U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For Quarterly Period Ended June 30, 2009.
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.)
24 E. Greenway Plaza, Suite 1875, Houston, Texas 77046
(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 [ ] No [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. Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, and
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of "large accelerated filer," "accelerated filer" and
"smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-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). Yes [X] No [ ].
Number of shares outstanding of each of the issuer's classes of common stock
as of July 31, 2009: 10,975,760 shares.
BALTIC INTERNATIONAL USA, INC.
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements (unaudited)
Balance Sheets -
June 30, 2009 and December 31, 2008 3
Statements of Operations -
Three Months Ended June 30, 2009 and 2008
and Six Months Ended June 30, 2009 and 2008 4
Statements of Cash Flows -
Six Months Ended June 30, 2009 and 2008 5
Notes to Financial Statements 6
Item 2 - Management's Discussion and Analysis or Plan of Operation 8
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 9
Item 4 - Controls and Procedures 10
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 11
Item 1A - Risk Factors 11
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds 11
Item 3 - Defaults Upon Senior Securities 11
Item 4 - Submission of Matters to a Vote of Security Holders 11
Item 5 - Other Information 11
Item 6 - Exhibits 11
Signatures 12
2
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
BALTIC INTERNATIONAL USA, INC.
Consolidated Balance Sheets
(unaudited)
June 30, December 31,
2009 2008
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 25 $ 25
----------- -----------
Total assets $ 25 $ 25
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 230,205 $ 226,029
Dividends payable 1,889,776 1,850,300
Short-term debt to officers 19,470 19,470
----------- -----------
Total liabilities 2,139,451 2,095,799
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT
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, 16,629,229 shares issued and
10,975,760 shares outstanding 166,292 166,292
Additional paid-in capital 13,019,530 13,019,530
Accumulated deficit (16,100,674) (16,057,022)
Treasury stock, at cost (804,574) (804,574)
----------- -----------
Total shareholders' deficit (2,139,426) (2,095,774)
----------- -----------
Total liabilities and shareholders' deficit $ 25 $ 25
=========== ===========
See accompanying notes to consolidated financial statements.
3
BALTIC INTERNATIONAL USA, INC.
Consolidated Statements of Operations
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2009 2008 2009 2008
REVENUES $ - $ - $ - $ -
------- ------- ------- ---------
OPERATING EXPENSES:
General and administrative 3,546 3,547 7,091 11,495
------- ------- ------- ---------
INCOME (LOSS) FROM OPERATIONS (3,546) (3,547) (7,091) (11,495)
------- ------- ------- ---------
OTHER INCOME (EXPENSE):
Interest expense (630) (630) (1,252) (1,259)
------- ------- ------- ---------
Total other income (expense) (630) (630) (1,252) (1,259)
------- ------- ------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (4,176) (4,177) (8,343) (12,754)
INCOME TAX EXPENSE - - - -
------- ------- ------- ---------
NET INCOME (LOSS) $ (4,176) $ (4,177) $ (8,343) $ (12,754)
======= ======= ======= =========
PER SHARE AMOUNTS
Basic and diluted $ (0.00) $ (0.00) $ (0.00) $ (0.00)
WEIGHTED AVERAGE OUTSTANDING
COMMON SHARES:
Basic and diluted 10,975,760 10,975,760 10,975,760 10,975,760
See accompanying notes to consolidated financial statements.
4
BALTIC INTERNATIONAL USA, INC.
Consolidated Statements of Cash Flows
(unaudited)
Six Months Ended June 30,
2009 2008
Cash flows from operating activities:
Net loss $ (8,343) $ (12,754)
Adjustments to reconcile net loss to cash flows
from operating activities:
Share-based compensation - 4,400
Increase/decrease in current assets and
current liabilities:
Accounts payable and accrued liabilities 8,343 8,354
----------- -----------
Net cash used by operating activities - -
----------- -----------
Net increase (decrease) in cash and cash
equivalents - -
Cash and cash equivalents, beginning of period 25 25
----------- -----------
Cash and cash equivalents, end of period $ 25 $ 25
=========== ===========
Supplemental disclosures:
Cash paid for interest $ - $ -
Cash paid for income taxes - -
Noncash investing and financing activities:
Dividends declared and unpaid $ 78,856 $ 78,952
See accompanying notes to consolidated financial statements.
