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 March 31, 2002 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 [] Yes [x] Class Number of Shares Common Stock - Par Value $.0001 Per Share 48,679,757 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. WANT & ENDER C.P.A. P.C. Certified Public Accountants MARTIN ENDER CPA STANLEY Z. WANT CPA CFP Want & Ender CPA, P.C. Certified Public Accountants New York, NY May 14,2002 To Whom it May Concern: Want & Ender, CPA, P.C. grants Baltia Airlines permission to use the follwoing signed letter. Any questions or problems, please call Martin Ender, CPA at 212-684-2414. Regards, Want & Ender, CPS, P.C. 386 PARK AVENUE SOUTH - SUITE 1618 NEW YORK, NY 10016 TEL 212.684.2414 - FAX 212 684-5433 - EMAIL: WECPAPC@SPRYNET.COM WANT & ENDER C.P.A. P.C. Certified Public Accountants MARTIN ENDER CPA STANLEY Z. WANT CPA CFP Baltia Airlines, Inc. To the Board of Directors and Stockholders: We have reviewed the accompanying balance sheets of Baltia Airlines, Inc. as of March 31, 2002 and the related income statement for the period then ended in accordance with standards established by the American Institute of Certified Public Accountants. All information in these financial statements is the representation of the management of Baltia Airlines Inc. A review constists principally of inquiries of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statement in order for them to be in conformity with generally accepted accounting principles. Respectfully submitted, Want & Ender P.C. (signed) Want & Ender CPA, P.C. Certified Public Accountants New York, NY May 14,2002 386 PARK AVENUE SOUTH - SUITE 1618 NEW YORK, NY 10016 TEL 212.684.2414 - FAX 212 684-5433 - EMAIL: WECPAPC@SPRYNET.COM BALTIA AIR LINES, INC. BALANCE SHEETS As At MARCH 31, 2002 ASSETS Current Assets Cash $2,198 Total Current Assets 2,198 Fixed Assets Property, Plant and Equipment Property, Plant and Equipment 60,191 Less Accumulated Depreciation 18,565 Net Property, Plant and Equipment 41,626 TOTAL ASSETS $ 43,824 LIABILITIES AND STOCKHOLDERS EQUITY Current Liabilities Accounts Payable $ 1,500 Total Current Liabilities 1,500 Stockholders Equity Common Stock 4,868 Preferred Stock 2,753 Paid-in-Capital 8,146,033 Retained Earnings (8,111,229) Treasury Stock (100) Total Stockholders Equity 42,325 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 43,825 BALTIA AIR LINES INC. STATEMENTS OF CHANGES OF SHAREHOLDERS EQUITY THREE MONTHS ENDED MARCH 31, 2002 Preferred Stock Common Stock Additional Shares Par Value Shares Par Value Paid In Capital Balance - Dec 31, 2001 275,250 $2,753 48,679,757 $4,868 $8,138,593 2002 Issue-Preferred Stock 0 0 - - 2002 Issue-Common Stock - - 0 0 7,440 Balance - March 31, 2002 275,250 $2,753 48,679,757 $4,868 $8,146,033 STATEMENT OF OPERATIONS Three months Ended August 24, 1989 March 31, (Inception) to 2002 2001 Mar 31, 2002 (Unaudited) (Unaudited) Revenues 0 0 0 Expenses Depreciation $ 3,202 $ 3,202 $ 264,238 Interest Expense 0 0 1,066,659 General and Administrative 6,066 4,185 2,415,149 Professional fees 0 1,874 2,012,152 Service contributions 0 0 1,352,516 Training Expense 0 0 225,637 FAA Certification 0 0 206,633 Media Costs 52,812 26,406 363,083 Abandoned fixed assets 0 0 205,162 Total expenses 62,080 35,667 8,111,229 Net loss $ (62,080) $(35,667) $ (8,111,229) STATEMENT OF CASH FLOWS Cash flows from Operations Three months Ended Aug 24, 1989 Mar 31, (inception) to 2002 2001 Mar 31, 2002 (Unaudited) (Unaudited) Net Income $(62,080) $(35,667) $(8,111,229) Adjustments to reconcile net loss to net cash provided by operations: Depreciation 3,202 3,202 264,238 Change in Property, Plant and Equipment 0 0 (309,066) Interest paid by stock 0 0 63,500 Change in Premedia costs 52,812 26,406 400,301 Change in Accounts Payable (2,379) (5,750) 1,800,194 Change in Officers Loan 0 (1,250) (368,890) Service Contributions 0 0 1,352,516 Total Adjustments 53,635 22,608 3,202,793 Net Cash Provided by Operations (8,445) (13,059) (4,908,436) Cash flows from Financing Activities: Shareholder Loans 0 0 1,351,573 Paid In Capital 7,440 13,232 2,922,433 Issuance of Common Stock 0 0 1,133,976 Issuance of Preferred Stock 0 0 2,753 Issuance of Treasury Stock 0 0 (500,100) Net Increase(Decrease) in Cash (1,005) 173 2,199 Equivs Cash and Cash Equivalents - 3,627 2,935 0 Beginning CASH AND CASH EQUIVALENTS - $ 2,622 $ 3,108 $ 2,199 ENDING 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 March 31, 2002 (Unaudited) consisted of the following; Office Equipment $53,406 Furniture & Fixtures 6,782 Total 60,191 Less, Accumulated Depreciation (18,565) Total Property and Equipment $41,626 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 The Company's legal counsel, Steffanie Lewis, of the International Business Law Firm, P.C. owns 803,750 restricted shares of common stock at March 31, 2002 or approximately 12.8% of the Company's issued and outstanding common stock. Ms. Lewis was issued 125,000 restricted common shares in June 1997 in exchange for legal work performed in connection with various certifications, authorities and financial matters. She was previously issued 33,333 of restricted common shares in exchange for the first six months preparation of the 1990 application to the Department of Transportation for Air Line Fitness Certification. 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 $57,000. 6. INCOME TAXES At December 31, 2001 the Company has a net operating loss carry forward of $7,001,186 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 December 31, 2001, 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 305,081 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 December 31, 2001, no options have been exercised. (B) Retirement or Stock On November 4, 1992, the Company issued 72,912 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, 5,833,331 common shares for $100 and has granted him an option to repurchase 7,000,000 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) 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. On November 30, 2001 the Board of Directors authorized and the majority of the current shareholders ratified a seven for one stock split of the Company's $0.0001 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 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. 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 March 28, 2992, the U.S. Supreme Court denied the Company's petition for a writ of certiorari. Item 2. Changes in Securities. Intentionally omitted. Item 3. Default Upon Senior Securities. Intentionally omitted. Item 4. Submission of Matters to a Vote of Security Holders. A special Board of Directors Meeting was held at 9:00 a.m. on January 28, 2002 at the Company's corporate offices at which an absolute majority of shareholders were present. The absolute majority of shareholders unanimously consented to the following resolution: Resolved, that (i) the company's stock listing on the Pink Sheets is approved; and (ii) upgrade from the Pink Sheets to the Bulleting Board is approved. 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: 5-14-2002 ____ IGOR DMITROWSKY (signed) _____ By: Igor Dmitrowsky, President Date: 5-14-2002 ____ WALTER KAPLINKSY (signed)_____ By: Walter Kaplinsky, Secretary [BLTQ02-1.wpd 020514]