<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d) of
Securities Exchange Act of 1934
For Quarter ended September 30, 1996
Commission File Number 0-25416
BAOA, INC.
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(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0563989
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(State of Incorporation) (I.R.S. Employer Identification No.)
2635 Camino Del Rio South, Suite 210, San Diego, California 92108
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(Address of Principal Executive Offices) (Zip Code)
(619) 291-2262 FAX (619) 291-2290
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(Registrant's telephone and fax number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock at the latest practicable date.
As of September 30, 1996, the registrant had 16,298,600 shares of common stock,
$.001 par value, issued and outstanding.
<PAGE> 2
PART 1 FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
BAOA, INC.
BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
September 30
1996
<S> <C>
ASSETS
CURRENT ASSETS
CASH 1,132
ACCOUNTS RECEIVABLE 115,181
INVENTORY 102,943
------------
TOTAL CURRENT ASSETS 219,256
FIXED ASSETS
FURNITURE AND EQUIPMENT 45,856
LESS DEPRECIATION -24,338
------------
NET FIXED ASSETS 21,518
OTHER ASSETS
DEPOSITS 3,493
ORGANIZATION COSTS 20,000
LESS AMORTIZATION -13,000
------------
TOTAL OTHER ASSETS 10,493
------------
TOTAL ASSETS 251,267
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 3
FINANCIAL STATEMENTS (continued)
BAOA, INC.
BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
September 30
1996
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE 184,667
ACCRUED LIABILITIES 83,627
SALES TAX PAYABLE 638
ACCRUED INCOME TAXES 1,600
NOTE PAYABLE 139,000
NOTES PAYABLE - SHAREHOLDERS 546,225
ACCRUED ROYALTIES 193,551
------------
TOTAL CURRENT LIABILITIES 1,149,308
LONG TERM LIABILITIES
------------
TOTAL LONG TERM LIABILITIES 0
------------
TOTAL LIABILITIES 1,149,308
STOCKHOLDERS' EQUITY
COMMON STOCK - $.001 PAR. 16,299
25,000,000 SHARES AUTHORIZED,
16,298,600 ISSUED
ADDITIONAL PAID IN CAPITAL 2,402,455
BEGINNING RETAINED EARNINGS -2,714,909
NET INCOME (LOSS) -601,886
ENDING RETAINED EARNINGS -3,316,795
------------
TOTAL STOCKHOLDERS' EQUITY -898,041
------------
TOTAL LIAB & STOCKHOLDERS' EQUITY 251,267
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 4
FINANCIAL STATEMENTS (continued)
BAOA, INC.
INCOME STATEMENT
UNAUDITED
<TABLE>
<CAPTION>
September 30 September 30
1996 1995
<S> <C> <C>
REVENUE
SALES 58,196 17,385
-----------------------------
TOTAL REVENUE 58,196 17,385
COST OF SALES 111,937 14,694
-----------------------------
GROSS PROFIT (LOSS) -53,741 2,691
OPERATING EXPENSES
SALARIES & WAGES 104,901
SALES & MARKETING 373,696 42,429
ROYALTIES 23,853 4,344
CONSULTING & OUTSIDE SERVICES 7,625 17,700
TRAVEL 1,000 6,039
LEGAL & ACCOUNTING 30,825 46,054
GENERAL & ADMINISTRATIVE 62,214 116,075
AMORTIZATION 3,000 2,999
DEPRECIATION 6,262 6,262
-----------------------------
TOTAL OPERATING EXPENSES 508,475 346,803
-----------------------------
INCOME (LOSS) FROM OPERATIONS -562,216 -344,112
OTHER INCOME & EXPENSE
INTEREST EARNED 2 11
INTEREST EXPENSE -39,672 -28,169
-----------------------------
TOTAL OTHER INCOME & EXPENSE -39,670 -28,158
INCOME (LOSS) BEFORE TAXES -601,886 -372,270
PROVISION FOR TAXES 800
-----------------------------
NET INCOME (LOSS) -601,886 -373,070
=============================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 5
FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
BAOA, INC.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPT. 30
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME (LOSS) -601,886 -373,070
ADJ TO RECONCILE NET INCOME (LOSS) TO NET
CASH USED IN OPERATING ACTIVITIES:
DEPRECIATION & AMORTIZATION 9,261 9,261
(INCREASE) DECREASE IN ACCTS RECEIVABLE -14,923 31,086
DECREASE IN INVENTORY 146,992 15,442
INCREASE IN ACCTS PAYABLE 11,422 95,162
INCREASE IN ACCRUED LIAB 64,059 32,573
INCREASE IN INCOME TAXES PAYABLE 800
PAYMENTS FOR SERVICES BY COMMON STOCK 320,553
--------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES -64,522 -188,746
CASH FLOWS FROM FINANCING ACTIVITIES
NOTES PAYABLE 64,000 175,480
--------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 64,000 175,480
NET INCREASE (DECREASE) IN CASH -522 -13,266
CASH AT BEGINNING OF PERIOD 1,654 15,459
CASH AT END OF PERIOD 1,132 2,193
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
FINANCIAL STATEMENTS (continued)
NOTES TO FINANCIAL STATEMENTS
Note 1: Management's opinion
In the opinion of management, the accompanying financial statements contain all
adjustments necessary to present fairly the financial position of the company
as of September 30, 1996 and the results of operations for the nine months
ended September 30, 1996 and 1995 and changes in cash for the nine months ended
September 30, 1996 and 1995.
