ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
You should read the following summary together with the more detailed information and consolidated financial statements and notes thereto and schedules appearing elsewhere in this report. When we refer to the “Company” “TX Holdings,” “we,” “our” or “us,” we mean TX Holdings, Inc., and its subsidiary.
The discussion and analysis contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is based upon our consolidated financial statements which have been prepared in accordance with GAAP.
The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our critical accounting policies and estimates, including those related to revenue recognition and contingencies. We base our estimates on historical experience, where available, and on various other assumptions we believe 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. Actual results may differ from these estimates under different assumptions and conditions.
Except for historical information, the statements and other information contained in this MD&A are forward-looking. Our actual results could differ materially from the results discussed in the forward-looking statements, which include certain risks and uncertainties.
Our independent registered public accounting firm’s report on the consolidated financial statements included in our Annual Report Form 10-K for the year ended September 30, 2018, contained an explanatory paragraph in which they expressed an opinion that there is substantial doubt about our ability to continue as a going concern.
Accordingly, careful consideration of such opinion should be given in determining whether to continue or become our stockholder.
Please refer to and carefully consider the factors described in the Risk Factors section in our Form 10-K for the year ended September 30, 2018, and in this report.
Business and Operational Overview
We are in the business of supplying, distributing and selling drill bits, related tools, and other mining supplies, rail and rail material directly and through other suppliers to United States’ coal mining companies for use in their production and transportation processes. Our coal mining customers are primarily located in Ohio, Pennsylvania, Kentucky and West Virginia. Our principal executive offices and warehousing facility is located in Ashland, Kentucky.
Our Business
We purchase mining supplies such as drill bits, augurs and related products from domestic as well as overseas manufacturers and rail material such as tee rail, switches, ties and other rail products from several suppliers of such products and distribute and sell such products to U.S. coal mining companies and other suppliers. Our products are either shipped to our warehouse in Ashland, Kentucky, for distribution to our customers or shipped directly to our customers, including products we import once they have been received by us at a port and cleared customs. Our products are transported primarily by ground transportation to our customers. Shipping costs are born by our customers.
We distribute and sell our products through an independent sales agent who is compensated on a commission basis.
We were incorporated in the State of Georgia in 2000.
RESULTS OF OPERATIONS
Results of Operations – For the three months ended
June 30
, 2019, versus the three months ended
June 30
, 2018
Revenues from Operations
Revenues for the third quarter of fiscal 2019 were $1,028,828 as compared to $1,002,866 for the same period in fiscal 2018, an increase of $25,962 or 2.6%. The increase in revenues is attributable to higher sales of our rail products
during the current period due to increased or renewed operations at previously downsized or shut-down coal mines.
Cost of Goods Sold
During the quarter ended June 30, 2019, our cost of goods sold was $904,542 as compared to cost of goods sold of $832,680 for the quarter ended June 30, 2018, an increase of $71,862 or 8.6%. The increase in cost of goods sold was due to an increase in sales, and a $19,174 inventory write-off during the current period. As a percentage of sales, cost of goods sold, excluding inventory write-off, increased from 83.0% in 2018 to 86.0% during the current period due to higher sales of a product mix with relatively higher unit cost during the current quarter.
G
ross Profit
Gross profit for the period ended June 30, 2019, decreased as a percentage of revenue to 12.1% from 17.0% for the same period of the prior fiscal year. The decrease in gross profit resulted from an unfavorable mix of higher cost rail related products with lower margins and an inventory write-off during the current third quarter.
Operating Expenses
Operating expenses for the three months ended June 30, 2019 were $150,347 as compared to $140,356 for the three months ended June 30, 2018, an increase of $9,991 or 7.1%.
