10-Q 1 b10q93009.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009 BALTIA AIR LINES, INC. (Exact name of registrant as specified in its charter) STATE of NEW YORK 11-2989648 (State of Incorporation) (IRS Employer Identification No.) 63-25 SAUNDERS STREET, SUITE 7I, REGO PARK, NY 11374 (Address of principal executive offices) Registrant's telephone number, including area code: (718) 275 5205 Check whether the issuer (1) filed all reports required to be filed by Section 13, or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. No [ ] Yes [X] Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [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 definition of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated Non-accelerated Smaller reporting accelerated filer filer company filer [ ] [ ] [ ] [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] Number of shares of the registrant's common stock outstanding as of November 14, 2009: 438,260,159 shares of Common Stock PART ONE - FINANCIAL INFORMATION Item 1. Financial Statements.
BALTIA AIR LINES, INC. BALANCE SHEETS (A Development Stage Company) ASSETS 9/30/2009 12/31/2008 (Unaudited) Current Assets Cash $ 20,000 $ 724,240 Plant and Equipment Equipment 155,795 115,067 Less Accumulated Depreciation (81,434) (73,934) Net Property, Plant and Equipment 74,361 41,133 Other Assets Deposit on Aircraft 75,000 0 TOTAL ASSETS $ 169,361 $ 765,373 LIABILITIES AND STOCKHOLDERS EQUITY Current Liabilities Accounts Payable $ 108,913 $ 15,000 Current portion of long-term debt 0 0 Total current liabilities 108,913 15,000 Long-term debt 0 0 Equity Preferred Stock 665 665 Common Stock 47,911 35,577 Paid-in-Capital 22,136,043 18,716,994 Deficit Accumulated During Development Stage (22,124,171) (18,002,862) Total Equity 60,449 750,374 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 169,361 $ 765,374 See notes to unaudited interim financial statements.
STATEMENT OF OPERATIONS (A Development Stage Company) Three Months Ended Nine Months Ended August 24, 1989 Sep 30, Sep 30, (Inception) to 2009 2008 2009 2008 Sep 30, 2009 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues $ 0 0 0 0 0 Costs & Expenses General and Administrative 727,876 265,852 3,554,412 1,140,896 18,915,090 FAA Certification 203,839 158,553 556,927 162,972 1,029,419 Training Expense 0 0 0 0 225,637 Depreciation 5,500 (47) 7,500 4,000 327,107 Other 0 0 0 0 568,245 Interest 188 (7,929) (462) (15,302) 1,050,230 Total expenses 937,402 416,429 4,118,376 1,292,566 22,115,727 Loss before income taxes (937,402) (416,429) (4,118,376) (1,292,566) (22,115,727) Income Taxes 1,902 1,068 2,932 3,830 8,444 Deficit Accumulated During Development Stage: (939,304) (417,497) (4,121,308) (1,296,396) (22,124,171) Per share amounts: Loss Nil Nil Nil Nil Weighted Average Shares Outstanding 463,799,116 302,343,246 423,951,099 296,296,946 See notes to unaudited interim financial statements.
STATEMENT OF CASH FLOWS (A Development Stage Company) Nine Months Ended Aug 24, 1989 Sep 30, (inception) to 2009 2008 Sep 30, 2009 (Unaudited) (Unaudited) (Unaudited) Cash flows from Operating Activities: Deficit Accumulated During Development Stage $(4,121,308) $(1,296,396) $ (22,124,170) Adjustments to reconcile net loss to net cash provided by operations: Depreciation 7,500 4,000 327,107 Expenses paid by issuance of common stock and options 2,373,085 354,527 9,690,021 (Increase) decrease in prepaid expenses 0 0 400,301 Change in payables & accrued expenses 93,913 (10,000) 3,260,394 Cash used by operating activities:(1,646,811) (947,869) (8,446,348) Cash flows from investing activities: Purchase of Equipment (90,728) 0 (413,853) Cash used in investing activities: (90,728) 0 (413,853) Cash flows from financing activities: Issuance of Common Stock 1,033,300 46,450 8,435,683 Issuance of Preferred Stock 0 0 2,753 Loans from related parties 0 0 1,351,573 Repayment of related party loans 0 0 (368,890) Principal payments on long-term debt 0 (19,367) (40,817) Acquisition of Treasury Stock 0 0 (500,100) Cash generated by financing: 1,033,300 27,083 8,880,202 Change in cash (704,240) (920,786) 20,000 Cash-beginning of period 724,240 2,002,496 0 Cash -end of period $ 20,000 $1,081,710 $ 20,000 See notes to unaudited interim financial statements.
Baltia Air Lines, Inc. Unaudited Statement of Shareholders' Equity (A Development Stage Company) Preferred Common Deficit Accumulated Common Additional During Par Stock Paid-In Development Shares Value Shares Amount Capital Stage Balance at December 31, 2007 66,500 665 279,450,534 27,945 16,233,527 (14,254,325) Exercise of Warrants and Options 46,000,000 4,600 0 Shares issued for cash 816,625 82 46,368 Shares issued for services 29,500,000 2,950 673,000 Options issued for services 1,764,099 Net Loss (3,748,537) Balance at December 31, 2008 66,500 665 355,767,159 35,577 18,716,994 (18,002,862) Exercise of Warrants and Options 48,000,000 4,800 0 Shares issued for cash 23,425,000 2,343 1,030,958 Shares issued for services 50,920,000 5,092 1,763,193 Options issued for services 600,000 Stock issued to purchase aircraft 1,000,000 100 24,900 Net Loss (4,121,308) Balance at June 30, 2009 66,500 665 479,112,159 47,911 22,136,044 (22,124,170) See notes to unaudited interim financial statements.
