UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K

Mark One
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended December 31, 2015
[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

BALTIA AIR LINES, INC.

(Exact name of Registrant as specified in its charter)

NEW YORK
(State of Incorporation)
11-2989648
(IRS Employer Identification No.)
JFK International Airport,
Terminal 4, Room 262.089, Jamaica, NY 11430

(Address of principal executive offices)

(718) 917-8052
(Registrant's telephone number, including area code)
Title of each class
-None-
Name of each Exchange on which registered
-None-
Securities Registered pursuant to Section 12(g) of the Exchange Act:
Common Stock,
(Title of Class)
$.0001 Par Value
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] - - No [X]
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [   ] - - No [X]
Indicate by check mark whether the Registrant (1) has filed all reports 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 [  ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes [X] - - No [  ]
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [   ]
Non-accelerated filer [   ]
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 of 1934).  Yes [ ]   No [X]
  The aggregate market value of the voting common equity held by non-affiliates as of December 31, 2015 is $ 6,703,843
The number of shares of the registrant's common stock outstanding as of March 31, 2016 was 8,111,449,414

TABLE OF CONTENTS

PART 1
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Information
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statement Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting And Financial Disclosures
Item 9A Controls and Procedures
Item 9B Other Information - Required FD Disclosure of Nonpublic Material Information
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Financial Statements and Other Exhibits

PART I

Item 1. Business.

Baltia Air Lines, Inc. (the "Company" or "Baltia" or "Baltia Air Lines"), a Part 121 (heavy jet operator) start-up United States airline with headquarters at JFK International Airport, New York, and base of operations on the Willow Run Airport, Ypsilanti, Michigan. The FAA Eastern Michigan FISDO has oversight of Baltia's Air Carrier Certification and operations. Upon completion of the Certification, Baltia will commence scheduled non-stop service from JFK Int'l Airport to Pulkovo II Int'l Airport of St. Petersburg. Baltia Air Lines, Inc. was organized in the State of New York on August 24, 1989.

In the last quarter of 2010, Baltia purchased a Boeing 747 aircraft from Kalitta Air. The Company plans to replace the Boeing 747 with a leased airplane in 2016 and plans to expand its fleet of airplanes. Baltia will carry airline liability insurance as required for a US airline by DOT regulation. Baltia carries will carry airline liability insurance as required for a US airline by DOT regulation.

Following the commencement of service on the JFK-St. Petersburg route, Baltia's objective is to develop its route network to Russia, Latvia, Ukraine, and Belarus.

Baltia intends to provide passenger and cargo service on its authorized routes.

There is currently no non-stop service from JFK to St. Petersburg. Connecting service is provided mainly by foreign carriers. Finnair, Lufthansa and SAS are the leading competitors in the US-Russia market. KLM, British Airways, Air France, Austrian Airlines, Ukraine Airlines and Swiss International also provide service. United Airlines code shares with Swiss International and Lufthansa flights into St. Petersburg. Delta code-shares between JFK and Moscow. Two Russian airlines, Aeroflot and Transaero, operate between JFK and Moscow. With the exception of the JFK-Moscow route, there exists no non-stop competitive air transportation service on the routes for which Baltia intends to apply.

A comparison of direct and connecting services with respect to passenger convenience and cargo transport efficiency is set forth below.

BALTIA - US flag, non-stop service:

With non-stop service, a passenger can fly from JFK to St. Petersburg in about 8 hours in a Boeing B747 wide body airplane. Cargo arrives containerized, palletized, and secure.

Foreign, connecting service:

With connecting service, it would take a passenger 10 to 18 hours to fly through Helsinki, Copenhagen, Moscow, or Frankfurt. In addition, passengers must change to narrow-body aircraft at a layover airport. Cargo is "broken up" and manually loaded onto narrow-body aircraft, or trucked from Helsinki.

Baltia intends to initiate service carrying passengers and cargo. Baltia has passenger service and ground service arrangements at JFK and at Pulkovo II Airport in St. Petersburg. As a US carrier flying into a foreign country, Baltia will be eligible to the same degree of priority that a foreign carrier receives when arriving in the US.

Baltia intends to start the JFK-St. Petersburg service with one round- trip flight per week, then increase the frequency to three round trips, and then to five round trips.

Baltia plans to build operating modules and apply them in developing new markets. Once established, Baltia plans to duplicate its JFK-St. Petersburg standards on flights on other transatlantic routes.

Concurrently with its Part 121 Air Carrier Certification ("Part 121") for scheduled service, Baltia is certifying for world-wide charter service, opening the opportunity to earn additional revenues from charters.

As of December 31, 2015, Baltia's staff of thirty-one includes professionals with airline experience.

Item 1A. Risk Factors.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 1B. Unresolved Staff Comments.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 2. Properties.

The Company rents space and has headquarters at Terminal Four, JFK Airport, and rents space at Willow Run Airport, Ypsilanti, Michigan, for its base of operations.  

Item 3. Legal Proceedings.

During 2015, Baltia was sued for non-payment of rent which was withdrawn by stipulation without prejudice. Rent due is reported as an account payable.

During 2015, SEC Enforcement Division conducted a confidential investigation of Baltia. As of December 31, 2015 Baltia was subject to potential enforcement action. On March 15, 2016, the SEC officially closed the investigation as having no intent to recommend enforcement.

Item 4. Reserved

PART II.

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The following table sets forth the high and low sales prices, as quoted by the OTCBB, for our common stock for each quarter during our two most recent fiscal years ended December 31, 2014 and 2015. These quotations reflect inter-dealer prices, without retail mark-ups, mark-downs or commissions, and may not represent actual transactions.

Fiscal Quarter Ended

High

Low

March 31, 2014

.04

.01

June 30,2014

.03

.02

September 30, 2014

.02

.01

December 31, 2014

.02

.01

March 31, 2015

.0109

.0099

June 30, 2015

.0047

.0035

September 30, 2015

.0048

.0038

December 31, 2015

.0015

.0012

The Company currently estimates that there are approximately 4,935 holders of record of its common stock. Given its continuing need to retain any earnings to fund its future operations and desired growth, the Company has not declared or paid, nor does it currently anticipate declaring or paying for the foreseeable future, any dividends on the Company's common stock.

Item 6. Selected Financial Information.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Statements in this discussion that include words such as "believe," "expect," "should," intend," "may," "anticipate," "likely," "contingent," "could," "may," or other future-oriented statements, are forward-looking statements. Such forward-looking statements include, but are not limited to, statements regarding our business plans, strategies and objectives, and, in particular, statements referring to our expectations regarding our ability to continue as a going concern, generate increased market awareness of, and demand for, our service, realize profitability and positive cash flow, and timely obtain required financing. These forward-looking statements involve risks and uncertainties that could cause actual results to differ from anticipated results. The forward-looking statements are based on our current expectations and what we believe are reasonable assumptions given our knowledge of the markets; however, our actual performance, results and achievements could differ materially from those expressed in, or implied by, these forward-looking statements.

Our fiscal year ends on December 31. References to a fiscal year refer to the calendar year in which such fiscal year ends.

OVERVIEW  

The Company was organized in the State of New York on August 24, 1989. Its objective is to provide scheduled air transportation from the U.S. to Russia, and former Soviet Union countries.

Baltia has been in Phase III of the FAA Air Carrier Certification throughout year 2015 pending passage of the evacuation test, which remains pending at years end. Upon completion of the Air Carrier Certification, Baltia intends to commence scheduled non-stop service from its Base of Operations at Terminal 4, JFK Int'l Airport in New York to Pulkovo II Int'l Airport of St. Petersburg.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During 2015 the Company lacked sufficient cash for payment of ongoing operating expenses, has incurred operating losses and experienced negative cash flows from operations since inception. The Company has funded its activities through December 31, 2015 almost exclusively from debt and equity financings. For the years ended December 31, 2015 and 2014, the Company raised approximately $6.6 and $9.8 million, respectively, from private placements, funds needed to continue with the certification process, a process that must be completed before it can commence revenue service.

The Company's operational success may be dependent upon its timely procuring significant external debt and/or equity financing to fund its immediate and nearer-term operations, and subsequently realizing operating cash flows from ticket sales sufficient to sustain its longer-term operations and growth initiatives.

PLAN OF OPERATION

As indicated above, we continued to finance our operations through the issuance of our common stock during 2014 and 2015. Until revenue operations begin, our monthly expenditures for administrative and regulatory compliance can be controlled at about $120,000-$150,000. At the time flight service is inaugurated, the Company plans to employee approximately 30 management and 50 crew members and staff.

While the Company believes it will be successful in obtaining the necessary financing to fund its operations, there are no assurances that such additional funding will be achieved and that it will succeed in its future operations. If adequate funds are not available or are not available on acceptable terms, we may not be able to fund operations to complete certification.

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of our financial statements requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Our estimates, judgments and assumptions are continually re-evaluated based upon available information and experience. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates. Areas in which significant judgment and estimates are used include, but are not limited to, valuation of long-lived assets and deferred income taxes.

Valuation of Long-Lived Assets

We review the recoverability of our long- lived assets, including buildings, equipment and intangible assets, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. Our primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations

The Company periodically reviews the carrying value of property, plant, and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. The company determined that its Airplane was impaired, which resulted in impairment loss of $2,079,035. The impairment loss is recorded as a component of "Operating expenses" in the Income Statement for 2015.

We amortize the costs of other intangibles (excluding goodwill) over their estimated useful lives unless such lives are deemed indefinite. Amortizable intangible assets are tested for impairment based on undiscounted cash flows and, if impaired, written down to fair value based on either discounted cash flows or appraised values. Intangible assets with indefinite lives are tested for impairment, at least annually, and written down to fair value as required

Stock-Based Compensation Plans

The Company complies with FASB ASC Topic 718 Compensation - Stock Compensation, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. FASB ASC Topic 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. FASB ASC Topic 718 requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award the requisite service period (usually the vesting period). No compensation costs are recognized for equity instruments for which employees do not render the requisite service. The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments (unless observable market prices for the same or similar instruments are available). If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification.

Our primary type of share-based compensation consists of stock-based awards. We use the fair value method in accordance with ASC 718. We also may use stock options. We use the Black-Scholes option pricing model in valuing options. No stock options were issued during the year ended December 31, 2015. All outstanding stock options were canceled in 2012. All warrants have expired.

Income taxes

Income taxes are recorded in accordance with ASC Topic 740, Accounting for Income Taxes ("ASC 740"), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The Company determines its deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are provided, when necessary, to reduce the deferred income tax assets to the amount expected to be realized.

The determination of the Company's provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions. The benefits of uncertain tax positions are recorded in the Company's financial statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge, if any, from tax authorities. When facts and circumstances change, the Company reassesses these probabilities and records any changes in the financial statements as appropriate.

In accordance with GAAP, The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company's management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months

Generally, the tax filings are no longer subject to income tax examinations by major taxing authorities for years before 2011.

RESULTS OF OPERATIONS

We had no revenues during the fiscal years ended December 31, 2014 and 2015, because (1) we did not fly aircraft in passenger, charter, or freight service, and (2) we could not sell tickets for those services.

For the years ended December 31, 2015 and 2014, general and administrative expenses were $3,398,094 and $13,820,392, respectively, a decrease of $10,422,298, or 75%. This decrease resulted from the general and administrative costs incurred in connection with aircraft maintenance.

FAA certification costs increased $1,083,546, or 77% for the year ended December 31, 2015 from $1,400,198 reported for the year ended December 31, 2014. This increase resulted from the additional costs incurred for FAA certification activities in connection the air certification process.

We reported net losses of $8,338,134 and $15,403,415 for the years ended December 31, 2015 and 2014, respectively, a decrease of $7,065,281 or 46%. This decrease is primarily attributable to the $10,422,298 decrease in general and administrative expenses, partially offset by increases in FAA certification costs of $1,083,546, increases in impairment charges of $2,079,15 increases in depreciation of $156,179 and increases in interest of $38,157.

Our future ability to achieve profitability in any given future fiscal period remains highly contingent upon our beginning flight operations. Our ability to realize revenue from flight operations in any given future fiscal period remains highly contingent upon our obtaining significant equity infusions and/or long-term debt financing sufficient to fund initial operations. Even if we were to be successful in procuring such funding, there can be no assurance that we will be successful in commencing revenue operations or, if commenced, that such operations would be profitable.

LIQUIDITY AND CAPITAL RESOURCES

Since our inception, we have incurred substantial operating and net losses, as well as negative operating cash flows. As of December 31, 2015, we had cash of $0 a decrease of $185,613 from the cash balance of $185.613, reported at December 31, 2014. At December 31, 2015, our stockholders'deficit was $3,372,310, an increase of $1.594.537 from the stockholders'deficit balance of $1,777,773 reported at December 31, 2014.

Our operating activities utilized $7,303,540 in cash during the fiscal year ended December 31, 2015, a decrease of $1,837,405 from the $9,140,945 in cash utilized during the fiscal year ended December 31, 2014.

Our financing activities provided $6,815,634 and $9,894,043 in cash during the fiscal year ended December 31, 2015 and 2014, respectively.

We had no significant planned capital expenditures, budgeted or otherwise, as of December 31, 2015, except continuous support in air carrier certification activities.

Off-Balance Sheet Arrangements: We do not have any off-balance sheet arrangements which have, or are reasonably likely to have, an effect on our financial condition, financial statements, revenues or expenses.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 8. Financial Statement Supplementary Data.

None. 

Item 9. Changes in and Disagreements with Accountants on Accounting And Financial Disclosures

Item 9A(T). Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. Prior to conducting an evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) for year 2015, Igor Dmitrowsky then President, CEO and Chief Financial Officer, died of natural causes on January 4, 2015. Based upon a subsequent evaluation, our current chief executive and financial officer concluded that the Company's disclosure controls and procedures were in need of modification, and, as of December 31, 2015, were not effective to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms.

Management's Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit the company to provide only management's report in this annual report.

Changes in Internal Control Over Financial Reporting. There was no change in our internal controls or in other factors that could affect these controls during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. While existing controls may be adequate at present, upon the commencement of flight revenue service, we intend to implement controls appropriate for airline operations.

Item 9B. Other Information.

None.

PART III

Item 10. Directors and Executive Officers of the Registrant.

The following table summarizes certain information with respect to the executive officers and directors of the board : 

Name   Age   Position    
Igor Dmitrowsky 61      President, CEO, CFO, Chairman of the Board (deceased January 4, 2016)
Russell Thal   82  Executive Vice President (elected President and Chairman, by Board on January 5, 2016)  
Barry Clare 57  Vice President Finance  
Walter Kaplinsky  78  Secretary, Director  
Andris Rukmanis 54  Vice President Europe, Director  
Vick Luis Bolanos  56 Director  

Our directors serve until the next annual meeting and until their successors are elected and qualified. Our officers are appointed to serve for one year until the meeting of the board of directors following the annual meeting of stockholders and until their successors have been elected and qualified. There are no family relationships between any of our directors or officers.

A. Board of Directors:

Igor Dmitrowsky

Igor Dmitrowsky, chairman and president, chief executive officer and CFO, founded the Company in August 24, 1989. Managing daily operations of the Company had been his full-time occupation and executive profession throughout those years. The centralized control of the Company by a single person is being modified following his death. No organization to which Mr. Dmitrowsky had been associated is a parent, subsidiary or other affiliate of Baltia Air Lines.

Walter Kaplinsky 

Walter Kaplinsky is a retired engineer and has been director and corporate secretary since 1993. No organization to which Mr. Kaplinsky has been associated is a parent, subsidiary or other affiliate of Baltia Air Lines. No organization to which Mr. Kaplinsky has been associated is a parent, subsidiary or other affiliate of Baltia Air Lines.

Andris Rukmanis

Andris Rukmanis, director and vice president Europe, is and has been for more than twenty years a full-time qualified licensed attorney in Latvia, specializing in business law, and has been a Director of the Company since 1990. No organization to which Mr. Rukmanis has been associated is a parent, subsidiary or other affiliate of Baltia Air Lines.

Vick Luis Bolanos 

Vick Luis Bolanos, has served as director since 2009. He is, and has been, president and chairman of Eastern Construction & Electric, Inc. throughout those years. No organization to which Mr. Bolanos has been associated is a parent, subsidiary or other affiliate of Baltia Air Lines.

B. Executive Officers In Addition to Mr. Dmitrowsky, Mr. Kaplinsky, and Mr. Rukmanis:

Russell Thal 

Russell Thal, executive vice president, joined the Company in year 2000, and has since been working for Baltia. No organization to which Mr. Thal has been associated is a parent, subsidiary or other affiliate of Baltia Air Lines, Inc.

Barry Clare

Barry Clare, vice president of finance, joined the Company in 2006 and has been working with Baltia since 2006. No organization to which Mr. Clare has been associated is a parent, subsidiary or other affiliate of Baltia Air Lines, Inc.

C. Nominations for Director:

No new nominations during 2015. Nominations subsequent to the death of Igor Dmitrowsky in 2016 are incorporated by reference to Company's Exhibit 1 of Form 8-K/A filed February 10, 2016.

Item 11. Executive Compensation.

Minimal weekly base salaries of $500 plus bonuses have been paid to executive officers commencing the second quarter of fiscal year ended December 31, 2014, and throughout fiscal year 2015. During the fiscal year ended December 31, 2015, no executive options were granted.

During the fiscal year ended December 31, 2015, no executive stock options were issued or exercised.

No shares were issued to executive officers in 2015.

SUMMARY COMPENSATION TABLE

Name & Principal
Position

(a)
Year
(b)
Salary
($)

(c)
Bonus
($)

(d)
Stock
awards*
($)

(e)
Option
awards*
($)

(f)
Non-equity
incentive plan
compensation
($)

(g)
Change in Pension
Value and
Non-qualified
deferred
compensation
($)

(h)
All Other
Compensation
($)
**
(i)
Total
($)

(j)
Igor Dmitrowsky
President, CEO
2015
2014
$ 44,534
19,600
$
0
$ 0
0
$ 0
0
$ 0
0
$ 0
0
$ 0
102,000
$ 44,534
121,600
Barry Clare
Vice-President
2015
2014
$ 64,033
20,850
$ 0
0
$ 0
0
$ 0
0
$ 0
0
$ 0
0
$ 31,844
748,511
$ 95,877
769,361
Russell Thal
Vice-President
2015
2014
$ 45,867
52,600
$ 0
0
$ 0
0
$ 0
0
$ 0
0
$ 0
0
$ 46,000
55,200
$ 91,867
107,800
Walter Kaplinsky
Secretary
2015
2014
$ 0
0
$ 0
0
$ 0
0
$ 0
0
$ 0
0
$ 0
0
$ 17,905
17,905
$ 11,968
15,800
Andris Rukmanis
VP, Europe
2015
2014
$ 0
0
$ 0
0
$ 0
0
$ 0
0
$ 0
0
$ 0
0
$ 0
0
$ 0
0

* These columns represent the grant date fair value of the awards as calculated in accordance with FASB ASC Topic 718, Compensation - Stock Compensation.

