<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-KSB
Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the year ended December 31, 1999
Commission File Number 0-25416
BAOA, INC.
----------------------------------------------
(Name of Small Business Issuer in Its Charter)
CALIFORNIA 33-0563989
------------------- -------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
555 Whitehall, Atlanta, Georgia 30381
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(404) 222-0760
------------------
(Registrant's telephone number, including area code)
Securities registered under Section 12(g) of the Exchange Act:
Common Stock - .001 Par Value
----------------
(Title of Class)
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10 KSB
or any amendment to this Form 10-KSB.
Yes [X] No [ ]
The issuer's had no revenues for the year ended December 31, 1999.
The approximate aggregate market value of the voting stock held by
non-affiliates of the registrant as of December 31, 1999, based on the average
of the closing bid and asked prices of one share of the Common Stock of the
Company, as reported on December 31, 1999 was $2,364,495.
2
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PART 1
ITEM 1 DESCRIPTION OF BUSINESS
Business Development
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 approved a name change
to BAOA, Inc. From 1993 through 1997, BAOA was engaged in the development,
marketing, and sales of an educational and entertainment board game.
There have been no bankruptcy, receivership or similar proceedings.
There have been no material reclassifications, mergers, consolidations, or
purchase or sale of a significant amount of assets not in the ordinary course of
business.
Business of the Issuer
The Company is in the business of operating call centers. The call centers that
will be operating in the United States will all be strategically located within
the boundaries of federally designated empowerment zones.
The call centers will then be eligible to receive job training dollars, grants,
loans and subsidies, as well as tax credits and energy credits. The main
criteria for obtaining these incentives is creating jobs.
The Company anticipates employing 300 - 500 people in each particular city of
operation. These jobs are attainable and they do not require higher education.
Each person must go through a training program which is subsidized by the
Government. These jobs will develop a transferrable skill in the Communications
Industry that will make them employable for not just a job but a career.
The Company has received a commitment for debt financing from the Atlanta
Empowerment Zone. The Company has also received a commitment from the Upper
Manhattan Empowerment Zone for debt financing, subject to certain conditions.
The Company is in the final stages of negotiations with the Figueroa Economic
Development Council in Los Angeles and has begun discussions with the Miami
Empowerment Zone.
The Company anticipates opening the Atlanta call center during the 2nd quarter
of 2000, with the other call centers to open as finances dictate. During these
periods of negotiations with the various Empowerment Zones, the Company has put
a deal together with Jamaica Call
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Centers Limited. This deal will allow the Company to open a call center in
Montego Bay, Jamaica, and actually start operations in April of 2000. The labor
cost and the lower turnover rate of employees will make locating in Jamaica
highly attractive.
The Company has basically been in research and development stage for the last
two years and is now poised to become a major player in the call center world.
Competition
While the size and financial strength of the Company's competitors are
substantially greater than those of the Company, management believes the Company
will be able to compete effectively because it will incur lower costs and
expenses due to government funding programs and tax incentives as it provides
telecommunications and computer jobs to economically depressed areas of inner
cities. There is currently no direct competition in this inner city market.
Year 2000 Disclosure
During the last five years, almost all users of computers in public and business
applications were made aware that time-sensitive software might cause their
computer systems to recognize a date using "00" as the year 1900 rather than the
year 2000. Computer users were concerned that this software date problem might
result in system failures or miscalculations causing disruption of normal
business activities, primarily in the first weeks of 2000.
The Company's business plan directs the purchase of computer equipment and
software during the second half of 2000. The Company's Management has hands-on
familiarity with all of the software that will be utilized in its business plan
and has experienced no Year 2000 related systems problems as of the date of this
filing. Management has discussed Year 2000 computer systems issues with proposed
goods and services suppliers for the Company's business plan and they have
confirmed their computer related systems are already Year 2000 compatible.
Therefore, Management has made no Year 2000 compliance plans, other than to plan
purchases of computer systems and software which are already Year 2000
compatible. Management has no Year 2000 contingency plans and does not intend to
prepare future contingency plans related to Year 2000 compliance worst case
scenarios. Management reasonably anticipates that the Company will experience no
adverse operational or cash flow effect from Year 2000 computer related software
problems.
4
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ITEM 2 DESCRIPTION OF PROPERTY
The Company has a lease on their office space located at 555 Whitehall Street,
Atlanta, Georgia. The Company has an option to purchase this property subject to
certain conditions.
ITEM 3 LEGAL PROCEEDINGS
The Company had no legal proceedings in 1999 and none are pending.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There have been no such submissions, as the Company did not have a shareholders
meeting during 1999.
PART II
ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.
General
The Company's common stock is traded on the OTC Electronic Bulletin Board. The
OTC Electronic Bulletin Board is sponsored by the National Association of
Securities Dealers (NASD). The Electronic Bulletin Board is a network of
security dealers who buy and sell stocks.
For the periods indicated, the following table sets forth the high and low bid
prices per share of common stock. These prices represent inter-dealer quotations
without retail markup, markdown, or commission and may not necessarily represent
actual transactions.
<TABLE>
<CAPTION>
Low High
<S> <C> <C>
1998
First Quarter .03 .18
Second Quarter .04 .28
Third Quarter .05 .18
Fourth Quarter .03 .11
</TABLE>
5
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<TABLE>
<CAPTION>
Low High
<S> <C> <C>
1999
First Quarter .04 .06
Second Quarter .03 .15
Third Quarter .03 .06
Fourth Quarter .02 .05
</TABLE>
The Company's Board of Directors determines any payment of dividends. The Board
of Directors does not expect to authorize the payment of cash dividends in the
foreseeable future. Any future decision with respect to dividends will depend on
future earnings, operations, capital requirements and availability, restrictions
in future financing agreements, and other business and financial considerations.
