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EXCEL - IDEA: XBRL DOCUMENT - BALTIA AIR LINES INC | Financial_Report.xls |
EX-10 - BALTIA AIR LINES INC | 10-16resshar.htm |
EX-10 - BALTIA AIR LINES INC | 10-13_151rent.htm |
EX-10 - BALTIA AIR LINES INC | 10-15_terminalrent.htm |
EX-3 - BALTIA AIR LINES INC | 3.1.3_CertArtclesIncop.htm |
EX-3 - BALTIA AIR LINES INC | 3.1.1_CertArtclesIncop.htm |
EX-3 - BALTIA AIR LINES INC | 3.1.2_CertArtclesIncop.htm |
EX-3 - BALTIA AIR LINES INC | 3.1.4_CertArtclesIncop.htm |
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION Washington, DC 20549
FORM
10-K
Mark One
|
|
[ X ]
|
ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
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For
the Fiscal Year ended December 31, 2012
|
|
[ ]
|
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For the transition
period from January 1, 2012 to December 31,
2012
|
Date of Report: April 16,
2013
BALTIA
AIR LINES, INC.
(Exact name of Registrant as
specified in its charter)
NEW
YORK(State of
Incorporation)
|
11-2989648(IRS Employer
Identification No.)
|
JFK
International Airport, Building 151, Jamaica, NY
11430(Address
of principal executive offices)(718) 244
8880(Registrant's telephone
number, including area code)
|
|
Title of each class
-None-
|
Name of each Exchange
on which registered -None-
|
Securities Registered
pursuant to Section 12(g) of the Exchange Act:
|
|
Common Stock, (Title
of Class)
|
$.0001 Par
Value
|
Indicate by check mark
if the Registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [
] - - No [X]
|
|
Indicate by check mark
if the Registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act. Yes [
] - - No [X]
|
|
Indicate by check mark
whether the Registrant (1) has filed all reports 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 check mark
if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not
be contained, to the best of the registrant's
knowledge, in definitive proxy or
information statements
incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. Yes [X] - - 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 definitions of "large
accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
(Check one):
|
|
Large accelerated
filer [ ] Non-accelerated filer [
]
|
Accelerated filer
[ ] 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 of 1934). Yes
[ ] No [X]
|
|
The aggregate market value of the voting common equity
held by non-affiliates as of December 31, 2012 is
$23,185,507.
|
|
The number of shares of the registrant's common stock
outstanding as of April 15, 2013
was 2,579,123,580.
|
TABLE
OF CONTENTS
PART
1
|
|
Item 1.
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Business
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Item 1A.
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Risk Factors
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Item 1B.
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Unresolved Staff
Comments
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Item 2.
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Properties
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Item 3.
|
Legal
Proceedings
|
PART
II
|
|
Item 5.
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Market for
Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
Item 6.
|
Selected Financial
Information
|
Item 7.
|
Management's
Discussion and Analysis of Financial Condition and
Results of Operations
|
Item 7A.
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Quantitative and
Qualitative Disclosures About Market Risk
|
Item 8.
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Financial Statement
Supplementary Data
|
Item 9.
|
Changes in and
Disagreements with Accountants on Accounting And
Financial Disclosures
|
Item 9A
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Controls and
Procedures
|
Item 9B
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Other Information -
Required FD Dislosure of Nonpublic Material
Information
|
PART
III
|
|
Item 10.
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Directors and
Executive Officers of the Registrant
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Item 11.
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Executive
Compensation
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Item 12.
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Security Ownership of
Certain Beneficial Owners and Management and Related
Stockholder Matters
|
Item 13.
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Certain Relationships
and Related Transactions
|
Item 14.
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Principal Accountant
Fees and Services
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PART
IV
|
|
Item 15.
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Financial Statements
and Other Exhibits
|
PART
I
Item
1. Business.
Baltia Air Lines, Inc. (the
"Company" or "Baltia" or "Baltia Air Lines") is a Part 121
(heavy jet operator) start-up United States airline with
Government fitness approval and is currently conducting the
FAA Air Carrier Certification. Upon completion of the Air
Carrier Certification, Baltia will 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.
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 International Airport, New York, New York to Pulkovo
International Airport, St. Petersburg Russia. Baltia was also
authorized for worldwide charter services. Baltia had filed
its application with the DOT in October 2007.
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 purchased its first Boeing 747 aircraft from Logistic
Air, Inc.
In the first quarter of
2010, we leased engines on a power by the hour basis from
Logistic Air, Inc. The engines have been delivered and
installed on the aircraft.
In the last quarter of 2010,
we purchased our second Boeing 747 aircraft from Kalitta
Air.
Baltia 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. The Company will carry airline liability
insurance as required for a US airline by DOT
regulation.
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. 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 Swiss International 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 with
profitable growth 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.
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
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.
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. Concurrently with with its Part 121 air
carrier certification ("Part 121") for scheduled service,
Baltia is certifying for world wide charter service. Baltia
plans to utilize aircraft time available between scheduled
service, to earn additional revenues from charters. We may
also qualify our aircraft for military contracts.
As of December 31, 2012,
Baltia's staff of twenty-five includes professionals who have
extensive major US airline experience in aircraft
maintenance, airline operations, airline regulatory
compliance, reservation, info technology, passenger service,
and administration.
Item
1A. Risk Factors.
We are a smaller reporting
company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information
under this item.
Item
1B. Unresolved Staff Comments.
We are a smaller reporting
company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information
under this item.
Item
2. Properties.
The Company rents space at
Concourse A, Terminal 4, JFK International Airport and has
headquarters at Building 151, JFK Airport. Baltia has an
office space in Pulkovo Airport, St. Petersburg, Russia. In
addition, in 2012, Baltia opened its operations office in at
Willow Run Airport, Ypsilanti, Michigan.
Item
3. Legal Proceedings.
None.
Item 4. Reserved
PART
II.
Item
5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities.
The following table sets
forth the high and low sales prices, as quoted by the OTCBB,
for our common stock for each quarter during our two most
recent fiscal years ended December 31, 2011 and 2012. These
quotations reflect inter-dealers prices, without retail
mark-ups, mark-downs or commissions, and may not represent
actual transactions.
Fiscal Quarter
Ended
|
High
|
Low
|
---------------------------
|
---------------
|
----------------
|
March 31, 2011
|
.04
|
.04
|
June 30, 2011
|
.04
|
.04
|
September 30,
2011
|
.05
|
.04
|
December 31,
2011
|
.05
|
.04
|
March 31, 2012
|
.05
|
.03
|
June 30,2012
|
.04
|
.01
|
September 30,
2012
|
.04
|
.01
|
December 31,
2012
|
.04
|
.01
|
The Company currently
estimates that there are more than 1000 holders of record of
its common stock. Given its continuing need to retain any
earnings to fund its future operations and desired growth,
the Company has not declared or paid, nor does it currently
anticipate declaring or paying for the foreseeable future,
any dividends on the Company's common stock.
Equity
Compensation Plan
The Company’s
compensation plan is a generic plan that was adopted by its
Board without the securities holders approval. Under this
plan, Baltia’s President is authorized to negotiate
compensation in shares to obtain goods and services necessary
to achieve the Company’s goal – commencing
commercial flights. All services and goods supplied to Baltia
are essential to that goal. Baltia’s president reports
to the Board of Directors about the distribution of shares,
including shares issued to each officer and director, and the
aggregate number of shares issued to all non-employees, such
as directors, consultants, advisors, vendors, suppliers, or
lenders.
Baltia currently has no
written purchase, savings, option, bonus, appreciation,
profit sharing, thrift, incentive, or pension.
Item
6. Selected Financial Information.
We are a smaller reporting
company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information
under this item.
Item
7. 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
The Company was organized in
the State of New York on August 24, 1989. Its objective is to
provide scheduled air transportation from the U.S. to Russia,
and former Soviet Union countries.
Baltia is currently in Phase
II of the FAA Air Carrier Certification process. 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 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 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 has capital which management
believes is sufficient to start revenue operations on the
JFK-St. Petersburg route. The Company's operational success
may be 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.
PLAN OF OPERATION
We believe that we have
financial capability to commence revenue flight operations.
During 2012 and into 2013 we continued to finance our
operations through the issuance of our common stock. Until
revenue operations begin, our monthly expenditures for
administrative and regulatory compliance can be controlled at
about $200,000-$400,000. Approximately $1,500,000 is budgeted
for certification tasks, and $500,000 for general and
administrative expenses. At the time flight service is
inaugurated the Company plans to have approximately 20
management and 45 staff personnel.
There can be no assurance
that additional financing will be available on terms
favorable to us or at all. If adequate funds are not
available or are not available on acceptable terms, we may
not be able to fund operations.
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.
