UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007
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, STE 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 an (X) whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of November 14, 2007 the issuer had 270,972,409 shares of common stock
outstanding.
Transitional Small Business Disclosure Format (Check one): No [X]
PART ONE - FINANCIAL INFORMATION
Item 1. Financial Statements.
BALTIA AIR LINES, INC.
BALANCE SHEETS
(A Development Stage Company)
ASSETS
9/30/2007 12/31/2006
(Unaudited)
Current Assets
Cash $ 1,468,656 $ 4,185
Plant and Equipment
Equipment 115,067 63,264
Less Accumulated Depreciation (64,078) (60,735)
Net Property, Plant and Equipment 50,989 2,529
TOTAL ASSETS $ 1,519,645 $ 6,714
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts Payable $ 25,000 $ 1,200
Current Portion of Long-term Debt 5,000 0
Total Current Liabilities 30,000 1,200
Long-term Debt 14,112 0
Equity
Preferred Stock 665 665
Common Stock 23,901 12,239
Paid-in-Capital 17,705,764 10,486,192
Deficit Accumulated During
Development Stage (16,254,797) (10,493,592)
Total Equity 1,475,533 5,514
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 1,519,645 $ 6,714
See notes to unaudited interim financial statements.
STATEMENT OF OPERATIONS
(A Development Stage Company)
Three Months Ended Nine Months Ended August 24, 1989
Sept 30, Sept 30, (Inception) to
2007 2006 2007 2006 Sept 30, 2007
(Unaudited)(Unaudited) (Unaudited)(Unaudited) (Unaudited)
Revenues $ 0 0 0 0 0
Costs & Expenses
General and
Administrative $4,236,071 $ 95,628 $5,751,392 $ 897,659 $13,870,244
FAA Certification 0 0 10,000 0 216,633
Training Expense 0 0 0 0 225,637
Depreciation 3,181 81 3,343 243 309,751
Other 0 0 0 0 568,245
Interest (3,520) 0 (3,520) 0 1,063,139
Total expenses 4,235,732 95,709 5,761,215 897,902 16,253,649
Loss before
income taxes (4,235,732) (95,709) (5,761,215) (897,902) (16,253,649)
Income Taxes 0 0 0 0 1,148
Deficit
Accumulated
During
Development
Stage: (4,235,732) (95,709) (5,761,215) (897,902) (16,254,797)
Per share
amounts:
Loss ($0.02) Nil ($0.04) ($0.01)
Weighted
Average Shares
Outstanding 206,884,199 83,614,500 157,042,599 79,880,783
See notes to unaudited interim financial statements.
STATEMENT OF CASH FLOWS
(A Development Stage Company)
Nine Months Ended Aug 24, 1989
Sept 30, (inception)to
2007 2006 Sept 30, 2007
(Unaudited) (Unaudited) (Unaudited)
Cash flows from
Operating Activities:
Deficit Accumulated During
Development Stage $(5,761,215) $ (897,902) $ (16,254,797)
Adjustments to reconcile net
loss to net cash provided by
operations:
Depreciation 3,343 243 309,751
Expenses paid by issuance of
common stock 5,484,660 816,328 7,225,411
(Increase) decrease in prepaid
expenses 0 0 400,301
Change in payables & accrued expenses 23,800 0 3,176,481
Cash used by operating activities: (249,412) (81,331) (5,142,853)
Cash flows from investing activities:
Purchase of Equipment (32,691) 0 (344,830)
Deposit on Airplane Lease 0 0 0
Cash used in investing activities: (32,691) 0 (344,830)
Cash flows from financing activities:
Issuance of Common Stock 1,746,573 73,206 6,471,002
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)
Acquisition of Treasury Stock 0 0 (500,100)
Cash generated by financing: 1,746,573 73,206 6,956,338
Change in cash 1,464,470 (8,125) 1,468,655
Cash-beginning of period 4,185 14,947 0
Cash-end of period $ 1,468,655 $ 6,822 $ 1,468,655
See notes to unaudited interim financial statements.