As of December 31, 1999, there were approximately 695 holders of record of the
Company's Common Stock. The Board of Directors believe that the number of
beneficial owners is substantially greater than the number of record holders
because a portion of the Company's outstanding Common Stock is held of record in
broker "street names" for the benefit of individual investors.
ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Plan of Operations
As the Company advanced its business plan to open call centers in the Economic
Empowerment Zones, the Company has maintained sufficient cash to sustain
corporate operations through the sale of equity securities and direct advances
from shareholders. During the next twelve months the Company's plans of
operations include opening a call center in Montego Bay, Jamaica with Jamaica
Call Centers Limited. The Company also plans on opening a call center during the
2nd quarter of 2000 in Atlanta, Georgia. The subsequent call centers to open
will be opened as finances dictate.
The Company will face considerable risk in each of its business plan steps, such
as difficulty of building site renovations within its budget, difficulty of
completing its build-out within its timetable and budget, difficulty of hiring
competent personnel within its budget and a lack of funding due to the Company's
inability to raise capital in the Equity Securities Market. If no funding is
received during the next twelve months, the Company will be forced to rely on
its existing cash in the bank and funds loaned to the Company. In such a
restricted cash flow scenario, the Company would be unable to complete its
business plan steps and would instead
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delay all cash intensive activities. It should be noted that funds are in place
for the Jamaica Call Center.
Results of Operations
As of December 31, 1999, the Company had $4,755 cash on hand and in the bank.
The primary sources of cash and financing for the Company for the year ended
December 31, 1999 were $214,500 from issuance of stock and shareholders' loans
to the Company of $106,500. The primary uses of cash during 1999 were $291,851
to finance the Company's operations, $21,467 for an option to purchase a
building in the City of Atlanta for the Company's call center business, and
$2,255 to purchase property and equipment. The Company had no full time
employees during 1999.
Significant losses in 1999 were primarily due to managements decision to utilize
operating funds to advance the Company's business plan of opening call centers
inside Economic Empowerment Zones. Management believes the Company will achieve
revenue and profit goals in 2000 through the operations of the Jamaica Call
Center and the anticipated operations of the Atlanta Call Center.
ITEM 7 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The audited financial statements of the Company and related Notes which are
included in this filing have been examined by S.W. Hatfield, Certified Public
Accountants, and have been so included in reliance upon the opinion of such
accountants given upon their authority as experts in auditing and accounting.
7
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BAOA, INC.
AND SUBSIDIARIES
Financial Statements
and
Auditor's Report
December 31, 1999 and 1998
[S. W. HATFIELD, CPA LETTERHEAD]
<PAGE> 9
BAOA, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-3
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets
as of December 31, 1999 and 1998 F-4
Consolidated Statements of Operations and Comprehensive Income
for the years ended December 31, 1999 and 1998 F-5
Consolidated Statement of Changes in Shareholders' Equity
for the years ended December 31, 1999 and 1998 F-6
Consolidated Statements of Cash Flows
for the years ended December 31, 1999 and 1998 F-7
Notes to Consolidated Financial Statements F-8
</TABLE>
F-2
<PAGE> 10
[S. W. HATFIELD, CPA LETTERHEAD]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shareholders and Board of Directors
BAOA, Inc. and Subsidiaries
We have audited the consolidated balance sheets of BAOA, Inc. (a California
corporation) and Subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations and comprehensive income, changes in
shareholders' equity, and cash flows for each of the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of BAOA,
Inc. and Subsidiaries as of December 31, 1999 and 1998 and the results of its
consolidated operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note B to the
financial statements, the Company has suffered losses in prior years, working
capital deficiencies and continues to experience liquidity problems that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note B. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
In a prior year, as discussed in Note C, the Company reported the write off of
various advances as forgiveness of debt in the 1998 statement of operations.
Subsequent thereto, management determined, due to the related party nature of
these transactions, that these items should have been reclassified as additional
paid-in capital instead of forgiveness of debt. The effect of this change has
been made to the 1998 statement of operations and statement of changes in
shareholders' equity in the accompanying financial statements.
