<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, 1997
Commission File Number 0-25416
BAOA, INC.
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0563989
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
2635 Camino Del Rio South, Suite 210, San Diego, California 92108
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(619) 291-2262 FAX (619) 291-2290
------------------ --------------------------
(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, 1997, the registrant had 27,366,217 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,
1997
-------------
<S> <C>
ASSETS
Current Assets
Cash $ 114,009
Accounts receivable 53,339
Employee advances 350
Inventory 23,892
---------
Total current assets 191,590
Fixed assets
Furniture and equipment 47,367
Less depreciation (32,806)
---------
Net fixed assets 14,561
Other assets
Deposits 2,258
Organization costs 20,000
Less amortization (17,000)
---------
Total other assets 5,258
---------
Total assets $ 211,409
=========
</TABLE>
See notes to financial statements
2
<PAGE> 3
FINANCIAL STATEMENTS (continued)
BAOA, INC.
BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 45,461
Salaries and wages payable 1,664
Payroll taxes payable 204
Sales tax payable 7
Accrued income taxes 800
Accrued royalties 57,592
-----------
Total current liabilities 105,728
Long term liabilities
Contracts payable 130,325
Accrued liabilities 136,745
Notes payable 136,500
Notes payable -- shareholders 570,625
-----------
Total long term liabilities 974,195
-----------
Total liabilities 1,079,923
Stockholders' equity
Common Stock -- $.001 par, 50,000,000 shares
authorized, 27,366,217 issued 27,366
Additional paid in capital 3,204,513
Beginning retained earnings (3,672,377)
Net income (loss) (428,016)
Ending retained earnings (4,100,393)
-----------
Total stockholders' equity (868,514)
-----------
Total liabilities and stockholders' equity $ 211,409
===========
</TABLE>
See notes to financial statements
3
<PAGE> 4
FINANCIAL STATEMENTS (continued)
BAOA, INC.
INCOME STATEMENT
UNAUDITED
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
<S> <C> <C>
Revenue
Sales $ 17,945 $ 58,196
---------- ---------
Total revenue 17,945 58,196
Cost of sales 37,893 111,937
---------- ---------
Gross profit (loss) (19,948) (53,741)
Operating expenses
Salaries and wages 7,138
Sales and marketing 317,044 373,696
Royalties (136,673) 23,853
consulting and outside services 17,084 7,625
Travel 33,499 1,000
Legal and accounting 22,900 30,825
General and administrative 95,843 62,214
Amortization 3,000 3,000
Depreciation 6,382 6,262
---------- ---------
Total operating expenses 366,217 508,475
---------- ---------
Income (loss) from operations (386,165) (562,216)
Other income and expense
Interest earned 1 2
Interest expense (40,946) (39,672)
Penalties (106)
---------- ---------
Total other income and expense (41,051) (39,670)
Income (loss) before taxes (427,216) (601,886)
Provision for taxes 800
---------- ---------
Net income (loss) $ (428,016) $(601,886)
========== =========
</TABLE>
See notes to financial statements
4
<PAGE> 5
FINANCIAL STATEMENTS (continued)
BAOA, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $(428,016) $(601,886)
Adjustment to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 9,382 9,261
(Increase) decrease in accounts receivable (5,769) (14,923)
(Increase) decrease in employee advances (350)
Decrease in inventory 21,364 146,992
(Increase) decrease in assets (1,511)
Increase (decrease) in accounts payable (33,289) 11,422
Increase (decrease) in wages payable 1,664
Increase (decrease) in property taxes payable 204
Increase (decrease) in accrued liabilities 157,634 64,059
Increase (decrease) in income taxes payable (800)
Payments for services by common stock 191,125 320,553
---------- ---------
Net cash flows from operating activities (88,362) (64,522)
Cash flows from financing activities
Increase (decrease) in notes payable 61,400 64,000
Common stock purchases 139,600
---------- ---------
Net cash flows from financing activities 201,000 64,000
Net increase (decrease) in cash 112,638 (522)
Cash at beginning of period 1,371 1,654
Cash at end of period 114,009 1,132
</TABLE>
See notes to financial statements
5
<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, 1997 and the results of operations for the nine months ended
September 30, 1997 and 1996 and changes in cash for the nine months ended
September 30, 1997 and 1996.
Note 2: Interim reporting
The results of operations for the nine months ended September 30, 1997 and 1996
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, 1997, inventory consisted of $23,892 of finished products.
6
<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 30,1997: the Company had $114,009 cash on hand and in the bank.
The primary sources of cash and financing for the Company for the nine months
then ended were $17,945 from sales, $61,400 loans from shareholders, and
$139,600 from sale of common stock. The primary uses of cash during that period
were $92,724 to finance the company's operations, and $13,276 to pay down
current liabilities.
The Company currently maintains a positive cash balance through payables and
notes due to shareholders.
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, officers, and the advisory board of notable African
American business and professional leaders have negotiated and signed several
contracts and letters of intent which will provide revenue from
telecommunications and entertainment sources beginning in 1998. Management has
changed the Company's primary market focus by using in-house expertise and joint
venture contracts for providing nation-wide telephone services such as out
source telephone call centers and long distance products. Management believes
that the Company should return to profitability in 1998.
7
<PAGE> 8
PART II OTHER INFORMATION
ITEM 1: Not applicable.
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) 27 Financial Data Schedule
b) No reports on Form 8-K were filed during the fiscal quarter
ended September 30, 1997
8
<PAGE> 9
SIGNATURES
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, 1997 /s/ STEVEN R. WRIGHT
---------------------------
Steven R. Wright,
Treasurer and Principal
Financial Officer
9
<PAGE> 10
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
INTERIM FINANCIAL STATEMENTS FOR THE THIRD QUARTER 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH BAOA, INC. 10-QSB.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 114,009
<SECURITIES> 0
<RECEIVABLES> 53,339
<ALLOWANCES> 0
<INVENTORY> 23,892
<CURRENT-ASSETS> 191,590
<PP&E> 47,367
<DEPRECIATION> 32,806
<TOTAL-ASSETS> 211,409
<CURRENT-LIABILITIES> 105,728
<BONDS> 0
0
0
<COMMON> 27,366
<OTHER-SE> 3,204,513
<TOTAL-LIABILITY-AND-EQUITY> 211,409
<SALES> 17,945
<TOTAL-REVENUES> 17,945
<CGS> 37,893
<TOTAL-COSTS> 37,893
<OTHER-EXPENSES> 366,217
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,946
<INCOME-PRETAX> (428,016)
<INCOME-TAX> 0
<INCOME-CONTINUING> (428,016)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (428,016)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
