<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 June 30, 1998
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
- --------------------------------------------------------------------------------
(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 June 30, 1998, the registrant had 33,851,000 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>
June 30 June 30
1998 1997
<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH 1,958 5,472
ACCOUNTS RECEIVABLE 6,540 54,062
DUE FROM SHAREHOLDERS 5,000
EMPLOYEE ADVANCES 200
INVENTORY 0 23,896
---------------------
TOTAL CURRENT ASSETS 13,698 83,430
FIXED ASSETS
FURNITURE AND EQUIPMENT 49,525 45,856
LESS DEPRECIATION -36,226 -30,598
---------------------
NET FIXED ASSETS 13,299 15,258
OTHER ASSETS
DEPOSITS 82,014 2,259
INVESTMENTS 13,320
ORGANIZATION COSTS 20,000 20,000
LESS AMORTIZATION -18,923 -16,000
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TOTAL OTHER ASSETS 96,411 6,259
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TOTAL ASSETS 123,408 104,947
=====================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 3
FINANCIAL STATEMENTS (continued)
BAOA, INC.
BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
June 30 June 30
1998 1997
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
DEPOSITS 229,000 38,500
ACCOUNTS PAYABLE 100,124 183,276
SALARIES & WAGES PAYABLE 1,426
PAYROLL TAXES PAYABLE 168
SALES TAX PAYABLE 0 6
ACCRUED INCOME TAXES 2,063 1,600
ACCRUED ROYALTIES 55,103 57,587
----------------------------
TOTAL CURRENT LIABILITIES 387,884 280,969
LONG TERM LIABILITIES
CONTRACTS PAYABLE 130,325
ACCRUED LIABILITIES 180,790 122,679
NOTE PAYABLE 196,500 136,500
NOTES PAYABLE - SHAREHOLDERS 598,625 550,625
----------------------------
TOTAL LONG TERM LIABILITIES 1,106,240 809,804
----------------------------
TOTAL LIABILITIES 1,494,124 1,090,773
STOCKHOLDERS' EQUITY
COMMON STOCK - $.001 PAR 33,851 20,539
25,000,000 SHARES AUTHORIZED,
33,851,000 ISSUED
ADDITIONAL PAID IN CAPITAL 3,757,731 2,837,065
BEGINNING RETAINED DEFICIT -4,555,054 -3,672,376
NET INCOME (LOSS) -607,244 -171,054
ENDING RETAINED DEFICIT -5,162,298 -3,843,430
----------------------------
TOTAL STOCKHOLDERS' EQUITY -1,370,716 -985,826
----------------------------
TOTAL LIAB & STOCKHOLDERS' EQUITY 123,408 104,947
============================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 4
FINANCIAL STATEMENTS (continued)
BAOA , INC.
INCOME STATEMENT
UNAUDITED
<TABLE>
<CAPTION>
June 30 June 30
1998 1997
<S> <C> <C>
REVENUE
SALES 0 17,926
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TOTAL REVENUE 0 17,926
COST OF SALES 0 25,689
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GROSS PROFIT (LOSS) 0 -7,763
OPERATING EXPENSES
SALARIES & WAGES 6,990
SALES & MARKETING 394,968 193,657
ROYALTIES 0 -136,677
CONSULTING & OUTSIDE SERVICES 46,660 6,900
TRAVEL 42,911 9,656
LEGAL & ACCOUNTING 6,265 12,663
GENERAL & ADMINISTRATIVE 74,637 44,039
AMORTIZATION 923 2,000
DEPRECIATION 4,049 4,174
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TOTAL OPERATING EXPENSES 577,403 136,412
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INCOME (LOSS) FROM OPERATIONS -577,403 -144,175
OTHER INCOME & EXPENSE
INTEREST EARNED 0 1
INTEREST EXPENSE -29,777 -26,880
PENALTIES -264
RENTAL INCOME 1,000
------------------------
TOTAL OTHER INCOME & EXPENSE -29,041 -26,879
INCOME (LOSS) BEFORE TAXES -606,444 -171,054
PROVISION FOR TAXES 800
------------------------
NET INCOME (LOSS) -607,244 -171,054
========================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 5
FINANCIAL STATEMENTS (continued)
BAOA, INC.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME (LOSS) -607,244 -171,054
ADJ TO RECONCILE NET INCOME (LOSS) TO NET
