UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000 BALTIA AIR LINES, INC. (Baltia) (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 7 I, 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 "x" Yes "x" Required report filed herewith. Class Number of Shares Common Stock - Par Value $.0001 Per Share 3,982,552 Preferred Stock - Par Value $.01 Per Share 275,250 Transitional Small Business Disclosure Format (Check one): No "x" PART ONE - FINANCIAL INFORMATION Item 1. Financial Statement. BALTIA AIR LINES, INC. BALANCE SHEETS As At JUNE 30, 2000 ASSETS Current Assets Cash $ 3,280 Total Current Assets 3,280 Fixed Assets Property, Plant and Equipment Property, Plant and Equipment 89,656 Less Accumulated Depreciation 25,616 Net Property, Plant and Equipment 64,040 Other Assets Premedia Costs 211,248 Total Other Assets 211,248 TOTAL ASSETS $ 278,568 LIABILITIES AND STOCKHOLDERS EQUITY Current Liabilities Accounts Payable $ 48,068 Total Current Liabilities 48,068 Other Liabilities Officers Loan 119,500 Total Other Liabilities 119,500 Stockholders Equity Common Stock 399 Preferred Stock 2,753 Paid-in-Capital 7,960,288 Retained Earnings (7,852,340) Treasury Stock (100) Total Stockholders Equity 111,000 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 278,568 BALTIA AIR LINES INC. STATEMENTS OF CHANGES OF SHAREHOLDERS EQUITY SIX MONTHS ENDED JUNE 30, 2000 Preferred Stock Common Stock Additional Shares Par Value Shares Par Value Paid In Capital Balance - Dec 31, 1999 275,250 $2,753 3,982,552 399 $ 7,933,825 2000 Issue-Preferred Stock 0 0 - - 2000 Issue-Common Stock - - 0 0 26,463 Balance - June 30, 2000 275,250 2,753 3,982,552 399 7,960,288 STATEMENT OF OPERATIONS Six months Ended August 24, 1989 June 30, (Inception) to 2000 1999 June 30, 2000 (Unaudited) (Unaudited) Revenues 0 0 0 Expenses Depreciation 6,404 6,404 25,616 Interest Expense 0 0 1,242,363 General and Administrative 8,371 82,480 2,400,214 Professional fees 3,748 0 2,005,608 Service contributions 0 0 1,352,516 Training Expense 0 0 225,637 FAA Certification 0 0 206,633 Media Costs 52,812 66,015 151,835 Abandoned fixed assets 0 0 205,162 Total expenses 71,335 154,899 7,815,584 Net loss (71,335) (154,899) (7,815,584) STATEMENT OF CASH FLOWS Cash flows from Operations Six months Ended Aug 24, 1989 June 30 (inception) to 2000 1999 June 30, 2000 (Unaudited) (Unaudited) Net Income (71,335) (154,899) (7,852,339) Adjustments to reconcile net loss to net cash provided by operations: Depreciation 6,404 6,404 245,026 Change in Property, Plant and Equipment 0 0 (309,066) Interest paid by stock 0 0 63,500 Change in Premedia costs 52,812 116,016 184,842 Change in Accounts Payable (11,500) 0 1,852,512 Change in Officers Loan (2,500) 0 (249,390) Service Contributions 0 0 1,352,516 Total Adjustments 45,216 122,420 3,139,940 Net Cash Provided by Operations (26,119) (32,479) (4,712,399) Cash flows from Financing Activities: Shareholder Loans 0 0 1,351,573 Paid In Capital 26,464 31,922 2,728,044 Issuance of Common Stock 0 0 1,133,409 Issuance of Preferred Stock 0 0 2,753 Issuance of Treasury Stock 0 1,953 (500,100) Net Increase(Decrease) in Cash 345 1,396 3,280 Equivs Cash and Cash Equivalents - Beginning 2,935 2,202 0 CASH AND CASH EQUIVALENTS - ENDING 3,280 3,598 3,280 NOTES TO FINANCIAL STATEMENTS I. ORGANIZATION, NATURE OF OPERATIONS, GOING CONCERN CONSIDERATIONS (A) Organization The Company was incorporated under the laws of the state of New York on August 24, 1989. (B) Nature of Operations The Company was formed to provide commercial, passenger, cargo and mail air transportation between New York and Russia. Since inception, the Company's primary activities have been raising of capital, obtaining financing and obtaining Route Authority and approval from the U.S. Department of Transportation. The Company has not yet commenced revenue producing activities. Accordingly, the Company is deemed to be a Development Stage Company. 2. ACCOUNTING POLICIES (A) Cash and Cash Equivalents The Company considers cash and cash equivalents to be all short term investments which have an initial maturity of three months or less. (B) Property and Equipment The cost of property and equipment is depreciated over the estimated useful lives of the related assets. Leasehold improvements are depreciated over the lesser of the term of the related lease or the estimated lives of the assets. Depreciation is computed on the straight-line method for financial reporting purposes and tax purposes. (E) Income Taxes Deferred income taxes arise from temporary differences between the recording of assets and or liabilities reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of the assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. To the extent that the total of deferred tax assets are not realized, a reserve is established. 3. PROPERTY and EQUIPMENT Property and equipment at June 30, 2000 (Unaudited) consisted of the following; Office Equipment $53,406 Furniture & Fixtures 6,782 Automobiles 29,465 Total 89,656 Less, Accumulated Depreciation (25,616) Total Property and Equipment $64,040 The useful lives of property and equipment for purposes of computing depreciation are; Office equipment 5-7 years Automobiles 5 Years 5. RELATED PARTY TRANSACTIONS On June 30, 1997 Steffanie Lewis was issued 125,000 restricted common shares, as negotiated with the management of the Company, in exchange for the total due to her, in the amount of $ 1,624,432. On June 23, 1997 Igor Dmitrowsky, President of the Company and a shareholder, relinquished the amount due to him totaling $22,142. Accordingly, the Company has recorded Contributed Capital in the amount of $22,142. On March 30, 1998, Various shareholders including Igor Dmitrowsky, President of the Company relinquished the amounts due them totaling $160,983. Accordingly, the Company recorded Contributed Capital in the amount of $160,983. On September 1998, Igor Dmitrowsky, President of the Company and a shareholder, relinquished the amount due to him totaling $45,711. Accordingly, the Company has recorded Contributed Capital in the amount of $45,711. On September 1998, Leonard Becker, a shareholder, relinquished the amount due to him totaling $57,000. Accordingly, the Company has recorded Contributed Capital in the amount of S57,000. 