-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IngwG+Bg+19l7K9MNPlnn7n0GOKCjWLOr3tFnO8a6NKsMp3Pt6s4UrMEa+dOaylC 0yxooG/91p1nOfL0weJD8A== 0000918545-00-000019.txt : 20000523 0000918545-00-000019.hdr.sgml : 20000523 ACCESSION NUMBER: 0000918545-00-000019 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000522 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BALTIC INTERNATIONAL USA INC CENTRAL INDEX KEY: 0000918545 STANDARD INDUSTRIAL CLASSIFICATION: ARRANGEMENT OF TRANSPORTATION OF FREIGHT & CARGO [4731] IRS NUMBER: 760336843 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-26558 FILM NUMBER: 640880 BUSINESS ADDRESS: STREET 1: 5151 SAN FELIPE STREET 2: SUITE 1661 CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 7139619299 MAIL ADDRESS: STREET 1: 5151 SAN FELIPE STREET 2: SUITE 1661 CITY: HOUSTON STATE: TX ZIP: 77056 10QSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarterly Period Ended March 31, 2000. OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period From to . Commission File Number: 0-26558 BALTIC INTERNATIONAL USA, INC. (Exact name of small business issuer as specified in its charter) TEXAS 76-0336843 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 5151 San Felipe, Suite 1661, Houston, Texas 77056 (Address of principal executive offices) (713) 961-9299 (Issuer's telephone number) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . Number of shares outstanding of each of the issuer's classes of common stock as of May 15, 2000: 9,975,960 shares. Transitional Small Business Disclosure Format (Check one): Yes ; No X . BALTIC INTERNATIONAL USA, INC. TABLE OF CONTENTS Page PART I - FINANCIAL INFORMATION Item 1 - Consolidated Financial Statements Condensed Balance Sheets - March 31, 2000 and December 31, 1999 3 Condensed Statements of Operations - Three Months Ended March 31, 2000 and 1999 4 Condensed Statements of Cash Flows - Three Months Ended March 31, 2000 and 1999 5 Notes to Condensed Financial Statements 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II - OTHER INFORMATION Item 1 - Legal Proceedings 11 Item 2 - Changes in Securities 11 Item 3 - Defaults on Senior Securities 11 Item 4 - Submission of Matters to a Vote of Security Holders 11 Item 5 - Other Information 11 Item 6 - Exhibits and Reports on Form 8-K 11 Signatures 12 PART I - FINANCIAL INFORMATION Item 1 - FINANCIAL STATEMENTS BALTIC INTERNATIONAL USA, INC. Condensed Consolidated Balance Sheets March 31, December 31, 2000 1999 (unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 179,424 $ 868,522 Accounts receivable 61,452 45,825 Note receivable 106,456 89,100 Inventory 38,255 50,638 Prepaids and deposits 13,338 10,352 ----------- ----------- Total current assets 398,925 1,064,437 ----------- ----------- PROPERTY AND EQUIPMENT, net 175,505 14,229 INVESTMENT IN AND ADVANCES TO JOINT OPERATIONS 1,500 1,500 GOODWILL 802,456 - OTHER ASSETS 54,474 33,524 ----------- ----------- Total assets $ 1,432,860 $ 1,113,690 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 267,432 $ 270,076 Dividends payable 428,108 388,632 Short-term debt 54,781 - ----------- ----------- Total current liabilities 750,321 658,708 LONG-TERM DEBT 404,272 - ----------- ----------- Total liabilities 1,154,593 658,708 ----------- ----------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Warrants 252,793 256,793 Preferred stock: Series A, convertible, $10 par value, 499,930 shares authorized, 123,000 shares issued and outstanding 1,230,000 1,230,000 Series B, convertible, $10 par value, $25,000 stated value, 70 shares authorized, 14 shares issued and outstanding 350,000 350,000 Common stock, $.01 par value, 40,000,000 shares authorized, 15,629,229 shares issued and 9,975,960 and 9,455,960 shares outstanding 156,292 156,292 Additional paid-in capital 12,752,337 12,763,943 Accumulated deficit (13,658,582) (13,419,467) Treasury stock, at cost (804,573) (878,579) ----------- ----------- Total shareholders' equity 278,267 454,982 ----------- ----------- Total liabilities and shareholders' equity $ 1,432,860 $ 1,113,690 =========== =========== See accompanying notes to condensed consolidated financial statements. BALTIC INTERNATIONAL USA, INC. Condensed Consolidated Statements of Operations (unaudited) Three Months Ended March 31, 2000 1999 REVENUES: Refrigerants $ 87,613 - Beverage distribution 46,733 57,431 