The table below details the components of operating expenses, as well as the dollar and percentage changes for the comparative three-month periods.
|
|
Three Months Ended
|
|
|
|
6/30/2019
|
|
|
6/30/2018
|
|
|
$ Change
|
|
|
%Change
|
|
Operating Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission expense
|
|
$
|
28,256
|
|
|
$
|
44,418
|
|
|
$
|
(16,162
|
)
|
|
|
(36.4
|
)
|
Salary expense
|
|
|
35,421
|
|
|
|
30,814
|
|
|
|
4,607
|
|
|
|
15.0
|
|
Professional fees
|
|
|
5,212
|
|
|
|
5,267
|
|
|
|
(55
|
)
|
|
|
(1.0
|
)
|
Bad debt expense
|
|
|
14,621
|
|
|
|
–
|
|
|
|
14,621
|
|
|
|
100.0
|
|
Depreciation expense
|
|
|
1,792
|
|
|
|
1,792
|
|
|
|
0
|
|
|
|
0.0
|
|
Other operating expense
|
|
|
65,045
|
|
|
|
58,065
|
|
|
|
6,980
|
|
|
|
12.0
|
|
Total
|
|
$
|
150,347
|
|
|
$
|
140,356
|
|
|
$
|
9,991
|
|
|
|
7.1
|
|
Commission expense for the third quarter ended March 31, 2019 decreased by $16,162 due to a receivable write-off of $14,621 and lower sales margins of rail related products.
Salary expense for the three months ended June 30, 2019, was $35,421 compared to $30,814 for the same period in 2018, an increase of $4,607 or 15.0%. The higher salary expense is the direct result of an additional warehouse staff added to the payroll in the current period.
Professional fees decreased by $55 during the three months ended June 30, 2019 as compared to the same period in 2018. The decrease can be attributed to lower legal expenses related to SEC compliance and other compliance related matters.
Bad Debt Expense were $14,621 during the quarter ended June 30, 2019 which represent a 100% increase over the same period the prior year. The current period expense resulted from customer’s accounts write-off due to bankruptcy.
Depreciation expense during the three months ended June 30, 2019, was $1,792, which compares to the same period the prior year.
During the three months ended June 30, 2019, other operating expenses of $65,045 increased by $6,980 or 12.0% from $58,065 for the same period in 2018. The higher other operating expenses resulted primarily from higher repair and maintenance expenses.
Income from operations
Loss from operations for the quarter ended June 30, 2019, was $26,061 compared to income from operations of $29,830 during the same period in 2018. The decrease in income from operations when compared to the same period the prior year is the direct result of lower sales margins and higher operating expenses in the current period.
Other income and (expense)
Other income and expense for the three months ended June 30, 2019 was a net income of $53,742 as compared to a net expense of $29,266 for the quarter ended June 30,2018 or, an increase of $83,008. The net income increase is the result of a vendor credit of $93,545 for inventory previously written-off, partially offset by a $7,000 loss on disposal of a fixed asset.
Net income
For the quarter ended June 30, 2019, we had net income of $27,681 compared to net income of $564 for the quarter ended June 30, 2018. The $27,117 increase in net income in the current period was the result of a credit for prior written-off material, partially offset by lower sales margins of rail products and higher operating expenses during the current quarter.
Net income per common share
The net income of $27,681 for the quarter ended June 30, 2019, as well as the net income of $564 for the quarter ended June 30, 2018, when divided by the number of common shares outstanding of 48,053,084 basic shares in both years resulted in a net income per share of less than $0.01 in both periods.
RESULTS OF OPERATIONS
Results of Operations – For the
nine
months ended
June 30
, 2019, versus the
nine
months ended
June 30
, 2018
Revenues from Operations
Revenues for the nine months of fiscal 2019 were $3,158,569 as compared to $3,100,840 for the same period in fiscal 2018, an increase of $57,729 or 1.9%. The increase in revenues is attributable to higher sales of our rail products
during the current period due to increased or renewed operations at previously downsized or shut-down coal mines.
Cost of Goods Sold
During the nine months period ended June 30, 2019, our cost of goods sold was $2,664,579 as compared to cost of goods sold of $2,578,678 for the same period ended June 30, 2018, an increase of $85,901 or 2.6% due to an increase in sales during the current period and a $19,174 inventory write-off. As a percentage of sales, cost of goods sold increased from 83.2% in 2018 to 84.4% during the current period due to higher sales of a product mix with relatively higher unit cost during the current nine months period. The inventory write-off accounted for 0.6% of the cost of goods sold increase.
G
ross Profit
Gross profit for the period ended June 30, 2019, decreased as a percentage of revenue to 15.6% from 16.8% for the same period of the prior fiscal year. The decrease in gross profit resulted from an unfavorable mix of higher cost rail related products with lower margins sold during the current nine months period.