NOTES TO FINANCIAL STATEMENTS BALTIA AIR LINES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2009 1. Basis of Presentation The Financial Statements presented herein have been prepared by us in accordance with the accounting policies described in our December 31, 2008 Annual Report on Form 10-K and should be read in conjunction with the notes to financial statements which appear in that report. The preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on going basis, we evaluate our estimates, including those related to intangible assets, income taxes, insurance obligations and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results may differ from these estimates under different assumptions or conditions. In the opinion of management, the information furnished in this Form 10-QSB reflects all adjustments necessary for a fair statement of the financial position and results of operations and cash flows as of and for the three and nine-month periods ended September 30, 2009 and 2008. All such adjustments are of a normal recurring nature. The Financial Statements have been prepared in accordance with the instructions to Form 10-QSB and therefore do not include some information and notes necessary to conform to annual reporting requirements. The financial statements have been presented in a "development stage" format. Since inception, our primary activities have been raising of capital, obtaining financing and obtaining route authority and approval from the U.S. Department of Transportation. We have not commenced our principal revenue producing activities. 2. Earnings/Loss Per Share Basic earnings per share is computed by dividing income available to common shareholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. Diluted earnings per share assumes that any dilutive convertible securities outstanding were converted, with related preferred stock dividend requirements and outstanding common shares adjusted accordingly. It also assumes that outstanding common shares were increased by shares issuable upon exercise of those stock options for which market price exceeds the exercise price, less shares which could have been purchased by us with the related proceeds. In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive. Due to the net losses reported, dilutive common equivalent shares were excluded from the computation of diluted loss per share, as inclusion would be anti-dilutive for the periods presented. 3. Stockholders' Equity Stock Issued for Services During the nine months ended September 30, 2009 we issued 50,920,000 shares of our common stock in exchange for services. The shares were valued at $ 1,768,000 or about $0.035 per share and reflected the share market value at the time of issuance. We also issued 1,000,000 shares valued at $0.025 per share as partial payment on the acquisition of Boeing 747-200 aircraft. The shares are not registered and are subject to restrictions as to transferability. During the nine months ended September 30, 2008 we issued 7,050,000 shares of our common stock in exchange for services. The shares were valued at $ 311,000 or about $0.04 per share and reflected the share market value at the time of issuance. The shares are not registered and are subject to restrictions as to transferability. Stock Issued for Cash In 2009, we issued 23,425,000 shares of our common stock in exchange for cash. The shares were subscribed at $ 1,033,000 or about $0.05 weighted average per share. We also issued 48,000,000 in exchange for the exercise of options by Igor Dimitrowsky (our President), The shares were issued pursuant to our private placement offering, are not registered and are subject to restrictions as to transferability During the nine months ended September 30, 2008 we issued 816,625 and 16,000,000 shares of our common stock in exchange for cash and the for the exercise of options by Igor Dimitrowsky (our President), respectively. The shares sold for cash were subscribed at $ 46,250 or about $0.047 weighted average per share. The company also paid an additional $56,000 in commissions due on the 2007 common stock offering and reduced paid-in capital accordingly. The options were exercised at par value. 