Attached files
file | filename |
---|---|
EXCEL - IDEA: XBRL DOCUMENT - BALTIA AIR LINES INC | Financial_Report.xls |
EX-10 - EXHIBIT 10.9 AIRCRAFT BILL OF SALE - N705BL - BALTIA AIR LINES INC | Yusof_BillofSale.htm |
EX-10 - EXHIBIT 10.13 JLT INSURANCE BINDER HULL DEDUCTIBLE - BALTIA AIR LINES INC | JLT_HullDedBinder.htm |
EX-10 - EXHIBIT 10.10 JLT CERTIFICATE OF INSURANCE BA-12-009 - BALTIA AIR LINES INC | JLT_CertBA-12-009.htm |
EX-10 - EXHIBIT 10.12 JLT INSURANCE BINDER WAR AND ALLIED PERILSA - BALTIA AIR LINES INC | JLT_WarPerilsBinder.htm |
EX-10 - EXHIBIT 10.11 JLT INSURANCE BINDER SPARES AND LIABILITY - BALTIA AIR LINES INC | JLT_SparesLiabBinder.htm |
EX-10 - EXHIBIT 10.1 FUEL SUPPLY SOVEX (REDACTED) - BALTIA AIR LINES INC | SOVEX_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)