XOTC:BLTA Quarterly Report 10-Q Filing - 6/30/2012

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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: June 30, 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

August 20, 2012

Class: Common Stock

2,242,215,384

 

 

 

 


BALTIA AIR LINES, INC.

 

 

INDEX

 

Part I - Financial Information

Page

 

 

Item 1 –Financial Statements:

 

 

 

   Balance Sheet – June 30, 2012

 

 

 

   Statement of Operations – Three and Six Months Ended June 30, 2012

 

 

 

   Statement of Cash Flows – Six Months Ended June 30, 2012

 

 

 

   Statement of Shareholder Equity

 

 

 

Notes to Financial Statements

 

 

 

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations

 

 

 

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

 

 

 

Item 4T – Controls and Procedures

 

 

 

 

 

Part II - Other Information

 

 

 

Item 1 – Legal Proceedings

 

 

 

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

 

 

 

Item 3 - Default Upon Senior Securities.

 

 

 

Item 4 - Submission of Matters to a Vote of Security Holders.

 

 

 

Item 5 – Other Information

 

 

 

Item 6 – Exhibits

 

Signatures and Certifications

 

 

 

 

 

Exhibit 101 – XBRL Files

 

 

 

 


 

Baltia Air Lines, Inc.

Balance Sheet

(A Development Stage Company)

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2012

 

December 31,

2011

 

 

(unaudited)

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

Cash

$

45,715

$

57,390

Prepaid expenses

 

-

 

-

  Total current assets

 

45,715

 

57,390

 

 

 

 

 

Property & Equipment:

 

 

 

 

  Equipment

 

1,762,179

 

3,513,526

  Accumulated depreciation

 

(119,268)

 

(109,268)

  Net property & equipment

 

1,642,911

 

3,404,258

 

 

 

 

 

Other Assets:

 

 

 

 

  Security deposit and other

 

317,293

 

317,293

 

 

 

 

 

Total Assets

$

2,005,919

$

3,778,941

 

 

 

 

 

Liabilities & Equity

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

Accounts payable

$

145,286

$

205,285

Accrued expenses

 

$163,875

 

$112,125

  Total current liabilities

 

309,161

 

317,410

Long-term debt, net of discount

 

1,067,063

 

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,

 

 

 

 

2,145,253,718 issued & outstanding (1,863,937,020 in Dec)

 

214,525

 

186,394

Additional paid in capital

 

84,663,317

 

76,918,969

Deficit accumulated during development stage

 

(84,248,812)

 

(74,648,438)

Total Equity

 

629,695

 

2,457,590

 

 

 

 

 

Total Liabilities and Equity

$

2,005,919

$

3,778,941

See notes to unaudited interim financial statements.

 

 

 

 

 

 

 


Statement of Operations

(Unaudited)

(A Development Stage Company)

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

8/29/89 (Inception) to

 

 

2012

 

2111

 

2012

 

2011

 

6/30/2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

-

$

-

$

-

$

-

$

-

 

 

 

 

 

 

 

 

 

 

 

Costs & Expenses:

 

 

 

 

 

 

 

 

 

 

  General & administrative

 

6,041,706

 

12,139,761

 

7,681,203

 

14,750,085

 

77,329,423

 FAA certification costs

 

99,977

 

135,472

 

187,117

 

236,354

 

2,711,264

 Training

 

-

 

-

 

-

 

-

 

225,637

 Depreciation

 

5,000

 

2,500

 

10,000

 

5,000

 

366,089

 Other

 

-

 

-

 

-

 

-

 

568,245

 Interest expense (income)

 

57,436

 

59,629

 

114,872

 

117,574

 

1,426,091

 Loss on sale of assets

 

-

 

-

 

1,607,183

 

-

 

1,607,183

  Total costs & expenses

 

6,204,119

 

12,337,362

 

9,600,375

 

15,109,013

 

84,233,932

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

(6,204,119)

 

(12,337,362)

 

(9,600,375)

 

(15,109,013)

 

(84,233,932)

Income taxes

 

-

 

1,478

 

-

 

-

 

14,881

 

 

 

 

 

 

 

 

 

 

 

Deficit accumulated during development stage

$

($6,204,119)

 $

(12,338,840)

 $

(9,600,375)

 $

(15,109,013)

$

(84,248,813)

Per share amounts:

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 Loss

 

Nil

 

Nil

 

Nil

 

($0.01)

 

 

 

 

 

 

 

 

 

 

 Weighted Average Shares Outstanding

 

2,027,130,171

1,280,198,196

1,956,028,148

 

1,240,250,677

 

See notes to unaudited interim financial statements.

 

 

 

 

 

 

 

 

 

 

 

 


 

Baltia Air Lines, Inc.

