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 March 31, 1999.
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.)
5151 San Felipe, Suite 1661, 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 25, 1999: 9,445,960 shares.
Transitional Small Business Disclosure Format (Check one): Yes ; No X .
BALTIC INTERNATIONAL USA, INC.
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
Condensed Balance Sheets -
March 31, 1999 and December 31, 1998 3
Condensed Statements of Operations -
Three Months Ended March 31, 1999 and 1998 4
Condensed Statements of Cash Flows -
Three Months Ended March 31, 1999 and 1998 5
Notes to Condensed Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 13
Item 2 - Changes in Securities 13
Item 3 - Defaults on Senior Securities 13
Item 4 - Submission of Matters to a Vote of Security Holders 13
Item 5 - Other Information 13
Item 6 - Exhibits and Reports on Form 8-K 13
Signatures 14
PART I - FINANCIAL INFORMATION
Item 1 - FINANCIAL STATEMENTS
BALTIC INTERNATIONAL USA, INC.
Condensed Consolidated Balance Sheets
March 31, December 31,
1999 1998
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 9,886 $ 110,380
Accounts receivable 159,133 163,880
Inventory 47,957 66,589
Prepaids and deposits 10,057 8,144
----------- -----------
Total current assets 227,033 348,993
----------- -----------
PROPERTY AND EQUIPMENT, net 32,705 35,211
INVESTMENT IN AND ADVANCES TO JOINT OPERATIONS 834,338 3,276,094
OTHER ASSETS 31,649 33,899
----------- -----------
Total assets $ 1,125,725 $ 3,694,197
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 827,267 $ 934,663
Short-term debt, net 62,000 2,050,000
----------- -----------
Total liabilities 889,267 2,984,663
----------- -----------
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 shares issued and outstanding 350,000 350,000
Common stock, $.01 par value, 40,000,000 shares
authorized, 15,629,229 and 15,586,785 shares
issued and outstanding 156,292 156,292
Additional paid-in capital 11,717,776 11,717,776
Accumulated deficit (14,503,680) (14,030,604)
Treasury stock, at cost (20,540) (20,540)
----------- -----------
Total shareholders' equity 236,458 709,534
----------- -----------
Total liabilities and shareholders' equity $ 1,125,725 $ 3,694,197
=========== ===========
See accompanying notes to condensed consolidated financial statements.
BALTIC INTERNATIONAL USA, INC.
Condensed Consolidated Statements of Operations
(unaudited)
Three Months Ended March 31,
1999 1998
REVENUES:
Beverage distribution $ 57,431 $ 59,097
General sales agency revenue 6,752 19,500
Net equity in earnings (losses) of
joint operations (297,544) 42,530
----------- -----------
Total operating revenues (233,361) 121,127
----------- -----------
OPERATING EXPENSES:
Cost of revenue 61,409 63,784
General and administrative 126,878 290,043
----------- -----------
Total operating expenses 188,287 353,827
----------- -----------
LOSS FROM OPERATIONS (421,648) (232,700)
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (8,875) (66,813)
Interest income - 21,962
Other (3,173) (602)
----------- -----------
Total other income (expense) (12,048) (45,453)
----------- -----------
LOSS BEFORE INCOME TAXES AND DISCONTINUED
OPERATIONS (433,696) (278,153)
INCOME TAX EXPENSE - -
----------- -----------
LOSS FROM CONTINUING OPERATIONS (433,696) (278,153)
DISCONTINUED OPERATIONS - 2,496
----------- -----------
NET LOSS $ (433,696) $ (275,657)
----------- -----------
LESS PREFERRED DIVIDENDS (39,380) (40,462)
----------- -----------
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (473,076) $ (316,119)
=========== ===========
LOSS PER SHARE AMOUNTS (Basic and Diluted):
Continuing operations $ (0.03) $ (0.02)
Discontinued operations $ - $ -
Total $ (0.03) $ (0.02)
See accompanying notes to condensed consolidated financial statements.
