where occupancy
fluctuates during a 24-hour period, such as: office buildings, government
facilities, shopping malls, movie theaters, restaurants &
schools.
 
 The
Company through its subsidiary Griffin Filters provides a complete line of air
filtration and environmental control equipment to industries such as: chemical,
cement, steel, food, construction, mining, & petrochemical. Griffin’s
equipment is used to: (i) remove dust, corrosive fumes, mists, hydrocarbons,
volatile organic compounds, submicron particles and particulate from industrial
exhausts and boilers; (ii) clean noxious and acid gases such as sulfur dioxide,
hydrogen chloride, hydrogen sulfide, chlorides,  and  organics
from  industrial exhaust stacks prior to discharging to the atmosphere;
(iii) control emissions of coal, dust, sawdust, phosphates, flyash, cement,
carbon black, soda ash, silica, etc. from construction facilities, mining
operations and dryer exhausts.
  INDUSTRY
BACKGROUND
  The
market for environmental control systems and technologies is directly dependent
upon governmental regulations and their enforcement.  During the past three
decades, federal, state and local governments have realized the contaminated air
poses significant threats to public health and safety, and, in response, have
enacted legislation designed to curb emissions of a variety of air
pollutants.  Management believes that the existence of governmental
regulations creates demand for Company’s emission monitoring equipment and
environmental control systems.
  16
 These
governmental regulations affect nearly every industrial activity. The principal
federal legislation that was created is the Clean Air Act of 1970, as amended
9th Clean Air Act). This legislation requires compliance with ambient air
quality standards and empowers the Environmental Protection Agency (EPA) to
establish and enforce limits on the emissions of various pollutants from
specific types of facilities. The states have primary responsibility for
implementing these standards and, in some cases, have adopted standards more
stringent than those established by the EPA. In 1990, amendments to the Clean
Air Act were adopted which address, among  other things, the country acid
rain problem by imposing strict control on the emissions of sulfur dioxide from
power plants.  During 1997, EPA approved regulations for ozone related
emissions and in 1998 EPA issued regulations requiring utilities in 22 states to
significantly reduce Nitrogen oxides emissions.
  According
to certain scientists, the Earth's surface has risen in temperature by about 1
degree Fahrenheit in the past century. There is increasing evidence that certain
human activities are contributing to this change in temperature through
activities that increase the levels of greenhouse gases, primarily carbon
dioxide, methane, and nitrous oxide, in the atmosphere. Greenhouse gases trap
heat that would normally escape back into the atmosphere, thus increasing the
earth's natural greenhouse effect and increasing temperature over
time.
  The
earth's climate is predicted by certain scientists to change because human
activities are altering the chemical composition of the atmosphere through the
buildup of greenhouse gases—primarily carbon dioxide (CO2), methane
(CH4),
and nitrous oxide (NOx). The
heat-trapping property of these gases is undisputed. Although uncertainty exists
about exactly how earth's climate responds to these gases, global temperatures
are rising.
  EPA
Clean Air market Programs
  EPA’s
Clean air market programs include various market-based regulatory programs
designed to improve air quality. Clean air markets include various market-based
regulatory programs designed to improve air quality by reducing outdoor
concentrations of fine particles, sulfur dioxide, nitrogen oxides, mercury,
ozone and other significant air emissions. The most well-known of these programs
are EPA’s Acid Rain
Program and the NOxTrading Programs,
which reduce emissions of sulfur dioxide (SO2) and
nitrogen oxides (NOx)–compounds
produced by fossil fuel combustion.
 
 Acid
Rain Program
 
 The goal
of the Acid Rain Program is to achieve significant environmental and public
health benefits through reductions in emissions of sulfur dioxide (SO2) and
nitrogen oxides (NOx), the
primary causes of acid rain. To achieve this goal at the lowest cost to society,
the program employs both traditional and innovative, market-based approaches for
controlling air pollution. In addition, the program encourages energy efficiency
and pollution prevention.
 
 "Acid
rain" is a broad term referring to a mixture of wet and dry deposition
(deposited material) from the atmosphere containing higher than normal amounts
of nitric and sulfuric acids. The precursors, or chemical forerunners, of acid
rain formation result from both natural sources, such as volcanoes and decaying
vegetation, and man-made sources, primarily emissions of SO2
and NOxresulting from fossil fuel combustion. In the United States, roughly 2/3
of all SO2 and 1/4 of
all NOx come from
electric power generation that relies on burning fossil fuels, like coal. 
Acid rain occurs when these gases react in the atmosphere with water, oxygen,
and other chemicals to form various acidic compounds. The result is a mild
solution of sulfuric acid and nitric acid. When sulfur dioxide and nitrogen
oxides are released from power plants and other sources, prevailing winds blow
these compounds across state and national borders, sometimes over hundreds of
miles.
  17
   NOx
Trading Program
  The goal
of the NOx Trading Program is to reduce the transport of ground-level ozone
across large distances. The Ozone Transport Commission
(OTC) NOxBudget Program was
implemented from 1999 to 2002 and was replaced by the NOxBudget Trading
Program—also known as the “NOx SIP
Call”—in 2003. The NOxSIP
Call  Program is a market-based cap and trade program created
to reduce emissions of nitrogen oxides (NOx) from
power plants and other large combustion sources in the eastern United States.
NOx is a prime ingredient in the formation of ground-level ozone (smog), a
pervasive air pollution problem in many areas of the eastern United States. The
NOx
Budget Trading Program was designed to reduce NOx emissions
during the warm summer months, referred to as the ozone season, when
ground-level ozone concentrations are highest.
  Clean Air Interstate Rule
(CAIR)
  On March
10, 2005, EPA issued the Clean Air Interstate Rule (CAIR). This rule provides
states with a solution to the problem of power plant pollution that drifts from
one state to another. CAIR covers 28 eastern states and the District of
Columbia. The rule uses a cap and trade system to reduce the target
pollutants—sulfur dioxide (SO2) and
nitrogen oxides (NOx)—by 70
percent.
  The goal
of the Clean Air Interstate Rule (CAIR) is to permanently cap emissions of
SO2
and NOx in the
eastern U.S. States must achieve the required emission reductions using one of
two compliance options: (1) meet the state’s emission budget by requiring power
plants to participate in an EPA-administered interstate cap and trade system, or
(2) meet an individual state emissions budget through measures of the state’s
choosing.
  Clean Air Mercury Rule
(CAMR)
  On March
15, 2005, EPA issued the Clean Air Mercury Rule (CAMR) to permanently cap and
reduce mercury emissions from coal-fired power plants for the first time ever.
This rule makes the United States the first country in the world to regulate
mercury emissions from utilities.
 
