NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
1.
|
DESCRIPTION
OF BUSINESS AND BASIS OF PRESENTATION
|
Organization
Boomer
Holdings, Inc. (the “Company”), through its wholly owned subsidiary, Boomer Naturals, Inc., engages in the development
and sale of the proprietary CB5 wellness formula in the United States of America and internationally. All of the Company’s
sales relate to CB5 and its related products. Boomer Naturals, Inc. was incorporated in June 2019 and is headquartered in Las
Vegas, Nevada.
Share
Exchange Between Boomer Natural Holdings and Boomer Naturals, Inc.
Boomer
Naturals, Inc. (“Naturals”) was incorporated as a Nevada corporation on June 7, 2019. Boomer Natural Holdings, Inc.
(“Boomer”) was incorporated as a Nevada corporation on January 7, 2020 and was a non-operating company. On or about
the same day, Naturals completed its share exchange with Boomer, whereby, the shareholders of Naturals became shareholders of
Boomer and all of common stock shares of Boomer Naturals, Inc. was exchanged to Boomer by the shareholder of Boomer Naturals,
Inc. for newly-issued shares of Boomer common stock resulting in Boomer Naturals, Inc. becoming a wholly-owned subsidiary of Boomer.
The transaction is accounted for as a “reverse merger” and recapitalization since the stockholder of Boomer Naturals,
Inc. owned a majority of the outstanding shares of the common stock of Boomer immediately following the completion of the transaction,
the stockholders of Boomer Naturals, Inc. will have the significant influence and the ability to elect or appoint or to remove
a majority of the members of the governing body of Boomer, and Boomer Naturals, Inc.’s senior management will dominate the
management of Boomer immediately following the completion of the transaction. Accordingly, Boomer Naturals, Inc. will be deemed
to be the accounting acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of Boomer.
Share
Exchange Between Remaro Group Corp and Boomer Naturals Holdings
On
December 12, 2019, Marina Funt, the former principal shareholder, Chief Executive Officer, Chief Financial Officer, President,
Treasurer, Secretary and Director of Remaro Group Corp. (the “Company”), consummated the sale of Ms. Funt’s
24,000,000 shares (the “Shares”) of the Registrant’s common stock, par value $0.001 per share (the “Common
Stock”) to Boomer Natural Wellness, Inc. (“BNW”). The acquisition of the Shares, which represent approximately
76% of the Company’s shares of outstanding Common Stock, resulted in a change in control of the Registrant. In connection
with the sale of the Shares, Ms. Funt waived, forgave and discharged any indebtedness of any kind owed to her by the Company.
On
January 7, 2020, the Company, then named Remaro Group Corp., executed and consummated an Agreement of Merger and Plan of Share
Exchange (the “Exchange Agreement”), with Boomer Natural Wellness, Inc. (“BNW”), Boomer Naturals Holdings,
Inc., a Nevada corporation (“Boomer”), Boomer Naturals, and the shareholders of Boomer (the “Exchange”).
Upon consummation of the transactions set forth in the Exchange Agreement (the “Closing”), the Company adopted the
business plan of Boomer Naturals. Pursuant to the terms of the Exchange Agreement, the Company agreed to acquire all of the outstanding
shares of Boomer in exchange for the issuance of an aggregate 120,980,739 shares (the “Exchange Shares”) of the Company’s
Common Stock and BNW agreed to retire 24,000,000 shares of the Company’s Common Stock. As a result of the Exchange, Boomer
became a wholly-owned subsidiary of the Company and the Company adopted the business plan of Boomer Naturals. Following the consummation
of the Exchange, the Boomer Shareholders beneficially owned approximately Ninety-Four (94%) of the issued and outstanding Common
Stock of the Company.
On
January 7, 2020, the Company approved an amendment to its Articles of Incorporation (the “Amendment”) to: change the
name of the Company to Boomer Holdings Inc.; effect a forward stock split on the basis of three-to-one (3:1); and to increase
the number of authorized shares of capital stock to 210,000,000 of which 200,000,000 shares shall be Common Stock and 10,000,000
shares will be blank-check preferred stock, par value $0.001 per share.
BOOMER HOLDINGS,
INC.
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
1.
|
DESCRIPTION
OF BUSINESS AND BASIS OF PRESENTATION (continued)
|
Share
Exchange Between Remaro Group Corp and Boomer Naturals Holdings (continued)
The
transaction above will be accounted for as a “reverse merger” and recapitalization since the stockholder of Boomer
will own a majority of the outstanding shares of the common stock of Company immediately following the completion of the transaction,
the stockholders of Boomer will have the significant influence and the ability to elect or appoint or to remove a majority of
the members of the governing body of the combined entity, and Boomer’s senior management will dominate the management of
the combined entity immediately following the completion of the transaction. Accordingly, Boomer will be deemed to be the accounting
acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of the Company. Accordingly, the
assets and liabilities and the historical operations that are reflected in the financial statements are those of the Boomer and
are recorded at the historical cost basis of the Company. As a result, Boomer is the surviving company and the financial statements
presented are historical financial accounts of Boomer Holdings, Inc. and its wholly owned subsidiary, Boomer Naturals, Inc.