4. Subsequent Events On November 18, 2009 we completed the purchase of one Boeing 747-200 aircraft. The purchase price was $475,000. The aircraft did not include any engines. As of September 30, 2009 $75,000 in payments toward the purchase price had been made. On November 12, 2009 the company received $1.4 million in proceeds from an offering of its common stock. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. The following discussion includes certain forward-looking statements within the meaning of the safe harbor protections of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that include words such as "believe," "expect," "should," intend," "may," "anticipate," "likely," "contingent," "could," "may," or other future-oriented statements, are forward-looking statements. Such forward-looking statements include, but are not limited to, statements regarding our business plans, strategies and objectives, and, in particular, statements referring to our expectations regarding our ability to continue as a going concern, generate increased market awareness of, and demand for, our service, realize profitability and positive cash flow, and timely obtain required financing. These forward-looking statements involve risks and uncertainties that could cause actual results to differ from anticipated results. The forward-looking statements are based on our current expectations and what we believe are reasonable assumptions given our knowledge of the markets; however, our actual performance, results and achievements could differ materially from those expressed in, or implied by, these forward-looking statements. Our fiscal year ends on December 31. References to a fiscal year refer to the calendar year in which such fiscal year ends. OVERVIEW Baltia Air Lines, Inc. the "Company" or "Baltia" or "Baltia Air Lines") is a New York State corporation organized to conduct business as a U.S. commercial airline intending to provide international air transportation services. As a start-up airline, whose ability to provide air transportation is subject to the receipt of government operating authority, Baltia is neither offering nor accepting ticket sales at this time. Baltia's progress towards the obtaining of such authority is detailed below. On December 19, 2008, the U.S. Department of Transportation (DOT) issued its Order to Show Cause, finding that Baltia Air Lines is fit, willing and able to engage in international air transport of persons, property and mail. Baltia was awarded the non-stop route from JFK to St. Petersburg Russia. Baltia was also authorized for worldwide charter services. Baltia had filed its application with the DOT in October 2007. On March 7, 2009, following the regulatory public comment period and the Presidential Review, the DOT issued the Final Order, making its findings of the Show Cause Order final. On March 20, 2009 the DOT awarded Baltia Air Lines its initial frequencies for flights from JFK to St. Petersburg On March 25, 2009 the United States Government formally notified the Government of the Russian Federation that Baltia Air Lines has been designated for service on the JFK St. Petersburg route. In July 2009, IATA issued the two-letter Code. In July 2009, the FAA arranged for arrival and departure times at JFK Airport. On August 18, 2009, the Pulkovo Airport Authority affirmed arrival and departure times at Purlkovo Airport. On August 18, 2009, the Company executed the Aircraft Purchase Agreement for the purchase of its first Boeing 747 aircraft. On November 15, 2009, the Company paid the remaining balance and it now owns the aircraft. The aircraft was purchased without engines. In conjunction with the purchase, the seller is leasing to the company engines on a power by the hour basis. Baltia will take delivery of the aircraft and will register the ownership title with the FAA in Oklahoma City. The aircraft is scheduled for maintenance and interior upgrading. Baltia is currently conducting the FAA Air Carrier Certification process under Part 121. As a start-up airline, Baltia's ability to commence operations is subject to the receipt of government operating authority, and accordingly, no ticket sales are currently available. Upon completion of the Air Carrier Certification and the receipt of related government authorities, Baltia intends to commence scheduled non-stop service from JFK Int'l Airport in New York to Pulkovo II Int'l Airport of St. Petersburg, Russia. Baltia Air Lines' operations are based at JFK Int'l Airport, Terminal 4. We have made key operating arrangements at JFK and other service arrangements are in the process of being made. Baltia staff is now auditing air carrier manual system for SAI (Safety Attribute) compliance prior to the manual submission to the FAA. Baltia's personnel meet regulatory requirements and have recent certification experience. Following the commencement of service on the JFK-St. Petersburg route, Baltia's objective is to develop its