NOTES TO FINANCIAL STATEMENTS
BALTIA AIR LINES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
September 30, 2007
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, 2006
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-QSB
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 and nine month periods ended September 30, 2007 and 2006. All
such adjustments are of a normal recurring nature. The Financial Statements
have been prepared in accordance with the instructions to Form 10-QSB 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 nine months ended September 30, 2007 we issued 79,552,988 shares
of our common stock in exchange for services. The shares were valued at $
5,659,659 or about $0.071 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, 2006 we issued 11,224,100 shares
of our common stock in exchange for services. The shares were valued at
$816,328 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
In 2007, we issued 37,064,845 shares of our common stock in exchange for
cash. The shares were subscribed at $ 1,747,160 or about $0.047 weighted
average per share. We also received about $150,000 for 3 million shares that
were issuable at September 30, 2007. The shares were issued pursuant to our
private placement offering, are not registered and are subject to
restrictions as to transferability.
In conjunction with each unit of the offering (priced at $10,000) each
subscriber was generally entitled to warrants of our common stock
exercisable for a period of 3 years after issue at a strike price of $.10.
As of September 30, 2007 we had issued 29,965,000 of such warrants.
4. New Accounting Standards-Adoption of SFAS 123R
On January 1, 2006, the Company 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, the Company
accounted for its 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
recognized no compensation expense for stock option grants since all 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 nine months ended September 30, 2007 and 2006, the Company
recognized no compensation expense related to stock option grants. The
Company did not grant any options during the nine months ended September 30,
2007.
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, 2007, 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 September 30, 2007 was
$0 (also none during the three-month period ended September 30, 2006).
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 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 derecognition,
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.
Item 2. Management's Discussion and Analysis and Plan of Operation.
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 current products, 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
The Company was organized in the State of New York, August 24,
1989. Its objective is to provide scheduled air transportation from
the U.S. to Russia, and former Soviet Union countries. In 1991,
the Department of Transportation (DOT) granted the Company routes
to provide non-stop passenger, cargo and mail service from JFK to
St. Petersburg and from JFK to Riga, with online service to Minsk,
Kiev and Tbilisi as well as back up service to Moscow. For lack of
sufficient working capital, the US Department of Transportation
terminated the Company's route authority without prejudice to
reapply when financing was in hand. Since such time, Baltia was engaged in
market research, operations development and planning, as well as
activities to raise requisite funding. These costs were borne by Baltia
shareholders and principals.
Baltia now has raised the capital we believe enables us to commence revenue
flight operations from JFK to St. Petersburg. In October 2007 Baltia filed
its application with the DOT to provide service on this route. Baltia has
leased additional office space at terminal 4 of JFK. We have made key
operating arrangements at JFK and other service arrangements are in the
process of being made. Baltia staff is preparing air carrier manual system
for submission to the FAA. We have contracted two professional aviation
consultants, Aviation Content Management LLC and Professional Aviation
Consulting Group LLC (FAA approved consultant) to review our manuals for
regulatory compliance in order to expedite the certification process.
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 pending financing. Baltia intends to
supply 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 subject to registration.
The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company's
starting revenue operations is dependent upon its timely procuring
significant external debt and/or equity financing to fund its immediate and
nearer-term operations, and subsequently realizing operating cash flows from
ticket sales sufficient to sustain its longer-term operations and growth
initiatives.
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.
We carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures as of September 30,
2007. This evaluation was accomplished under the supervision and with the
participation of our chief executive officer, principal executive officer,
chief financial officer/principal accounting officer who concluded that our
disclosure controls and procedures are not effective to ensure that all
material information required to be filed in the quarterly report on Form
10-QSB has been made known to him.
Disclosure controls and procedures are designed to ensure that information
required to be disclosed in our reports filed or submitted under the
Securities Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that
information required to be disclosed in our reports filed under the Exchange
Act is accumulated and communicated to management, including our Chief
Executive Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure.
Based upon an evaluation conducted for the period ended September 30, 2007,
Igor Dmitrowsky who served as our Chief Executive Officer and Chief
Financial Officer (which duties include that of principal accounting
officer) as of September 30, 2007, and the date of this Report, has
concluded that as of the end of the period covered by this report, we have
identified the following material weakness of our internal controls:
Reliance upon independent financial reporting consultants for review of
critical accounting areas and disclosures and material non-standard
transactions.
Lack of sufficient accounting staff which results in a lack of segregation
of duties necessary for a good system of internal control.
In order to remedy our existing internal control deficiencies, as soon as
our finances allow, we will hire a Chief Financial Officer who will be
sufficiently versed in public company accounting to implement appropriate
procedures for timely and accurate disclosures
Changes in internal control over financial reporting
We have not yet made any changes in our internal control over financial
reporting that occurred during the period covered by this report on Form
10-QSB that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
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.
