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EXCEL - IDEA: XBRL DOCUMENT - BALTIA AIR LINES INCFinancial_Report.xls
EX-10 - EXHIBIT 10.9 AIRCRAFT BILL OF SALE - N705BL - BALTIA AIR LINES INCYusof_BillofSale.htm
EX-10 - EXHIBIT 10.13 JLT INSURANCE BINDER HULL DEDUCTIBLE - BALTIA AIR LINES INCJLT_HullDedBinder.htm
EX-10 - EXHIBIT 10.10 JLT CERTIFICATE OF INSURANCE BA-12-009 - BALTIA AIR LINES INCJLT_CertBA-12-009.htm
EX-10 - EXHIBIT 10.12 JLT INSURANCE BINDER WAR AND ALLIED PERILSA - BALTIA AIR LINES INCJLT_WarPerilsBinder.htm
EX-10 - EXHIBIT 10.11 JLT INSURANCE BINDER SPARES AND LIABILITY - BALTIA AIR LINES INCJLT_SparesLiabBinder.htm
EX-10 - EXHIBIT 10.1 FUEL SUPPLY SOVEX (REDACTED) - BALTIA AIR LINES INCSOVEX_FuelSupply_2012rd.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 
 
   
 
For the quarterly period ended: March 31, 2012 
 
BALTIA AIR LINES, INC. 
(Exact name of registrant as specified in its charter)
 
New York
(State or other jurisdiction of
incorporation or organization) 
11-2989648 
(IRS Employer
Identification No.) 
 
JFK International Airport 
Building 151, Jamaica, NY 11430 
(Address of principal executive offices) 
 
Issuer’s telephone no: (718)244 8880 
 
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 checkmark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). |X| Yes   |  | No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large Accelerated Filer |_|    Accelerated Filer |_|    Smaller reporting company |X|
Non Accelerated Filer |_| (Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES |_|   NO |X|
  
APPLICABLE ONLY TO CORPORATE ISSUERS:
 
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 
Outstanding as of
May 10, 2012
Class: Common Stock  
1,989,728,322
   
 
 
BALTIA AIR LINES, INC. 
  
  
INDEX 
 
Part I - Financial Information
Page
   
Item 1 –Financial Statements:
3
   
Balance Sheet – March 31, 2012
3
   
Statement of Operations – Three Months Ended March 31, 2012
4
   
Statement of Cash Flows – Three Months Ended March 31, 2012
5
   
Statement of Shareholder Equity
6
   
Notes to Financial Statements
7 - 8
   
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
8
   
Item 3 – Quantitative and Qualitative Disclosures about Market Risk
14
   
Item 4T – Controls and Procedures
14
   
   
Part II - Other Information
15
   
Item 1 – Legal Proceedings
15
   
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds 
15
   
Item 3 Default Upon Senior Securities.  
15
   
Item 4 - Submission of Matters to a Vote of Security Holders.  
15
   
Item 5 – Other Information
15
   
Item 6 – Exhibits
 
Signatures and Certifications
15-17
   
   
Exhibit 101 – XBRL Files
 
   
 
 
 
 
 
 
Baltia Air Lines, Inc.
Balance Sheet
(A Development Stage Company)
 
 
     
March 31, 2012
December 31, 2011
 
(unaudited)
 
Assets
   
     
Current Assets
   
Cash
$39,847
$57,390
Prepaid expenses
0
0
Total current assets
39,847
57,390
   
Property & Equipment:
   
equipment
1,762,179
3,513,526
accumulated depreciation
(114,268)
(109,268)
Net property & equipment
1,647,911
3,404,258
     
Other Assets:
   
Security deposit and other
317,293
317,293
     
Total Assets
$2,005,051
$3,778,941
     
Liabilities & Equity
   
     
Current Liabilities:
   
Accounts payable
$210,286
$205,285
Accrued expenses
138,000
112,125
Total current liabilities
348,286
317,410
     
Long-term debt, net of discount
1,035,502
1,003,941
     
Equity:
   
Preferred stock-2,000,000 authorized $0.01 par value
   
66,500 issued & outstanding
665
665
Common stock-2,000,000,000 authorized $0.0001 par value
   
1,760,436,018 issued & outstanding (1,718,031,382 in Dec)
176,044
171,803
Additional paid in capital
78,483,802
76,933,560
Deficit Accumulated During Development Stage
(78,039,248)
(74,648,438)
Total Equity
621,263
2,457,590
     
Total Liabilities & Equity
$2,005,051
$3,778,941
See notes to unaudited interim financial statements.
   
