UNITED STATES UNITED
STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C.
20549
FORM
10-Q/A
Date of Amended Report
Filing: December 13, 2012
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period
ended: September 30,
2012
BALTIA
AIR LINES, INC.
(Exact name of registrant as
specified in its charter)
New
York
|
11-2989648
|
(State or other
jurisdiction of
|
(IRS Employer
|
incorporation or
organization)
|
Identification
No.)
|
JFK
International Airport
Building
151, Room 361, Jamaica, NY 11430
(Address of principal
executive offices)
Issuer’s
telephone no: (718) 995 4130
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
November 13,
2012
|
Class:
Common Stock
|
2,405,704,717
|
NOTE:
This amended filing is made to correct certain formatting
errors in the Financial Statements and miscalculations of the
Company’s working capital deficit in Item 2 of
Management’s discussion of Liquidity and Capital
Reserves as filed on November 14, 2012.
BALTIA
AIR LINES, INC.
INDEX
Part I -
Financial Information
|
Page
|
Item 1
–Financial Statements:
|
3
|
Balance Sheet –
September 30, 2012
|
3
|
Statement of
Operations – Nine Months Ended September 30,
2012
|
4
|
Statement of
Shareholder Equity
|
5
|
Statement of Cash
Flows – Nine Months Ended September 30,
2012
|
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)
|
|||
September
30, 2012
|
December
31, 2011
|
||
(unaudited)
|
|||
Assets
|
|||
Current
Assets
|
|||
Cash
|
$ 136,631
|
$ 57,390
|
|
Prepaid expenses
|
-
|
-
|
|
Total
current assets
|
136,631
|
57,390
|
|
Property
& Equipment:
|
|||
Equipment
|
1,762,179
|
3,513,526
|
|
Accumulated
depreciation
|
(124,268)
|
(109,268)
|
|
Net
property and equipment
|
1,637,911
|
3,404,258
|
|
Other
Assets:
|
|||
Security deposit and
other
|
317,293
|
317,293
|
|
Total
assets
|
$ 2,091,835
|
$ 3,778,941
|
|
Liabilities
and Equity
|
|||
Current
Liabilities:
|
|||
Accounts payable
|
$ 95,286
|
$ 205,285
|
|
Accrued expenses
|
189,750
|
112,125
|
|
Total
current liabilities
|
285,036
|
317,410
|
|
Long-term
debt, net of discount
|
1,098,625
|
1,003,941
|
|
Equity:
|
|||
Preferred
stock-2,000,000 authorized $0.01 par value
|
|||
66,500 issued &
outstanding
|
665
|
665
|
|
Common
stock-2,500,000,000 authorized $0.0001 par value
|
|||
2,367,318,050 and
1,863,937,020 issued & outstanding
|
|||
at September 30, 20112
and December 31, 2011, respectively
|
236,732
|
186,394
|
|
Additional paid in
capital
|
87,411,435
|
76,918,969
|
|
Deficit accumulated
during development stage
|
(86,940,658)
|
(74,648,438)
|
|
Total
equity
|
708,174
|
2,457,590
|
|
Total
liabilities and equity
|
$ 2,091,835
|
$ 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
|
Nine
Months Ended
|
8/29/89
|
|||||||||||
September
30,
|
September
30,
|
(Inception)
to
|
|||||||||||
2012
|
2011
|
2012
|
2011
|
9/30/2012
|
|||||||||
Revenue
|
$ -
|
-
|
-
|
$ -
|
$ -
|
||||||||
Costs and
expenses:
|
|||||||||||||
General &
administrative
|
2,535,848
|
5,899,459
|
10,217,051
|
20,649,544
|
79,865,271
|
||||||||
FAA certification
costs
|
93,560
|
155,432
|
280,677
|
391,786
|
2,804,824
|
||||||||
Training
|
-
|
0
|
0
|
0
|
225,637
|
||||||||
Depreciation
|
5,000
|
2,500
|
15,000
|
7,500
|
371,089
|
||||||||
Other
|
-
|
0
|
0
|
0
|
568,245
|
||||||||
Interest expense
(income)
|
57,437
|
58,377
|
172,309
|
175,951
|
1,483,528
|
||||||||
Loss on sale of
assest
|
-
|
1,607,183
|
0
|
1,607,183
|
|||||||||
Total
costs and expenses
|
2,691,845
|
6,115,768
|
12,292,220
|
21,224,781
|
86,925,777
|
||||||||
Loss before income
taxes
|
(2,691,845)
|
(6,115,768)
|
(12,292,220)
|
(21,224,781)
|
(86,925,777)
|
||||||||
Income taxes
|
-
|
2,427
|
-
|
2,427
|
14,881
|
||||||||
Deficit accumulated
during development stage
|
$ (2,691,845)
|
$ (6,118,195)
|
$ (12,292,220)
|
$ (21,227,208)
|
$ (86,940,658)
|
||||||||
Basic:
|
|||||||||||||
Loss
|
($0.00)
|
($0.00)
|
($0.01)
|
($0.02)
|
|||||||||
Weighted average shares
outstanding
|
2,256,143,384
|
1,528,939,640
|
2,056,748,921
|
1,337,537,800
|
|||||||||
See notes to unaudited
interim financial statements.
|
Baltia
Air Lines, Inc.