6. INCOME TAXES At June 30, 2000 the Company has a net operating loss carry forward of $7,852,340 which is available to offset future taxable income. The carry forwards start to expire between the year 2006 and 2013. The Company is still liable for certain minimum state and city taxes. As of June 30, 2000, a net deferred tax benefit has not been reflected to record temporary differences between the amount of assets and liabilities recorded for financial reporting and income tax purposes due to the establishment of a 100% valuation allowance relating to the uncertainty of recoverability. 7. STOCKHOLDERS' DEFICIT (A) Stock Options In 1992, the Company granted options to purchase 43,583 restricted shares of common stock, at $80.00 per share, to certain private investors. These options expire upon the passing of thirty full calendar months after the Company has made a public sale of securities in compliance with the Securities Act of 1933, as amended, or the passing of twenty years from date of said agreements, whichever is earlier. As of June 30, 2000, no options have been exercised. (B) Retirement or Stock On November 4, 1992, the Company issued 10,416 restricted shares of stock for $500,000 to a private investor. On November 24, 1992, these shares were repurchased for the same amount from the investor and subsequently retired. (C) Acquisition of Common Treasury Stock On September 28, 1998 the Company purchased from Igor Dmitrowsky, president of the Company, 833,333 common shares for $100 and has granted him an option to repurchase 1,000,000 common shares from the Company at $100 upon the completion or the Company's inaugural flight or upon the exercise of any warrants, whichever occurs first. (D) Reverse Stock Split On August 24, 1995, the Board of Directors authorized and the majority of the current shareholders ratified a ten for one reverse stock split of the Company's $.0001 par value common stock. On December 31, 1997, the Board of Directors authorized and the majority of the current shareholders ratified a two for one reverse stock split of the Company's $.000l par value common stock. On September 29, 1998, the Board of Directors authorized and the majority of the current shareholders ratified a one and two tenths (1.2) for one reverse stock split of the Company's $.0001 par value common stock. All references in the accompanying financial statements to the number of common shares, warrants and per share amounts have been restated to reflect the reverse stock splits. (E) Preferred Shares On December 7, 1998, the Company amended its Articles of Incorporation thereby, increasing the authorized aggregate number of preferred stock shares from 15,000 preferred stock shares at no par value to 500,000 preferred stock shares at $.01 par value. (F) Contributed Capital The Company has recorded service contributions from certain key officers who have worked for and on behalf of the Company. The service contribution amounts have been calculated based on an a normal rate of compensation, on either a full or part time basis, as based on the number of hours worked by each individual. The Company maintains no obligation, present or future, to pay or repay for any and all service contributions received. Accordingly, the Company has not recorded a liability for, accrued for, and/or accounted for any monetary reserves in connection with the service contributions. On June 23, 1997, certain of the Company's management relinquished the amount due them for back-pay totaling $270,928 Accordingly, the Company has recorded Contributed Capital in the amount of $270,928. Item 2. Management's Discussion and Plan of Operation. The Company has been working with consultants to refine tools and procedures for implementing its revenue operations plan for use when management, with the advice of consultants, determines the appropriate time. Administrative activities have been conducted to further that end and to pursue the suit identified above. The Company expects to maintain over the next twelve months. In the absence of outside investors, management is foregoing compensation and expects to contribute administrative costs necessarily incurred. The Company plans no product research and development at this time or any purchase or sale of equipment. There is no significant change in the personnel disclosed in Registration Statement 333-37409. PART II -OTHER INFORMATION Item 1. Legal Proceedings. On February 8, 1999 the Company brought suit in the New York Supreme Court, First Department against the Canadian Imperial Bank of Commerce and its wholly-owned subsidiary to compel access to clearance or for damages if access were not timely provided to preserve the Company's public offering. The action was dismissed on May 13, 1999 and appeal was made to the Appellate Division of that court. On June 8, 2000, the Supreme Court of New York, Appellate Division, First Department affirmed but stated it lacked jurisdiction to consider violations of the Securities Exchange Act. The Company requested Reargument. On February 1, 2000, the Company sued on securities violations and RICO in the US District Court for the Southern District of New York. Respondents answered with a Motion to Dismiss which was summarily granted on June 16, 2000. Item 2. Intentionally omitted. Item 3. Intentionally omitted. Item 4. Intentionally omitted. Item 5. Intentionally omitted. Item 6. Intentionally omitted. SIGNATURES In accordance with the requirements 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., Registrant Date: 12-15-2001 ____ IGOR DMITROWSKY (signed) _____ By: Igor Dmitrowsky, President Date: 12-15-2001 ____ WALTER KAPLINKSY (signed)_____ By: Walter Kaplinsky, Secretary [BLTQ00-2.wpd 011215]