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    BOMH   US09859M1045

BOOMER HOLDINGS INC.

(BOMH)
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BOOMER : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)

11/06/2020 | 04:43pm EST

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS


This annual report contains certain "forward-looking statements" within the
meaning of the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995 with respect to our business, financial condition, liquidity
and results of operations. Words such as "anticipates," "expects," "intends,"
"plans," "predicts," "believes," "seeks," "estimates," "could," "would," "will,"
"may," "can," "continue," "potential," "should," and the negative of these terms
or other comparable terminology often identify forward-looking statements.
Statements in this annual report that are not historical facts are hereby
identified as "forward-looking statements" for the purpose of the safe harbor
provided by Section 21E of the Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended. These forward-looking
statements are not guarantees of future performance and are subject to risks and
uncertainties that could cause actual results to differ materially from the
results contemplated by the forward-looking statements. See "Risk Factors"
beginning on page 13.

Many of the important factors that will determine these results are beyond our
ability to control or predict. You are cautioned not to put undue reliance on
any forward-looking statements, which speak only as of the date of this annual
report. Except as otherwise required by law, we do not assume any obligation to
publicly update or release any revisions to these forward-looking statements to
reflect events or circumstances after such applicable date or to reflect the
occurrence of unanticipated events. You should, however, review the factors and
risks we describe in the "Risk Factors" section hereof beginning on page 13 and
in reports we will file from time to time with the Commission after the date of
this annual report.

Corporate History

Boomer Holdings Inc. was incorporated as Remaro Group Corp. under the laws of
the State of Nevada on March 31, 2016. On January 7, 2020, the Company executed
an Agreement of Merger and Plan of Share Exchange (the "Exchange Agreement"),
with BNW, Boomer Naturals Holdings, Inc., a Nevada corporation ("Boomer"),
Boomer Naturals, Inc., 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. Pursuant to the
Agreement, the Company agreed to acquire all of the outstanding shares of Boomer
in exchange for the issuance of an aggregate 40,326,913 pre-split shares (the
"Exchange Shares") of the Company's common stock, par value $0.001 per share
(the "Common Stock"). Pursuant to the terms of the Exchange Agreement, the
Company's Majority Shareholder agreed to retire 8,000,000 shares of the
Company's Common Stock. Also 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.

Description of Our Business

CB5 Products

We are engaged in the research, development, acquisition, licensing and sales of
health and wellness products including our proprietary line of CB5 products and,
more recently, face coverings gloves, and gowns and hand sanitizers. Our
specialized natural CB5 products have FDA compliant ingredients and are
impactful on the endocannabinoid system. These products are powered by natural
terpenes, include, edible and topical offerings. We are engaged in marketing and
branding within the alternative CBD/THC space, including our trademark "CB5"
brand which is a proprietary formula and currently patent pending. Boomer
Naturals currently operates a retail store in Las Vegas Nevada and is
negotiating a lease on the company's flagship store in Manhattan New York.
Boomer Natural products are also available in Golf Pro Shops, Specialty Stores,
Chiropractic Offices and Nail Salons across the countries. Boomer Naturals has a
robust online presence and enjoys material sales through its website at
boomernaturals.com. The Company has shifted its focus to its Boomer Medical
Supplies segment. Boomer Medical Supplies is focusing on the perceived
opportunity created from the recent shift away from the reliance on
Chinese-produced medical supplies.

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Our Strategy

With our CB5 formula we believe are in a unique position to brand our line. Our
FDA compliant product will give us access to advertising on national television
and social media platforms like Facebook and Google. In addition we expect to
air promotional/educational content throughout 2020 on PBS affiliates across the
country as well as a corporate sponsorship at Madison Square Garden and the MSG
network.

Online Sales

Through its websites and internet advertising, Boomer will be able to brand its
products while informing consumers of the attributes of CB5. This direct to
consumer interaction could pave the way for significant online sales through the
Boomer Naturals website.

