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 June 30, 1998.
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.)
1990 Post Oak Blvd., Suite 1630, 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 August 14, 1998: 15,586,785 shares.
Transitional Small Business Disclosure Format (Check one): Yes ; No X .
<PAGE> 2
BALTIC INTERNATIONAL USA, INC.
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
Condensed Balance Sheets -
June 30, 1998 and December 31, 1997 3
Condensed Statements of Operations -
Three Months Ended June 30, 1998 and 1997
and Six Months Ended June 30, 1998 and 1997 4
Condensed Statements of Cash Flows -
Six Months Ended June 30, 1998 and 1997 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 12
Item 2 - Changes in Securities 12
Item 3 - Defaults on Senior Securities 12
Item 4 - Submission of Matters to a Vote of Security Holders 12
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 12
Signatures 13
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1 - FINANCIAL STATEMENTS
BALTIC INTERNATIONAL USA, INC.
Condensed Consolidated Balance Sheets
June 30, December 31,
1998 1997
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 352,215 $ 965,992
Accounts receivable 228,603 273,234
Inventory 106,721 195,971
Prepaids and deposits 9,830 11,446
----------- -----------
Total current assets 697,369 1,446,643
----------- -----------
PROPERTY AND EQUIPMENT, net 18,451 12,836
INVESTMENT IN AND ADVANCES TO JOINT OPERATIONS 4,390,094 4,316,168
OTHER ASSETS 28,484 31,649
GOODWILL, NET 194,118 208,848
----------- -----------
Total assets $ 5,328,516 $ 6,016,144
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 638,087 $ 669,233
Short-term debt, net 2,050,000 83,711
----------- -----------
Total current liabilities 2,688,087 752,944
----------- -----------
LONG-TERM DEBT TO A SHAREHOLDER - 2,000,000
----------- -----------
Total liabilities 2,688,087 2,752,944
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Warrants 1,306,610 1,306,610
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 and 16 shares issued and outstanding 350,000 400,000
Common stock, $.01 par value, 40,000,000 shares
authorized, 15,629,229 and 15,502,792 shares
issued and 15,586,785 and 15,460,348 shares
outstanding 156,292 155,028
Additional paid-in capital 11,717,776 11,687,809
Accumulated deficit (12,099,709) (11,495,707)
Treasury stock, at cost (20,540) (20,540)
----------- -----------
Total shareholders' equity 2,640,429 3,263,200
----------- -----------
Total liabilities and shareholders' equity $ 5,328,516 $ 6,016,144
=========== ===========
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
<TABLE>
<CAPTION>
BALTIC INTERNATIONAL USA, INC.
Condensed Consolidated Statements of Operations
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
REVENUES:
Freight revenue $ 47,699 $ 58,273 $ 94,470 $ 112,055
Food distribution 224,894 79,001 283,991 140,530
General sales agency revenue 19,500 19,500 39,000 39,000
Net equity in earnings of
joint operations (3,379) 85,785 39,151 243,674
------- ------- ------- -------
Total operating revenues 288,714 242,559 456,612 535,259
------- ------- ------- -------
OPERATING EXPENSES:
Cost of revenue 243,744 99,178 331,298 176,231
General and administrative 245,502 204,272 555,448 497,830
------- ------- ------- -------
Total operating expenses 489,246 303,450 886,746 674,061
------- ------- ------- -------
LOSS FROM OPERATIONS (200,532) (60,891) (430,134) (138,802)
------- ------- ------- -------
OTHER INCOME (EXPENSE):
Interest expense (66,250) (141,980) (133,063) (275,232)
Interest income 18,514 1 40,476 5
Other income (expense) (105) 66,642 (1,309) 70,563
------- ------- ------- -------
Total other income (expense) (47,841) (75,337) (93,896) (204,664)
------- ------- ------- -------
LOSS BEFORE INCOME TAXES (248,373) (136,228) (524,030) (343,466)
INCOME TAX EXPENSE - - - -
------- ------- ------- -------
NET LOSS $ (248,373) $ (136,228) $ (524,030) $ (343,466)
------- ------- ------- -------
LESS PREFERRED DIVIDENDS (39,510) (117,302) (79,972) (167,004)
------- ------- ------- -------
NET LOSS ATTRIBUTABLE TO COMMON
SHAREHOLDERS $ (287,883) $ (253,530) $ (604,002) $ (510,470)
======= ======= ======= =======
PER SHARE AMOUNTS:
Basic $ (0.02) $ (0.02) $ (0.04) $ (0.05)
Diluted $ (0.02) $ (0.03) $ (0.04) $ (0.07)
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
BALTIC INTERNATIONAL USA, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