Financial
Reporting
As
a result of share exchanges occurred amongst Company, Boomer, Boomer Naturals, Inc., and shareholders of the amongst companies,
the consolidated financial statements include historical financial information of Boomer Holdings, Inc. and its wholly owned subsidiary,
Boomer Naturals Inc. (combined companies referred as the “Company”) since June 7, 2019.
Products
Boomer
Naturals Holdings Inc., through its wholly-owned subsidiary Boomer Naturals, Inc., a Nevada corporation, provides wellness solutions
to multiple target markets through multiple sales channels, including PPE products, retail locations, e-commerce, and wholesale
distribution networks. Boomer sells health and wellness products and services geared toward alleviating pain, anxiety and improving
general wellness through our proprietary lines of CB5 products. CB5 formula is the first FDA-compliant alternative that fully
supports the body’s endocannabinoid system (ECS). This revolutionary breakthrough combines five natural and powerful ingredients
that target the ECS.
The
CB5 products were developed by neurosurgeon, Dr. Mark Chwajol https://boomernaturalwellness.com/larry-mccleary-md/. The Boomer
CB5 products contain a powerful combination of terpenes that interact with three known cannabinoid receptors and possibly a fourth,
while the standard products in the industry interact only with one. The product contains all-natural ingredients which are all
listed on the Generally Recognized as Safe list of the Food and Drug Administration and was developed by a practicing brain surgeon
who is an expert in natural ingredients and CB receptors.
Boomer
focuses on wellness solutions for the 50 and older age demographic through the development of products using the Boomer proprietary
CB5 formula. The CB5 formula includes a variety of terpenes that are compliant with FDA guidelines as all ingredients are listed
on the Generally Recognized as Safe list. The solutions include products to alleviate pain, reduce anxiety, increase sleep quality,
as well as offer cosmetic benefits. In addition, Boomer offers a full line of products to benefit the health of pets, including
those suffering from seizures.
Unaudited
Interim Financial Information
These
unaudited interim financial statements have been prepared in accordance with GAAP for interim financial reporting and the rules
and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. Therefore, certain
information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed
or omitted. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation of the
financial position, results of operations and cash flows for the periods presented have been made.
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
1.
|
DESCRIPTION
OF BUSINESS AND BASIS OF PRESENTATION (continued)
|
Unaudited
Interim Financial Information (continued)
The
results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the year
ending July 31, 2020.
The
balance sheets and certain comparative information as of July 31, 2019 are derived from the audited financial statements and related
notes for the year ended July 31, 2019.
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
This
summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial
statements. The financial statements and notes are representation of the company’s management who are responsible for the
integrity and objectivity of the financial statements. These accounting policies confirm to accounting principles generally accepted
in the United States of America and have been consistently applied in the preparation of the financial statements.
Basis
of Presentation and Consolidation
The accompanying consolidated
financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) as promulgated
in the United States of America.
The consolidated financial statements
include the account of Boomer Holdings, Inc. and the following subsidiary:
Subsidiary Name
|
Equity %
Owned
|
Boomer Naturals, Inc.
|
100%
|
All intercompany accounts, transactions,
and profits have been eliminated upon consolidation.
The consolidated financial statements
were prepared and presented in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 810, Consolidation.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates include, but are
not limited to, the estimated useful lives of property and equipment, patent and trademark, the ultimate collection of accounts
receivable and accrued expenses. Actual results could materially differ from those estimates.
Reclassification
Certain
prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no
effect on the reported results of operations or cash flows.
Revenue
Recognition
The
Company recognizes revenue when persuasive evidence of an arrangement exists, the price is fixed or determinable, and collectability
is reasonably assured, and delivery has occurred or services have been rendered. The Company offers the CB5 proprietary formula
various channels, PPE products, e-commerce, and brick and mortar retail.
The
Company includes shipping and handling costs in cost of sales. Amounts billed for shipping and handling are included with revenues
in the statement of operation.
The
Company recognizes an allowance for estimated future sales returns in the period revenue is recorded, based on pending returns
and historical return data, among other factors. Management did not believe any allowance for sales returns was required at April
30, 2020.
Advertising
Expense
Advertising
costs are expensed as incurred. Advertising expense amounted to $1,067,936 and $427,743 for the nine and three months ended April
30, 2020, respectively.
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Accounts
Receivable
Accounts
receivable are carried at original invoice amount less the allowance for doubtful accounts based on a review of all outstanding
amounts at year end. Management determines the allowance for doubtful accounts based on a combination of write-off history, aging
analysis, and any specific known troubled accounts. Trade receivables are written off when deemed uncollectible.
Inventories
Inventories
primarily consist of finished goods and are stated at the lower of cost (first-in-first-out) or market. The Company maintains
an allowance for potentially excess and obsolete inventories and inventories that are carried at costs that are higher than their
estimated net realizable values.