S. W. HATFIELD, CPA
Dallas, Texas
March 23, 2000 (except for Note C
as to which the date is August 31, 2000)
F-3
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BAOA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,755 $ --
------------ ------------
TOTAL CURRENT ASSETS 4,755 --
------------ ------------
PROPERTY AND EQUIPMENT - AT COST
Furniture 14,402 14,402
Equipment 37,378 35,123
------------ ------------
51,780 49,525
Accumulated depreciation (45,979) (40,430)
------------ ------------
NET PROPERTY AND EQUIPMENT 5,801 9,095
------------ ------------
OTHER ASSETS
Option to acquire real property 115,684 94,217
Organization costs, net of accumulated amortization
of approximately $20,000 and $20,000, respectively -- --
Deposits and other assets 10,703 2,258
------------ ------------
TOTAL OTHER ASSETS 126,387 96,475
------------ ------------
TOTAL ASSETS $ 136,943 $ 105,570
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Cash overdraft $ -- $ 672
Accounts payable 103,762 110,553
Accrued expenses 54,555 55,103
Advances and notes payable to affiliates and related parties -- 108,700
Interest payable to affiliates and related parties 28,222 10,436
Income taxes payable 4,363 3,563
------------ ------------
TOTAL CURRENT LIABILITIES 190,902 289,207
------------ ------------
LONG-TERM LIABILITIES
Notes payable to affiliates and related parties 208,200 --
------------ ------------
TOTAL LIABILITIES 399,102 289,207
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock - $0.001 par value. 10,000,000 shares
authorized. None issued and outstanding -- --
Common stock - $0.001 par value. 90,000,000
shares authorized. 76,082,015 and 45,191,295
shares issued and outstanding, respectively 76,082 45,191
Additional paid-in capital 6,489,735 5,320,604
Accumulated deficit (6,827,976) (5,549,252)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (262,159) (183,457)
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 136,943 $ 105,570
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 12
BAOA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
REVENUES, NET $ -- $ --
COST OF SALES -- --
------------ ------------
GROSS PROFIT -- --
OPERATING EXPENSES
Sales and marketing expenses 24,146 1,801
Marketing and consulting fees to related parties 919,613 65,768
General and administrative expenses 224,548 889,052
Bad debt expense -- 6,140
Depreciation 5,549 8,253
Amortization -- 2,000
Compensation expense related
to common stock sales at less
than "fair value" 83,772 --
------------ ------------
TOTAL OPERATING EXPENSES 1,257,628 973,014
------------ ------------
LOSS FROM OPERATIONS (1,257,628) (973,014)
OTHER INCOME (EXPENSE)
Interest expense (20,296) (23,133)
Other -- 2,750
------------ ------------
TOTAL OTHER INCOME (EXPENSE) (20,296) (20,383)
------------ ------------
LOSS BEFORE INCOME TAXES (1,277,924) (993,397)
Federal and state income taxes (800) (800)
------------ ------------
NET INCOME (LOSS) BEFORE COMPREHENSIVE INCOME (1,278,724) (994,197)
OTHER COMPREHENSIVE INCOME -- --
------------ ------------
COMPREHENSIVE INCOME (LOSS) $ (1,278,724) $ (994,197)
============ ============
Income (Loss) per weighted-average share of common
stock outstanding, computed on net loss
Basic and fully diluted $ (0.02) $ (0.03)
============ ============
Weighted-average number of shares of common stock outstanding 61,114,785 36,287,379
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 13
BAOA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Common Stock Additional
--------------------------- paid-in Accumulated
Shares Amount capital deficit Total
---------- -------- ---------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1998 30,246,386 $ 30,246 $ 3,409,511 $(4,555,055) $(1,115,298)
Sales of common stock, as reported 6,441,659 6,442 332,858 -- 339,300
Correction of clerical error
discovered during 1999 200,000 200 (200) -- --
Common stock issued for
Consulting and other services 8,103,250 8,103 555,472 -- 563,575
Payment of interest 200,000 200 12,300 -- 12,500
Contributed capital from reclassification
of debt and accrued interest payable to
related parties -- -- 1,010,663 -- 1,010,663
Net loss for the year -- -- -- (994,197) (994,197)
----------- ----------- ----------- ----------- -----------
BALANCES AT DECEMBER 31, 1998 45,191,295 45,191 5,320,604 (5,549,252) (183,457)
Sales of common stock 9,980,720 9,981 288,291 -- 298,272
Common stock issued for
Consulting and other services 20,650,000 20,650 871,850 -- 892,500
Payment of interest and
retirement of note payable 260,000 260 8,990 -- 9,250
Net loss for the year -- -- -- (1,278,724) (1,278,724)
----------- ----------- ----------- ----------- -----------
BALANCES AT DECEMBER 31, 1999 76,082,015 $ 76,082 $ 6,489,735 $(6,827,976) $ (262,159)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 14
BAOA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the year $(1,278,724) $ (994,197)
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 5,549 10,253
Bad debt expense -- 6,140
Common stock issued for fees and services 892,500 563,575
Common stock issued for interest expense 2,250 12,500
Compensation expense related to common
stock sales at less than "fair value" 83,772 --
(Increase) decrease in
Accounts receivable -- 400
Deposits and other assets (8,445) 200
Increase (decrease) in
Accounts payable (6,791) 37,228
Accrued liabilities and other 17,238 5,428
Income taxes payable 800 2,763
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (291,851) (355,710)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (2,255) (2,158)
Cash paid for option to acquire real property (21,467) (92,217)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (23,722) (94,375)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in cash overdrafts (672) 672
Proceeds from advances from related parties 106,500 112,700
Payments on advances from related parties -- (4,000)
Proceeds from sale of common stock 214,500 339,300
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 320,328 448,672
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,755 (1,413)
Cash and cash equivalents at beginning of year -- 1,413
----------- -----------
Cash and cash equivalents at end of year $ 4,755 $ --
----------- ===========
SUPPLEMENTAL DISCLOSURES OF INTEREST AND INCOME TAXES PAID
Interest paid $ 260 $ 198
=========== ===========
Income taxes paid (refunded), net $ -- $ (463)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 15
BAOA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE A - BACKGROUND AND ORGANIZATION
BAOA, Inc. (BAOA) was originally incorporated on August 15, 1983 according to
the laws of the State of California. BAOA was dormant until 1993. From 1993
through 1997, BAOA was engaged in the development, sale and marketing of an
educational and entertainment board game, the marketing of an affinity credit
card, the licensing of its trademarked logo "Black Americans of Achievement" and
the development for production of a television game show.
During 1997, BAOA redirected its efforts to the operation of telemarketing call
centers located in Federally designated "Empowerment Zones" throughout the
United States. BAOA has entered into a strategic alliance with MKT
Communications Corp., a telemarketing and call center management entity, to
assist the Company in marketing and managing its call centers. As of December
31, 1999, the Company has no call centers in operation and remains in
negotiation for the opening of call centers in Atlanta, Georgia and New York
City, New York.
In anticipation of opening the Atlanta center and others to be established, the
Company has incorporated wholly-owned subsidiaries: Call Atlanta, Inc. and Call
Harlem, Inc.
The Company's wholly-owned subsidiary, Call Atlanta, Inc. was incorporated on
January 7, 1998 under the laws of the State of Georgia. Call Atlanta, Inc. will
operate the Company's telemarketing call center operations domiciled in the
Atlanta Georgia designated "Empowerment Zone".