Year
|
Interest Rate
|
Dividend Yield
|
Expected
Volatility
|
Expected Life in
Years
|
2011
|
4.4%
|
0.00%
|
200%
|
1
|
2012
|
3.0%
|
0.00%
|
200%
|
5
|
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 fiscal years ended December 31, 2012 and 2011, because
(1) we did not fly aircraft in passenger, charter, or freight
service, and (2) we could not sell tickets for those
services.
Our general and
administrative expenses decreased by $13,197,702 to
$11,125,526 during fiscal year ended December 31, 2012
as compared to an increase of $5,762,390 during the fiscal
year ended December 31,2011. This decrease resulted from the
reduction in costs in connection with air carrier
certification.
Primarily as a result of air
carrier certification, we incurred a net loss of $13,623,873
during the fiscal year ended December 31, 2012 as compared to
a net loss of $25,075,497 during the fiscal year ended
December 31, 2011.
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 remains highly
contingent upon us obtaining significant equity infusions
and/or long-term debt financing sufficient to fund initial
operations. Even if we were to be successful in 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 December 31, 2012, we
had cash of $12,326, decrease of $45,064 from the cash
balance of $57,390 reported at December 31,2011. Our
stockholders' equity was $147,187 at December 31, 2012, a
decrease of $2,321,403 from the balance of $2,457,590
reported at December 31, 2011.
Our operating activities
utilized $3,683,065 in cash during the fiscal year ended
December 31, 2012, a decrease of $3,540,116 from the
$7,223,181 in cash utilized during the fiscal year ended
December 31, 2011.
Our financing activities
provided $3,626,882 and $7,807,242 in cash during the fiscal
year ended December 31, 2012 and 2011, respectively.
Cash flows through investing
activities was $11,119 for the year ended December 31, 2012,
an increase of $590,629 from the net cash used by investing
activities for the year ended December 31, 2011. The
increase is attributable to the proceeds of $144,164 received
from the sale of a used 747 aircraft, partially offset by
$133,045 used for the purchase of equipment.
Off-Balance Sheet
Arrangements: We do not have any off-balance sheet
arrangements which have, or are reasonably likely to have, an
effect on our financial condition, financial statements,
revenues or expenses.
Item
7A. Quantitative and Qualitative Disclosures About Market
Risk.
We are a smaller reporting
company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information
under this item.
Item
8. Financial Statement Supplementary Data.
None.
Item
9. Changes in and Disagreements with Accountants on
Accounting And Financial Disclosures
None
Item
9A(T). Controls and Procedures.
Evaluation of Disclosure
Controls and Procedures. As of the end of the period covered
by this report, we conducted an evaluation under the
supervision and with the participation of our chief executive
officer and chief financial officer of our disclosure
controls and procedures (as defined in Rule 13a-15(e) and
Rule 15d-15(e) of the Exchange Act). Based upon this
evaluation, our chief executive officer and chief financial
officer concluded that our disclosure controls and procedures
are effective to ensure 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.
Management's Annual Report
on Internal Control over Financial Reporting. Our management
is responsible for establishing and maintaining adequate
internal control over financial reporting (as defined in Rule
13a-15(f) under the Exchange Act). Our internal control over
financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes of accounting principles generally accepted
in the United States.
Because of its inherent
limitations, internal control over financial reporting may
not prevent or detect misstatements. Therefore, even those
systems determined to be effective can provide only
reasonable assurance of achieving their control
objectives.
Our management evaluated the
effectiveness of our internal control over financial
reporting as of December 31, 2012. Based on this
evaluation, our management concluded that, as of December 31,
2012, our internal control over financial reporting was
effective.
This annual report does not
include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation
by our registered public accounting firm pursuant to
temporary rules of the SEC that permit the company to provide
only management's report in this annual report.
Changes in Internal Control
Over Financial Reporting. 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.
Item
9B. Other Information.
Regulation FD
Disclosure of Nonpublic Material Information
The Company has successfully
completed Gate I requirements of FAA Air Carrier
Certification process
On March 28, 2013, at the
FAA East Michigan Flight Standards District Office Baltia Air
Lines senior staff and their FAA counterparts conducted a
Formal Meeting to review Baltia’s certification
documentation and management readiness.
On April 10, 2013, Baltia
received confirmation that Baltia’s management
personnel, system design, and other supporting documentation
were found to be satisfactory.
The FAA Certification Team
has determined that Baltia meets the requirements of FAA
Order 8900.1 Volume 10 Chapter 2 Section 6 and is fit to
enter into Phase II of the ATOS Certification Process.
PART
III
Item
10. Directors and Executive Officers of the
Registrant.
The following table
summarizes certain information with respect to the executive
officers and directors of the board :
Name
|
Age
|
Position
|
|
Igor Dmitrowsky
|
57
|
President, CEO, CFO,
Chairman of the Board
|
|
Russell
Thal
|
78
|
Executive Vice
President
|
|
Barry Clare
|
54
|
Vice President
Finance
|
|
Walter
Kaplinsky
|
75
|
Secretary,
Director
|
|
Andris Rukmanis
|
51
|
Vice President Europe,
Director
|
|
Vick Luis
Bolanos
|
53
|
Director
|
Our directors serve until
the next annual meeting and until their successors are
elected and qualified. Our officers are appointed to serve
for one year until the meeting of the board of directors
following the annual meeting of stockholders and until their
successors have been elected and qualified. There are no
family relationships between any of our directors or
officers.
A. Board of
Directors:
Igor Dmitrowsky
Igor Dmitrowsky, Chairman
and President, Chief Executive Officer and CFO, founded the
Company in August 24, 1989. Guiding, directing and
maintaining daily operations of the Company has been his full
time occupation and executive profession throughout the
years. Prior to founding Baltia Air Lines, Inc., in 1979, Mr.
Dmitrowsky immigrated from Latvia, learned the English
language, attended US university in engineering and business,
founded American Kefir Corporation, a dairy distribution
company, which completed a public offering in 1986 and from
which he retired in 1987 and became a U.S. Citizen. As a
hobby he designed and began construction of a personal flying
machine, became a pilot and pursued an interest in
securities.
As of December 2011, Mr.
Dmitrowsky had the language, culture and social skills
necessary to structure a business involving both the United
States and Russia. His engineering and business education as
well as the above stated experience enables him to manage the
various aspects of an international airline.
No organization to which Mr.
Dmitrowsky has been associated is a parent, subsidiary or
other affiliate of Baltia Air Lines.
Walter
Kaplinsky
Walter Kaplinsky, Director
and Corporate Secretary since 1993, has been a retired
engineer for the past six years, contributing his time to the
Company. Together with Mr. Dmitrowsky, Mr. Kaplinsky was a
co-founder of American Kefir Corporation, where he served
full-time professionally as Secretary and Vice President. As
an emigre from Russia, he has substantial knowledge of the
culture which will be the primary destination of the
Company.
As of December 2012, Mr.
Kaplinsky has knowledge of the Company business operations
and efforts, collaborating in the development of the Company
business plan since inception, through its earlier efforts to
commence operations and to date. In exercising the functions
of a corporate Secretary, he served the Company diligently
over many years, and provides institutional memory and
experience with the problems and powers of the corporate
structure.
No organization to which Mr.
Kaplinsky has been associated is a parent, subsidiary or
other affiliate of Baltia Air Lines, Inc..
Andris Rukmanis
Andris Rukmanis, Director
and Vice President Europe, is and has been for more than
twenty years a full-time qualified licensed attorney in
Latvia, specializing in business law, and has been a Director
of the Company since 1990. From 1988 through 1989, he was
Senior Legal Counsel for the Town of Adazhi in Riga County,
Latvia. From 1989 to 1990, he served as Deputy Mayor of
Adazhi.
As of December 2012, Mr.
Rukmanis had the political experience, legal education, and
language as well as cultural skills that were needed by the
Company in light of the Baltia's initial market in European
foreign Soviet controlled countries.
No organization to which Mr.
Rukmanis has been associated is a parent, subsidiary or other
affiliate of Baltia Air Lines, Inc..
Vick Luis
Bolanos
Vick Luis Bolanos, has
served as Director since 2009. Mr. Bolanos is, and has been
since 1992, full-time President of Eastern Construction &
Electric, Inc. Since May 2005, Eastern has been the
Simplified Acquisition Base Engineering Requirements (SABER)
contractor. The USAF uses the SABER contractor to fulfill
engineering requirements on a variety of projects, ranging
from small renovations to large scale infrastructure needs
involving pipelines, electrical substations, and life safety
issues. Eastern is also working on McGuire AFB for the Corps
of Engineers under a Basic Agreement to both design and build
or install several projects and is currently working for the
Air Force at Willow Grove Air Station and a Task Order
Contract at Fort Monmouth, New Jersey.