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BALTIC INTERNATIONAL USA, INC.
Notes to Consolidated Financial Statements
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements of
Baltic International USA, Inc. have been prepared in accordance with accounting
principles generally accepted in the United States of America and the rules of
the Securities and Exchange Commission, and should be read in conjunction with
the audited financial statements and notes thereto contained in our Annual
Report filed with the SEC on Form 10-KSB. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of financial position and the results of operations for the
interim periods presented have been reflected herein. The results of
operations for interim periods are not necessarily indicative of the results to
be expected for the full year. Notes to the consolidated financial statements
which would substantially duplicate the disclosure contained in the audited
consolidated financial statements for fiscal 2008 as reported in the
Form 10-KSB have been omitted.
NOTE 2 - FINANCIAL CONDITION
We have incurred operating losses since inception. At June 30, 2009, we
had an accumulated deficit of $16,100,674 and current assets and current
liabilities of $25 and $2,139,451, respectively, resulting in a working
capital deficit of $2,139,426. Net cash used in operating activities was $0
in the six months ended June 30, 2009 and $0 in six months ended June 30,
2008. We currently have limited cash resources available and have obligations
due or past due.
Management believes that we will be able to achieve a satisfactory level
of liquidity to meets its business plan and capital needs through December 31,
2009. Additionally, management believes we have the ability to obtain
additional financing from key officers, directors and certain investors.
Management also believes that we can continue to defer certain amounts payable
by us that are either currently payable or past due. However, there can be no
assurance we will be successful to meet its liquidity needs.
NOTE 3 - WARRANTS
On March 24, 2008, we extended the expiration date of the public warrants to
April 26, 2012. In connection with the extension, we recognized $4,400 of
expense.
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NOTE 4 - LOSS PER COMMON SHARE
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 we had earnings for the period. For the periods ended
June 30, 2009 and 2008, all stock warrants and options are considered
anti-dilutive. Supplemental disclosures for loss per share are as follows:
Three Months Ended June 30, Six Months Ended June 30,
2009 2008 2009 2008
Net income (loss) to be
used to compute loss
per share:
Net loss $ (4,176) $ (4,177) $ (8,343) $ (8,474)
Less preferred dividends (39,476) (39,476) (78,856) (78,952)
---------- ---------- ---------- ----------
Net loss attributable to
common shareholders $ (43,652) $ (43,653) $ (87,199) $ (87,426)
========== ========== ========== ==========
Weighted average number
of shares - basic and diluted 10,975,760 10,975,760 10,975,760 10,975,760
========== ========== ========== ==========
Basic and diluted loss per
common share $ (0.00) $ (0.00) $ (0.00) $ (0.00)
========== ========== ========== ==========
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BALTIC INTERNATIONAL USA, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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 our ability to maintain or improve its operating
results or execute its primary growth strategy. Although we believe 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
us or any other person that our objectives and plans will be achieved.
Current Plan of Operations
Our current business objective for the next 12 months is to investigate
and, if such investigation warrants, acquire a target company or business
seeking the perceived advantages of being a publicly held corporation. Our
principal business objective for the next 12 months and beyond will be to
achieve long-term growth potential through a combination with a business rather
than immediate, short-term earnings. We will not restrict our potential
candidate target companies to any specific business, industry or geographical
location and, thus, may acquire any type of business.
We do not currently engage in any business activities that provide us with
positive cash flows. As such, the costs of investigating and analyzing
business combinations for the next approximately 12 months and beyond will be
paid with our current cash on hand and through funds from financing to be
obtained.
During the next 12 months we anticipate incurring costs related to filing
of Exchange Act reports and costs relating to consummating an acquisition.
We believe we will be able to meet these costs with our current cash on
hand and additional amounts, as necessary, to be loaned to or invested in us by
our stockholders or other investors.