** Mr. Dmitrowsky received salary and other compensation of $44,534 and $121,600 the years ended December 31, 2015 and 2014, respectively for services provided to the Company.

** Mr. Clare was paid salary and other compensation of $95,877 and $769,361 for the years ended December 31, 2015 and 2014, respectively, which represents amounts paid him in connection with the raise of new equity capital.

** Russell Thal earned salary and other compensation of $91,867 and $107,800 for services provided the Company during the years ended December 31, 2015 and 2014.

** Mr. Kaplinsky was paid additional compensation of $17,905 and $11,968 for services provided the Company during the years ended December 31, 2015 and 2014.

EMPLOYMENT AGREEMENTS

The Company has no current individual employment agreements with any of its executive officers or employees.

Future Compensation of Executive Officers

The board of directors approves salaries for the Company's executive officers as well as the Company's overall salary structure. For year one following commencement flight operations, the rate of compensation for the Company's executive officers is expected to be: president $420,000, executive vice president $230,000, vice president-finance $270,000.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

As of December 31, 2015, there were 7,555,755,534 shares of common stock, par value $0.0001 outstanding. The following table sets forth, as of December 31, 2015, the ownership of the Company's Common Stock by (i) each director and officers of the Company, (ii) all executive officers and directors of the Company as a group, and (iii) all other persons known to the Company to own more than 5% of the Company's Common Stock. Each person named in the table has or shares voting and investment power with respect to all shares shown as beneficially owned by such person.

Directors and Officers

Common Shares Beneficially Owned

Percent of Total Outstanding, % 

Igor Dmitrowsky
63-26 Saunders St., Suite 7-I
Rego Park, NY 11374

851,654,266  *

11.272 

Russell Thal
26 Ridge Drive
Port Washington, NY 11050

26,850,000 

0.355 

Barry Clare
4319 215th St.
Bayside, NY 11361

147,003,998  **

1.946 

Vick Luis Bolanos
633 Monroe St.
Riverside, NJ 08075

534,254,501 

7.071 

Walter Kaplinsky
2000 Quentin Rd.
Brooklyn, NY 11229

15,500,000

0.205 

Andris  Rukmanis
Kundzinsala, 8 Linija 9.
Riga, Latvia LV-1005

6,468,750

0.086 

Shares of all directors and executive officers as a group (6 persons)

1,581,731,515 

20.934%

Other 5% Owners

Common Shares Beneficially Owned

Percent of Total Outstanding, % 

John A. Drago
1911 Route 110,
Farmingdale, NY 11735

1,008,173,896

13.343 

* - an error in the summation of the previously issued stock was discovered and corrected in a Form 5 filing on April 30, 2015.
** - an share audit revealed error in the summation of the previously issued stock and this was corrected in a Form 5 filing on May 20, 2015.

Item 13. Certain Relationships and Related Transactions.

Mr. Vick Luis Bolanos was elected to the Baltia board of directors while he was, and remains, president and chairman of Eastern Construction & Electric, Inc. The transaction between Baltia and Eastern was made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the lender; and did not involve more than the normal risk of collectibility or present other unfavorable features. This transaction is discussed further in Note 7 to the Financial Statements infra.

The principal of $1.150 million remained outstanding during 2014 and accrued interest of $508,875 was outstanding as of December 31, 2015. By agreement of Parties, no interest was paid in 2014, and the rate of interest is 9% per annum. An amended, agreement was concluded and submitted in Company's 10-Q filing for 3rd quarter 2013, filed November 19, 2013, Exhibit 10.18 therein.

During the year related parties have continually invested material operating capital into the company at various times in exchange for shares discounted from closing market quotations due to liquidity and selling restrictions impacting the value of such transactions.

Item 14. Principal Accountant Fees and Services.

The Company paid its independent accountant $21,500 for services in providing an audit of the year ending December 31, 2015. The Company paid $12,000 for audit services for the year ending in December 31, 2014. All other Company accounting and tax preparations have been done in-house.


PART IV.

 

Item 15. Exhibits and Financial Statements. 

APPENDIX A - Financial Statements for the Years Ended December 31, 2015 and 2014  

Report of Independent Registered Accounting firm F-1
Balance Sheet as of December 31, 2015 and 2014 F-2
Statement of Operations for the years ended December 31, 2015 and
2014, and the period August 29, 1989 (inception) to December 31, 2015
F-3
Statement of Changes of Stockholders'Equity for the years ended
December 31, 2013 through 2015
F-4
Statement of Cash Flows for the years ended December 31, 2015 and 2014,
and the period August 9, 1989 (inception) to December 31, 2015
F-5
Notes to Financial Statements F-6 to F-15

 

 

 

 

 

 

 

 

 

 

 

 


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Years Ended December 31, 2015 and 2014 


Scrudato & Co., PA
CERTIFIED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Baltia Air Lines, Inc.

We have audited the accompanying balance sheet of Baltia Air Lines, Inc. as of December 31, 2015 and 2014 and the related consolidated statements of operations, changes in stockholders'equity and cash flows for the years then ended. These financial statements are the responsibility of the Company management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Baltia Air Lines, Inc. at December 31, 2015 and 2014, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 10, the Company has incurred significant accumulated deficits, recurring operating losses and a negative working capital. This and other factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also discussed in Note 10. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Scrudato & Co., PA

Califon, New Jersey
April 11, 2016

          7 Valley View Drive Califon, New Jersey 07830
Registered Public Company Accounting Oversight Board Firm

F-1


Baltia Air Lines, Inc.

BALANCE SHEETS

(A Development Stage Company)

 

December 31,

 

 

2015

 

 

 

2014

 

 

 

 

 

 

 

 

 

ASSETS

Current assets

 

 

 

 

 

 

 

Cash

 

$ -

 

 

$ 185,613

 

Due From Former Employee

 

 

51,874

 

 

 

-

 

Due from the Estate of CEO/Founder

 

 

125,716

 

 

 

-

 

Shares of Common Stock to be Cancelled

 

 

1,488,536

 

 

 

-

 

Other current assets

 

 

-

 

 

 

24,908

 

Total current assets

 

 

1,666,126

 

 

 

210,521

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

39,628

 

 

 

2,316,036

 

Other assets:

 

 

 

 

 

 

 

 

Security deposit and other

 

 

1,390

 

 

 

318,683

 

Total assets

 

$ 1,707,144

 

 

$ 2,845,240

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS'EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$ 2,414,955

 

 

$ 1,951,465

 

Deposit - Common Stock Purchases

 

 

280,000

 

 

 

528,000

 

Note payable

 

 

559,783

 

 

 

385,523

 

Accrued Salaries

 

 

138,700

 

 

 

92,700

 

Accrued interest

 

 

536,016

 

 

 

515,325

 

Total current liabilities

 

 

3,929,454

 

 

 

3,473,013

 

 

 

 

 

 

 

 

 

 

Noncurrent liabilities

 

 

 

 

 

 

 

 

Long-term debt, net of discount

 

 

1,150,000

 

 

 

1,150,000

 

Total liabilities

 

 

5,079,454

 

 

 

4,623,013

 

 

 

 

 

 

 

 

 

 

Stockholders'equity (deficit)

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value; 2,000,000 shares authorized, 66,500 issued and outstanding  

 

665

 

 

 

665

 

Common stock, $.0001 par value; 7,986,000,000 shares authorized, 7,555,715,234 and 5,497,415,771 issued and

   outstanding at December 31, 2015 and 2014, respectively  

 

755,570

 

 

 

549,741

 

Additional paid-in capital

 

 

114,753,511

 

 

 

108,215,743

 

Deficit accumulated during development stage

 

 

(118,882,056 )

 

 

(110,543,922 )

Total stockholders'equity (deficit)

 

 

(3,372,310 )

 

 

(1,777,773 )

Total liabilities and stockholders'equity (deficit)

 

$ 1,707,144

 

 

$ 2,845,240

 

 

The accompanying footnotes are an integral part of these financial statements.

 

 
F-1
 

 

Baltia Air Lines, Inc.

STATEMENT OF OPERATIONS

(A Development Stage Company)

 

 

 

 

 

 

 

 

 

From

 

 

 

 

 

 

 

 

 

Inception to

 

 

 

Years Ended December 31,

 

 

December 31,

 

 

 

2015

 

 

2014

 

 

2015

 

 

 

 

 

 

 

 

 

(Unaudited)

 

Revenue

 

$ -

 

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost and Expenses

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

3,398,094

 

 

 

13,820,392

 

 

 

103,903,898

 

FAA certification costs

 

 

2,483,744

 

 

 

1,400,198

 

 

 

7,845,133

 

Training

 

 

-

 

 

 

-

 

 

 

225,637

 

Depreciation

 

 

212,273

 

 

 

56,094

 

 

 

654,795

 

Other

 

 

-

 

 

 

-

 

 

 

568,245

 

Impairment charge

 

 

2,079,135

 

 

 

 

 

 

 

2,079,135

 

Interest

 

 

164,888

 

 

 

126,731

 

 

 

1,975,012

 

Loss on sale of assets

 

 

-

 

 

 

-

 

 

 

1,607,183

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total costs and expenses

 

 

8,338,134

 

 

 

15,403,415

 

 

 

118,859,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss before income taxes

 

 

(8,338,134 )

 

 

(15,403,415 )

 

 

(118,859,038 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

23,018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deficit accumulated during development stage

 

$ (8,338,134 )

 

$ (15,403,415 )

 

$ (118,882,056 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per weighted share, basic and fully diluted  

$ (0.001 )

 

$ (0.004 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding, basic and fully diluted  

 

6,479,059,153

 

 

 

4,302,033,740

 

 

 

 

 

 

The accompanying footnotes are an integral part of these financial statements. 

 

 
F-2
 

 

Baltia Air Lines, Inc.

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS'S EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

During

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Development

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Stage

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2012

 

 

66,500

 

 

 

665

 

 

 

2,466,538,050

 

 

 

246,654

 

 

 

88,172,179

 

 

 

(88,272,311 )

 

 

147,187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued and issuable for cash

 

 

 

 

 

 

 

 

 

 

701,621,438

 

 

 

70,162

 

 

 

4,062,352

 

 

 

 

 

 

 

4,132,514

 

Shares issued for services

 

 

 

 

 

 

 

 

 

 

127,967,500

 

 

 

12,796

 

 

 

2,273,171

 

 

 

 

 

 

 

2,285,967

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,868,196 )

 

 

(6,868,196 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2013

 

 

66,500

 

 

 

665

 

 

 

3,296,126,988

 

 

$ 329,612

 

 

$ 94,507,702

 

 

$ (95,140,507 )

 

$ (302,528 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued and issuable for cash

 

 

 

 

 

 

 

 

 

 

1,974,254,019

 

 

 

197,425

 

 

 

9,707,018

 

 

 

 

 

 

 

9,904,443

 

Shares issued for services

 

 

 

 

 

 

 

 

 

 

232,534,764

 

 

 

23,254

 

 

 

4,060,873

 

 

 

 

 

 

 

4,084,127

 

Shares cancelled

 

 

 

 

 

 

 

 

 

 

(5,500,000 )

 

 

(550 )

 

 

(59,850 )

 

 

 

 

 

 

(60,400 )

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,403,415 )

 

 

(15,403,415 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2014

 

 

66,500

 

 

 

665

 

 

 

5,497,415,771

 

 

$ 549,741

 

 

$ 108,215,743

 

 

$ (110,543,922 )

 

$ (1,777,773 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued and issuable for cash

 

 

 

 

 

 

 

 

 

 

2,075,755,030

 

 

 

207,575

 

 

 

6,433,799

 

 

 

 

 

 

 

6,641,374

 

Shares issued for services

 

 

 

 

 

 

 

 

 

 

(17,455,567 )

 

 

(1,746 )

 

 

103,969

 

 

 

 

 

 

 

102,223

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,338,134 )

 

 

(8,338,134 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2015

 

 

66,500

 

 

 

665

 

 

 

7,555,715,234

 

 

$ 755,570

 

 

$ 114,753,511

 

 

$ (118,882,056 )

 

$ (3,372,310 )

 

The accompanying footnotes are an integral part of these financial statements.

 

 
F-3
 

 

Baltia Air Lines, Inc.

STATEMENTS OF CASH FLOWS

(A Development Stage Company)

 

 

 

 

 

 

 

 

 

From

 

 

 

 

 

 

 

 

 

Inception to

 

 

 

Years Ended December 31,

 

 

December 31,

 

 

 

2015

 

 

2014

 

 

2015

 

 

 

 

 

 

 

 

 

(Unaudited)

 

Cash flows from operations

 

 

 

 

 

 

 

 

 

Deficit accumulated during development stage

 

$ (8,338,134 )

 

$ (15,403,415 )

 

$ (118,882,056 )

Adjustment to reconcile deficit accumulated during development stage to cash used in operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

212,273

 

 

 

56,094

 

 

 

654,795

 

Impairment charge

 

 

2,079,135

 

 

 

-

 

 

 

2,079,135

 

Amortization of loan discount

 

 

 

 

 

 

-

 

 

 

294,977

 

Expenses paid issuance of common stock and options

 

 

102,223

 

 

 

4,084,127

 

 

 

63,622,059

 

Loss on sale of assets

 

 

 

 

 

 

 

 

 

 

1,607,183

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Due from Former Employee

 

 

(51,874 )

 

 

-

 

 

 

(51,874 )

Due from the Estate of Founder

 

 

(125,716 )

 

 

-

 

 

 

(125,716 )

Shares of Common Stock to be Cancelled

 

 

(1,488,536 )

 

 

-

 

 

 

(1,488,536 )

Prepaid expenses and other current assets

 

 

24,908

 

 

 

(24,908 )

 

 

400,301

 

Deposit - Common Stock Purchases

 

 

(248,000 )

 

 

 

 

 

 

(248,000 )

Accounts payable and accrued expenses

 

 

530,181

 

 

 

2,147,157

 

 

 

7,104,677

 

Net cash used by operating activities

 

 

(7,303,540 )

 

 

(9,140,945 )

 

 

(45,033,055 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of equipment

 

 

(15,000 )

 

 

(577,644 )

 

 

(4,462,290 )

Proceeds from sale of assets

 

 

 

 

 

 

-

 

 

 

144,164

 

Security deposit

 

 

317,293

 

 

 

(1,390 )

 

 

(1,390 )

Net cash used by investing activities

 

 

302,293

 

 

 

(579,034 )

 

 

(4,319,516 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

6,641,374

 

 

 

9,844,043

 

 

 

47,533,792

 

Proceeds from issuance of preferred stock

 

 

-

 

 

 

-

 

 

 

2,753

 

Proceeds from notes payable

 

 

174,260

 

 

 

50,000

 

 

 

224,260

 

Loans from related parties

 

 

 

 

 

 

-

 

 

 

1,351,573

 

Repayment of related party loans

 

 

 

 

 

 

-

 

 

 

(368,890 )

Principal payments on long-term debt

 

 

 

 

 

 

-

 

 

 

1,109,183

 

Acquisition of treasury stock

 

 

 

 

 

 

-

 

 

 

(500,100 )

Net cash provided by financing activities

 

 

6,815,634

 

 

 

9,894,043

 

 

 

49,352,571

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

 

(185,613 )

 

 

174,064

 

 

 

-

 

Cash, beginning of period

 

 

185,613

 

 

 

11,549

 

 

 

-

 

Cash, end of period

 

$ -

 

 

$ 185,613

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid during the year for interest

 

$ -

 

 

$ -

 

 

 

 

 

 

The accompanying footnotes are an integral part of these financial statements.

 

 
F-4
 

 

BALTIA AIR LINES, INC.
NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2015

 

1. Nature of Operations

 

The Company was formed as a U.S. airline on August 24, 1989 in the State of New York. Our objective is to provide scheduled air transportation from the U.S. to Russia, the Baltic States and Ukraine. In 1991, the Department of Transportation (DOT) granted the Company routes to provide nonstop passenger, cargo and mail service from JFK to St. Petersburg and from JFK to Riga, with online service to Minsk, Kiev and Tbilisi as well as back up service to Moscow. We have two registered trademarks, "BALTIA" and "VOYAGER CLASS," and five trademarks subject to registration. Our activities to date have been devoted principally to raising capital, obtaining route authority and approval from the DOT and the FAA, training crews, and conducting market research to develop the Company's marketing strategy.

 

Regulatory Compliance

 

We intend to operate as a Part 121 carrier, a heavy jet operator. As such, following certification we will be required to maintain our air carrier standards as prescribed by DOT and FAA regulation and as specified in the FAA approved Company manuals. As part of its regulatory compliance, we will be required to submit periodic reports of our operations to the DOT.

 

2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The financial statements have been presented in a "development stage" format. Since inception, our primary activities have been raising of capital, obtaining financing and of obtaining route authority and approval from the DOT and the FAA. We have not commenced our principal revenue producing activities.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires our management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.

 

Cash and Cash Equivalents

 

For financial statement presentation purposes, we consider those short-term, highly liquid investments with original maturities of three months or less to be cash or cash equivalents. There are no cash equivalents at December 31, 2015 and 2014.

 

Fair Value of Financial Instruments

 

FASB ASC Topic 825, Financial Instruments ("ASC 825"), requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. FASB ASC 825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At December 31, 2015 and 2014, the carrying value of certain financial instruments (cash and cash equivalents, accounts payable and accrued expenses.) approximates fair value due to the short-term nature of the instruments or interest rates, which are comparable with current rates.

 

 
F-5
 

 

BALTIA AIR LINES, INC.
NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2015

 

2. Summary of Significant Accounting Policies (continued)

 

Fair Value Measurements

 

FASB ASC Topic 820, Fair Value Measurements and Disclosure ("ASC 820"), defines fair value and establishes a framework for measuring fair value and establishes a fair value hierarchy which prioritizes the inputs to the inputs to the valuation techniques. Fair value is the price that would be received to sell an asset or amount paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or cost approach, as specified by FASB ASC 820, are used to measure fair value.

 

Fair Value Hierarchy

 

 FASB ASC 820 specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs), or reflect the Company's own assumptions of market participant valuation (unobservable inputs). In accordance with FASB ASC 820, these two types of inputs have created the following fair value hierarchy:

 

Level 1 - Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 - Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly.

Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

  

FASB ASC 820 requires the use of observable market data if such data is available without undue cost and effort.

 

Measurement of Fair Value

 

The Company measures fair value as an exit price using the procedures described below for all assets and liabilities measured at fair value. When available, the Company uses unadjusted quoted market prices to measure fair value and classifies such items within Level 1. If quoted market prices are not available, fair value is based upon internally developed models that use whenever possible current market-based or independently-sourced market parameters such as interest rates and currency rates. Items valued using internally generated models are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be inputs that are readily observable. If quoted market prices are not available, the valuation model used generally depends on the specific asset or liability being valued. The determination of fair value considers various factors including interest rate yield curves and time value underlying the financial instruments.

 

 
F-6
 

 

BALTIA AIR LINES, INC.
NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2015

 

2. Summary of Significant Accounting Policies (continued)

 

Property and Equipment

 

Property and equipment is stated at cost less accumulated depreciation and amortization. Improvements are amortized using the straight-line method over the shorter of the estimated useful lives of the respective assets or the lease term. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 5-15 years. Expenditures for renewals and betterments are capitalized. Expenditures for minor items, repairs, and maintenance are charged to operations as incurred. Gain or loss upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place.

 

Valuation of Long-Lived Assets

 

The Company periodically evaluates its long-lived assets for potential impairment in accordance with ASC 360, Property, Plant and Equipment, and records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets'carrying amounts. There was no impairment charges during the year ended December 31, 2014.

 

Stock-Based Compensation Plans

 

Stock-based awards are accounted for using the fair value method in accordance with ASC 718, Share-Based Payments. Our primary type of share-based compensation consists of stock options and stock-based awards. We use the Black-Scholes option pricing model in valuing options. The inputs for the valuation analysis of the options include the market value of the Company's common stock, the estimated volatility of the Company's common stock, the exercise price of the warrants and the risk free interest rate.

 

Loss per Common Share

 

The Company complies with accounting and disclosure requirements of ASC 262, Earnings Per Share. Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per common share incorporates the dilutive effect of common stock equivalents on an average basis during the period. No adjustment was made to the weighted-average number of shares outstanding in the calculation of loss per share for the years ended December 31, 2015 and 2014.

 

Income Taxes

 

Income taxes are recorded in accordance with ASC Topic 740, Accounting for Income Taxes ("ASC 740"), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The Company determines its deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are provided, when necessary, to reduce the deferred income tax assets to the amount expected to be realized.

 

 
F-7
 

 

BALTIA AIR LINES, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2015

 

2. Summary of Significant Accounting Policies (continued)

 

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of December 31, 2015 and 2014, the Company did not have any uncertain tax positions.

 

Generally, tax fillings are no longer subject to income tax examinations by major taxing authorities for years before 2012. Any potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with U.S. federal, state, and local tax laws. The Company's management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

 

The Company's policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of December 31, 2015 and 2014, the Company has not accrued interest or penalties related to uncertain tax positions.

 

Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing the tax benefit associated with the use of the carryforwards and will recognize a deferred tax asset at that time.

 

Recent Accounting Pronouncements

 

In June 2014, the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition of the award. A reporting entity should apply existing guidance in Accounting Standards Codification Topic 718, Compensation-Stock Compensation, as it relates to such awards. The guidance is effective for fiscal years beginning after December 15, 2015, and may be applied prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this guidance will have on the Company's financial statements and related disclosures.

 

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. The guidance requires an entity to evaluate whether there are conditions or events, in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the financial statements are available to be issued when applicable) and to provide related footnote disclosures in certain circumstances. The guidance is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early application is permitted. We do not believe the adoption of this guidance will have a significant impact the Company's financial statements and related disclosures.

 

In November 2014, the FASB issued ASU 20-14-16, Derivatives and Hedging - Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The guidance requires an entity to determine the nature of the host contract by considering the economic characteristics and risks of the entire hybrid financial instrument, including the embedded derivative feature. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 andinterim periods beginning after December 15, 2016. Early adoption, including adoption in an interim period, is permitted The Company is currently evaluating the impact that the adoption of this guidance will have on the Company's financial statements and related disclosures.

 

In January 2015, the FASB issued ASU 2015-1, Income Statement - Extraordinary and Unusual - Simplifying Income Presentation by Eliminating the Concept of Extraordinary Items. The guidance eliminates from GAAP the concept of extraordinary items. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted The Company is currently evaluating the impact that the adoption of this guidance will have on the Company's financial statements and related disclosures.

 

 
F-8
 

 

BALTIA AIR LINES, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2015

 

2. Summary of Significant Accounting Policies (continued)

 

Recent Accounting Pronouncements (continued)

 

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the "SEC") did not or are not believed by management to have a material impact on the Company's present or future financial statements

 

3. Shares of Common Stock to be canceled

 

After the death of the CEO/Founder in January 2016, the Company discovered that he was holding approximately 45M in common stock certificates issued in 2015 and previous fiscal years but never distributed to various service providers. For the years these certificates were originally issued, the value of the services was expensed to Operating Expenses in the Income Statement. For 2015 the Company is recording a benefit of $1,488,536 to Operating Expenses in the Income Statement. In 2016, the Company will be canceling these certificates.

 

4. Property and Equipment

 

A summary of property and equipment is as follows:

 

 

 

Estimated Useful Life

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

Airplane

 

10- 15 years

 

$ -

 

 

$ 2,079,135

 

Office equipment and other

 

5 - 7 years

 

 

448,751

 

 

 

433,751

 

Less accumulated depreciation

 

 

 

 

(409,123 )

 

 

(196,850 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$ 39,628

 

 

$ 2,316,036

 

 

 

 

 

 

 

 

 

 

 

 

Current depreciation

 

 

 

$ 212,273

 

 

$ 56,094

 

 

Impairment of Long-Lived Assets and Amortizable Intangible Assets

 

The Company follows ASC 360-10, "Property, Plant, and Equipment," which established a "primary asset" approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. During the 2015 year the company determined that its airplane valued at $2,079,135 was fully impaired and recorded a charge to income for that amount.

 

 
F-9
 

 

BALTIA AIR LINES, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2015

 

5. Stockholders'Equity

 

Description of Securities

 

Common Stock

 

We are authorized to issue 7,986,000,000 shares of common Stock at $.0001 par value per share. As of December 31, 2015, a total of 7,555,715,234 shares of common Stock were issued and outstanding and held by approximately 4,500 shareholders. Holders of common Stock are entitled to receive dividends, when and if declared by the board of directors, subject to prior rights of holders of any Preferred Stock then outstanding and to share ratably in the net assets of the company upon liquidation. Holders of common Stock do not have preemptive or other rights to subscribe for additional shares. The Certificate of Incorporation does not provide for cumulative voting. Shares of common Stock have equal voting, dividend, liquidation and other rights, and have no preference, exchange, or appraisal rights.

 

Preferred Stock

 

We are authorized to issue up to a maximum of two million shares of preferred stock. At December 31, 2015, 66,500 shares of preferred stock were issued and outstanding. We can issue these shares upon the adoption of a resolution by the board of directors. Our preferred stock is not entitled to share in any dividends declared on the Common Stock and has no voting rights. Each share is convertible in to 3 shares of common. The liquidation preference is set by this conversion formula and results in a pro rata claim on the Company's assets based upon the underlying common shares issuable (199,500) upon conversion.

 

Recent Issuance of Unregistered Securities

 

2014:

 

Stock Issued for Cash

 

We issued 1,974,255,019 shares of our common stock in exchange for receiving a total of $9,904,443 in cash net of offering expenses. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.

   

2014

 

Stock Issued for Services

 

We issued 232,534,764 shares of our common stock in exchange for services. The shares were valued at $4,084,127 or approximately $0.018 per share, which reflected the weighted average market value at the time of issuance.

 

2015:

 

Stock Issued for Cash

 

We issued 2,075,755,030 shares of our common stock in exchange for receiving a total of $6,433,799 in cash net of offering expenses. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.

 

Stock Issued for Services

 

We issued (net of cancellations) (17,455,567) shares of our common stock in exchange for services. The shares were valued at $102,223 or approximately $0.058 per share, which reflected the weighted average market value at the time of issuance.

 

 
F-10
 

 

BALTIA AIR LINES, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2015

 

6. Stock options and Warrants

 

Stock Options

 

No stock options were issued during the year ended December 31, 2015.

 

Warrants

 

For the years ended December 31, 2015 and 2014, warrant activity was as follows:

 

 

 

Number of

 

 

Weighted

 

 

Remaining

 

 

 

Warrants

 

 

Average

 

 

Term

 

 

 

Outstanding

 

 

Price

 

 

(In Years)

 

 

 

 

 

 

 

 

 

 

 

Warrants outstanding at December 31, 2013

 

 

72,328,008

 

 

$ 0.05

 

 

 

0.80

 

Granted in 2014

 

 

327,500

 

 

 

-

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

 

 

-

 

Canceled in 2014

 

 

47,233,675

 

 

 

-

 

 

 

-

 

Warrants outstanding at December 31, 2014

 

 

25,421,833

 

 

$ 0.06

 

 

 

0.80

 

Granted in 2015

 

 

-

 

 

 

-

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

 

 

-

 

Canceled in 2015

 

 

25,421,833

 

 

 

-

 

 

 

-

 

Warrants outstanding at December 31, 2015

 

 

-

 

 

 

-

 

 

 

-

 

 

 
F-11
 

 

BALTIA AIR LINES, INC.
NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2015

 

7. Income Taxes

 

The Company has approximately $71.8 million in available net operating loss carryovers available to reduce future income taxes. These carryovers expire at various dates through the year 2034. The Company has adopted ASC 740, Accounting for Income Taxes which provides for the recognition of a deferred tax asset based upon the value the loss carry-forwards will have to reduce future income taxes and management's estimate of the probability of the realization of these tax benefits. We have determined it more likely than not that these timing differences will not materialize and have provided a valuation allowance against our entire net deferred tax asset of approximately $24.2 million.

 

Utilization of federal and state NOL and tax credit carry-forwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of NOL and tax credit carry-forwards before full utilization.

 

8. Commitments and Contingencies

 

The Company leases office space for its administrative offices which expired on August 15, 2015. The Company also leases an airport terminal facility on a month to month basis. The payments are charged to rental expense as incurred. Rental payments for these two operating leases for the years ended December 31, 2015 and 2014 were $533,000 and $438,000 and are included in general administrative expenses in the statement of operations.

 

The Company also leases office space, an airport terminal facility at Willow Run Airport, and other facilities under terms of an operating lease, which expire on August 31, 2016. The payments are charged to rental expense as incurred. Rental payments for the years ended December 31, 2015 and 2014 were $151,000 and $23,000, respectively, and are included in general administrative expenses in the statement of operations. Future minimum payments are $20,800 for the years ended December 31, 2016.

 

The Company also leases office space for its administrative offices in St. Petersburg, Russia under the terms of an operating lease which expires on February 1, 2017. The payments are charged rental expense as incurred. Rental payments for the year ended 2015 and 2014 were approximately $18,000 and $15,000 respectively, and are included in general administrative expenses in the statement of operations. Future minimum payments are $18,000 for the years ended December 31, 2016.

 

 
F-12
 

 

BALTIA AIR LINES, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2015

 

9. Long-Term Debt-Related Party

 

On December 1, 2010, the Company entered into a loan arrangement with a company owned or controlled by one of our directors for a total amount of $1,150,000. The Company issued a note ("Note") bearing interest at 9% per annum, payable quarterly, with a maturity date of March 31, 2013. Under terms of the Note dated December 1, 2010, the Company was obligated to repay the $1,150,000 prior to the maturity date upon raising $4 million or from proceeds of operating revenue. In connection with the terms of the Note, the Company issued the lender 6.8 million shares of common stock and 3.4 million warrants. The Company recorded the relative fair value of the shares and warrants of $294,297 as additional paid-in capital and established a discount on the debt. The discount was amortized over 24 months at an effective rate of 14.98%. The note is secured by aircraft to a limit of $2.9 million.

 

On March 31, 2013, the repayment terms of the Note were modified, wherein the Company is obligated to repay the principal amount of $1,150,000 to the lender on or before the second anniversary of the date upon which the Company commences its revenue flight operations. The modification further provides that the Company will pay accrued interest to date on or before the first anniversary of the date upon which the Company commences its revenue flight operations. There were no other changes to the terms of the original note.

 

10. Development Stage Activities and Going Concern

 

The Company is currently in the development stage and has not as of yet generated any revenue from its planned operation to provide scheduled air transportation from the United States to Russia, the Baltic States, and the Ukraine.

 

The accompanying financial statements have been prepared using the accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business.

 

Currently, the Company has a minimum cash balance available for the payment of ongoing operating expenses, which would allow it to cover its operational costs and allow it to continue as a going concern, and it has incurred operating losses and experienced negative cash flows from operations since inception. The Company has a deficit accumulated as of December 31, 2015 of approximately $118.8 million. The Company has funded its activities through December 31, 2015 almost exclusively from debt and equity financings. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

 

For the years ended December 31, 2015 and 2014, the Company raised approximately $6.6 and $9.9 million, respectively, from private placements, funds needed to continue with the certification process, a process that must be completed before it can launch nonstop revenue service to Russia with its 747 aircraft. In addition to raising funds from private placements, the Company supplemented the financing of its ongoing operations through the issuance of common stock to pay operating expenses not paid with cash raised from the private placements. The continued operations of the Company over the long-term is dependent upon implementing airline service that will generate profits; until such time, however, it will continue to require substantial funds to continue with its aircraft and operational certification and carry out its business plan. In order to meet its ongoing operating cash requirements, management's plans include financing activities such as private placements of its common stock and the continued issuance of common stock for services rendered by vendors, consultants, and other professionals. Management has also considered the overall pipeline effect that enhances the initial cash position of a startup carrier. It is the industry practice for passengers to purchase tickets in advance of their flights while service vendors bill the carrier later. So that a new airline will not fly empty on day one, approximately 30 days prior to the expected inaugural date, the DOT authorizes sales of tickets and cargo. Such funds from advance sales, estimated at approximately $3 million for the company, accumulate in an escrow account, and are released upon the issuance of the air carrier certificate.

 

 
F-13
 

 

BALTIA AIR LINES, INC.

OTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014

 

10. Development Stage Activities and Going Concern (continued)

 

In the event we do not generate sufficient funds from revenues or financing through the issuance of our common stock or from debt financing, we may be unable to fully implement our business plan and pay our obligations as they become due, any of which circumstances would have a material adverse effect on our business prospects, financial condition, and results of operations

 

While the Company believes it will be successful in obtaining the necessary financing to fund its operations, there are no assurances that such additional funding will be achieved and that it will succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might be necessary should the Company be unable to continue in existence

 

11. Related Party

 

During the years ended December 31, 2015 and 2014 the President and CEO received salary of $44,534 and $121,600, respectively. A second officer, vice president - finance, was paid salary and additional compensation of $95,877 and $427,350 for the years ended December 31, 2015 and 2014, respectively, which represents amounts paid him for negotiating services in connection with the raise of new equity capital. A third officer, vice president, was paid salary and additional compensation of $91,867 and $107,800 for services provided the Company during the years ended December 31, 2015 and 2014, respectively. A fourth officer, corporate secretary, was additional compensation of $17,905 and $11,968 for services provided the Company during the years ended December 31, 2015 and 2014, respectively.

 

During the year related parties have continually invested material operating capital into the company at various times in exchange for shares discounted from closing market quotations due to liquidity and selling restrictions impacting the value of such transactions.

 

12. Subsequent events

 

On February 22, 2016 the Company, and St. George Investments, LLC, a Utah limited liability company ("Lender"), entered into a Securities Purchase Agreement for the sale of (i) an unsecured promissory note (the "Note") in the principal amount of $655,000 and  (ii) a warrant (the "Warrant") exercisable for five years for 125,961,538 shares of common stock of the Company. The Company received net proceeds from the issuance of the Note in the amount of $500,000. The Note is due on August 22, 2016.

 

 

F-14 


Item 6. Exhibits.

3. CORPORATE CERTIFICATES AND BYLAWS

EXHIBITS

3.1.1 Certificate of Incorporation (as amended) of Baltia Air Lines, Inc.   Incorporated by reference to Exhibit 3.1.1 to Baltia Air Lines Inc.'s reported on Form 10-K, for the year ended December 31, 2012, as filed April 16, 2013

3.1.2 Certificate of Incorporation amendment of Baltia Air Lines, Inc. (as amended and filed on June 24, 2011)   Incorporated by reference to Exhibit 3.1.2 to Baltia Air Lines Inc.'s reported on Form 10-K, for the year ended December 31, 2012, as filed April 16, 2013

3.1.3 Certificate of Incorporation amendment of Baltia Air Lines, Inc. (as amended and filed on May 24, 2012)   Incorporated by reference to Exhibit 3.1.3 to Baltia Air Lines Inc.'s reported on Form 10-K, for the year ended December 31, 2012, as filed April 16, 2013

3.1.4 Certificate of Incorporation amendment of Baltia Air Lines, Inc. (as amended and filed on December 27, 2012).   Incorporated by reference to Exhibit 3.1.4 to Baltia Air Lines Inc.'s reported on Form 10-K, for the year ended December 31, 2012, as filed April 16, 2013

3.1.5 Certificate of Incorporation amendment of Baltia Air Lines, Inc. (as amended and filed on July 29, 2013). Incorporated by reference to Exhibit 3.1.5 as reported on Baltia Air Lines's Form Q-10 filed 21 August 2013.

3.1.6 Certificate of Incorporation amendment of Baltia Air Lines, Inc. (as amended and filed on February 12, 2014). Incorporated by reference to Exhibit 3.1.6 as reported on Baltia Air Lines's Form 10-K filed April 15 2014.

3.1.7 Certificate of Incorporation amendment of Baltia Air Lines, Inc. (as amended and filed on June 18, 2014).Incorporated by reference to Exhibit 3.1.7 as reported on Baltia Air Lines's Form 10-Q for period ending June 30, 2014, filed August 19, 2014.

3.1.8 Certificate of Incorporation amendment of Baltia Air Lines, Inc. (as amended and filed on July 20, 2014).Incorporated by reference to Exhibit 3.1.8 as reported on Baltia Air Lines's Form 10-Q for period ending June 30, 2014, filed August 19, 2014.

3.1.9 Certificate of Incorporation amendment of Baltia Air Lines, Inc. (as amended and filed on May 11, 2015). Incorporated by reference to Exhibit 1 reported on Baltia Air Lines's Form 8-K, filed May 20, 2015.