General sales agency revenue 2,726 6,752 ----------- ----------- Total operating revenues 137,072 64,183 ----------- ----------- OPERATING EXPENSES: Cost of revenue 109,994 61,409 General and administrative 225,794 126,878 ----------- ----------- Total operating expenses 335,788 188,287 ----------- ----------- LOSS FROM OPERATIONS (198,716) (124,104) ----------- ----------- OTHER INCOME (EXPENSE): Interest expense (11,423) (8,875) Interest income 10,950 - Other (450) (3,173) ----------- ----------- Total other income (expense) (923) (12,048) ----------- ----------- LOSS BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS (199,639) (136,152) INCOME TAX EXPENSE - - ----------- ----------- LOSS FROM CONTINUING OPERATIONS (199,639) (136,152) DISCONTINUED OPERATIONS - (297,544) ----------- ----------- NET LOSS $ (199,639) $ (433,696) =========== =========== LOSS PER SHARE AMOUNTS (Basic and Diluted): Continuing operations $ (0.02) $ (0.01) Discontinued operations $ - $ (0.02) Total $ (0.02) $ (0.03) See accompanying notes to condensed consolidated financial statements. BALTIC INTERNATIONAL USA, INC. Condensed Consolidated Statements of Cash Flows (unaudited) Three Months Ended March 31, 1999 1998 Cash flows from operating activities: Net loss $ (199,639) $ (433,696) Noncash adjustments: Net equity in (earnings) and losses of joint operations - 297,544 Gain on sale of assets - (121) Other 20,869 2,506 Changes in current assets and current liabilities (40,075) (123,060) ----------- ----------- Net cash used by operating activities (218,845) (256,827) ----------- ----------- Cash flows from investing activities: Advances made on note receivable (17,356) - Acquisition cost for purchase of Advanced Reclamation, net of cash received of $3,721 (444,937) - Proceeds from sale of Air Baltic - 2,144,333 Acquisition of property and equipment (3,916) - ----------- ----------- Net cash provided (used) by investing activities (466,209) 2,144,333 ----------- ----------- Cash flows from financing activities: Borrowings of debt from an officer - 12,000 Repayment of debt (4,044) (2,000,000) ----------- ----------- Net cash used by financing activities (4,044) (1,988,000) ----------- ----------- Net decrease in cash and cash equivalents (689,098) (100,494) Cash and cash equivalents, beginning of period 868,522 110,380 ----------- ----------- Cash and cash equivalents, end of period $ 179,424 $ 9,886 =========== =========== See accompanying notes to condensed consolidated financial statements. BALTIC INTERNATIONAL USA, INC. Notes to Condensed Consolidated Financial Statements NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared by Baltic International USA, Inc. (the "Company") and include all adjustments which are, in the opinion of management, necessary for a fair presentation of financial results for the three months ended March 31, 2000 and 1999, pursuant to the rules and regulations of the Securities and Exchange Commission. All adjustments and provisions included in these consolidated statements are of a normal recurring nature. The information contained herein is condensed from that which would appear in the annual financial statements; accordingly, the financial statements included herein should be reviewed in conjunction with the financial statements and related notes thereto contained in the Annual Report on Form 10-KSB filed by the Company with the Securities and Exchange Commission for the fiscal year ended December 31, 1999. Accounting measurement at interim dates inherently involve greater reliance on estimates than at year-end. The results of operations for the interim period presented are not necessarily indicative of the results which can be expected for the entire year. NOTE 2 - OPERATIONS AND FINANCIAL CONDITION The Company was organized to identify, form and participate in aviation- related and other business ventures in Eastern Europe. The Company owned an 8.02% interest in Air Baltic Corporation SIA ("Air Baltic"), the national airline of Latvia. On January 4, 1999, the Company sold its interest in Air Baltic to Scandinavian Airlines System Denmark-Norway-Sweden for $2,144,333 in cash. Through October 1999, the Company had catering operations through its interest in AIRO Catering Services ("AIRO"). In July 1999, the Company sold a 23% interest in AIRO for consideration that included $250,000 