On January 1, 2006, the Company 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, the Company
accounted for its 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
recognized no compensation expense for stock option grants since all 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 nine months ended September 30, 2007 and 2006, the Company
recognized no compensation expense related to stock option grants. The
Company did not grant any options during the nine months ended September 30,
2007.
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, 2007, 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 September 30, 2007 was
$0 (also none during the three-month period ended September 30, 2006).
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 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 derecognition,
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 three months ended September 30, 2007 and 2006
because we do not fly any aircraft and cannot sell tickets.
Our general and administrative expenses increased $4,140,443 to $4,236,071
in the three months ended Sept 30, 2007 as compared to $95,628 in the three
months ended Sept 30, 2006. This increase is mainly the result of increased
activity in preparing for air carrier certification.
Primarily as a result of the foregoing, we incurred a net loss of $4,235,732
in the three months ended Sept 30, 2007 as compared to a net loss of $95,709
in the three months ended Sept 30, 2006.
Our future ability to achieve profitability in any given future fiscal
period remains highly contingent upon us beginning flight operations. Our
ability to realize revenue from flight operations in any given future fiscal
period is highly contingent upon us obtaining significant equity infusions
and/or long-term debt financing sufficient to fund leasing and operating a
Boeing 747. We now have procured the capital that we believe enables us to
commence revenue operations on the JFK St. Petersburg route. Even upon
procuring such funding, there can be no assurance that we will be successful
in commencing revenue operations or, if commenced, 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 Sept 30, 2007, our working
capital was $1,424,544 and our stockholders' equity was $1,475,533. This
reflects an increase from Sept 30, 2006 when our working capital was $5,622
and our stockholders' equity was $7,490. We had a cash balance of $1,468,656
at Sept 30, 2007, as compared to $6,822 at Sept 30, 2006.
Our operating activities utilized $249,412 in cash during the three months
ended Sept 30, 2007, an increase of $225,784 from the $23,628 in cash
utilized during the three months ended Sept 30, 2006.
Our financing activities, from issuance of common stock, provided $759,784
and $27,393 in cash during the three months ended Sept 30, 2007 and 2006,
respectively.
As a result of the foregoing, our unrestricted cash increased by $661,126 to
$1,468,665 at Sept 30, 2007, as compared to $6,822 at Sept 30, 2006.
We had no significant planned capital expenditures, budgeted or otherwise,
as of September 30, 2007.
We are now preparing for revenue flight operations. This involves an
escalation of costs associated with the air carrier certification, aircraft
costs, and service arrangements.
As of November 14, 2007, we have approximately $2,100,000 in working capital.
Item 3. 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 September 30, 2007, 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 September 30, 2007, 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 our last fiscal quarter 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.
Stock Issued for Services
During the nine months ended September 30, 2007 we issued 79,552,988
shares of our common stock in exchange for services. The shares
were valued at $ 5,659,659 or about $0.071 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, 2006 we issued 11,224,100
shares of our common stock in exchange for services. The shares
were valued at $816,328 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
In 2007, we issued 37,064,845 shares of our common stock in exchange
for cash. The shares were subscribed at $ 1,747,160 or about $0.047
weighted average per share. We also received about $150,000 for 3
million shares that were issuable at September 30, 2007. The shares
were issued pursuant to our private placement offering, are not
registered and are subject to restrictions as to transferability.
In conjunction with each unit of the offering (priced at $10,000)
each subscriber was generally entitled to warrants of our common
stock exercisable for a period of 3 years after issue at a strike
price of $.10. As of September 30, 2007 we had issued 29,965,000 of
such warrants.
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 the Company or executive officers of the
Company, and transfer was restricted. 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 14th DAY OF NOVEMBER, 2007
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-QSB 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 small business issuer'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 small business issuer 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
small business issuer, 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) Evaluated the effectiveness of the small business issuer'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 small business
issuer's internal control over financial reporting that occurred
during the small business issuer's most recent fiscal quarter (the
small business issuer's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to materially affect, the small business issuer's internal control
over financial reporting; and
5. The small business issuer's other certifying officer(s) and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the small business issuer's
auditors and the audit committee of the small business issuer'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 small business
issuer'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 small business
issuer's internal control over financial reporting.
Date: November 14, 2007
/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-QSB for the period ended September 30, 2007 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: November 14, 2007
/s/ Igor Dmitrowsky
------------------------
Igor Dmitrowsky
Chief Executive Officer and Chief Financial Officer (principal
accounting officer)