3.1.10 Certificate of Incorporation amendment of Baltia Air Lines, Inc. (as amended and filed on September 14, 2015).Incorporated by reference to Exhibit 1 as reported on Baltia Air Lines's Form 8-K filed October 27, 2015.

3.2 Bylaws of Baltia Air Lines, Inc. (amended and ratified November 7, 2011)   Incorporated by reference to Exhibit 3.2.2 to Baltia Air Lines Inc.'s reported on Form 10-K, 21 Dec 2011 from the year ended December 31, 2010.

10. MATERIAL CONTRACTS

10.1.- Fuel Agreement, World Fuel Services Inc., initial term September 1, 2013 to September 1, 2016, automatic renewal for one year extensions unless terminated. Incorporated by reference to Exhibit 10.1 to Company's 10-K for period ending December 31, 2014, filed April 15, 2015.

10.2 - Amendment II - Aircraft Engine Lease Agreement, Logistic Air Inc., executed May 15, 2014, effective through February 1, 2015. Incorporated by reference to Exhibit 10.2 to Company's Form 10-Q for period ending June 30, 2014, filed August 19, 2014. Expired - Extension Pending

10.4 - Ground Handling Agreement at Pulkovo Airport between ZAO Cargo Terminal Pulkovo and Baltia Air Lines, Inc. effective June 1, 2014 through May 31, 2016. Incorporated by reference to Exhibit 10.4 to Company's Form 10-Q for period ending June 30, 2014, filed August 19, 2014.

10.5 - Aircraft and/or Engine Maintenance Services Agreement between Kalitta Air, LLC and Baltia Air Lines, Inc., and Letter Agreement to Extend Aircraft Maintenance Service Agreement between Kalitta Air and Baltia Air Lines, Inc. effective December 24, 2015 until December 24, 2017 with 1-year extension with 60-day notice.

10.10 - Certificate of Insurance, Port Authority of New York and New Jersey insured, Airport Premises, effective December 24, 2015 to December 24, 2016.

10.12 - John F. Kennedy Airport - Terminal 4, Lease Agreement between JFK International Air Terminal, LLC and Baltia Air Lines, dated November 17, 2008, effective until terminated by either party. Incorporated by reference to Exhibit 10.12 to Baltia Air Lines Inc.'s report on Form 10-K for the year ended December 31, 2012.

10.12.1 - Certificate of Insurance, JFK International Air Terminal LLC insured, Terminal 4 Leased space to Baltia Air Lines, Inc., effective December 24, 2015 to December 24, 2016.

10.14 - Willow Run Airport facility lease between Wayne County Airport Authority and Baltia Air Lines, effective from August 19, 2015 until August 18, 2016.  

10.14.2 - Certificate of Insurance, Wayne County Airport Authority insured, Detroit Metro Airport Premises, effective December 24, 2015 to December 24, 2016.

10.14.3 - Certificate of Insurance, Wayne County Airport Authority insured, LC Smith Airport Premises, effective September 15, 2015 to September 15, 2016. Incorporated by reference to Exhibit 10.14.3 to Company's 10-Q for period ending September 30, 2015, filed November 17, 2015.

10.15 - Pulkovo Airport facility SubLease Agreement between LLC Northern Capital Gateway and Baltia Air Lines, effective from March 1, 2013, auto renewed unless objected to by Sublessor. Incorporated by reference to Exhibit 10.15 to Company's 10-Q for period ending March 30, 2014, filed May 20, 2014

10.16 - Contract affirmed by Board resolution affirming Agreements between the Company and its officers agreeing not to sell the shares issued to them until the Company receives FAA Certification and commence its revenue flights. Incorporated by reference to Exhibit 10.16 to Baltia Air Lines Inc.'s report on Form 10-K for the year ended December 31, 2012.

10.17 - Purchase of Cessna Citation 500 aircraft N606KR. Incorporated by reference to Form 8-K filed May 21, 2013. (NOTE: Aircraft currently not being operated.)

10.18 - Loan Agreement (amended) dated October 14, 2013 between Baltia Air Lines, Inc. and Eastern Construction & Electric, Inc. for purchase of Boeing 747 aircraft.   Incorporated by reference to Exhibit 10.18 to Company's 10-Q for 3rd quarter 2013 filed November 19, 2013.

10.22 - Loan Agreement - Legal services rendered by International Business Law Firm PC to Baltia Air Lines, executed June 30, 2014. Incorporated by reference to Exhibit 10.22 to Company's 10-K for 2013 filed April 15, 2014.

10.24 - Cargo Handling at JFK - Cargo Airport Services USA and Baltia, valid to 1 January 2017 and continued annually until one party serves the other party with written notice not to renew. Incorporated by reference to Exhibit 10.24 to Company's 10-Q for period ending June 30, 2014, filed November 19, 2014.

10.25 - Security Service at JFK - FJC Security Services, Inc., valid to 9/18/15 with automatic annual renewal unless one party serves the other party with written notice not to renew. Incorporated by reference to Exhibit 10.25 to Company's 10-Q for period ending June 30, 2014, filed November 19, 2014.

10.26- Ground Handling at JFK - Swissport Agreement, Standard IATA Agreement of 1998 Ramp and Passenger Handling valid to May 16, 2017. Incorporated by reference to Exhibit 10.26 to Company's 10-Q for period ending June 30, 2014, filed November 19, 2014.

10.27- Maintenance Services Agreement, Standard IATA Agreement of 1998 with F&E Maintenance valid to May 16, 2017. Incorporated by reference to Exhibit 10.27 to Company's 10-Q for period ending June 30, 2014, filed November 19, 2014.

10.28 - Jeppessen Sanderson, Inc. Services Agreement dated February 3, 2014 effective to February 3, 2019, automatic extension for one-year additional terms unless terminated as provided. Incorporated by reference to Exhibit 10.28 to Company's 10-K for period ending December 31, 2014, filed April 15, 2015.

10.29 - 121 Inflight Catering, Inc., Services Agreement dated October 7, 2014 effective to October 7, 2015. Incorporated by reference to Exhibit 10.29 to Company's 10-K for period ending December 31, 2014, filed April 15, 2015. (renewal pending flight operations)

10.30 - Workers Compensation and Liability Insurance - NY - State Insurance fund. 4-6-2015 through 4-6-2016. Incorporated by reference to Exhibit 10.30 to Company's 10-Q for period ending March 31, 2015, filed May 14, 2015 (cancelled)

10.31 - Workers Compensation and Liability Insurance - Michigan - Travellers - 4-6-2015 through 4-6-2016. Incorporated by reference to Exhibit 10.31 to Company's 10-Q for period ending March 31, 2015, filed May 14, 2015

10.32 - Employment contracts - senior management, executed but not in effect pending FAA certification or commencement of revenue flight operations. Incorporated by reference to Exhibit 10.32 to Company's 10-Q for period ending June 30, 2015, filed August 18, 2015.

10.33 - Claim of Lien and transmittal correspondence - Kalitta Maintenance, May 20, 2015. Incorporated by reference to Exhibit 10.33 to Company's 10-Q for period ending June 30, 2015, filed August 18, 2015.

CERTIFICATIONS

31.1 Certification by Chief Executive Officer and Chief Financial Officer pursuant to Sarbanes-Oxley Section 302, provided herewith.

32.1 Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S. C. Section 1350, provided herewith.

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned thereunto duly authorized.

Baltia Air Lines, Inc.

Date: April 14, 2016

/s/ Russell Thal
By: Russell Thal, President and Chairman

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE

TITLE

DATE

/s/ Russell Thal
Russell Thal

Chairman and President
(Principal Executive Officer)

April 14, 2016

/s/ Frank Acquavella
Frank Acquavella 

VP- Operations,
Director

April 14, 2016

/s/ Walter Kaplinsky
Walter Kaplinsky 

Secretary,
Director

April 14, 2016

/s/ Barry Clare
Barry Clare

Executive VP,
Director

April 14, 2016

/s/ Vick Luis Bolanos
Vick Luis Bolanos 

Director

April 14, 2016

 

 

Exhibit 31.1

BALTIA AIR LINES INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION
1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Russell Thal, certify that:

1. I have reviewed this annual report on Form 10-K of Baltia Air Lines, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a- 15(f) and 15d-15(f))for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 14, 2016

/s/ Russell Thal
Chairman and President
Russell Thal
(Principal Executive Officer)

/s/ Anthony D. Koulouris
Interim Chief Financial Officer
Anthony D. Koulouris
(Principal Accounting Officer)

 

EXHIBIT 32.1

BALTIA AIR LINES, INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION
1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report for Baltia Air Lines, Inc. (the "Company") on Form 10-K for the period ended December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the Report),

I, Russell Thal, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to Baltia Air Lines, Inc. and will be retained by Baltia Air Lines, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Date: April 14, 2016

/s/ Russell Thal
Chairman and President April 14, 2016
Russell Thal
(Principal Executive Officer)

/s/ Anthony D. Koulouris
Interim Chief Financial Officer April 14, 2016
Anthony D. Koulouris
(Principal Accounting Officer)


EXHIBIT 10.14 Kalitta Maintenance Agreement
AIRCRAFT AND/OR ENGINE 
MAINTENANCE SERVICES AGREEMENT 
Dated as of December 24, 2015 by and between
  BALTIA AIR LINES, INC.  and 
KALITTA AIR, LLC d/b/a KALITTA MAINTENANCE 
Agreement No. __________ 
INDEX INDEX TO EXHIBITS 
ARTICLE ARTICLE 1 ARTICLE 2 ARTICLE 3 ARTICLE 4 ARTICLE 5 ARTICLE 6 
ARTICLE 7 ARTICLE 8 ARTICLE 9 ARTICLE 10 ARTICLE 11 ARTICLE 12 ARTICLE
 
13 ARTICLE 14 ARTICLE 15 ARTICLE 16 ARTICLE 17 ARTICLE 18 ARTICLE 19 
ARTICLE 20  HEADING DEFINITIONS ENGAGEMENT TERMS OF AGREEMENT SCOPE OF
 
THE SERVICES PARTS, MATERIAL, SUPPLIES REGULATORY REQUIREMENTS OUTSIDE
  SERVICES DELIVERY, ACCEPTANCE AND REDELIVERY CHARGES AND PAYMENTS 
WARRANTIES RELEASE AND INDEMNIFICATION INSURANCE DEFAULT AND REMEDIES 
DELAYS TAXES RECORDS NON LIABILITY OF INDIVIDUALS CUSTOMER'S 
REPRESENTATIVES NON DISCLOSURE/NON SOLICITATION MISCELLANEOUS  
EXHIBIT  EXHIBIT HEADING   EXHIBIT 1  WORK AUTHORIZATION FORM  
EXHIBIT 2  SCHEDULE OF CHARGES  
EXHIBIT 3  MODIFICATION OF WORK SCOPE  REQUEST  
EXHIBIT 4  AIRCRAFT DELIVERY RECEIPT  
EXHIBIT 5  AIRCRAFT REDELIVERY RECEIPT  
EXHIBIT 6  ENGINE DELIVERY RECEIPT  
EXHIBIT 7  ENGINE REDELIVERY RECEIPT  
EXHIBIT 8  MISCELLANEOUS EXPENDABLE MATERIAL &SUPPLIES (MSP) LIST  
EXHIBIT 9  INVENTORY LIST OF CUSTOMER PROVIDED PARTS  
EXHIBIT 10  FUELING SERVICES ADDENDUM  
EXHIBIT 11  KALITTA REQUIRED INSURANCE  
EXHIBIT 12  CUSTOMER REQUIRED INSURANCE  
EXHIBIT 12.1  CUSTOMER CERTIFICATE OF INSURANCE  
AIRCRAFT AND/OR ENGINE MAINTENANCE
  SERVICES AGREEMENT 
THIS AIRCRAFT AND/OR ENGINE MAINTENANCE SERVICES AGREEMENT is made as 
of the 24th day of December 2015 (the "Effective Date"), between 
BALTIA AIR LINES, INC. a New York Corporation, having its registered 
office at John F. Kennedy International Airport, Terminal 4, Room 
262.089, Jamaica, NY 11430 (hereinafter referred to as "CUSTOMER"), 
and KALITTA AIR, L.L.C. (dba KALITTA MAINTENANCE), a Michigan limited 
liability company having its registered office at 818 Willow Run 
Airport, Ypsilanti, Michigan 48198 (hereinafter called "KALITTA"). 
CUSTOMER and KALITTA may hereinafter be referred to individually as a 
" Party" and collectively  as the "Parties".  RECITALS 
WHEREAS, CUSTOMER desires that KALITTA perform maintenance services on
  CUSTOMER's Aircraft and/or Engine as may be designated by CUSTOMER 
from time to time as set 
forth in Exhibit 1 hereto; and 

WHEREAS, KALITTA maintains and operates a Federal Aviation 
Administration approved certified facility (Repair Station with 
certificate number KO0R718X) for the performance of aircraft and 
engine inspection, maintenance, modification, overhaul and repair 
services, and KALITTA is willing to provide the Services (as defined 
below) on the terms and conditions as set out below; 
NOW, THEREFORE, in consideration of the foregoing and of the mutual 
covenants set forth herein, the two parties agree as follows: 
1 DEFINITIONS 
In this Agreement, unless the context requires otherwise: 
1.1 "Acceptance Tests"  means acceptance ground and flight tests 
performed on the Aircraft by CUSTOMER prior to Redelivery in 
accordance with the provisions of Article 8.5 and 8.7 hereof. 
1.2 "Agreement"  means this Aircraft and/or Engine Maintenance 
Services Agreement and all schedules, annexes and exhibits hereto as 
well as all amendments or variation as agreed in writing from time to 
time by the parties hereto.  Version 1 February 23, 2016 
1.3 "Aircraft"  means the aircraft and installed engines owned by 
CUSTOMER on which Services are to be performed pursuant to a Work 
Authorization Form. 
1.4 "Delivery"   means the delivery of the Aircraft and/or Engine by 
CUSTOMER to KALITTA at the Facility.  1.5 "Delivery Date" 
means the date of Delivery of an Aircraft and/or 
Engine by CUSTOMER to KALITTA at the facility.  1.6 "Delivery Receipt" 
means a receipt in the form of Exhibit 4 
(Aircraft) and Exhibit 6 (Engine) hereto executed by KALITTA and 
CUSTOMER upon the Delivery of the Aircraft and/or Engine. 
1.7 "Engine"  means the engine owned by CUSTOMER on which Services are 
to be performed pursuant to a Work Authorization Form. 
1.8 "Engine Test"   means a test performed pursuant to the Pratt & 
Whitney or General Electric Maintenance Manual.  1.9 "FAA" 
means the Federal Aviation Administration of the United 
States of America, and any successor thereof. 
1.10 "Facility"   means KALITTA's facility at OSC, Oscoda, Michigan. 
1.11 "FARs"  means any regulations promulgated by the FAA and any 
successor thereof that are applicable to the provision of the Services.
  1.12 "Herein", "hereof', "hereunder", and like terms  shall refer to 
this Agreement, as the same may be amended or supplemented from time 
to time. 
1.13 "Induction Date"   means the date KALITTA will begin the work on 
the Aircraft and/or Engine as described in Exhibit 1 hereto. 
1.14 "Modified Work Scope Services"  means any additional maintenance, 
modification or other services, other than those described in the Work 
Authorization Form, requested by CUSTOMER in writing (including e 
mail) which, will modify the Work Authorization Form and shall become 
part of this Agreement. 
1.15 "Modification of Work Scope Request" or "MWSR"  means a document 
in the form of Exhibit 3 for Additional Services, which should be 
executed by KALITTA and CUSTOMER. The MWSR shall memorialize the 
request by CUSTOMER to amend the Work Authorization Form to include 
the Additional Services to be performed by KALITTA. 
Version 1 February 23, 2016  1.16 "Parts" 
means all accessories, components, instruments and other 
equipment, parts and materials required for the performance of the 
Services (other than engines).  1.17 "Redelivery" 
means the redelivery of the Aircraft and/or Engine 
from KALITTA to CUSTOMER at the Facility at the completion of the 
Services, in accordance with Article 8 hereof. 

1.18 "Redelivery Date"   means the date of Redelivery. 
1.19 "Redelivery Receipt"  means a receipt in the form of Exhibit 5 
(Aircraft) and Exhbit 7 (Engine) hereto executed by KALITTA and 
CUSTOMER concurrently with the Redelivery of the Aircraft and/or 
Engine.  1.20 "Schedule of Charges"  means the Schedule of Charges for 
performing the Services and providing Parts as set forth in Exhibit 2 
hereto, which shall be executed by the parties hereto prior to the 
induction of the Aircraft and/or Engine.  1.21 "Services" 
means the services to be performed by KALITTA for the 
Aircraft and/or Engine as set forth in the Work Authorization Form and 
any MWSRs.  1.22 "Work Authorization Form" 
means a document in the form of 
Exhibit 1 hereto identifying the Aircraft and/or Engine on which 
Services are to be performed, describing the Services and the man 
hours or charges for performing the Services, and setting forth the 
scheduled Delivery and Redelivery Dates. The form when executed by 
KALITTA and CUSTOMER shall constitute, in each case, 
CUSTOMER's authorization for KALITTA to perform the Services on the 
Aircraft and/or Engine and 
KALITTA undertaking to do so, in accordance with this Agreement. 
2 ENGAGEMENT 
Subject to the terms and conditions of this Agreement, CUSTOMER
  engages KALITTA to perform the Services and provide Parts in 
accordance with Kalitta Maintenance Repair Station procedures. 
3 TERMS OF AGREEMENT 
3.1 Except as may be otherwise provided herein, this Agreement shall 
commence as of the date set forth on the first page of this Agreement 
upon execution hereof by both parties and shall continue in full force
  and effect for a period of two (2) years after such date, unless 
earlier terminated by either party for any or no reason by providing 
the other party with thirty (30) days prior written notice of 
termination. CUSTOMER may elect to extend this Agreement for 
additional successive terms of one 
(1) year each, by providing written notice of such election to KALITTA
  at least sixty (60) days prior  Version 1 February 23, 2016 
to the end of the initial term or any renewal term. KALITTA shall have
 
the right to reject any such renewal or to condition such renewal on a
 
new Schedule of Charges by giving CUSTOMER notice of such rejection or
  new Schedule of Charges within thirty (30) days after receipt of 
CUSTOMER's renewal notice. If the parties are unable to agree on the 
revised charges, this Agreement shall terminate at the expiration of 
that initial or renewal term. 
3.2 CUSTOMER agrees to pay all charges specified on the Schedule of 
Charges. 
4 SCOPE OF THE SERVICES 
4.1 Services to be Provided 
A. The specific Services to be provided by KALITTA shall be mutually 
agreed upon between KALITTA and CUSTOMER in the Work Authorization 
Form. A Work Authorization Form must be executed for each Aircraft 
and/or Engine on which KALITTA performs Services under this Agreement 
and must be signed by both parties. 