As of December 2012, Mr.
Bolanos had the specific experience of developing a company
from the start as 8a. He understands managing large projects
to produce growth and profit. He is familiar with working
with government agencies and has specific experience working
projects in the aviation field. These skills are critical to
the Company in light of Baltia's being a start-up company in
aviation with the need to initiate and bring to fruition many
projects to enable the Company to grow profitably.
No organization to which Mr.
Bolanos has been associated is a parent, subsidiary or other
affiliate of Baltia Air Lines, Inc..
B. Executive Officers In
Addition to Mr. Dmitrowsky and Mr. Rukmanis:
Russell Thal
Russell Thal, Executive Vice
President, joined the Company in year 2000 and his full time
occupation has been as Executive Vice President of the
Company where he has maintained his executive profession. In
1958, he left the US Army and entered the civilian human
relations field. In 1964, he joined Ceabord World Airlines as
Personnel Manager. Soon was moved to Director of Crew
Scheduling and Dispatch and finished as interface with
Military Airlift Command for Ceabord. From 1980 to 1981 he
was Director of Stations with responsibility for hiring and
outfitting all stations for the start-up New York Air. In
1981, Mr. Thal started Compuflight, Inc., and served as
President and Chairman until he retired in 2001. Compuflight
provided both flight planning and engineering services to the
airline industry.
As of December 2012, Mr.
Thal had the specific experience in airline operations and
management to assist Baltia President Igor Dmitrowsky. He
functions as head of human resources, purchasing and provide
all management services required by the Company. Mr. Thal's
experience and skills is particularly needed as Baltia is
starting up. A limited number of people are required with
skills in many fields.
No organization to which Mr.
Thal has been associated is a parent, subsidiary or other
affiliate of Baltia Air Lines, Inc.
Barry Clare
Barry Clare, Vice President
of Finance joined the Company in 2006 and it has been his
full-time occupation and profession for the past five years.
From 2004 to 2006 Mr. Clare owned his own business as a
full-time and profession investment banker. From 2001 to 2004
Mr. Clare had been Chief Operating Officer for Advance Plant
Pharmaceuticals, Inc. From 1995 to 1996, Mr. Clare served as
Vice President of Intermediaries, Inc., an investment banking
firm.
As of December 2012, Mr.
Clare had the specific experience in raising capital that has
been absolutely critical to the Company's being able to
purchase aircraft, hire specialized experts for pursuing
certifications, to enlarge the staff and physical workplace,
create and maintain a station in St. Petersburg, Russia, and
support the extensive travel required to
prepare for commencing
international scheduled flights. All this has been maintained
financially over the past five years with zero operating
revenue.
No organization to which Mr.
Clare has been associated is a parent, subsidiary or other
affiliate of Baltia Air Lines, Inc.
C. Nominations for
Director:
Baltia Air Lines, Inc., has
had only one recent nomination for director, Vick Luis
Bolanos, who was nominated and chosen as a director in 2009
because Baltia sought someone with the skills stated above.
The Baltia has four Board members. Each has direct access to
others and "hands on" opportunities to advance the Company.
Mr. Bolanos was unanimously selected to replace the retiring
Board member because he brought insight, experience, and
skills that had enabled him to bring Eastern Construction
& Electric, Inc. from inception to a large company
operating in several geographic locations. Similar to the
operations which Mr. Bolanos has been a part of, Baltia is a
start-up with plans to become a large company with stations
in Russia and in several former Soviet controlled
countries.
Item
11. Executive Compensation.
No base salary has been paid
to our executive officers during the fiscal years ended
December 31, 2012 and 2011.
During the fiscal year ended
December 31, 2012, no executive options were granted.
During the fiscal year ended
December 31, 2012, no executive stock options were
exercised.
In 2012, the Company issued
194,000,000 of its $.0001 par value common stock to its
executive offices. These shares were awarded as bonus fully
earned and non-assessable, and containing no future earned
performance or forfeiture requirements. Of this, 140,000,000
of the shares, valued at $3,220,000 were issued to the
Company's President and CEO, Igor Dmitrowsky.
During the year ended
December 31, 2011, the Company issued 245,749,998 shares of
its $.0001 par value common stock to its executive officers;
the shares were recorded at fair value and were awarded as
bonus fully earned and non-assessable, and containing no
future earned performance of forfeiture requirements. Of this
245,749,998 total, 208,500,000 shares, valued at $10,712,000,
was issued to Igor Dmitrowsky, president and CEO.
Name amd
Principal
Position
|
Year
|
Bonus
|
Stock
Awards*
|
Option
Awards*
|
Non-Equity
Incentive
Plan
Compensation
Earnings
|
Change in
Pension
Value and
Nonqualified
Incentive
Plan
Compensation
|
All Other
Compensation
|
Total
|
Igor Dmitrosky
|
2012
|
$ -
|
$ 3,888,000
|
$ -
|
$ -
|
$ -
|
$ 50,957
|
$ 3,938,957
|
President, CEO
|
2011
|
-
|
10,712,000
|
-
|
-
|
-
|
75,106
|
10,787,106
|
Barry Clare
|
2012
|
-
|
858,000
|
-
|
-
|
-
|
198,285
|
1,056,285
|
Vice President
|
2011
|
-
|
1,426,000
|
-
|
-
|
-
|
347,948
|
1,773,948
|
Russell Thal
|
2012
|
-
|
289,000
|
-
|
-
|
-
|
30,500
|
319,500
|
Vice President
|
2011
|
-
|
362,000
|
-
|
-
|
-
|
51,000
|
413,000
|
Walter Kaplinsky
|
2012
|
-
|
76,000
|
-
|
-
|
-
|
15,960
|
91,960
|
Secretary
|
2011
|
-
|
214,000
|
-
|
-
|
-
|
-
|
214,000
|
Andris Rukmanis
|
2012
|
-
|
20,000
|
-
|
-
|
-
|
-
|
20,000
|
Vice President
Europe
|
2011
|
$ -
|
$ -
|
$ -
|
$ -
|
$ -
|
$ -
|
$ -
|
* These columns represent
the grant date fair value of the awards as calculated in
accordance with FASB ASC Topic 718, Compensation
– Stock Compensation. The fair value of these equity
awards on the date of grant was approximately
$5,131,000 and $12,714,000 for stock awards for the
years ended December 31, 2012 and 2011. The fair value was
estimated using the Black-Sholes option pricing model with
the following assumptions: risk free interest rate of 3.0%
and 4.4%, for the years ended December 31, 2012 and 2011,
respectively, no dividend yield, expected lives between one
and five years, and volatility of 200%. The expected term of
the equity instruments granted is based on the
“simplified method for “plain vanilla”
options discussed in SEC Staff Accounting Bulletin
(“SAB”) No. 107, as amended by SAB No. 110. The
expected volatility is derived from historic volatility of
the Company’s stock on the OTCBB for a period that
matches the expected term of the equity award. The risk-free
interest rate is the yield from a Treasury note corresponding
to the expected term of the equity awards.
** Mr. Dmitrowsky was
charged additional compensation of $15,000 and $15,000, which
represents one-hundred percent of the rent the Company paid
for its original corporate headquarters during the years
ended December 31, 2012 and 2011, respectively. In addition,
during the years ended December 31, 2012 and 2011, Mr.
Dmitrowsky received other compensation of $35,957 and
$60,106, respectively, for services provided to the Company
in lieu of salary.
Mr. Clare was paid
additional compensation of $198,285 and $347,948 for the
years ended December 31, 2012 and 2011, respectively, which
represents amounts paid him for negotiating services in
connection with the raise of new equity capital.
Russell Thal was paid
additional compensation of $30,500 and 51,000 for services
provided the Company during the years ended December 31, 2012
and 2011.
Mr. Kaplinsky was paid
additional compensation of $15,960 and $-0- for services
provided the Company during the years ended December 31, 2012
and 2011.
EMPLOYMENT AGREEMENTS
The Company has no
individual employment agreements with any of its executive
officers or employees.
Future Compensation of
Executive Officers
The board of directors
approves salaries for the Company's executive officers as
well as the Company's overall salary structure. For year one
following the closing of financing sufficient to commence
flight operations, the rate of compensation for the Company's
executive officers is expected to be:(i) President $198,000,
Executive Vice President $130,000, Vice
President Finance $120,000,
(ii) Vice President Marketing $110,000,and (iii) Vice
President Europe $90,000. Board directors are not presently
compensated and shall receive no compensation prior to
commencement of revenue service.
Item
12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.
