<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

                      For the year ended December 31, 1996
                         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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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
                    -------                    --------


<PAGE>   2

The issuer's revenues for the year ended December 31, 1996 were $63,368.

The approximate aggregate market value of the voting stock held by
non-affiliates of the registrant as of December 31, 1996, 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, 1996 was $10,577,322. As of December 31,
1996 the registrant had outstanding 18,558,600 shares of common stock, $.001 par
value.



<PAGE>   3

PART 1

ITEM 1         BUSINESS

General

BAOA, Inc. ("the Company") is currently in the business of selling Black
Americans of Achievement, "The Game" and developing a licensing program for its
BAOA logo as a primary African American logo for an expanded in-house product
line as well as for products sold by outside vendors. The Company is developing
licensable trademark and product concepts including a series of electronic
ethnic, music, educational, and game CD-ROMS. An advisory board has been
appointed consisting of the Reverend Jesse Jackson, Mervyn Dymally, and other
notable African American business leaders, politicians, and professional
athletes. The purpose of the advisory board is to provide marketing direction
and direct access to corporate sponsors, as well as access to networks of
African American special interest groups and religious organizations. The
advisory board is currently working with management to secure major corporate
sponsors for the Company's ethnic product niche.

The Company is in the process of completing several new products and services
including a CD-Rom game, an Internet Web site, long-distance telephone services,
and a BAOA credit card that should result in profitable operations and a
positive cash flow during the next year.

Competition

The Company sells its current game, and anticipates its future products to be
sold through the retail and educational sectors. Proposed electronic products
will be sold through a variety of channels such as multi-media retail stores and
through on-line services such as the Internet.

Competitors in the traditional board game lines include Hasbro, Milton Bradley,
and Parker Brothers. Competitors in the electronic game and educational lines
generally consist of a multitude of small to medium size companies, with a few
dominant major corporations such as Sony and Sega. Competitors in the
long-distance telephone and credit card business are dominated by large
telephone carriers and banks, however, BAOA intends to utilize its ethnic niche
appeal and contacts within the ethnic community to secure a significant portion
of these markets.

The size and financial strength of the Company's competitors are substantially
greater than those of the Company. Management, however, believes the Company
will be able to compete effectively because of its unique products and its
cultural niche goals. The Company maintains current product sales through a
variety of retail outlets and is discussing new major sponsorships with major
U.S. corporations for new distribution channels.


<PAGE>   4

Intellectual Property

The Company is in compliance with its legal obligations for rights and
authorizations to use names and likenesses of historical and famous personages.
Copyright and trademark licensing agreements are currently in force for the
Company's current game board and for its developmental products. These licensing
agreements are between the Company and several of its major shareholders. The
Company has properly accrued all licensing obligations as "Accrued Royalties"
per agreements with the major shareholder licensors. (HOWEVER SEE ITEM 3 - LEGAL
PROCEEDINGS)

ITEM 2         PROPERTIES

The Company leases its corporate office space located at 2635 Camino del Rio
South, Suite 210, San Diego, California. The office space consists of
approximately 2,700 square feet. The lease commenced November 1996 and will
terminate November 30, 2001.

ITEM 3         LEGAL PROCEEDINGS

In the first quarter of 1996, the Company was served with a complaint filed in
the Superior Court for the State of California, as was reported in the Company's
prior 10-KSB filing for 1995. The second complaint was filed in June, 1996, in
the Superior Court for the State of California. The complaints involved demands
for payments of a loan and other monies advanced to the Company by two former
management personnel. The Company's position was that no payments were possible
due to the lack of necessary cash flow. Both complaints were dismissed without
prejudice in October, 1996 at a cost to the Company of less than $10,000.

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 1996.


<PAGE>   5

PART II

ITEM 5         MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
               EQUITY AND RELATED STOCKHOLDERS MATTERS.

The Company's common stock is traded on the NNOTC Electronic Bulletin Board. The
NNOTC 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 mark-up, markdown, or commission and may not necessarily
represent actual transactions.

<TABLE>
<CAPTION>
                                    Low            High
<S>                                 <C>            <C> 
1995

First Quarter                       .50            1.75
Second Quarter                      .125           .50
Third Quarter                       .125           .50
Fourth Quarter                      .25            .50

1996

First Quarter                       .25            .50
Second Quarter                      .1875          .25
Third Quarter                       .125           .23
Fourth Quarter                      .125           .20
</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, 1996, there were approximately 200 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.