 The goal
of the Clean Air Mercury Rule (CAMR) is to reduce mercury emissions from
coal-fired power plants through “standards of performance” for new and existing
utilities and a market-based cap and trade program.
 
 CAMR
establishes “standards of performance” limiting mercury emissions from new and
existing coal-fired power plants, and creates a market-based cap and trade
program that will reduce nationwide utility emissions of mercury in two distinct
phases. The first phase cap is 38 tons and emissions will be reduced by taking
advantage of “co-benefit” reductions—that is, mercury reductions achieved by
reducing sulfur dioxide (SO2) and
nitrogen oxides (NOx) emissions
under Clean Air
Interstate Rule (CAIR). In the second phase, due in 2018, coal-fired
power plants will be subject to a second cap, which will reduce emissions to 15
tons upon full implementation.
 
 EPA
Emission Monitoring Requirements
 
 EPA’s
emissions monitoring requirements are designed to ensure the compliance with its
current regulations pursuant to various programs. The emission monitoring
requirements ensure that the emissions data collected is of a known, consistent,
and high quality, and that the mass emissions data from source to source are
collected in an equitable manner. This is essential to support the Clean Air
Markets Program’s mission of promoting market-based trading programs as a means
for solving air quality problems
 
 Continuous
emissions monitoring (CEM) is instrumental in ensuring that the mandated
reductions of SO2, NOxmercury
and other pollutants are achieved. While traditional emissions limitation
programs have required facilities to meet specific emissions rates, the current
Program requires an accounting of each ton of emissions from each regulated
unit. Compliance is then determined through a direct comparison of total annual
emissions reported by CEM and allowances held for the unit.
 
 CEM is
the continuous measurement of pollutants emitted into the atmosphere in exhaust
gases from combustion or industrial processes. EPA has established requirements
for the continuous monitoring of SO2,
volumetric flow, NOx, diluent
gas, and opacity for units regulated under the Acid Rain Program. In addition,
procedures for monitoring or estimating carbon dioxide (CO2) are
specified. The CEM rule also contains requirements for equipment performance
specifications, certification procedures, and recordkeeping and
reporting.
  18
 
 The Acid
Rain Program uses a market-based approach to reduce SO2 emissions
in a cost-effective manner. (One allowance is an authorization to emit 1 ton of
SO2
during or after a specified calendar year; a utility may buy, sell, or hold
allowances as part of its compliance strategy.) Complete and accurate emissions
data are key to implementing this market-based approach.
 
 An
essential feature of smoothly operating markets is a method for measuring the
commodity being traded. The CEM data supplies the gold standard to back up the
paper currency of emissions allowances. The CEM requirement, management
believes, instills confidence in the market-based approach by verifying the
existence and value of the traded allowance.
 
 The owner
or operator of a unit regulated under the Acid Rain Program must install CEM
systems on the unit unless otherwise specified in the regulation. CEM systems
include:
 ·
              An
      SO2
      pollutant concentration monitor.
 ·
              A
      NOx
      pollutant concentration monitor.
 ·
              A
      volumetric flow monitor.
 ·
              An
      opacity monitor.
 ·
              A
      diluent gas (O2 or
      CO2)
      monitor.
 ·
              A
      computer-based data acquisition and handling system (DAHS) for recording
      and performing calculations with the
data.
 
 All CEM
systems must be in continuous operation and must be able to sample, analyze, and
record data at least every 15 minutes. All emissions and flow data will be
reduced to 1-hour averages. The rule specifies procedures for converting the
hourly emissions data into the appropriate units of measure.
 