 
Baltia Air Lines, Inc.
Statement of Operations
(Unaudited)
(A Development Stage Company)
 
Three Months Ended March 31,
 
8/29/89 (Inception) to
 
2012
2011
 
3/31/2012
 
     
Revenue
$0
$0
 
$0
         
Costs & Expenses:
       
General & administrative
1,634,051
2,610,324
 
71,282,271
FAA certification costs
87,140
100,882
 
2,611,287
Training
0
0
 
225,637
Depreciation
5,000
2,500
 
361,089
Other
0
0
 
568,245
Interest expense (income)
57,436
57,945
 
1,368,655
Loss on sale of assets 
1,607,183
0
 
1,607,183
Total costs & expenses
3,390,810
2,771,651
 
78,024,367
         
Loss before income taxes
(3,390,810)
(2,771,651)
 
(78,024,367)
Income taxes
0
0
 
14,881
         
Deficit Accumulated During Development Stage
($3,390,810)
($2,771,651)
 
($78,039,248)
Per share amounts:
       
Basic:
       
Loss
Nil
Nil
   
Weighted Average Shares Outstanding
1,739,000,707
1,150,504,772
 
See notes to unaudited interim financial statements.
       
 
 
 
Baltia Air Lines, Inc.
Statement of Cash Flows
(Unaudited)
(A Development Stage Company)
 
Three Months Ended March 31,
8/29/89 (Inception) to
Statement of Cash Flows
2012
2011
 
3/31/2012
         
Cash flows from operating activities:
     
Deficit Accumulated During Development Stage
($3,390,810)
($2,771,651)
 
($78,039,248)
Adjustments required to reconcile deficit accumulated
       
development stage to cash used in operating activities:
       
Depreciation
5,000
2,500
 
359,940
Amortization of loan discount
31,561
32,070
 
180,479
Expenses paid by issuance of common stock and options
422,877
1,253,850
 
49,886,033
Basis of sold or disposed assets
1,751,347
0
 
1,751,347
(Increase) decrease in prepaid expenses
0
0
 
400,301
Increase in accounts payable & accrued expenses
30,876
136,502
 
3,499,767
Cash flows used by operating activities:
(1,149,149)
(1,346,729)
 
(21,961,381)
       
Cash flows from investing activities:
       
Purchase of equipment
0
(77,422)
 
(3,696,583)
Security deposits
(0)
0
 
(317,293)
Cash used in investing activities
(0)
(77,422)
 
(4,013,876)
         
Cash flows from financing activities:
       
Proceeds from issuance of common stock
1,131,606
1,406,311
 
24,420,585
Proceeds from issuance of preferred stock
0
0
 
2,753
Loans from related parties
0
0
 
1,351,573
Repayment of related party loans
0
0
 
(368,890)
Proceeds of long-term debt
0
0
 
1,109,183
Acquisition of treasury stock
0
0
 
(500,100)
Cash generated by financing activities
1,131,606
1,406,311
 
26,015,104
         
Change in cash
(17,543)
(17,840)
 
39,847
Cash-beginning of period
57,390
52,840
 
0
Cash-end of period
$39,847
$35,000
 
$39,847
See notes to unaudited interim financial statements.
       
 
 
 
 
 
 
 
 
 
 
 
Baltia Air Lines, Inc.
Statement of Stockholders' Equity
(Unaudited)
(A Development Stage Company)
                 
 
Preferred
 
Common
 
Deficit
 
Shares
Par Value
 
Shares
Common Stock Amount
Additional Paid-In Capital
 
Accumulated During Development Stage
Balance at December 31, 2011
66,500
$665
 
1,718,031,382
$171,803
$76,933,560
 
($74,648,438)
Stock issued and issuable for cash
     
31,791,666
3,179
1,128,427
   
Stock issued for services @$.039/share
     
10,612,970
1,062
421,815
   
Net Loss
             
(3,390,810)
Balance at March 31, 2012
66,500
$665
 
1,760,436,018
$176,044
$78,483,802
 
($78,039,248)
See notes to unaudited interim financial statements.
               
 
 
 
Baltia Air Lines, Inc.
(A DEVELOPMENT STAGE COMPANY)
Notes To UNAUDITED INTERIM Financial Statements
MARCH 31, 2012 
 
 
1.
Basis of Presentation
 
The Financial Statements presented herein have been prepared by us in accordance with the accounting policies described in our December 31, 2011 Annual Report on Form 10-K and should be read in conjunction with the notes to financial statements which appear in that report.
 
The preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on going basis, we evaluate our estimates, including those related to intangible assets, income taxes, insurance obligations and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results may differ from these estimates under different assumptions or conditions.
 
In the opinion of management, the information furnished in this Form 10-Q reflects all adjustments necessary for a fair statement of the financial position and results of operations and cash flows as of and for the three-month periods ended March 31, 2012 and 2011. All such adjustments are of a normal recurring nature. The Financial Statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include some information and notes necessary to conform to annual reporting requirements. 
 
The financial statements have been presented in a “development stage” format. Since inception, our primary activities have been raising of capital, obtaining financing and obtaining route authority and approval from the U.S. Department of Transportation. We have not commenced our principal revenue producing activities.
 
 
2.
Earnings/Loss Per Share
 
Basic earnings per share is computed by dividing income available to common shareholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. Diluted earnings per share  assumes that any dilutive convertible securities outstanding were converted, with related preferred stock dividend requirements and outstanding common shares adjusted accordingly. It also assumes that outstanding common shares were increased by shares issuable upon exercise of those stock options for which market price exceeds the exercise price, less shares which could have been purchased by us with the related proceeds. In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive. Due to the net losses reported, dilutive common equivalent shares were excluded from the computation of diluted loss per share, as inclusion would be anti-dilutive for the periods presented. 
 
3.  Stockholders' Equity 
  Stock Issued for Services
During the three months ended March 31, 2012 we issued 10,612,970 shares of our common stock in exchange for services. The shares were valued at $ 422,877, approximately $0.039 per share and reflected the share market value at the time of issuance. The shares are not registered and are subject to restrictions as to transferability 
During the three months ended March 31, 2011 we issued 25,077,000 shares of our common stock in exchange for services. The shares were valued at $ 1.254 million, approximately $0.05 per share and reflected the share market value at the time of issuance. The shares are not registered and are subject to restrictions as to transferability.
  Stock Issued for Cash 
During the three months ended March 31, 2012 we issued 31.8 million shares of our common stock in exchange for cash. The shares sold for cash were subscribed at $ 1,131,000, approximately $0.036 weighted average per share. The options were exercised at par value.
During the three months ended March 31, 2011 we issued 39.7 million shares of our common stock in exchange for cash. The shares sold for cash were subscribed at $ 1.406 million, approximately $0.035 weighted average per share.
4. Sale of Assets
 
In January 2012, we sold one of our aircraft, Boeing 747 N705BL, for approximately $144,000 resulting in a loss of approximately 1.6 million dollars.  
 
 
ITEM 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations 
 
The following discussion includes certain forward-looking statements within the meaning of the safe harbor protections of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that include words such as "believe," "expect," "should," intend," "may," "anticipate," "likely," "contingent," "could," "may," or other future-oriented statements, are forward-looking statements. Such forward-looking statements include, but are not limited to, statements regarding our business plans, strategies and objectives, and, in particular, statements referring to our expectations regarding our ability to continue as a going concern, generate increased market awareness of, and demand for, our service, realize profitability and positive cash flow, and timely obtain required financing. These forward-looking statements involve risks and uncertainties that could cause actual results to differ from anticipated results. The forward-looking statements are based on our current expectations and what we believe are reasonable assumptions given our knowledge of the markets; however, our actual performance, results and achievements could differ materially from those expressed in, or implied by, these forward-looking statements.
 
Our fiscal year ends on December 31. References to a fiscal year refer to the calendar year in which such fiscal year ends.
 
OVERVIEW 
 
Baltia Air Lines, Inc. the “Company” or “Baltia” or “Baltia Air Lines”) is the only Part 121 (heavy jet operator) start-up airline in the United States today that has received Government fitness approval. Baltia is currently conducting the FAA Air Carrier Certification. Baltia Air Lines, Inc. is a New York State corporation, organized in the State of New York on August 24, 1989.
 
On December 19, 2008, the U.S. Department of Transportation (DOT) issued its Order to Show Cause, finding that Baltia Air Lines is fit, willing and able to engage in international air transport of persons, property and mail. Baltia was awarded the non-stop route from JFK to St. Petersburg Russia. Baltia was also authorized for worldwide charter services. Baltia had filed its application with the DOT in October 2007.
 