<PAGE>   6

ITEM 6         SELECTED FINANCIAL DATA


Financial Condition

The financial condition of the company has not improved when comparing 1995 to
1996. The following table presents the key measures of financial condition as of
December 31, 1995 and 1996:

<TABLE>
<CAPTION>
                                    1996                         1995
                                              %                           %
                               $          of assets         $         of assets
<S>                          <C>            <C>           <C>           <C>
Cash                         1,372          1.13          1,654         .42

Current Assets               94,198         77.28         351,847       89.50

Current Liabilities          1,147,010      941.04        1,009,827     256.88

Working Capital              -1,051,440     ------        -656,326      ------

Property & Equip (net)       19,432         15.94         27,780        7.07

Total Assets                 121,888        100           393,119       100

Long Term Debt               ------         ------        ------        ------

Shareholders' Equity         -1,025,122     ------        -616,708      ------
</TABLE>

As of December 31, 1996, the Company had $1,372 cash on hand and in the bank.
The primary sources of cash and financing for the Company for the year ended
December 31, 1996 were $63,368 from sales, a $12,001 decrease in accounts
receivable, and a $112,683 increase in accounts payable and notes payable, of
which, shareholders payables and loans to the Company increased by $88,116. The
primary use of cash during 1996 was $186,458 to finance the Company's
operations.


<PAGE>   7

ITEM 7         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Significant losses in 1996 were primarily due to the lack of material
distributions contracts and marketing delays in obtaining new sponsorships for a
revised version of the Company's game products. Management has achieved its goal
of hiring new African American officers and employees in order to develop the
Company's targeted ethnic niche markets. With new management personnel, the
Board believes the Company will achieve new contracts and sponsorships in 1997.

The Board chose to utilize the benefits of a Stock Award Plan in filing with the
Securities and Exchange Commission a Registration Statement on Form S-8 in
December 1996. This registration for 3,000,000 shares of common stock was used
as authorized under Rule 16(b) (3) under the Securities Exchange Act of 1934 for
selected consultants.

ITEM 8         FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following Financial Statements of the Company with related Notes are
attached hereto:

        Balance Sheets as of December 31, 1996 and 1995
        Statements of Operations for the years ended December 31, 1996 and 1995
        Statements of Stockholders' Equity for the years ended December 31, 1996
        and 1995 Statements of Cash Flows for the years ended December 31, 1996
        and 1995

ITEM 9         CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
               ACCOUNTING AND FINANCIAL DISCLOSURE

        None


<PAGE>   8

PART III


ITEM 10        DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


<TABLE>
<CAPTION>
Directors:
                      Age    Date Elected          Position
<S>                   <C>         <C>              <C>
Peter Van Brunt       51          7/20/96          Director & President

Steven R. Wright      52          11/1/93          Director, Secretary & Treasurer

Ed Litwak             53          7/30/96          Director

William H. Black      39          3/6/96           Director
</TABLE>

Mr. Van Brunt is a graduate of Columbia University, has taken postgraduate
studies at Oxford University, and completed a J.D. in law from the University of
La Verne where he made Law Review. 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 an
officer and attorney 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 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.

Mr. Wright has a B.A. in public administration and a B.S. in accounting, both
from San Diego State University in California. He continues to work on his
masters degree. He is responsible for corporate taxes at Wright & Geis,
Certified Public Accountants, Inc., in San Diego. He is responsible for firm
marketing, all corporate tax client management, quality control, tax review, tax
strategies, tax research, audit representation, strategic planning, and staff
management. He designs and implements financial policies for client accounting,
cash management, job costing, and budgets. He has an extensive background in
working with lenders and investors and small business entrepreneurs.