 The
following is a summary of monitoring method requirements and
options:
 ·
              All
      existing coal-fired units serving a generator greater than 25 megawatts
      and all new coal units must use CEMs for SO2,
      NOx,
      flow, and opacity.
 ·
              Units
      burning natural gas may determine SO2 mass
      emissions by: (1) measuring heat input with a gas flowmeter and using a
      default emission rate; or (2) sampling and analyzing gas daily for sulfur
      and using the volume of gas combusted; or (3) using
  CEMs.
 ·
              Units
      burning oil may monitor SO2 mass
      emissions by one of the following
methods:
 1.
              daily
      manual oil sampling and analysis plus oil flow meter (to continuously
      monitor oil usage)
 2.
              sampling
      and analysis of diesel fuel oil as-delivered plus oil flow
      meter
 3.
              automatic
      continuous oil sampling plus oil flow
meter
 4.
              SO2 and
      flow CEMs.
 ·
              Gas-fired
      and oil-fired base-loaded units must use NOx
      CEMs.
 ·
              Gas-fired
      peaking units and oil-fired peaking units may either estimate NOx
      emissions by using site-specific emission correlations and periodic stack
      testing to verify continued representativeness of the correlations, or use
      NOx
      CEMS. The emission correlation method has been significantly streamlined
      in the revised rule.
 ·
              All
      gas-fired units using natural gas for at least 90 percent of their annual
      heat input and units burning diesel fuel oil are exempt from opacity
      monitoring.
 ·
              For
      CO2 all
      units can use either (1) a mass balance estimation, or (2) CO2
      CEMs, or (3) O2 CEMs
      in order to estimate CO2
      emissions.
  PRODUCTS
  The
Company’s MIP division offers a range of products and systems, incorporating
diverse technologies, to address the needs of a wide variety of industries and
their environmental regulations. Management believes that the Company provides a
single source responsibility for design, engineering, assembly, installation and
maintenance of systems to its customers. The Company’s products are designed to
operate so as to allow its users to determine their compliance with the latest
governmental emissions regulations.  The Company’s products measure
the concentrations of various regulated pollutants in the flue gases discharging
the exhaust stacks at various utilities and industries.
  19
  The MIP
division’s current products include the following:
  Opacity
monitor: Compliance & non-compliance types
  Management
believes that the Company’s Laser Opacity monitor provides the highest accuracy
and long-term reliability available for stack opacity and dust
measurements.  An EPA-compliant monitoring system, the monitor is a
lightweight, efficient solution for determining opacity or dust concentration in
stack gases.  Proven in many installations worldwide, it advances the
state of opacity monitoring with higher levels of accuracy, flexible
installation and reduced long-term maintenance
  Extractive
Continuous Emission Monitors (CEMS)
  Cemtrex
provides direct-extractiveanddilution-extractive
CEMS  equipment & systems that are applicable for utilities,
industrial boilers, FGD systems, SCR-NOx control, furnaces, gas turbines,
process heaters, incinerators, and process controls.  In addition to
traditional CEMS designed for maximum reliability and minimal maintenance in
monitoring criteria pollutants, the Company can also accurately quantify other
gaseous compounds through in-situ or extractive FTIR systems. The Company’s
Extractive CEMS can be configured to monitor for one or all of the following: •
NOx • SO2 • CO2 • O2 • CO • THC • Mercury • H2S • HCl & HF Acid • NH3 •
Particulate • Opacity • Volumetric Flow and Moisture.
  Ammonia
Analyzer
  The flue
gas stream which contain ammonia, nitrogen oxides and in some cases sulfur
dioxide utilize Ultra Violet radiation techniques for measurements. All these
components absorb UV radiation, and therefore can be monitored by process
analyzers that utilize UV absorbance techniques for detection.
  Mercury
Analyzer
  The EPA
Clean Air Mercury rule requires that all coal fired power plants must provide
continuous mercury monitoring by 2009. Management believes that Cemtrex's SM4
mercury monitor, a result of 10 years experience in mercury monitoring business,
provides reliable online measurements at a much lower cost than any other
competing model in the market. Cemtrex SM4 is the first instrument working on a
thermo catalytic principle avoiding wet chemical sample treatment. As a
consequence, the Company has found that maintenance demand has been drastically
minimized. We believe that it is the only monitor that required no maintenance
at a coal fired utility wet stack, no carrier gases, no water and 95% data
availabilitySM4 uses straight extractive Teflon sheathed Hastelloy probe with no
plugging or corrosion.
  The
Company ‘s carbon Credits division provides consulting services for carbon
credit projects from abatement of greenhouse gases pursuant to Kyoto protocol
and assists project owners in developing such projects globally. Carbon Credits
are emission offsets that are generated from greenhouse gases abatement,
renewable energy such as solar & wind, and energy efficiency projects which
displace carbon emissions from traditional fossil fuel sources like coal, oil or
gas with the subsequent reduction in greenhouse gas emissions. Companies,
agencies and governments buy, sell, bank and trade Carbon Credits called
Certified Emission Reductions or CERs.  The Company provides complete
services such as registering the project to be eligible to generate carbon
credits and  arrange for the required funding.  The Company
also markets MCDR technology for generating carbon credits from control of
Methane from coal mines.
 
