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. TCompanyCompanyCompanyCompanyCompanyCompanyCompanyCompany
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.
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 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.
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
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. 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 State of America and have been consistently applied in the preparation of the financial statements.
Basis
of Presentation and Consolidation
These
accounting policies conform to generally accepted accounting principles in the United States of America (“GAAP”) and
have been consistently applied in the preparing the Firm’s financial statements. The accounting and reporting policies of
the Company are in accordance with accounting principles generally accepted in the United States of America, which is based on
the accrual method of accounting.
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.
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 January
31, 2020.
Advertising
Expense
Advertising
costs are expensed as incurred. Advertising expense amounted to $639,653 and $380,568 for the six and three months ended January
31, 2020, respectively.
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.
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
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.
|
As
of January 31, 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.
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
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 January 31, 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 related products. E-commerce accounted
for 48% of revenues for the six months ended January 31, 2020, respectively and brick and mortar retail accounted for 52% of revenues
for the six months ended January 31, 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
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.
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
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 $$1,162,113 million and $1,200,091, respectively as of January 31, 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 not 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 $1,162,113
million and $1,200,091 million, respectively as of January 31, 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 not 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.
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.
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Inventories
primarily consisted of finished goods in the amount of $526,592 and $53,724 as of January 31, 2020 and July 31, 2019, respectively.
|
4.
|
NOTES
RECEIVABLES – RELATED PARTIES
|
Notes
receivables from related parties consisted of the following:
|
|
January
31,
|
|
July
31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
Loan receivable
bearing no interest with unpaid principal balance due on demand.
|
|
$
|
119,585
|
|
|
$
|
—
|
|
Loan
receivable bearing no interest with unpaid principal balance due on demand.
|
|
|
3,207
|
|
|
|
1,600
|
|
|
|
|
|
|
|
|
|
|
Total
notes receivables
|
|
$
|
122,792
|
|
|
$
|
1,600
|
|
|
5.
|
PROPERTY
AND EQUIPMENT
|
Property
and equipment consisted of the following:
Depreciation
and amortization expense on property and equipment amounted to $9,251 and $0 for the six and three months ended January 31, 2020,
respectively.
|
|
|
|
|
|
|
January
31, 2020
|
|
July
31,
2019
|
|
|
|
|
|
Furniture
and Equipment
|
|
$
|
14,381
|
|
|
$
|
35,838
|
|
Leasehold Improvement
|
|
|
102,666
|
|
|
$
|
—
|
|
Computer
|
|
|
16,051
|
|
|
|
40,090
|
|
|
|
|
|
|
|
|
|
|
Total property and
equipment
|
|
|
133,098
|
|
|
|
75,928
|
|
Less-accumulated
depreciation and amortization
|
|
|
(9,251
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total
property and equipment, net
|
|
$
|
123,847
|
|
|
$
|
75,928
|
|
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:
|
|
|
|
|
|
|
January
31,
|
|
July
31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
July
2019 ($300,000 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.
|
|
$
|
30,306
|
|
|
$
|
—
|
|
July
2019 ($89,000 line of credit) -
Line of credit with maturity date of July 1, 2029 with 6% interest per annum with unpaid principal balance and accrued interest
payable on the maturity date.
|
|
|
64,400
|
|
|
|
—
|
|
July
2019 ($300,000 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.
|
|
|
378,827
|
|
|
|
50,000
|
|
July
2019 ($150,000 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.
|
|
|
68,440
|
|
|
|
—
|
|
July
2019 ($60,000 line of credit) -
Line of credit with maturity date of July 29, 2029 with 6% interest per annum with unpaid principal balance and accrued interest
payable on the maturity date.
|
|
|
17,300
|
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
Total lines of credit
|
|
|
559,273
|
|
|
|
110,000
|
|
|
|
|
|
|
|
|
|
|
Less: Short-term
portion
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total
lines of credit - long portion
|
|
$
|
559,273
|
|
|
$
|
110,000
|
|
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
4.
|
LINES
OF CREDIT – RELATED PARTIES (continued)
|
July
2019 - $300,000 line of credit
On
July 1, 2019, the Company entered into a line of credit agreement in the amount of $300,000 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 $269,694 as of January 31, 2020.
July
2019 - $89,000 line of credit
On
July 1, 2019, the Company entered into a line of credit agreement in the amount of $89,000 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 $24,600 as of January 31, 2020.
July
2019 - $300,000 line of credit
On
July 1, 2019, the Company entered into a line of credit agreement in the amount of $300,000 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 January 31, 2020.
July
2019 - $150,000 line of credit
On
July 1, 2019, the Company entered into a line of credit agreement in the amount of $150,000 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 $81,560 as of January 31, 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, 2029.
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 $42,700 as of January 31, 2020.
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
5.
|
NOTES
PAYABLE – RELATED PARTIES
|
Notes
payable to related parties consisted of the following:
|
|
January
31,
|
|
July
31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
July
2019 ($300,000 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.
|
|
$
|
100,000
|
|
|
$
|
—
|
|
July
2019 ($89,000 notes payable) -
Notes payable with maturity date of July 1, 2029 with 6% interest per annum with unpaid principal balance and accrued interest
payable on the maturity date.
|
|
|
5,000
|
|
|
|
—
|
|
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
|
|
|
|
74,000
|
|
July
2019 ($5,980 notes payable) -
Notes payable with maturity date of June 30, 2021 with 8.25% interest per annum with unpaid principal balance and accrued
interest payable on the maturity date.
|
|
|
2,718
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total notes payable
|
|
|
181,718
|
|
|
|
74,000
|
|
|
|
|
|
|
|
|
|
|
Less: Short-term
portion
|
|
|
(2,718
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total
notes payable - long portion
|
|
$
|
179,000
|
|
|
$
|
74,000
|
|
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.
