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RELATED PARTY TRANSACTIONS
 3 Months Ended
Dec. 31, 2024
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 17 – RELATED PARTY TRANSACTIONS

 

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

 

On January 6, 2025, the Company and Saagar Govil signed an agreement to revise the purchase price structure and payment terms.

 

The Agreement’s Purchase Price provisions was amended to reflect that the Purchase Price will solely consist of the royalties based on the actual revenues generated in the three years following closing. The provision requiring the total sum of royalties to reach a minimum of $820,000, with any shortfall to be paid by Purchaser, was removed from the Agreement.

 

Additionally, it was agreed that the payment terms due under the royalties shall be as follows commencing on January 1, 2025:

 

●First Year (January 2025) Monthly Payment: $10,000
●Second Year (January 2026) Monthly Payment: $20,000
●Balloon Payment at the end of the Second Year (December 31, 2026): Total outstanding royalties

 

This transaction was approved by the Board of Directors with Saagar Govil abstaining from the vote.

 

As of December 31, 2024, management had been engaged in negotiations with Mr. Govil regarding the amendment to the contract, as both parties sought to modify the agreement as stated above. Based on the status of negotiations at year-end and the high likelihood that the modification would be finalized, management determined that it was appropriate to remove the previously recognized royalty receivable of $280,545 from the financial statements as of December 31, 2024.

 

As of December 31, 2024, there were royalties receivable from the sale of Cemtrex, XR, Inc. of $404,756, of which $120,000 is considered short-term and is presented on the Company’s unaudited Condensed Consolidated Balance Sheet under the caption “Trade receivables, net – related party. The Company has taken a $10,000 allowance for expected credit losses against these royalties. 

 

As of December 31, 2024, there was $524,838 in trade receivables due from the Cemtrex XR successor company, 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 subscription services that are set up on auto pay with a credit card. $120,000 is the short-term due on the royalties on CXR, Inc.’s revenues. The remaining $344,210 is related to services provided by Cemtrex Technologies Pvt. Ltd. in the normal course of business.