The Company's wholly-owned subsidiary, Call Harlem, Inc. was incorporated on
September 29, 1998 under the laws of the State of Delaware. Call Harlem, Inc.
will operate the Company's telemarketing call center operations domiciled in the
New York City designated "Empowerment Zone".
The accompanying financial statements present the consolidated financial
condition, operations and cash flows of BAOA, Inc. and its wholly-owned
subsidiaries, Call Atlanta, Inc. and Call Harlem, Inc. All significant
intercompany transactions have been eliminated in consolidation. The
consolidated entities are collectively referred to as the "Company".
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
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE B - GOING CONCERN UNCERTAINTY
The Company has had continuing losses from operations and experienced negative
cash flows from operating activities since 1993. Further, the Company has
limited ability to utilize traditional financing methods. The Company's survival
in the current and prior years has been substantially dependent upon advances
from related parties and other individuals and the sale of equity securities
through the efforts of Management.
The Company's continued existence is dependent upon its ability to generate
sufficient cash flows from operations to support its daily operations as well as
provide sufficient resources to retire existing liabilities and obligations on a
timely basis.
F-8
<PAGE> 16
BAOA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE B - GOING CONCERN UNCERTAINTY - CONTINUED
The Company has customer contracts to provide telemarketing services commencing
with the opening of its two (2) planned call centers. The City of Atlanta,
Georgia has issued final site and financial commitment approval for the
Company's Atlanta Empowerment Zone call center. The City of New York City, New
York has issued its final site and financial commitment approval for the
Company's New York Empowerment Zone call center.
On February 22, 1999, the Company received a financing commitment letter from
the Atlanta Empowerment Zone Corporation for a development loan of approximately
$3.5 million at an interest rate of 8.0% and a term of ten (10) years. As of
March 23, 2000, the loan, and related documentation, has been executed and the
initial funding has been made.
On September 3, 1998, the Company was approved by the Upper Manhattan
Empowerment Zone Development Corporation for a development loan of approximately
$800,000. As of March 23, 2000, the loan, and related documentation, has not
been executed or funded.
Additionally, management believes that its ongoing efforts to raise additional
capital through the sale of equity securities and/or debt instruments will
provide additional cash flows. However, there can be no assurance that the
Company will be able to obtain additional funding or, that such funding, if
available, will be obtained on terms favorable to or affordable by the Company.
NOTE C - CORRECTION OF AN ERROR
During 1998, the Company, with advice of legal counsel, determined that no
formal documents related to various notes and/or advances from the following
current or former officers, directors, other related parties and/or
shareholders: Douglas Norman, Sontag S. A., Barkley Edwards, Steve Wright and
Peter Van Brunt.
Further, no demand for payment had been made within a time period specified in
the Uniform Commercial Code from the inception of the advances through December
31, 1998. Accordingly, the Company, upon the advice of legal counsel, initially
wrote off these advances as forgiveness of debt in previously released versions
of the 1998 statement of operations. Subsequent thereto, the Company determined,
due to the related party nature of these transactions, that these items should
have been reclassified as additional paid-in capital instead of forgiveness of
debt.
The effect of this change has been made to the 1998 statement of operations and
statement of changes in shareholders' equity in the accompanying financial
statements.
NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Cash and Cash Equivalents
For Statement of Cash Flows purposes, the Company considers all cash on hand
and in banks, including accounts in book overdraft positions, certificates of
deposit and other highly-liquid investments with maturities of three months
or less, when purchased, to be cash and cash equivalents.
Cash overdraft positions may occur from time to time due to the timing of
making bank deposits and releasing checks, in accordance with the Company's
cash management policies.
F-9
<PAGE> 17
BAOA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
2. Accounts Receivable
In the normal course of business, the Company extends unsecured credit to
virtually all of its clients which are located throughout the United States.
Because of the credit risk involved, management has provided an allowance for
doubtful accounts which reflects its opinion of amounts which will eventually
become uncollectible. In the event of complete non-performance, the maximum
exposure to the Company is the recorded amount of trade accounts receivable
shown on the balance sheet at the date of non-performance.
3. Property and Equipment
Property and equipment are recorded at cost and are depreciated on a
straight-line basis, over their estimated useful lives (generally 5 to 7
years). Major additions and betterments are capitalized and depreciated over
the remaining estimated useful lives of the related assets. Maintenance,
repairs, and minor improvements are charged to expense as incurred.
4. Organization costs
Organization costs are being amortized using the straight-line method over
five years.
5. Income Taxes
The Company uses the asset and liability method of accounting for income
taxes. At December 31, 1999 and 1998, respectively, the deferred tax asset
and deferred tax liability accounts, as recorded when material to the
financial statements, are entirely the result of temporary differences.
Temporary differences represent differences in the recognition of assets and
liabilities for tax and financial reporting purposes, primarily accumulated
depreciation and amortization, allowance for doubtful accounts and vacation
accruals.
As of December 31, 1999 and 1998, the deferred tax asset related to the
Company's net operating loss carryforward is fully reserved. If these
carryforwards are not utilized, they will begin to expire in 2007.
6. Earnings (loss) per share
Basic earnings (loss) per share is computed by dividing the net income (loss)
by the weighted-average number of shares of common stock and common stock
equivalents (primarily outstanding options and warrants). Common stock
equivalents represent the dilutive effect of the assumed exercise of the
outstanding stock options and warrants, using the treasury stock method. The
calculation of fully diluted earnings (loss) per share assumes the dilutive
effect of the exercise of outstanding options and warrants at either the
beginning of the respective period presented or the date of issuance,
whichever is later. As of December 31, 1999 and 1998, the outstanding
warrants and options are deemed to be anti-dilutive due to the Company's net
operating loss position.