<PAGE>   9

Mr. Litwak majored in business at Cornell University. He is the chairman and CEO
of Merchandise Entertainment Television (METV-1) and Satellite TODAY, Inc. He
has achieved awards of excellence and national recognition for his
accomplishments in marketing, sales, administration and broadcasting in the
satellite and cable television industries. He has served as an officer and owner
in various manufacturing and marketing companies since 1964. His experience
includes high level management and marketing in the clothing, shoe, and sports
merchandising fields. As a consultant, he managed the special events marketing
for Pepsi-Cola's most successful sports program. He was the licensing agent for
fashion designer Paolo Gucci and the Gucci family in their successful
development of retail and hotel businesses, and the Gucci and Versace labels. He
worked in association with General Electric to establish the fourth largest home
shopping and entertainment television channel, Merchandise Entertainment
Television (METV-1). He has formed a strategic alliance with AT&T and Hughes
Network Systems DirecPC to create Satellite TODAY for delivery of
up-to-the-minute, on-line, vital medical information to doctors, pharmacists,
and hospitals on a world wide basis. He currently serves on the board of
advisors for AT&T's Global Information Solutions and the Interactive Times
Shoppers Network.


Mr. Black has a B.A. in business administration from Carson-Newman College in
Jefferson City, Tennessee. He is the Chairman and CEO of Professional
Management, Inc. and World Express Travel, Inc. He also owns Professional
Realty, Inc. These companies include one of the largest professional athlete
management agencies in the United States - with clients such as Sterling Sharpe,
Andre Risen, Terry Allen, Robert Brooks, and Natrone Means; a large travel
agency with major national corporate clients; and a successful realty company
that specializes in real estate investing. He was a three-time College Football
All-American, played professional football, and was a college football coach. He
is known nationally for his business acumen and his long history of community
service.


<PAGE>   10

ITEM 11        EXECUTIVE COMPENSATION


Summary Compensation Table for 1996:

<TABLE>
<S>                   <C>                          <C>
Name                  Peter Van Brunt              Steven R. Wright

Principal Position    Director & President         Director, Treasurer & Secretary

Salary                $    0                        $   0

Bonus                      0                            0

Other
Compensation               0                            0

Restricted stock
awards                     0                            0

Options                    0                            0

LTIP payouts               0                            0

All other
compensation               0                            0
</TABLE>

Notes: William Black served as president until July 20, 1996 without salary. Mr.
Black earned 250,000 shares of restricted stock as other compensation from the
Company. The Company currently has no standard arrangement by which its
Directors are compensated. The Company canceled its two year employment contract
with William H. Black on July 20, 1996.


<PAGE>   11

ITEM 12        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> 
Maritime International Ltd.          2,475,422                   13.3
c/o Clark, Wilson Barristers
& Solicitors
800-885 West Georgia St.
Vancouver, B.C., Canada

Sontag S.A.                          2,110,424                   11.4
c/o Clark, Wilson Barristers
& Solicitors
800-885 West Georgia St.
Vancouver, B.C., Canada

Barkley Edwards, Inc.                2,114,422                   11.4
c/o Clark, Wilson Barristers
& Solicitors
800-885 West Georgia St.
Vancouver, B.C., Canada

William H. Black                       450,000                    2.4
914 Richland St.
Ste A200
Columbia, South Carolina

Steven R. Wright                       165,000                     .9
c/o BAOA, Inc.
2635 Camino del Rio South
Ste 210
San Diego, California
</TABLE>


(Percentages are based on the number of outstanding shares as of 
December 31, 1996)



<PAGE>   12

ITEM 13        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        None


ITEM 14        EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
               FORM 8-K


        Balance Sheet as of December 31, 1996
        Statements of Operations for the years ended December 31, 1996 and 1995
        Statements of Stockholders' Equity for the years ended December 31, 1996
        and 1995
        Statements of Cash Flows for the years ended December 31, 1996 and 1995

        Reports filed on Form 8-K:  None

        Reports required to be filed by Regulation S-X:  None

        Exhibits

           23      Consent of Independent Accountants
           27      Financial Data Schedule
<PAGE>   13

                                   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:  March 28, 1997       /s/ PETER VAN BRUNT
                                    --------------------------------------------
                                    Peter Van Brunt,
                                    President, Principal Executive Officer, 
                                    Director

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: March 28, 1997       /s/ STEVEN R. WRIGHT
                                    --------------------------------------------
                                    Steven R. Wright,
                                    Treasurer, Principal Financial Officer, 
                                    Director



        Dated: March 28, 1997       /s/ ED LITWAK
                                    --------------------------------------------
                                    Ed Litwak,
                                    Director

<PAGE>   14
                                   BAOA, INC.