BALTIC INTERNATIONAL USA, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended March 31,
1999 1998
Cash flows from operating activities:
Net loss $ (433,696) $ (275,657)
Noncash adjustments:
Net equity in (earnings) and losses of joint
operations 297,544 (42,530)
Gain on sale of assets (121) -
Other 2,506 8,313
Changes in current assets and current liabilities (123,060) 98,505
----------- -----------
Net cash used by operating activities (256,827) (211,369)
----------- -----------
Cash flows from investing activities:
Investment in and advances to joint operations - (1,007)
Proceeds from sale of Air Baltic 2,144,333 -
Acquisition of property and equipment - (3,911)
----------- -----------
Net cash provided (used) by investing
activities 2,144,333 (4,918)
----------- -----------
Cash flows from financing activities:
Borrowings of debt from an officer 12,000 -
Repayment of debt (2,000,000) (8,711)
Purchase of preferred stock - (29,973)
Preferred dividends paid - (35,777)
----------- -----------
Net cash used by financing activities (1,988,000) (74,461)
----------- -----------
Net decrease in cash and cash equivalents (100,494) (290,748)
Cash and cash equivalents, beginning of period 110,380 965,992
----------- -----------
Cash and cash equivalents, end of period $ 9,886 $ 675,244
=========== ===========
See accompanying notes to condensed consolidated financial statements.
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 three months ended March 31, 1999
and 1998, 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, 1998. 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 owned an
8.02% interest in Air Baltic Corporation SIA ("Air Baltic"), the national
airline of Latvia. On January 4, 1999, the Company sold its interest in Air
Baltic to Scandinavian Airlines System Denmark-Norway-Sweden for $2,144,333 in
cash. The Company has catering operations through its interest in AIRO
Catering Services ("AIRO"). As discussed in Note 9, the Company sold a 23%
interest in AIRO to ORESA Ventures N.V. and Celox S.A. in July 1999. As part
of this transaction, the Company also entered into an option agreement giving
ORESA Ventures N.V. and Celox S.A. the right to purchase the remaining 23% of
AIRO held by the Company for $1,145,000 in cash and forgiveness of
approximately $190,000 in debt. The option agreement expires on September 30,
1999. American Distributing Company ("ADC"), a wholly owned subsidiary, began
operations on December 1, 1995 as a beverage and food distribution company.
In August 1998, the Company ceased operations as a cargo marketing and sales
company to Air Baltic and other airlines through its wholly owned subsidiary,
Baltic World Air Freight ("BWAF").
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 Air Baltic effective October 1,
1995, and BIA has not conducted any substantive business operations since that
date.
The Company has incurred losses since inception through March 31, 1999
and thereafter. At March 31, 1999, the Company had an accumulated deficit of
$14,503,680 and current assets and current liabilities of $227,033 and
$889,267, respectively, resulting in a working capital deficit of $662,234.
Net cash used in operating activities was $256,827 in the three months ended
March 31, 1999 and $211,369 in three months ended March 31, 1998. The Company
currently has limited cash resources available and has obligations due or
becoming due in the near future.
Management believes that the Company will be able to achieve a
satisfactory level of liquidity to meets its business plan and capital needs
through December 31, 1999. During March 1999 through July 1999, the Company
borrowed an aggregate principal amount of $108,000 as bridge financing from
officers and directors of the Company. In connection with these borrowings,
the Company issued warrants to purchase 10,800 shares of common stock at an
exercise price of $0.15 per share. In July 1999, the Company sold a 23%
interest in AIRO for consideration that included $250,000 cash and entered
into an option giving the buyers the right to purchase the remaining 23% of
AIRO held by the Company for $1,145,000 in cash and forgiveness of
approximately $190,000 in debt. If the option is not exercised by the buyers
to purchase the remaining interest in AIRO by September 30, 1999, management
believes that the Company has the ability to sell the remaining interest in
AIRO to another third party or use the shares as collateral for a debt
financing. The Company also has loans receivable from AIRO of $577,000 that
management believes could be sold to a third party at a discount or used as
collateral for a loan. Additionally, management believes the Company has the
ability to obtain additional financing from key officers, directors and certain
investors. Management also believes that the Company can continue to defer
certain notes and amounts payable by the Company which are either currently
payable or payable in the near future. However, there can be no assurance the
Company will be successful to meet its liquidity needs.
The above factors raise substantial doubt about the Company's ability to
continue as a going concern. The accompanying consolidated financial
statements do not include any adjustments related to the recoverability and
classification of recorded assets or other adjustments should the Company be
unable to continue as a going concern.
NOTE 3 - DISCONTINUED OPERATIONS
In August 1998, the Company ceased the operations of BWAF. The
consolidated statements reflect the operating results of the discontinued
operations separately from continuing operations. The unamortized goodwill of
$176,766 resulting from the acquisition of the remaining 50% interest in BWAF
was written off in the third quarter of 1998. Amounts for prior periods have
been restated. Operating results for the discontinued operations were:
Three Months Ended March 31,
1999 1998
Operating revenues $ - $ 46,771
Income from operations $ - $ 3,098
Net income $ - $ 2,496
At March 31, 1999, BWAF had current assets aggregating $11,515,
noncurrent assets of $4,697 and current liabilities of $142,123 which are
included in the Company's consolidated financial statements. The Company
recorded a loss in the third quarter of 1998 from the disposal of the
operation for the write-off of the goodwill and the estimated costs to
liquidate BWAF.