B. The Work Authorization Form may from time to time be amended by 
additional, alternative, or supplementing services as the parties may 
agree in writing including email, and memorialize by means of a 
written Modification of Work Scope Request or "MWSR" in the form of 
Exhibit 3 hereto, to be executed by authorized representatives of 
KALITTA and 
CUSTOMER. Any additional Services which have a schedule impact on the 
scheduled Redelivery Date shall be mutually agreed and indicated in 
the applicable MWSR. 
C. In the event of any conflict between the general terms and 
conditions of this Agreement and the specific terms and conditions 
which have been mutually agreed to by the parties in an executed Work 
Authorization Form, the terms and conditions contained in the Work 
Authorization Form shall prevail. 
4.2 Fueling Services 
For the purpose of performing maintenance services on the CUSTOMER 
Aircraft, or for the purpose of permitting the CUSTOMER to return the 
Aircraft to its base or the location of its choice, Fueling Services 
may be provided by KALITTA. Fueling Services include the sale and 
delivery of Fuel to the CUSTOMER. CUSTOMER agrees to purchase, receive
  and pay for the Fuel for consumption in the 
CUSTOMER's Aircraft. Fueling Services may also include the defueling 
of an Aircraft as may be 
required by applicable maintenance requirements. In the event CUSTOMER
  elects to have KALITTA provide fueling services the terms and 
conditions relating to Fueling Services are set forth in the 
Version 1 February 23, 2016 
attached Fueling Services Addendum (in the form of Exhibit 10 hereto) 
and will become applicable upon execution by the parties, or upon the 
provision of fueling services by KALITTA. 
5 PARTS, MATERIAL, SUPPLIES 
5.1 KALITTA  Furnished Parts 
Except as otherwise provided in Article 5.2 hereof, KALITTA shall 
procure and provide all common aircraft and engine hardware parts 
necessary to perform the Services. All freight and handling charges
  shall be in accordance with the Schedule of Charges. 
5.2 CUSTOMER Furnished Parts 
CUSTOMER will furnish to KALITTA any Parts required for the 
performance of the Services ("CUSTOMER Furnished Parts"), in which 
case they shall be delivered to KALITTA no later than the scheduled 
Delivery Date.  All parts furnished by CUSTOMER for the routine or 
stated work appearing in Exhibit 1 hereto, will be received through 
OSC Stores Inspection Procedures and placed in a holding area as 
stated in Article 5.3A hereof. All non routine parts supplied by 
CUSTOMER will meet the need by date specified by the Project Manager 
and conform to the OSC Inspection Procedures. Any CUSTOMER furnished 
non routine part not delivered to OSC by the need date will be 
considered a cause to escalate the re delivery schedule on a day for 
day slip, predicated on the actual date the part is received in OSC. 
Should the CUSTOMER be unable to supply a non routine part, after 
stating it would supply the part, CUSTOMER has forty eight (48) hours 
to notify KALITTA. In the event CUSTOMER fails to notify KALITTA 
within the forty eight (48) hour period or fails to supply a non 
routine part, KALITTA may procure the non routine part and charge 
CUSTOMER according to the provisions of Exhibit 2 hereto. 
CUSTOMER will provide KALITTA with an inventory list of all provided 
Parts, including, part numbers, descriptions and values in accordance 
with  the provisions of  Exhibit 9, hereto. 
5.3 Handling, Storage and Disposition of CUSTOMER's Property 
A. KALITTA shall provide sufficient hangar space for the Aircraft 
and/or Engine when required for performance of the Services and 
sufficient warehouse space for all CUSTOMER
Furnished Parts and/or any 
of CUSTOMER's property removed from the Aircraft and/or Engine for 
storage. CUSTOMER Furnished Parts shall be physically isolated from 
KALITTA Parts, and KALITTA shall take reasonable precautions to ensure
  limited access to and provide adequate security for the CUSTOMER 
Furnished Parts. 
B. CUSTOMER shall be responsible for all the handling, shipping and 
freight charges incurred for all CUSTOMER
Furnished Parts or property. 
C. KALITTA shall return all the unused CUSTOMER Furnished Parts and 
property to CUSTOMER at the Redelivery. KALITTA shall arrange, at 
CUSTOMER's sole expense and risk, for preparation and shipment of such
  Parts to the locations designated by CUSTOMER. 
5.4 Title and Risk of Loss and Damage 
During the performance of the Services, title to the Aircraft and/or 
Engine, any of CUSTOMER's 
property removed from the Aircraft and/or Engine for storage and all 
CUSTOMER Furnished Parts shall at all times remain with CUSTOMER. 
KALITTA shall bear the risk of direct loss or damage to such Aircraft 
and/or Engine(s), their parts, its engines, items of  CUSTOMER's 
property or any items of CUSTOMER Furnished Parts occurring while in 
the care, custody or control of KALITTA, if any loss or damage is 
caused by the negligence or willful misconduct of KALITTA or its 
employees.   KALITTA's responsibility and risk for any such loss or 
damage is limited to actual direct physical loss of or damage to the 
Aircraft and or Engine, its parts, items of Customer's Property or 
items of CUSTOMER
Furnished Parts and excluded special, incidental, or 
consequential damages, as provides for in Article 11.2 
6 REGULATORY REQUIREMENTS 
6.1 KALITTA Regulatory Responsibilities
 
KALITTA shall: 
A. at all times meet the technical and operational requirements of an 
FAA Certified Repair Station authorized to perform the Services and 
shall maintain an FAR Part 145 Certificate with applicable ratings for
  performance of the Services; 
B. promptly report to CUSTOMER any discrepancies between FAA 
requirements and KALITTA operations as reported to KALITTA by the FAA;
  C. provide CUSTOMER with appropriate records of all maintenance 
transactions and component and piece part removals, along with the 
related teardown findings and repair billing information; and 
D. be responsible for preparing FAA Form 337, or comparable CUSTOMER 
supplied documents (E.A. / E.O., etc.), to cover all major repairs and
  alterations accomplished during the Services; and 
It shall be the responsibility of CUSTOMER to supply FAA approved data
  (acceptable to KALITTA) to cover all alterations, unless otherwise 
agreed by KALITTA. It shall be the responsibility of KALITTA to supply
 
FAA approved data for all major repairs performed during the Services,
  unless otherwise agreed, in writing, between KALITTA and CUSTOMER. 
6.2 Classification of Repairs 
CUSTOMER shall be required to classify major and minor repairs in
  accordance with the FAR Part 43 
Appendix "A" definition and guidelines, it being understood that 
KALITTA shall have no obligation 
to do so for CUSTOMER under this Agreement. 
7 OUTSIDE SERVICES 
7.1 Use of Subcontracts 
KALITTA may have any of the Services performed by subcontractors; 
provided, that the use of subcontractors shall not create any 
contractual or agency relationship between CUSTOMER and any such 
subcontractor. The performance by any subcontractor of any Services
  shall not relieve KALITTA of any of its obligations to CUSTOMER 
hereunder 
7.2 Outside Services or Subcontract Services Requirements 
Any subcontractor used by KALITTA shall meet one or more of the 
following provisions as applicable: 
A. hold a currently valid FAA Repair Station Certificate issued under 
Part 145 of the Federal Aviation Regulations, with applicable rating 
for work to be performed under this Agreement and the specific 
requirements of FAR 145.2; 
B. hold a current valid FAA Repair Station Certificate issued under 
Part 145 of the Federal Aviation Regulations, with a limited rating 
for specialized services applicable to the Services performed, and 
have the related FAA approved process specification listed on its 
operations specifications; 
C. be the manufacturer of the items to be serviced and have attached 
to each item a maintenance record prepared in accordance with Part 43 
of the Federal Aviation Regulations; or 
D. be equipped with the necessary tools, facilities, qualified 
personnel, quality control system, inspection procedures, and 
technical data to perform the Services; and be listed as an approved 
vendor for these Services in accordance with KALITTA's FAA approved 
145 Repair Station requirements. Services performed by Kalitta under 
this provision shall be returned to service by Kalitta under its 
authority. 
E. Any subcontractor must comply with any and all applicable 
requirements of Amendment 91 336 to 14 CFR Part 91. 
8 DELIVERY, ACCEPTANCE AND REDELIVERY 
8.1 Delivery of the Aircraft and/or Engine 
A. CUSTOMER shall deliver the Aircraft and/or Engine designated in the
  Work Authorization Form to the Facility on or before the Induction 
Date. 
B. In the event of any delay of the scheduled Delivery of the Aircraft
 
and/or Engine by CUSTOMER to the Facility, CUSTOMER shall immediately 
inform KALITTA of the details of such delay and advise KALITTA of a 
new scheduled Delivery Date. If the delay has an impact on the 
scheduled Redelivery Date, both parties shall discuss and mutually 
agree upon an amendment in the scheduled Redelivery Date specified in 
the Work Authorization Form. 
C. Upon Delivery, KALITTA and CUSTOMER shall make a ground inspection 
of the Aircraft and/or Engine and execute a Delivery Receipt in the 
form of Exhibit 4 and/or Exhibit 6 hereto. 
D. If defueling is required to accomplish the Services on the 
Aircraft, CUSTOMER shall be charged for the defueling, storage, re  
certification and refueling in accordance with the provisions set
  forth in the Schedule of Charges in Exhibit 2 hereto. 
8.2 Inspections and Tests of Aircraft 
KALITTA shall conduct such inspections of the Aircraft and perfor
m 
such tests as it deems necessary to comply with this Agreement. 
8.3 Acceptance Tests by CUSTOMER of Aircraft 
A. Upon KALITTA's completion of the Services and ground tests, 
CUSTOMER may, using CUSTOMER's flight crews and at CUSTOMER's sol
e  risk and expense, perform ground and 
flight 
tests ("Acceptance Tests") on the Aircraft. KALITTA shall have 
the right to have a 
representative on board during any ground or test flight. 
B. All Acceptance Tests which are required by CUSTOMER shall be 
carried out by CUSTOMER at its own expense and risk, and CUSTOMER 
shall insure for all risks of loss, damage or liability arising from 
such Acceptance Tests. CUSTOMER agrees that all provisions of Article 
11 and 12 of this Agreement apply to all Acceptance Tests. 
4    Correction of Discrepancies of Aircraft 
Upon completion of Acceptance Tests, KALITTA shall promptly correct 
any defects or discrepancies to the extent attributable to the 
performance of the Services by KALITTA or its subcontractor, at no 
additional cost to CUSTOMER. Additional Acceptance Tests may be 
performed by CUSTOMER at its own expense and risk to inspect KALITTA's
  correction of such defects or discrepancies. 
5    Redelivery of the Aircraft 
A. Upon completion of the Services by KALITTA and Acceptance Tests by 
CUSTOMER, KALITTA shall redeliver the Aircraft to CUSTOMER at the 
Facility. KALITTA and CUSTOMER shall make a ground inspection of the 
Aircraft and execute a Redelivery Receipt in the form of Exhibit 5 
hereto which shall indicate:  (1) 
CUSTOMER's acceptance of the Aircraft and willingness to take 
redelivery thereof, and 
(2) 
CUSTOMER's recognition that KALITTA has performed all Services in 
compliance with the Work Authorization Form and MWSRs pursuant to this
  Agreement. 
B. 
KALITTA warrants to CUSTOMER that at Redelivery:
 
(1)  The Aircraft's maintenance paperwork shall have received all 
appropriate entries and where approved by the CUSTOMER, appropriate
  aircraft log entries made; and 
(2) 
All Services shall have been appropriately documented and shall have 
been performed in conformance with all applicable FARs, the Operators 
Maintenance Program, if applicable, and Exhibit 1. 
6    Inspections and Tests of Engine 
KALITTA shall conduct such inspections of the Engine(s) and perform 
such tests as it deems necessary to comply with this Agreement. 
CUSTOMER shall have the right, upon providing prior 
Version 1 February 23, 2016 
notice to KALITTA, but not the obligation, to observe KALITTA's 
performance of the inspections and tests and shall have the right, at 
all reasonable times, upon reasonable advance notice to KALITTA, to 
inspect the Engine(s), the maintenance records, FAA forms and records 
and all other documentation pertaining to the Engine(s) or the 
performance of the Services, provided that 
CUSTOMER shall not interfere with KALITTA's performance and its 
obligations under this  Agreement. 
8.7 Redelivery of the Engine 
A. Upon completion of the Services, KALITTA shall redeliver the Engine
  to CUSTOMER at the Facility together with:   (1) 
such Engine's relevant Customer Furnished Documentation, duly up
dated; 
(2)  all relevant test reports, technical repair reports and/or 
investigation reports (if any) including any required by the FAA IA
 
Inspector in accordance with Article 6.1(D) of this Agreement; and 
B. Upon receipt of the foregoing, CUSTOMER shall execute a Redelivery 
Receipt in the form of Exhibit 7 which shall indicate: 
(1) CUSTOMER's acceptance of the Engine and willingness to take 
redelivery thereof, and  (2) 
CUSTOMER's recognition that KALITTA has performed all Services in 
compliance with the Work Authorization Form and MWSRs pursuant to this
  Agreement. 
C. 
KALITTA agrees that all Services shall have been appropriately 
documented and shall have been performed in conformance with al
l  applicable FARs. 
9 CHARGES AND PAYMENTS 
KALITTA charges to CUSTOMER and payment by CUSTOMER for all Services 
and Parts provided by KALITTA, subcontract services and other charges 
associated with the performance of the Services, shall be in 
accordance with the Schedule of Charges. 
10 WARRANTIES:  AIRCRAFT OR ENGINES  10.1 KALITTA Warranties 
Version 1 February 23, 2016 
KALITTA warrants its workmanship performed under this Agreement and
 
agrees to bear the costs required to correct any defect in any Part
  serviced by KALITTA if the defect in such Part is caused by 
KALITTA's  faulty workmanship, provided: 
A. (Aircraft and Pratt & Whitney JT9 D Engines) the defect is 
discovered within sixty 
(60) days or one hundred fifty (150) flying hours, whichever occurs
 
first, following completion of the Workscope of the Aircraft, and 
KALITTA is notified in writing within ten (10) days of CUSTOMER 
discovering the defect. 
(GE Manufactured Engines) the defect is discovered within one hundred 
eighty days  (180) 
or one thousand (1000) flying hours, whichever occurs first, following
 
installation of the Engines, and KALITTA is notified in writing within
  ten (10) days of CUSTOMER discovering the defect.; 
B. 
CUSTOMER demonstrates to the reasonable satisfaction of KALITTA that 
the defect was due to faulty workmanship by KALITTA, provided that no 
act or omission by KALITTA shall be deemed to be faulty workmanship 
unless such act or omission is shown to be contrary to approved 
technical procedures in effect at the time performed; in the event of 
a warranty related dispute, both parties will attempt to reach an 
agreement; if an agreement cannot be reached, a third party expert 
agreeable to both the parties will be used for arbitration and whose 
decision will be accepted as final; and 
C. 
the Aircraft, engine, Part or material is returned to the Facility, at
 
CUSTOMER's expense, together with written particulars as to the nature
 
of the claimed defect or to such other location as may be agreed upon 
between the parties in writing, and 
D. 
in no event shall KALITTA's liability under this Article exceed the
  total repair costs already paid by CUSTOMER to KALITTA. 
10.2 Warranty Repairs by KALITTA 
A. KALITTA's liability under the warranties set forth in Article 10.1 
hereto shall be limited to the replacement or repair, at KALITTA's 
expense, (and subject to the limitations of Article 10.1(d)),  of all 
or any portion of the  warranted Services which, in the reasonable 
discretion of KALITTA, is caused by the defective workmanship of 
KALITTA, and to the repair or replacement of only those  items or 
Parts which have been serviced by and returned to KALITTA and, while 
in the reasonable discretion of KALITTA, have suffered damage directly
  as a result of a 
defect in KALITTA's warranted Services. 
B. KALITTA's obligations under this Article 10.2 shall not extend to 
CUSTOMER Furnished or third party furnished Parts used by KALITTA in 
the performance of the Services unless and to the extent such parts 
are found by Kalitta, in its reasonable discretion to be damaged as a 
direct result of a defect in the warranted Services 
10.3 Limitation of Warranties THE WARRANTIES SET FORTH IN THIS ARTICLE
 
10 AND THE OBLIGATIONS AND LIABILITIES OF KALITTA UNDER THIS ARTICLE 
10 ARE THE EXCLUSIVE WARRANTIES PROVIDED BY KALITTA UNDER THIS 
AGREEMENT. KALITTA MAKES NO WARRANTY, EXPRESS, IMPLIED, STATUTORY, OR 
ORAL OF ANY KIND, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF 
AIRWORTHINESS, MERCHANTABILITY, OR FITNESS FOR INTENDED USE OR FITNESS
  FOR A PARTICULAR PURPOSE FOR ANY SERVICES, PARTS OR MATERIALS OR 
INFORMATION FURNISHED HEREUNDER. KALITTA WILL NOT BE LIABLE FOR ANY 
INCIDENTAL, SPECIAL, CONSEQUENTIAL, OR RESULTANT DAMAGES OF ANY KIND, 
INCLUDING BUT NOT LIMITED TO THE LOSS OF USE, LOSS OF REVENUE OR 
PROFIT OR DIMINUTION OF VALUE. CUSTOMER AGREES THAT KALITTA'S SOLE 
LIABILITY UNDER THIS ARTICLE 10 WILL BE AS PROVIDED IN ARTICLE 10.2 
HEREOF. 
10.4 CUSTOMER's Warranty Repairs Unless otherwise agreed in writing by
 