F-10
<PAGE> 18
BAOA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
7. Stock Options
During 1997, the Company adopted a method of accounting for stock-based
compensation as required by Statement of Financial Accounting Standards No.
123 (SFAS 123), "Accounting for Stock Based Compensation". SFAS 123 allows
for two methods of valuing stock-based compensation. The first method allows
for the continued application of Accounting Principle Board Opinion No. 25
(APB 25). The second method uses an option pricing model to value stock
compensation and record such valuation as compensation expense within the
financial statements over the anticipated period that the options will be
outstanding. The Company has elected to apply the tenets of APB 25 and the
supplemental disclosure standards of SFAS 123.
8. Advertising
The Company expenses direct advertising and marketing costs as incurred.
Advertising expenses of approximately $450 and $1,801 are included in the
accompanying financial statements as a component of sales and marketing
expense for the years ended December 31, 1999 and 1998, respectively.
9. Research and development
The Company expenses research and development costs as incurred. Research and
development costs of approximately $-0- and $41,949 are included in the
accompanying financial statements as a component of general and
administrative expenses for the year ended December 31, 1999 and 1998,
respectively.
NOTE E - RELATED PARTY TRANSACTIONS
The Company has both advances and notes payable to related parties, who are also
stockholders or related to stockholders of the Company. The advances arose from
the direct payment of expenses paid on behalf of the Company and for various
cash advances made directly to the Company. The advances are not formally
documented, unsecured, non-interest bearing and are due upon demand based on the
initial understanding of the Company and the related parties.
During 1998, the Company, with advice of legal counsel, determined that no
formal documents related to various notes and/or advances existed. Additionally,
no demand for payment had been made within a time period specified in the
Uniform Commercial Code from the inception of the advances through December 31,
1998. Accordingly, the Company, upon the advice of legal counsel, wrote off
these advances as forgiveness of debt in the accompanying financial statements.
During 1999 and 1998, the Company has received additional loans from other
related parties, who are also stockholders or entities controlled by
stockholders of the Company. The loans bear interest at rates ranging from 5.0%
to 30.0%. All notes are due on terms between two (2) years and three (3) years
from the funding date of the respective loan advance.
F-11
<PAGE> 19
BAOA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE E - RELATED PARTY TRANSACTIONS - CONTINUED
The following summarizes these amounts as of December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Advances $ -- $108,700
Notes 208,200 --
-------- --------
208,200 108,700
Interest 28,222 10,436
-------- --------
$236,422 $119,136
======== ========
</TABLE>
Additionally, the Company has paid, in cash and/or common stock, certain amounts
to related parties, including members of management, officers and directors of
the Company for various consulting, marketing and management services. These
amounts are shown as "Marketing and consulting fees to related parties" in the
accompanying Statement of Operations and Comprehensive Income.
NOTE F - OPTION TO ACQUIRE REAL PROPERTY
In 1997, the Company entered into an contractual agreement, which was
subsequently modified and extended, to purchase a building in Atlanta, Georgia
to house its administrative offices and its initial telemarketing call center.
On March 23, 1998, the building was purchased by an affiliated individual, who
intends to deed the property to the Company at a future date to be determined.
Since the closing date, the Company funded all initial deposits, closing costs
and debt service payments on behalf of the owning party. The monies advanced on
behalf of the owning party have been classified as "Option to acquire real
property" in the accompanying balance sheets and statements of cash flows.
NOTE G- INCOME TAXES
The components of income tax (benefit) expense for the years ended December 31,
1999 and 1998, respectively, are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Federal:
Current $ -- $ --
Deferred -- --
---- ----
-- --
---- ----
State:
Current 800 800
Deferred -- --
---- ----
800 800
---- ----
Total $800 $800
==== ====
</TABLE>
As of December 31, 1999, the Company has a net operating loss carryforward of
approximately $2,600,000 to offset future taxable income. Subject to current
regulations, this carryforward will begin to expire in 2007 for Federal purposes
and 1999 for State purposes.
F-12
<PAGE> 20
BAOA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE G - INCOME TAXES - CONTINUED
The Company's income tax expense for the years ended December 31, 1999 and 1998,
respectively, differed from the statutory federal rate of 34 percent as follows:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Statutory rate applied to earnings (loss) before income taxes $(434,494) $ 5,598
Increase (decrease) in income taxes resulting from:
State income taxes 800 800
Other, including reserves for deferred tax asset 434,494 (5,598)
--------- ---------
Income tax expense $ 800 $ 800
========= =========
</TABLE>
The Company's deferred tax asset as of December 31, 1999 and 1998, respectively,
is as follows:
<TABLE>
<S> <C> <C>
Net operating loss carryforwards $ 2,614,000 $ 1,336,100
Valuation allowance (2,614,000) (1,336,100)
----------- -----------
Net deferred tax asset $ -- $ --
=========== ===========
</TABLE>
The valuation allowance estimate increased (decreased) by approximately
$1,277,900 and $(5,600) for the years ended December 31, 1999 and 1998,
respectively. Management is of the opinion that it's valuation estimate is
reasonably possible of changing in future periods.
F-13
<PAGE> 21
BAOA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE H - CAPITAL STOCK TRANSACTIONS
In October 1998, the Company's Articles of Incorporation (Articles) were amended
to increase the number of shares which may be issued. As amended in 1998, the
Articles increased the number of shares which may be issued from 50,000,000 to
100,000,000. Of the 100,000,000 shares authorized, 90,000,000 shares of $0.001
par value common stock and 10,000,000 shares of $0.001 preferred stock may be
issued. This amendment designated 4,000,000 shares of the authorized preferred
stock as "Series A Convertible Preferred Stock". The remaining undesignated
preferred stock may be designated and/or issued from time to time in one or more
series as determined by the Company's Board of Directors.