NOTE 4 - NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information" as of December 31, 1998. SFAS No. 131
requires that segment reporting for public reporting purposes be conformed to
the segment reporting used by management for internal purposes. This standard
also requires disclosures about products and services, geographic areas and
major customers.
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 adopted SOP 98-5 in the first quarter of 1999 and the adoption had a
negative effect on its net equity in earnings of joint operations of $298,877
as a result of the write-off of AIRO's unamortized start-up costs.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. Changes in
the derivative's fair value will be accounted for based upon their intended use
and designation. Since the Company's holdings in such instruments are minimal,
adoption of this standard is not expected to have a material effect on the
consolidated financial statements. The Company is required to adopt SFAS No.
133 not later than the first quarter of fiscal 2001.
NOTE 5 - INVESTMENTS IN AND ADVANCES TO JOINT OPERATIONS
The investment in and advances to joint operations are as follows:
March 31, December 31,
1999 1998
Joint operations accounted for using
cost method:
Air Baltic $ - $2,144,212
BIA - -
--------- ---------
Subtotal - 2,144,212
--------- ---------
Joint operations accounted for using
equity method:
BCS 5,000 5,000
AIRO 829,338 1,126,882
--------- ---------
Subtotal 834,338 1,131,882
--------- ---------
Total $ 834,338 $3,276,094
========= =========
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:
March 31, December 31,
1999 1998
Current assets $ 1,161,310 $ 1,089,182
Property and other assets, net 5,759,487 6,468,654
---------- ----------
Total assets $ 6,920,797 $ 7,557,836
========== ==========
Current liabilities $ 2,401,958 $ 2,157,576
Minority interest 545,778 603,134
Equity 3,973,061 4,797,126
---------- ----------
Total liabilities and equity $ 6,920,797 $ 7,557,836
========== ==========
A summary of the results of operations of the combined joint
operations accounted for using the equity method of accounting is as
follows:
Three Months Ended March 31,
1999 1998
Combined 100% Basis:
Operating revenues $ 1,368,412 $ 971,190
Income from operations $ 114,959 $ 199,859
Cumulative effect of change in
accounting for start-up costs $ (651,574) $ -
Net income (loss) $ (749,188) $ 61,954
Company Percentage Interest:
Operating revenues $ 627,691 $ 447,550
Income from operations $ 98,840 $ 105,787
Cumulative effect of change in
accounting for start-up costs $ (298,877) $ -
Net income (loss) $ (297,544) $ 42,530
NOTE 6 - LOSS PER COMMON SHARE
The computations of loss per common share are computed using 15,586,785
and 15,510,857 weighted average shares of common stock for the three months
ended March 31, 1999 and 1998, respectively. 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 the Company had
earnings for the period. For the three months ended March 31, 1999 and 1998,
all stock warrants and options are considered anti-dilutive.
NOTE 7 - EQUITY TRANSACTIONS
During the three months ended March 31, 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.
NOTE 8 - SEGMENT INFORMATION
As discussed in Note 4, the Company adopted SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information" as of December 31,
1998. Reportable segments are based on internal organizational structure and
are comprised of Catering, Airlines, Distribution and Cargo. Segment
financial information is summarized as follows:
<TABLE>
<CAPTION>
Corporate
Catering Airlines Distribution Cargo and Other Total
<S> <C> <C> <C> <C> <C> <C>
First Quarter
1999
Revenue:
Net sales $ - $ 6,752 $ 57,431 $ - $ - $ 64,183
Equity in earnings (losses) of
joint operations (297,544) - - - - (297,544)
---------- ---------- -------- -------- ---------- ----------
Total revenue (297,544) 6,752 57,431 - - (233,361)
---------- ---------- -------- -------- ---------- ----------
Net income (loss) (297,544) 4,329 (28,724) - (111,757) (433,696)
Total assets at end of period 834,338 - 161,846 16,212 113,329 1,125,725
1998
Revenue:
Net sales $ - $ 19,500 $ 59,097 $ - $ - $ 78,597
Equity in earnings of joint operations 42,530 - - - - 42,530
---------- ---------- -------- -------- ---------- ----------
Total revenue 42,530 19,500 59,097 - - 121,127
---------- ---------- -------- -------- ---------- ----------
Net income (loss) 42,530 19,500 (33,719) 2,496 (306,464) (275,657)
Total assets at end of period 1,063,514 3,276,534 222,405 95,465 960,777 5,618,695
</TABLE>
NOTE 9 - SUBSEQUENT EVENT
In July 1999, the Company sold a 23% interest in AIRO to ORESA Ventures
N.V. and Celox S.A. in exchange for an aggregate of 6,250,000 shares of the
Company's common stock, warrants to purchase 6,250,000 shares of the Company's
common stock and $250,000 in cash. As part of this transaction, the Company
also entered into an option agreement giving ORESA Ventures N.V. and Celox S.A.