KALITTA, CUSTOMER shall return the Aircraft and/or Engine or defective
  Parts to KALITTA for all warranty repair or replacement pursuant to 
Article 10.2 hereof. 
10.5 Assignment of Warranties KALITTA shall assign to CUSTOMER on 
Parts provided by KALITTA any and all assignable warranties, service 
life policies and patent indemnities of manufacturers, suppliers and 
subcontractors other than KALITTA. CUSTOMER shall be solely 
responsible for enforcement of CUSTOMER's rights under such 
warranties, service life policies and patent indemnities. Upon CUSTOME
R 's  request, KALITTA shall give notice to any such manufacturers, 
suppliers and subcontractors of the assignment of such warranties, 
service life policies and patent indemnities. To the extent warranties
 
are not assignable by KALITTA to CUSTOMER, KALITTA shall endeavor, at 
CUSTOMER's 
expense, to enforce its rights under such warranties, service life 
policies and patent indemnities for the benefit of CUSTOMER. 
10.6 Limitation of KALITTA 's Liabilities 
KALITTA shall be relieved of all obligations and liabilities under 
this Article 10 if: 
A. CUSTOMER maintains, operates or permits operation of the Aircraft, 
engine or Part 
other than in accordance with the applicable manufacturer's operating 
and maintenance instructions, or 
other than in accordance with an approved maintenance program for the 
Aircraft and/or Engine. B CUSTOMER accomplishes or has accomplished by
  agencies other than by KALITTA, 
the repair or replacement of all or any portion of KALITTA's warranted
 
Services without notifying and obtaining KALITTA's consent in writing.
  C. CUSTOMER accomplishes or has accomplished by agencies other than 
KALITTA, repairs, alterations, modifications, replacements or 
overhauls of the Aircraft, engine or Part and if such repair, 
alteration, modification, replacement or overhaul is determined to be 
the cause of such defect. 
D. The Aircraft, engine or Part is operated subsequent to involvement 
in an accident (as defined in 49 CFR 803.2) or an incident (as defined
 
in FAA Order 8020.11C Chapter 6.r.) that caused any physical damage to
  the aircraft and prior to complete repair, if such operation is 
determined to be the cause of such defect. 
E. KALITTA is notified in writing of any defect in KALITTA warranted 
Services after the expiration of the warranty period set forth in 
Article 10.1 hereof. 
11 RELEASE, INDEMNIFICATION, AND LIABILITY 
11.1 Release, Indemnification and Liability by CUSTOMER 
A. Except as specifically provided for in Articles 5.4 and 11.1E, each
 
Party will be liable towards the other Party for damage to or loss of 
property and for the injury to or death of any person caused by the 
gross negligence or the willful misconduct of its members, its 
managers, its directors, officers, employees, agents or subcontractors
 
in connection with or as a result of the Services rendered under this 
Agreement. 
B. KALITTA will indemnify, defend and hold harmless CUSTOMER, its 
members, its managers, its directors, officers, employees, agents and 
subcontractors from and against all claims of third parties related to
  damage, including but not limited to the Aircraft, loss, injury or 
death caused by the gross negligence or the willful misconduct of 
KALITTA, its members, its managers, its directors, officers, 
employees, agents or subcontractors. 
C. CUSTOMER will indemnify, defend and hold harmless KALITTA, its 
members, its managers, its directors, officers, employees, agents and 
subcontractors from and against all claims of third parties related to
  damages, including but not limited to the Aircraft, including any 
engines which may be attached, loss, injury or death unless such 
damage, loss, injury or death is caused by the gross 
Version 1 February 23, 2016 
negligence or the willful misconduct of KALITTA, its members, its 
managers, its directors, officers, employees, agents or subcontractors
.  D. The liability and indemnification include all necessary costs, 
expenses and fees incident thereto, however under no circumstances 
will the liability in Article 11 include any indirect, incidental, 
special, or consequential or resultant damages, of any kind, including
  but not limited to, loss of use, loss of profit, loss of revenue or 
diminution of value, provided, however, that this Article 11.1D shall 
not limit any claim KALITTA may have against CUSTOMER for breach of 
any payment obligation. 
E. Each party assumes full responsibility for any and all liability on
  account of bodily injury to or death of any of its own employees 
occurring in the course of their employment (unless the bodily injury 
or death caused by the other party). Each party, with respect to its 
own employees, accepts full and exclusive liability in the payment of 
Worker's Compensation or employer's liability insurance premiums and 
for the payment of all taxes, contributions, or other payments for 
unemployment compensation or old age benefits, pensions or annuities 
imposed by any government or agency having jurisdiction.  
11.2. Exclusion. 
NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR, AND EACH PARTY 
EXPRESSLY 
WAIVES AND RELEASES THE OTHER PARTY FROM, ANY CLAIM FOR CONSEQUENTIAL,
 
SPECIAL, INCIDENTAL, CONTINGENT AND/OR INDIRECT DAMAGES OF ANY KIND, 
INCLUDING, BUT NOT LIMITED TO, LOSS OF USE, LOSS OF REVENUE, LOSS OF 
PROFITS 
AND/OR DIMINUTION OF VALUE. 
11.3 Survival The provisions of this Article 11 shall remain in full 
force and effect after the expiration or earlier termination of this 
Agreement.  Further, CUSTOMER will require any lessee or future 
operator of the Aircraft to agree to release and indemnify KALITTA 
according to the provisions of this Article 11.  . 
11.4 Employee. Each party represents that it has or will obtain 
appropriate agreements with its employees or others whose services it 
may require, sufficient to enable it to comply with all the provisions
  of this 
Agreement. KALITTA shall have the sole responsibility for supervision 
and control of KALITTA's  personnel. 
12 INSURANCE
 
12.1 General
 
Version 1 February 23, 2016 
Prior to Services being performed and throughout the term of this
 
Agreement, both KALITTA and CUSTOMER shall maintain insurance as 
required in this Article 12 and shall furnish to the other a 
certificate from its insurance carriers or insurance brokers  
confirming such coverage. The certificate will be in a form 
substantially the same as Exhibit 12.1 for CUSTOMER , or 11.1 for 
KALITTA, and will include the expiration dates, limits of coverage, 
additional insured requirements, contractual liability, and insurer's 
acceptance of all the provisions of this Agreement. All policies of 
insurance shall be endorsed so that coverage may not be canceled or 
changed adverse to the interest of the other party, without at least 
thirty (30) days prior written notice to the Parties. 
12.2 Kalitta's Required Insurance.  See Exhibit 11. 
 
12.3 Customer's Required Insurance.  See Exhibit 12.
 
12.4 Leased or Sold Aircraft and/or Engine. 
In the event the Aircraft is leased or sold within three (3) years of 
the completion of the Workscope, CUSTOMER will require any LESSEE, 
subsequent owner or future operator of the Aircraft and/or Engine to 
maintain insurance coverages as provided for in this Article 12, 
including, but not limited to, naming KALITTA as an additional insured
 
and waiving subrogation in favor of KALITTA but balance of the three 
(3) years or until the next major maintenance check/inspection. 
13 DEFAULT AND REMEDIES 
13.1 Events of Default 
Except as otherwise provided in this Agreement, if any one or more of 
the following events of default (the "Events of Default") shall 
happen, then this Agreement may be terminated, at the option of the 
party not in default (provided that the non defaulting party's option 
to terminate shall not be deemed an election of remedies): 
A. If either party shall fail, in any material respect, in the 
performance of any of the obligations contained in this Agreement, 
which failure shall continue uncured for a period of ten (10) calendar
  days following written notice from the other party, unless the 
defaulting party provides to the other adequate assurance of its 
ability to cure such failure within a commercially reasonable time, 
and thereafter so cures; 
B If either party shall file a voluntary petition in bankruptcy, or 
shall be adjudicated a bankrupt or insolvent or shall file any 
petition or answer seeking any reorganization, composition, 
readjustment, liquidation or similar relief for itself under any 
present or future statutes, law or  Version 1 February 23, 2016 
regulation of the United States or shall seek or consent to or 
acquiesce in the appointment of any trustee, or shall make any general
 
assignment for the benefit of creditors, or shall admit in writing its
  inability to pay its debts generally as they become due; or 
C. If any representation or warranty made by any party herein or made 
in any statement or certificate furnished or required hereunder, or in
  connection with the execution and delivery of this Agreement proves 
untrue in any material respect as of the date of the issuance or 
making thereof. 
Notwithstanding the provisions of Article 13.lA, hereof, CUSTOMER 
shall not be entitled to any notice of default with respect to its 
obligation to pay invoices under Article 9 hereof and in accordance 
with the provisions specified in the Terms of Payment set forth in 
Exhibit 2 hereto. 

14 DELAYS 
14.1. Excusable Delays 
A. KALITTA shall be excused from performance of the Services to the 
extent that such performance is delayed by change in the scope of 
Services to be provided, acts or omissions by CUSTOMER to supply 
agreed data for Aircraft and/or Engine in work the non
availability of 
Parts not generally anticipated in the performance of the Services on 
the Aircraft and/or Engine, delays caused by CUSTOMER, such as, but 
not limited to, the late Delivery of the Aircraft and/or Engine, the 
delivery of CUSTOMER Furnished Parts in an unusable or unserviceable 
condition or in insufficient quantities, mistakes, inaccuracies or 
other insufficiencies in any data supplied by CUSTOMER and relied upon
  by KALITTA, delays caused by CUSTOMER
Furnished labor and/or CUSTOMER 
Furnished maintenance or the late delivery of documents CUSTOMER is 
required to furnish prior to the performance of the Services or an Act
  of God, natural hazard and/or disaster or any labor unrest, riot, 
civil commotion, lockout, national emergency, government intervention,
  restrictions or requirements, war, acts of foreign enemies or any 
fire, flood, earthquake, hurricane, tornado or perils 
of the sea or other perils or any circumstances beyond the control of 
KALITTA  ("Excusable Delays"). 
B. Notwithstanding, if CUSTOMER is delayed in delivering the Aircraft 
and/or Engine 
due to causes beyond CUSTOMER's reasonable control, KALITTA shall, 
upon Delivery of the 
Aircraft and/or Engine, use diligent efforts to complete the Services 
to be performed by the scheduled Redelivery Date and shall, to the 
extent necessary, request overtime authorization from 
CUSTOMER's representative or extend the Redelivery Date. 
15 TAXES 
15.1 Taxes 
A. CUSTOMER shall be solely responsible for paying any and all taxes, 
excises, duties and assessments (except taxes levied or assessed 
against KALITTA based on gross or net income ("Taxes") arising out of 
KALITTA's performance of the Services and because the Aircraft and/or 
Engine is located in Michigan, in any manner levied, assessed or 
imposed by any government or subdivision or agency having jurisdiction.
  B. CUSTOMER shall promptly pay and discharge when due, unless the 
validity or application to the Services is being contested in good 
faith, any and all Taxes, together with any interest and penalties, 
the responsibility and liability for which is assumed by CUSTOMER 
pursuant hereto. If any such Taxes are levied, assessed or imposed 
upon KALITTA , KALITTA shall notify CUSTOMER and CUSTOMER shall 
promptly pay and discharge the Taxes, but upon the written request and 
at the expense of CUSTOMER, KALITTA shall assist CUSTOMER in 
contesting the validity or application of such Taxes. If KALITTA 
receives a refund of all or any part of any Taxes (including, but not 
limited to, a refund of interest or penalties), the amount refunded to 
KALITTA shall promptly be remitted to CUSTOMER, less any expenses of 
KALITTA associated with contesting the validity or application of the 
Taxes which were not previously reimbursed by CUSTOMER to KALITTA. 
15.2 Tax Indemnities 
Each party shall defend and indemnify and hold the other harmless from 
any and all Taxes, charges, interest, penalties and expenses assessed 
against the other party but which is the responsibility of the 
 
indemnifying party pursuant to Article 15.1 hereof. 
16 RECORDS 
16.1 Record keeping by KALITTA 
A. KALITTA shall maintain work records consistent with FAA, and 
KALITTA policies and procedures and shall provide CUSTOMER reasonable 
access to such records, for examination and, at CUSTOMER's expense, 
reproduction, upon reasonable advance request from CUSTOMER. 
B. KALITTA shall maintain all records required by the FAA and shall 
supply to CUSTOMER all data required by CUSTOMER for FAA reports. 
C. KALITTA shall supply CUSTOMER with one (1) copy of the records 
described in this Article 16 upon Redelivery or no later than ten (10)
  calendar days after Redelivery of the Aircraft and/or Engine to 
CUSTOMER by KALITTA; provided, however, KALITTA shall supply CUSTOMER 
with one (1) copy of the records necessary or advisable for the 
operation of the Aircraft and/or Engine upon Redelivery. 
KALITTA shall provide CUSTOMER with man hour runs with respect to T & 
M items three (3) times per week. 
16.2 Aircraft and/or Engine Maintenance Records 
A. KALITTA shall record all maintenance entries in accordance with 
Kalitta Maintenance Repair Station procedures and applicable FARs. 
B. CUSTOMER shall furnish to KALITTA all applicable Aircraft and/or 
Engine records, manuals and forms necessary for KALITTA's performance 
of the Services. It is the responsibility of CUSTOMER to supply 
current revisions of CUSTOMER's manuals held by KALITTA. 
17 NON LIABILITY OF INDIVIDUALS  17.1 Non
Liability No director, officer, agent or employee of either 
party shall be charged personally or held contractually liable by or 
to the other party under any term or provision of this Agreement or 
any supplement, modification, or amendment to this Agreement or 
because of any breach thereof or because of its execution or attempted
  execution. 
18 CUSTOMER'S REPRESENTATIVES 
18.1 On Site Representatives 
A. During the period the Aircraft and or Engine is in the Facility, 
CUSTOMER shall assign and designate, in writing, one or more person 
(the "On Site Representative") to oversee KALITTA performance of the 
Services. The On Site Representative shall have the authority to 
execute or authorize any MWSRs, overtime, Part requisitions, purchase 
orders and accept performance of the Services to be performed pursuant
  to the Work Authorization Form. All MWSRs executed by the On Site 
Representative shall be for the account of CUSTOMER. 
B. KALITTA shall provide the CUSTOMER's On
Site Representative(s) with 
an appropriately furnished office at the Facility. The CUSTOMER's On 
Site Representative(s) shall have access to telephone, facsimile 
machine and photocopier as required. All long distance telephone calls
  Version 1 February 23, 2016 
and facsimile, living and traveling expenses, taxes, levies and other 
costs incurred by the On Site Representative(s) shall be for the 
account of CUSTOMER. 
19 NON DISCLOSURE/NON SOLICITATION  19.1 Non
Disclosure The parties recognize that, in order for KALITTA 
to be able to perform the Services under this Agreement, it may be 
necessary for CUSTOMER or one or more of its affiliates or 
representatives to provide to KALITTA engineering and other technical 
data, drawings and other information that are 
confidential and proprietary to CUSTOMER (the "Confidential Informatio
n "). KALITTA (a) shall 
not disclose any of the Confidential Information to any person or 
entity except as necessary for the performance of the Services, and 
(b) shall not use any of the Confidential Information in any manner 
or for any purpose other than for the performance of the Services. The
  term "Confidential Information" does not include data, drawings or 
information that are a matter of public record.  19.2 Non
Solicitation CUSTOMER and/or any affiliate of CUSTOMER shall 
not recruit, solicit, or employ any KALITTA employee, directly or 
indirectly, during the term of this Agreement and for a period of one 




















(1) year following the termination of this Agreement, or the date of 
the last maintenance performed pursuant to this Agreement, whichever 
occurs last, without the prior written approval of KALITTA. 
or to such other persons or addresses as may be specified by either 
party in writing. 
20.2 Assignment This Agreement shall inure to the benefit of and be 
binding upon each of the parties and their respective successors and 
assigns, but neither the rights nor the duties of either party under 
this 
Agreement may be voluntarily assigned, in whole or in part, without 
the prior written consent of the other party, which consent shall not 
be unreasonably withheld. 
20.3 Article Headings and Captions 
All Article headings and captions used in this Agreement are for 
convenient reference and shall not affect the interpretation of this 
Agreement. 
20.4 Exhibits 
All Exhibits described in this Agreement shall be deemed to be 
incorporated herein and made a part of this Agreement. 
20.5 Applicable Law, Jurisdiction and Venue This Agreement will be 
governed and interpreted by Michigan law. Any lawsuit arising either 
directly or indirectly out of this Agreement, will be litigated in the
  Circuit Court for Washtenaw County, 
Michigan, or if original jurisdiction can be established, in the 
United States District Court for the Eastern District of Michigan. 
Each Party shall be responsible for all associated costs related to 
acquiring and retention of their  respective legal counsel. 
20.6 Amendments Except as otherwise specifically provided, this 
Agreement shall not be modified except by written 
agreement signed on behalf of CUSTOMER and KALITTA by their respective
  authorized representatives. 
20.7 Entire Agreement This Agreement supersedes all prior 
understandings, representations, negotiations and correspondence 
between the parties and constitutes the entire Agreement between the 
parties with respect to the transaction contemplated herein and shall 
not in any manner be supplemented, amended or modified 
Version 1 February 23, 2016 
by any course of dealing, course of performance or usage of trade or 
by any other means except executed in writing on behalf of the parties
  by their duly authorized officers. 
20.8 Legality of Provisions 
If any provision of this Agreement shall be held to be invalid, 
illegal or unenforceable, the validity, legality and enforceability of
 
the remaining provisions shall not in any way be affected or impaired 
thereby. 
20.9 No Waiver 
The failure of either party at any time to require performance by the 
other of any provision of this Agreement shall in no way affect that 
party's right thereafter to enforce such provisions, nor shall the 
waiver of either party of any breach of any provision of this 
Agreement be taken or held to be a waiver of any further breach of the
  same provision or any other provision. 
20.10 Third Party Beneficiaries. 
A. The parties hereby designate the indemnified parties as third party
  beneficiaries of the indemnification provisions of this Agreement. 
B. Except as provided in Article 20.2 the parties do not confer any 
rights or remedies upon any person other than the parties to this 
Agreement and their respective successors and permitted assigns. 
LEFT INTENTIONALL BLANK 
Signature page to follow 
EXHIBIT 1 
WORK AUTHORIZATION FORM 
Pursuant to the Aircraft And/Or Engine Maintenance Service Agreement 
between BALTIA AIR LINES, INC. ( CUSTOMER") and KALITTA AIR, LLC d/b/a
 
KALITTA MAINTENANCE ("KALITTA") Dated as of  __________________, 2016.
  1. AIRCRAFTAND/OR ENGINE 
Manufacturer: _____________________ Model No: _____________________ 
Registration No.: _____________________ Serial No: 
_____________________ 
2. WORK SCOPE & AGREED CHARGES 
Maintenance Check (Routine) bid tasks include: 
No.  Item  Man Hours*  Routine Cost**  
 
*The above Man Hour quotes are based from the Work Scope Tally dated 
_____________________.  
**The total routine labor cost is based on _________ hours at the 
standard maximum rate of USD 
_________ per hour (USD_____________) and _________ hours at NDT rate 
of USD ____________ per 
hour (USD______________) for a total routine cost of USD _____________.
  