Series A Convertible Preferred Stock
The Company's Board of Directors has designated 4,000,000 shares of its
authorized preferred stock as "Series A Convertible Preferred Stock". As of
December 31, 1999 and 1998, no shares have been issued by the Company. Each
outstanding share of Class A Convertible Preferred Stock shall be converted, at
the sole option of the holder, at any time into common stock at an initial
conversion rate of one share of common stock for each share of preferred stock
outstanding. The conversion rate will be adjusted for the effects of any future
stock dividends, combinations or subdivisions of the Company's common stock
which may occur subsequent to the issuance of the Preferred Stock. Holders of
the Class A Convertible Preferred Stock shall also be entitled to receive, when
declared by the Company's Board of Directors, dividends at par with holders of
the Company's common stock had been converted into common stock as of the record
date of the dividend.
In the event of liquidation, dissolution or winding up of the Company, the
holders of Series A Convertible Preferred Stock shall be entitled to receive,
prior and in preference to any distribution to the holders of common stock,
$1.00 per share plus all declared and unpaid dividends on each issued and
outstanding share.
Common stock issuances
During the years ended December 31, 1999 and 1998, respectively, the Company
issued 20,650,000 and 8,103,250 shares of common stock in exchange for various
marketing and consulting services. These transactions were valued at a
cumulative approximate $892,500 and $563,575, respectively, which approximates
the fair market value of the shares given in payment and the value of the
services.
During the years ended December 31, 1999 and 1998, respectively, the Company
sold an aggregate 9,980,720 and 6,441,659 shares of common stock to various
unrelated third party investors for gross aggregate proceeds of approximately
$214,500 and $339,300. The Company charged operations approximately $83,800 for
differences between the estimated fair value of the stock sold during 1999 and
the cash proceeds received by the Company. It is the intent of the Company to
price the sale of restricted securities at or near the closing market price of
the Company's securities. Differences may occur due to the timing of the receipt
of funds on restricted securities sales and market fluctuations in the Company's
quoted market prices. In conjunction with the sale of common stock during 1998,
the Company granted a cumulative 800,333 options to purchase an additional
800,333 shares of restricted, unregistered common stock at prices ranging from
$0.04 to $0.50 per share. During 1999, these options expired and no options were
exercised and, accordingly, no shares of common stock were issued.
During the year ended December 31, 1999, the Company issued 260,000 shares of
restricted, unregistered common stock in payment of a $7,000 note payable and
$2,250 in accrued interest.
During the year ended December 31, 1998, the Company issued 200,000 shares of
restricted, unregistered common stock as payment for accrued interest in the
amount of $12,500.
F-14
<PAGE> 22
BAOA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE I - STOCK OPTIONS
The Company granted various stock options to purchase shares of the Company's
common stock at specified prices in 1998 and 1997 as compensation for services.
The options generally expire one year from the date of the grant and become
exercisable immediately. At December 31, 1999 and 1998, a total of 50,000 and
840,333 options were outstanding, respectively. The following table lists the
status of the various option and warrant programs in effect at December 31, 1999
and 1998, respectively:
<TABLE>
<CAPTION>
Expired or
Balance at Granted Exercised Balance at Exercise price
Program December 31, 1997 during 1998 during 1998 December 31, 1998 per share
------- ----------------- ----------- ----------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
1997 Consultant options 200,000 -- (200,000) -- N/A
1998 Consultant options -- 50,000 -- 50,000 $0.35
1998 Stock sale options -- 800,333 (10,000) 799,333 $0.04 - $0.50
------- ------- -------- ------
Totals at December 31, 1998 200,000 850,333 (210,000) 849,333 $0.25 - $0.50
======= ======= ======== =======
</TABLE>
Weighted average price of outstanding options at December 31, 1998: $0.22 per
share.
<TABLE>
<CAPTION>
Expired or
Balance at Granted Exercised Balance at Exercise price
Program December 31, 1998 during 1999 during 1999 December 31, 1999 per share
------- ----------------- ----------- ----------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
1998 Consultant options 50,000 -- -- 50,000 $0.35
1998 Stock sale options 799,333 -- (799,333) -- $0.04 - $0.50
------- ------ -------- --------
Totals at December 31, 1999 849,333 -- (799,333) 50,000 $0.25 - $0.50
======= ====== ======== ========
</TABLE>
Weighted average price of outstanding options at December 31, 1998: $0.35 per
share.
As of March 23, 2000, the Company had the following outstanding options.
Additionally, none of the options issued and outstanding as of March 23, 2000
and/or December 31, 1999 had been exercised by the option holders.
<TABLE>
<CAPTION>
Expiring as of Options outstanding
-------------- -------------------
<S> <C> <C>
August 31, 2000 50,000
-------
50,000
======
</TABLE>
Had compensation cost for options granted in 1999 and 1998, respectively, been
determined based on the fair values at the grant dates, as prescribed by SFAS
123, the Company's net loss and net loss per share would not have changed due to
the fact that the exercise price of the options was substantially higher than
the market price at the grant date.
The calculations to estimate the fair value of the options were made using the
Black-Scholes pricing model which required making significant assumptions. These
assumptions include the expected life of the options, which was determined to be
one year, the expected volatility, which was based on fluctuations of the stock
price over a 12 month period, the expected dividends, determined to be zero
based on past performance, and the risk free interest rate, which was estimated
using the bond equivalent yield of 6.0% at December 31, 1999 and 1998,
respectively.
F-15
<PAGE> 23
BAOA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE J - COMMITMENTS
Operating leases
The Company leases office facilities in Atlanta, Georgia under an operating
lease. The lease was for an initial term of 180 days from March 13, 1999 and
contained a single renewal term of an additional 180 days, which was exercised.