 Company’s
energy Efficiency division  has recently developed an energy
efficiency product line named Green DCV,  which
provides  energy efficiency in HVAC systems for commercial buildings
and industrial installations. Cemtrex’s Green-DCV system uses carbon dioxide
(CO2) sensors to monitor CO2 levels inside a building, and then regulate the
HVAC air-handling system to save energy and improve air quality. Cemtrex
Green-DCV can provide significant   energy savings in buildings
where occupancy fluctuates during a 24-hour period, such as: office buildings,
government facilities, shopping malls, movie theaters, restaurants &
schools.
  20
  The
Company through its subsidiary, Griffin Filters, provides a complete line
of air filtration and environmental control equipment to industries such as:
chemical, cement, steel, food, construction, mining, & petrochemical.
Griffin’s equipment is used to: (i) remove dust, corrosive fumes, mists,
hydrocarbons, volatile organic compounds, submicron particles and particulate
from industrial exhausts and boilers; (ii) clean noxious and acid gases such as
sulfur dioxide, hydrogen chloride, hydrogen sulfide,
chlorides,  and  organics from  industrial exhaust
stacks prior to discharging to the atmosphere; (iii) control emissions of coal,
dust, sawdust, phosphates, flyash, cement, carbon black, soda ash, silica, etc.
from construction facilities, mining operations and dryer exhausts.
  PRODUCT
DEVELOPMENT
  The
Company is currently in the process of developing technology for economically
controlling carbon dioxide emissions from power plant flue gases that already
have installed wet limestone scrubbers utilizing a proprietary chemical. The
Company is carrying out an in-house pilot test program to develop this
technology for carbon dioxide reduction.
  The
Company is not dependent on, nor expects to become dependent on, any one or a
limited number of suppliers.  The Company buys parts and components to
assemble its equipment and products. The Company does not manufacture or
fabricate its own products or systems.  The Company relies on
sub-suppliers and third party vendors to procure from or fabricate its
components based on its design, engineering and specifications. The Company also
enters into subcontracts for field installation, which the Company supervises;
and the Company manages all technical, physical and commercial aspects of the
performance of the Company contracts. To date, the Company has not experienced
difficulties either in obtaining fabricated components and other materials and
parts or in obtaining qualified subcontractors for installation
work.
  PARTS,
REPAIR AND REFURBISHMENT SERVICES
  The
Company also provide  replacement  and
spare  parts  and  repair  and  refurbishment
services for our emission monitoring systems following the expiration of our
warranties  which  generally range up to  12
months. The Company has experienced only minimal costs from its
warranties.
  The
Company’s standard terms of sale disclaim any liability for consequential or
indirect losses or damages stemming from any failure of our products or systems
or any component thereof.  The Company seeks indemnification from its
subcontractors for any loss, damage or claim arising from the subcontractors'
failure to perform.
  COMPETITION
  The
Company faces substantial competition in each of its principal
markets.  Most of its competitors are larger and have greater
financial resources than the Company; several are divisions of multi-national
companies. The Company competes on the basis of price, engineering and
technological expertise, know-how and the quality of our products, systems and
services.  Additionally, the Company’s management believes that the
successful performance of the Company’s installed products and systems is a key
factor in gaining business as customers typically prefer to make significant
purchases from a company with a solid performance history.
  21
  We obtain
virtually all our contracts through competitive bidding. Although price is an
important factor and may in some cases be the
governing  factor,  it is not always determinative, and
contracts are often awarded on the basis of the
efficiency  or  reliability  of  products  and  the  engineering  and  technical
expertise of the bidder.  Several companies market products that compete
directly with our products. Other companies offer products that potential
customers may consider to be acceptable alternatives to our products and
services.  We face direct competition from companies with far greater
financial, technological, manufacturing and personnel resources, including
Thermo Fisher Scientific Inc., Tekran Instruments Corporation, Altech
Environment USA, Shaw Group, and Horiba Instruments Inc. in the emissions
monitoring business.
  INTELLECTUAL
PROPERTY
  Over the
years, the Company has developed proprietary technologies that give us an edge
in competing with its competitors. Thus, the Company relies on a combination of
trade secrets and know-how to protect its intellectual property. The Company has
not filed any patents.
  MARKETING
  The
Company relies on manufacturing representatives, distributors, direct
salespersons, magazine advertisements, internet advertising, trade shows, trade
directories and catalogue listings to market our products and services. The
Company uses more than eight manufacturing sales representatives in the United
States backed by our senior management and technical professionals. The
Company’s arrangements with independent sales representatives accord each a
defined territory within which to sell some or all of
our  products  and  systems,  provide  for
the payment of  agreed-upon  sales
commissions  and
are  terminable  at  will.  The
Company’s sales representatives do not have authority to execute contracts on
the Company’s behalf.
  The
Company’s sales representatives also serve as ongoing liaison function between
us and our customers during the installation phase of our products and systems
and address customers' questions or concerns arising thereafter. The Company
selects representatives based upon industry reputation, prior sales performance
including number of prospective leads generated and sales closure rates, and the
breadth of territorial coverage, among other criteria.
  Technical
inquiries received from potential customers are referred to our engineering
personnel. Thereafter, the Company’s sales and engineering personnel jointly
prepare a budget for future planning, a proposal, or a final bid.  The
period between initial customer contact and issuance of an order is generally
between two and twelve months.
  CUSTOMERS
  The
Company’s principal customers are engaged in refining, power, chemical, mining
and metallurgical processing.  Historically, most of our customers