3. SCHEDULED DELIVERY AND REDELIVERY 
Delivery Date: ____________________________
 Redelivery Date:  ____________________________
 Induction Date:  ____________________________   26 
4. GENERAL TERMS & CONDITIONS, IF ANY 
For and on behalf of 
BALTIA AIR LINES, INC.  KALITTA AIR, LLC d/b/a KALITTA MAINTENANCE 
  By:  By:  
Name:  Name:  
Title:  Title:
  
Date:  Date:  
EXHIBIT 2 SCHEDULE OF CHARGES 
1. LABOR CHARGES 
a. 
The labor charges for the Services to be performed, when agreed upon 
by the parties, shall be the result of applying the Hourly Labor Rate,
  contained in this Exhibit 2, to the actual man
hours ("on hand labor") 
for the Services defined in the Work Authorization Form, written 
requests to modify the work scope and/or MWSRs. 
b.  Upon receipt of any MWSRs, ("CUSTOMER") or its Authorized 
Representative shall approve or advise KALITTA AIR, LLC d/b/a KALITTA 
MAINTENANCE ("KALITTA") of any disputed charges presented in such 
MWSRs. All MWSRs will only be worked on upon receipt of a written 
request (including e mail) and/or approval from the CUSTOMER or 
its Authorized Representative.   2.  HOURLY LABOR RATE  
Airframe Labor Rates  Engine Labor Rates (if requested): 
  JT 9D  CF 6 , P/W 4000  
Standard Labor Rate  US $55.00  US $55.00  US $ 70.00  
Overtime Labor Rate  US  $59.00  US $60.00  US $105.00  
Holiday OT Labor Rate  US $62.00  US $67.50  US $140.00  
Inspection  US  $55.00  US $55.00  US $105.00  
NDT Services  US  $65.00  US $60.00  US $105.00  
Engineering Services  US  $75.00  Negotiable  US $110.00 
  DER Services  Cost of Service  Negotiable  Negotiable  
plus 5%, no cap  
Machine Shop  US $65.00  US $70.00  US $70.00  
 
Engine/Test Cells  n/a  US $30,000.00  US $46,000.00 
  (Does not include fuel & Oil)  
The Overtime Labor rates only apply if KALITTA has to adhere to the 
original contractual Redelivery Date in spite of major non routine(s) 
arising and/or other additional CUSTOMER work requirement.  EXHIBIT 2
SCHEDULE OF CHARGES (continued)  3. 
MATERIAL CHARGES 
4. 
FIELD TRIP CHARGES
 
a.  KALITTA  Supplied Parts and Fabricated Parts:  Acquisition costs 
plus 12% handling charge, not to exceed US$1000.00 per line item.  
b.  CUSTOMER Furnished Parts:  Any packing, handling, and freight 
charges will be billed at actual cost to CUSTOMER. Freight charges 
will be assessed a 10% handling charge.  
c.  Parts Exchange:  Vendor's exchange charges and the repair overhaul
 
or replacement costs for the removed Part plus 7% handling charge, not 
to exceed US$1000.00 per line item.  
d.  Outside/Subcontract Services:  Acquisition costs plus 10% handling
  charge, not to exceed US $1000.00 per line item.  
e.  Fuel Handling:  If aircraft defueling and/or fueling is required, 
and CUSTOMER fails to execute the Fuel Services Addendum then CUSTOMER
  must contract with the Fixed Based Fuel Operator at CUSTOMER's sole 
cost. This cost shall be in addition to any man hours required of 
Kalitta for the defueling and refueling.  
f.  Miscellaneous Expendable Material & Supplies  Shall be provided by
  KALITTA and charged at 5% of the total non routine labor invoice 
amount  
g.  Freight Expenses:  All freight expenses not charged directly to 
CUSTOMER'S freight account will be billed at cost plus 10% to the 
CUSTOMER.  
h.  State of Michigan sales tax:  If required by the State of 
Michigan, 6% on parts and materials that are purchased in Michigan for
 
use on the Aircraft and/or Engine. Note: CUSTOMER must submit any tax 
exemption certificate for aircraft and/or engine parts and spares to 
KALITTA upon execution of this Agreement and prior to any invoice to 
obtain a waiver of Michigan sales tax.  
The following charges shall apply for field trip work (which for this 
purpose shall be defined as work accomplished at any location outside 
KALITTA Facility):  Item  Description  Schedule of Changes  Remarks  
a.  Standard Time  US$440.00 per eight (8) hour day per mechanic or 
$55.00 per man hour. The eight hour day shall include preparation 
time, if any, such as loading of equipment and shipping and 
waiting/travel time.  A minimum charge of four (4) man hours shall 
apply to any Field Trip work. Field Trip charges shall start from the 
time of preparation for the trip and terminate upon the personnel 
return to KALITTA Facility.  
b.  Overtime  Each overtime hour will be billed at one and one
half of 
the Standard Time rate. Holiday Overtime shall be billed at two times 
the Standard Time rate.  Overtime charges shall apply only if the 
mechanic works in excess of eight (8) hours per day.  
c.  Per Diem  US$55.00 per mechanic per day, domestic and US$65.00 per
 
mechanic per day international.  Each mechanic shall complete a daily 
Field Trip work Record to be verified by the CUSTOMER.  
d.  Incidental Expenses  The CUSTOMER shall pay for the following 
incidental expenses: 1. All round trip airfare, airport taxes, excess 
baggage charges, hotel, rental car (plus gas) or transportation costs 
to and from the airport, and hotel. 2. Any special tooling 
acquisition/or fabrication and shipping costs associated with the 
movement of such tooling/equipment from and to KALITTA's facility. 
Such request shall be at the written request of the CUSTOMER. 3. Other
  expenses incurred that are associated with the Field trip such as 
telephone calls to base/vendors, equipment rental, etc.  A flat rate 
of $0.60 per mile shall apply if KALITTA vehicle is utilized for the 
Field Trip.   e.  Materials and Outside Services  1. KALITTA
Furnished  acquisition  cost plus 12% handling charge, not
to exceed US $500.00 per line item  2. CUSTOMER
Furnished: Actual cost 3. Outside Services  cost of such 
services plus 12% handling charge, not to exceed US$500.00 per line 
item (with the exception of CUSTOMER mandated fuel tank work). A Flat 
Fee for outside services will be negotiated with the customer upon 
notification of work to be performed.  All freight charges for 
material and outside services are billed at cost plus 10% to the 
CUSTOMER.  
5. TERMS OF PAYMENT 
a. For the Services and Parts provided pursuant to this Agreement, 
KALITTA shall invoice CUSTOMER and CUSTOMER shall pay KALITTA based on
  the payment schedule below:  (1) 
On the Delivery Date of the Aircraft and/or Engine, CUSTOMER shall 
make a payment for one half (1/2) of the fixed portion of the total 
contractual work scope and agreed charges. 
(2)  On or before the half
way point of the contractual work scope, KALITTA 
shall invoice CUSTOMER one half (1/2) of the fixed portion of the 
total contractual work scope and agreed charges, revised for any 
increases since the Delivery Date and CUSTOMER shall pay invoice 
before Redelivery. 
(3)  KALITTA may invoice CUSTOMER monthly for the non
routine/variable 
portion of the total contractual work scope and agreed charges and 
CUSTOMER shall pay each invoice no later than fifteen (15) days after 
receipt thereof. 
(4) 
Kalitta may, prior to Redelivery of the Aircraft, invoice CUSTOMER for
  the estimated final non
routine/variable costs. CUSTOMER shall pay the 
invoice prior to Redelivery of the Aircraft. An additional invoice or 
credit will be issued to CUSTOMER after Redelivery once KALITTA 
determines the actual non
routine/variable costs.  The invoice will be 
paid within five (5) days of receipt. 
5, On or before Redelivery of an Engine, CUSTOMER shall make a payment
  for any Modification of Work Scope Request which also includes all 
parts, materials, subcontractor services as well as miscellaneous 
items such as long distance telephone charges, freight, etc. KALITTA 
has the right to estimate prices for parts, materials, and 
subcontractor services, which have not been invoiced to KALITTA prior 
to Redelivery. An additional invoice or credit will be issued to 
CUSTOMER once KALITTA receives the actual invoices from its vendor. 
b. 
KALITTA may at any time submit additional invoices for any properly 
documented charges of services for which KALITTA is unable to invoice 
CUSTOMER prior to Aircraft and/or Engine Redelivery either 
inadvertently omitted from, or improperly documented in a previous 
invoice. 
c. 
All invoices submitted to CUSTOMER after Aircraft and/or Engine
  Redelivery is due net five (5) days after receipt. 

PLEASE NOTE THAT ALL NOTICES ARE SENT ELECTRONICALLY.  NO INVOICE WILL
  BE SUBMITTED BY MAIL. 
e. Payments to KALITTA shall be in United States dollars, if paid by 
wire transfer to:  Fifth Third Bank,  1000 Town Center 
Southfield, MI 48075 
Account Name:  Kalitta Air LLC 
ABA Number:  042000314 
Account Number:  7913836966 
f.  In the event that CUSTOMER in good faith, disputes any of the 
invoices, payment of the disputed portion shall be delayed until such 
dispute is resolved to the mutual satisfaction of the Parties. 
However, the undisputed portion shall be paid when due and payable. 
CUSTOMER shall be deemed to have approved the invoice unless it 
submits its objection in writing within ten (10) days from date of 
invoice. 
g. 
Late Payments. If any sum payable under this Agreement is not paid on 
the due date then (without prejudice to KALITTA other rights and 
remedies at law or otherwise) KALITTA reserves the right to charge 
interest on such sum at the rate of two percent (2%) per month for 
each month or partial month, but not to exceed twenty five percent 
(25%) per annum or the maximum rate allowable under Michigan Law, 
whichever is less. 
EXHIBIT 3 
MODIFICATION OF WORK SCOPE REQUEST
 
CUSTOMER: BALTIA AIR LINES, INC. Agreement No: ______________
  Date of Request:___________________  Project No./MWSR 
No.:_________________ 
Aircraft Type: ____________________ Aircraft Registration:  
___________________ 
Engine Type: _____________________ Engine Serial Number 
__________________ 
Job Number: ______________________  Reference Document: 
___________________ 
Generating Document/Item:
 
Task Description: 
COMPLETE OR N/A WHERE APPLICABLE:  Estimated Man
hours: ____________________ Fixed Price Items Man 
hours:____________ 
Overtime Required: Yes [ ] No [ ] 
Material Provisioning Responsibility: CUSTOMER [ ] KALITTA [ ] 
Estimated Material Costs: _____________________  Special to
type Tooling/Equipment Yes BALTIA AIR LINES, INC. No BALTIA  AIR 
LINES, INC. Estimated Costs: _________________ 
Schedule Impact: Yes [ ] No [ ] Revised Redelivery Date:______________
_ 
EXHIBIT 3 MODIFICATION OF WORK SCOPE REQUEST (CONTINUED) 
For and on behalf of 
BALTIA AIR LINES, INC. By:  KALITTA AIR, LLC (d/b/a KALITTA 
MAINTENANCE) . By:   Name  Name:  
Title:  Title:
  
Date:  Date:  
EXHIBIT 4 
AIRCRAFT DELIVERY RECEIPT 
KALITTA AIR, LLC d/b/a KALITTA MAITENANCE ("KALITTA") hereby accepts 
the delivery of one (1) _______________________________  Aircraft, 
Manufacturer's Serial NO. __________, Federal Aviation Administration 
Registration No______________ (the "Aircraft"), 
together with the attached engines and all fixed equipment, parts, 
components and accessories installed thereon and all loose equipment 
specified in the Loose Equipment Inventory List, from BALTIA AIR 
LINES, INC. ("CUSTOMER"), such delivery having been made at KALITTA's 
facility at OSC, Oscoda, Michigan, at _______(a.m./p.m.) on the _____ 
day of_________ , 20____ in accordance with the Aircraft and/or Engine
 
Maintenance Services Agreement between KALITTA and CUSTOMER dated as 
of _____________, 20____. 
KALITTA hereby accepts the delivery of the Aircraft for the 
performance of the Services in accordance with the above Agreement. 
For and on behalf of 
BALTIA AIR LINES, INC. By:  KALITTA AIR, LLC d/b/a KALITTA MAINTENANCE
  By:  
Name:  Name:  
Title:  Title:
  
Date:  Date:  
EXHIBIT 5 
AIRCRAFT REDELIVERY RECEIPT
 
BALTIA AIR LINES, INC.("CUSTOMER") hereby accepts the redelivery of 
one (1) ______________________  aircraft, Manufacturer Serial No. 
______ and Federal Aviation Administration Registration No. 
N___________, together with the attached engines and all fixed 
equipment, parts, components and accessories installed thereon, and 
all loose equipment specified in the Loose Equipment Inventory List,
  from KALITTA AIR, LCC d/b/a KALITTA MAINTENANCE ("KALITTA"), such 
redelivery having been made at KALITTA's facility at OSC, Oscoda, 
Michigan, at _______ (a.m./p.m.) on the ______ day of ________, 
20____, in accordance with the Aircraft and/or Engine Maintenance 
Services Agreement between KALITTA and CUSTOMER dated as of 
_____________, 20____. 
CUSTOMER hereby accepts the return and redelivery of the Aircraft in
  accordance with the above Agreement.  For and on behalf of 
BALTIA AIR LINES, INC. By:  KALITTA AIR, LLC d/b/a KALITTA MAINTENAN
CE  By:  
Name:  Name:  
Title:  Title:
  
Date:  Date:  
EXHIBIT 6 
ENGINE DELIVERY RECEIPT 
KALITTA AIR, LLC d/b/a KALITTA MAINTENANCE ("KALITTA') hereby accepts 
the delivery of the engine(s) whose Manufacturer is 
___________________________________Model  No(s).______________, 
Manufacturer's Serial No(s). ___________, together with all fixed 
equipment, parts, components and accessories installed thereon, from 
BALTIA AIR LINES, INC. ("CUSTOMER"), such delivery having been made at
  the Facility, at ______(a.m./p.m.) on the _____ day of_________ , 
20_____ in accordance with the Aircraft and/or Engine Maintenance 
Services Agreement between KALITTA and CUSTOMER dated the ______ day 
of __________________, 20______ . 
KALITTA hereby accepts the delivery of the Engine(s) for the 
performance of the Services in accordance with the above Agreement. 
For and on behalf of 
BALTIA AIR LINES, INC. By:  KALITTA AIR, LLC d/b/a KALITTA MAINTENANCE
  By:  
Name:  Name:  
Title:  Title:
  
Date:  Date:  
EXHIBIT 7 
ENGINE REDELIVERY RECEIPT 
BALTIA AIR LINES, INC.("CUSTOMER"), hereby accepts the redelivery of 
the Engine(s) whose Manufacturer is _____________________________  
No(s). ________________, Manufacturer Serial No(s). 
___________________, together with all fixed equipment, parts, 
components and accessories installed thereon, from KALITTA AIR, LLC 
d/b/a KALITTA 
MAINTENANCE ("KALITTA"), such redelivery having been made at the 
Facility, at 
__________________ (a.m./p.m.) on the ______ day of ________, 20_____,
  in accordance with the Aircraft and/or Engine Maintenance Services 
Agreement between KALITTA and CUSTOMER dated the _____ day of 
____________, 20____. 
CUSTOMER hereby accepts the return and redelivery of the Engine in 
accordance with the above Agreement.  For and on behalf of 
BALTIA AIR LINES, INC. By:  KALITTA AIR, LLC d/b/a KALITTA MAINTENANCE
  By:  
Name:  Name:  
Title:  Title:
  
Date:  Date:  
EXHIBIT 8 
MISCELLANEOUS EXPENDABLE MATERIAL & SUPPLIES (MSP) LIST
  
EXHIBIT 9 
INVENTORY LIST OF CUSTOMER PROVIDED PART
S 
EXHIBIT 10 
FUELING SERVICES ADDENDUM 
Fueling Services provided pursuant to this Agreement will be provided 
according to the following terms and conditions:  1. 
KALITTA AIR, LLC d/b/a KALITTA MAINTENANCE ("KALITTA") warrants to ("
CUSTOMER") that the Fuel supplied by it shall meet the specifications:
  (a) Jet A, latest issue; and/or  (b) Jet A 1, latest issue 
2. 
EXCEPT FOR THE SPECIFICATION REQUIREMENT SET FORTH ABOVE, THERE ARE NO
  GUARANTEES OR WARRANTIES HEREIN, EXPRESS OR IMPLIED, AS TO THE 
MERCHANTABILITY, FITNESS OR SUITABILITY OF THE FUEL FOR ANY PARTICULAR
  PURPOSE OR OTHERWISE. 
3. 
Title to and risk of loss of the Fuel shall pass to the CUSTOMER at
  the time the Fuel passes the inlet coupling of the Aircraft. 
4. 
KALITTA's measurement shall be accepted as prima facie evidence of the
  quantities of Fuel delivered. 
5.  Deliveries shall be made in accordance with all applicable 
governmental laws and regulations, and the requirements of the airport
  governing authority. 
6.  CUSTOMER may request, and KALITTA may agree upon, a defueling of 
CUSTOMER's Aircraft. The Fuel so removed from CUSTOMER's Aircraft 
shall be disposed of or stored as agreed between the parties and at 
CUSTOMER's sole cost and expense. KALITTA may charge an extra fee for 
such services. 
7. 
CUSTOMER shall have sole responsibility for operating all appropriate 
Aircraft fueling switches, valves and pre set quantities gauges.  In 
the event CUSTOMER requests KALITTA to operate fueling switches, 
valves and pre set gauges or other delivery services in addition to 
those listed as normal delivery services in the Agreement, and KALITTA
 