 

Statement of Cash Flows

 

(Unaudited)

 

(A Development Stage Company)

 

 

 

Six Months Ended June 30,

 

8/29/89 (Inception) to

Statement of Cash Flows

 

2012

 

 

2011

 

 

6/30/2012

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Deficit Accumulated During Development Stage

$

(9,600,375)

 

$

(15,109,013)

 

$

(84,248,813)

Adjustments required to reconcile deficit accumulated

 

 

 

 

 

 

 

 

      development stage to cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

10,000

 

 

5,000

 

 

364,940

Amortization of loan discount

 

63,122

 

 

65,824

 

 

212,040

Expenses paid by issuance of common stock and options

 

5,246,049

 

 

10,859,194

 

 

54,709,205

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

 

(8,249)

 

 

161,750

 

 

3,460,642

 Cash flows used by operating activities:

 

(2,538,106)

 

 

(3,967,085)

 

 

(23,350,338)

 

 

 

 

 

 

 

 

 

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

 

2,526,431

 

 

4,192,435

 

 

25,815,410

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 generated by financing activities

 

2,526,431

 

 

4,192,435

 

 

27,409,929

 

 

 

 

 

 

 

 

 

Change in cash

 

(11,675)

 

 

(8,474)

 

 

45,715

Cash-beginning of period

 

57,390

 

 

52,840

 

 

-

Cash-end of period

$

45,715

 

$

44,366

 

$

45,715

See notes to unaudited interim financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Baltia Air Lines, Inc.

Statement of Stockholders' Equity

(Unaudited)

(A Development Stage Company)

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

Common Stock

 

Deficit

 

Shares

 

Par Value

 

Shares

 

Common Stock Amount

 

Additional Paid-In Capital

 

Accumulated During Development Stage

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2011

66,500

$

665

 

1,863,937,020

$

$186,394

$

76,918,968

 $

(74,648,438)

Stock issued and issuable for cash

 

 

 

 

80,043,966

 

8,004

 

2,518,427

 

 

Stock issued for services @$.026/share

 

 

 

 

201,272,732

 

20,127

 

5,225,921

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

(3,396,256)

Balance at June 30, 2012

66,500

$

665

 

2,145,253,718

$

$214,526

$

84,663,315

 $

(78,044,694)

See notes to unaudited interim financial statements.

 

 

 

 

 

 

 

 

 

 

 

 


 

Baltia Air Lines, Inc.

(A DEVELOPMENT STAGE COMPANY)

Notes To UNAUDITED INTERIM Financial Statements

JUNE 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 six-month periods ended June 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 six months ended June 30, 2012 we issued 201,272,732 shares of our common stock in exchange for services. The shares were valued at $ 5,246,000 or about $0.026 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 six months ended June 30, 2011 we issued 219.3 million shares of our common stock in exchange for services. The shares were valued at $ 10.9 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 six months ended June 30, 2012 we issued 80,043,000 shares of our common stock in exchange for cash. The shares sold for cash were subscribed at $ 2,526,000 or about $0.031 weighted average per share.

During the six months ended June 30, 2011 we issued 133.09 million shares of our common stock in exchange for cash. The shares sold for cash were subscribed at $ 4.2 million or about $0.032 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).

 

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, 2012, 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-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-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 June 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 six-month period ended June 30, 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 six months ended June 30, 2012 because we do not fly any aircraft and cannot sell tickets.

 

Our general and administrative expenses decreased $7,068,882 to $7,681,203 in the six months ended June 30, 2012 as compared to $14,750,085 in the six months ended June 30, 2011. General and administrative expenses comprise 65% and loss in sale of asset comprises 17% of total net loss of $9,600,375 in the six months ended June 30, 2012, as compared to the net loss of $15,109,013 in the six months ended June 30, 2011.

 

Our future ability to achieve profitability in any given future fiscal period remains highly contingent upon our beginning flight operations. The management believes that the company has the cash and cash equivalent 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 June 30, 2012, liquid assets consisted primarily of cash and cash equivalents of approximately $45,715, which is $11,675 less than the approximately $57,390 liquid assets as of December 31, 2011. At June 30, 2012, our working capital was approximately ($263,446), a decrease of approximately $3,426, or 1% from the ($260,020) reported as of December 31, 2011. As of June 30, 2012, our stockholders’ equity balance was approximately $629,695, decrease of $1,827,895 or 74.3% from approximately $2,457,590 reported as of December 31, 2011. 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 $84.2 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 $2,538,106 in cash during the six months ended June 30, 2012, a decrease of $1,428,979 from the $3,967,085 in cash utilized during the three months ended June 30, 2011.

 

Our financing activities, from issuance of common stock, provided $2,526,431 and $4,192,435 in cash during the six months ended June 30, 2012 and 2011, respectively.

 

As a result of the foregoing, our unrestricted cash decreased to $45,715 as of June 30, 2012, as compared to $57,390 as of December 31, 2011.

 

We had no significant planned capital expenditures, budgeted or otherwise, as of June 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 June 30, 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 June 30, 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 six months ended June 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.

 

None.

 

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

 

During the six months ended June 30, 2012 we issued 201,272,732 shares of our common stock in exchange for services. The shares were valued at $0.026 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 Six months ended June 30, 2012 we issued 80,043,966 shares of our common stock in exchange for cash. The shares sold for cash were subscribed at $2,526,431 or about $0.031 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. 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 - 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. Incorporated by reference to Exhibit 10.9 to Company’s 10-Q for 1st quarter 2012 as filed May 15, 2012.

 

10.10 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.

 

10.11 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.

 

10.12 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.

 

10.13 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 20TH DAY OF August 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: August 20, 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 June 30, 2012 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: August 20, 2012

 

------------------------ 

Igor Dmitrowsky

Chief Executive Officer and Chief Financial Officer (principal accounting officer)

 

 

 

 

 

 

 

 

 

 

 

 

XOTC:BLTA Quarterly Report 10-Q Filling

XOTC:BLTA Stock - Get Quarterly Report SEC Filing of XOTC:BLTA stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

XOTC:BLTA Quarterly Report 10-Q Filing - 6/30/2012
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