initial route network to Russia, Latvia, Ukraine, and Belarus. Baltia's objective is to establish itself as the leading non-stop carrier in the market niche over the North Atlantic with operations that are profitable and growing over time. In order to accomplish this objective, we intend to establish and maintain high quality service standards which we believe will be competitive with the European airlines currently providing connecting flights. Baltia does not expect to be in direct competition with deep discount airlines, including several East European airlines and the offspring of the former Soviet airline Aeroflot, which provide connecting flights. Baltia intends to provide First, Business, and Voyager Class (coach) 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 SITA Reservations System. The Company intends to activate its reservations service when the DOT issues its order authorizing Baltia to sell tickets (expected to be approximately 30 to 45 days before the inaugural flight). Baltia has identified the following market segments in the U.S.-Russia market: (i) Business Travelers, (ii) General Tourism, (iii) Ethnic Travelers, (iv) Special Interest Groups, (v) Professional Exchanges, and (vi) Government and Diplomatic Travel. Baltia believes that the direct non-stop service to be offered by it will be superior to the stop-over service currently offered by foreign airlines. A comparison between the two services with respect to passenger convenience and cargo transport efficiency is set forth below. BALTIA - US flag, non-stop service: With non-stop service, a passenger can fly from JFK to St. Petersburg in about 8 hours in a Boeing B747 wide body airplane. Cargo arrives containerized, palletized, and secure. Foreign, stop-over journeys: With stop-over service, it would take a passenger 10 to 18 hours to fly through Helsinki, Copenhagen, Moscow, or Frankfurt on a foreign carrier. In addition, passengers must change to narrow-body aircraft at a layover airport. Cargo is "broken up" and manually loaded onto narrow-body aircraft, or trucked from Helsinki. Baltia plans to operate efficiently and provide consistent high quality service to passengers and cargo shippers alike in order to establish the Company as the preferred airline in the market in comparison to its competitors. The Company also plans to use targeted marketing of its service to maintain and grow its market share. Because of the increased reliability and comfort of a non-stop flight, Baltia expects to capture a portion of the existing traffic. Further, US government traffic is required by law (Fly America Act) to fly on a US Flag carrier when service is available. With the Boeing 747 true wide-body aircraft Baltia intends to provide cargo service from JFK to St. Petersburg, offering containers, pallets, and block space arrangements. Baltia expects to carry contract cargo for express shippers. Baltia also plans to market its own "Baltia Courier", "Baltia Express", and "Baltia Priority" express service for letters and packages. Baltia also expects revenues from diplomatic mail and cargo, under the Fly America Act. Baltia has prepared passenger service and ground service arrangements at JFK, and similar services are available at Pulkovo II Airport in St. Petersburg, based on recent contact. As a US carrier flying into a foreign country, Baltia will be eligible to the same degree of priority that a foreign carrier receives when arriving in the US. Baltia intends to start the JFK-St. Petersburg service with one round-trip flight per week, then increase the frequency to three round trips, and then to five round trips, within a four-month period. By starting with one roundtrip flight per week for the first four weeks, Baltia not only accelerates and simplifies its FAA Certification, but expects to save itself the additional time it would incur to make needed improvements and corrections. Starting with a light schedule, any inefficiencies of a given flight may be corrected for the next flight. Baltia management believes that in the initial four weeks, the Company will attain high operating efficiencies and service standards. These standards may be further refined during the following two months when Baltia plans to increase service to three round-trips per week. Following that, Baltia plans to increase service to five round trips per week, and then subsequently to daily round trip flights as additional aircraft are brought into service. The transitional schedule allows Baltia to train additional pilots, flight attendants, and support staff with a continuous training program. It also allows the Baltia marketing program to take effect through its various segments. During the past two years Baltia has also been preparing standards for service. The care taken in establishing high standards