Note 2: Interim reporting
The results of operations for the nine months ended September 30, 1996 and 1995
are not necessarily indicative of the results to be expected for the remainder
of the year.
Note 3: Components of Inventory
As of September 30, 1996, inventory consisted of $102,943 of finished products.
<PAGE> 7
PART 1 FINANCIAL INFORMATION
ITEM 2: Management's Discussion and Analysis of financial condition and
results of operations.
Material changes in financial condition:
- ---------------------------------------
As of September 30,1996: the Company had $1,132 cash on hand and in the bank.
The primary sources of cash and financing for the Company for the nine months
then ended were $58,196 from sales, and $64,000 from shareholder loans. The
primary use of cash during that period was $121,664 to finance the company's
operations.
The Company currently maintains a positive cash balance through payables and
notes due to shareholders. The Company has recruited several new key officers
in order to finalize contracts with major distributors and sponsors. All
officers are currently serving without salaries.
Material changes in the results of operations:
- ---------------------------------------------
Losses in the current period are mitigated by the fact that the majority of
costs and expenses are non-cash accruals. These accrued liabilities will only
be paid down upon the Company's achievement of necessary gross profit from
sales.
The Board of Directors is working with new officers in order to finalize new
contracts and sponsorships in 1996. In addition, the Company has expanded its
products and marketing by entering into computerized game development and
Internet sales. Management believes that the Company should return to
profitability in 1997.
<PAGE> 8
PART II OTHER INFORMATION
ITEM 1 The Company had been named as a defendant in three legal
proceedings arising in the ordinary course of business. All three
proceedings involved a former officer and major shareholder
involved with the daily operations of the Company since 1993. As
of the date of this filing, all legal matters had been settled at
no additional cost to the Company other than approximately $10,000
in legal expenses.
ITEMS 2-4: Not applicable
ITEM 5: Information required in lieu of Form 8-K: None
ITEM 6: Exhibits and Reports on 8-K:
a) Exhibits
27 Financial Data Schedule
b) No reports on Form 8-K were filed during the fiscal
quarter ended September 30, 1996
<PAGE> 9
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Dated: November 15, 1996 /s/ STEVEN R. WRIGHT
------------------------------------------
Steven R. Wright,
Treasurer and Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERIM
FINANCIAL STATEMENTS FOR THIRD QUARTER 1996 AND IS QUALIFIED IN ITS ENTIRETY TO
SUCH BAOA, INC. 10Q-SB
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,132
<SECURITIES> 0
<RECEIVABLES> 115,181
<ALLOWANCES> 0
<INVENTORY> 102,943
<CURRENT-ASSETS> 219,256
<PP&E> 45,856
<DEPRECIATION> 24,338
<TOTAL-ASSETS> 251,267
<CURRENT-LIABILITIES> 1,149,308
<BONDS> 0
0
0
<COMMON> 16,299
<OTHER-SE> 2,402,455
<TOTAL-LIABILITY-AND-EQUITY> 251,267
<SALES> 58,196
<TOTAL-REVENUES> 58,196
<CGS> 111,937
<TOTAL-COSTS> 111,937
<OTHER-EXPENSES> 508,475
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,672
<INCOME-PRETAX> (601,886)
<INCOME-TAX> 0
<INCOME-CONTINUING> (601,886)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (601,886)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
