BAYNON INTERNATIONAL CORP.

STATEMENTS OF OPERATIONS

(UNAUDITED)

The accompanying notes are an integral part of these financial statements

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BAYNON INTERNATIONAL CORP.

STATEMENTS OF CASH FLOWSSTOCKHOLDERS’ DEFICIENCY

FOR THE SIXTHREE MONTHS ENDED JUNE 30,MARCH 31, 2019 AND 2018 AND 2017

(UNAUDITED)

The accompanying notes are an integral part of these financial statements

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BAYNON INTERNATIONAL CORP.

STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

(UNAUDITED)

The accompanying notes are an integral part of these financial statements

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BAYNON INTERNATIONAL CORP.

NOTES TO FINANCIAL STATEMENTS

JUNE 30,MARCH 31, 2019 AND 2018 AND 2017

(UNAUDITED)

1.THE COMPANY 

Baynon International Corp. formerly known as Technology Associates Corporation (the “Company”), was originally incorporated on February 29, 1968 under the laws of the Commonwealth of Massachusetts to engage in any lawful corporate undertaking.  On December 28, 1989, the Company reincorporated under the laws of the State of Nevada.  The Company was formerly engaged in the technology marketing business and its securities traded on the National Association of Securities Dealers OTC Bulletin Board.  The Company has not engaged in any business operations for at least the last fourteenfifteen fiscal years and has no operations to date.years.

The Company will attempt to identify and negotiate with a business target for the merger of that entity with and into the Company.  In certain instances, a target company may wish to become a subsidiary of the company or wish to contribute assets to the Company rather than merge.

No assurance can be given that the Company will be successful in identifying or negotiating with any target company.  The Company provides a means for a foreign or domestic private company to become a reporting (public) company whose securities would be qualified for trading in the United States secondary market.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

Interim Presentation

The December 31, 20172018 balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted accounting principles.in the United States of America.  In the opinion of management, the accompanying unaudited financial statements contain all normal and recurring adjustments necessary to present fairly the financial position of the Company as of June 30, 2018,March 31, 2019, its results of operations for the three and six months ended June 30,March 31, 2019 and 2018 and 2017 and its cash flows for the sixthree months ended June 30, 2018March 31, 2019 and 2017.2018.

The statements of operations for the three and six months ended June 30,March 31, 2019 and 2018 and 2017 are not necessarily indicative of the results for the full year.

While the Company believes that the disclosures presented are adequate to make the information not misleading, these financial statements should be read in conjunction with the financial statements and accompanying notes included in the Company’s annual Report on Form 10-K for the year ended December 31, 2017.2018.

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Loss Per Share

The Company computes loss per share in accordance with FASB ASC 260, “Earnings Per Share”.Share.”  Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share reflects the potential dilution that could occur if securities or other agreements to issue common stock were exercised or converted into common stock.  Diluted earnings per share is computed based upon the weighted average number of common shares and dilutive common equivalent shares outstanding, which includes convertible debentures, stock options and warrants. The following securities have been excluded from the calculation of loss per share for the sixthree months ended June 30,March 31, 2019 and 2018 and 2017 as their effect would be anti-dilutive:

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has incurred continuing operating losses and has an accumulated deficit of $(465,590)$(481,563) at June 30, 2018.March 31, 2019.  The Company has no revenue generating operations and has limited cash resources.  These factors raise substantial doubt about the ability of the Company to continue as a going concern.

Management believes that it will be able to achieve a satisfactory level of liquidity to meet the Company’s obligations through June 30, 2019May 31, 2020 by obtaining additional financing from key officers, directors and certain investors.  However, there can be no assurance that the Company will be able to generate sufficient liquidity to maintain its operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Fair Value of Financial Instruments

The carrying amounts reported in the balance sheet for cash and cash equivalents and accounts payable, notes payable and accrued expenses approximate fair value based on the short-term maturity of those instruments. The carrying value of convertible notes payable – related parties approximated its fair value as of March 31, 2019 and December 31, 2018 as the interest rate on the notes approximated market rates. 

Recently Issued Accounting Standards

Management does not believe that any recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the accompanying financial statements.

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3.CONVERTIBLE NOTES PAYABLE - STOCKHOLDERS– RELATED PARTIES 

On May 18, 2015, the Company issued an unsecured convertible note payable to a stockholder in exchange for $25,000 in cash for the Company’s working capital needs. The note bears interest at 6% per annum and originally had a term of one year. The note has been extended through May 18, 2019. The stockholder has the option to convert the note and accrued interest into the Company’s common stock at $0.0125 per share.

On September 9, 2016, the Company issued an unsecured convertible note payable to a stockholder in exchange for $20,000 in cash for the Company’s working capital needs. The note bears interest at 6% per annum and originally had a term of one year. The note has been extended through September 9, 2018.2019. The stockholder has the option to convert the note and accrued interest into the Company’s common stock at $0.0125 per share.

On April 24, 2017, the Company issued an unsecured convertible note payable to a stockholder in exchange for $25,000 for the Company’s working capital needs. The note bears interest at 6% per annum originally had a term of one year. The note has been extended through April 24, 2019.2020. The stockholder has the option to convert the note and accrued interest into the Company’s common stock at $0.0125 per share.