On August 18, 2009, the Company purchase of Boeing 747 aircraft (N705BL). In 2010 the Company purchased a second Boeing 747 aircraft (N706BL). Baltia leased engines on a power-by-the-hour basis which are installed on the aircraft.  On January 11, 2012, Baltia sold Boeing 747 aircraft (N705BL). 
 
Baltia currently carries $500,000,000 aircraft liability insurance, and has placed $1.2 billion airline liability insurance through JLT Aerospace meeting the regulatory requirement in preparation for the commencement of revenue operations.
 
Following the commencement of service on the JFK-St. Petersburg route, Baltia’s objective is to develop its route network to Russia, Latvia, Ukraine, and Belarus.  
 
Baltia intends to provide full service, i.e. passenger, cargo and mail, and will not be dependent upon one or a few major customers. Baltia has two registered trademarks "BALTIA" and "VOYAGER CLASS" and five trademarks are subject to registration.
 
There is currently no non-stop service from JFK to St. Petersburg. Connecting service is provided mainly by foreign carriers. Finnair, Lufthansa and SAS are the leading competitors in the US-Russia market. KLM, British Airways, Air France, Austrian Airlines, and Swissair also provide service. However, foreign carriers are required to have intermediate stops at transit airports in their respective countries (Helsinki, Frankfurt, Stockholm, Copenhagen, etc.) because they are “third nation” airlines and as such cannot fly directly between the US and Russia (only a US airline as well as a reciprocating Russian airline is eligible to fly nonstop). Delta and two Russian airlines, Aeroflot and Transaero, currently operate between JFK and Moscow. With the exception of the JFK-Moscow route, there exists no non-stop competitive air transportation service on the routes for which Baltia intends to apply.
 
Baltia’s objective is to establish itself as the leading non-stop carrier in the market niche over the North Atlantic with operations that are profitable and growing over time. In order to accomplish this objective, we intend to establish and maintain high quality service standards which we believe will be competitive with the European airlines currently providing connecting flights. Baltia does not expect to be in direct competition with deep discount airlines, including several East European airlines and the offspring of the former Soviet airline Aeroflot, which provide connecting flights.
 
Baltia intends to provide First, Business, and Voyager Class accommodations. Baltia’s passenger market strategy is tailored to particular preferences of the various segments of its customer base, with marketing attention particularly focused on American business travelers with interests in Russia who require high quality, non-stop service from the US to Russia.
 
Baltia’s initial marketing strategy is based on existing agencies specializing in the market, selected travel and business publications, supplemented by direct mailings to corporate travel planners, and individual American businesses that are currently involved in Russia. Soon after the inauguration of flight service, Baltia plans to implement its frequent flyer program. As the marketing matures, Baltia plans to advertise to the general public throughout the US, and in Russia. Baltia also plans to sponsor selected industry and trade events in the US and in St. Petersburg.
 
Baltia intends to provide customer service and reservations centers in New York and in St. Petersburg, to list Baltia’s schedules and tariffs in the Official Airline Guide, and provide world-wide access to reservations on Baltia’s flights through a major Computer Reservations and Ticketing System (“CRS”).
 
The Company intends to activate its reservations service when the DOT issues its order authorizing Baltia to sell tickets.
  
Baltia has identified the following market segments in the U.S.-Russia market: (i) Business Travelers, (ii) General Tourism, (iii) Ethnic Travelers, (iv) Special Interest Groups, (v) Professional Exchanges, and (vi) Government and Diplomatic Travel.
 
Baltia believes that the direct non-stop service to be offered by it will be superior to the stop-over service currently offered by foreign airlines. A comparison between the two services with respect to passenger convenience and cargo transport efficiency is set forth below.
 
BALTIA - US flag, non-stop service: With non-stop service, a passenger can fly from JFK to St. Petersburg in about 8 hours in a Boeing B747 wide body airplane. Cargo arrives containerized, palletized, and secure.
 
Foreign, stop-over journeys: With stop-over service, it would take a passenger 10 to 18 hours to fly through Helsinki, Copenhagen, Moscow, or Frankfurt on a foreign carrier. In addition, passengers must change to narrow-body aircraft at a layover airport. Cargo is “broken up” and manually loaded onto narrow-body aircraft, or trucked from Helsinki.
 
Baltia plans to operate efficiently and provide consistent high quality service to passengers and cargo shippers alike in order to establish the Company as the preferred airline in the market. The Company also plans to use targeted marketing of its service to maintain and grow its market share.
 