Operating Expenses
Operating expenses for the nine months ended June 30, 2019 were $393,922 as compared to $418,963 for the nine months ended June 30, 2018, a decrease of $25,041 or 6.0%.
The table below details the components of operating expenses, as well as the dollar and percentage changes for the comparative nine-month periods.
|
|
Nine Months Ended
|
|
|
|
6/30/2019
|
|
|
6/30/2018
|
|
|
$ Change
|
|
|
%Change
|
|
Operating Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission expense
|
|
$
|
86,634
|
|
|
$
|
108,259
|
|
|
$
|
(21,625
|
)
|
|
|
(20.0
|
)
|
Salary expense
|
|
|
109,814
|
|
|
|
87,572
|
|
|
|
22,242
|
|
|
|
25.4
|
|
Professional fees
|
|
|
5,398
|
|
|
|
22,167
|
|
|
|
(16,769
|
)
|
|
|
(75.6
|
)
|
Bad debt expense
|
|
|
14,621
|
|
|
|
20
|
|
|
|
14,601
|
|
|
|
73005.0
|
|
Depreciation expense
|
|
|
5,376
|
|
|
|
5,376
|
|
|
|
0
|
|
|
|
0.0
|
|
Other operating expense
|
|
|
172,079
|
|
|
|
195,569
|
|
|
|
(23,490
|
)
|
|
|
(12.0
|
)
|
Total
|
|
$
|
393,922
|
|
|
$
|
418,963
|
|
|
$
|
(25,041
|
)
|
|
|
(6.0
|
)
|
Commission expense for the current nine-month period decrease by $21,625 or 20.0% when compared to the same nine-month period in 2018. The lower commission is a direct result of lower profit margins in our sales of rail and mine products.
Salary expense for the nine months ended June 30, 2019, was $86,634 compared to $108,259 for the same period in 2018, an increase $21,625 or 20.0%. The higher salary expense is the direct result of an additional warehouse staff and an additional salesman added to the payroll in the current period.
Professional fees decreased $16,769 or 75.6% during the nine months ended June 30, 2019 as compared to the same period in 2018. The decrease can be attributed to lower legal expenses related to SEC compliance and other compliance related matters.
Depreciation expense during the nine months ended June 30, 2019, was $5,376, which compares to the same period the prior year.
Bad Debt Expense were $14,621 during the nine months ended June 30, 2019 which increased by $14,601 when compared to the same period the prior year. The current period expense resulted from customer’s accounts write-off due to bankruptcy.
During the nine months ended June 30, 2019, other operating expenses of $172,079 decreased by $23,490 or 12.0% from $195,569 for the same period in 2018. The lower other operating expenses resulted primarily from a $28,918 payroll tax over-accrual reversed in the current period.
Income from operations
Income from operations for the three quarters ended June 30, 2019, was $100,068 compared to income from operations of $103,199 during the same period in 2018. The decrease in income from operations when compared to the same period the prior year is the direct result of lower sales margins of rail products partially offset by lower operating expenses, in the current period.
Other income and (expense)
Other income and expense for the nine months ended June 30, 2019 was a net expense of $18,890 as compared to a net expense of $86,704 for the nine months ended on June 30,2018 or a loss decrease of $67,814. The lower net expense is the result of a vendor credit of $93,545 for inventory previously written-off, partially offset by a $7,000 loss on disposal of a fixed asset, higher interest on our loan of $8,039 in the current period and a $10,692 gain on sale of scrap during the 2018 period.
Net income
For the three quarters ended June 30, 2019, we had net income of $81,178 compared to net income of $16,495 for the same period ended June 30, 2018. The $64,683 increase in the current period net income resulted primarily from a credit from vendor on inventory previously written-off recorded in the current period.
Net income per common share
The net income of $81,178 for the nine months period ended June 30, 2019, as well as the net income of $16,495 for the nine months ended June 30, 2018, when divided by the number of common shares outstanding of 48,053,084 basic shares in both years resulted in a net income per share of less than $0.01 in both periods.