have purchased individual products or systems which, in many instances, operate
in conjunction with products and systems supplied by others. For several years,
the Company has marketed its products as integrated custom engineered emission
monitoring systems and environmental management solutions. No one single
customer accounts for a large percentage of our annual sales.
  On most
projects, the Company is responsible to its customers for all phases of the
design, assembly, supply and, if included, field installation of its products
and systems. The successful completion of a project is generally determined by a
successful operational test of the supplied equipment conducted by our field
service technician in the presence of the customer.
  22
  TECHNOLOGY
  The
Company has developed a broad range of emission monitoring technological
base.  The Company’s equipment and instruments are used to measure:
(i) particulate, carbon dioxide, nitrogen oxides, mercury and sulfur dioxide
from coal-fired power plants, (ii) particulate from cement plants, (iii)
hydrocarbons, particulate and sulfur dioxide from refineries, (iv) hydrogen
sulfide, carbon monoxide, ammonia, hydrocarbons and other regulated pollutants
from chemical plants, steel plants, incinerators and other industrial exhausts.
Our emission monitors are capable of meeting all current federal and local
emission monitoring standards.  Company also markets technologies for
control of Methane from coal mines and creating energy efficiency in HVAC
systems through monitoring of carbon dioxide for commercial buildings and
industrial installations.  The Company has not filed any patents with
respect to its technology.
  BONDING
AND INSURANCE
  While
only a very few of our contracts require the Company to procure bid and
performance bonds, such requirements are prevalent for large projects or
projects partially or fully funded by federal, state or local governments. A bid
bond guarantees that a bidder will execute a contract if it is awarded the job
and a performance bond guarantees performance of the contract.  The
Company does not presently have a bank credit line to back bid or performance
bonds. Thus, the Company cannot bid on certain contracts.
  In
certain cases, the Company is able to secure large contracts by accepting
progress payments with retention provisions in lieu of bonds.
  The
Company currently maintains different types of insurance, including general
liability and property coverage.  The Company does not maintain
product liability insurance with respect to its products and
equipment.  Management believes that the insurance coverage that it is
adequate for our current business needs.
  GOVERNMENT
REGULATION
  Significant
environmental laws, particularly the Federal Clean Air Act, have been enacted in
response to public concern about the environment.  The Company believe
that compliance with and enforcement of these laws and regulations create the
demand for our products and systems and largely determine  the level
of expenditures that customers will  make to monitor the emissions
from their facilities. The Federal Clean Air Act, initially adopted in 1970 and
extensively amended in 1990, requires compliance with ambient air quality
standards and empowers the EPA to establish and enforce limits on the emission
of various pollutants from specific types of industrial
facilities.  States have primary responsibility for implementing these
standards, and, in some cases, have adopted more stringent
standards.
  The 1990
amendments to the Federal Clean Air Act  require, among other matters,
reductions in the emission of sulfur oxides, believed to be the cause of "acid
rain," in the emission of 189 identified hazardous air pollutants and
toxic  substances and the installation of equipment and systems which
will contain certain named toxic substances used in industrial processes in the
event of sudden, accidental, high-volume releases. Such amendments also extend
regulatory coverage to many facilities previously exempt due to their small size
and require the EPA to identify those industries which will be required to
install the mandated control technology for the industry to reduce the emission
of hazardous air pollutants from their respective plants and
facilities.  The Montreal Protocol, adopted in 1987, as well as EPA
regulations issued in 1992, call for the phase-out of CFCs. In addition,
regulations promulgated by the EPA in 1993 further limit the concentration of
pollutants, such as hydrogen chloride, sulfur dioxide, chlorine, heavy metals
and hazardous solid substances in the form of extremely fine dust, from sewage
sludge incinerators. Sewage sludge facilities are required to comply with these
regulations. Compliance with all these regulations can only be achieved by first
monitoring the pertinent emission levels.
  EMPLOYEES
  The
Company employs 18 full time and three part time employees, consisting of four
executive officers, three managers, six technical engineers, and five clerical
and administrative support persons.  None of our employees are
represented by a labor union. In addition, the Company utilizes commission sales
personnel and contract design engineers, on an as needed basis. There are no
employment agreements.
  23
  FACILITIES
  The
Company does not own any real estate.
  The
Company leases its principal office at Farmingdale, New York, 4000 square feet
of office and warehouse/shop space in a single story commercial structure on a
month to month lease from Ducon Technologies Inc., at a monthly rental of
2,157.00. The Company’s subsidiary Griffin Filters LLC leases approx. 10,000 sq.
ft. of office and warehouse space in Liverpool, New York from a third party in a
five year lease at a monthly rent of $ 4,858.00 expiring on March 30,
2012.  The Company has no plans to acquire any property in the
immediate future. The Company believes that its current facilities are adequate
for its needs through the next six months, and that, should it be needed,
suitable additional space will be available to accommodate expansion of the
Company's operations on commercially reasonable terms, although there can be no
assurance in this regard. There are no written agreements.
  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 this
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” section hereof.
  For the
three month period ended March 31, 2010, we generated revenues of $1,015,177
which is a decrease of  $738,485.00 from the three month period ended
March 31, 2009.  For the three month period ended March 31, 2010, we
generated a net loss of $157,300.  For the three month period ended
March 31, 2009, we had a net income of $121,671.   The following
table summarizes these results:
  For the Three Months EndedMarch 312010
                                                            