The lease requires monthly payments of $5,703 per month plus, as additional
rent, one half of all real estate taxes, general assessments, utility billings,
maintenance, cleaning, security and trash bills imposed upon the property. As of
December 31, 1999, the Company had terminated and settled all other lease
agreements which were previously in effect. The accompanying financial
statements include rent expense for operating leases of approximately $84,493
and $47,415, as a component of general and administrative expenses, for the year
ended December 31, 1999 and 1998, respectively. Future minimum lease payments
due under noncancellable leases as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Year ending
December 31, Amount
------------ ------
<S> <C>
2000 $17,109
======
</TABLE>
Marketing and consulting contracts
In December 1998, the Company entered into an agreement with an independent
consultant to provide various business development services. The terms of this
agreement require the payment of an aggregate 250,000 shares of common stock, on
dates prescribed in the agreement, and the granting of 50,000 options to
purchase 50,000 shares of common stock at a price of not more than $0.35 per
share, commencing on August 5, 1999 and expiring on August 5, 2000. As of
December 31, 1999 and 1998, respectively, no shares have been issued pursuant to
this agreement.
In July 1997, the Company entered into two agreements with independent
consultants to establish marketing and distribution systems for the Company's
board game and telecommunication products. The terms of the agreements provide
for compensation through the issuance of 225,000 shares of the Company's common
stock, the granting of 200,000 options to acquire 200,000 shares of the
Company's common stock at exercise prices ranging from $0.25 to $0.50 per share,
and the reimbursement for approved travel expenses incurred on the Company's
behalf. Under one of the agreements, the consultant is entitled to receive a
5.0% commission on revenues received from corporate sponsors through the direct
efforts of the consultant. As of December 31, 1997, the Company has issued
50,000 shares of common stock valued at $0.10 per share and 50,000 valued at
$0.09 per share as compensation on these contracts. Further, as of December 31,
1998 and 1997, respectively, no options were exercised and all issued options
have expired and no commissions have been paid related to any Company products.
In July 1997, the Company entered into an agreement with an independent
consultant to establish and implement a distribution system for the Company's
board game and telecommunication products in the Southeastern United States. The
terms of the agreement provide for compensation through the issuance of 125,000
shares of the Company's common stock. The agreement may be terminated at any
time by either the consultant or the Company. As of December 31, 1997, the
Company has issued two blocks of 50,000 shares of the Company's common stock,
valued at $0.10 and $0.09 per share, respectively.
F-16
<PAGE> 24
BAOA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE J - COMMITMENTS - CONTINUED
Marketing and consulting contracts - continued
In May 1997, the Company entered into an agreement with an independent
consultant to provide advisory and marketing services for the Company. The terms
of the agreement provide for compensation through the issuance of 100,000 shares
of the Company's common stock, a 5.0% commission on gross sales to the
consultant which do not require payment of additional commissions to other third
party sales representatives, a 1.5% commission on sales which do require the
payment of additional commissions to other third party sales representatives and
a $1,500 per month advance against future commissions. This agreement may be
terminated at any time by either the consultant or the Company. As of December
31, 1997, the Company had issued the required 100,000 shares of common stock in
two blocks of 50,000 shares each, valued at $0.10 and $0.09 per share each.
In February 1997, the Company entered into an agreement with an individual to
serve as an advisory director and provide various business advisory services.
The agreement is for a period of two (2) years and provides for compensation
through the issuance of 100,000 shares of the Company's common stock. As of
December 31, 1997, 100,000 shares of common stock, valued at $0.10 per share,
had been issued pursuant to this agreement.
In January 1996, the Company entered into an agreement with an independent
consultant for the design and maintenance of an Internet web site and other
Internet-related consulting services. The contract provides for compensation
through the issuance of 150,000 shares of the Company's common stock. At
December 31, 1997, the Company has issued 87,500 and 37,500 shares of the
Company's common stock at $0.10 and $0.09 per share, respectively.
Call center contracts
In August 1997, the Company entered into an agreement with a telecommunications
company to design, develop, set-up and managing a completely functioning
teleservice center (Call Center) for the Company. This agreement is for a period
of three (3) years, beginning August 22, 1997. The Company is required to pay
$50,000 in advance for services and work to be performed plus travel advances
for expenses to be incurred on behalf of the Company. This agreement requires
additional compensation through the issuance of 3,000,000 shares of the
Company's unregistered, restricted common stock as follows: 1,000,000 shares
upon submission of a business plan for the initial Call Center; 1,000,000 shares
upon delivery of a completely functioning Call Center; and 1,000,000 shares upon
delivery of a purchase order for telemarketing services representing collectable
revenue of at least $2,400,000. Further, the Company will issue an additional
1,000,000 shares of unregistered, restricted common stock upon the opening of a
second Call Center and an additional 1,000,000 shares of unregistered,
restricted common stock when the second Call Center earns an annual gross
revenue of $900,000. The telecommunications company will also provide ongoing
management on the Call Center for $20,000 per month plus 10.0% of the gross
telemarketing billings. Additionally, this agreement requires future issuances
of common stock and warrants to purchase common stock in amounts and at prices
to be mutually agreed upon at a future date not specified in this agreement. In
the event that the telecommunications company fails to provide an initial Call
Center, all rights to common stock pursuant to this agreement shall be
forfeited. As of July 14, 1999, performance on this agreement had not begun,
and, accordingly, no common stock has been issued nor had any required payments
been made.
F-17
<PAGE> 25
BAOA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE J - COMMITMENTS - CONTINUED
Financial services contracts
In March 1999, the Company formalized an agreement with an entity to provide
capital development services. The contractor is to raise approximately
$1,000,000 through the sale of equity securities to new and existing investors.
For these services, the Company is obligated to pay the contractor 7,000,000
shares of common stock and a sum of money equal to 5.0% of the gross money
received. This agreement is for a period of five (5) years from January 1997.