Statement
of Stockholders' Equity
(Unaudited)
(A
Development Stage Company
|
||||||||||||||||||||
Preferred
|
Common
|
Deficit
Accumulated
|
||||||||||||||||||
Shares
|
Par
Value
|
Shares
|
Amount
|
Additional
Paid-in
Capital
|
During
Development Stage
|
|||||||||||||||
Balance at December 31,
2011
|
66,500
|
$ 665
|
1,863,937,020
|
$ 186,394
|
$ 76,918,968
|
$ (74,648,438)
|
||||||||||||||
Stock issued and
issuable for cash
|
219,829,215
|
21,983
|
3,629,191
|
|||||||||||||||||
Stock issued for
services @$.024/share
|
283,551,815
|
28,355
|
6,863,275
|
|||||||||||||||||
Net loss
|
(12,292,220)
|
|||||||||||||||||||
Balance at September
30, 2012
|
66,500
|
$ 665
|
2,367,318,050
|
$ 236,732
|
$ 87,411,434
|
$ (86,940,658)
|
||||||||||||||
See notes to unaudited
interim financial statements.
Statement
of Cash Flows
|
||||||
(Unaudited)
|
||||||
(A
Development Stage Company)
|
||||||
Nine
Months Ended September 30,
|
8/29/89
(Inception) to
|
|||||
Statement of Cash
Flows
|
2012
|
2011
|
9/30/2012
|
|||
Cash
flows from operating activities:
|
||||||
Deficit Accumulated
During Development Stage
|
$ (12,292,220)
|
$ (15,109,013)
|
$ (86,940,658)
|
|||
Adjustments required to
reconcile deficit accumulated
|
||||||
development stage to
cash used in operating activities:
|
||||||
Depreciation
|
15,000
|
5,000
|
369,940
|
|||
Amortization of loan
discount
|
94,684
|
65,824
|
243,602
|
|||
Expenses paid by
issuance of common stock and options
|
6,891,630
|
10,859,194
|
56,354,786
|
|||
Basis of sold or
disposed assets
|
1,751,347
|
-
|
1,751,347
|
|||
(Increase) decrease in
prepaid expenses
|
-
|
50,160
|
400,301
|
|||
Increase in accounts
payable & accrued expenses
|
(32,374)
|
161,750
|
3,436,517
|
|||
Cash
flows used by operating activities:
|
(3,571,933)
|
(3,967,085)
|
(24,384,165)
|
|||
Cash
flows from investing activities:
|
||||||
Purchase of
equipment
|
-
|
(205,737)
|
(3,696,583)
|
|||
Security
deposits
|
-
|
(28,087)
|
(317,293)
|
|||
Cash
used in investing activities
|
-
|
(233,824)
|
(4,013,876)
|
|||
Cash
flows from financing activities:
|
||||||
Proceeds from issuance
of common stock
|
3,651,174
|
4,192,435
|
26,940,153
|
|||
Proceeds from issuance
of preferred stock
|
-
|
-
|
2,753
|
|||
Loans from related
parties
|
-
|
-
|
1,351,573
|
|||
Repayment of related
party loans
|
-
|
-
|
(368,890)
|
|||
Proceeds of long-term
debt
|
-
|
-
|
1,109,183
|
|||
Acquisition of treasury
stock
|
-
|
-
|
(500,100)
|
|||
Cash
provided by financing activities
|
3,651,174
|
4,192,435
|
28,534,672
|
|||
Change in
cash
|
79,241
|
(8,474)
|
136,631
|
|||
Cash-beginning of
period
|
57,390
|
52,840
|
-
|
|||
Cash-end
of period
|
$ 136,631
|
$ 44,366
|
$ 136,631
|
|||
See notes to unaudited
interim financial statements.
Baltia
Air Lines, Inc.
(A
DEVELOPMENT STAGE COMPANY)
Notes To
UNAUDITED INTERIM Financial Statements
SEPTEMBER 30, 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-KSB 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 and nine-month periods ended
September 30, 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.
