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RELATED PARTY TRANSACTIONS
 12 Months Ended
Sep. 30, 2024
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 17 – RELATED PARTY TRANSACTIONS

 

As of September 30, 2024, and September 30, 2023, there was $0 and $3,806, 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 negotiated a payment agreement regarding past receivables and other liabilities due to Cemtrex, Inc. totaling $761,585. This agreement was in the form of a secured promissory note earning interest at a rate of 5% per annum and matured on July 31, 2024. The Company did not receive payment on this note at the maturity date and placed a full allowance on the note during fiscal year 2024 and appears on the Company’s Consolidated Statements of Operations and Comprehensive Loss 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.

 

Mr. Govil also executed a secured promissory note (the “Note”) in the amount of $1,533,280. The Note matured and was due in full in two years and boar interest at 9% per annum and was 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. 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 loss. The Company has not received payment on this note to date.

 

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

 

On November 22, 2022, the Company completed the above disposition for the following consideration.

 

●Cemtrex XR, Inc.

 

○$895,000 comprised of:

 

■$75,000 in cash payable at Closing; and
■5% royalty of all revenues on the Business to be paid 90 days after the end of each calendar year for the next three years; and should the total sum of royalties due be less than $820,000 at the end of the three-year period, Purchaser shall be obligated to pay the difference between $820,000 and the royalties paid.

 

●Cemtrex Advanced Technologies, Inc.

 

○$10,000 in cash payable at Closing; and
○5% royalty of all revenues on the Business to be paid 90 days after the end of each calendar year for the next 5 years; and
○$1,600,000 in SAFE (common equity) at any subsequent fundraising or exit above $5,000,000 with a $10,000,000 cap.

 

The Company’s Board of Directors, excluding Saagar Govil who abstained from all voting on these agreements, approved these actions and agreements.

 

 

Due to the on-going losses and risk associated with the SmartDesk business the Company has valued the royalty and SAFE agreement associated with the SmartDesk sale at $0 and considers such consideration to be a gain contingency. All receivables due from SmartDesk, Inc, have a full allowance placed on them, no payments have been received.

 

Based on sales projections for Cemtrex XR, Inc., the Company does not believe that it will exceed the sales levels required to exceed the $820,000 royalties due and has not accounted for any additional royalties at this time. In accordance with ASC 310 – Receivables, the Company has discounted the royalties due to $660,621 and during the years ended September 30, 2024, and 2023 the Company recognized $53,126 and $44,272 of royalties due, respectively, and will amortize the remaining amount over the period the royalties are due. Additionally, the Company received $76,000 in royalty payments.

 

As of September 30, 2024, there was $685,788 in trade receivables due from CXR, Inc. Of these receivables $60,628 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. $215,408 is related to the current amount of royalties due and the remaining $409,752 is related to services provided by Cemtrex Technologies Pvt. Ltd. in the normal course of business. These balances are presented on the Consolidated Balance Sheets under the caption “Trade receivables - related party”. The long-term balance of royalties of $456,611 is presented on the Company’s Consolidated Balance Sheets under the caption “Note receivable, net - related party”. During Fiscal year 2024, the Company recognized $665,520 of revenue from CXR, Inc.