In March 1998, the Company entered into an underwriting contract with a
brokerage firm whereby the brokerage firm was to use its best efforts in raising
approximately $600,000 for the Company through a Private Placement Memorandum.
The funds were to be raised through the sale of Units, consisting of 100,000
shares of common stock, 100,000 Class A Warrants and 100,000 Class B Warrants,
at a price of $25,000 per Unit. Pursuant to the terms of the Agreement, these
efforts were not completed by May 15, 1998 and the Agreement terminated with no
further obligation to the Company.
NOTE K- SUBSEQUENT EVENTS
During the period from January 1, 2000 through March 23, 2000, the Company has
sold a total of approximately 6,800,000 shares of common stock for gross
proceeds of approximately $179,000.
During the period from January 1, 2000 through March 23, 2000, the Company has
issued an aggregate 5,316,667 shares of common stock for various consulting
services. These transactions were valued at approximately $213,500, or $0.04 per
share, which approximates the fair market value of the shares given in payment
and the value of the services.
NOTE L - SELECTED FINANCIAL DATA (UNAUDITED)
The following is a summary of the quarterly results of operations for the years
ended December 31, 1999 and 1998, respectively.
<TABLE>
<CAPTION>
Quarter ended Quarter ended Quarter ended Quarter ended Year ended
March 31, June 30, September 30, December 31, December 31,
------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
1999
Revenues $ -- $ -- $ -- $ -- $ --
Gross profit -- -- -- -- --
Net earnings
from operations (47,405) (550,286) (47,502) (528,663) (1,173,856)
Basic and fully
diluted earnings
per share nil nil nil (0.02) (0.02)
Weighted-average
number of shares
issued and outstanding 36,287,379 56,267,226 53,905,435 74,257,287 61,114,785
</TABLE>
F-18
<PAGE> 26
BAOA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE L - SELECTED FINANCIAL DATA (UNAUDITED) - CONTINUED
<TABLE>
<CAPTION>
Quarter ended Quarter ended Quarter ended Quarter ended Year ended
March 31, June 30, September 30, December 31, December 31,
------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
1998
Revenues $ -- $ -- $ -- $ -- $ --
Gross profit -- -- -- -- --
Net earnings
from operations (415,528) (161,875) (132,427) (263,184) (973,014)
Basic and fully
diluted earnings
per share (0.01) nil nil (0.01) (0.03)
Weighted-average
number of shares
issued and outstanding 33,330,640 32,406,154 34,606,598 41,535,898 36,287,379
</TABLE>
F-19
<PAGE> 27
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants on accounting
and financial disclosure.
8
<PAGE> 28
PART III
ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
<TABLE>
<CAPTION>
Director Age Date Elected Position
<S> <C> <C> <C>
Peter Van Brunt 46 7/20/96 Director & President
</TABLE>
Mr. Van Brunt is a graduate of Columbia University, completed a J.D. in Law from
the University of La Verne where he made Law Review and has taken postgraduate
studies at Oxford University. He is responsible for overall development,
production, marketing, and distribution of the Company's products. He is using
his established talents in the music and game software industries to establish
BAOA's high visibility as a product leader in the emerging ethnic, urban
contemporary market niche. Mr. Van Brunt has over fifteen years experience as
senior vice president and assistant general counsel for one of the nation's
largest African American owned record labels. He has extensive experience as a
corporate officer conducting commodities transactions and business development
throughout the African continent, dealing with heads of state, political bodies
and the international banking community. He has acted as chief negotiator for
crude petroleum acquisition and distribution projects. He has managed all phases
of business affairs and contract negotiations for one of the largest African
American owned recording companies. His experience includes managing recording
artists through the recording process, selecting material and producers,
promoting and marketing products, and managing tours. He has developed and
negotiated agreements for recording, distribution, label joint ventures,
publishing, and foreign licensing.
9
<PAGE> 29
ITEM 10 EXECUTIVE COMPENSATION
Summary Compensation Table for 1999:
Name Peter Van Brunt
Principal Position Director & President
Salary $0
Bonus 0
Other
Compensation $24,973
(see notes)
Restricted stock
awards 0
Options 0
LTIP payouts 0
All other
compensation 0
Notes: The Company currently has no standard arrangement by which its Officers
and Directors are compensated. Mr. Van Brunt received management fee payments
throughout 1999 for services, lodging, and travel expenses for his extensive
stays away from home in relation to the completion of the Company's call center
business negotiations with the Cities of Atlanta and New York.
10
<PAGE> 30
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information on the ownership of the Company's
voting securities by Officers, Directors, and Major shareholders as well as
those who own beneficially more than five percent of the Company's common stock.
<TABLE>
<CAPTION>
Name of Beneficial Owner Number of Shares Percent of Total
<S> <C> <C>
None
</TABLE>
(Percentages are based on the number of outstanding shares as of December 31,
1999)
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1999, the Company had advances and notes
payable from related parties, who are also stockholders or related to
stockholders of the Company. The advances and notes payable from related parties
were for expenses of the Company paid by related parties and for direct loans to
the Company. These advances and notes payable from related parties are not
formally documented. Notes payable bear interest at rates ranging from 5.0% and
30.0% and are due on terms of between two years and three years from the dates
of issue. The Company has paid in cash and common stock certain amounts to
related parties, including company personnel, officers, and directors for
services rendered to the Company.
ITEM 13 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Exhibit 27 Financial Data Schedule
Reports filed on Form 8-K: Changes in Registrant's Certifying Accountant
Reports required to be filed by Regulation S-X: None
11
<PAGE> 31
SIGNATURES
Pursuant to the requirements of Section 13 and 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BAOA, INC.
Date: August 31, 2000
/s/ Peter Van Brunt,
--------------------------------------------
President, Principal Executive Officer,
Director
12