cash and in October 1999, the Company sold the remaining 23% of AIRO for $1,145,000 in cash and forgiveness of approximately $200,000 in debt. American Distributing Company ("ADC"), a wholly owned subsidiary, began operations on December 1, 1995 as a beverage and food distribution company. In August 1998, the Company ceased operations as a cargo marketing and sales company to Air Baltic and other airlines through its wholly owned subsidiary, Baltic World Air Freight ("BWAF"). The Company also owns 89% of Baltic International Airlines ("BIA"), a joint venture registered in the Republic of Latvia. The routes and passenger service operations of BIA were transferred to Air Baltic effective October 1, 1995, and BIA has not conducted any substantive business operations since that date. In February 2000, the Company purchased Advanced Reclamation Company ("ARC") from the Nicol Family Partnership for $400,000 in cash, a total of 500,000 common shares of the Company, a note payable to seller of an additional $400,000 and an earnout agreement. The note payable matures on January 1, 2005, has an interest rate of 10% with interest due quarterly and is collateralized by the fixed assets of ARC. The note payable has a prepayment provision such that prepayments of principal are to be made equal to the ARC's annual pretax profits in excess of $225,000. However, the prepayments are not to exceed $120,000 for any year. The earnout agreement provides for an equal split of ARC's annual pretax profits in excess of $225,000 between the Company and the Nicol Family Partnership for a period of three years ending December 31, 2002. The Company recorded goodwill of $812,613 related to the purchase of ARC. Goodwill is amortized over 20 years. The Company has incurred operating losses since inception through March 31, 2000. At March 31, 2000, the Company had an accumulated deficit of $13,658,582 and current assets and current liabilities of $398,925 and $750,321, respectively, resulting in a working capital deficit of $351,396. Net cash used in operating activities was $218,845 in the three months ended March 31, 2000 and $256,827 in three months ended March 31, 1999. The Company currently has limited cash resources available and has obligations due or past due. Management believes that the Company will be able to achieve a satisfactory level of liquidity to meets its business plan and capital needs through December 31, 2000. Additionally, management believes the Company has the ability to obtain additional financing from key officers, directors and certain investors. Management also believes that the Company can continue to defer certain amounts payable by the Company that are either currently payable or past due. However, there can be no assurance the Company will be successful to meet its liquidity needs. The above factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets or other adjustments should the Company be unable to continue as a going concern. NOTE 3 - NEW ACCOUNTING PRONOUNCEMENTS In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up Activities" which requires at adoption the Company to write-off any unamortized start-up costs as a cumulative change in accounting principle and, going forward, expense all start-up activity costs as they are incurred. The Company adopted SOP 98-5 in the first quarter of 1999 and the adoption had a negative effect on its net equity in earnings of joint operations of $298,877 as a result of the write-off of AIRO's unamortized start-up costs. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. Changes in the derivative's fair value will be accounted for based upon their intended use and designation. Since the Company's holdings in such instruments are minimal, adoption of this standard is not expected to have a material effect on the consolidated financial statements. The Company is required to adopt SFAS No. 133 not later than the first quarter of fiscal 2001. NOTE 4 - DISCONTINUED OPERATIONS In August 1998, the Company ceased the operations of BWAF. At March 31, 2000, BWAF had current assets aggregating $10,960, noncurrent assets of $2,024 and current liabilities of $148,302 which are included in the Company's consolidated financial statements. In July 1999, the Company sold a 23% interest in AIRO to ORESA Ventures N.V. and Celox S.A. in exchange for an aggregate of 