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RELATED PARTY TRANSACTIONS
 12 Months Ended
Sep. 30, 2023
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 17 – RELATED PARTY TRANSACTIONS

 

As of September 30, 2023, and September 30, 2022, there was $3,806 payable due to Ducon Technologies, Inc. and $19,133, respectively, payable due to Ducon Technologies, Inc., which is controlled by Aron Govil, the Company’s Founder and Former Director and CFO. As of September 30, 2023, there were $637,208 of receivables due from Ducon Technologies, Inc. The Company has negotiated a payment agreement regarding past receivables and other liabilities due to Cemtrex, Inc. totaling $761,585. This agreement is in the form of a secured promissory note earning interest at a rate of 5% per annum and matures on July 31, 2024. Receivables of $708,512 representing the amount due from Ducon to Cemtrex Technologies Pvt. Ltd. the Company’s subsidiary based in India has been written off in fiscal 2022 to bad debt and appears on the Company’s consolidated statements of operations under general and administrative expenses.

 

On February 26, 2021, the Company entered into a Settlement Agreement and Release with Aron Govil regarding a dispute over an alleged misappropriation of funds.

 

As part of the Settlement Agreement, Mr. Govil was required to pay the Company consideration with a total value of $7,100,000 (the “Settlement Amount”) by entering into the Agreement. The Settlement Amount was satisfied in a combination of Mr. Govil forfeiting certain Preferred Stock and outstanding options and executing a secured note in the amount of $1,533,280. The Independent Board of Directors in coordination with Management concluded the settlement represented fair value.

 

As discussed above, Mr. Govil also executed a secured promissory note (the “Note”) in the amount of $1,533,280. The Note matures and is due in full in two years and bears interest at 9% per annum and is secured by all of Mr. Govil’s assets. Mr. Govil also agreed to sign an affidavit confessing judgment in the event of a default on the Note. While the Company believes the note is fully collectible, in accordance with ASC 450-30, Gain Contingencies, the Company determined the gain will not be recognized until the note is paid. Accordingly, the note and associated gain is not presented on the Company’s Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Income/(Loss).

 

On November 22, 2022, the Company entered into two Asset Purchase Agreements and one Simple Agreement for Future Equity (“SAFE”) with the Company’s CEO, Saagar Govil, to secure the sale of the subsidiaries Cemtrex Advanced Technologies, Inc, and Cemtrex XR, Inc., which include the brands SmartDesk, Cemtrex XR, Virtual Driver Interactive, Bravo Strong, and good tech (formerly Cemtrex Labs), to Mr. Govil (see NOTE 1).

 

As of September 30, 2023, there was $476,134 in trade receivables due from these companies and $64,703 in accounts payables. Of these receivables $132,102 are related to costs paid by Cemtrex related to payroll during the transition of employees to the new company and some subscription services that are set up on auto pay with a credit card. The remaining $344,032 is related to services provided by Cemtrex Technologies Pvt. Ltd. in the normal course of business. During Fiscal year 2023, the Company recognized $1,522,102 of revenue from these companies. During fiscal year 2023, $38,027 of trade receivables were reserved for by the Company’s subsidiary Cemtrex Technologies Pvt. Ltd. Due to regulations by the Indian tax authority. The Company will keep this allowance in place but considers the debt to be collectable. These balances are presented on the Consolidated Balance Sheets under the captions “Trade receivables - related party” and “Accounts payable - related party”.

 

As of September 30, 2023, there were royalties receivable from the sale of Cemtrex, XR, Inc. of $704,893, $30,000 is considered short-term and reported under the caption “Trade receivables - related party”.