                              FINANCIAL STATEMENTS

                           DECEMBER 31, 1996 AND 1995


<PAGE>   15


                                   BAOA, INC.
                              FINANCIAL STATEMENTS
                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                           PAGE
                                                                           ----
<S>                                                                         <C>
INDEPENDENT AUDITORS' REPORT............................................... F-1

BALANCE SHEETS............................................................. F-2

STATEMENTS OF OPERATIONS................................................... F-4

STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT.............................. F-5

STATEMENTS OF CASH FLOWS................................................... F-6

NOTES TO FINANCIAL STATEMENTS......................................... F-7-F-13
</TABLE>


<PAGE>   16
[LOGO]

                                  [LETTERHEAD
                               HARLAN & BOETTGER
                         CERTIFIED PUBLIC ACCOUNTANTS]


                          INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF BAOA, INC.:

We have audited the accompanying balance sheets of BAOA, Inc. (a California
corporation) as of December 31, 1996 and 1995 and the related statements of
operations, changes in stockholders' deficit, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit 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 financial statements referred to above present fairly, in
all material respects, the financial position of BAOA, Inc. as of December 31,
1996 and 1995, and the results of operations and 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 L to the
financial statements, the Company's default on certain loan agreements,
recurring losses, decreases in working capital, and negative cash flows raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note L to
the financial statements. The financial statements do not include any
adjustments relating to the recoverability and classification of reported asset
amounts or the amounts and classification of liabilities that might result from
the outcome of this uncertainty.


/S/ HARLAN & BOETTGER

San Diego, California
March 10, 1997

                                       F-1

<PAGE>   17
[LOGO]                            [LETTERHEAD]

                               HARLAN & BOETTGER
                          CERTIFIED PUBLIC ACCOUNTANTS

                                   BAOA, INC.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                   December 31,
                                                          -------------------------------
                                                             1996                1995
                                                          ----------           ----------
<S>                                                       <C>                   <C>      
        ASSETS
  CURRENT ASSETS
    Cash                                                  $    1,372            $   1,654
    Accounts receivable, less $100,687 and
       $60,000 of allowance for doubtful accounts             47,570              100,258
    Inventory, net (Note B)                                   45,256              249,935
                                                          ----------           ----------
        TOTAL CURRENT ASSETS                                  94,198              351,847
                                                          ----------           ----------
  FURNITURE AND EQUIPMENT,
    less $26,424, and $18,076 of accumulated
       depreciation (Note C)                                  19,432               27,780
                                                          ----------          -----------
  OTHER ASSETS (Note D)

    Organization Costs, net of $14,000,
       and $10,000 of accumulated amortization                 6,000               10,000
    Deposits                                                   2,258                3,492
                                                        ------------         ------------
        TOTAL OTHER ASSETS                                     8,258               13,492
                                                        ------------         ------------
                                                        $    121,888         $    393,119
                                                        ============         ============
</TABLE>



    The accompanying notes are an integral part of this financial statement.



                                       F-2

<PAGE>   18

                                   BAOA, INC.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                               December 31,
                                                     -------------------------------
                                                          1996             1995
                                                     -------------    -------------
<S>                                                  <C>              <C>          
LIABILITIES AND STOCKHOLDERS' DEFICIT
  CURRENT LIABILITIES
    Accounts payable (Note E)                        $     209,075    $     173,245
    Accrued expenses (Note E)                              290,610          213,757
    Income taxes payable                                     1,600            1,600
    Related party debt (Note F)                            645,725          621,225
                                                     -------------    -------------
        TOTAL CURRENT LIABILITIES                        1,147,010        1,009,827
                                                     -------------    -------------
COMMITMENTS AND CONTINGENCIES (Note I)

  STOCKHOLDERS' DEFICIT (Note H)
    Common Stock-,$.001 par,
      25,000,000 shares authorized
      18,558,600 shares issued and
      outstanding at December 31, 1996,
      and 13,551,600 issued and outstanding
      at December 31, 1995                                  18,559           13,552

  Paid in capital                                        2,628,695        2,084,649
  Retained deficit                                      (3,672,376)      (2,714,909)
                                                     -------------    -------------
        TOTAL STOCKHOLDERS' DEFICIT                     (1,025,122)        (616,708)
                                                     -------------    -------------
                                                     $     121,888    $     393,119
                                                     =============    =============
</TABLE>


    The accompanying notes are an integral part of this financial statement.