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
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 October 31, 2019.
A
reconciliation of the Company’s effective tax rate to the statutory federal rate is as follows:
Description
|
|
January
31, 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
|
%
|
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
|
|
January
31, 2020
|
|
July
31,
2019
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net
operating loss
|
|
$
|
(965,448
|
)
|
|
$
|
(47,894
|
)
|
Other
temporary differences
|
|
|
—
|
|
|
|
—
|
|
Total deferred tax
assets
|
|
|
(965,448
|
)
|
|
|
(47,894
|
)
|
Less
- valuation allowance
|
|
|
965,448
|
|
|
|
47,894
|
|
Total
deferred tax assets
|
|
|
—
|
|
|
|
—
|
|
At
January 31, 2020, the Company had available net operating loss carryovers of approximately $965,448 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.
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
7. INCOME
TAX PROVISION (Continued)
At
the six months ended January 31, 2020, the Company had cumulative net operating loss carryforwards for federal tax purposes of
approximately $965,448. 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.
|
8.
|
RELATED
PARTY TRANSACTIONS
|
The
Company had the following related party transactions:
|
·
|
Outside
Services – One of the Company’s outside contractor or consultant
is Mr. Daniel Capri, a shareholder and Chief Executive Officer of the Company. Mr. Daniel
Capri provides various consulting and management services to the Company. The Company
recorded expense of $20,665 for six months ended January 31, 2020 and $5,806 for three
months ended January 31, 2020 and had outstanding balance recorded as accrued expense
of $5,935 as of January 31, 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 $8,000 for six months ended
January 31, 2020 and $0 for three months ended January 31, 2020 and had outstanding balance
recorded as accrued expense of $0 as of January 31, 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.
|
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
8. RELATED
PARTY TRANSACTIONS. (Continued)
|
·
|
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.
|
|
·
|
Line
of Credit – On July 1, 2019, the Company entered into a line of credit
agreement in the amount of $300,000 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, 2029.
|
|
·
|
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.
|
|
·
|
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.
|
|
9.
|
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.
|
|
·
|
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 six months ended January 31, 2020 was $199,996.
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 $1,162,113 million and $1,200,091 million as of January
31, 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.
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
9. COMMITMENTS
AND CONTINGENCIES (Continued)
Operating
Leases (continued)
In
accordance with ASC 842, the components of lease expense were as follows:
For
the six months ended
|
|
Fairways
|
|
Technology
Center
|
|
Total
|
|
|
|
|
|
|
|
Operating
lease expense
|
|
$
|
34,374
|
|
|
$
|
3,604
|
|
|
$
|
37,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
lease expense
|
|
$
|
34,374
|
|
|
$
|
3,604
|
|
|
$
|
37,978
|
|
In
accordance with ASC 842, maturities and operating lease liabilities as of January 31, 2020 were as follows:
|
|
|
|
|
|
|
Year
ended December 31,
|
|
Fairways
|
|
Technology
Center
|
|
Total
|
|
|
|
|
|
|
|
Undiscounted
cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
$
|
223,906
|
|
|
$
|
26,964
|
|
|
$
|
250,870
|
|
2021
|
|
|
231,695
|
|
|
|
30,564
|
|
|
|
262,259
|
|
2022
|
|
|
238,252
|
|
|
|
26,332
|
|
|
|
264,584
|
|
2023
|
|
|
244,810
|
|
|
|
—
|
|
|
|
244,810
|
|
2024
|
|
|
251,367
|
|
|
|
—
|
|
|
|
251,367
|
|
Thereafter
|
|
|
434,974
|
|
|
|
—
|
|
|
|
434,974
|
|
Total
undiscounted cash flows
|
|
|
1,625,004
|
|
|
|
83,860
|
|
|
|
1,708,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted
cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
liabilities - current
|
|
|
103,245
|
|
|
|
20,678
|
|
|
|
123,923
|
|
Lease
liabilities - long-term
|
|
|
1,021,447
|
|
|
|
54,721
|
|
|
|
1,076,168
|
|
Total
discounted cash flows
|
|
|
1,124,692
|
|
|
|
75,399
|
|
|
|
1,200,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Difference
between undiscounted and discounted cash flows
|
|
$
|
500,312
|
|
|
$
|
8,461
|
|
|
$
|
508,773
|
|
In
accordance with ASC 842, future minimum lease payments as of January 31, 2020 were as follows:
|
|
|
|
|
|
Year
ending
|
|
|
Fairways
|
Technology
Center
|
Total
|
|
|
|
|
|
|
Minimum lease payments
|
|
|
|
|
|
2020
|
|
|
$ 203,042
|
$ 25,023
|
$ 228,065
|
2021
|
|
|
187,112
|
25,784
|
212,896
|
2022
|
|
|
170,753
|
20,277
|
191,030
|
2023
|
|
|
155,707
|
-
|
155,707
|
2024
|
|
|
141,885
|
-
|
141,885
|
Thereafter
|
|
|
209,511
|
-
|
209,511
|
|
|
|
|
|
|
Present
values of minimum lease payments
|
|
|
$ 1,068,010
|
$ 71,084
|
$ 1,139,094
|
BOOMER HOLDINGS,
INC. AND SUBSIDIARY
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
10.
|
COMMITMENTS
AND CONTINGENCIES (continued)
|
Contingencies
The
Company is subject to various legal proceedings from time to time as part of its business. As of January 31, 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 January 31, 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 January 31, 2020.