Emerging
Growth Company Critical Accounting Policy
Disclosure: We
qualify as an “emerging growth company” under the
2012 JOBS Act. Section 107 of the JOBS Act provides that an
emerging growth company can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the
Securities Act for complying with new or revised accounting
standards. As an emerging growth company, we can delay the
adoption of certain accounting standards until those
standards would otherwise apply to private companies. We have
elected to take advantage of the benefits of this extended
transition period.
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 nine months ended
September 30, 2012 we issued 283,551,815 shares of our common
stock in exchange for services. The shares were valued at $
3,651,000 or about $0.024 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 nine months ended
September 30, 2011 we issued 284.6 million shares of our
common stock in exchange for services. The shares were valued
at $ 14.6 million or about $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 nine months ended
September 30, 2012 we issued 219,829,215 shares of our common
stock in exchange for cash. The shares sold for cash were
subscribed at $ 3,650,000 or about $0.0167 weighted average
per share.
During the nine months ended
September 30, 2011 we issued 183.2 million shares of our
common stock in exchange for cash. The shares sold for cash
were subscribed at $ 6.5 million or about $0.035 weighted
average per share.
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).
In the third quarter of
2012, Baltia took steps to open an office in Ypsilanti,
Michigan, where the company’s crew members plan to
conduct their training with Kalitta Air.
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 United States
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 worldwide 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
generating 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 September 30, 2011,
Baltia had a staff of thirty 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.
Stock-Based
Compensation Plans: Stock-based awards are accounted
for using the fair value method in accordance with SFAS No.
123R, Accounting for Stock-Based Compensation, and EITF Issue
No. 96-18, Accounting for Equity Instruments that are Issued
to Other Than Employees for Acquiring, or in Conjunction with
Selling Goods or Services. Our primary type of share-based
compensation consists of 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.
On January 1, 2006, we
adopted the provisions of Statement of Financial Accounting
Standards (“SFAS”) 123R, “Share-Based
Payment” (“SFAS 123(R)”), which requires
that companies measure and recognize compensation expense at
an amount equal to the fair value of share-based payments
granted under compensation arrangements. Prior to January 1,
2006, we accounted for our stock-based compensation plans
under the recognition and measurement principles of
Accounting Principles Board (“APB”) Opinion 25,
“Accounting for Stock Issued to Employees,” and
related interpretations, and would typically recognize no
compensation expense for stock option grants if options
granted had an exercise price equal to the market value of
the underlying common stock on the date of grant.
The Company adopted SFAS
123(R) using the “modified prospective” method,
which results in no restatement of prior period amounts.
Under this method, the provisions of SFAS 123(R) apply to all
awards granted or modified after the date of adoption. In
addition, compensation expense must be recognized for any
unvested stock option awards outstanding as of the date of
adoption on a straight-line basis over the remaining vesting
period. The Company calculates the fair value of options
using a Black-Scholes option pricing model. For the six
months ended June 30, 2011, the Company’s recognized
(2005 on a pro forma basis) no compensation expense related
to stock option grants.
SFAS 123(R) also requires
the benefits of tax deductions in excess of recognized
compensation expense to be reported in the Statement of Cash
Flows as a financing cash inflow rather than an operating
cash inflow. In addition, SFAS 123(R) required a modification
to the Company’s calculation of the dilutive effect of
stock option awards on earnings per share. For companies that
adopt SFAS 123(R) using the “modified
prospective” method, disclosure of pro forma
information for periods prior to adoption must continue to be
made.
As of September 30, 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 nine-month period ended
September 30, 2012 was $0.
In May 2005, the FASB issued
SFAS No. 154, “Accounting Changes and Error
Corrections,” which replaces APB Opinion No. 20
“Accounting Changes,” and FASB Statement No. 3
“Reporting Accounting Changes in Interim Financial
Statements,” and changes the requirements for the
accounting for and reporting of a change in accounting
principle. This Statement requires retrospective application
to prior periods’ financial statements of changes in
accounting principle, unless it is impracticable to determine
either the period-specific effects or the cumulative effect
of the change. This Statement shall be effective for
accounting changes and corrections of errors made in fiscal
years beginning after December 15, 2005. Early adoption is
permitted for accounting changes and corrections of errors
made in fiscal years beginning after the date this Statement
is issued. We do not believe that adoption of SFAS 154 will
have a material impact on our financial statements.