has implications beyond the launching of the JFK-St. Petersburg flight. Baltia plans to build operating modules and apply that know-how to develop new markets. Once established, Baltia plans to duplicate its JFK-St. Petersburg standards on flights on other transatlantic routes. By the end of year one, Baltia plans to introduce three additional aircraft. Additional revenues from charter flying. In conjunction with its Part 121 air carrier certification ("Part 121"), (referring to a Federal Aviation Regulations' number, is an industry acronym used to describe a US airline operating heavy jet aircraft) for scheduled service, Baltia intends to seek certification for world wide charter service. Following certification, Baltia plans to utilize aircraft time available between scheduled service, to earn additional revenues from charters. We are also considering qualifying our aircraft for military contracts. In order to start revenue flight operations, the Company has to complete FAA Air Carrier Certification. During the past two years the Company has been preparing for air carrier certification. The Company's staff has prior experience with the certification and is familiar with the latest System Safety & Certification Process procedures (CPD 8.0), and the Air Transportation Oversight System (ATOS) requirements. The Company currently carries $100,000,000 ground liability insurance, and prior to commencement of flight operations will carry airline liability insurance as required for a US airline by DOT regulation. As of September 30, 2009, Baltia had twenty full-time employees and ten part-time employees. Baltia's staff includes professionals who have extensive major US airline experience in aircraft maintenance, airline operations, airline regulatory compliance and administration. CRITICAL ACCOUNTING POLICIES Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of our financial statements requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Our estimates, judgments and assumptions are continually re-evaluated based upon available information and experience. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates. Areas in which significant judgment and estimates are used include, but are not limited to valuation of long lives assets and deferred income taxes. Valuation of Long-Lived Assets: We review the recoverability of our long-lived assets, including buildings, equipment and intangible assets, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. Our primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations. We amortize the costs of other intangibles (excluding goodwill) over their estimated useful lives unless such lives are deemed indefinite. Amortizable intangible assets are tested for impairment based on undiscounted cash flows and, if impaired, written down to fair value based on either discounted cash flows or appraised values. Intangible assets with indefinite lives are tested for impairment, at least annually, and written down to fair value as required. Stock-Based Compensation Plans: Stock-based awards to non-employees are accounted for using the fair value method in accordance with SFAS No. 123(R), Accounting for Stock-Based Compensation, and EITF Issue No. 96-18, Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services. On January 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards ("SFAS") 123R, "Share-Based Payment" ("SFAS 123(R)"), which requires that companies measure and recognize compensation expense at an amount equal to the fair value of share-based payments granted under compensation arrangements. Prior to January 1, 2006, we accounted for our stock-based compensation plans under the recognition and measurement principles of Accounting Principles Board ("APB") Opinion 25, "Accounting for Stock Issued to Employees," and related interpretations, and would typically recognize no compensation expense for stock option grants if options granted had an exercise price equal to the market value of the underlying common stock on the date of grant. The Company adopted SFAS 123(R) using the "modified prospective" method, which results in no restatement of prior period amounts. Under this method, the provisions of SFAS 123(R) apply to all awards granted or modified after the date of adoption. In addition, compensation expense must be recognized for any unvested stock option awards outstanding as of the date of adoption on a straight-line basis over the remaining vesting period. The Company calculates the fair value of options using a Black-Scholes option pricing model. For the nine months ended September 31, 2009 and 2008, the Company's recognized no compensation expense related to stock option grants. SFAS 123(R) also requires the benefits of tax deductions in excess of recognized compensation expense to be reported