As of December 31, 2012,
there were 2,465,538,050 shares of common stock, par value
$0.0001 outstanding. The following table sets forth, as of
December 31, 2012, the ownership of the Company's Common
Stock by (i)each director and officers of the Company, (ii)
all executive officers and directors of the Company as a
group, and (iii) all other persons known to the Company to
own more than 5% of the Company's Common Stock. Each person
named in the table has or shares voting and investment power
with respect to all shares shown as beneficially owned by
such person.
Directors and
Officers
|
Common Shares
Beneficially Owned
|
Percent of Total
Outstanding, %
|
Igor Dmitrowsky 63-26
Saunders St., Suite 7I Rego Park, NY 11374
|
779,662,766
|
31.62
|
Russell Thal 26 Ridge
Drive Port Washington, NY 11050
|
20,468,750
|
0.83
|
Barry Clare 4319 215th
St. Bayside, NY 11361
|
114,849,998
|
4.65
|
Vick Luis Bolanos 633
Monroe St. Riverside, NJ 08075
|
223,325,001
|
9.05
|
Walter Kaplinsky 2000
Quentin Rd. Brooklyn, NY 11229
|
15,500,000
|
0.62
|
Andris RukmanisKundzinsala,
8 Linija 9. Riga, Latvia LV-1005
|
6,468,750
|
0.26
|
Shares of all
directors and executive officers as a group (6
persons)
|
1,160,275,265
|
47
|
Item
13. Certain Relationships and Related Transactions.
Mr. Vick Luis Bolanos was
elected to the Baltia Board of Directors while he was, and
remains, President and Chairman of Eastern Construction &
Electric, Inc. The transaction between Baltia and Eastern was
made in the ordinary course of business on substantially the
same terms, including interest rates and collateral, as those
prevailing at the time for comparable loans with persons not
related to the lender; and did not involve more than the
normal risk of collectibility or present other unfavorable
features. This transaction is discussed further in Note 6 to
the Financial Statements infra.
Item
14. Principal Accountant Fees and Services.
In 2011, 2010, 2009 and 2008
the Company paid its independent accountant $7,000 for
services in providing an audit of the previous year. In 2012,
the Company paid $11,500 for audit services. All other
Company accounting and tax preparations have been done in
house.
PART
IV.
Item
15. Exhibits and Financial Statements.
APPENDIX
A - Financial Statements for the Years Ended December 31,
2012 ad 2011
Report of Independent
Registered Accounting firm
|
F-1
|
Balance Sheets as of
December 31, 2012 and 2011
|
F-2
|
Statements of
Operations for the years ended December 31, 2012 and
2011, and the period August 29, 1989 (inception) to
December 31, 2012
|
F-3
|
Statements of Cash
Flows for the years ended December 31, 2012 and 2011,
and the period August 9, 1989 (inception) to December
31, 2012
|
F-4
|
Statement of Changes
of Stockholders' Equity for the years ended December
31, 2012, 2011, 2010, 2009, and 2008
|
F-5
|
Notes to Financial
Statements
|
F-6 to F-26
|
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMYears Ended December 31, 2012 and
2011
Board of Directors and
Shareholders Baltia Air Lines, Inc. New York, NY
I have audited the
accompanying balance sheets of Baltia Air Lines, Inc. ("the
Company") as of December 31, 2012 and 2011 and the statements
of operations, stockholders' equity, and cash flows for the
years then ended and for the period from January 1, 2008 to
December 31, 2012. The financial statements for the period
from inception to December 31, 2007 were audited by other
auditors whose reports included an explanatory paragraph that
expressed substantial doubt about the Company’s ability
to continue as a going concern. My opinion on the
statements of operations, stockholders’ deficit and
cash flows for the period from inception to December 31,
2007, insofar as it relates to amounts for prior periods
through December 31, 2007, is based solely on the report of
the other auditors. These financial statements are
the responsibility of the Company's management. My
responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audits in
accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards
require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements
are free of material misstatements. I was not engaged to
perform an audit of its internal control over financial
reporting. My audits included consideration of internal
control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over
financial reporting. Accordingly, I express no such opinion.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management,
as well as evaluating the overall financial statement
presentation. I believe that my audits provide a reasonable
basis for my opinion. In my opinion, these financial
statements present fairly, in all material respects, the
financial position of Baltia Air Lines, Inc. as of December
31, 2012 and 2011 and the results of its operations and its
cash flows for the years then ended in conformity with
accounting principles generally accepted in the United
States.
In my opinion, the financial
statements referred to above present fairly, in all material
respects, the financial position of Baltia Air Lines, Inc. as
of December 31, 2012 and the results of its operations and
its cash flows for the year period ended December 31, 2012 in
conformity with accounting principles generally accepted in
the United States.
The accompanying financial
statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 9 of the
financial statements, the Company has incurred a deficit
during its development stage of approximately $88 million and
consumed approximately $24 million of cash due to its
operating activities. The Company may not have adequate
readily available resources to fund operations through
December 31, 2012. This raises substantial doubt about the
Company's ability to continue as a going concern.
Management's plans in regard to these matters are also
described in Note 9. The financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
/s/ Patrick Rodgers, CPA, PA
Patrick Rodgers, CPA, P
Altamonte Springs,
FloridaApril 15, 2013
F-1
Baltia
Air Lines, Inc.
BALANCE
SHEETS
(A
Development Stage Company)
|
||||||||||||
December
31,
|
||||||||||||
2012
|
2011
|
|||||||||||
ASSETS
|
||||||||||||
Current
assets
|
||||||||||||
Cash
|
$ 12,326
|
$ 57,390
|
||||||||||
Total current
assets
|
12,326
|
57,390
|
||||||||||
Property
and equipment, net
|
1,807,456
|
3,404,258
|
||||||||||
Other
assets:
|
||||||||||||
Security deposit and
other
|
317,293
|
317,293
|
||||||||||
Total
assets
|
$ 2,137,075
|
$ 3,778,941
|
||||||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||||||
Current
liabilities
|
||||||||||||
Accounts
payable
|
$ 587,763
|
$ 205,285
|
||||||||||
Accrued
interest
|
215625
|
112,125
|
||||||||||
Total
current liabilities
|
803,388
|
317,410
|
||||||||||
Long-term
debt, net of discount
|
1,186,500
|
1,003,941
|
||||||||||
Total
liabilities
|
1,989,888
|
1,321,351
|
||||||||||
Stockholders'
equity
|
||||||||||||
Preferred stock, $0.01
par value; 2,000,000 shares
authorized, 66,500
issued and outstanding
|
665
|
665
|
||||||||||
Common stock, $.0001
par value; 2,850,000,000 shares
authorized,
2,318,550,746 and 1,718,031,382 issued and
outstanding at
December 31, 2012 and 2011, respectively
|
231,856
|
171,803
|
||||||||||
Additional paid-in
capital
|
88,186,977
|
76,933,560
|
||||||||||
Deficit accumulated
during development stage
|
(88,272,311)
|
(74,648,438)
|
||||||||||
Total
stockholders' equity
|
147,187
|
2,457,590
|
||||||||||
Total
liabilities and stockholders' equity
|
$
2,137,075
|
$ 3,778,941
|
The
accompanying footnotes are an integral part of these
financial statements.
F-2
Baltia
Air Lines, Inc.
STATEMENTS
OF OPERATIONS
(A
Development Stage Company)
|
||||||||||
From
|
||||||||||
Inception
to
|
||||||||||
Years
Ended December 31,
|
December
31,
|
|||||||||
2012
|
2011
|
2012
|
||||||||
Revenue
|
$ -
|
$ -
|
$ -
|
|||||||
Costs and
Expenses
|
||||||||||
General and
administrative
|
11,125,526
|
24,323,228
|
80,773,746
|
|||||||
FAA certification
costs
|
622,062
|
490,851
|
3,146,209
|
|||||||
Training
|
-
|
-
|
225,637
|
|||||||
Depreciation
|
15,000
|
16,486
|
371,089
|
|||||||
Other
|
-
|
-
|
568,245
|
|||||||
Interest
|
249,565
|
241,493
|
1,560,784
|
|||||||
Loss on sale of
assets
|
1,607,183
|
-
|
1,607,183
|
|||||||
Total
costs and expenses
|
13,619,336
|
25,072,058
|
88,252,893
|
|||||||
Net
loss before income taxes
|
(13,619,336)
|
(25,072,058)
|
(88,252,893)
|
|||||||
provision
for income taxes
|
4,537
|
3,439
|
19,418
|
|||||||
Deficit
accumulated during development stage
|
$ (13,623,873)
|
$ (25,075,497)
|
$ (88,272,311)
|
|||||||
Net
loss per weighted share,
basic and
fully diluted
|
$ (0.01)
|
$ (0.02)
|
||||||||
Weighted
average number of common
shares
outstanding, basic and fully diluted
|
2,147,024,121
|
1,416,885,867
|
||||||||
The accompanying footnotes
are an integral part of these financial statements.