For the Six Months
Ended June 30,
1998 1997
Cash flows from operating activities:
Net loss $ (524,030) $ (343,466)
Noncash adjustments:
Net equity in (earnings) and losses
of joint operations (39,151) (243,674)
Gain on sale of assets - (62,510)
Other 16,553 127,045
Changes in assets and liabilities 119,932 (100,271)
------- ---------
Net cash used by operating activities (426,696) (622,876)
------- ---------
Cash flows from investing activities:
Investment in and advances to joint
operations (14,432) (4,649)
Distributions and repayments from joint
operations - 47,228
Acquisition of property and equipment (7,438) -
------- ---------
Net cash provided (used) by
investing activities (21,870) 42,579
------- ---------
Cash flows from financing activities:
New borrowings - 55,000
Repayment of debt and long-term obligations (33,711) (10,000)
Purchase of preferred stock (59,761) -
Issuance of stock, net of related costs - 191,867
Payment of dividends (71,739) -
------- ---------
Net cash provided by financing activities (165,211) 236,867
------- ---------
Net decrease in cash and cash equivalents (613,777) (343,430)
Cash and cash equivalents,
beginning of period 965,992 384,245
------- ---------
Cash and cash equivalents, end of period $352,215 $ 40,815
======= =========
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
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 six months ended June 30,
1998 and 1997, 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, 1997. 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 currently owns an 8.02% interest in airBaltic Corporation SIA
("airBaltic"), the national airline of Latvia. The Company will expand its
catering operations through its 46% interest in AIRO Catering Services
("AIRO"). In March 1998, the Company transferred its remaining interest in
Riga Catering Services ("RCS") to AIRO as part of a capital contribution.
In January 1998, AIRO opened a in-flight catering kitchen in Tallinn,
Estonia, and in May 1998, AIRO opened its third kitchen in Kiev, Ukraine.
The Company also serves as a cargo marketing and sales company to airBaltic
and other airlines through its wholly owned subsidiary, Baltic World Air
Freight ("BWAF"). American Distributing Company ("ADC"), a wholly owned
subsidiary, began operations on December 1, 1995 as a beverage and food
distribution company.
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 airBaltic effective
October 1, 1995, and BIA has not conducted any substantive business
operations since that date. The Company made significant investment in and
advances to BIA which has incurred losses of approximately $12,700,000 from
inception through June 30, 1998.
The Company requires substantial capital to pursue its operating
strategies. To date, the Company has relied upon net cash provided by
financing activities to fund its capital requirements. There can be no
assurance that the Company's business interests will generate sufficient
cash in future periods to satisfy its capital requirements. In April 1998,
the Company obtained a line of credit in the aggregate of $800,000 from two
shareholders to provide additional liquidity. This line of credit matures
on December 31, 1999 and any outstanding balance will bear interest at a
rate of 13%. No advances are to be made under the line of credit until the
$2,000,000 loan to a shareholder is repaid, and the line of credit is
secured by the shares of stock owned in AIRO. The Company does not
anticipate needing to draw on this line of credit in 1998.
NOTE 3 - NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
comprehensive income", which establishes standards for reporting the
components of comprehensive income. The Company adopted SFAS No. 130 as of
January 1, 1998. However, the Company has no items of other comprehensive
income in any period presented in the accompanying consolidated financial
statements. Therefore, a separate statement of comprehensive income has
not been presented.
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use" which provides
guidance with respect to accounting for the various types of costs incurred
for computer software developed or obtained for the Company's use. 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 is required to and will adopt SOP 98-1 and SOP 98-5 in the first
quarter of 1999 and believes that adoption will not have a significant effect
on its consolidated financial statements.