Property
and Equipment
Property
and equipment consist of leasehold improvements, furniture and fixtures, machinery and equipment are stated at cost. Property
and equipment are recorded at cost. Depreciation of property and equipment is provided using the straight-line method over the
estimated useful lives of the assets, generally 5-7 year. Leasehold improvements are depreciated over the shorter of the useful
life of the improvement or the lease term, including renewal periods that are reasonably assured.
Impairment
of Long-lived Assets
In
accordance with ASC 360, “Property, Plant, and Equipment,” the Company reviews for impairment of long-lived assets
and certain identifiable intangibles whenever events or circumstances indicate that the carrying amount of assets may not be recoverable. The
Company considers the carrying value of assets may not be recoverable based upon our review of the following events or changes
in circumstances: the asset’s ability to continue to generate income from operations and positive cash flow in future periods;
loss of legal ownership or title to the assets; significant changes in our strategic business objectives and utilization of the
asset; or significant negative industry or economic trends. An impairment loss would be recognized when estimated future
cash flows expected to result from the use of the asset are less than its carrying amount.
Fair
Value of Financial Instruments
The
Company records its financial assets and liabilities at fair value, which is defined under the applicable accounting standards
as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or
most advantageous market for the asset or liability in an orderly transaction between market participants on the measure date.
The Company uses valuation techniques to measure fair value, maximizing the use of observable outputs and minimizing the
use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the
first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:
|
●
|
Level
1 – Quoted prices in active markets for identical assets or liabilities.
|
|
●
|
Level
2 – Inputs other than Level 1 that are observable, either directly or indirectly,
such as quoted
prices for similar assets or liabilities; quoted prices in markets that are not active;
or other inputs
that are observable or can be corroborated by observable market data for substantially
the full term of
the assets or liabilities.
|
|
●
|
Level
3 – Inputs include management's best estimate of what market participants would
use in pricing
the asset or liability at the measurement date. The inputs are unobservable in
the market and significant
to the instrument's valuation.
|
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Fair
Value of Financial Instruments (continued)
As
of April 30, 2020, the Company believes that the carrying value of cash, account receivables, accounts payable, accrued expenses,
and other current assets and liabilities approximate fair value due to the short maturity of theses financial instruments. The
financial statements do not include any financial instruments at fair value on a recurring or non-recurring basis.
Income
Taxes
The
Company has elected to be taxed as an S-corporation. Accordingly, except for a minimal state tax, the Company is not taxed at
the corporate level; rather, the tax on corporate income is paid and the benefits of losses are recognized at the stockholder
level. Therefore, no provision or credit for federal income taxes has been included in the financial statements. Certain
transactions of the Company are subject to accounting methods for income tax purposes which differ from the accounting methods
used in preparing the financial statements. Accordingly, the net income of the Company reported for federal income tax purposes
may differ from the net income reported in these financial statements. The major differences relate to accounting for depreciation
on property and equipment, stock compensation, and research credits
The
Company has adopted ASC 740-10-25, which provides criteria for the recognition, measurement, presentation and disclosure of uncertain
tax position. The Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that
the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The
tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a
greater than 50% likelihood of being realized upon ultimate resolution. The Company did not recognize additional liabilities for
uncertain tax positions as a result of the implementation of ASC 740-10-25 for the three months ended April 30, 2020.
The
Company is no longer subject to federal and state income tax examination by tax authorities for year ended before 2019, respectively.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk are accounts receivable and other receivables
arising from its normal business activities. The Company has a diversified customer base. The Company controls credit risk related
to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial
strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectable
accounts and, as a consequence, believes that its accounts receivable related credit risk exposure beyond such allowance is limited.
All
of the Company’s revenues are derived from the sale of the proprietary CB5 formula and PPE products, E-commerce accounted
for 47% of revenues for the nine months ended April 30, 2020, respectively and brick and mortar retail accounted for 53% of revenues
for the nine months ended April 30, 2020, respectively. The Company’s principal market in 2019 was the United States, but
the Company plans to expand internationally in 2020. The Company maintains its cash and cash equivalents with various credit institutions.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, deposits of up to $250,000 at FDIC-insured institutions are
covered by FDIC insurance. At times, deposits may be in excess of the FDIC insurance limit; however, management does not believe
the Company is exposed to any significant related credit risk.
Leases
Prior
to December 31, 2019, the Company accounted for leases under Accounting Standards Codification (ASC) 840, Accounting for Leases.
Effective from December 31, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize a
right-of-use asset and a lease liability for virtually all leases.
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Leases (continued)
On
February 25, 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842), to increase transparency and comparability
among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about
leasing transactions. ASC 842 requires that lessees recognize right of use assets and lease liabilities calculated based on the
present value of lease payments for all lease agreements with terms that are greater than twelve months. ASC 842 distinguishes
leases as either a finance lease or an operating lease that affects how the leases are measured and presented in the statement
of operations and statement of cash flows.