in the Statement of Cash Flows as a financing cash inflow rather than an operating cash inflow. In addition, SFAS 123(R) required a modification to the Company's calculation of the dilutive effect of stock option awards on earnings per share. For companies that adopt SFAS 123(R) using the "modified prospective" method, disclosure of pro forma information for periods prior to adoption must continue to be made. As of September 30, 2009, there was no unrecognized compensation cost related to non-vested options granted under the plan. The total fair value of shares vested during the three-month period ended September 30, 2009 was $0. In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections," which replaces APB Opinion No. 20 "Accounting Changes," and FASB Statement No. 3 "Reporting Accounting Changes in Interim Financial Statements," and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement requires retrospective application to prior periods' financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. This Statement shall be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Early adoption is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date this Statement is issued. We do not believe that adoption of SFAS 154 will have a material impact on our financial statements. In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements ("SAB 108"). SAB 108 establishes an approach that requires quantification of financial statement misstatements based on the effects of the misstatements on each of the Company's consolidated financial statements and the related financial statement disclosures. SAB 108 is effective for the year ending December 31, 2006. We are currently evaluating the effect that the adoption of SAB 108 will have on our results of operations and financial In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes an Interpretation of FASB Statement 109 ("FIN 48"), which clarifies the accounting for uncertain tax positions. This Interpretation allows the tax effects from an uncertain tax position to be recognized in the Company's financial statements if the position is more likely than not to be sustained upon audit, based on the technical merits of the position. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. We do not expect the adoption of FIN 48 to have a material impact on our financial statements. RESULTS OF OPERATIONS We had no revenues during the three months ended September 30, 2009 and 2008 because we do not fly any aircraft and cannot sell tickets. Our general and administrative expenses increased $462,024 to $727,876 in the three months ended September 30, 2009 as compared to $265,852 in the three months ended September 30, 2008. This increase is mainly the result of activity in preparing for air carrier certification and commencement of operations. Primarily as a result of the foregoing, we incurred a net loss of $937,402 in the three months ended September 30, 2009 as compared to a net loss of $416,429 in the three months ended September 30, 2008. Subsequently, since September 30, 2009, we have received $1,596,000 in investments. Our future ability to achieve profitability in any given future fiscal period remains highly contingent upon us beginning flight operations. The management believes that the company has the necessary funding and will be able to raise additional funding to commence revenue flight operations, subject to completion of the FAA Air Carrier Certification. If commenced, there can be no assurance that such operations would be profitable. Earlier in 2009 the company was exposed to a financial scam by a group of individuals who falsely presented that they had lines of credit and equity investment for the company. The company issued 15,000,000 shares but received no money. Under the threat that the company was going to notify authorities, 11,000,000 shares were returned to the company. However, the individual who appears to have masterminded the scam has not returned the remaining 4,000,000 share certificate in his possession. The shares have been cancelled, and the General Counsel has notified law enforcement authorities. LIQUIDITY AND CAPITAL RESOURCES Since our inception, we have incurred substantial operating and net losses, as well as negative operating cash flows. As of September 30, 2009, our working capital was -$108,913 and our stockholders' equity was $60,449. As compared to September 30, 2009, our working capital decreased from $1,066,708 at September 30, 2008 and our stockholders' equity decreased from $1,112,393 at September 30, 2008. Our operating activities utilized $4,121,308 in cash during the nine months ended September 30, 2009, an increase of $2,824,915 from the $1,296,396 in cash utilized during the nine months ended September 30, 2008. Our financing activities, from issuance of common stock, provided $1,033,300 and $46,450 in cash during the nine months ended September 30, 2009 and 2008, respectively. Except for the purchase of our first Boeing 747 aircraft on August 18, 2009 and subsequent maintenance and upgrades, we had no significant planned capital expenditures, budgeted or otherwise, as of September 30, 2009. Item 3. Quantitative and Qualitative Disclosures About Market Risk. None Item 4T. Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer, based on evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) required by paragraph (b) of Rule 13a-15 or Rule 15d-15, as of September 30, 2009, have concluded that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. Our Chief Executive Officer and Chief Financial Officer also concluded that, as of September 30, 2009 our disclosure controls and procedures are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. There was no change in our internal controls or in other factors that could affect these controls during the three months ended September 30, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. While existing controls may be adequate at present, upon the commencement of flight revenue service we intend to implement controls appropriate for airline operations. PART II - OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. During the nine months ended September 30, 2009 we issued 50,920,000 shares of our common stock in exchange for services. The shares were valued at $ 1,768,000 or about $0.035 per share and reflected the share market value at the time of issuance. We also issued 1,000,000 shares valued at $0.025 per share as partial payment on the acquisition of Boeing 747-200 aircraft. The shares are not registered and are subject to restrictions as to transferability. In 2009, we issued 23,425,000 shares of our common stock in exchange for cash. The shares were subscribed at $ 1,033,000 or about $0.05 weighted average per share. We also issued 48,000,000 in exchange for the exercise of options by Igor Dimitrowsky (our President), The shares were issued pursuant to our private placement offering, are not registered and are subject to restrictions as to transferability. All of the above issuances were deemed to be exempt under rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, as amended. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were accredited investors, business associates of Baltia or executive officers of Baltia, and transfer was restricted by Baltia in accordance with the requirements of the Securities Act of 1933, as amended. In addition to representations by the above-referenced persons, we have made independent determinations that all of the above-referenced persons were accredited or sophisticated investors, and that they were capable of analyzing the merits and risks of their investment, and that they understood the speculative nature of their investment. Furthermore, all of the above-referenced persons were provided with access to our Securities and Exchange Commission filings. Item 3. Default Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. None. Item 6. Exhibits. 31.1 Certification by Chief Executive Officer and Chief Financial Officer pursuant to Sarbanes-Oxley Section 302, provided herewith. 32.1 Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S. C. Section 1350, provided herewith. SIGNATURES Pursuant to the requirements of Section 12 of the Securities Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned thereunto duly authorized. DATED THIS 20th DAY OF NOVEMBER 2009 BALTIA AIR LINES, INC. /s/ Igor Dmitrowsky ------------------------ Igor Dmitrowsky Chief Executive Officer and Chief Financial Officer(principal accounting officer) EXHIBIT 31.1 BALTIA AIR LINES, INC. OFFICER'S CERTIFICATE PURSUANT TO SECTION 302 I, Igor Dmitrowsky, the Chief Executive Officer and Chief Financial Officer of Baltia Air Lines, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Baltia Air Lines, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 20, 2009 /s/ Igor Dmitrowsky ------------------------ Igor Dmitrowsky Chief Executive Officer and Chief Financial Officer (principal accounting officer) EXHIBIT 32.1 BALTIA AIR LINES, INC. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report Baltia Air Lines, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Igor Dmitrowsky, Chief Executive Officer and Chief Financial Officer (principal accounting officer) of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906 has been provided to Baltia Air Lines, Inc. and will be retained by Baltia Air Lines, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. Date: November 20, 2009 /s/ Igor Dmitrowsky ------------------------ Igor Dmitrowsky Chief Executive Officer and Chief Financial Officer (principal accounting officer)