LIQUIDITY AND CAPITAL RESOURCES
The following table presents a summary of our net cash provided (used) by operating, investing and financing activities:
|
|
Nine Months Ended
|
|
Liquidity and capital resources
|
|
6/30/2019
|
|
|
6/30/2018
|
|
Net cash provided/(used) in operating activities
|
|
$
|
(39,604
|
)
|
|
$
|
55,771
|
|
Net cash provided/(used) in investing activities
|
|
|
–
|
|
|
|
–
|
|
Net cash provided/(used) in financing activities
|
|
|
10,539
|
|
|
|
(54,282
|
)
|
Net increase/(decrease) in cash equivalents
|
|
$
|
(29,065
|
)
|
|
$
|
1,489
|
|
At June 30, 2019, we had cash and cash equivalents of $7,544 as compared to $36,609 at September 30, 2018 a decrease of $29,065 or 79.4%.
Cash Flows Provided/(Used) in Operating Activities
Net cash used by operating activities for the nine months ended June 30, 2019, was $39,604 compared to net cash provided by operating activities of $55,771 in the same nine-months in 2018.
During the nine months ended June 30, 2019, we had net income of $81,178 as compared to net income of $16,495 for the same period in the prior year.
In the current nine months period, as well as prior year for the same period, the Company had non-cash expenses for depreciation of $5,376.
Net Cash used by operating activities during the nine months ended June 30, 2019 was $39,604. The increase in cash used in operations resulted from an increase in accounts receivable of $164,096, increase in inventory of $76,906 and a reduction in accrued liabilities of $92,782. The used cash from operations was partially offset primarily by an increase in accounts payable of $79,948, an increase in various liabilities of $105,115 and a net income of $81,178.
Cash Flows Provided/(Used in) Investing Activities
There was no cash flow used in investing activities for the period ended June 30, 2019 or 2018.
Cash Flows
Provided/(
Used
in
)
Financing Activities
During the nine months ended June 30, 2019, cash provided by financing activities was $10,539 compared to cash used in financing activities of $54,282 during the same period in 2018. During the current nine months period, the Company made payments on its term loan of $40,961 and received advances from our CEO of $124,500.
On December 3, 2015, we entered into a new fixed term loan agreement with a bank of $711,376 the proceeds of which were used to repay our previous line of credit. The loan is for a term of five years and matures on December 3, 2020. As of June 30, 2019, the loan balance was $508,089. The current rate of interest under the loan is 5.50% per annum. Principal, interest and collection costs under the loan are guaranteed by Mr. Shrewsbury.
On February 25, 2014, we issued to Mr. Shrewsbury a Consolidated Secured Promissory Note (“Consolidated Note”) to consolidate an aggregate of $2,000,000 in outstanding debt and unpaid interest due to Mr. Shrewsbury. The Consolidated Note bears interest at 5% per annum or prime rate if higher than 5% per annum and principal and interest are repayable ten years from February 25, 2014. The Consolidated Note is subject to customary events of default. Payment of the Consolidated Note is to be secured or otherwise payable by us out of the death benefit proceeds of key man insurance of $2 million that has been purchased by us on the life of Mr. Shrewsbury.
During the nine months ended June 30, 2019, we received advances of $124,500 from Mr. Shrewsbury and made payments to him of $73,000, bringing the total outstanding advance balance to $143,987. Cash advances from Mr. Shrewsbury are repayable upon demand and do not bear interest.
As of June 30, 2019 the Company had an accrued liability in the amount of $319,179 due to Jose Fuentes, CFO, for past services.
Financial Condition and Going Concern Uncertainties
Since inception, the Company, with a few exceptions has not generated sufficient cash to fund its operations and has incurred operating losses. As of June 30, 2019, the Company’s accumulated deficit was $15,529,958. Currently, in addition to funds from operations, the Company relies substantially upon financing provided by Mr. Shrewsbury, the Company’s Chief Executive Officer, and a secured bank loan that is guaranteed by Mr. Shrewsbury to finance its business operations. In view of these matters, realization of certain assets in the accompanying balance sheet is dependent upon continued operations which are dependent upon our ability to meet our financial requirements, upon the continued provision of financing from Mr. Shrewsbury and under the Company’s bank loan, and the success of our operations.
Our independent registered public accounting firm’s report on the financial statements included in our Annual Report on Form 10-K for the year ended September 30, 2018, contained an explanatory paragraph in which our auditors expressed an opinion that there is a substantial doubt about our ability to continue as a going concern.