                                                            
                                                            2009Revenues
                                                            
                                                            $
                                                            1,015,177
                                                            
                                                            
                                                            $
                                                            1,753,662Operating
      Expenses
                                                            
                                                            $
                                                            683,984
                                                            
                                                            
                                                            $
                                                            620,558Net
      Income (Loss)
                                                            
                                                            $
                                                            (157,300
                                                            )
                                                            
                                                            $
                                                            121,671Income
      (Loss) Per Share-Basic and Diluted
                                                            
                                                            
                                                            0.00
                                                            
                                                            
                                                            
                                                            0.00Weighted
      Average Number of Shares
                                                            
                                                            
                                                            39,822,862
                                                            
                                                            
                                                            
                                                            34,328,862
  As at
                      
                      
                      As atMarch
                        31
                      
                      
                      September
                        302010
                      
                      
                      2009Current
      Assets
                      
                      $
                      1,602,511
                      
                      
                      $
                      1,654,119Total
      Assets
                      
                      $
                      1,680,090
                      
                      
                      $
                      1,743,482Total
      Liabilities
                      
                      $
                      1,758,020
                      
                      
                      $
                      1,655,196Total
      Stockholders’ Equity
                      
                      $
                      (77,930
                      )
                      
                      $
                      88,286
 
 24
  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.
  We
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
three months ended March 31, 2010 decreased by $738,485 or 43%, to $1,015,177
from $1,753,662 for the three months ended March 31,2009. Sales growth decreased
during the three month period ended March 31, 2010 primarily due to decreased
sales in the MIP division.
  Gross Profit: Net loss for
the three months ended March 31, 2010 was $157,300 which made up16% of net
sales   as compared to $121,671 for the three months ended March
31, 2009, which was 7% of net sales.  The lower gross margin in the
three months ended March 31, 2010 was a direct result of low profit margin jobs
booked and shipped due to the difficult economic climate as compared to the
previous quarter and also due to the direct results of the lower margin products
mix shipped during the period.
  25
  Operating Expenses:Operating
expenses for the three months ended March 31, 2010 increased $63,426, or 11%, to
$659,984 from $620,558 for the three months ended March 31,
2009.  Operating expenses as a percentage of sales increased in the
three month period ended March 31, 2010 to 68% from 36% in the three month
period ended March 31, 2009.  The increase in operating expenses in
the current quarter were primarily due to  marketing expenses for
promoting Company’s green DCV and ventilation air methane MCDR product
lines.
  Net Income/Loss:The Company
had net loss of $157,300 which was 16% of net sales, for the three month period
ended March 31 2010 as compared to a net income of $121,671 which was 7% of net
sales, for the three month ended March 31, 2009.  The loss in the
current quarter as compared to the previous quarter a year ago was a result of
high marketing expenses for promoting Company’s green DCV and ventilation air
methane MCDR product lines and lower gross profit made on shipments made during
the current quarter. The net loss percentage in this period as compared to the
previous one was a result of lower gross margin sales and  higher
operating expenses due to higher marketing  expenses for promoting
Company’s green DCV and ventilation air methane MCDR product lines.
  Provision
for Income Taxes: There is no provision for income for this period due net loss
of $157,300.
  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 $113,717 at March 31, 2010 compared to $389,443 at September 30,
2009.  This include cash and cash equivalent of $25,083 at March 31,
2010 and $356,552 at September 30,2009, respectively. The reason for the
decrease in working capital was due to non profitability of operations during
this period.
  Trade
receivables increased $336,921 or 36% at March 31, 2010 to $1,285,736 at March
31, 2009 from $948,815 at September 30, 2009. The increase in accounts
receivable is attributable to terms and timing of order shipments from
customers.
  Inventories
decreased $51,604 or 16% to $282,498 at March 31, 2010 from $334,102 at
September 30, 2009.  The decrease inventory was due to timing of order
shipment from customers and receipt of fresh inventories.
  Continuing
operations provided $510,175 of cash for the three months ended March 31, 2010,
compared to usage of $72,370.  The increase in cash flows was
primarily related to payments of account payable and collection of account
receivables timing.   Investing activities for continuing
operations generated $0 of cash during the three months ended March 31, 2010,
compared to use of $68,048 cash during the three months ended March 31,
2009.  The financing activities during the three months ended March
31, 2010 used up $178,706 in cash from repayment of loans to shareholder and
provided $146,030 in cash for the three month period ended March 31, 2009 from
loan proceeds.
  We
believe that our cash on hand, cash generated by operations, is sufficient to
meet the capital demands of our current operations during the 2010 fiscal year.
Any major increases in sales, particularly in new products, may require
substantial capital investment. Failure to obtain sufficient capital could
materially adversely impact our growth potential.
  26
  Outlook
  We
anticipate that the outlook for our products and services remains quite 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 mercury monitors, opacity
monitors, carbon credits and air filtration products of subsidiary Griffin
Filters.
  President
Obama has promised to invest $150 billion over 10 years in renewable energy and
environmental control technologies as part of a wider plan to increase US energy
security amid fear of oil shortages, while also reducing the country’s carbon
emissions in a bid to tackle global warming - and create jobs during an economic
downturn. A report from a leading US-based research firm predicts that while the
global carbon market will contract 29% this year to just $84 billion, it will
recover quickly over the next four years, growing at an average of 68% a year to
be worth $669 billion by 2013. According to official
budget figures released by the Obama administration earlier this year, it
expects to
raise $646 billionbetween 2012 and 2019 for
the US treasury through the auctioning of carbon
allowances.
  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 “Risk Factors” as well
as:
  •
              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 federal and state
      regulations and laws;
  •
              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 10Q will
in fact occur.
  Item 3. Quantitative &
Qualitative Disclosures about Market Risks
  Not
applicable.
  27
  Item
4. Controls and Procedures
  (a)
              Evaluation
      of Disclosure and Procedures
  We
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of March 31, 2010. This evaluation was carried out
under the supervision and with the participation of our President (Chief
Executive Officer), Arun Govil and our Vice President of Finance, Renato Dela
Rama. Based upon that evaluation, our Chief Executive Officer and Vice President
of Finance concluded that, as of March 31, 2010, our disclosure controls and
procedures were and concluded that it is effective as of such date. Any internal
control system, no matter how well designed, will have inherent limitations.
Therefore, even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and
presentation. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
  Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act are recorded, processed, summarized and
reported, within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed under the Exchange Act is accumulated and communicated to
management, including our Chief Executive Officer and Vice President of Finance,
to allow timely decisions regarding required disclosure.
  (b)
              Changes
      in Internal Controls over financial
reporting
  There
have been no changes in our internal controls over financial reporting during
our last fiscal quarter, which has materially affected, or is reasonably likely
to materially affect, our internal control over financial
reporting.
  28
  Part II Other
Information
  Item
1. Legal Proceedings
  The
Company is not currently a party to any threatened or pending legal proceedings,
other than incidental litigation arising in the ordinary course of
business.  In the opinion of management, the ultimate disposition of these
matters will not have a material adverse effect on the Company’s consolidated
financial position, results of operations or cash flows.
  Item
1A Risk Factors
  RISKS
RELATED TO OUR BUSINESS
  RISK
FACTORS
  An
Investment in our common stock involves risks. You should carefully consider the
following risks, as well as the other information contained in this quarterly
report. If any of the following risks actually occur, our business could be
materially harmed.
  o     
We are substantially dependent upon the success and market acceptance of our
technology. The failure of the emissions monitoring and controls market to
develop as we anticipate, would adversely affect our business.
  The
Company's success is largely dependent on increased market acceptance of our
emission monitoring equipment and control systems. . If acceptance of emissions
monitoring equipment does not continue to grow, then the Company’s revenues may
be significantly reduced.
  oIf we are unable to develop new products, our competitors may develop and
market products with better features that may reduce demand for our potential
products. The Company may not be able to introduce any new products or any
enhancements to its existing products on a timely basis, or at all. In addition,
the introduction by the Company of any new products could adversely affect the
sales of certain of its existing products. If the Company's competitors develop
innovative emissions testing technology that are superior to the Company's
products or if the Company fails to accurately anticipate market trends and
respond on a timely basis with its own innovations, the Company may not achieve
sufficient growth in its revenues to attain profitability.
  oWe have incurred losses for the three months ended March 31, 2010 and for
the fiscal year ending September 30, 2007, and we may incur losses for the
foreseeable future.
  We had a
net loss of $157,300 for the three months ended March 31, 2010 and a net loss of
$32,916 for the three months ended December 31, 2009. These losses have resulted
principally from higher marketing expenses of new product lines and expenses
incurred in the extensive demonstration testing of its new SM4 compliance
mercury monitors at various utility sites and the low gross margin product line
of Griffin Filters. We may continue to incur significant expenditures related to
research and development, selling and marketing and general and administrative
activities as well as capital expenditures and anticipate that our expenses and
losses may increase in the foreseeable future as we expand our business;
however, for the year ended September 30, 2009, we generated a net profit of
$155,010. Further, as a public company we will also incur significant legal,
accounting and other expenses that we did not incur as a private company. To
achieve sustained profitability, we will need to generate significant additional
revenues with significantly improved gross margins. It is uncertain when, if
ever, we will return to profitability. We might not be able to return to,
sustain or increase profitability on a quarterly or annual
basis.
  29
 