6,250,000 shares of the Company's common stock, warrants to purchase 6,250,000 shares of the Company's common stock and $250,000 in cash. In October 1999, the Company sold the remaining 23% of AIRO to ORESA Ventures N.V. and Celox S.A. for $1,145,000 in cash and forgiveness of approximately $200,000 in debt. The Company recognized a gain of $1,457,059 on these sales. At March 31, 2000, the Company has receivables from AIRO aggregating $777,831. When these receivables are received, additional gains will be recorded by the Company. The consolidated statements reflect the operating results of the discontinued operations separately from continuing operations. Amounts for prior periods have been restated. The net equity in losses from joint operations in 1999 has been included in discontinued operations. NOTE 5 - LOSS PER COMMON SHARE The computations of loss per common share are computed using 9,787,389 and 15,586,785 weighted average shares of common stock for the three months ended March 31, 2000 and 1999, respectively. Stock warrants and options are considered to be dilutive for earnings per share purposes if the average market price during the period exceeds the exercise price and the Company had earnings for the period. For the three months ended March 31, 2000 and 1999, all stock warrants and options are considered anti-dilutive. Supplemental disclosures for loss per share are as follows: Three Months Ended March 31, 2000 1999 Basic and diluted Net loss to be used to compute loss per share: Net loss $ (199,639) $ (433,696) Less preferred dividends (39,476) (39,380) ------------ ------------ Net loss attributable to common shareholders $ (239,115) $ (473,076) ============ ============ Weighted average number of shares: Average common shares outstanding 9,787,389 15,586,785 ============ ============ Basic and diluted loss per common share $ (0.02) $ (0.03) ============ ============ NOTE 6 - SEGMENT INFORMATION Reportable segments are based on internal organizational structure and are comprised of Refrigerants, Catering, Airlines and Distribution. As a result of the acquisition of ARC in 2000, the Company added the segment of Refrigerants for the operations of ARC. Segment financial information is summarized as follows:
Corporate Refrigerants Catering Airlines Distribution and Other Total First Quarter 2000 Revenues $ 87,613 $ - $ 2,726 $ 46,733 $ - $ 137,072 Income (loss) before income taxes and discontinued operations (62,403) - 2,726 (22,283) (117,679) (199,639) Discontinued operations - - - - - - Net income (loss) (62,403) - 2,726 (22,283) (117,679) (199,639) Total assets at end of period 256,772 - - 39,659 1,136,429 1,432,860 1999 Revenues $ - $ - $ 6,752 $ 57,431 $ - $ 64,183 Income (loss) before income taxes and discontinued operations - - 4,329 (28,724) (111,757) (136,152) Discontinued operations - (297,544) - - - (297,544) Net income (loss) - (297,544) 4,329 (28,724) (111,757) (433,696) Total assets at end of period - 834,338 - 161,846 129,541 1,125,725
BALTIC INTERNATIONAL USA, INC. Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussions contain forward-looking information. Readers are cautioned that such information involves risks and uncertainties, including those created by general market conditions, competition and the possibility of events may occur which limit the ability of the Company to maintain or improve its operating results or execute its primary growth strategy. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate, and there can therefore be no assurance that the forward-looking statements included herein will prove to be accurate. The inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. The Company's revenues are derived from its equity in the net income of its joint operations and from revenue generated by BWAF and ADC. Quarter Ended March 31, 2000 and 1999 For the quarter ended March 31, 2000, the Company had revenues of $137,072 compared with $64,183 for the quarter ended March 31, 1999. The increase is primarily due to the acquisition of ARC effective January 1, 2000. As a result of the purchase of ARC, the Company added the refrigerant management business to our operations. Management believes that the refrigerant revenue for the first quarter will be low compared to remainder of 2000 due to the change in ownership of ARC in the first quarter and the