National Retail Chains.

Currently many National Retail Chains are hesitant to introduce CBD related
products on a national scale and thus far have only offered topical products in
regional test markets. The FDA compliant ingredients in CB5 will allow these
chains to offer Boomer Natural products in both topical and ingestible forms
nation-wide.

Golf

We plan to continue to grow our distribution network in the golf space in part
through our relationship with PGA Magazine and the PGA Merchandising Show. With
access to vendors through these mediums and the ability to advertise we will be
able to best utilize of our wide-ranging wholesale sales network. We are in a
unique position to capture a significant share of the expansive golf market.

Chiropractors


Without the endorsement of the American Chiropractors Association many
Chiropractors are not employing CBD into treatments. CB5 with its FDA compliant
ingredients clears the path for doctors wishing to employ a natural alternative
to pharmaceuticals. CB5 was be introduced nationally to the Chiropractor
community at the widely attended Parker Chiropractor Show in Las Vegas Nevada in
February. A key component to the attendance at this show is that no CBD
companies were allowed to exhibit.

Veterinarians

Like the Chiropractor community Veterinarians continue to look for non-pharmaceutical solutions for animals. To date the American Veterinary Association has not endorsed CBD. This leaves a tremendous opportunity for CB5 making an impact into the Veterinary space. Boomer Naturals can exhibit and introduce its product line to the community at the AVMA annual conventions.

Overseas opportunities


Boomer has begun discussions with distributors in over 7 countries to carry the
Boomer Naturals CB5 product line. These distributors see a unique opportunity to
fulfill consumer demand via CB5 where CBD is not available to sell.

In addition, we intend to seek new branding and licensing opportunities for our intellectual property and we will seek strategic corporate and product acquisitions.

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COVID-19 Developments - Boomer Medical Products


Upon most U.S. States issuing some level of Stay-At-Home orders arising from the
COVID-19 pandemic, the short-term business strategy of Boomer Naturals shifted.
Boomer Naturals received its first round of Tommy Bahama orders during the first
quarter 2019 and expected that Tommy Bahama would be reordering on a monthly
basis to replenish stock at all of its brick and mortar retail locations. In
addition, Tommy Bahama intended to launch an aggressive e-commerce campaign
commencing with email advertisements to its significant database of customers.
Once the Stay-At-Home orders took effect, Tommy Bahama was required to close its
retail stores for several months and further elected to delay any major
e-commerce marketing initiatives due to their belief that consumers were
primarily spending money on food and other necessities as opposed to engaging in
significant discretionary spending during the Pandemic. It would have been
reasonably expected that said actions by Tommy Bahama would have caused a
significant delay in revenues to the Company. However, management saw an
opportunity to remain consistent with its health and wellness brand strategy by
expanding its offerings to face coverings and other products within the Personal
Protective Equipment category.

Commencing in April 2020, Boomer Naturals began to offer for online retail sale
at its website a variety of face coverings and sanitizers. During this period,
Boomer Naturals was able to leverage their unique manufacturing capabilities and
supply chain to quickly provide face coverings.  Boomer Naturals began running
advertisements on television, radio and various digital platforms featuring face
coverings. Due the demand for such items, e-commerce sales have grown to
over 3,000 orders per day during the period ended July 31, 2020. This increased
revenue stream replaced the anticipated revenue arising from the Tommy Bahama
relationship. In addition, while the e-commerce PPE vertical continued to grow,
Boomer Naturals began to receive interest in wholesale and retail purchases of
face coverings and other protective equipment. Boomer Naturals is in the
early-stages of growing a wholesale PPE division that includes sales to leading
national retailers. While no assurance can be given regarding the performance of
the Boomer Medical products division, the Company anticipates that this division
will continue to generate an increase in revenues during the duration of the
pandmeic to accompany the expected reemergence of the CB5 division upon Tommy
Bahama retail stores reopening.