 oThe Company faces constant changes in governmental standards by which our
products are evaluated.
  The
Company believes that, due to the constant focus on the environment and clean
air standards throughout the world, a requirement in the future to adhere to new
and more stringent regulations both domestically and abroad is possible as
governmental agencies seek to improve standards required for certification of
products intended to promote clean air.  In the event our products
fail to meet these ever-changing standards, some or all of our products may
become obsolete.
  oThe future growth of our business depends, in part, on enforcement of
existing emissions-related environmental regulations and further tightening of
emission standards worldwide.
  The
Company expects that the future business growth will be driven, in part, by the
enforcement of existing emissions-related environmental regulations and
tightening of emissions standards worldwide.  If such standards do not
continue to become stricter or are loosened or are not enforced by governmental
authorities, it could have a material adverse effect on our business, operating
results, financial condition and long-term prospects.
  oWe may incur substantial costs enforcing our proprietary information,
defending against third-party patents, invalidating third-party patents or
licensing third-party intellectual property, as a result of litigation or other
proceedings relating to patent and other intellectual property
rights.
  The
Company considers its technology and procedures proprietary. In particular, the
Company depends substantially on its flexibility to develop custom engineered
solutions for various applications and be responsive to customer needs. The
Company has not filed for any patents for its technologies.
  The
Company may be notified of claims that it has infringed a third party's
intellectual property. Even if such claims are not valid, they could subject the
Company to significant costs. In addition, it may be necessary in the future to
enforce the Company's 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. An adverse
outcome in litigation or any similar proceedings could force the Company 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 the Company 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 the Company has 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 affect the Company's 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.
  oProduct defects could cause the Company to incur significant product
liability, warranty, repair and support costs and damage its reputation which
would have a material adverse effect on its business.
  Although
the Company rigorously tests its products, defects may be discovered in future
or existing products. These defects could cause the Company to incur significant
warranty, support and repair costs and divert the attention of its research and
development personnel. It could also significantly damage the Company's
reputation and relationship with its distributors and customers which would
adversely affect its business. In addition, such defects could result in
personal injury or financial or other damages to customers who may seek damages
with respect to such losses. A product liability claim against the Company, even
if unsuccessful, would likely be time consuming and costly to
defend.
  oThe markets in which we operate are highly competitive, and many of our
competitors have significantly greater resources than we do.
  There is
significant competition among companies that provide emissions monitoring
systems.  Several companies market products that compete directly with
our products.  Other companies offer products that potential customers
may consider to be acceptable alternatives to our products and
services.  We face direct competition from companies with far greater
financial, technological, manufacturing and personnel resources, including
Thermo Fisher Scientific Inc., Tekran Instruments Corporation, Altech
Environment USA, Shaw Group, and Horiba Instruments Inc. in the emissions
monitoring business. Newly developed products could be more effective and cost
efficient than our current or future products.  Many of the current
and potential future competitors have substantially more engineering, sales and
marketing capabilities and broader product lines than we have.
  30
  oThe Company’s results may fluctuate due to certain regulatory, marketing
and competitive factors over which we have little or no control.
  The
factors listed below, some of which we cannot control, may cause our revenue and
results of operations to fluctuate significantly:
  ·
              the
      existence and enforcement of government environmental regulations. If
      these regulations are not maintained or enforced (or they are modified)
      then the market for Company’s products could
  deteriorate;
 ·
              Retaining
      and keeping qualified employees and management
  personnel;
 ·
              Ability
      to upgrade our products to keep up with the changing market place
      requirements;
 ·
              Ability
      to keep up with our competitors who have much higher resources than
      us;
 ·
              Ability
      to find sub suppliers and sub contractors to assemble and install our
      products;
 ·
              General
      economic conditions of the industry and the ability of potential customers
      to spend money on setting up new industries that require our
      products;
 ·
              Ability
      to maintain or raise adequate working capital required for the operations
      and future growth; and
 ·
              Ability
      to retain our CEO and other senior key
  personnel.
  oThe loss of our senior management and failure to attract and retain
qualified personnel in a competitive labor market could limit our ability to
execute our growth strategy, resulting a slower rate of growth.
  We depend
on the continued service of our senior management. Due to the nature of our
business, we may have difficulty locating and hiring qualified personnel and
retaining such personnel once hired. The loss of the services of any of our key
personnel, or our failure to attract and retain other qualified and experienced
personnel on acceptable terms, could limit our ability to execute our growth
strategy resulting in a slower rate of growth.
  o[General economic downturns in general would have a material adverse
effect on the Company's business, operating results and financial
condition.
  The
Company's operations may in the future experience substantial fluctuations from
period to period as a consequence of general economic conditions affecting
consumer spending. Therefore, any economic downturns in general would have a
material adverse effect on the Company's business, operating results and
financial condition.][need to revise based upon current financials]
  Risks related to investment in the
common stock of the Company
  o We may
need additional funds in the future. We may be unable to obtain additional funds
or if we obtain financing it may not be on terms favorable to us. You may lose
your entire investment.
  Based on
our current plans, we believe our existing cash and cash equivalents along with
cash generated from operations will be sufficient to fund our operating expenses
and capital requirements through December 31, 2010, although there is no
assurance of this result, we may need funds in the future. If our capital
resources are insufficient to meet future capital requirements, we will have to
raise additional funds. If we are unable to obtain additional funds on terms
favorable to us, we may be required to cease or reduce our operating
activities.
  o If we
raise additional funds by selling additional shares of our capital stock, the
ownership interests of our stockholders will be diluted.
  o Our
stock trades on the Over the Counter Bulletin Board (OTCBB) electronic quotation
system.
  31
  The
Company’s Common Stock currently trades on the Over the Counter Bulletin Board
(OTCBB) electronic quotation system under the symbol “CTEI.OB”. The OTCBB is a
decentralized market regulated by the Financial Industry Regulatory Authority in
which securities are traded via an electronic quotation system. There can be no
assurance that a trading market for the Company's shares will continue to exist
in the future, and there can be no assurance that an active trading market will
develop or be sustained. The market price of the shares of Common Stock is
likely to be highly volatile and may be significantly affected by factors such
as actual or anticipated fluctuations in the Company's operating results,
announcements of technological innovations, new products or new contracts by the
Company or its competitors, developments with respect to proprietary rights,
adoption of new government regulations affecting the environment, general market
conditions and other factors. In addition, the stock market has from time to
time experienced significant price and volume fluctuations that have
particularly affected the market price for the common stocks of technology
companies. These types of broad market fluctuations may adversely affect the
market price of the Company's common stock. SeeRisk Factor “Our stock
price may be highly volatile” below.
 