<PAGE> 7
NOTE 4 - INVESTMENTS IN AND ADVANCES TO JOINT OPERATIONS
The investment in and advances to joint operations are as follows:
June 30, December 31,
1998 1997
Joint operations accounted for using
cost method:
airBaltic $2,144,212 $2,144,212
BIA 1,145,747 1,131,315
LAMCO 40,000 40,000
--------- ---------
Subtotal 3,329,959 3,315,527
--------- ---------
Joint operations accounted for using
equity method:
BCS 44,298 44,298
AIRO 1,015,837 784,991
RCS - 171,352
--------- ---------
Subtotal 1,060,135 1,000,641
--------- ---------
Total $4,390,094 $4,316,168
========= =========
A condensed summary of the financial position (100% basis) of the
combined joint operations accounted for using the equity method of
accounting is as follows:
June 30, December 31,
1998 1997
Current assets $ 750,787 $ 920,152
Noncurrent assets 5,592,834 3,385,511
---------- ----------
Total assets $ 6,343,621 $ 4,305,663
========== ==========
Current liabilities $ 356,898 $ 3,461,788
Minority interest 52,825 -
Equity 5,933,898 843,875
---------- ----------
Total liabilities and equity $ 6,343,621 $ 4,305,663
========== ==========
A summary of the results of operations of the combined joint
operations accounted for using the equity method of accounting is as
follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Combined 100% Basis:
Operating revenues $ 1,360,318 $ 939,818 $ 2,331,508 $ 1,390,965
=========== =========== =========== ===========
Income from operations $ 202,563 $ 222,828 $ 402,422 $ 420,347
=========== =========== =========== ===========
Net income (loss) $ (45,385) $ 232,654 $ 16,569 $ 613,986
=========== =========== =========== ===========
Company Percentage Interest:
Operating revenues $ 626,043 $ 320,130 $ 1,073,593 $ 581,995
=========== =========== =========== ===========
Income from operations $ 110,355 $ 84,568 $ 216,142 $ 166,450
=========== =========== =========== ===========
Net income (loss) $ (3,379) $ 88,116 $ 39,151 $ 246,005
=========== =========== =========== ===========
</TABLE>
<PAGE> 8
NOTE 5 - LOSS PER COMMON SHARE
The computations of loss per common share are computed using
15,586,785 and 7,680,041 weighted average shares of common stock for the
three months ended June 30, 1998 and 1997, respectively, and 15,549,031 and
7,606,757 weighted average shares of common stock for the six months ended
June 30, 1998 and 1997, respectively. Stock warrants and options are
considered to be dilutive for earnings per share purposes if the average
market price during the three and six month periods ending on the balance
sheet date exceeds the exercise price and the Company had earnings for the
period. For each of these periods, all stock warrants and options are
considered anti-dilutive.
NOTE 6 - EQUITY TRANSACTIONS
During the three months ended June 30, 1998, the Company purchased
one share of its Series B Convertible Redeemable Preferred Stock from a
shareholder for an aggregate $35,000 including accrued dividends.
<PAGE> 9
BALTIC INTERNATIONAL USA, INC.
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 June 30, 1998 and 1997
For the quarter ended June 30, 1998, the Company had revenues of
$288,714 compared with $242,559 for the quarter ended June 30, 1997. The
19% increase is due to an increase in food distribution revenue resulting
from the Company focusing the operations of ADC on beer distribution and
adding additional beers to its products for distribution. ADC is now the
largest beer importer in Latvia. This increase was partially offset by
decreases in freight revenue and net equity in earnings of catering
operations and the decrease in net equity in earnings of joint operations
is principally due to the additional general and administrative costs at
AIRO in 1998 for the infrastructure of AIRO which did not exist in the
second quarter of 1997. AIRO built up its infrastructure during the first
six months of 1998 to have its manpower in place for the expansion of new
kitchens, including the kitchen in Tallinn, Estonia opened in January 1998
and the kitchen in Kiev, Ukraine opened in May 1998. Additionally, the
Company transferred its remaining interest in RCS to AIRO in the first
quarter of 1998 as part of a capital contribution. As part of this
contribution, the Company's partners in AIRO made their pro rata share
contributions consisting of cash of $1,000,000 and services with a value of
$197,990. This transfer resulted in the Company's proportionate share of
RCS decreasing to approximately 27% for 1998 from 41% for 1997, but
increased the overall value of AIRO and maintained the Company's 46%
interest in AIRO.
The number of meals sold by AIRO's in-flight kitchens increased by
91% to 177,013 meals sold in the second quarter of 1998 from 92,778
meals sold in the second quarter of 1997. This increase is due to the
opening of the Tallinn kitchen in January 1998 and the Kiev kitchen in May
1998 and a 19% increase in meals sold in Riga.
The Company's operating expenses for the quarter ended June 30, 1998
were $489,246 compared to $303,450 for the same quarter in 1997. The
increase is due to an increase in cost of revenue resulting from higher
food distribution sales. General and administrative expenses increased to
$245,502 in 1998 from $204,272 in the same quarter of 1997. This increase
was due primarily to increased general and administrative costs of ADC in
1998 compared to 1997 and increased legal and professional costs related to
the registration of outstanding securities in 1998.
Interest expense decreased to $66,250 in the second quarter of 1998
from $141,980 in 1997, reflecting the decreased amortization of debt costs
and discount for borrowings.