seasonality of the refrigerant business. The Company's operating expenses for the quarter ended March 31, 2000 were $335,788 compared to $188,287 for the same quarter in 1999. The increase is due to acquisition of ARC with the added cost of revenue and general and administrative expenses for the refrigerant operation. Interest expense increased to $11,423 in the first quarter of 2000 from $8,875 in 1999, reflecting the new debt incurred in connection with the purchase of ARC in 2000. The Company had a net loss of $199,639 for the quarter ended March 31, 2000 compared to a net loss of $433,696 for the quarter ended March 31, 1999. This decrease is primarily due to the adoption of AICPA SOP 98-5, "Reporting on the Costs of Start-Up Activities" in 1999 which requires at adoption the Company to write-off any unamortized start-up costs as a cumulative change in accounting principle and, going forward, expense all start-up activity costs as they are incurred. The Company's share of the write-off of AIRO's start-up costs as of January 1, 1999 was $298,877. Liquidity and Capital Resources The Company had $179,424 in cash at March 31, 2000, compared to $868,522 at December 31, 1999. Significant payments made in the first quarter of 2000 include $440,000 in connection with the purchase of ARC and $87,000 paid to officers for deferred compensation previously accrued. At March 31, 2000, the Company had working capital deficit of $351,396 as compared to working capital of $405,729 at December 31, 1999. The decrease in the working capital is due primarily to the cash paid for the purchase of ARC. Net cash used in operating activities for the three months ended March 31, 2000 was $218,845 as compared to $256,827 for the same period of 1999. Net cash used by investing activities was $466,209 for the three months ended March 31, 2000 compared to net cash provided of $2,144,333 for the three months ended March 31, 1999. The decrease in net cash provided by investing activities is due to the sale of the interest in Air Baltic in 1999. Net cash used by financing activities was $4,044 for the three months ended March 31, 2000 compared to $1,988,000 for the three months ended March 31, 1999. Such decrease was primarily due to the repayment of the note payable to a shareholder in 1999. The Company has incurred losses since inception through March 31, 2000. At March 31, 2000, the Company had an accumulated deficit of $13,658,582 and current assets and current liabilities of $398,925 and $750,321, respectively, resulting in a working capital deficit of $351,396. The Company currently has limited cash resources available and has obligations due or past due. The above factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets or other adjustments should the Company be unable to continue as a going concern. BALTIC INTERNATIONAL USA, INC. PART II - OTHER INFORMATION Item 1. Legal Proceedings, None Item 2. Changes in Securities, None Item 3. Defaults Upon Senior Securities, None Item 4. Submission of Matters to a Vote of Security-Holders, None Item 5. Other Information, None Item 6. Exhibits and Reports on Form 8-K: (a) Exhibits 27 Financial Data Schedule (b) The Company filed a Current Report on Form 8-K dated February 2, 2000 pursuant to which the Company purchased Advanced Reclamation Company, L.L.C. from the Nicol Family Partnership. BALTIC INTERNATIONAL USA, INC. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BALTIC INTERNATIONAL USA, INC. (Registrant) Date: May 19, 2000 By: /s/ Robert L. Knauss ---------------------- ---------------------------------- Robert L. Knauss Chairman of the Board and Chief Executive Officer Date: May 19, 2000 By: /s/ David A. Grossman ---------------------- ---------------------------------- David A. Grossman President, Chief Financial Officer and Corporate Secretary EX-27 2
5 3-MOS 3-MOS DEC-31-2000 DEC-31-1999 MAR-31-2000 MAR-31-1999 179,424 9,886 0 0 167,908 159,133 0 0 38,255 47,957 398,925 227,033 175,505 32,705 0 0 1,432,860 1,125,725 750,321 889,267 0 0 0 0 1,580,000 1,580,000 156,292 156,292 (1,458,025) (1,499,834) 1,432,860 1,125,725 137,072 64,183 137,072 64,183 109,994 61,409 335,788 188,287 450 3,173 0 0 11,423 8,875 (199,639) (136,152) 0 0 (199,639) (136,152) 0 (297,544) 0 0 0 0 (199,639) (433,696) (0.02) (0.03) (0.02) (0.03)
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