                                       F-3

<PAGE>   19

                                   BAOA, INC.
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                     Year ended December 31,
                                                 ------------------------------
                                                      1996             1995
                                                 -------------    -------------
<S>                                              <C>              <C>          
REVENUES
  Sales                                          $      63,368    $      18,879
                                                 -------------    -------------
        TOTAL REVENUES                                  63,368           18,879
COST OF SALES (Note B)                                 164,086          315,096
                                                 -------------    -------------
  Gross profit (loss)                                 (100,718)        (296,217)
                                                 -------------    -------------
OPERATING EXPENSES
  Sales and marketing                                  541,294          533,898
  Salaries and wages                                       -            107,216
  Legal & professional                                  61,462           49,921
  Consulting & outside services                         10,965           41,751
  Travel                                                 2,690           25,039
  Depreciation                                           8,348            8,349
  Royalties                                             24,567            4,652
  Amortization                                           4,000            4,000
  General and administrative                           150,782          146,798
                                                 -------------    -------------
        TOTAL OPERATING EXPENSES                       804,108          921,624
                                                 -------------    -------------
LOSS FROM OPERATIONS                                  (904,826)      (1,217,841)

OTHER INCOME (EXPENSES)
  Interest income                                            3               13
  Interest expense                                     (51,844)         (40,060)
                                                 -------------    -------------
        TOTAL OTHER EXPENSE                            (51,841)         (40,047)
                                                 -------------    -------------
LOSS BEFORE TAXES                                     (956,667)      (1,257,888)
INCOME TAXES                                               800              800
                                                 -------------    -------------
NET LOSS                                         $    (957,467)   $  (1,258,688)
                                                 =============    =============
NET LOSS PER COMMON SHARE                        $        (.06)   $        (.11)
                                                 =============    =============
AVERAGE COMMON SHARES OUTSTANDING                   14,974,900       11,648,600
                                                 =============    =============
</TABLE>


    The accompanying notes are an integral part of this financial statement.



                                       F-4

<PAGE>   20

                                   BAOA, INC.
                 STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT


<TABLE>
<CAPTION>
                                             Common Stock         
                                     -----------------------------      Paid in        Retained
                                         Shares          Amount         Capital         Deficit            Total
                                     -------------   -------------   -------------   -------------    -------------
<S>                                     <C>          <C>             <C>             <C>              <C>          
BALANCE, DECEMBER 31, 1994              11,551,600   $      11,552   $   1,586,649   $  (1,456,221)   $     141,980
                                     -------------   -------------   -------------   -------------    -------------
Issued shares of common
  stock for services                     2,000,000           2,000         498,000              --          500,000
Net loss for year                               --              --              --      (1,258,688)      (1,258,688)
                                     -------------   -------------   -------------   -------------    -------------
BALANCE, DECEMBER 31, 1995              13,551,600   $      13,552   $   2,084,649   $  (2,714,909)   $    (616,708)
                                     -------------   -------------   -------------   -------------    -------------
Issued shares of common
  stock for services                     5,007,000           5,007         544,046              --          549,053
Net loss for year                               --              --              --        (957,467)        (957,467)
                                     -------------   -------------   -------------   -------------    -------------
BALANCE, DECEMBER 31, 1996              18,558,600   $      18,559   $   2,628,695   $  (3,672,376)   $  (1,025,122)
                                     =============   =============   =============   =============    ============= 

</TABLE>


    The accompanying notes are an integral part of this financial statement.



                                       F-5

<PAGE>   21

                                   BAOA, INC.
                            STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                                     --------------------------
                                                        1996            1995
                                                     -----------    -----------
<S>                                                  <C>            <C>         
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                           $  (957,467)   $(1,258,688)
  Adjustments to reconcile net income
    (loss) to net cash used in
     operating activities:
      Depreciation and amortization                       12,348         12,349
      Allowance accounts                                 108,570        308,686
      Common stock issued for services                   549,053        500,000
  (Increase) decrease in:
    Accounts receivable                                   12,001         16,158
    Inventory                                            136,796         32,332
  Increase (decrease) in:
    Accounts payable                                      35,830         91,215
    Accrued expenses                                      76,853         45,673
                                                     -----------    -----------
        NET CASH USED IN OPERATING ACTIVITIES            (26,016)      (252,275)

CASH FLOWS FROM INVESTING ACTIVITIES
  (Increase) decrease in deposits                          1,234           (510)
                                                     -----------    -----------
        NET CASH PROVIDED BY (USED IN)
          INVESTING ACTIVITIES                             1,234           (510)