The Company recorded a gain of $62,510 on the transfer of 2.82% of
RCS to AIRO during the second quarter of 1997. No such gain was recorded
in 1998.
Six months Ended June 30, 1998 and 1997
For the six months ended June 30, 1998, the Company had revenues of
$456,612 compared with $535,259 for the six months ended June 30, 1997. The
decrease in year-to-date revenues was due to a decrease in the net equity in
earnings of catering operations due to the reversal in 1997 of a reserve
recorded on the final determination of RCS' income tax status for 1996 and
the additional general and administrative costs at AIRO in 1998 for the
infrastructure of AIRO which did not exist in the first six months of 1997.
The tax determination was received in 1997 in favor of RCS. The decrease
was partially offset by the increase in food distribution revenue in the
second quarter discussed above.
The number of meals sold by AIRO's in-flight kitchens increased by
79% to 297,815 meals sold in the first six months of 1998 from 166,261
meals sold in the first six months of 1997. This increase is due to the
openings of the Tallinn kitchen in January 1998 and the Kiev kitchen in May
1998 and a 14% increase in meals sold in Riga.
<PAGE> 10
The Company's operating expenses for the six months ended June 30,
1998 were $886,746 compared to $674,061 for 1997. Year-to-date operating
expenses were impacted by the same factors that affected the second quarter
results.
The Company recorded a gain of $62,510 on the transfer of 2.82% of
RCS to AIRO during the second quarter of 1997. No such gain was recorded
in 1998.
The Company had a net loss of $524,030 for the six months ended June
30, 1998 compared to a net loss of $343,466 for the six months ended June
30, 1997.
The Company's consolidated financial statements included elsewhere
herein present the Company's share of the joint operations using the equity
method of accounting in accordance with generally accepted accounting
principles. The Company's interests in airBaltic, BIA and LAMCO are
accounted for using the cost method. The following table presents a pro
forma condensed combined statement of operations of the Company assuming
its proportionate share of the joint operations accounted for using the
equity method is combined with the Company. Management believes this
presentation is informative of the Company's results of operations given
that a significant portion of the Company's business is conducted through
the joint operations.
<TABLE>
<CAPTION>
Pro Forma Condensed Combined Statement of Operations
For the Six Months Ended June 30, 1998
Proportionate
Share of Pro Forma
Company Joint Combined
(As reported) Operations Eliminations Company
<S> <C> <C> <C> <C>
Operating revenues $ 456,612 $1,073,593 $ (39,151) $1,491,054
Operating expenses 886,746 857,451 - 1,744,197
---------- ---------- --------- ----------
Income (loss) from operations (430,134) 216,142 (39,151) (253,143)
Other income (expense) (93,896) (27,117) - (121,013)
---------- ---------- --------- ----------
Income (loss) before
income taxes (524,030) 189,025 (39,151) (374,156)
Minority interest - (120,652) - (120,652)
Provision for income taxes - (29,222) - (29,222)
---------- ---------- --------- ----------
Net income (loss) $ (524,030) $ 39,151 $ (39,151) $ (524,030)
========== ========== ========= ==========
</TABLE>
Liquidity and Capital Resources
The Company had $352,215 in cash at June 30, 1998, compared to
$965,992 at December 31, 1997.
At June 30, 1998, the Company had a working capital deficit of
$1,990,718 as compared to working capital of $693,699 at December 31, 1997.
The decrease in the working capital is due primarily to a decrease in cash
of $613,777 and an increase in short-term debt of $1,966,289. The increase in
short-term debt is primarily due to the reclassification of a $2,000,000 loan
from long-term debt at December 31, 1997 to short-term debt at June 30, 1998.
Net cash used in operating activities for the six months ended June
30, 1998 was $426,696 as compared to $622,876 for the same period of 1997.
Such decrease was primarily due to a lower level of food inventory
resulting from the focus on beer distribution for ADC, less cash used on
prepaid expenses and better collection of accounts receivable. Net cash
used by investing activities was $21,870 for the six months ended June 30,
1998 compared to $42,579 provided by investing activities for the six
months ended June 30, 1997. The change was due primarily to the decrease
in distributions from the joint operations. Net cash used by financing
activities was $165,211 for the six months ended June 30, 1998 compared to
net cash provided by common stock of $236,867 for the six months ended June
30, 1997. The change was primarily due to the proceeds of $191,867 raised
from the issuance of common stock and proceeds of $55,000 from borrowings
during 1997 with no such financing activities in 1998. Additionally, the
Company purchased two shares of its Series B Convertible Redeemable Preferred
Stock from a shareholder for an aggregate $70,000 including accrued dividends
and paid dividends of $61,500 to the shareholders of the Convertible
Redeemable Series A Preferred Stock during the first six months of 1998 with
no such payments in the first six months of 1997.