Accordingly, careful consideration of such opinion should be given in determining whether to continue or to become our stockholder.
As of June 30, 2019, we had cash and cash equivalents of $7,544 as compared to $36,609 as of September 30, 2018.
Our accounts receivable was $409,169 as of June 30, 2019, as compared to $259,694 as of September 30, 2018, an increase of $149,475 or 57.6%. The higher June 30. 2019 receivable balance is the direct result of higher sales during the last two weeks of the current period.
Inventory was $1,875,446 as of June 30, 2019, as compared to $1,798,540 as of September 30, 2018, an increase of $76,906 or 4.3%.
Accrued expenses were reduced from $416,636 as of September 30, 2018 to $323,854 as of the nine- months ended June 30, 2019, a reduction of $92,782. A reduction in accrued payroll and payroll taxes account for the lower accrued liabilities balance as of June 30, 2019.
Accounts payable for the nine-months ended June 30, 2019, were $609,801 as compared to $529,853 as of September 30, 2018, an increase of $79,948 or 15.1%.
During the nine-months ended June 30, 2019, our accumulated deficit decreased from $15,611,136 to $15,529,958, a decrease of $81,178 due to the reported net income during the nine months ended June 30, 2019.
During the nine months ended June 30, 2019, the Company’s net income was $81,178 compared to a net income of $16,495 for the comparable period in 2018. The net income increase is due to increased sales and sales margins of our rail and mining related products and lower operating expenses in the current period.
Currently, in addition to product purchases for resale, we are spending approximately $50,000 per month on operations. Management believes that the Company’s available cash, cash flows from operations, loans and advances provided by Mr. Shrewsbury, and the loan provided by the bank to be sufficient to fund the Company’s operations during the next 12 months.
We continue to rely substantially upon financings provided by Mr. Shrewsbury and a bank loan to fund our operations. The terms of such financings are discussed below.
Bank Loan
On December 3, 2015, we obtained a term loan from Town Square Bank of $711,376. We used proceeds of the new loan to repay our former line of credit. The loan is for a term of five years and matures on December 3, 2020. As of June 30, 2019, the loan balance was $508,089.
During the term of the loan, we agreed to make equal monthly repayments of principal and interest of $6,967 commencing January 3, 2016, and to make a final payment on December 3, 2020, of the outstanding balance of the interest and principal, estimated to be approximately $391,896. Early repayment of the loan will not affect the monthly repayment amount, unless otherwise agreed to by the bank.
An event of default under the loan will occur upon the occurrence of any of the following events:
|
●
|
we fail to make any payment when due;
|
|
●
|
we fail to comply with any term, obligation, covenant or condition in the loan documents or any other agreement with the bank;
|
|
●
|
we default under any loan, extension of credit, security agreement, purchase or sales agreement or other agreement with any creditor that materially affects our property or our ability to repay the note or perform our obligations under the note or related documents;
|
|
●
|
a warranty, representation or statement made to the bank under the loan documents is or becomes materially false or misleading;
|
|
●
|
the dissolution or termination of our existence, our insolvency, the appointment of a receiver for any part of our property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against us;
|
|
●
|
the commencement of foreclosure or forfeiture proceedings by any creditor or any governmental agency against any collateral securing the loan;
|
|
●
|
any of the preceding events occurs with respect to any loan guarantor;
|
|
●
|
a 25% or more change in the ownership of our common stock;
|
|
●
|
a material adverse change in our financial condition, or the bank believes the prospect of payment or performance of the loan is impaired; or
|
|
●
|
the bank in good faith believes itself insecure.
|
The loan agreements contain affirmative covenants, including an obligation to: notify the bank of a material adverse change in our financial condition and of any threatened litigation or claim or other proceeding which could materially affect our financial condition; maintain certain liability insurance in amounts acceptable to the bank; maintain qualified executive and management personnel; comply with applicable environmental laws and perform environmental studies required by the bank; and certify annually to the bank compliance with the representations and warranties in the bank loan documents. The loan agreements contain other customary covenants, terms and conditions.