On November 16, 2017, the Company issued two unsecured convertible notes payable to stockholders in exchange for $20,000 ($10,000 each) in cash for the Company’s working capital needs. The notes bear interest at 6% per annum and mature onoriginally had a term of one year.  The notes have been extended through November 16, 2018.2019. The stockholders each have the option to convert the note and accrued interest into the Company’s common stock at $0.0125 per share.

On April 22, 2019, the Board of Directors approved a resolution for additional capital to pay current liabilities by issuing an additional note to a stockholder in exchange for $20,000. The note will be due and payable one year from issuance and will bear interest at 6% per annum.

At June 30, 2018March 31, 2019 and December 31, 20172018 convertible notes payable – stockholdersrelated parties were $90,000, respectively. At June 30, 2018March 31, 2019 and December 31, 2017,2018, accrued interest on the notes were $9,380$13,434 and $6,703,$12,103, respectively.  Interest expense amounted to $(2,677)$1,331 and $(1,618) for the six months ended June 30, 2018 and 2017, respectively.  Interest expense amounted to $(1,345) and $(952)1,332 for the three months ended June 30,March 31, 2019 and 2018, and 2017, respectively.

4.INCOME TAXES

The Company recorded no income tax expense for the three months ended March 31, 2019 and 2018 because the estimated annual effective tax rate was zero. As of March 31, 2019, the Company continues to provide a valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized.

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5.COMMON STOCK 

Holders of shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock do not have cumulative voting rights. Holders of common stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the Board of Director in its discretion from funds legally available therefore. In the event of liquidation, dissolution or winding up of the Company, the holders of common stock are entitled to share pro rata in all assets remaining after payment in full of all liabilities. All of the outstanding shares of common stock are fully paid and non-assessable. Holders of common stock have no preemptive rights to purchase the Company’s common stock. There are no conversions or redemption rights or sinking fund provisions with respect to the common stock.

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5.6.SUBSEQUENT EVENTS 

The Company has evaluated subsequent events through the date the financials were issued.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. These statements include those concerning the following:  Our intentions, beliefs and expectations regarding the fair value of all assets and liabilities recorded; our strategies; growth opportunities; product development and introduction relating to new and existing products; the enterprise market and related opportunities; competition and competitive advantages and disadvantages; industry standards and compatibility of our products; relationships with our employees; our facilities, operating lease and our ability to secure additional space; cash dividends; excess inventory, our expenses; interest and other income; our beliefs and expectations about our future success and results; our operating results; our belief that our cash and cash equivalents will be sufficient to satisfy our anticipated cash requirements, our expectations regarding our revenues and customers; investments and interest rates.  These statements are subject to risk and uncertainties that could cause actual results and events to differ materially.

Baynon undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Form 10-Q.

Critical Accounting Policies

The financial statements and accompanying footnotes included in this report hashave been prepared in accordance with accounting principles generally accepted in the United States of America with certain amount based on management’s best estimates and judgments. To determine appropriate carrying values of assets and liabilities that are not readily available from other sources, management uses assumptions based on historical results and other factors that believe are reasonable.  Actual results could differ from those estimates.

Our critical accounting policies are described in our Annual Report on Form 10-K for the year ended December 31, 2017.2018.  There have been no material changes to our critical accounting policies as of and for the sixthree months ended June 30, 2018.March 31, 2019.

Trends and Uncertainties

There are no material commitments for capital expenditure at this time.  There are no trends, events or uncertainties that have had or are reasonably expected to have a material impact on our limited operations. There are no known causes for any material changes from period to period in one or more line items of the Company’s financial statements.

Liquidity and Capital Resources

At June 30, 2018,March 31, 2019, the Company had a cash balance of $15,650,$1,300, which represents a $8,370$12,508 decrease from the $24,020$13,808 balance at December 31, 2017.2018.  This decrease was primarily the result of cash used to satisfy the requirements of a reporting company. The Company’s working capital deficit at June 30, 2018March 31, 2019 was $112,220$128,193 as compared to a December 31, 20172018 working capital deficit of $99,098.$122,363.

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For the sixthree months ended June 30, 2018,March 31, 2019, we incurred a net loss of $13,122. We had the following adjustments to reconcile net loss to net cash used in operating activities: we had an increase of $2,075 due to accounts payable and accrued expenses, and an increase of $2,677 due to accrued interest. As a result, we had net cash used in operating activities of $8,370 for the six months ended June 30, 2018.

For the six months ended June 30, 2017, we incurred a net loss of $10,986.$5,830. We had the following adjustments to reconcile net loss to net cash used in operating activities: we had a decrease of $18,484$8,009 due to accounts payable and accrued expenses, and an increase of $1,618$1,331 due to accrued interest. As a result, we had net cash used in operating activities of $27,852$12,508 for the sixthree months ended June 30,March 31, 2019.

For the three months ended March 31, 2018, we incurred a net loss of $6,685. We had the following adjustments to reconcile net loss to net cash used in operating activities: we had a decrease of $2,020 due to accounts payable and accrued expenses and an increase of $1,331 due to accrued interest. As a result, we had net cash used in operating activities of $7,374 for the three months ended March 31, 2018.