We may consider a business which has recently commenced operations, is a
developing company in need of additional funds for expansion into new products
or markets, is seeking to develop a new product or service, or is an
established business which may be experiencing financial or operating
difficulties and is in need of additional capital. In the alternative, a
business combination may involve the acquisition of, or merger with, a company
which does not need substantial additional capital, but which desires to
establish a public trading market for its shares, while avoiding, among other
things, the time delays, significant expense, and loss of voting control which
may occur in a public offering.
Any target business that is selected may be a financially unstable company
or an entity in its early stages of development or growth, including entities
without established records of sales or earnings. In that event, we will be
subject to numerous risks inherent in the business and operations of
financially unstable and early stage or potential emerging growth companies.
In addition, we may effect a business combination with an entity in an industry
characterized by a high level of risk, and, although our management will
endeavor to evaluate the risks inherent in a particular target business, there
can be no assurance that we will properly ascertain or assess all significant
risks.
8
We anticipate that the selection of a business combination will be complex
and extremely risky. Because of general economic conditions, rapid
technological advances being made in some industries and shortages of available
capital, our management believes that there are numerous firms seeking even the
limited additional capital which we will have and/or the perceived benefits of
becoming a publicly traded corporation. Such perceived benefits of becoming a
publicly traded corporation include, among other things, facilitating or
improving the terms on which additional equity financing may be obtained,
providing liquidity for the principals of and investors in a business, creating
a means for providing incentive stock options or similar benefits to key
employees, and offering greater flexibility in structuring acquisitions, joint
ventures and the like through the issuance of stock. Potentially available
business combinations may occur in many different industries and at various
stages of development, all of which will make the task of comparative
investigation and analysis of such business opportunities extremely difficult
and complex.
Liquidity and Capital Resources
We had $25 in cash at June 30, 2009, compared to $25 at December 31,
2008.
At June 30, 2009, we had working capital deficit of $2,139,426 as compared
to $2,095,774 at December 31, 2008. The increase in the working capital
deficit is due primarily to the accrual of additional liabilities.
Net cash used in operating activities for the six months ended June 30,
2009 was $0 as compared to $0 for the same period of 2008.
We have incurred operating losses since inception. At June 30, 2009, we
had an accumulated deficit of $16,100,674 and current assets and current
liabilities of $25 and $2,139,451, respectively, resulting in a working
capital deficit of $2,139,426. We currently have limited cash resources
available and have obligations due or past due.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in our market risks since the end of the
fiscal year 2008.
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Item 4. CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer, after evaluating
the effectiveness of our "disclosure controls and procedures" (as defined in
the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the
end of the period covered by this Quarterly Report on Form 10-Q, have
concluded that our disclosure controls and procedures were effective to
provide reasonable assurance that information we are required to disclose in
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure.
There were no significant changes in our internal control over financial
reporting during our most recent fiscal quarter that materially affected, or
were reasonably likely to materially affect, our internal control over
financial reporting.
Limitations on the Effectiveness of Internal Control
Our management does not expect that our disclosure controls and procedures
or our internal control over financial reporting will necessarily prevent all
fraud and material errors. An internal control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because
of the inherent limitations on all internal control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, and/or by management's override of
the controls. The design of any system of internal control is also based in
part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions. Over time, controls may become
inadequate because of changes in circumstances, and/or the degree of compliance
with the policies and procedures may deteriorate. Because of the inherent
limitations in a cost-effective internal control system, financial reporting
misstatements due to error or fraud may occur and not be detected on a timely
basis.
10
BALTIC INTERNATIONAL USA, INC.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS, None
Item 1A. Risk Factors, Not Required
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS, 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
31.1 Chief Executive Officer Certification pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
31.2 Chief Financial Officer Certification pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
32.1 Chief Executive Officer Certification pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
32.2 Chief Financial Officer Certification pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
11
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: August 14, 2009 By: /s/ Robert L. Knauss
---------------------- -------------------------------
Robert L. Knauss
Chairman of the Board and
Chief Executive Officer
Date: August 14, 2009 By: /s/ David A. Grossman
---------------------- -------------------------------
David A. Grossman
Chief Financial Officer and
Corporate Secretary
12