<PAGE> 11
The Company requires substantial capital to pursue its operating
strategies. To date, the Company has relied upon net cash provided by
financing activities to fund its capital requirements. There can be no
assurance that the Company's business interests will generate sufficient
cash in future periods to satisfy its capital requirements. In April 1998,
the Company obtained a line of credit in the aggregate of $800,000 from two
shareholders to provide additional liquidity. This line of credit matures
on December 31, 1999 and any outstanding balance will bear interest at a
rate of 13%. No advances are to be made under the line of credit until the
$2,000,000 loan to a shareholder is repaid, and the line of credit is
secured by the shares of stock owned in AIRO. The Company does not
anticipate needing to draw on this line of credit in 1998.
The Company's consolidated balance sheet included elsewhere herein
presents the Company's share of the joint operations using the equity
method of accounting in accordance with generally accepted accounting
principles. The Company's interests in airBaltic, BIA and LAMCO are
accounted for using the cost method. The following table presents a pro
forma condensed combined balance sheet of the Company assuming its
proportionate share of the joint operations accounted for using the equity
method is combined with the Company. Management believes this presentation
is informative of the Company's financial condition since the majority of
the Company's underlying investment in its joint operations consists of net
current assets.
Pro Forma Condensed Combined Balance Sheet
As of June 30, 1998
Proportionate
Share of Pro Forma
Company Joint Combined
(As reported) Operations Eliminations Company
Current assets $ 697,369 $ 346,177 $ (47,734) $ 995,812
Investments in and
advances to joint
operations 4,390,094 - (1,060,135) 3,329,959
Property and other
assets, net 241,053 2,566,730 (2,240,940) 566,843
---------- ---------- ---------- ----------
Total assets $5,328,516 $2,912,907 $(3,348,809) $4,892,614
========== ========== ========== ==========
Current liabilities $2,688,087 $ 164,601 $ (624,734) $2,227,954
Minority interest - 24,231 - 24,231
Stockholders' and
partners' equity 2,640,429 2,724,075 (2,724,075) 2,640,429
---------- ---------- ---------- ----------
Total liabilities and
equity $5,328,516 $2,912,907 $(3,348,809) $4,892,614
========== ========== ========== ==========
Year 2000 System Requirements. The Company is performing an analysis of
its systems in order to determine the impact of year 2000 issues. Management
is unable to predict at this time the full impact year 2000 issues will have
on the Company's operations or future financial condition. However, the
Company does not expect that such costs to modify its programs and systems
will be material to its financial condition or results of operations. The
Company does not currently have information concerning the year 2000
compliance of its suppliers and customers. In the event the Company's major
suppliers or customers do not successfully and timely achieve year 2000
compliance, the Company's operations could be adversely affected.
<PAGE> 12
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, None
(b) No reports on Form 8-K were filed during the quarter ended
June 30, 1998.
<PAGE> 13
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, 1998 By: /s/ Robert L. Knauss
--------------------------------
Robert L. Knauss,
Chairman of the Board and
Chief Executive Officer
Date: August 14, 1998 By: /s/ David A. Grossman
--------------------------------
David A. Grossman,
Chief Financial Officer and
Corporate Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 352,215 352,215
<SECURITIES> 0 0
<RECEIVABLES> 228,603 228,603
<ALLOWANCES> 0 0
<INVENTORY> 106,721 106,721
<CURRENT-ASSETS> 697,369 697,369
<PP&E> 18,451 18,451
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 5,328,516 5,328,516
<CURRENT-LIABILITIES> 2,688,087 2,688,087
<BONDS> 0 0
0 0
1,580,000 1,580,000
<COMMON> 156,292 156,292
<OTHER-SE> 904,137 904,137
<TOTAL-LIABILITY-AND-EQUITY> 5,328,516 5,328,516
<SALES> 292,093 414,461
<TOTAL-REVENUES> 288,714 456,612
<CGS> 243,744 331,298
<TOTAL-COSTS> 489,246 886,746
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 66,250 133,063
<INCOME-PRETAX> (248,373) (524,030)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (248,373) (524,030)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (248,373) (524,030)
<EPS-PRIMARY> (0.02) (0.04)
<EPS-DILUTED> (0.02) (0.04)
</TABLE>
