- Quarterly Report (10-Q)

Date : 08/15/2011 @ 1:47PM
Source : Edgar (US Regulatory)
Stock : Baltic International USA Inc (GM) (BISA)
Quote : 0.001  0.0 (0.00%) @ 12:00AM

- Quarterly Report (10-Q)

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, 2011.
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.)

6002 Rogerdale Road, Suite 500, Houston, Texas 77072
(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, 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 [X] 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, 2011: 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, 2011 and December 31, 2010 3
 Statements of Operations -
 Three Months Ended June 30, 2011 and 2010
 and Six Months Ended June 30, 2011 and 2010 4
 Statements of Cash Flows -
 Six Months Ended June 30, 2011 and 2010 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 - (Removed and Reserved) 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,
 2011 2010
ASSETS

CURRENT ASSETS
 Cash and cash equivalents $ 300 $ 117
 ----------- -----------
 Total current assets 300 117

Reimbursable acquisition costs 50,000 50,000
 ----------- -----------
 Total assets $ 50,300 $ 50,117
 =========== ===========

LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES

Accounts payable and accrued liabilities $ 318,895 $ 309,844
Dividends payable 2,205,776 2,126,920
Short-term debt to officers 36,981 34,908
 ----------- -----------
 Total liabilities 2,561,652 2,471,672
 ----------- -----------

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 (16,472,600) (16,382,803)
Treasury stock, at cost (804,574) (804,574)
 ----------- -----------
 Total shareholders' deficit (2,511,352) (2,421,555)
 ----------- -----------
 Total liabilities and shareholders' deficit $ 50,300 $ 50,117
 =========== ===========

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,
 2011 2010 2011 2010
REVENUES $ - $ - $ - $ -
 ------- ------- ------- ---------
OPERATING EXPENSES:
 General and administrative 4,790 14,059 8,330 17,607
 ------- ------- ------- ---------
INCOME (LOSS) FROM OPERATIONS (4,790) (14,059) (8,330) (17,607)
 ------- ------- ------- ---------
OTHER INCOME (EXPENSE):
 Interest expense (1,329) (650) (2,611) (1,272)
 ------- ------- ------- ---------
 Total other income (expense) (1,329) (650) (2,611) (1,272)
 ------- ------- ------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (6,119) (14,709) (10,941) (18,879)
INCOME TAX EXPENSE - - - -
 ------- ------- ------- ---------
NET INCOME (LOSS) $ (6,119) $ (14,709) $ (10,941) $ (18,879)
 ======= ======= ======= =========

PER SHARE AMOUNTS
Basic and diluted $ (0.00) $ (0.00) $ (0.01) $ (0.01)

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,
 2011 2010
Cash flows from operating activities:
 Net loss $ (10,941) $ (18,879)
 Adjustments to reconcile net loss to cash flows
 from operating activities:
 Increase/decrease in current assets and
 current liabilities:
 Accounts payable and accrued liabilities 9,051 16,529
 ----------- -----------
 Net cash used by operating activities (1,890) (2,250)
 ----------- -----------

Cash flows from financing activities:
 Proceeds from short-term debt to officer 2,073 2,250
 ----------- -----------
 Net cash provided by financing activities 2,073 2,250
 ----------- -----------

Net increase in cash and cash equivalents 183 -
Cash and cash equivalents, beginning of period 117 25
 ----------- -----------
Cash and cash equivalents, end of period $ 300 $ 25
 =========== ===========

Supplemental disclosures:
Cash paid for interest $ - $ -
Cash paid for income taxes - -

Noncash investing and financing activities:
 Dividends declared and unpaid $ 78,856 $ 78,856

See accompanying notes to consolidated financial statements.

5

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-K. 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 2010 as reported in the Form 10-K have been omitted.

NOTE 2 - FINANCIAL CONDITION

We have incurred operating losses since inception. At June 30, 2011, we had an accumulated deficit of $16,472,600 and current assets and current liabilities of $300 and $2,561,652, respectively, resulting in a working capital deficit of $2,561,352. Net cash used in operating activities was $1,890 in the six months ended June 30, 2011 and $2,250 in six months ended June 30, 2010. 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, 2011. 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.

6

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, 2011 and 2010, 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,
 2011 2010 2011 2010
Net income (loss) to be
 used to compute loss
 per share:
 Net loss $ (6,119) $ (14,709) $ (10,941) $ (18,879)
 Less preferred dividends (39,476) (39,476) (78,856) (78,856)
 ---------- ---------- ---------- ----------
Net loss attributable to
 common shareholders $ (45,595) $ (54,185) $ (89,797) $ (97,735)
 ========== ========== ========== ==========


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) $ (0.01) $ (0.01)
 ========== ========== ========== ==========

7

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.

Quality Resource Technologies

In October 2010, we effected a spin-off of our subsidiary, Quality Resource Technologies, Inc. (formerly B-L Merger Sub, Inc.) ("QRT"), to our shareholders of record on October 4, 2010. Quality Resource Technologies is to develop, manufacture and sell innovative light-weight fiber reinforced shipping container and storage and housing units. QRT filed a registration statement on Form 10 on May 13, 2011 in order to register the shares distributed to our shareholders. However, the registration statement was withdrawn in July 2011 as QRT has not been able to secure financing. We are determining how to move forward with QRT.

Liquidity and Capital Resources

We had $300 in cash at June 30, 2011, compared to $117 at December 31, 2010.

At June 30, 2011, we had working capital deficit of $2,561,352 as compared to $2,471,555 at December 31, 2010. 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, 2011 was $1,890 as compared to $2,250 for the same period of 2010.

Net cash provided by financing activities for the six months ended June 30, 2011 was $2,073 as compared to $2,250 for the same period of 2010.

We have incurred operating losses since inception. At June 30, 2011, we had an accumulated deficit of $16,472,600 and current assets and current liabilities of $300 and $2,561,652, respectively, resulting in a working capital deficit of $2,561,352. 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 2010.

9

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, has 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 xchange 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. (Removed and Reserved)

Item 5. OTHER INFORMATION, None

Item 6. EXHIBITS

31 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32 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 15, 2011 By: /s/ David A. Grossman
 ---------------------- -------------------------------
 David A. Grossman
 Chief Executive Officer,
 Chief Financial Officer and
 Corporate Secretary

12

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