RESULTS OF OPERATIONS


                       Year Ended July 31, 2020 (Audited)
                Compared to Year Ended July 31, 2019 (Audited):

                                                          Year Ended July 31,

                                                    2020                         2019                        Changes
                                                             % of                        % of
                                            Amount         Revenue        Amount       Revenue         Amount            %

Net revenue                              $  11,472,571        100.0 %   $   67,675        100.0 %   $  11,404,896        100.0 %
Cost of Goods Sold                           3,888,175         33.9 %       25,550         37.8 %       3,862,625         33.9 %
Gross profit                                 7,584,396         66.1 %       42,125         62.2 %       7,542,271         66.1 %

Operating expenses:
Advertising and marketing                   13,832,587        120.6 %      

110,201 162.8 % 13,722,386 120.3 % General and administrative

                   3,854,396         33.6 %      

129,444 191.3 % 3,724,952 32.7 % Payroll and payroll taxes

                    2,429,386         21.2 %      

135,069 199.6 % 2,294,317 20.1 % Professional fees

                            1,974,360         17.2 %      

183,098 270.6 % 1,791,262 15.7 % Research and development

                        17,024          0.1 %       

3,907 5.8 % 13,117 0.1 % Depreciation and amortization

                   28,224          0.2 %            -          0.0 %          28,224          0.2 %
Rent                                           624,882          5.4 %       45,092         66.6 %         579,790          5.1 %
Total operating expenses                    22,760,859        198.4 %      606,811        896.7 %      22,154,048        194.3 %

Loss from operations                       (15,176,463 )     -132.3 %     (564,686 )     -834.4 %     (14,611,777 )     -128.1 %

Other income (expense):
Interest expense                                (2,942 )        0.0 %     

(30,069 ) -44.4 % 27,127 0.2 % Interest expense - related party

              (340,116 )       -3.0 %            -          0.0 %        (340,116 )       -3.0 %
Other expense                                  (56,580 )       -0.5 %            -          0.0 %         (56,580 )       -0.5 %
Other income                                    11,323          0.1 %      

- 0.0 % 11,323 0.1 % Total other income (expense)

                  (388,315 )       -3.4 %      

(30,069 ) -44.4 % (358,246 ) -3.1 %

Loss before provision for income taxes (15,564,778 ) -135.7 % (594,755 ) -878.8 % (14,970,023 ) -131.3 %


Provision for income taxes                           -          0.0 %            -          0.0 %               -          0.0 %

Net loss                                 $ (15,564,778 )     -135.7 %   $ (594,755 )     -878.8 %   $ (14,970,023 )     -131.3 %



Revenue

Our revenue during the year ended July 31, 2020 was $11,472,571, coming from PPE
products, sales, retail, and wholesale income from customers that purchased our
CB5 wellness products, compared to $67,675 from these revenue sources for the
same period one year ago. We expect the revenue we receive from PPE to increase
meaningfully in the near future and expect CB5 wellness products to continue to
grow from current levels.

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Cost of Goods Sold

Our Cost of Goods Sold ("COGS") for sales of PPE and CB5 wellness products
consists of the cost of acquiring and manufacturing the product to the customer.
For the year ended July 31, 2020, our COGS associated with PPE products and CB5
wellness was $3,888,175. Most orders are delivered directly to the customer,
without any handling, storage or processing by us. For the year ended July 31,
2019, our COGS associated with CB5 wellness was $25,500.

Operating Expenses


Overall, operating expenses increased for the year ended July 31, 2020, to the
amount of $22,760,859 as compared to $606,811 for the same period ended 2019 as
the Company ramped up operations.  The increase was primarily due to a strategic
decision to increase advertising and marketing related to the initial launch of
the Company's PPE products.  The Company also increased its payroll for
additional employees, general and administrative expense due to increased
payroll and administrative expenses resulting from the Company's growth.  We
expect a decrease in advertising and marketing expenses during the first quarter
of 2021.