F-3
STATEMENT
OF CASH FLOWS
(A
Development Stage Company)
|
||||||||
From
|
||||||||
Inception
to
|
||||||||
Years
Ended December 31,
|
December
31,
|
|||||||
2012
|
2011
|
2012
|
||||||
Cash
flows from operations
|
||||||||
Deficit accumulated
during development stage
|
$ (13,623,873)
|
$ (25,075,497)
|
$ (88,272,310)
|
|||||
Adjustment to
reconcile deficit accumulated during
|
||||||||
development stage to
cash used in operating activities:
|
||||||||
Depreciation and
amortization
|
15,000
|
16,486
|
369,940
|
|||||
Amortization of loan
discount
|
146,059
|
137,993
|
294,977
|
|||||
Expenses paid by
issuance of common stock and options
|
7,686,586
|
17,438,892
|
57,149,742
|
|||||
Loss on sale of
assets
|
1,607,183
|
-
|
1,607,183
|
|||||
Changes in operating
assets and liabilities:
|
||||||||
Prepaid
expenses
|
-
|
50,160
|
400,301
|
|||||
Accounts payable and
accrued expenses
|
485,980
|
208,785
|
3,954,871
|
|||||
Net
cash used by operating activities
|
(3,683,065)
|
(7,223,181)
|
(24,495,296)
|
|||||
Cash
flows from investing activities
|
||||||||
Purchase of
equipment
|
(133,045)
|
(502,217)
|
(3,829,628)
|
|||||
Proceeds from sale of
assets
|
144,164
|
-
|
144,164
|
|||||
Security
deposits
|
-
|
(77,293)
|
(317,293)
|
|||||
Net
cash used by investing activities
|
11,119
|
(579,510)
|
(4,002,757)
|
|||||
Cash
flows from financing activities
|
||||||||
Proceeds from issuance
of common stock
|
3,626,882
|
7,807,242
|
26,915,861
|
|||||
Proceeds from issuance
of preferred stock
|
-
|
-
|
2,753
|
|||||
Loans from related
parties
|
-
|
-
|
1,351,573
|
|||||
Repayment of related
party loans
|
-
|
-
|
(368,890)
|
|||||
Principal payments on
long-term debt
|
-
|
-
|
1,109,183
|
|||||
Acquisition of
treasury stock
|
-
|
-
|
(500,100)
|
|||||
Net
cash provided by financing activities
|
3,626,882
|
7,807,242
|
28,510,380
|
|||||
Net
increase (decrease) in cash
|
(45,064)
|
4,551
|
12,326
|
|||||
Cash, beginning of
period
|
57,390
|
52,839
|
-
|
|||||
Cash, end
of period
|
$ 12,326
|
$ 57,390
|
$ 12,326
|
|||||
Supplemental
cash flow disclosures:
|
||||||||
Cash paid during the
year for interest
|
$ 6
|
$ 19,504
|
||||||
The accompanying footnotes
are an integral part of these financial statements.
F-4
(A
Development Stage Company)
STATEMENT
OF CHANGES IN STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||||||
Preferred
Stock
|
Common
Stock
|
Additional
Paid-in
Capital
|
Deficit
Accumulated
During
Development
Stage
|
Total
|
||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||||
Balance,
December 31, 2008
|
66,500
|
$ 665
|
355,767,159
|
$ 35,577
|
$ 18,716,994
|
$ (18,002,863)
|
$ 750,375
|
|||||||||||||||||
Exercise of warrants
and options
|
32,000,000
|
3,200
|
3,200
|
|||||||||||||||||||||
Shares issued and
issuable for cash
|
154,034,244
|
15,403
|
3,686,497
|
3,701,900
|
||||||||||||||||||||
Shares issued for
services
|
200,778,636
|
20,078
|
9,430,413
|
9,450,491
|
||||||||||||||||||||
Options issued for
services
|
243,787
|
243,787
|
||||||||||||||||||||||
Stock issued to
purchase airplane
|
1,000,000
|
100
|
24,900
|
25,000
|
||||||||||||||||||||
Net loss
|
(12,175,550)
|
(12,175,550)
|
||||||||||||||||||||||
Balance,
December 31, 2009
|
66,500
|
665
|
743,580,039
|
74,358
|
32,102,591
|
(30,178,413)
|
1,999,201
|
|||||||||||||||||
Stock issued and
issuable for cash
|
115,776,464
|
11,578
|
4,365,876
|
4,377,454
|
||||||||||||||||||||
Stock issued for
services
|
252,658,491
|
25,266
|
14,984,584
|
15,009,850
|
||||||||||||||||||||
Fair value of options
issued as loan incentive
|
92,745
|
92,745
|
||||||||||||||||||||||
Stock issued as loan
incentive
|
6,800,000
|
680
|
201,552
|
202,232
|
||||||||||||||||||||
Net loss
|
(19,394,527)
|
(19,394,527)
|
||||||||||||||||||||||
Balance,
December 31, 2010
|
66,500
|
665
|
1,118,814,994
|
111,881
|
51,747,348
|
(49,572,940)
|
2,286,954
|
|||||||||||||||||
Stock issued and
issuable for cash
|
241,369,947
|
24,137
|
7,783,105
|
7,807,242
|
||||||||||||||||||||
Stock issued for
services
|
357,846,441
|
35,786
|
17,403,106
|
17,438,892
|
||||||||||||||||||||
Net loss
|
(25,075,498)
|
(25,075,498)
|
||||||||||||||||||||||
Balance,
December 31, 2011
|
66,500
|
665
|
1,718,031,382
|
171,804
|
76,933,559
|
(74,648,438)
|
2,457,590
|
|||||||||||||||||
Stock issued and
issuable for cash
|
271,270,882
|
27,127
|
3,599,755
|
3,626,882
|
||||||||||||||||||||
Stock issued for
services
|
329,248,482
|
32,925
|
7,653,663
|
7,686,588
|
||||||||||||||||||||
Net loss
|
(13,623,873)
|
(13,623,873)
|
||||||||||||||||||||||
Balance,
December 31, 2012
|
66,500
|
$ 665
|
2,318,550,746
|
$ 231,856
|
$ 88,186,977
|
$ (88,272,311)
|
$ 147,187
|
|||||||||||||||||
BALTIA
AIR LINES, INC. NOTES TO FINANCIAL STATEMENTS
DECEMBER
31, 2012
1.
Summary of Significant Accounting Policies
Basis
of Presentation: The financial statements have been
presented in a “development stage” format. Since
inception, our primary activities have been raising of
capital, obtaining financing and of obtaining route authority
and approval from the DOT and the FAA. We have not commenced
our principal revenue producing activities.
Use
of Estimates: The preparation of financial
statements in conformity with generally accepted accounting
principles requires our management to make estimates and
assumptions that affect reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statement and the
reported amounts of revenues and expenses during the
reporting period. Actual results could differ from the
estimates.
Cash
and Cash Equivalents: For financial statement
presentation purposes, we consider those short-term, highly
liquid investments with original maturities of three months
or less to be cash or cash equivalents. There are no cash
equivalents at December 31, 2012 and 2011.
Fair
Value of Financial Instruments: FASB ASC 825, “Financial
Instruments,”
requires entities to disclose the fair value of financial
instruments, both assets and liabilities recognized and not
recognized on the balance sheet, for which it is practicable
to estimate fair value. FASB ASC 825 defines fair value of a
financial instrument as the amount at which the instrument
could be exchanged in a current transaction between willing
parties. At December 31, 2012 and 2011, the carrying
value of certain financial instruments (cash and cash
equivalents, accounts payable and accrued expenses.)
approximates fair value due to the short-term nature of the
instruments or interest rates, which are comparable with
current rates.
Fair
Value Measurements: FASB ASC 820 defines fair value
and establishes a framework for measuring fair value and
establishes a fair value hierarchy which prioritizes the
inputs to the inputs to the valuation techniques. Fair value
is the price that would be received to sell an asset or
amount paid to transfer a liability in an orderly transaction
between market participants at the measurement date. A fair
value measurement assumes that the transaction to sell the
asset or transfer the liability occurs in the principal
market for the asset or liability or, in the absence of a
principal market, the most advantageous market. Valuation
techniques that are consistent with the market, income or
cost approach, as specified by FASB ASC 820, are used to
measure fair value.