Because of the increased reliability and comfort of a non-stop flight, Baltia expects to capture a portion of the existing traffic. 
 
With the Boeing 747 true wide-body aircraft Baltia intends to provide cargo service from JFK to St. Petersburg, offering containers, pallets, and block space arrangements. Baltia expects to carry contract cargo for express shippers. Baltia also plans to market its own “Baltia Courier”, “Baltia Express”, and “Baltia Priority” express service for letters and packages. Baltia also expects revenues from diplomatic mail and cargo, under the Fly America Act.  
 
Baltia has passenger service and ground service arrangements at JFK and at Pulkovo II Airport in St. Petersburg. As a US carrier flying into a foreign country, Baltia will be eligible to the same degree of priority that a foreign carrier receives when arriving in the US. 
 
Baltia intends to start the JFK-St. Petersburg service with one round-trip flight per week, increase frequency to three round trips and then to five round trips per week.
  
Baltia plans to build operating modules and apply them in developing new markets. Once established, Baltia plans to duplicate its JFK-St. Petersburg standards on flights on other transatlantic routes. 
  
Additional revenues from charter flying: In conjunction with its Part 121 air carrier certification (“Part 121”), (referring to a Federal Aviation Regulations’ number, is an industry acronym used to describe a US airline operating heavy jet aircraft) for scheduled service, Baltia intends to seek certification for world-wide charter service. Following certification, Baltia plans to utilize aircraft time available between scheduled service, to earn additional revenues from charters. We are also considering qualifying our aircraft for military contracts.
 
In order to start revenue flight operations, the Company has to complete FAA Air Carrier Certification. During the past two and half years the Company has been participating in air carrier certification.
The Company will carry airline liability insurance as required for a US airline by DOT regulation.
 
As of June 30, 2011, Baltia had a staff of twenty-five which includes professionals who have extensive major US airline experience in aircraft maintenance, airline operations, airline regulatory compliance, reservation, info technology, passenger service and administration.
  
CRITICAL ACCOUNTING POLICIES
 
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of our financial statements requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Our estimates, judgments and assumptions are continually re-evaluated based upon available information and experience. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates. Areas in which significant judgment and estimates are used include, but are not limited to valuation of long lives assets and deferred income taxes.
 
Valuation of Long-Lived Assets: We review the recoverability of our long-lived assets, including buildings, equipment and intangible assets, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. Our primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.
 
We amortize the costs of other intangibles (excluding goodwill) over their estimated useful lives unless such lives are deemed indefinite. Amortizable intangible assets are tested for impairment based on undiscounted cash flows and, if impaired, written down to fair value based on either discounted cash flows or appraised values. Intangible assets with indefinite lives are tested for impairment, at least annually, and written down to fair value as required.
 
The Company complies with FASB ASC Topic 718 "Compensation - Stock Compensation," which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. FASB ASC Topic 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. FASB ASC Topic 718 requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award the requisite service period (usually the vesting period). No compensation costs are recognized for equity instruments for which employees do not render the requisite service. The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments (unless observable market prices for the same or similar instruments are available). If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification.
 
Our primary type of share-based compensation consists of stock-based awards. We use the fair value method in accordance with ASC 718. We also may use stock options. We use the Black-Scholes option pricing model in valuing options. The inputs for the valuation analysis of the options include the market value of the Company's common stock, the estimated volatility of the Company's common stock, the exercise price of the warrants and the risk free interest rate.
 
 
As of March 31, 2012, there was no unrecognized compensation cost related to non-vested options granted under the plan. The total fair value of shares vested during the three-month period ended March 31, 2012 was $0.
 
Income taxes: The Company accounts for income taxes in accordance with FASB ASC Topic 740 "Income Taxes," which requires accounting for deferred income taxes under the asset and liability method. Deferred income tax asset and liabilities are computed for difference between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on the enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce the deferred income tax assets to the amount expected to be realized.
 
The determination of the Company's provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions. The benefits of uncertain tax positions are recorded in the Company's financial statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge, if any, from tax authorities. When facts and circumstances change, the Company reassesses these probabilities and records any changes in the financial statements as appropriate.
 