Non-Operating Expenses

We incurred interest expense related to notes payable and lines of credit in the amount of $343,058 for the year ended July 31, 2020.

Liquidity and Capital Resources


Our principal liquidity requirements are for working capital and capital
expenditures. We fund our liquidity requirements primarily through cash on hand,
cash flows from operations and borrowings from through debt. We ended July 31,
2020 with $4,171,371 of cash compared with $152,667 as of July 31, 2019.

The following table summarizes our cash flows from operating, investing, and
financing activities:

                                                          Year Ended July 31,
                                                          2020            2019
Net cash provided by (used in) operating activities   $ (5,281,278 )   $ (473,805 )
Net cash provided by (used in) investing activities       (224,865 )      (77,528 )
Net cash provided by (used in) financing activities      9,524,847        704,000
Net increase (decrease) in cash                       $  4,018,874        

152,667




Operating Activities - For the year months ended July 31, 2020 and 2019, net
cash used in operating activities was $5,281,278 and $473,805, respectively,
primarily due to loss of $15,564,778 for the year ended July 31, 2020.

Investing Activities - Cash used in investing activities primarily consisted of purchases of property and equipment.


Financing Activities - Net cash provided by or used in financing activities
primarily consisted of net borrowings from notes payable and lines of credit of
$9,771,985 for the year ended July 31, 2020 and $74,000 for the year ended July
31, 2019 and issuances of common stock of $3,661,343 for the year ended July 31,
2020.

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CRITICAL ACCOUNTING POLICIES

Our critical accounting estimates are included in our significant accounting
policies as described in Note 2 of the consolidated financial statements of this
Form 10-Q. Those consolidated financial statements were prepared in accordance
with GAAP. Critical accounting estimates are those that we believe are most
important to the portrayal of our financial condition and results of operations.
The preparation of our consolidated financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenue and expense. Our estimates are evaluated on an ongoing basis and drawn
from historical experience, current trends and other factors that management
believes to be relevant at the time our consolidated financial statements are
prepared. Actual results may differ from our estimates. Management believes that
the following accounting estimates reflect the more significant judgments and
estimates we use in preparing our consolidated financial statements.

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, 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 July 31, 2020.

Advertising Expense

Advertising costs are expensed as incurred. Advertising expense amounted to $13,832,587 and $110,201 for the fiscal years ended July 31, 2020 and 2019, respectively. The increase was primarily due to a strategic decision to increase advertising related to the initial launch of PPE products during the fourth quarter of fiscal 2020.

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.

Year ended July 31, 2020.

Revenue

During the year ended July 31, 2020, our revenues were $11,472,571. During the year ended July 31, 2020, the cost of revenue was $3,888,175.

Operating Expenses

During the year ended July 31, 2020, we incurred $3,854,396 in general and administrative expenses and $13,832,587 of marketing expenses. General and administrative expenses incurred generally related to corporate overhead, financial and administrative contracted services, such as legal and accounting and developmental costs.


Net Loss

Our net loss for the year ended July 31, 2020 was $15,564,778.

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PLAN OF OPERATION AND FUNDING

Based on our current rate of expenditures and anticipated changes, we have
estimated a total cash expenditure budget of approximately $65 million for the
next 12 months, of which approximately $29 million is expected to be expended
towards advertising, marketing and sales, $1 million is expected to be expended
toward product development and approximately $35 million is budgeted for working
capital and general and administrative expenses.

We expect that working capital requirements will continue to be funded through a
combination of increased sales, both online and wholesale, our existing funds
and further issuances of securities. Our working capital requirements are
expected to increase in line with the growth of our business. Historically, we
have financed our operations through private sales of equity securities and, in
part, through sales of our products. We believe that our cash flow from
operating activities and the sale of equity securities will be sufficient to
meet our capital requirements for at least the next 12 months.

© Edgar Online, source Glimpses

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