Fair
Value Hierarchy: FASB
ASC 820 specifies a hierarchy of valuation techniques based
upon whether the inputs to those valuation techniques reflect
assumptions other market participants would use based upon
market data obtained from independent sources (observable
inputs), or reflect the Company’s own assumptions of
market participant valuation (unobservable inputs). In
accordance with FASB ASC 820, these two types of inputs have
created the following fair value hierarchy:
|
Level 1 – Quoted
prices in active markets that are unadjusted and
accessible at the measurement date for identical,
unrestricted assets or liabilities.
|
|
Level 2 – Quoted
prices for identical assets and liabilities in markets
that are not active, quoted prices for similar assets
and liabilities in active markets or financial
instruments for which significant inputs are
observable, either directly or indirectly.
|
|
Level 3 – Prices
or valuations that require inputs that are both
significant to the fair value measurement and
unobservable.
|
FASB ASC 820 requires the
use of observable market data if such data is available
without undue cost and effort.
F-6
BALTIA
AIR LINES, INC. NOTES TO FINANCIAL STATEMENTS
DECEMBER
31, 2012
1.
Summary of Significant Accounting Policies (continued)
Measurement of Fair
Value
The Company
measures fair value as an exit price using the procedures
described below for all assets and liabilities measured at
fair value. When available, the Company uses unadjusted
quoted market prices to measure fair value and classifies
such items within Level 1. If quoted market prices are not
available, fair value is based upon internally developed
models that use, where possible, current market-based or
independently-sourced market parameters such as interest
rates and currency rates. Items valued using internally
generated models are classified according to the lowest level
input or value driver that is significant to the valuation.
Thus, an item may be classified in Level 3 even though there
may be inputs that are readily observable. If quoted market
prices are not available, the valuation model used generally
depends on the specific asset or liability being valued. The
determination of fair value considers various factors
including interest rate yield curves and time value
underlying the financial instruments.
Property
and Equipment: Property and equipment are
recorded at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the
assets, generally 5-15 years. Expenditures for renewals and
betterments are capitalized. Expenditures for minor items,
repairs and maintenance are charged to operations as
incurred. Gain or loss upon sale or retirement due to
obsolescence is reflected in the operating results in the
period the event takes place.
Valuation
of Long-Lived Assets: We review the recoverability of
our long-lived assets, including buildings, equipment and
intangible assets, when events or changes in circumstances
occur that indicate that the carrying value of the asset may
not be recoverable. The assessment of possible impairment is
based on our ability to recover the carrying value of the
asset from the expected future pre-tax cash flows
(undiscounted and without interest charges) of the related
operations. If these cash flows are less than the carrying
value of such asset, an impairment loss is recognized for the
difference between estimated fair value and carrying value.
Our primary measure of fair value is based on discounted cash
flows. The measurement of impairment requires management to
make estimates of these cash flows related to long-lived
assets, as well as other fair value determinations.
We amortize the costs of other
intangibles (excluding goodwill) over their estimated useful
lives unless such lives are deemed indefinite. Amortizable
intangible assets are tested for impairment based on
undiscounted cash flows and, if impaired, written down to
fair value based on either discounted cash flows or appraised
values. Intangible assets with indefinite lives are tested
for impairment, at least annually, and written down to fair
value as required.
Stock-Based
Compensation Plans: Stock-based awards are accounted
for using the fair value method in accordance with ASC
718, Share-Based
Payments. 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.
F-7
BALTIA
AIR LINES, INC. NOTES TO FINANCIAL STATEMENTS
DECEMBER
31, 2012
1.
Summary of Significant Accounting Policies (continued)
Earnings
per Common 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 assume 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. All options have
either expired or been cancelled during 2012. No adjustment
has been made to the weighted-average number of shares
outstanding in the calculation of earnings per share. For
2011, the earnings per share calculation excluded options of
5,556,818 because they were anti-dilutive.
Income
Taxes: We have
adopted ASC 740, Accounting for
Income Taxes. Pursuant to ASC 740, we are
required to compute tax asset benefits for net operating
losses carried forward. The potential benefits of net
operating losses have not been recognized in these financial
statements because the Company cannot be assured it is more
likely than not it will utilize the net operating losses
carried forward in future years.
We must make certain
estimates and judgments in determining income tax expense for
financial statement purposes. These estimates and judgments
occur in the calculation of certain tax assets and
liabilities, which arise from differences in the timing of
recognition of revenue and expense for tax and financial
statement purposes.
Deferred tax assets and
liabilities are determined based on the differences between
financial reporting and the tax basis of assets and
liabilities using the tax rates and laws in effect when the
differences are expected to reverse. ASC 740 provides for the
recognition of deferred tax assets if realization of such
assets is more likely than not to occur. Realization of our
net deferred tax assets is dependent upon our generating
sufficient taxable income in future years in appropriate tax
jurisdictions to realize benefit from the reversal of
temporary differences and from net operating loss, or NOL,
carryforwards. We have determined it more likely than not
that these timing differences will not materialize and have
provided a valuation allowance against substantially all of
our net deferred tax asset. Management will continue to
evaluate the realizability of the deferred tax asset and its
related valuation allowance. If our assessment of the
deferred tax assets or the corresponding valuation allowance
were to change, we would record the related adjustment to
income during the period in which we make the determination.
Our tax rate may also vary based on our results and the mix
of income or loss in domestic and foreign tax jurisdictions
in which we operate.
Effective
January 1, 2007, the Company adopted FASB guidelines that
address the determination of whether tax benefits claimed or
expected to be claimed on a tax return should be recorded in
the financial statements. Under this guidance, we may
recognize the tax benefit from an uncertain tax position only
if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on
the technical merits of the position. The tax benefits
recognized in the financial statements from such a position
should be measured based on the largest benefit that has a
greater than fifty percent likelihood of being realized upon
ultimate settlement. This guidance also provides guidance on
derecognition, classification, interest and penalties on
income taxes, accounting in interim periods and requires
increased disclosures. At the date of adoption, and as of
December 31, 2012 and 2011, the Company did not have a
liability for unrecognized tax benefits, and no adjustment
was required at adoption.
The
Company’s policy is to record interest and penalties on
uncertain tax provisions as income tax expense. As of
December 31, 2012 and 2011, the Company has not accrued
interest or penalties related to uncertain tax positions.
Additionally, tax years 2007 through 2012 remain open to
examination by the major taxing jurisdictions to which the
Company is subject.
Upon the
attainment of taxable income by the Company, management will
assess the likelihood of realizing the tax benefit associated
with the use of the carryforwards and will recognize a
deferred tax asset at that time.
F-8
BALTIA
AIR LINES, INC. NOTES TO FINANCIAL STATEMENTS
DECEMBER
31, 2012
1.
Summary of Significant Accounting Policies (continued)
Recent
Accounting Pronouncements:
Recently
Adopted Standards
In December 2011, the FASB
issued ASU No. 2011-11, “Balance Sheet (Topic 210):
Disclosures about Offsetting Assets and
Liabilities.” This ASU
requires an entity to disclose information about offsetting
and related arrangements to enable users of its financial
statements to understand the effect of those arrangements on
its financial position. ASU No. 2011-11 will be applied
retrospectively and is effective for annual and interim
reporting periods beginning on or after January 1, 2013. The
Company does not expect adoption of this standard to have a
material impact on its results of operations, financial
condition, or liquidity.
Other recent accounting
pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the Securities Exchange
Commission (the "SEC") did not or are not believed by
management to have a material impact on the Company's present
or future financial statements.
2.
Organization and Operations
The Company
was formed as a U.S. airline on August 24, 1989 in the State
of New York. Our objective is to provide scheduled air
transportation from the U.S. to Russia, the Baltic States and
Ukraine. 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. We have two registered
trademarks "BALTIA" and "VOYAGER CLASS," and five trademarks
subject to registration. Our activities to date have been
devoted principally to raising capital, obtaining route
authority and approval from the DOT and the FAA, training
crews, and conducting market research to develop the
Company's marketing strategy.
Regulatory
Compliance
We intend to
operate as a Part 121 carrier, a heavy jet operator. As such,
following certification we will be required to maintain our
air carrier standards as prescribed by DOT and FAA regulation
and as specified in the FAA approved Company manuals. As part
of its regulatory compliance we will be required to submit
periodic reports of our operations to the DOT.
.
3.
Property and Equipment
A summary of property
and equipment is as folloows:
|
|||
Estimated Useful
Life
|
2012
|
2011
|
|
Airplane
|
10-15 years
|
$1,505,738
|
$ 3,257,085
|
Office equipment and
other
|
5-7 years
|
425,986
|
256,441
|
Less accumulated
depreciation
|
(124,268)
|
(109,268)
|
|
Net
|
$ 1,807,456
|
$ 3,404,258
|
|
Current
depreciation
|
$ 15,000
|
$ 16,486
|
F-9
BALTIA
AIR LINES, INC. NOTES TO FINANCIAL STATEMENTS
DECEMBER
31, 2012
4.