In addition, the loan agreements contain negative covenants, including that we will not, without the bank’s consent:
|
●
|
incur any indebtedness other than to the bank or for trade debt incurred in the ordinary course;
|
|
●
|
sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of our assets, except for permitted liens;
|
|
●
|
sell our accounts receivable, except to the bank;
|
|
●
|
engage in business activities substantially different from our current activities;
|
|
●
|
cease operations, liquidate, merge, transfer, acquire or consolidate with another entity, change our name, dissolve, or sell the inventory or accounts receivable secured under the loan;
|
|
●
|
pay any dividend other than in stock;
|
|
●
|
lend money, invest or advance money or assets to another person or entity;
|
|
●
|
purchase, create or acquire an interest in any other entity;
|
|
●
|
incur any obligation as a surety or guarantor other than in the ordinary course; or
|
|
●
|
enter into any agreement containing any provision which would be violated or breached by the performance of our obligations under the loan agreements.
|
Interest under the loan is variable and is based upon the Wall Street Journal Prime rate, currently 5.50% per annum. In the event of a default, interest under the loan may be increased by 2%. The loan is secured by a priority security interest in the Company’s inventory and accounts receivable and has been guaranteed by our CEO.
Advances and Loans from Mr. Shrewsbury
Since 2006, Mr. Shrewsbury, our Chairman and CEO, has provided financing to us in the form of demand notes and advances.
Mr. Shrewsbury, our Chairman and CEO, has provided financing to us in the form of demand notes and advances. On February 25, 2014, we entered into a Note Exchange Agreement (“Exchange Agreement”) with Mr. Shrewsbury under which an aggregate of $2,000,000 of our indebtedness (including amounts of accrued interest) to Mr. Shrewsbury was consolidated and restructured and we issued in exchange for the indebtedness a Consolidated Secured Promissory Note (the “Consolidated Note) in the principal amount of $2,000,000.
The principal and interest under the Consolidated Note is due and payable ten years from the date of issuance and is to be secured by the proceeds of key man life insurance purchased by us on the life of Mr. Shrewsbury. The Consolidated Note bears interest at the rate of 5% per annum except that, if the prime rate reported by the Wall Street Journal (“WSJ Prime Rate”) exceeds 5%, then the Consolidated Note will bear interest at the WSJ Prime Rate. As of June 30, 2019, accrued interest on the note was $534,521.
An event of default will occur under the Consolidated Note upon:
|
●
|
we fail to pay when due any principal or interest;
|
|
●
|
we violate any covenant or agreement contained in the Consolidated Note, the Exchange Agreement, or related transaction documents;
|
|
●
|
an assignment for the benefit of creditors by us;
|
|
●
|
the application for the appointment of a receiver or liquidator for us or our property;
|
|
●
|
the filing of a petition in bankruptcy by or against us;
|
|
●
|
the issuance of an attachment or the entry of a judgment against us in excess of $250,000;
|
|
●
|
a default by us with respect to any other indebtedness or with respect to any installment debt whether or not owing to Mr. Shrewsbury;
|
|
●
|
the sale of all or substantially all of our assets or a transfer of more than 51% of our equity interests to a person not currently a holder of our equity interests;
|
|
●
|
our termination of existence or dissolution;
|
|
●
|
the death of Mr. Shrewsbury; or
|
|
●
|
the failure to pay when due any premium under the key man policy required to be purchased on the life of Mr. Shrewsbury.
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In addition, in consideration of Mr. Shrewsbury agreeing to consolidate and restructure the indebtedness, the Company granted to Mr. Shrewsbury options to purchase an aggregate of 500,000 shares of our common stock pursuant to the terms of a Non-Qualified Stock Option Agreement, issued February 25, 2014. The options were exercisable commencing April 1, 2014, and for a period of three years thereafter. The options were exercisable at a price of $0.0924 per share subject to anti-dilution adjustments in the event of stock dividends, subdivisions, capital reorganizations, a consolidation or merger, or sale of all or substantially all of our assets. The options expired on March 31, 2017.
As of June 30, 2019, Mr. Shrewsbury had advanced an aggregate of $143, 987 to the Company. The advances do not bear interest and are repayable upon demand. As of June 30, 2019, the Company also has a payable of $102,000 to Mr. Shrewsbury for warehouse storage rental.
The Consolidated Note and advances are subordinate to the Company’s bank indebtedness.
Off-Balance Sheet Arrangements
We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial condition or results of operations as of June 30, 2019, and September 30, 2018.