Technology company Cemtrex (Nasdaq: CETX) announced that it has undertaken a transformative restructuring to focus exclusively on its Vicon Industries and Advanced Industrial Services (AIS) businesses.
The restructuring — in which Cemtrex has divested its Smartdesk and VR subsidiaries — is the culmination of the company’s previously announced strategic shift toward prioritizing its core businesses.
“Surveillance industry trends are rapidly evolving toward Video Surveillance as a Service (VSaaS) as end-users seek a reliable source of video surveillance and access control technologies fit for today’s highly dynamic environment,” said Saagar Govil, chairman and CEO of Cemtrex. “We continue to see escalating demand from major customers for Vicon’s expanding line of Valerus products and software services, with Allied Market Research predicting the global VSaaS and video surveillance market will reach over $83 billion by 2030 with a CAGR of 10.9% between 2021 and 2030.”
Cemtrex acquired ownership of approximately 46% of outstanding common stock of Vicon Industries in 2018.
Govil said Vicon is on a strong path toward $5-10 million of recurring revenue in the next three to five years as the industry shifts to SaaS solutions leveraging AI and cloud technology solutions. “We believe this shift in focus to capture significant near-term recurring revenue opportunities in Vicon will maximize shareholder value over the next several years.”
AIS continues to be a strong source of cash flow with high repeat business and a well-known reputation, Govil said. “We expect to see continued growth in this segment driven by an increase in demand for industrial contracting and predictive maintenance services, as the industrial economy in the U.S. continues to thrive,” he continued.
On Nov. 22, as part of the strategic restructuring, Cemtrex completed a divestiture of its Smartdesk, CXR services, Cemtrex Labs, Virtual Driver Interactive and Bravo Strong assets and trade liabilities. The divestment of the subsidiaries was accomplished through a sale to existing management of Cemtrex, led Govil.
The company’s independent Board of Directors and management worked with independent third parties to establish valuations for the assets included in the transaction, according to the announcement. The Board of Directors, excluding Govil who abstained from all voting on the agreements, approved the actions and agreements.
Govil said the Smart Desk and AR/VR businesses have proven challenging to drive attractive returns and are better suited to be operated as private companies.
“This divesture will allow us to focus on helping Vicon accelerate the implementation of VSaaS and AI-based video analytics for our global customer base, and growing AIS industrial contracting services in a high repeat business,” Govil said.
On Nov. 22 the company stated the following disposition of assets and certain liabilities for the following consideration:
Cemtrex XR; $895,000 comprised of:
- $75,000 in cash payable at closing
- 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:
- $10,000 in cash payable at closing
- 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 million with a $10 million cap.
“With the divestments completed, we will be able to drive growth capital to Vicon and focus on a return to profitability,” Govil said. “We will invest in Vicon’s state-of-the-art end-to-end video surveillance security system that provides customers with a complete solution with the ability to monitor LPR, access control and video management all from Valerus.”