Stockholders' Equity
Description of
Securities
Common
Stock: We have
2,850,000,000 authorized shares of Common Stock at
$.0001 par value per share. As of December 31, 2012, a total of
2,464,456,384 shares of Common Stock were issued and outstanding and held by
over 1000 shareholders. Holders of Common Stock are entitled
to receive dividends, when and if declared by
the board of directors, subject to prior rights of holders of
any Preferred Stock then outstanding and to share ratably in
the net assets of the company upon liquidation. Holders of
Common Stock do not have preemptive or other rights to
subscribe for
additional shares. The Certificate of Incorporation does not
provide for cumulative voting. Shares of Common Stock have equal voting,
dividend, liquidation and other rights, and have no
preference, exchange or appraisal rights.
Preferred
Stock: We are
authorized to issue up to a maximum of 2 million shares
(66,500 shares outstanding) of Preferred Stock. We can issue
these shares as our board of directors shall from time to
time fix by resolution. Our Preferred Stock is not entitled
to share in any dividends declared on the Common Stock and
has no voting rights. Each share is convertible in to 3
shares of Common. The liquidation preference is set by this
conversion formula and results in a pro rata claim on the
Company’s assets based upon the underlying common
shares issuable (199,500) upon conversion.
Recent
Issuance of Unregistered Securities
2012:
Stock Issued
for Cash
We issued 271,270,882 shares
of our common stock in exchange for receiving a total of
$3,626,882 in cash net of offering expenses. The shares were
deemed to have been issued pursuant to an exemption provided
by Section 4(2) of the Act, which exempts from registration
“transactions by an issuer not involving any public
offering.”
We issued 329,248,482 shares
of our common stock in exchange for services. The shares were
valued at $7,686,586 or about $0.023 per share which
reflected the weighted average market value at the time of
issuance. 158,100,000 of the shares valued at approximately
$3,888,000 were issued to Igor Dmitrowsky our
president.
2011:
Stock Issued
for Cash
We issued 241,369,947 shares
of our common stock in exchange for receiving a total of
$7,807,242 in cash net of offering expenses. The shares were
deemed to have been issued pursuant to an exemption provided
by Section 4(2) of the Act, which exempts from registration
“transactions by an issuer not involving any public
offering.”
Stock
Issued for Services
We issued 357,846,441 shares
of our common stock in exchange for services. The shares were
valued at $17,438,892 or about $0.049 per share which
reflected the weighted average market value at the time of
issuance. 148,500,000 of the shares valued at approximately
$7.2 million were issued to Igor Dmitrowsky our
president.
Summary
of Option Activity
All existing
options were cancelled in 2012.
F-10
BALTIA
AIR LINES, INC. NOTES TO FINANCIAL STATEMENTS
DECEMBER
31, 2012
5. Income
Taxes
The Company has
approximately $30.8 million in available net operating loss
carryovers available to reduce future income taxes. These
carryovers expire at various dates through the year 2032. The
Company has adopted ASC 740, Accounting for
Income Taxes which
provides for the recognition of a deferred tax asset based
upon the value the loss carry-forwards will have to reduce
future income taxes and management's estimate of the
probability of the realization of these tax benefits. We have
determined it more likely than not that these timing
differences will not materialize and have provided a
valuation allowance against our entire net deferred tax asset
of approximately $6.1 million.
Utilization of federal and
state NOL and tax credit carry-forwards may be subject to a
substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code of 1986, as
amended, and similar state provisions. The annual limitation
may result in the expiration of NOL and tax credit
carry-forwards before full utilization.
6.
Commitments and Contingencies
Facilities:
The Company leases office
space for its administrative offices, under three month to
month agreements, at a combined monthly rental of
approximately $27,000. In 2012 and 2011 expense was $618,544
and $336,979 respectively.
7.
Long-Term Debt-Related Party:
On December 1, 2010, the
Company entered into a loan arrangement with a company owned
or controlled by one of our directors for a total amount of
$1,150,000. The Company issued a note bearing interest at 9%
per annum payable quarterly and a maturity date of March 31,
2013. The Company will be obligated to repay the note prior
to the maturity date upon raising $4 million or from the
proceeds of operating revenue. As a loan inducement the
Company issued 6.8 million shares of common stock and 3.4
million warrants. A placement fee of $50,000 was paid from
the proceeds of this loan. The note is secured by both
aircraft up to a limit of $2.9 million.
The
Company recorded the relative fair value of the shares and
warrants of $294,297 as additional paid-in capital and
established a discount on the debt. The discount is being
amortized over the life of the note (27 months) at an
effective rate of 14.98%. The note is carried net of the
discount.
8.
Management's Plan of Operation
We believe we currently have
sufficient capital to commence revenue flight operations and
to maintain our current level of operations. During 2012 and
into 2013 we continue to finance our operations through the
issuance of our common stock and the continued exercise of
warrants. Until revenue operations begin, our monthly
expenditures for administrative and regulatory compliance can
be controlled at about $200,000-$400,000. Based on
current reserves we have sufficient capital to support our
development stage operations through the most of 2013.
In 2012 we raised $3.6
million in a private placement in order to start revenue
flight operations. Based on our prior experience with
certification and current preparations the management
believes that the launch budget, previously reviewed by the
DOT, will be adequate to complete certification and to
commence flight service. Approximately $300,000 is budgeted
for aircraft, $450,000 for certification tasks, and $300,000
for general and administrative expenses. At the time flight
service is inaugurated the company plans to have
approximately 15 management and 45 staff
personnel.
Management has considered
the overall pipeline effect that enhances the initial cash
position of a startup carrier. It is the industry practice
for passengers to purchase tickets in advance of their
flights while service vendors bill the carrier later.
F-11
BALTIA
AIR LINES, INC. NOTES TO FINANCIAL STATEMENTS
DECEMBER
31, 2012
8.
Management's Plan of Operation (continued)
In order that a new airline
would not fly empty on day one, approximately 30 days prior
to the expected inaugural date the DOT authorizes sales of
tickets and cargo. Such funds from advance sales, estimated
at approximately $3 mm for the company, accumulate in an
escrow account, and are released upon the issuance of the air
carrier certificate.
There can be no assurance
that additional financing will be available on terms
favorable to us or at all. If adequate funds are not
available or are not available on acceptable terms, we may
not be able to fund expansion.
9. Going
Concern
The accompanying financial
statements have been prepared assuming that the company will
continue as a going concern, which contemplates the
recoverability of assets and the satisfaction of liabilities
in the normal course of business. Currently, the Company has
a minimum cash balance available for the payment of ongoing
operating expenses, and its operations has not of yet
produced any revenue, which would allow it to cover its
operational costs and allow it to continue as a going
concern. Since inception, the Company has incurred a deficit
during its development stage of approximately $88.0 million
and consumed approximately $21.0 million. The continued
operations of the Company is dependent upon implementing
airline service that would generate profits and raising
sufficient capital through placement of its common stock or
issuance of debt securities, which would enable the Company
to carry out its business plan.
In the event we do not
generate sufficient funds from revenues or financing through
the issuance of our common stock or from debt financing, we
may be unable to fully implement our business plan and pay
our obligations as they become due, any of which
circumstances would have a material adverse effect on our
business prospects, financial condition, and results of
operations. The accompanying financial statements do not
include any adjustments that might be required should the
Company be unable to recover the value of its assets or
satisfy its liabilities.
During 2012 and into 2011,
we continue to finance our operations through the issuance of
our common stock and the continued exercise of warrants.
Until revenue operations begin, our monthly expenditures for
administrative and regulatory compliance can be controlled at
about $200,000-$400,000.
In 2012, we raised $3.6
million a private placement in order to start revenue flight
operations. Revenue services did not start in 2011 as
planned, and, as of April 15, 2013, we still have not
implemented revenue producing services. At the time flight
service is inaugurated, the company plans to have
approximately 15 management and 45 staff personnel.
Management has considered
the overall pipeline effect that enhances the initial cash
position of a startup carrier. It is the industry practice
for passengers to purchase tickets in advance of their
flights while service vendors bill the carrier later.
In order that a new airline
would not fly empty on day one, approximately 30 days prior
to the expected inaugural date the DOT authorizes sales of
tickets and cargo. Such funds from advance sales, estimated
at approximately $3 million for the company, accumulate in an
escrow account, and are released upon the issuance of the air
carrier certificate.
There can be no assurance
that additional financing will be available on terms
favorable to us or at all. If adequate funds are not
available or are not available on acceptable terms, we may
not be able to fund expansion.
F-12
BALTIA
AIR LINES, INC. NOTES TO FINANCIAL STATEMENTS
DECEMBER
31, 2012
10.
Related Party
During the year ended
December 31, 2012 and 2011, the Company issued 194,000,000
and 245,749,998, respectively, restricted shares of its
$0.001 par value common stock to officers and directors.