CASH FLOWS FROM FINANCING ACTIVITIES
  Related party debt increase                             24,500        238,980
                                                     -----------    -----------
        NET CASH PROVIDED BY
          FINANCING ACTIVITIES                            24,500        238,980
                                                     -----------    -----------
NET DECREASE IN CASH                                        (282)       (13,805)

CASH, AT BEGINNING OF PERIOD                               1,654         15,459
                                                     -----------    -----------

CASH, AT END OF PERIOD                               $     1,372    $     1,654
                                                     ===========    ===========
</TABLE>



    The accompanying notes are an integral part of this financial statement.


                                       F-6

<PAGE>   22

                                   BAOA, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1996 AND 1995


A.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

        Organization and Nature of Business

        The Company was incorporated in the state of California in August 1983
        under the name Tahoe Lake Concessions, Inc. Pursuant to a special
        meeting of shareholders held June 21, 1993 the Company changed its name
        to BAOA, Inc.

        The Company was originally incorporated to engage in the field of real
        estate development and investments. After its reorganization in June
        1993, the Company is now engaged in the business of the sale and
        marketing of the board game known as Black Americans of Achievement
        (BAOA), the sale and marketing of a BAOA credit card, the licensing of
        its trademark logo, as well as the development for production of a
        television game show.

        Revenue and Cost Recognition

        The Company recognizes sponsorship revenue on an accrual basis as the
        sponsorship fees are earned. Board game sales are recorded upon
        invoicing and concurrent shipment of games. General and administrative
        costs are charged to expense as incurred. Research and development costs
        are charged to expense in the period incurred.

        Inventories

        Inventories are stated at lower of cost (first-in, first-out) or market.

        Organization Costs

        The Company is amortizing its organization costs on the straight-line
        method over a 5 year period.

        Intangible Assets

        The Company is amortizing its intangible assets on the straight-line
        method over the estimated useful life of the assets.

        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.



                                       F-7

<PAGE>   23

                                   BAOA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1996 AND 1995
                                   (CONTINUED)


A.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)

        Property and Equipment

        Property and equipment is stated at cost, and depreciated using the
        straight-line method over the estimated useful lives of the assets,
        which range from five to ten years. Assets under capital leases are
        depreciated by the straight-line method over the shorter of the lease
        term or the useful lives of the assets. Maintenance, repairs and minor
        renewals are charged to operations as incurred. Major replacements or
        betterments are capitalized. When properties are retired or otherwise
        disposed, the related cost and accumulated depreciation are eliminated
        from the respective accounts and any gain or loss on disposition is
        reflected as income or expense.

        Income Taxes

        Income taxes, including pro forma computations, are provided 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.

        Net Loss per Common Share

        Net loss per share is calculated using the weighted average outstanding
        common and common stock equivalent shares.

B.      INVENTORY:

        Inventory at December 31, 1996 and 1995 consisted of finished products
        as follows:

<TABLE>
<CAPTION>
                                                          December 31,
                                                   ---------------------------
                                                      1996            1995
                                                   ---------         ---------
                <S>                                <C>               <C>      
                Board games                        $  88,745         $ 433,593
                5-Up kits                             12,075            57,926
                10-Up kits                            12,319            57,102
                                                   ---------         ---------
                Total                                113,139           548,621
                Less valuation allowance             (67,883)         (298,686)
                                                   ---------         ---------
                Inventory, net                     $  45,256         $ 249,935
                                                   =========         =========
</TABLE>

        During 1996 and 1995 it became apparent to management that actual market
        value for their board game was less than actual costs. As a result,
        inventory as of December 31, 1996 and 1995 has been adjusted to reflect
        current market value. The results of this adjustment was to charge
        $67,883 and $298,686 to cost of sales for the years ended December 31,
        1996 and 1995, respectively, and to establish an inventory valuation
        allowance account.