In accordance with GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. De-recognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce stockholders equity. This policy also provides guidance on thresholds, measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition that is intended to provide better financial statement comparability among different entities. Management's conclusions regarding this policy may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulations and interpretations thereof. Generally, the tax filings are no longer subject to income tax examinations by major taxing authorities for years before 2007. Any potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with U.S. federal, state and local tax laws. The Company's management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months..
 
RESULTS OF OPERATIONS 
 
We had no revenues during the three months ended March 31, 2012 because we do not fly any aircraft and cannot sell tickets.
 
Our general and administrative expenses decreased $976,273 to $1,634,051 in the three months ended March 31, 2012 as compared to $2,610,324 in the three months ended March 31, 2011. General and administrative expenses comprise 48% and loss in sale of asset comprises 47% of total net loss of $3,390,810 in the three months ended March 31, 2012, as compared to the net loss of $2,771,651 in the three months ended March 31, 2011. 
 
Our future ability to achieve profitability in any given future fiscal period remains highly contingent upon us beginning flight operations. The management believes that the company has the necessary funding to commence revenue flight operations, subject to completion of the FAA Air Carrier Certification. If commenced, there can be no assurance that such operations would be profitable.
 
LIQUIDITY AND CAPITAL RESOURCES 
 
As of March 31, 2012, liquid assets consisted primarily of cash and cash equivalents of approximately $39,847, which is $17,543 less than the approximately $57,390 liquid assets as of December 31, 2012. At March 31, 2012, our working capital was approximately ($308,439), an increase of approximately $48,419, or 18.6% from the ($260,020) reported as of December 31, 2012. As of March 31, 2012, our stockholders’ equity balance was approximately $621,263, a decrease of $1,836,327, or 74.7% from approximately $2,457,590 reported as of December 31, 2012. The decrease in stockholders’ equity is primarily the result of recording a loss of approximately $1.6 million on the sale of a Boeing 747 aircraft in January 2012.  
 
Since inception, we have incurred substantial operating and net losses of approximately $78.0 million. These losses have primarily been financed with long-term borrowings and proceeds received from the sale of our common stock. 
 
Our operating activities utilized $1,149,149 in cash during the three months ended March 31, 2012, a decrease of $197,580 from the $1,346,729 in cash utilized during the three months ended March 31, 2011.
 
Our financing activities, from issuance of common stock, provided $1,131,606 and $1,406,311in cash during the three months ended March 31, 2012 and 2011, respectively.
 
As a result of the foregoing, our unrestricted cash increased to $39,847 as of March 31, 2012, as compared to $57,390 as of December 31, 2011.
 
We had no significant planned capital expenditures, budgeted or otherwise, as of March 31, 2012.
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
 
None
 
Item 4T. Controls and Procedures.
 
Our Chief Executive Officer and Chief Financial Officer, based on evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) required by paragraph (b) of Rule 13a-15 or Rule 15d-15, as of March 31, 2012, have concluded that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. Our Chief Executive Officer and Chief Financial Officer also concluded that, as of March 31, 2012 our disclosure controls and procedures are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
 
There was no change in our internal controls or in other factors that could affect these controls during the three months ended March 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. While existing controls may be adequate at present, upon the commencement of flight revenue service we intend to implement controls appropriate for airline operations.
 
PART II - OTHER INFORMATION
 
Item 1. Legal Proceedings.
 
None.
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 
 
During the three months ended March 31, 2012 we issued 10,612,970 shares of our common stock in exchange for services. The shares were valued at $0.039 per share and reflected the share market value at the time of issuance. The shares are not registered and are subject to restrictions as to transferability. 
 
During the three months ended March 31, 2012 we issued 31,791,666 shares of our common stock in exchange for cash. The shares sold for cash were subscribed at $1,128,427 million or about $0,0354 weighted average per share. The options were exercised at par value.
 
All of the above issuances were deemed to be exempt under rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, as amended. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were accredited investors, business associates of Baltia or executive officers of Baltia, and transfer was restricted by Baltia in accordance with the requirements of the Securities Act of 1933, as amended. In addition to representations by the above-referenced persons, we have made independent determinations that all of the above-referenced persons were accredited or sophisticated investors, and that they were capable of analyzing the merits and risks of their investment, and that they understood the speculative nature of their investment. Furthermore, all of the above-referenced persons were provided with access to our Securities and Exchange Commission filings.
 
Item 3. Default Upon Senior Securities.
 
None.
 
Item 4. Submission of Matters to a Vote of Security Holders.
 
None.
 
Item 5. Other Information.
 
None.
 
Item 6. Exhibits. 
 
