UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2011
BALTIA AIR LINES, INC.
(Exact name of registrant as specified in its charter)
STATE of NEW YORK 11-2989648
(State of Incorporation) (IRS Employer Identification No.)
63-25 SAUNDERS STREET, SUITE 7I, REGO PARK, NY 11374
(Address of principal executive offices)
Registrant's telephone number, including area code: (718) 275 5205
Check whether the issuer (1) filed all reports required to be filed by
Section 13, or 15(d) of the Exchange Act during the past 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. No [ ] Yes [X]
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T
during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). 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 definition of "large accelerated filer",
"accelerated filer" and "smaller reporting company" in Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer [ ]
Accelerated filer [ ]
Non-accelerated filer [ ] (do not check if smaller reporting company)
Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Number of shares of the registrant's common stock outstanding as of
May 12, 2011: 1,330,970,915 shares of Common Stock
PART ONE - FINANCIAL INFORMATION
Item 1. Financial Statements.
BALTIA AIR LINES, INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
3/31/2011 12/31/2010
(Unaudited)
Current Assets
Cash $ 35,000 $ 52,840
Prepaid Expenses 50,160 50,160
Total Current Assets 85,160 103,000
Property and Equipment
Equipment 3,088,731 3,011,308
Less Accumulated Depreciation (95,282) (92,782)
Net Property and Equipment 2,993,449 2,918,526
Other Assets
Security Deposit Airplane Engines 240,000 240,000
TOTAL ASSETS $ 3,318,609 $ 3,261,526
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts Payable $ 210,627 $ 100,000
Accrued Expenses 34,500 8,625
Current portion of long-term debt 0 0
Total current liabilities 245,127 108,625
Long-term debt 898,018 865,948
Equity
Preferred Stock 665 665
Common Stock 118,363 111,881
Paid-in-Capital 54,401,027 51,747,347
Deficit Accumulated During
Development Stage (52,344,591) (49,572,940)
Total Equity 2,175,464 2,286,953
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 3,318,609 $ 3,261,526
See notes to unaudited interim financial statements.
BALTIA AIR LINES, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
Three Months Ended August 24, 1989
March 31, (Inception) to
2011 2010 March 31, 2011
(Unaudited) (Unaudited) (Unaudited)
Revenues 0 0 0
Costs & Expenses
General and
Administrative $ 2,610,324 $ 6,775,278 $ 47,935,316
FAA Certification 100,882 390,100 2,134,178
Training Expense 0 0 225,637
Depreciation 2,500 3,500 342,103
Other 0 0 568,245
Interest 57,945 0 1,127,670
Total expenses 2,771,651 7,168,878 52,333,149
Loss before income taxes (2,771,651) (7,168,878) (52,333,149)
Income Taxes 0 1,100 11,442
Deficit Accumulated During
Development Stage: $ (2,771,651) $(7,169,978) $ (52,344,591)
Per share amounts:
Loss Nil Nil
Weighted Average Shares
Outstanding 1,150,504,772 790,640,603
See notes to unaudited interim financial statements.
BALTIA AIR LINES, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Three Months Ended Aug 24, 1989
March 31, (inception) to
2011 2010 March 31, 2011
(Unaudited) (Unaudited) (Unaudited)
Cash flows from Operating Activities:
Deficit Accumulated During
Development Stage $(2,771,651) $ (7,169,978) $(52,344,592)
Adjustments to reconcile net
loss to net cash provided by
operations:
Depreciation 2,500 3,500 340,954
Amortization of loan discount 32,070 0 42,995
Expenses paid by issuance of
common stock 1,253,850 5,948,387 33,278,115
(Increase) decrease in prepaid
expenses 0 (47,433) 350,141
Change in payables & accrued expenses 136,502 0 3,396,608
Cash used by operating activities:(1,346,729) (1,265,524) (14,935,779)
Cash flows from investing activities:
Purchase of Equipment (77,422) 0 (3,271,788)
Security Deposits 0 0 (240,000)
Cash used in investing activities: (77,422) (240,000) (3,511,788)
Cash flows from financing activities:
Issuance of Common Stock 1,406,311 850,484 16,888,048
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: 1,406,311 850,484 18,482,567
Change in cash (17,840) (655,040) 35,000
Cash-beginning of period 52,840 1,439,897 0
Cash -end of period $ 35,000 $ 784,857 $ 35,000
See notes to unaudited interim financial statements.
BALTIA AIR LINES, INC.
(A Development Stage Company)
UNAUDITED STATEMENT OF SHAREHOLDERS' EQUITY
Preferred Common Deficit
Accumulated
Common Additional During
Par Stock Paid-In Development
Shares Value Shares Amount Capital Stage
Balance at December 31, 2010 66,500 665 1,118,814,994 111,881 51,747,348 (49,572,940)
Shares issued for cash 39,743,000 3,974 1,402,337
Shares issued for services 25,077,000 2,508 1,251,342
Net Loss (2,771,651)
Balance at March 31, 2011 66,500 665 1,183,634,994 118,363 54,401,027 (52,344,591)
See notes to unaudited interim financial statements.
BALTIA AIR LINES, INC.