During the sixthree months ended June 30,March 31, 2019 and 2018, and 2017, we did not pursue any investing activities.

During the six months ended June 30, 2018, we did not pursue any financing activities.  For the six months ended June 30, 2017, we received proceeds from related party note payable of $25,000, resulting in net cash provided by financing activities of $25,000 for the period.

The focus of Baynon’s efforts is to acquire or develop an operating business. Despite no active operations at this time, management intends to continue in business and has no intention to liquidate Baynon.  Baynon has considered various business alternatives including the possible acquisition of an existing business, but to date has found possible opportunities unsuitable or excessively priced.  Baynon does not contemplate limiting the scope of its search to any particular industry.  Management has considered the risk of possible opportunities as well as their potential rewards.  Management has invested time evaluating several proposals for possible acquisition or combination; however, none of these opportunities were pursued. Baynon presently owns no real property and at this time has no intention of acquiring any such property. Baynon’s sole expected expenses are comprised of professional fees primarily incident to its reporting requirements.

The accompanying financial statement has been prepared assuming the Company will continue as a going concern. As shown in the accompanying financial statements, Baynon has incurred losses of $13,122$5,830 and $10,986$6,685 for the sixthree months ended June 30,March 31, 2019 and 2018, and 2017, respectively, and has a working capital deficiency which raises substantial doubt about the Company’s ability to continue as a going concern.

Management believes the Company will continue to incur losses and negative cash flows from operating activities for the foreseeable future and will need additional equity or debt financing to sustain its operations until it can achieve profitability and positive cash flows, if ever.  Management plans to seek additional debt and/or equity financing for the Company, but cannot assure that such financing will be available on acceptable terms. Baynon’s continuation as a going concern is dependent upon its ability to ultimately attain profitable operations, generate sufficient cash flow to meet its obligations, and obtain additional financing as may be required.  On April 22, 2019, the Board of Directors approved a resolution for additional capital to pay current liabilities by issuing an additional note to a stockholder in exchange for $20,000. The note will be due and payable one year from issuance and will bear interest at 6% per annum. Our auditors have included a going

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concern qualification in their auditors’ report dated March 28, 2018.April 1, 2019. Such

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a going concern qualification may make it more difficult for us to raise funds when needed. The outcome of this uncertainty cannot be assured.

The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. There can be no assurance that management will be successful in implementing its business plan or that the successful implementation of such business plan will actually improve the Company’s operating results.

Results of Operations for the three months ended June 30, 2018March 31, 2019 compared to the three months ended June 30, 2017.March 31, 2018.

The Company incurred a net loss of $6,437$5,830 in the current period versus a net loss of $5,349$6,685 in the prior period.  General and administrative expenses were $5,096$4,500 compared to $4,401$5,358 in the prior period, an increasea decrease of $695.$858.  General and administrative expenses were incurred primarily to enable Baynon to satisfy the requirements of a reporting company.

During the current and prior period, the Company did not record an income tax benefit due to the uncertainty associated with the Company’s ability to merge with an operating company, which might permit the Company to avail itself of those advantages.

Results of Operations for the six months ended June 30, 2018 compared to the six months ended June 30, 2017.

The Company incurred a net loss of $13,122 in the current period versus a net loss of $10,986 in the prior period.  General and administrative expenses were $10,454 compared to $9,376 in the prior period, an increase of $1,078.  General and administrative expenses were incurred primarily to enable Baynon to satisfy the requirements of a reporting company.

During the current and prior period, the Company did not record an income tax benefit due to the uncertainty associated with the Company’s ability to merge with an operating company, which might permit the Company to avail itself of those advantages.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable for a smaller reporting company.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that material information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed,

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summarized and reported within the time periods specified in the SEC'sSecurities and Exchange Commissions’ rules and forms, and that the information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We performed an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2018.March 31, 2019.  Based on the existence of the material weakness in internal control over financial reporting discussed in our Form 10-K for the year ended December 31, 2017,2018, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective as of June 30, 2018March 31, 2019 to provide such reasonable assurances.

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We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud.  Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met.  Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs.  Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any.  The design of disclosure controls and procedures is also based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Remediation Plan for Material Weaknesses

At such time that it is economically feasible, we will aggressively recruit experienced professionals to ensure that we maintain adequate segregation of duties and have controls in place to ensure proper disclosures are in our filings with the Securities and Exchange Commission. Although we believe that these corrective steps will enable management to conclude that the internal controls over our financial reporting are effective when the staff is trained, we cannot assure you these steps will be sufficient. We may be required to expend additional resources to identify, assess and correct any additional weaknesses in internal control.

Changes in Internal Control over Financial Reporting

During the three months ended June 30, 2018,March 31, 2019, there were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1.   Legal Proceedings  

None

Item 1A.  Risk Factors

Not applicable for smaller reporting company.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.   Defaults Upon Senior Securities

None

Item 4.  Mine Safety Disclosure

Not Applicable 

Item 5.   Other Information

None

Item 6.   Exhibits