the right to purchase the remaining 23% of AIRO held by the Company for
$1,145,000 in cash and forgiveness of approximately $190,000 in debt. The
option agreement expires on September 30, 1999.
BALTIC INTERNATIONAL USA, INC.
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 the ability of the Company to
maintain or improve its operating results or execute its primary growth
strategy. Although the Company believes 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 the Company or any
other person that the objectives and plans of the Company will be achieved.
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 March 31, 1999 and 1998
For the quarter ended March 31, 1999, the Company had revenues of
$(233,361) compared with $121,127 for the quarter ended March 31, 1998. The
decrease is primarily due to a decrease in the net equity in earnings of
catering operations. This decrease resulted from the change in accounting of
start-up costs and the losses incurred from the kitchen in Kiev, Ukraine. The
Company's share of the write-off of AIRO's start-up costs as of January 1,
1999 was $298,877. The Kiev kitchen started operations in May 1998 and has
incurred losses since inception.
The number of meals sold by AIRO's in-flight kitchens increased by 46%
to 176,948 meals sold in the first quarter of 1999 from 120,802 meals sold in
the first quarter of 1998. This increase is due to the opening of the Kiev
kitchen in May 1998 and an aggregate 22% increase in meals sold in Tallinn and
Riga.
The Company's operating expenses for the quarter ended March 31, 1999
were $188,287 compared to $353,827 for the same quarter in 1998. The decrease
is due to a decrease in general and administrative expenses. This decrease
was primarily due to reductions in personnel and consulting costs.
Interest expense decreased to $8,875 in the first quarter of 1999 from
$66,813 in 1998, reflecting the repayment by the Company of the $2 million loan
from a shareholder that was repaid in January 1999.
The Company had a net loss of $433,696 for the quarter ended March 31,
1999 compared to a net loss of $275,657 for the quarter ended March 31, 1998.
This increase is primarily due to the adoption of AICPA 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. As previously discussed, the Company's share of the write-off of
AIRO's start-up costs as of January 1, 1999 was $298,877.
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 interest in BIA is 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 Three Months Ended March 31, 1999
Proportionate
Share of Pro forma
Company Joint Combined
(As reported) Operations Eliminations Company
<S> <C> <C> <C> <C>
Operating revenues $ (233,361) $ 627,691 $ 297,544 $ 691,874
Operating expenses 188,287 528,851 - 717,138
---------- ---------- --------- ----------
Income (loss) from operations (421,648) 98,840 297,544 (25,264)
Other income (expense) (12,048) (13,699) - (25,747)
---------- ---------- --------- ----------
Income (loss) before minority
interest, income taxes and
cumulative effect (433,696) 85,141 297,544 (51,011)
Minority interest - (53,258) - (53,258)
Provision for income taxes - (30,550) - (30,550)
Cumulative effect of change
in accounting for start-up
costs - (298,877) - (298,877)
---------- ---------- --------- ----------
Net income (loss) $ (433,696) $ (297,544) $ 297,544 $ (433,696)
========== ========== ========= ==========
</TABLE>
Liquidity and Capital Resources
The Company had $9,886 in cash at March 31, 1999, compared to $110,380
at December 31, 1998.
At March 31, 1999, the Company had working capital deficit of $662,234
as compared to $2,635,670 at December 31, 1998. The decrease in the working
capital deficit is due primarily to the repayment by the Company of the note
payable to a shareholder of $2 million in January 1999 from the proceeds of
the sale of Air Baltic.
Net cash used in operating activities for the three months ended March
31, 1999 was $256,827 as compared to $211,369 for the same period of 1998.
Net cash provided by investing activities was $2,144,333 for the three months
ended March 31, 1999 compared to net cash used of $4,918 for the three months
ended March 31, 1998. The increase in net cash provided by investing
activities is due to the sale of the interest in Air Baltic. Net cash used by
financing activities was $1,988,000 for the three months ended March 31, 1999
compared to $74,461 for the three months ended March 31, 1998. Such increase
was primarily due to the repayment of the note payable to a shareholder.