Recent
accounting pronouncement
ASC
842 supersedes nearly all existing lease accounting guidance under GAAP issued by the Financial Accounting Standards Board (“FASB”)
including ASC Topic 840, Leases.
For
operating leases, we calculated right of use assets and lease liabilities based on the present value of the remaining lease payments
as of the date of adoption using the IBR as of that date.
The adoption of ASC 842 resulted
in recording an adjustment to operating lease right of use assets and operating lease liabilities of $1,147,316 million and $1,165,612,
respectively as of April 30, 2020. The difference between the operating lease ROU assets and operating lease liabilities at transition
represented tenant improvements, and indirect costs that was derecognized. The adoption of ASC 842 did materially impact our
results of operations, cash flows, or presentation thereof.
FASB ASU 2016-02 “Leases
(Topic 842)” – In February 2016, the FASB issued ASU 2016-02, which will require lessees to recognize almost all
leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained
a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria
that are largely similar to those applied in current lease accounting but without explicit bright lines. Lessor accounting
is similar to the current model but updated to align with certain changes to the lessee model and the new revenue recognition standard. This
ASU is effective for the fiscal year beginning after December 15, 2019, including interim periods within those fiscal year beginning
after December 15, 2020. The Company adopted ASC 842 (ASU 2016-02). The adoption of ASC 842 resulted in recording an adjustment
to operating lease right of use assets and operating lease liabilities of $1,147,316 million and $1,165,612, respectively
as of April 30, 2020. The difference between the operating lease ROU assets and operating lease liabilities at transition represented
tenant improvements, and indirect costs that were derecognized. The adoption of ASC 842 did materially impact the Company’s
results of operations, cash flows, or presentation thereof.
FASB
ASU 2016-15 “Statement of Cash Flows (Topic 230)” – In August 2016, the FASB issued 2016-15. Stakeholders
indicated that there is a diversity in practice in how certain cash receipts and cash payments are presented and classified in
the statement of cash flows. ASU 2016-15 addresses eight specific cash flow issues to reduce the existing diversity in practice.
This ASU is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those fiscal
year beginning after December 15, 2019. Early adoption is permitted. Adoption of this ASU will not have a significant impact
on the Company’s statement of cash flows.
FASB
ASU 2016-12 “Revenue from Contracts with Customers (Topic 606)” – In May 2016, the FASB issued 2016-12.
The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. ASU 2016-12 provides clarification on assessing collectability, presentation of sales taxes, noncash
consideration, and completed contracts and contract modifications.
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Recent
accounting pronouncement (continued)
This
ASU is effective for quarterly reporting periods beginning after December 15, 2018, and interim periods beginning after December
15, 2019. The Company is currently assessing the potential impact this standard will have on the Company’s financial statements
and related disclosures.
Inventories
primarily consisted of finished goods in the amount of $771,949 and $53,724 as of April 30, 2020 and July 31, 2019, respectively.
|
4.
|
NOTES
RECEIVABLES – RELATED PARTIES
|
Notes
receivables from related parties consisted of the following:
|
|
April
30, 2020
|
|
July
31, 2019
|
|
|
|
|
|
Whale
Sports - Loan receivable bearing no interest with unpaid principal balance due on demand.
|
|
$
|
18,194
|
|
|
$
|
—
|
|
Net Tech Investment,
LLC - Loan receivable bearing no interest with unpaid principal balance due on demand.
|
|
|
4,185
|
|
|
|
—
|
|
Daniel Capri,
President - Loan receivable bearing no interest with unpaid principal balance due on demand.
|
|
|
3,207
|
|
|
|
1,600
|
|
|
|
|
|
|
|
|
|
|
Total
notes receivables
|
|
$
|
25,586
|
|
|
$
|
1,600
|
|
|
5.
|
PROPERTY
AND EQUIPMENT
|
Property
and equipment consisted of the following:
|
|
April
30, 2020
|
|
July
31, 2019
|
|
|
|
|
|
Furniture
and Equipment
|
|
$
|
40,336
|
|
|
$
|
35,838
|
|
Leasehold
Improvement
|
|
|
126,144
|
|
|
|
—
|
|
Computer
|
|
|
—
|
|
|
|
40,090
|
|
|
|
|
|
|
|
|
|
|
Total
property and equipment
|
|
|
166,480
|
|
|
|
75,928
|
|
Less-accumulated
depreciation
|
|
|
(19,834
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total
property and equipment, net
|
|
$
|
146,646
|
|
|
$
|
75,928
|
|
Depreciation expense on property
and equipment amounted to $19,834 and $11,536 for the nine and three months ended April 30, 2020, respectively.