 o Our
shares of common stock are thinly traded, so stockholders may be unable to sell
at or near ask prices or at all if they need to sell shares to raise money or
otherwise desire to liquidate their shares.
  Our
common stock has from time to time been “thinly-traded,” meaning that the number
of persons interested in purchasing our common stock at or near ask prices at
any given time may be relatively small or non-existent. This situation is
attributable to a number of factors, including the fact that we are a small
company that is relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community that generate or
influence sales volume, and that even if we came to the attention of such
persons, they tend to be risk-averse and would be reluctant to follow an
unproven company such as ours or purchase or recommend the purchase of our
shares until such time as we become more seasoned and viable. As a consequence,
there may be periods of several days or more when trading activity in our shares
is minimal or non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support continuous
sales without an adverse effect on share price. We cannot give stockholders any
assurance that a broader or more active public trading market for our common
shares will develop or be sustained, or that current trading levels will be
sustained.
  o Our
common stock will be subject to “penny stock” rules which may be detrimental to
investors.
  If our
common stock is not listed on a national exchange or market, the trading market
for our common stock may become illiquid. Our common stock trades on the
over-the-counter electronic bulletin board and, therefore, is subject to the
requirements of certain rules promulgated under the Securities Exchange Act of
1934, which require additional disclosure by broker-dealers in connection with
any trades involving a stock defined as a "penny stock". The Securities and
Exchange Commission has adopted regulations which generally define "penny stock"
to be any equity security that has a market price (as defined) of less than
$5.00 per share or an exercise price of less than $5.00 per share. The
securities will become subject to rules that impose additional sales practice
requirements on broker-dealers who sell such securities. For transactions
covered by these rules, the broker-dealer must make a special suitability
determination for the purchaser of such securities and have received the
purchaser's written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the transaction, of a disclosure schedule
prepared by the Securities and Exchange Commission relating to the penny stock
market. The broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market-maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, among other requirements, monthly statements must be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks. Consequently, the "penny
stock" rules may restrict the ability of shareholders to sell the Common Stock
offered hereby in the secondary market.
  32
  o We do
not anticipate paying any dividends.
  No
dividends have been paid on the common stock of the Company. The Company does
not intend to pay cash dividends on its common stock in the foreseeable future,
and anticipates that profits, if any, received from operations will be devoted
to the Company's future operations. Any decision to pay dividends will depend
upon the Company's profitability at the time, cash available and other relevant
factors.
  o Our
stock price may be volatile.
  The
market price of our common stock, like that of many other technology companies,
has been volatile and may continue to be so in the future due to a wide variety
of factors, including:
  ·
                  announcements
      of technological innovations by us, our collaborative partners or our
      present or potential
competitors;
 ·
                our
      quarterly operating results and
performance;
 ·
                developments
      or disputes concerning patents or other proprietary
  rights;
 ·
                acquisitions;
 ·
                litigation
      and government proceedings;
 ·
                adverse
      legislation;
 ·
                changes
      in government regulations;
 ·
                economic
      and other external factors; and
 ·
                general
      market conditions.
 
 In
addition, potential dilutive effects of future sales of shares of common stock
by shareholdersand
by the Company could have an adverse effect on the market price of our
shares.
  o Our
principal shareholder has significant influence over our company which could
make it impossible for the public stockholders to influence the affairs of the
Company.
  Approximately
65% of our outstanding voting equity (common stock and preferred stock) is
beneficially held by Arun Govil, the Company’s Chairman, Chief executive
officer, President and Treasurer, as a result of Mr. Govil’s common stock and
Series A preferred stock ownership. Consequently, Mr. Govil will be able to
control substantially all matters requiring approval by the stockholders of the
Company, including the election of all directors and approval of significant
corporate transactions. This makes it impossible for the public stockholders to
influence the affairs of the Company.
  Item 2.Unregistered Sales of Equity
Securities and Use of Proceeds:
  Item 3. Defaults upon Senior
Securities:
  None
  Item 5. Other
Information:
  None
  Item
6. Exhibits
  31.1
      (2)
                
                Certification
      of Chief Executive Officer as required by Rule 13a-14 or 15d-14 of the
      Exchange Act, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
      of 2002.31.2
      (2)
                
                Certification
      of Vice President of Finance and Principal Financial Officer as required
      by Rule 13a-14 or 15d-14 of the Exchange Act, as adopted Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.32.1(2)
                
                Certification
      of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant
      to Section 906 of the Sarbanes-Oxley Act 0f of 2002.32.2
      (2)
                
                Certification
      of Vice President of Finance and Principal Financial Officer Pursuant to
      18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
      Act 0f of 2002.
  33
  Signatures
  Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
  CEMTREX, INC.(Registrant)Dated:
      May 20, 2010
                      
                      By
                      /s/ Arun GovilArun
      Govil, Chairman of the Board, Chief Executive Officer and President
      (Principal Executive Officer)Dated:
      May 20, 2010
                      
                      By
                      /s/ Renato Dela RamaRenato
      Dela Rama, Vice President of Finance (Principal Financial
      Officer)
  34