CASH USED IN OPERATING ACTIVITIES:
DEPRECIATION & AMORTIZATION 4,972 6,174
(INCREASE) DECREASE IN ACCTS RECEIVABLE 0 -6,492
(INCREASE) DECREASE IN DUE FROM SHAREHOLDERS -5,000 0
DECREASE IN INVENTORY 0 21,360
(INCREASE) DECREASE IN FIXED ASSETS -2,159 0
(INCREASE) DECREASE IN INVESTMENTS -13,319 0
(INCREASE) DECREASE IN DEPOSITS ASSETS -77,757 -1
INCREASE (DECREASE) IN DEPOSITS LIABILITY 224,000 38,500
INCREASE (DECREASE) IN ACCTS PAYABLE 24,799 -25,799
INCREASE (DECREASE) IN SALARIES & WAGES PAYABLE 1,426 0
INCREASE (DECREASE) IN PAYROLL TAXES PAYABLE 168 0
INCREASE (DECREASE) IN SALES TAX PAYABLE -7 -540
INCREASE (DECREASE) IN INCOME TAX PAYABLE 1,263 0
INCREASE (DECREASE) IN ACCRUED LIAB 29,578 -109,797
PAYMENTS FOR SERVICES BY COMMON STOCK 336,825 165,250
-----------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES -82,455 -82,399
CASH FLOWS FROM FINANCING ACTIVITIES
INCREASE (DECREASE) IN NOTES PAYABLE 68,000 41,400
COMMON STOCK PURCHASES 15,000 45,100
-----------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 83,000 86,500
NET INCREASE (DECREASE) IN CASH 545 4,101
CASH AT BEGINNING OF PERIOD 1,413 1,371
CASH AT END OF PERIOD 1,958 5,472
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
FINANCIAL STATEMENTS (continued)
NOTES TO FINANCIAL STATEMENTS
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 June 30, 1998 and 1997, and the results of operations for the six months
ended June 30, 1998 and 1997 and changes in cash for the six months ended June
30, 1998 and 1997.
2. INTERIM REPORTING
The results of operations for the six months ended June 30, 1998 and 1997 are
not necessarily indicative of the results to be expected for the remainder of
the year.
3. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Nature of Operations
The Company was incorporated in California on August 15, 1983 using the name of
Tahoe Lake Concessions, Inc. The Company did not conduct any business activities
until 1993. On June 21, 1993, the Company's shareholders ratified an Agreement
and Plan of Reorganization dated June 11, 1993, whereby the Company would
acquire certain assets and liabilities in exchange for $100,000 cash plus a
promissory note for $200,000 payable within six months, and the issuance of
8,000,000 shares of its common stock. In addition, the Company's shareholders
approved the name change to BAOA, Inc.
In 1993, the Company developed and marketed a board game titled "Black Americans
of Achievement". With several major sponsors, the board game was successfully
marketed through national retail stores through the end of 1994. As the
Company's products and tournaments did not result in the anticipated amounts of
revenue and profit, management elected to reduce the emphasis of board game
sales and related product development during 1996.
Beginning in 1997, the Company changed the primary focus of the company from the
marketing and sales of a board game to telemarketing through its own call
centers to be operated throughout the United States in federally designated
empowerment zones.
<PAGE> 7
FINANCIAL STATEMENTS (continued)
NOTES TO FINANCIAL STATEMENTS
4. Basis of Accounting
The Company's policy is to use the accrual method of accounting and to prepare
and present financial statements which conform to generally accepted accounting
principles. The preparation of financial statements in conformity with generally
accepted accounting principles 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 reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
5. Cash and equivalents
For purpose of the statements of cash flows, all highly liquid investments with
a maturity of three months or less are considered to be cash equivalents. There
were no cash equivalents as of June 30, 1998 and June 30, 1997.
6. Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization of
property and equipment is provided using the straight line method over estimated
useful lives ranging from five to seven years. Upon retirement or disposal of
depreciated assets, the cost and related depreciation are removed and the
resulting gain or loss is reflected in income. Major renewals and betterments
are capitalized while maintenance costs and repairs are expensed in the year
incurred. Any assets acquired from shareholders are recorded at historical cost
at the time of transfer.
7. Income Taxes
Income taxes are provided for using the liability method of accounting in
accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109),
"Accounting for Income Taxes." A deferred tax asset or liability is recorded for
all temporary differences between financial and tax reporting. Deferred tax
expense (benefit) results from the net change during the year of deferred tax
assets and liabilities.
<PAGE> 8
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 June 30,1998: the Company had $1,958 cash on hand and in the bank. The
primary source of cash and financing for the Company for the six months then
ended was $239,000 from sales of common stock and deposits for the purchase of
common stock. The primary use of cash during that period was $236,497 to finance
the company's operations. The Company currently maintains a positive cash
balance through sales of common stock.
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.
Material changes in business products and services:
The Company has secured major purchase orders and contracts for BAOA call center
services to be operated throughout the United States, with the first call center
to be located in Atlanta, Georgia. The BAOA Atlanta Call Center will be a
leading distributor of products and services through direct-to-consumer
telemarketing for corporate clients and for BAOA's own line of future products.
BAOA has formed business alliances with major telemarketing management and call
center operating companies, First National Communications Network, Inc. and USA
Telecorp, to assist BAOA in marketing and managing its call center. Management
anticipates opening the call center in the fourth quarter of 1998. This call
center is expected to eventually employ up to 400 people and generate revenue in
the first quarter of 1999.
BAOA's strategy is to operate its call centers in federally designated
empowerment zones. Its first call center will be located in the Atlanta
empowerment zone. These empowerment zones are designed to help inner-cities and
the residents of the empowerment zones, as well as provide substantial revenues
to the Company. The Company's niche in the call center business will be enhanced
by the empowerment zone benefits that include job training subsidies, grants,
loans, investment tax credits and energy credits. These incentives significantly
reduce start up and direct costs of operations.
<PAGE> 9
PART 1 FINANCIAL INFORMATION (continued)
BAOA has secured a centrally located building in downtown Atlanta. With over
40,000 square feet available, BAOA intends to operate its call center and
sublease facilities for job training, day care, and after school youth
development centers. These additional centers combined with planned commercial
ventures such as food and other service outlets should enable BAOA to
dramatically improve the quality of life and the economic conditions in the
surrounding neighborhood. The intent is for BAOA to greatly benefit the people
in the neighborhood empowerment zone through its role as a major employer and
neighborhood developer, while generating a reasonable return for its investors.
<PAGE> 10
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) Exhibit # 27.1, "Financial Data Schedule"
b) No reports on Form 8-K were filed during the fiscal
quarter ended June 30, 1998
<PAGE> 11
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.
/s/ STEVEN R. WRIGHT
Dated: October 6, 1998 -------------------------------------------
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 SECOND QUARTER 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH BAOA, INC. 10-QSB
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,958
<SECURITIES> 0
<RECEIVABLES> 6,540
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,698
<PP&E> 49,525
<DEPRECIATION> 36,226
<TOTAL-ASSETS> 123,408
<CURRENT-LIABILITIES> 387,884
<BONDS> 0
0
0
<COMMON> 33,851
<OTHER-SE> 3,757,731
<TOTAL-LIABILITY-AND-EQUITY> 123,408
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 577,403
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,777
<INCOME-PRETAX> (606,444)
<INCOME-TAX> 800
<INCOME-CONTINUING> (607,244)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (607,244)
<EPS-PRIMARY> (1.79)
<EPS-DILUTED> (1.79)
</TABLE>