BOOMER
HOLDINGS, INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
6.
|
LINES
OF CREDIT – RELATED PARTIES
|
Lines
of credit related parties consisted of the following:
|
|
April
30, 2020
|
|
July
31, 2019
|
|
|
|
|
|
July
2019 ($447,500 line of credit) - Line of credit with maturity date of June 30, 2021 with 6% interest per annum with
unpaid principal balance and accrued interest payable on the maturity date.
|
|
$
|
447,500
|
|
|
$
|
50,000
|
|
July 2019 ($60,000
line of credit) - Line of credit with maturity date of July 29, 2021 with 6% interest per annum with unpaid principal
balance and accrued interest payable on the maturity date.
|
|
|
60,000
|
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
Total
lines of credit
|
|
|
507,500
|
|
|
|
110,000
|
|
|
|
|
|
|
|
|
|
|
Less: Short-term
portion
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total
lines of credit, net of current portion
|
|
$
|
507,500
|
|
|
$
|
110,000
|
|
July
2019 - $447,500 line of credit
On
July 1, 2019, the Company entered into a line of credit agreement in the amount of $447,500 with maturity date of June 30, 2021.
The line of credit bears interest at 6% per annum and interest and unpaid principal balance is payable on the maturity date. The
Company had unused line of credit of $0 as of April 30, 2020.
July
2019 - $60,000 line of credit
On
July 1, 2019, the Company entered into a line of credit agreement in the amount of $60,000 with maturity date of July 29, 2021.
The line of credit bears interest at 6% per annum and interest and unpaid principal balance is payable on the maturity date. The
Company had unused line of credit of $0 as of April 30, 2020.
|
7.
|
NOTES
PAYABLE – RELATED PARTIES
|
Notes
payable to related parties consisted of the following:
|
|
April
30, 2020
|
|
July
31, 2019
|
|
|
|
|
|
July
2019 ($150,000 notes payable) - Notes payable with maturity date of June 30, 2021 with 6% interest per annum with
unpaid principal balance and accrued interest payable on the maturity date.
|
|
$
|
—
|
|
|
$
|
74,000
|
|
|
|
|
|
|
|
|
|
|
Total
notes payable - related parties
|
|
$
|
—
|
|
|
$
|
74,000
|
|
|
|
|
|
|
|
|
|
|
Less: Short-term
portion of notes payable - related parties
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total notes payable - related parties, net of current portion
|
|
$
|
—
|
|
|
$
|
74,000
|
|
|
|
|
|
|
|
|
|
|
July
2019 - $150,000 notes payable
On
July 1, 2019, the Company entered into a note payable – related party agreement in the amount of $150,000 with maturity
date of June 30, 2021. The loan bears interest at 6% per annum and interest and unpaid principal balance is payable on the maturity
date. The Company had unused line of credit of $150,000 as of April 30, 2020.
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Notes payables consisted of the following:
|
|
April
30, 2020
|
|
July
31, 2019
|
|
|
|
|
|
January
2020 ($260,070 notes payable) - Notes payable with maturity date of January 4, 2021 with 12% interest per annum with
unpaid principal balance and accrued interest payable on the maturity date.
|
|
$
|
260,070
|
|
|
$
|
—
|
|
January 2020
($260,070 notes payable) - Notes payable with maturity date of January 4, 2021 with 12% interest per annum with unpaid
principal balance and accrued interest payable on the maturity date.
|
|
|
260,070
|
|
|
|
—
|
|
April 2020 ($10,000
notes payable) – SBA loan payable with maturity date of April 15, 2050 with 3.75% interest per annum with unpaid
principal balance and accrued interest payable on the maturity date.
|
|
|
10,000
|
|
|
|
—
|
|
January 2020
($105,375 notes payable) - Notes payable with maturity date of January 4, 2021 with 12% interest per annum with unpaid
principal balance and accrued interest payable on the maturity date.
|
|
|
105,375
|
|
|
|
—
|
|
February 2020
($100,000 notes payable) - Notes payable with maturity date of May 9, 2020 with 15% interest per annum with unpaid
principal balance and accrued interest payable on the maturity date.
|
|
|
69,855
|
|
|
|
—
|
|
February 2020
($500,000 notes payable) - Notes payable with maturity date of February 24, 2021 with 12% interest per annum with
unpaid principal balance and accrued interest payable on the maturity date.
|
|
|
500,000
|
|
|
|
—
|
|
February 2020
($90,000 notes payable) - Notes payable with maturity date of May 9, 2021 with 15% interest per annum with unpaid
principal balance and accrued interest payable on the maturity date.
|
|
|
34,894
|
|
|
|
—
|
|
February 2020
($50,000 notes payable) - Notes payable with maturity date of May 9, 2020 with 15% interest per annum with unpaid
principal balance and accrued interest payable on the maturity date.
|
|
|
36,253
|
|
|
|
—
|
|
February 2020
($100,000 notes payable) - Notes payable with maturity date of May 9, 2020 with 15% interest per annum with unpaid
principal balance and accrued interest payable on the maturity date.
|
|
|
69,812
|
|
|
|
—
|
|
February 2020
($100,000 notes payable) - Notes payable with maturity date of February 9, 2021 with 12% interest per annum with unpaid
principal balance and accrued interest payable on the maturity date.
|
|
|
69,177
|
|
|
|
—
|
|
February 2019
($500,000 notes payable) - Notes payable with maturity date of February 24, 2021 with 12% interest per annum with
unpaid principal balance and accrued interest payable on the maturity date.