These restricted shares were valued at $5,131,000 and
$12,714,000, respectively, or a weighted average price of
approximately $0.026 and $0.50 per share, respectively. Its
president and CEO was charged additional compensation of
$15,000 and $15,000, which represents one hundred percent of
the rent the Company paid for its original corporate
headquarters during the years ended December 31, 2012 and
2011, respectively. Also, during the years ended December 31,
2012 and 2011, this officer received other compensation of
$35,957 and $60,106, respectively, for services provided the
Company in lieu of salary. A second officer, Vice President
– Finance, was paid additional compensation of $198,285
and $347,948 for the years ended December 31, 2012 and 2011,
respectively, which represents amounts paid him for
negotiating services in connection with the raise of new
equity capital. A third officer, Vice President, was paid
additional compensation of $30,500 and $51,000 for services
provided the Company during the years ended December 31, 2012
and 2011, respectively. A fourth officer, Corporate
Secretary, was additional compensation of $15,960 for
services provided the Company during the year ended December
31, 2012.
11.
Subsequent events
The Company has successfully
completed Gate I requirements of FAA Air Carrier
Certification process
On March 28, 2013, at the
FAA East Michigan Flight Standards District Office Baltia Air
Lines senior staff and their FAA counterparts conducted a
Formal Meeting to review Baltia’s certification
documentation and management readiness.
On April 10, 2013, Baltia
received confirmation that Baltia’s management
personnel, system design, and other supporting documentation
were found to be satisfactory.
The FAA Certification Team
has determined that Baltia meets the requirements of FAA
Order 8900.1 Volume 10 Chapter 2 Section 6 and is fit to
enter into Phase II of the ATOS Certification Process.
F-13
OTHER
EXHIBITS
3.1
Certificate of Incorporation of Baltia Air Lines, Inc.
Incorporated by reference to Exhibit 3.1 to Baltia Air Lines
Inc.'s reported on Form 10-K, 21 Dec 2011 from the year ended
December 31, 2010.
3.1.1
Certificate of Incorporation amendment of Baltia Air Lines,
Inc. (as amended and filed on June 24, 2011)
3.1.2
Certificate of Incorporation amendment of Baltia Air Lines,
Inc. (as amended and filed on May 25, 2012)
3.1.3
Certificate of Incorporation amendment of Baltia Air Lines,
Inc. (as amended and filed on December 27, 2012).
3.2
Bylaws of Baltia Air Lines, Inc. (amended and ratified
November 7, 2011) Incorporated by reference to Exhibit 3.2.2
to Baltia Air Lines Inc.'s reported on Form 10-K, 21 Dec 2011
from the year ended December 31, 2010.
10.
MATERIAL CONTRACTS
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
1 st quarter 2012 as filed May 15, 2012.
10.2 - Letter evidencing
agreement that engines identified in Exhibit 10.3 below may
be removed from N705BL and installed on
N706BL. Incorporated
by reference to Exhibit 10.5 to Company’s 10-K/A for
year 2010 as filed December 21, 2011.
10.3 - Product and
Services Agreements between Navtech Systems Support Inc. and
Baltia Airt Lines, Inc. Dated January 15, 2010 with
confidential portion omitted and filed separately with the
Commission pursuant to a request for confidential
treatment. Incorporated
by reference to Exhibit 10.7 to Company’s 10-K/A for
year 2010 as filed December 21, 2011.
10.4 - Ground Handling
Agreement at Pulkovo Airport between ZAO Cargo Terminal
Pulkovo and Baltia Air Lines, Inc. effective June 1, 2011,
with amendment validating contract through June 1, 2014, with
confidential portion omitted and filed separately with the
Commission pursuant to a request for confidential treatment
of April 15, 2013. Original agreement incorporated
by reference to Exhibit 10.9.2 to Company’s 10-K/A for
year 2010 as corrected and filed March 2, 2012.
10.5 - Ground Handling
Agreement at Pulkovo Airport between ZAO Cargo Terminal
Pulkovo and Baltia Air Lines, Inc. effective June 1, 2012
with confidential portion omitted and filed separately with
the Commission pursuant to a request for confidential
treatment of April 15, 2013
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
3 rdquarter 2011, corrected and filed March 29,
2012.
10.7 Aircraft Bill of Sale
for Boeing 747 aircraft N705BL. Incorporated
by reference to Exhibit 10.9 to Company’s 10-Q for
1 st quarter 2012 as filed May 15, 2012.
10.8 JLT Certificate of
Insurance BA-12-009 – Hull and
Liability Incorporated
by reference to Exhibit 10.10 to Company’s 10-Q for
1 st quarter 2012 as filed May 15, 2012.
10.9 JLT Insurance Binder
– Hull, Spares and Liability. Incorporated
by reference to Exhibit 10.11 to Company’s 10-Q for
1 st quarter 2012 as filed May 15, 2012.
10.10 JLT Insurance Binder
– Airline Hull War and Allied Perils. Incorporated
by reference to Exhibit 10.12 to Company’s 10-Q for
1 st quarter 2012 as filed May 15, 2012.
10.11 JLT Insurance Binder
– Aviation Hull Deductible. Incorporated
by reference to Exhibit 10.13 to Company’s 10-Q for
1 st quarter 2012 as filed May 15, 2012.
10.12 John F. Kennedy
Airport - Terminal 4, Lease Agreement between JFK
International Air Terminal, LLC and Baltia Air Lines, dated
November 17, 2008, effective until terminated by either
party.
10.13 JFK Airport Building
151 Lease Agreement, between Japan Airlines Management Corp.
and Baltia Air Lines, effective on September 1, 2011, valid
through November 30, 2015.
10.14 Willow Run Airport
facility lease between Wayne County Airport Authority and
Baltia Air Lines, effective from November 1, 2012 until April
30, 2013.
10.15 Pulkovo Airport
facility Lease Agreement between Northern Capital Gateway,
LLC and Baltia Air Lines, effective from April 29, 2010 until
terminated by either party. Incorporated by reference to
Exhibit 10.2 to Baltia Air Lines’ report on Form 10K
for the year ended December 31, 2010.
10.16 Board resolution
affirming Agreements between Baltia Air Lines and its
officers agreeing not to sell the shares issued to them until
the Company receives FAA Certification and commence its
revenue flights.
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.NOTE: Pursuant to 17
CFR 240.24b-2, confidential information has been omitted from
certain of the appended exhibits and has been filed
separately with the Securities and Exchange Commission
pursuant to a Confidential Treatment Request filed with the
Commission.
NOTE: Pursuant to 17 CFR
240.24b-2, confidential information has been omitted from
certain of the appended exhibits and has been filed
separately with the Securities and Exchange Commission
pursuant to a Confidential Treatment Request filed with the
Commission.
SIGNATURES
In accordance with Section
13 or 15(d) of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Baltia Air Lines,
Inc.
Date: April 16,
2013
/s/ Igor Dmitrowsky By: Igor
Dmitrowsky, President, CEO and CFO
Pursuant to the requirements
of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the
registrant and in the capacities and on the dates
indicated.
SIGNATURE
|
TITLE
|
DATE
|
/s/ Igor Dmitrowsky
Igor Dmitrowsky (Principal Executive Officer and
Principal Accounting Officer)
|
Chairman, CEO and
CFO
|
April 16, 2013
|
/s/ Walter Kaplinsky
Walter Kaplinsky
|
Secretary and
Director
|
April 16, 2013
|
/s/ Andris Rukmanis
Andris Rukmanis
|
V.P. Europe and
Director
|
April 16, 2013
|
/s/ Vick Luis Bolanos
Vick Luis Bolanos
|
Director
|
April 16, 2013
|
Exhibit
31.1
BALTIA
AIR LINES INC. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION
1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Igor Dmitrowsky, certify
that:
1. I have reviewed this
annual report on Form 10-K 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 registrant 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)) and
internal controls over financial reporting (as defined in
Exchange Act Rules 13a- 15(f) and 15d-15(f))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
(d) 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: April 16,
2013
/s/ Igor Dmitrowsky
Chairman, CEO and CFO April 16, 2013 Igor Dmitrowsky
(Principal Executive Officer)
/s/ Igor Dmitrowsky
Chairman, CEO and CFO April 16, 2013 Igor Dmitrowsky
(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-K for the period ended December 31, 2012 as filed
with the Securities and Exchange Commission on the date
hereof (the Report),
I, Igor Dmitrowsky, 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: April 16,
2013
/s/ Igor Dmitrowsky
Chairman, CEO and CFO April 16, 2013 Igor Dmitrowsky
(Principal Executive Officer)
/s/ Igor Dmitrowsky
Chairman, CEO and CFO April 16, 2013 Igor Dmitrowsky
(Principal Accounting Officer)