10.1. - Fuel supply Agreement between Joint Stock Company “SOVEX” and Baltia Air Lines, Inc. of January 1, 2012 with confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment, redacted exhibit filed herewith.
 
10.2 - Letter evidencing agreement that engines identified in Exhibit 10.3 below may be removed from N705BL and installed on N706BL. Incorporated by reference to Exhibit 10.5 to Company’s 10-K/A for year 2010 as filed December 21, 2011.  
 
10.3 - Engine Lease Agreement between Logistic Air, Inc. and Baltia Air Lines, Inc. Dated January 15, 2010 with confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. Incorporated by reference to Exhibit 10.6 to Company’s 10-K/A for year 2010 as corrected and filed April 12, 2012.  
 
10.4 - Product and Services Agreements between Navtech Systems Support Inc. and Baltia Airt Lines, Inc. Dated January 15, 2010 with confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. Incorporated by reference to Exhibit 10.7 to Company’s 10-K/A for year 2010 as filed December 21, 2011.  
 
10.5 - Ground Handling Agreement at Pulkovo Airport between ZAO Cargo Terminal Pulkovo and Baltia Air Lines, Inc. effective June 1, 2011 with confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. Incorporated by reference to Exhibit 10.9.2 to Company’s 10-K/A for year 2010 as corrected and filed March 2, 2012. . 
 
10.6 - First Amendment to Product and Services Agreements between Navtech Systems Support Inc. and Baltia Air Lines, Inc. dated January 15, 2010. Incorporated by reference to Exhibit 10.10 to Company’s 10-Q/A for 3rd quarter 2011, corrected and filed March 29, 2012. 
 
10.7 - Flight Training Services Agreement between Pan Am International Flight Academy and Baltia Air Lines, Inc. dated April 19, 2011. Incorporated by reference to Exhibit 10.11 to Company’s 10-Q/A for 3rd Quarter 2011 as corrected and filed March 29, 2012.  
 
10.8 - Access and System and Data Use Agreement between Sabre Inc., and Baltia Air Lines, Inc. dated September 21, 2011, Incorporated by reference to Exhibit 10.12 to Company’s 10-Q/A for 3rd Quarter 2011 as filed March 29, 2012.  
 
10.9  Aircraft Bill of Sale for Boeing 747 aircraft N705BL.
 
10.10 JLT Certificate of Insurance BA-12-009 – Hull and Liability  
 
10.11 JLT Insurance Binder  – Hull, Spares and Liability 
 
10.12 JLT Insurance Binder – Airline Hull War and Allied Perils 
 
10.13 JLT Insurance Binder – Aviation Hull Deductible 
 
31.1 Certification by Chief Executive Officer and Chief Financial Officer pursuant to Sarbanes-Oxley Section 302, provided herewith.
 
32.1 Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S. C. Section 1350, provided herewith.
 
 
 
SIGNATURES
 
Pursuant to the requirements of Section 12 of the Securities Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned thereunto duly authorized.
 
DATED THIS 15th DAY OF May 2012 
 
BALTIA AIR LINES, INC.
 
/s/ Igor Dmitrowsky
------------------------
Igor Dmitrowsky
Chief Executive Officer and Chief Financial Officer (principal accounting officer)
 
 
EXHIBIT 3.1
 
BALTIA AIR LINES, INC. OFFICER'S CERTIFICATE PURSUANT TO SECTION 302
 
I, Igor Dmitrowsky, the Chief Executive Officer and Chief Financial Officer of Baltia Air Lines, Inc., certify that:
 
1. I have reviewed this quarterly report on Form 10-Q of Baltia Air Lines, Inc.;
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
 
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
 
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
 
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
  
/s/ Igor Dmitrowsky Date: May15, 2012 
------------------------
Igor Dmitrowsky
Chief Executive Officer and Chief Financial Officer (principal accounting officer)
 
 
EXHIBIT 3.2 
 
BALTIA AIR LINES, INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Quarterly Report Baltia Air Lines, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Igor Dmitrowsky, Chief Executive Officer and Chief Financial Officer (principal accounting officer) of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
A signed original of this written statement required by Section 906 has been provided to Baltia Air Lines, Inc. and will be retained by Baltia Air Lines, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
 
 
/s/ Igor Dmitrowsky Date: May 9, 2012  
 
------------------------
Igor Dmitrowsky
Chief Executive Officer and Chief Financial Officer (principal accounting officer)