                                       F-8

<PAGE>   24

                                   BAOA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1996 AND 1995
                                   (CONTINUED)


C.      FURNITURE AND EQUIPMENT:

        Furniture and Equipment consists of:


<TABLE>
<CAPTION>
                                                           December 31,
                                                    --------------------------
                                                      1996              1995
                                                    --------          --------
               <S>                                   <C>               <C>    
               Furniture                             $14,402           $14,402
               Equipment                              31,454            31,454
                                                    --------          --------
                      Total                           45,856            45,856
               Less accumulated
                 depreciation                         26,424            18,076
                                                    --------          --------
               Furniture and
                 equipment, net                     $ 19,432           $27,780
                                                    ========           =======
</TABLE>

D.      INTANGIBLE ASSETS:

        In June 1993 the Company entered into an agreement with BAOA, a Grand
        Cayman Corporation, whereby the Company exchanged 8,000,000 shares of
        its common stock and issued notes payable totaling $300,000 in exchange
        for all the rights, title and interest in various items. As a result of
        the intangible assets being acquired from an affiliated party as part of
        a nonmonetary exchange, the assets were valued at the predecessor's
        basis which has been determined to be $1. In 1993 the Company charged to
        expense $300,000 as asset acquisition costs. This amount represented the
        full amount of the notes payable issued, along with the Company's common
        stock, to obtain these intangible assets. The assets acquired and future
        liabilities associated with such acquisition are as follows:

        1.      The license of the board game known as, Black Americans of
                Achievement.

        2.      The board game concept known as, The Soul of American Music.

        3.      The Chelsea House Publishers, Division of Main Line Publishers
                contract.

        4.      Uniworld Group, Inc., Louis Corbo, Thomas M. Magee and HGI
                Marketing Services, Inc. contract.

        5.      The licensable Trademark concept of "BAOA" together with or
                without its tag line:



                               "Buy It With Pride"



                                       F-9

<PAGE>   25

                                   BAOA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1996 AND 1995
                                   (CONTINUED)


D.      INTANGIBLE ASSETS: (CONTINUED)

        6.      The Registered Television Game Show Concept entitled: "BAOA"

                The following monies, royalties and fees are all part and parcel
                of this transfer and are payable to the parties as indicated
                along with the party, Louis Corbo, under a licensing agreement
                dated May 14, 1993.

                a.      First year of the three years sponsorship revenues
                        received for said board game, Black Americans of
                        Achievement, in the following percentages --- 1/3 of
                        which to Louis Corbo and 2/3 of which to HGI Marketing
                        Services, Inc. and Thomas M. Magee, collectively.

                b.      Royalties of Eight (8%) percent of the wholesale selling
                        price from Black Americans of Achievement board game to
                        Louis Corbo pursuant to the licensing agreement dated
                        May 14, 1993.

                c.      Upon completion of the Soul of American Music board game
                        an Eight (8%) percent royalty shall be paid to Louis
                        Corbo for a license therefrom.

                d.      Royalties of Eight (8%) percent of the Budget of the
                        Television Game show entitled BAOA payable to Louis
                        Corbo.

                e.      Royalties of Eight (8%) percent of any and all licensing
                        fees derived from the marketing and sale of the BAOA
                        Trademark concept with or without its tag line "Buy It
                        With Pride" for such products as clothing, greeting
                        cards, gifts, food and candy, etc. payable to Louis
                        Corbo.

E.      ACCOUNTS PAYABLE AND ACCRUED EXPENSES:

        Accounts payable and accrued expenses consist of the following:


<TABLE>
<CAPTION>
                                                          December 31,
                                                  -----------------------------
                                                      1996            1995
                                                  ------------     ------------
           <S>                                    <C>              <C>     
           Accounts payable - shareholders        $    130,325     $    130,325
           Accounts payable - vendors                   78,750           42,920
           Accrued royalties                           194,265          169,698
           Accrued interest                             95,799           43,957
           Other accrued expenses                          546              102
                                                  ------------     ------------
                                                  $    499,685     $    387,002
                                                  ============     ============
</TABLE>


                                      F-10

<PAGE>   26


                                   BAOA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1996 AND 1995
                                   (CONTINUED)


F.      RELATED PARTY DEBT:

        Notes payable at December 31, 1996 and 1995 are summarized as follows:

<TABLE>
<CAPTION>
                                                                     1996           1995
                                                                 ------------    -----------
<S>                                                              <C>             <C>        
        Notes payable to various shareholders, interest
        payable at 8%, principal and interest due
        December 31, 1997.                                       $    509,225    $   482,225

        Notes payable to various shareholders, interest
        payable at 8%, principal and interest due
        December 31, 1997.                                            136,500        139,000
                                                                 ------------    -----------

                                                                $     645,725    $   621,225
                                                                =============    ===========
</TABLE>

G.      INCOME TAXES:

        The provision for income taxes for the year ended December 31, 1996
        consists solely of the minimum state taxes.

