BOOR HLDG 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 HistoryBoomer Holdings Inc. was incorporated asRemaro Group Corp. under the laws of theState of Nevada onMarch 31, 2016 . OnJanuary 7, 2020 , the Company executed an Agreement of Merger and Plan of Share Exchange (the "Exchange Agreement"), with BNW,Boomer Naturals Holdings, Inc. , aNevada 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 onJanuary 7, 2020 , the Company approved an amendment to its Articles of Incorporation (the "Amendment") to: change the name of the Company toBoomer 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 inLas Vegas Nevada and is negotiating a lease on the company's flagship store inManhattan New York . Boomer Natural products are also available inGolf 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 itsBoomer 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. 28
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Index 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 onPBS affiliates across the country as well as a corporate sponsorship atMadison 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 withPGA 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 theAmerican 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 inLas 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
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 mostU.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 ofTommy Bahama orders during the first quarter 2019 and expected thatTommy 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 byTommy 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 inApril 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 endedJuly 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 uponTommy 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 endedJuly 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. 30
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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 endedJuly 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
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 endedJuly 31, 2020 with$4,171,371 of cash compared with$152,667 as ofJuly 31, 2019 . The following table summarizes our cash flows from operating, investing, and financing activities: Year Ended July 31, 2020 2019 Net cash provided by (used in) operating activities$ (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 endedJuly 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 endedJuly 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 endedJuly 31, 2020 and$74,000 for the year endedJuly 31, 2019 and issuances of common stock of$3,661,343 for the year endedJuly 31, 2020 . 31
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Index 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 atJuly 31, 2020 .
Advertising Expense
Advertising costs are expensed as incurred. Advertising expense amounted to
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
Revenue
During the year ended
Operating Expenses
During the year ended
Net Loss
Our net loss for the year ended
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Index 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.
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