|
|
|
500,000
|
|
|
|
—
|
|
February 2020
($50,000 notes payable) - Notes payable with maturity date of May 9, 2020 with 12% interest per annum with unpaid
principal balance and accrued interest payable on the maturity date.
|
|
|
36,326
|
|
|
|
—
|
|
September 2019
($200,000 notes payable) - Notes payable with maturity date of September 14, 2021 with 12% interest per annum with
unpaid principal balance and accrued interest payable on the maturity date.
|
|
|
200,000
|
|
|
|
—
|
|
September 2019
($300,000 notes payable) - Notes payable with maturity date of December 14, 2021 with 12% interest per annum with
unpaid principal balance and accrued interest payable on the maturity date.
|
|
|
300,000
|
|
|
|
—
|
|
April 2020 ($347,700
notes payable) - Paycheck Protection Program payable with maturity date of December 31, 2020 with 1% interest per
annum with unpaid principal balance and accrued interest payable on the maturity date.
|
|
|
347,700
|
|
|
|
—
|
|
Total
notes payable
|
|
$
|
2,799,532
|
|
|
$
|
—
|
|
Less: current-term
portion
|
|
|
(2,269,392
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total notes payable – net of current portion
|
|
$
|
530,140
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
8.
|
NOTES
PAYABLES (continued)
|
April 2020 - $347,000 notes
payable
On April 21, 2020, the Company
received loan proceeds in the amount of $347,700 under the Paycheck Protection Program ("PPP") from Cross River Bank,
Inc. ("Lender"). The PPP was established as part of the Coronavirus Aid, Relief, and Economic Security Act (“CARES
Act”), provides for loans to qualifying businesses for amounts up to 2.5 times the average monthly payroll expenses of the
qualifying business. The loans and accrued interest are forgivable as the borrower uses the loan proceeds for eligible purposes,
including payroll, benefits, rent, and utilities, and maintains its payroll levels. Per PPP loan forgiveness guidelines, the Company
expects the loan to be forgiven, based on qualifying business expenses.
April 2020 - $10,000
notes payable
On April 14, 2020, the Company
received loan proceeds in the amount of $10,000 from the U.S. Small Business Administration (SBA). The loan maturity date is April
13, 2050, and bears interest at a rate of 3.75% per annum, payable monthly.
The
following tab provides future minimum payments as of April 30, 2020
Years
ended July 31,
|
|
Amount
|
|
|
|
|
2020
|
|
|
$
|
2,269,392
|
|
|
2021
|
|
|
|
531,140
|
|
|
2022
|
|
|
|
—
|
|
|
2023
|
|
|
|
—
|
|
|
2024
|
|
|
|
—
|
|
|
Thereafter
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
2,799,532
|
|
The
Company calculates earnings per share in accordance with ASC 260, “Earnings Per Share,” which requires a dual presentation
of basic and diluted earnings per share. Basic earnings per share are computed using the weighted average number of shares outstanding
during the fiscal year. Dilutive earnings per share is computed on the basis of the weighted average number of shares plus potentially
dilutive common shares which would consist of stock options outstanding (using the treasury method), which was none since the
Company had net losses and any additional potential shares would be antidilutive.
The
Company did not have material income tax provision (benefit) because of net loss and valuation allowances against deferred income
tax provision for the three months ended April 30, 2020.
A
reconciliation of the Company’s effective tax rate to the statutory federal rate is as follows:
Description
|
|
April
30, 2020
|
|
July
31, 2019
|
|
|
|
|
|
Statutory
federal rate
|
|
|
21
|
%
|
|
|
21
|
%
|
State
income taxes net of federal income tax benefit and others
|
|
|
0
|
%
|
|
|
0
|
%
|
Permanent
differences for tax purposes and others
|
|
|
0
|
%
|
|
|
0
|
%
|
Change
in valuation allowance
|
|
|
-21
|
%
|
|
|
-21
|
%
|
|
|
|
|
|
|
|
|
|
Effective
tax rate
|
|
|
0
|
%
|
|
|
0
|
%
|
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
10.
|
INCOME
TAX PROVISION (continued)
|
The
income tax benefit differs from the amount computed by applying the U.S. federal statutory tax rate of 21%, primarily due to the
change in the valuation allowance and state income tax benefit, offset by nondeductible expenses.
Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
The
components of deferred tax assets and liabilities are as follows:
Deferred
tax assets
|
|
April
30, 2020
|
|
July
31, 2019
|
|
|
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
Net
operating loss
|
|
$
|
(1,099,415
|
)
|
|
$
|
(47,894
|
)
|
Other
temporary differences
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total
deferred tax assets
|
|
|
(1,099,415
|
)
|
|
|
(47,894
|
)
|
Less
- valuation allowance
|
|
|
1,099,415
|
|
|
|
47,894
|
|
|
|
|
|
|
|
|
|
|
Total
deferred tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
At April 30, 2020, the Company
had available net operating loss carryovers of approximately $5,079,983. Per the Tax Cuts and Jobs Act (TCJA) implemented in 2018,
the two-year carryback provision was removed and now allows for an indefinite carryforward period. The carryforwards are limited
to 80% of each subsequent year's net income. As a result, net operating loss may be applied against future taxable income and expires
at various dates subject to certain limitations. The Company has a deferred tax asset arising substantially from the benefits of
such net operating loss deduction and has recorded a valuation allowance for the full amount of this deferred tax asset since it
is more likely than not that some or all of the deferred tax asset may not be realized.
The
Company files income tax returns in the U.S. federal jurisdiction and Nevada and is subject to income tax examinations by federal
tax authorities for tax year ended 2019 and later and by not subject to Nevada authorities for tax year ended 2019 and later.
The Company currently is not under examination by any tax authority. The Company’s policy is to record interest and penalties
on uncertain tax positions as income tax expense. As of October 31, 2019, the Company has no accrued interest or penalties related
to uncertain tax positions.
At the nine months ended April
30, 2020, the Company had cumulative net operating loss carryforwards for federal tax purposes of approximately $5,079,983. In
addition, the Company had state tax net operating loss carryforwards of approximately $0. The carryforwards may be applied against
future taxable income and expires at various dates subject to certain limitations.
|
11.
|
RELATED
PARTY TRANSACTIONS
|
The
Company had the following related party transactions:
|
●
|
Outside
Services – One of the Company’s outside contractor or consultant
is Mr. Thomas Ziemann, a shareholder of the Company. Mr. Thomas Ziemann provides various
consulting services to the Company. The Company recorded expense of $129,319 for nine
months ended April 30, 2020 and $15,000 for three months ended April 30, 2020 and had
outstanding balance recorded as accrued expense of $0 as of April 30, 2020.
|
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
11.
|
RELATED
PARTY TRANSACTIONS (continued)
|
|
●
|
Outside
Services – One of the Company’s outside contractor or consultant
is Mr. Daniel Capri, a shareholder and President of the Company. Mr. Daniel Capri provides
various consulting and management services to the Company. The Company recorded expense
of $29,112 for nine months ended April 30, 2020 and $0 for three months ended April 30,
2020 and had outstanding balance recorded as accrued expense of $5,935 as of April 30,
2020.
|
|
●
|
Outside
Services – One of the Company’s outside contractor or consultant
is Mr. Rob Ekstedt, a shareholder of the Company. Mr. Rob Ekstedt provides various consulting
services to the Company. The Company recorded expense of $0 for nine months ended April 30, 2020 and $36,000 for
three months ended April 30, 2020 and had outstanding balance recorded as accrued expense
of $0 as of April 30, 2020.
|
|
●
|
Notes
Receivables – No interest due on demand and the loan was provided
primarily to Daniel Capri, the Company’s President.
|
|
●
|
Line
of Credit – On July 1, 2019, the Company entered into a line of credit
agreement in the amount of $300,000 with Daniel Capri, the owner and founder of Whale Sports and President of the Company. The maturity date of the line of credit is June 30, 2021. As of April
30, 2020, the balance on the line of credit for $326,250, including interest was paid
off.
|
|
●
|
Line
of Credit – On July 1, 2019, the Company entered into a line of credit
agreement in the amount of $89,000 with NetTech Investments owned by Daniel Capri, the Company’s President.
The maturity date of the line of credit is July 1, 2029 bearing interest of 6% per annum.
As of April 30, 2020, the balance on the line of credit for $64,400 was paid off.
|
|
●
|
Line
of Credit – On July 1, 2019, the Company entered into a line of credit
agreement in the amount of $447,500 with Michael Quaid, Chief Executive Officer of the
Company. The maturity date of the line of credit is June 30, 2021.
|
|
●
|
Line
of Credit – On July 1, 2019, the Company entered into a line of credit
agreement in the amount of $60,000 with Debra Ziemann, a shareholder and the spouse of the Company’s Chief
Operating Officer and Director. The maturity date of the line of credit is July 29, 2021.
|
|
●
|
Line
of Credit – On July 1, 2019, the Company entered into a line of credit
agreement in the amount of $150,000 with Giang Hoang, a shareholder of the Company. The maturity date of the
line of credit is June 30, 2021. As of April 30, 2020, the balance on the line of credit for $171,880 including interest was
paid off.
|
|
●
|
Notes
Payable (related parties) – The Company entered into various notes
payable with related parties who are also shareholders of the Company. Refer to Notes Payable – Related
Parties for additional information.
|
|
12.
|
COMMITMENTS
AND CONTINGENCIES
|
Operating
Leases
The
Company entered into the following operating facility lases:
|
●
|
Cheyenne
Fairways – On July 25, 2019, the Company entered into an operating
facility lease for its corporate office located in Las Vegas with 84 months term and
with option to extend from 2 years to 5 years at the market rate. The lease started on
September 1, 2019 and expires on August 31, 2026.
|
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
12.
|
COMMITMENTS
AND CONTINGENCIES (continued)
|
Operating Leases (continued)
|
●
|
Cheyenne
Technology Center – On September 16, 2019, the Company entered into
an operating facility lease for its retail and warehouse located in Las Vegas for 37
months expiring on November 31, 2022.
|
The
two facility leases for two separate locations dated on July 25, 2019 and September 16, 2019. Rent expense paid under the lease
agreements for the nine months ended April 30, 2020 was $343,005.