(A Development Stage Company)
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
MARCH 31, 2011
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, 2010 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, 2011 and 2010. 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, 2011 we issued 25,077,000
shares of our common stock in exchange for services. The shares
were valued at $ 1.254 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.
During the three months ended March 31, 2010 we issued 74,347,250
shares of our common stock in exchange for services. The shares
were valued at $ 5,948,387 or about $0.08 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, 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 or about $0.035 weighted
average per share.
During the three months ended March 31, 2010 we issued 19.8 million
and 44 million shares of our common stock in exchange for cash. The
shares sold for cash were subscribed at $ 850,000 or about $0.043
weighted average per share. The options were exercised at par value.
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.
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 March 7, 2009, following the regulatory public comment period and
the Presidential Review, the DOT issued the Final Order, making its
findings of the Show Cause Order final.
On March 20, 2009 the DOT awarded Baltia Air Lines its initial
frequencies for flights from JFK to St. Petersburg
On August 18, 2009, the Company executed the Aircraft Purchase
Agreement for the purchase of its first Boeing 747 aircraft.
In the first quarter of 2011, we leased engines on a power by the
hour basis from Logistic Air, Inc. The Engines have been delivered
and installed.
In the first quarter of 2010, Baltia entered into a line maintenance
agreement with Evergreen at JFK.
In the first quarter of 2010, Baltia leased its station facilities
from Pulkovo Airport, entered into a fuelling agreement with SOVEX
(the exclusive fueling company at Pulkovo Airport), entered into
agreement with Pulkovo Caro facility and customs for cargo
processing, and entered into a ground servicing agreement with
Pulkovo Airport.
In the last quarter of 2010, we purchased our second Boeing 747
aircraft from 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 service.
Baltia is currently conducting the FAA Air Carrier Certification process
under Part 121.
Upon completion of the Air Carrier Certification, Baltia intends to
commence scheduled non-stop service from its Base of Operations at
Terminal 4, JFK Int'l Airport in New York to Pulkovo II Int'l Airport of
St. Petersburg.
Baltia Air Lines, Inc. was organized in the State of New York on
August 24, 1989.
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 can reapply.
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 (expected to
be approximately 30 to 45 days before the inaugural flight).
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.
Further, US government traffic is required by law (Fly America Act)
to fly on a US Flag carrier when service is available.
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, then increase the frequency to three
round trips, and then to five round trips, within a four-month
period.
Baltia has been preparing standards for service. The care taken in
establishing high standards has implications beyond the launching of
the JFK-St. Petersburg flight. Baltia plans to build operating
modules and apply that know-how to develop new markets. Once
established, Baltia plans to duplicate its JFK-St. Petersburg
standards on flights on other transatlantic routes. By the end of
year one, Baltia plans to introduce three additional aircraft.
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 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 March 31, 2011, Baltia had twenty full-time employees and
fifteen part-time employees. Baltia's staff 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-lived 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
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, 2011, 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,
2011 was $0 (also none during the three-month period ended March 31,
2010).
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, 2011 and
2010 because we do not fly any aircraft and cannot sell tickets.
Our general and administrative expenses decreased $4,164,954 to
$2,610,324 in the three months ended March 31, 2010 as compared to
$6,775,278 in the three months ended March 31, 2010.
Primarily as a result of the foregoing, we incurred a net loss of
$2,771,651 in the three months ended March 31, 2011 as compared to a
net loss of $7,168,878 in the three months ended March 31, 2010.
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 March 31,
2011, our working capital was $(159,967), a decrease of $154,342
from the $(5,625) reported for the comparable period in 2010.
Stockholders' equity was $2,175,464 and $2,286,953 at March 31, 2011
and 2010, respectively, a decrease of $111,789 (5%). We had
unrestricted cash balance of $35,000 at March 31, 2011, as compared
to $52,840 at March 31, 2010.
Our operating activities utilized $1,346,729 in cash during the
three months ended March 31, 2011, an increase of $81,205 from the
$1,265,524 in cash utilized during the three months ended March 31,
2010.
Our financing activities, from issuance of common stock, provided
$1,406,311 and $850,484 in cash during the three months ended March
31, 2011 and 2010, respectively.
As a result of the foregoing, our unrestricted cash decreased by
749,857 to $35,000 at March 31, 2011, as compared to $784,857 at
March 31, 2010.
We had no significant planned capital expenditures, budgeted or
otherwise, as of March 31, 2011.
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, 2010, 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, 2011 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, 2011 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, 2011 we issued 25,077,000
shares of our common stock in exchange for services. The shares
were valued at $1.254 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
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 or about $0.035 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.
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 20th DAY OF MAY 2011
BALTIA AIR LINES, INC.
/s/ Igor Dmitrowsky
------------------------
Igor Dmitrowsky
Chief Executive Officer and Chief Financial Officer(principal
accounting officer)
EXHIBIT 31.1
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.
Date: May 20, 2011
/s/ Igor Dmitrowsky
------------------------
Igor Dmitrowsky
Chief Executive Officer and Chief Financial Officer (principal
accounting officer)
EXHIBIT 32.1
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.
Date: May 20, 2011
/s/ Igor Dmitrowsky
------------------------
Igor Dmitrowsky
Chief Executive Officer and Chief Financial Officer (principal
accounting officer)