        The Company's total deferred tax asset as of December 31, 1996 is as
        follows:

<TABLE>
<CAPTION>
                                                                     1996
                                                               ---------------
<S>                                                             <C>           
           Net operating loss carryforwards                     $      886,800
           Valuation allowance                                        (886,800)
                                                               ---------------
               Net deferred tax asset                          $             -
                                                               ===============
</TABLE>

        As of December 31, 1996 the Company had net operating loss carryforwards
        before any limitations which expire as follows:

<TABLE>
<CAPTION>
               Year Ending
                December 31,                  Federal               State
                ------------                  -------               -----
                  <S>                     <C>                      <C>      
                  2007                    $   337,200              $       -
                  2008                      1,117,000                558,500
                  2009                      1,248,700                624,350
                  2010                        947,700                473,850
                  2011                        942,200                471,100
</TABLE>


                                      F-11

<PAGE>   27

                                   BAOA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1996 AND 1995
                                   (CONTINUED)

H.      STOCKHOLDERS' DEFICIT:

        Stock for Services

        During the twelve months ended December 31, 1996, the Company authorized
        and issued 5,007,000 shares of common stock in exchange for consulting
        and marketing services provided. The Company has entered into several
        agreements with public figures to promote the board games in exchange
        for stock. These contracts cover a period of one year.

I.      COMMITMENTS AND CONTINGENCIES:

        Operating Leases

        The Company leases office facilities and equipment under noncancelable
        operating leases from unrelated third parties which expire November 30,
        2001. The accompanying statement of operations includes expenses from
        operating leases of $35,870 and $36,564 for 1996 and 1995, respectively.
        Future minimum lease payments due under the noncancelable operating
        leases as of December 31, 1996 are as follows:

<TABLE>
             <S>                                                <C>      
             1997                                               $  35,178
             1998                                                  36,798
             1999                                                  38,418
             2000                                                  39,860
             2001                                                  36,081
                                                                ---------
                 Total                                          $ 186,335
                                                                =========
</TABLE>

J.      MAJOR CUSTOMERS:

        During the year ended December 31, 1996 the Company had three major
        customers, sales to each of which exceeded 10% of the Company's total
        sales. Sales to these customers totaled $39,250 for the year ended
        December 31, 1996.

K.      SUPPLEMENTAL CASH FLOW INFORMATION:

        Supplemental disclosures of cash flow information for the years ended
        December 31, 1996 and 1995 are summarized as follows:

<TABLE>
<CAPTION>
                                                          1996            1995
                                                        ---------       --------
<S>                                                      <C>           <C>     
        Noncash investing and financing activities:
           Services acquired with stock issuance         $549,053      $500,000
</TABLE>



                                      F-12

<PAGE>   28

                                   BAOA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1996 AND 1995
                                   (CONTINUED)


L.      GOING CONCERN:

        The Company has had recurring losses from operations, and as of December
        31, 1996, the Company's current liabilities exceeded its current assets
        by approximately $1,052,812. In addition, the Company had negative cash
        flows for the year ended December 31, 1996. These factors create an
        uncertainty as to the Company's ability to continue as a going concern.

        The Company has added an advisory board consisting of the Reverend Jesse
        Jackson, Mervyn Dymally, and other notable African American business
        leaders, politicians, and professional athletes. The purpose of the
        advisory board is to provide marketing direction and direct access to
        corporate sponsors, as well as access to networks of African American
        special interest groups and religious organizations. The advisory board
        is currently working with management to secure major corporate sponsors
        for the Company's ethnic product niche. The Company has a series of new
        products and services that they believe will result in profitable
        operations and a positive cash flow during the next year.

        The ability of the Company to continue as a going concern is dependent
        upon its ability in its endeavors to seek additional sources of capital,
        and its attaining future profitable operations. The accompanying
        financial statements do not include any adjustments that might be
        necessary should the Company be unable to continue as a going concern.


                                      F-13

<PAGE>   29
                                 EXHIBIT INDEX

                                                                 Sequentially
Exhibit                                                             Numbered
Number           Description                                          Page
------           -----------                                     ------------
  23             Consent of Independent Accountants
  27             Financial Data Schedule