For
operating leases, we calculated right of use assets and lease liabilities based on the present value of the remaining lease payments
as of the date of adoption using the incremental borrowing rate. The adoption of ASC 842 resulted in recording an adjustment to
operating lease right of use assets and operating lease liabilities of $1,147,316 million and $1,165,612 million as of April
30, 2020. The difference between the operating lease ROU assets and operating lease liabilities at transition represented existing
deferred rent expenses and tenant improvements, and indirect costs that was derecognized. The adoption of ASC 842 did not materially
impact our results of operations, cash flows, or presentation thereof.
In
accordance with ASC 842, the components of lease expense were as follows:
For
the nine months ended
|
|
Fairways
|
|
Technology
Center
|
|
Total
|
|
|
|
|
|
|
|
Operating
lease expense
|
|
$
|
68,702
|
|
|
$
|
11,151
|
|
|
$
|
79,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
lease expense
|
|
$
|
68,702
|
|
|
$
|
11,151
|
|
|
$
|
79,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In accordance with ASC 842, maturities and operating lease liabilities as of April 30, 2020 were as follows:
Year
ended July 31,
|
|
Fairways
|
|
Technology
Center
|
|
Total
|
|
|
|
|
|
|
|
Undiscounted
cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
$
|
63,173
|
|
|
$
|
7,274
|
|
|
$
|
70,447
|
|
2021
|
|
|
231,441
|
|
|
|
29,971
|
|
|
|
261,411
|
|
2022
|
|
|
235,520
|
|
|
|
31,169
|
|
|
|
266,689
|
|
2023
|
|
|
242,077
|
|
|
|
10,596
|
|
|
|
252,673
|
|
2024
|
|
|
248,635
|
|
|
|
—
|
|
|
|
248,635
|
|
Thereafter
|
|
|
540,986
|
|
|
|
—
|
|
|
|
540,986
|
|
Total
undiscounted cash flows
|
|
|
1,561,831
|
|
|
|
79,010
|
|
|
|
1,640,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted
cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
liabilities - current
|
|
|
29,977
|
|
|
|
5,538
|
|
|
|
35,515
|
|
Lease
liabilities - long-term
|
|
|
1,065,635
|
|
|
|
64,462
|
|
|
|
1,130,097
|
|
Total
discounted cash flows
|
|
|
1,095,612
|
|
|
|
70,000
|
|
|
|
1,165,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Difference
between undiscounted and discounted cash flows
|
|
$
|
466,219
|
|
|
$
|
9,010
|
|
|
$
|
475,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
accordance with ASC 842, future minimum lease payments as of April 30, 2020 were as follows:
Year
ended July 31,
|
|
Fairways
|
|
Technology
Center
|
|
Total
|
|
|
|
|
|
|
|
|
Minimum
lease payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
$
|
57,763
|
|
|
$
|
6,864
|
|
|
$
|
64,627
|
|
|
2021
|
|
|
|
196,605
|
|
|
|
26,574
|
|
|
|
223,179
|
|
|
2022
|
|
|
|
177,447
|
|
|
|
25,017
|
|
|
|
202,464
|
|
|
2023
|
|
|
|
161,860
|
|
|
|
7,957
|
|
|
|
169,817
|
|
|
2024
|
|
|
|
147,534
|
|
|
|
—
|
|
|
|
147,534
|
|
|
Thereafter
|
|
|
|
267,288
|
|
|
|
—
|
|
|
|
267,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present
values of minimum lease payments
|
|
|
$
|
1,008,497
|
|
|
$
|
66,412
|
|
|
$
|
1,074,909
|
|
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
12.
|
COMMITMENTS AND CONTINGENCIES (continued)
|
Contingencies
The
Company is subject to various legal proceedings from time to time as part of its business. As of April 30, 2020, the Company was
not currently party to any legal proceedings or threatened legal proceedings, the adverse outcome of which, individually or in
the aggregate, it believes would have a material adverse effect on its business, financial condition and results of operations.
The Company evaluated all events or transactions that occurred after April 30, 2020 up through the date the
financial statements were available to be issued. During this period, the Company did not have any material recognizable subsequent
events required to be disclosed as of and for the year ended April 30, 2020 except for the following:
|
●
|
Effective
July 20, 2020, the Company issued an aggregate of 7,743,156 shares of common stock to
various shareholders for subscriptions, services other consideration. $840,270 and 916,600,
of the shares were issued for subscriptions received in the aggregate amount of $0 and
6,826,556 of the shares were issued for services.
|