The Company has incurred losses since inception through March 31, 1999 and
thereafter. At March 31, 1999, the Company had an accumulated deficit of
$14,503,680 and current assets and current liabilities of $227,033 and
$889,267, respectively, resulting in a working capital deficit of $662,234.
The Company currently has limited cash resources available and has obligations
due or becoming due in the near future.
The above factors raise substantial doubt about the Company's ability to
continue as a going concern. The accompanying consolidated financial
statements do not include any adjustments related to the recoverability and
classification of recorded assets or other adjustments should the Company be
unable to continue as a going concern.
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 interest in BIA is 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 March 31, 1999
Proportionate
Share of Pro forma
Company Joint Combined
(As reported) Operations Eliminations Company
Current assets $ 227,033 $ 532,693 $ (72,732) $ 686,994
Investments in and
advances to joint
operations 834,338 - (834,338) -
Property and other
assets, net 64,354 2,641,877 (1,565,105) 1,141,126
---------- ---------- ---------- ----------
Total assets $1,125,725 $3,174,570 $(2,472,175) $1,828,120
========== ========== ========== ==========
Current liabilities $ 889,267 $1,101,778 $ (649,732) $1,341,313
Minority interest - 250,349 - 250,349
Shareholders' and
partners' equity 236,458 1,822,443 (1,822,443) 236,458
---------- ---------- ---------- ----------
Total liabilities and
equity $1,125,725 $3,174,570 $(2,472,175) $1,828,120
========== ========== ========== ==========
Year 2000 System Requirements
Company's State of Readiness. 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 that Year 2000 issues will
have on the Company's operations or future financial condition. The Company
does not currently have information concerning the Year 2000 compliance of all
of its suppliers and customers.
Costs to Address the Company's Year 2000 Issues. The Company expects
that such costs to modify its programs and systems will be less than $10,000.
Risks of the Company's Year 2000 Issues. Although management believes it
is unlikely, it is possible the Company could experience an adverse impact that
could be material to the results of operations or the financial position of the
Company as a result of potential failure by major customers or suppliers, or a
delay or oversight in the Company's effort, to address Year 2000 issues. In
addition, if the suppliers fail to provide their services, such failure could
also have an adverse impact on the results of operations or financial position
of the Company. However, management believes that if the Company's current
suppliers fail to provide their services, the Company will be able to find
replacement suppliers to meet its needs.
Company's Contingency Plans. The Company expects to establish
contingency plans, in the event all systems and critical suppliers have not
been made Year 2000 compliant, during 1999. If the computer systems fail,
management believes that the Company can maintain its systems using manual
methods until the proper systems are in place.
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) The Company filed a Current Report on Form 8-K dated January 4,
1999 pursuant to which the Company entered into an agreement to
sell its 8.02% interest in Air Baltic Corporation to Scandinavian
Airlines System Denmark-Norway-Sweden.
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 30, 1999 By: /s/ Robert L. Knauss
---------------------- ----------------------------------
Robert L. Knauss
Chairman of the Board and
Chief Executive Officer
Date: August 30, 1999 By: /s/ David A. Grossman
---------------------- ----------------------------------
David A. Grossman
President, Chief Financial Officer
and Corporate Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> 9,886 675,244
<SECURITIES> 0 0
<RECEIVABLES> 159,133 163,012
<ALLOWANCES> 0 0
<INVENTORY> 47,957 143,126
<CURRENT-ASSETS> 227,033 991,299
<PP&E> 32,705 15,799
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1,125,725 5,618,695
<CURRENT-LIABILITIES> 889,267 2,660,595
<BONDS> 0 0
0 0
1,580,000 1,605,000
<COMMON> 156,292 156,292
<OTHER-SE> (1,499,834) 1,196,808
<TOTAL-LIABILITY-AND-EQUITY> 1,125,725 5,618,695
<SALES> 64,183 66,271
<TOTAL-REVENUES> (233,361) 121,127
<CGS> 61,409 63,784
<TOTAL-COSTS> 126,878 290,043
<OTHER-EXPENSES> 3,173 602
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 8,875 66,813
<INCOME-PRETAX> (433,696) (278,153)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (433,696) (278,153)
<DISCONTINUED> 0 2,496
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (433,696) (275,657)
<EPS-BASIC> (0.03) (0.02)
<EPS-DILUTED> (0.03) (0.02)
</TABLE>
