10-Q 1 r10q-0923.txt BALTIC 10-Q 9-30-23 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 September 30, 2023. 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 registrant as specified in its charter) TEXAS 76-0336843 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 6002 Rogerdale Road, Suite 300, Houston, Texas 77072 (Address of principal executive offices) (713) 961-9299 (Issuer's telephone number) Securities registered pursuant to Section 12(b) of the Act: None 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 [X] No [ ] Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. Yes [ ] No [X] Indicate by check mark whether the registrant is a large accelerated filer, and accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X] Smaller reporting company [X] Emerging growth company [ ] If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ] 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 November 10, 2023: 10,975,760 shares. BALTIC INTERNATIONAL USA, INC. TABLE OF CONTENTS Page PART I - FINANCIAL INFORMATION Item 1 - Consolidated Financial Statements (unaudited) Balance Sheets - September 30, 2023 and December 31, 2022 3 Statements of Operations - Three and Nine Months Ended September 30, 2023 and 2022 4 Statements of Shareholders' Deficit - Nine Months Ended September 30, 2023 and 2022 5 Statements of Cash Flows - Nine Months Ended September 30, 2023 and 2022 7 Notes to Consolidated Financial Statements 8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3 - Quantitative and Qualitative Disclosures About Market Risk 11 Item 4 - Controls and Procedures 12 PART II - OTHER INFORMATION Item 1 - Legal Proceedings 13 Item 1A - Risk Factors 13 Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds 13 Item 3 - Defaults Upon Senior Securities 13 Item 4 - Mine Safety Disclosures 13 Item 5 - Other Information 13 Item 6 - Exhibits 13 Signatures 14 2 PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS BALTIC INTERNATIONAL USA, INC. Consolidated Balance Sheets (unaudited) September 30, December 31, 2023 2022 ASSETS CURRENT ASSETS Cash and cash equivalents $ 2,976 $ 2,976 ----------- ----------- Total assets $ 2,976 $ 2,976 =========== =========== LIABILITIES AND SHAREHOLDERS' DEFICIT CURRENT LIABILITIES Accounts payable and accrued liabilities $ 557,198 $ 538,239 Dividends payable 4,141,636 4,023,208 Short-term debt to officers and directors 69,481 69,481 ----------- ----------- Total liabilities 4,768,315 4,630,928 ----------- ----------- 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 (18,726,587) (18,589,200) Treasury stock, at cost (804,574) (804,574) ----------- ----------- Total shareholders' deficit (4,765,339) (4,627,952) ----------- ----------- Total liabilities and shareholders' deficit $ 2,976 $ 2,976 =========== =========== See accompanying notes to consolidated financial statements. 3

See accompanying notes to consolidated financial statements. 4

See accompanying notes to consolidated financial statements. 5

See accompanying notes to consolidated financial statements. 6 BALTIC INTERNATIONAL USA, INC. Consolidated Statements of Cash Flows (unaudited) Nine Months Ended September 30, 2023 2022 Cash flows from operating activities: Net loss $ (18,959) $ (18,959) Adjustments to reconcile net loss to net cash flows from operating activities: Change in operating assets and liabilities: Accounts payable and accrued liabilities 18,959 18,959 ----------- ----------- Net cash used in by operating activities - - ----------- ----------- Net increase in cash and cash equivalents - - Cash and cash equivalents, beginning of period 2,976 2,976 ----------- ----------- Cash and cash equivalents, end of period $ 2,976 $ 2,976 =========== =========== Supplemental disclosures: Cash paid for interest $ - $ - Cash paid for income taxes - - Noncash investing and financing activities: Dividends declared and unpaid on preferred stock $ 118,428 $ 118,428 See accompanying notes to consolidated financial statements. 7 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 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 consolidated financial statements for fiscal 2022 as reported in the Form 10-K have been omitted. NOTE 2 - FINANCIAL CONDITION We have incurred operating losses since inception. At September 30, 2023, we had an accumulated deficit of $18,726,587 and current assets and current liabilities of $2,976 and $4,768,315, respectively, resulting in a working capital deficit of $4,765,339. Net cash used in operating activities was $0 in the nine months ended September 30, 2023 and $3 in the nine months ended September 30, 2022. 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 for the next 12 months. 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. There is substantial doubt about our ability to continue as a going concern. The pandemic caused by an outbreak of a new strain of coronavirus (COVID-19) has resulted and is likely to continue to result, in significant national and global economic disruption and may adversely affect our business. Based on the Company's current assessment, we do not expect any material impact on our long-term development timeline and our liquidity due to the worldwide spread of the COVID-19 virus. However, we are actively monitoring this situation and the possible effects of our financial condition, liquidity, and operations. 8 NOTE 3 - 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 September 30, 2023 and 2022, all stock warrants and options are considered anti-dilutive. Supplemental disclosures for loss per share are as follows:

9 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 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. 10 We anticipate that the selection of a business combination will be complex and extremely risky. Because of general economic conditions, rapid technological advances being made in some industries and shortages of available capital, our management believes that there are numerous firms seeking even the limited additional capital which we will have and/or the perceived benefits of becoming a publicly traded corporation. Such perceived benefits of becoming a publicly traded corporation include, among other things, facilitating or improving the terms on which additional equity financing may be obtained, providing liquidity for the principals of and investors in a business, creating a means for providing incentive stock options or similar benefits to key employees, and offering greater flexibility in structuring acquisitions, joint ventures and the like through the issuance of stock. Potentially available business combinations may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Liquidity and Capital Resources We had $2,976 in cash at September 30, 2023, compared to $2,976 at December 31, 2022. At September 30, 2023, we had working capital deficit of $4,765,339 as compared to $4,627,952 at December 31, 2022. The increase in the working capital deficit is due primarily to the accrual of additional liabilities. Net cash used in operating activities for the nine months ended September 30, 2023 was $0 as compared to $0 for the same period of 2022. We have incurred operating losses since inception. At September 30, 2023, we had an accumulated deficit of $18,726,587 and current assets and current liabilities of $2,976 and $4,768,315, respectively, resulting in a working capital deficit of $4,765,339. 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 2022. 11 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 Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. There were no significant changes in our internal control over financial reporting during our most recent fiscal quarter that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting. Limitations on the Effectiveness of Internal Control Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material errors. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations on all internal control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, and/or by management's override of the controls. The design of any system of internal control is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in circumstances, and/or the degree of compliance with the policies and procedures may deteriorate. Because of the inherent limitations in a cost-effective internal control system, financial reporting misstatements due to error or fraud may occur and not be detected on a timely basis. 12 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. MINE SAFETY DISCLOSURES, Not Applicable 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 13 BALTIC INTERNATIONAL USA, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BALTIC INTERNATIONAL USA, INC. (Registrant) Date: November 13, 2023 By: /s/ David A. Grossman ---------------------- ------------------------------- David A. Grossman Chief Executive Officer, Chief Financial Officer and Corporate Secretary 14

BALTIC INTERNATIONAL USA INC 10-Q