In September 2006, the SEC
staff issued Staff Accounting Bulletin No. 108, Considering
the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements
(“SAB 108”). SAB 108 establishes an approach that
requires quantification of financial statement misstatements
based on the effects of the misstatements on
each of the Company’s
consolidated financial statements and the related financial
statement disclosures. SAB 108 is effective for the year
ending December 31, 2006. We are currently evaluating the
effect that the adoption of SAB 108 will have on our results
of operations and financial
In June 2006, the FASB
issued FASB Interpretation No. 48, Accounting for Uncertainty
in Income Taxes — an Interpretation of FASB Statement
109 ("FIN 48"), which clarifies the accounting for uncertain
tax positions. This Interpretation allows the tax effects
from an uncertain tax position to be recognized in the
Company's financial statements if the position is more likely
than not to be sustained upon audit, based on the technical
merits of the position. FIN 48 also provides guidance on
de-recognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. FIN
48 is effective for fiscal years beginning after December 15,
2006. We do not expect the adoption of FIN 48 to have a
material impact on our financial statements.
RESULTS OF OPERATIONS
We had no revenues during
the nine months ended September 30, 2012 because we do not
fly any aircraft and cannot sell tickets.
Our general and
administrative expenses decreased $3,363,611 to $2,535,848 in
the nine months ended September 30, 2012 as compared to
$5,899,459 in the nine months ended September 30, 2011.
Primarily as a result of the foregoing, we incurred a net
loss of $2,691,845 in the nine months ended September 30,
2012 as compared to a net loss of $6,115,768 in the nine
months ended September 30, 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
Since our inception, we have
incurred substantial operating and net losses, as well as
negative operating cash flows. As of September 30, 2012, our
working capital deficit was $148,405 and our stockholders'
equity was $708,174. Our working capital increased by
$111,615 from a deficit of $260,020 as of December 30, 2011,
and our stockholders' equity decreased $1,749,416 from
$2,457,590 on September 30, 2011.
Our operating activities
utilized $3,571,933 in cash during the nine months ended
September 30, 2012, a decrease of $395,152 from the
$3,967,085 in cash utilized during the nine months ended
September 30, 2011.
Our financing activities,
from issuance of common stock, provided $3,651,174 and
$4,192,435 in cash during the nine months ended September 30,
2012 and 2011, respectively.
As a result of the
foregoing, our unrestricted cash increased to $136,631 as of
September 30, 2012, as compared to $44,366 as of September
30, 2011.
We had no significant
planned capital expenditures, budgeted or otherwise, as of
September 30, 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 nine months ended September 30, 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.
Baltia currently is not
involved in any material legal proceedings as defined in 17
CFR 229.103 (Item 103) Regulation S-K
Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds.
During the nine months ended
September 30, 2012 we issued 283,551,815 shares of our common
stock in exchange for services. The shares were valued at
$0.024 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 nine months ended
September 30, 2012 we issued 219,829,215 shares of our common
stock in exchange for cash. The shares sold for cash were
subscribed at $3,629,191 million or about $0.01651 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. Mine Safety
Disclosures
Not applicable
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.
Incorporated
by reference to Exhibit 10.1 to Company’s 10-Q for 1st
quarter 2012 as filed May 15, 2012..
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 - 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.
10.4 - 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.
10.5 - 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.
10.6 Aircraft Bill of Sale
for Boeing 747 aircraft N705BL. Incorporated
by reference to Exhibit 10.9 to Company’s 10-Q for 1st
quarter 2012 as filed May 15, 2012.
10.7 JLT Certificate of
Insurance BA-12-009 – Hull and Liability Incorporated
by reference to Exhibit 10.10 to Company’s 10-Q for 1st
quarter 2012 as filed May 15, 2012.
10.8 JLT Insurance Binder
– Hull, Spares and Liability. Incorporated
by reference to Exhibit 10.11 to Company’s 10-Q for 1st
quarter 2012 as filed May 15, 2012.
10.9 JLT Insurance Binder
– Airline Hull War and Allied Perils. Incorporated
by reference to Exhibit 10.12 to Company’s 10-Q for 1st
quarter 2012 as filed May 15, 2012.
10.10 JLT Insurance Binder
– Aviation Hull Deductible. Incorporated
by reference to Exhibit 10.13 to Company’s 10-Q for 1st
quarter 2012 as filed May 15, 2012.
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 14th Day of
November 2012
BALTIA AIR LINES,
INC.
/s/ Igor Dmitrowsky
------------------------
Igor Dmitrowsky
Chief Executive Officer and
Chief Financial Officer (principal accounting officer)
EXHIBIT 3.1
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:
November 14, 2012
------------------------
Igor Dmitrowsky
Chief Executive Officer and
Chief Financial Officer (principal accounting officer)
EXHIBIT 3.2
BALTIA AIR LINES, INC.
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: November 14, 2012
------------------------
Igor Dmitrowsky
Chief Executive Officer and Chief Financial Officer
(principal accounting officer)