agrees to perform same, CUSTOMER agrees to indemnify, defend and save 
harmless KALITTA from and against all claims, demands, proceedings, 
damages and liabilities for loss of or damage to property or for death
  of or injury to any person and against all associated direct costs 
(including reasonable attorney's fees), losses and expenses, arising 
out of or related to KALITTA's action in performing or omission to 
perform the requested services, except as to KALITTA only, to the 
extent caused by the gross negligence or willful misconduct of KALITTA
. 
8. 
Complaints as to short delivery shall be notified to KALITTA at the 
time of delivery followed by a written claim to be made to KALITTA 
within fifteen (15) days after delivery. Complaints as to defects in 
quality or any other matter shall be notified to KALITTA as soon as 
practicable followed by a written claim to be made to KALITTA within 
thirty (30) days after delivery. If the claim is not made within 
either the fifteen (15) days period or the thirty (30) days period, 
respectively, it represents a waiver of the CUSTOMER's right to claim.
  In no event is a waiver of the right to claim made or implied by a 
signature or any other statement on the Delivery Note irrespective of 
whether or not such Delivery Note contains conditions implying such 
waiver. 
9. 
CUSTOMER shall pay any taxes, fees or other charges imposed by any 
national, local or airport authority on the delivery, sale, 
inspection, storage and use of Fuel except for taxes on KALITTA's 
income and taxes on raw material. If CUSTOMER is entitled to purchase 
any Fuel sold pursuant to the Agreement free of any taxes, duties or 
charges, CUSTOMER shall deliver to KALITTA a valid exemption 
certificate for such purchase. 
10. 
Specifically in regard to fueling services provided by KALITTA, and 
not in any manner to alter the general liability provisions contained 
herein for matters unrelated to fueling, KALITTA shall indemnify, 
defend and save harmless CUSTOMER from and against any and all claims,
  demands, 
proceedings, damages and liabilities for loss of or damage to property
  or for death of or injury to any person and against all associated 
direct costs (including reasonable attorney's fees), losses and 
expenses caused by the KALITTA's gross negligence or willful 
misconduct in the performance of or omission to 
perform the Agreement, except with respect to CUSTOMER, to the extent 
caused by the negligence or willful misconduct of CUSTOMER. 
Except to the extent otherwise provided in these General Terms and 
Conditions of the Agreement, CUSTOMER shall indemnify, defend and save
  harmless KALITTA from and against any and all claims, demands, 
proceedings, damages and liabilities for loss or damage to property or
 
for death of or injury to any person and against all associated direct
  costs (including reasonable attorney's fees), losses and expenses 
arising out of this Agreement or the obligations of the parties as set
  forth in this agreement, except, with respect to KALITTA, to the 
extent caused by the gross negligence or willful misconduct of KALITTA
. 
Notwithstanding anything to the contrary in these General Terms and 
Conditions of the Agreement, no claims shall be made under the 
Agreement for incidental, indirect, consequential or special damages, 
including, but not limited to, loss of profits or business 
interruption. 
BALTIA AIR LINES, INC.  KALITTA AIR, LLC d/b/a KALITTA MAINTENANCE 
By: By: Its: Its: EXHIBIT 11 
KALITTA AIR, LLC d/b/a KALITTA MAINTENANCE Required Insurance Kalitta 
Air, LLC d/b/a Kalitta Maintenance ("KALITTA") Insurance: 
a.  Comprehensive  General  Liability  Insurance  (including,  but  
not  limited  to,  
Premises, Products, and Hangar keeper's liabilities) with  a  Combined
  Single  
Limit (Bodily Injury/Property Damage) of Five  Hundred Million United 
States  
Dollars (US$500,000,000.00) any one accident / occurrence, but subject
  to the  
following:  as  respects Products Liability, the above limit is in the
 
aggregate  
annually.  
b.  Worker's  Compensation  Insurance  and/or Employer's Liability 
Insurance,  as  
required by law with limits of not less than One Million United States
  Dollars  
(US$1,000,000.00) per occurrence unless otherwise required by law.  
KALITTA shall provide to BALTIA AIR LINES, INC. ("CUSTOMER") with a 
certificate or certificates from its insurance carriers indicating the
  expiration dates and limits of coverage of such insurance. The 
certificate of insurance holder shall be in the name of CUSTOMER at 
the address set forth in the introductory paragraph of this Agreement.
  KALITTA shall bear the costs and shall be responsible for all 
deductibles contained in the insurance policies required under this 
Exhibit 11.  EXHIBIT 12 
CUSTOMER Required Insurance 
BALTIA AIR LINES, INC. ("CUSTOMER") Insurance: 
1.   CUSTOMER agrees to maintain in force, during the term of this 
Agreement, and for a period of three (3) years after Redelivery of the
  Aircraft,  the following insurance coverages: 
a.   Comprehensive Airline Liability (including passenger, cargo 
and contractual liabilities), Comprehensive General Liability 
(including airport premises, aviation products and completed 
operations and contractual liabilities and automobile liability while 
on airport premises) insuring all customer operations on a Worldwide 
basis.  Such coverage shall: 
(1) Have limits of liability of not less than $500,000,000.00 Combined
  Single limit each 
occurrence, except that the "on airport" automobile liability limit 
shall not be less than 
$25,000,000.00 each occurrence; and 
(2) Shall name 
Kalitta Air, LLC d/b/a Kalitta Maintenance ("KALITTA"
), its members, officers, directors, employees and agents and any 
other party which KALITTA may from 
time to time reasonably require as "Additional Insureds"; and 
(3) Be primary without any right of contribution from any insurance 
available to KALITTA 
or other "Additional Insured"; and 
(4) Not be invalidated by any act or omission of CUSTOMER or other 
person or entity and 
shall continue to insure the interests the "Additional Insured" 
regardless of any breach of 
any warranty , condition or exclusion contained in the policy; and 
(5) 
Insure the liabilities assumed by the CUSTOMER in this agreement und
er  the contractual liability coverage; and 
(6) 
Contain cross liability and severability of interest clauses.
 
b. 
"All Risks" Ground and Flight Aircraft Hull insurance and "All Risks, 
including transit, Aviation Spare Parts insurance insuring the 
Aircraft and/or the Engines designated as the Aircraft that is the 
subject of this agreement as well as all CUSTOMER furnished parts.  
Such coverage shall: 

(1) have limits of liability not less than the replacement cost of the
  aircraft and/or engines, which is the subject of this agreement, as 
well as all CUSTOMER furnished parts; and 
(2)  contained a waiver of subrogation in favor of KALITTA. 
c. 
Worker's Compensation Insurance and Employer's Liability Insurance as 
required by law. Such coverage shall include: 
(1) 
Coverage for all states in which the CUSTOMER operates; and 
(2) 
An Employers Liability limit of not less than $1,000,000; an
d 
d.  Each policy shall contain a provision that coverage shall not be 
cancelled, allowed to lapse, have any limits reduced, or have any 
material change made adverse to the interests of KALITTA, without 
KALITTA being first provided 30 days written notice by Fax to Mr. Pete
  Sanderlin at 734 709 5008 and email to psanderlin@kalittaair.com.  
2.   KALITTA shall have the right to refuse to accept the Aircraft 
from CUSTOMER until CUSTOMER provides KALITTA with a certificate 
substantially in the form attached as Exhibit 
12.1 evidencing the coverage, limits of liability, insurance carrier, 
additional insureds, waivers and notice requirements required herein. 
3.   CUSTOMER shall bear the cost and shall be responsible for all 
deductibles or self insured retentions contained in any insurance 
policy required under this EXHIBIT 12.  EXHIBIT 12.1 
CERTIFICATE OF INSURANCE 
This will confirm that as the appointed broker, we have been 
authorized by the insurers below to issue certificates, and that such 
coverage as is afforded by the policies is in effect and apply to the 
liabilities assumed by the Named Insured in the maintenance agreement 
between the Named Insured and Kalitta Air, LLC d/b/a Kalitta 
Maintenance date ____________________.  Broker Name/Address: 
Named Insured:  1. 
Aircraft Liability Policy Number: 
Policy Effective Date: Policy Expiration Date: 
Lead Underwriter:  Following Market: 
Liability Limit:  Not less than $500,000,000 combined single limit 
each occurrence. 
2. 
Comprehensive General Liability: Policy Number:
 
Policy Effective Date: Policy Expiration Date: 
Lead Underwriter:  Following Market: 

Liability Limits: Not less than $500,000,000 combined single limit 
each occurrence, but in the 
aggregate as respects Products & Completed Operations Liability. "On
  Airport" automobile 
liability limit is not less than $25,000,000 each occurrence. 
3.   Such coverage as is afforded by policies in 1 and 2 above: 
a. 
Include Kalitta, its member, officers, directors, employees and agen
ts  as "Additional Insureds"; and 
b. 
Are primary and without right of contribution from any insuranc
e  available to Kalitta; and 
c. 
Shall not be invalidated by any act or omission of Customer or any 
other person or entity and 
shall continue to insure the interests of the "Additional Insureds" 
regardless of any breach of 
any warranty, condition or exclusion contained in the policies; and, 
d.  Such coverage as is provided by the policies applies to the 
liabilities assumed by the Named Insured in the maintenance agreement 
between the Named Insured and Kalitta dated ______; and 
e. 
Contain cross liability and severability of interest clauses.
 
4.   Aircraft Hull and Aviation Spare Parts: Policy Number: 
Policy effective date: Policy Expiration Date: 
Lead Underwriter:  Following Market: 
Aircraft Serial Number: Insured Value:
 
Spare Parts Limits: Any one sending: 
Any one occurrence: 
Underwriters agree to waive their rights of subrogation against
  Kalitta. 
5.   Workers Compensation & Employers Liability: Policy Number: 
Insurance Company: Policy Expiration Date:  Policy Effective Date: 
Employer's Liability Limit: 
6.   The policies confirmed above shall not be cancelled, allowed 
to lapse, have any limit reduced or other material change adverse to
 
the interests of Kalitta without 30 days prior written notice being 
sent to Mr. Pete Sanderlin by FAX to 734 544 5008 and email 
psanderlin@kalittaair.com.  
By:________________________________________  
Date:_________________________  Signature  Typed/Printed Name 
Title 


EXHIBIT 10.10 Certificate of Insurance - Port Authority New York and New Jersey

 
 
1


EXHIBIT 10.12.1 Certificate of Insurance - JFK Airport

 
 
1


EXHIBIT 10.14 - Wayne County Airport

 
 
1

 
 
 
2

 
 
 
3

 
 
 
 
4

 
 
 
 
5

 
 
 
 
6

 
 
 
 
7

 
 
 
 
8

 
 
 
 
9

 
 
 
 
10

 
 
 
11
 
 
 
12

 
 
 
 
13

 
 
 
 
14

 
 
 
 
15

 
 
 
 
16

 
 
 
 
17

 

EXHIBIT 10.14.3 Certificate of Insurance LC Smith Airport Premises

 
 
1


blta-20151231.xml
Attachment: blta-20151231.xml


blta-20151231.xsd
Attachment: blta-20151231.xsd


blta-20151231_cal.xml
Attachment: blta-20151231_cal.xml


blta-20151231_def.xml
Attachment: blta-20151231_def.xml


blta-20151231_lab.xml
Attachment: blta-20151231_lab.xml


blta-20151231_pre.xml
Attachment: blta-20151231_pre.xml


v3.3.1.900
Document And Entity Information - USD ($)
12 Months Ended
Dec. 31, 2015
Mar. 31, 2016
Document And Entity Information    
Entity Registrant Name BALTIA AIR LINES INC  
Entity Central Index Key 0000869187  
Document Type 10-K  
Current Fiscal Year End Date --12-31  
Amendment Flag false  
Document Period End Date Dec. 31, 2015  
Entity Well-known Seasoned Issuer No  
Entity Voluntary Filers No  
Entity Current Reporting Status Yes  
Entity Filer Category Smaller Reporting Company  
Entity Public Float $ 6,703,843  
Entity Common Stock, Shares Outstanding   8,111,449,414
Document Fiscal Year Focus 2015  
Document Fiscal Period Focus FY  

v3.3.1.900
BALANCE SHEETS - USD ($)
Dec. 31, 2015
Dec. 31, 2014
Current assets    
Cash $ 185,613
Due From Former Employee $ 51,874
Due from the Estate of CEO/Founder 125,716
Shares of Common Stock to be Cancelled $ 1,488,536
Other current assets $ 24,908
Total current assets $ 1,666,126 210,521
Property and equipment, net 39,628 2,316,036
Other assets:    
Security deposit and other 1,390 318,683
Total assets 1,707,144 2,845,240
Current liabilities    
Accounts payable and accrued expenses 2,414,955 1,951,465
Deposit - Common Stock Purchases 280,000 528,000
Note payable 559,783 385,523
Accrued Salaries 138,700 92,700
Accrued interest 536,016 515,325
Total current liabilities 3,929,454 3,473,013
Noncurrent liabilities    
Long-term debt, net of discount 1,150,000 1,150,000
Total liabilities 5,079,454 4,623,013
Stockholders' equity (deficit)    
Preferred stock, $0.01 par value; 2,000,000 shares authorized, 66,500 issued and outstanding 665 665
Common stock, $.0001 par value; 7,986,000,000 shares authorized, 7,555,715,234 and 5,497,415,771 issued and outstanding at December 31, 2015 and 2014, respectively 755,570 549,741
Additional paid-in capital 114,753,511 108,215,743
Deficit accumulated during development stage (118,882,056) (110,543,922)
Total stockholders' equity (deficit) (3,372,310) (1,777,773)
Total liabilities and stockholders' equity (deficit) $ 1,707,144 $ 2,845,240

v3.3.1.900
BALANCE SHEETS (Parenthetical) - $ / shares
Dec. 31, 2015
Dec. 31, 2014
Stockholders' equity (deficit)    
Preferred stock par value $ 0.01 $ 0.01
Preferred stock, shares authorized 2,000,000 2,000,000
Preferred stock, shares issued 66,500 66,500
Preferred stock, shares outstanding 66,500 66,500
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 7,986,000,000 7,986,000,000
Common stock, shares issued 7,555,715,234 5,497,415,771
Common stock, shares outstanding 7,555,715,234 5,497,415,771

v3.3.1.900
STATEMENT OF OPERATIONS - USD ($)
12 Months Ended 316 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Statement Of Operations      
Revenue
Costs and Expenses      
General and administrative $ 3,398,094 $ 13,820,392 $ 103,903,898
FAA certification costs $ 2,483,744 $ 1,400,198 7,845,133
Training 225,637
Depreciation $ 212,273 $ 56,094 654,795
Other 568,245
Impairment charge $ 2,079,135 2,079,135
Interest $ 164,888 $ 126,731 1,975,012
Loss on sale of assets 1,607,183
Total costs and expenses $ 8,338,134 $ 15,403,415 118,859,038
Net loss before income taxes $ (8,338,134) $ (15,403,415) (118,859,038)
Provision for income taxes 23,018
Deficit accumulated during development stage $ (8,338,134) $ (15,403,415) $ (118,882,056)
Net loss per weighted share, basic and fully diluted $ (0.001) $ (0.004)  
Weighted average number of common shares outstanding, basic and fully diluted 6,479,059,153 4,302,033,740  

v3.3.1.900
STATEMENTS OF CHANGES IN STOCKHOLERS'S EQUTIY (DEFICIT) - USD ($)
Preferred Stock
Common Stock
Additional Paid-In Capital
Deficit Accumulated During Development Stage
Total
Beginning balance, Amount at Dec. 31, 2012 $ 665 $ 246,654 $ 88,172,179 $ (88,272,311) $ 147,187
Beginning balance, Shares at Dec. 31, 2012 66,500 2,466,538,050      
Stock issued and issuable for cash, Amount   $ 70,162 4,062,352   4,132,514
Stock issued and issuable for cash, Shares   701,621,438      
Shares issued for services, Amount   $ 12,796 2,273,171   2,285,967
Shares issued for services, Shares   127,967,500      
Net loss       (6,868,196) (6,868,196)
Ending balance, Amount at Dec. 31, 2013 $ 665 $ 329,612 94,507,702 (95,140,507) (302,528)
Ending balance, Shares at Dec. 31, 2013 66,500 3,296,126,988      
Stock issued and issuable for cash, Amount   $ 197,425 9,707,018   9,904,443
Stock issued and issuable for cash, Shares   1,974,254,019      
Shares issued for services, Amount   $ 23,254 4,060,873   4,084,127
Shares issued for services, Shares   232,534,764      
Shares cancelled, Amount   $ (550) (59,850)   (60,400)
Shares cancelled, Shares   (5,500,000)      
Net loss       (15,403,415) (15,403,415)
Ending balance, Amount at Dec. 31, 2014 $ 665 $ 549,741 108,215,743 (110,543,922) (1,777,773)
Ending balance, Shares at Dec. 31, 2014 66,500 5,497,415,771      
Stock issued and issuable for cash, Amount   $ 207,575 6,433,799   6,641,374
Stock issued and issuable for cash, Shares   2,075,755,030      
Shares issued for services, Amount   $ (1,746) 103,969   102,223
Shares issued for services, Shares   (17,455,567)      
Net loss       (8,338,134) (8,338,134)
Ending balance, Amount at Dec. 31, 2015 $ 665 $ 755,570 $ 114,753,511 $ (118,882,056) $ (3,372,310)
Ending balance, Shares at Dec. 31, 2015 66,500 7,555,715,234      

v3.3.1.900
STATEMENTS OF CASH FLOWS - USD ($)
12 Months Ended 316 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Cash flows from operations      
Deficit accumulated during development stage $ (8,338,134) $ (15,403,415) $ (118,882,056)
Adjustment to reconcile deficit accumulated during development stage to cash used in operating activities:      
Depreciation and amortization 212,273 $ 56,094 654,795
Impairment charge 2,079,135 2,079,135
Amortization of loan discount   294,977
Expenses paid issuance of common stock and options 102,223 $ 4,084,127 63,622,059
Loss on sale of assets     1,607,183
Changes in operating assets and liabilities:      
Due from Former Employee (51,874) (51,874)
Due from the Estate of Founder (125,716) (125,716)
Shares of Common Stock to be Cancelled (1,488,536) (1,488,536)
Prepaid expenses and other current assets 24,908 $ (24,908) 400,301
Deposit - Common Stock Purchases (248,000)   (248,000)
Accounts payable and accrued expenses 530,181 2,147,157 7,104,677
Net cash used in operating activities (7,303,540) (9,140,945) (45,033,055)
Cash flows from investing activities      
Purchase of equipment (15,000) $ (577,644) (4,462,290)
Proceeds from sale of assets   144,164
Security deposits 317,293 $ (1,390) (1,390)
Net cash used by investing activities 302,293 (579,034) (4,319,516)
Cash flows from financing activities      
Proceeds from issuance of common stock $ 6,641,374 $ 9,844,043 47,533,792
Proceeds from issuance of preferred stock 2,753
Proceeds from notes payable $ 174,260 $ 50,000 224,260
Loans from related parties   1,351,573
Repayment of related party loans   (368,890)
Principal payments on long-term debt   1,109,183
Acquisition of treasury stock   (500,100)
Net cash provided by financing activities 6,815,634 $ 9,894,043 $ 49,352,571
Net increase (decrease) in cash (185,613) 174,064
Cash, beginning of period $ 185,613 11,549
Cash, end of period $ 185,613
Supplemental cash flow disclosures:      
Cash paid during the year for interest  

v3.3.1.900
Nature of Operations
12 Months Ended
Dec. 31, 2015
Notes to Financial Statements  
1. Nature of Operations

The Company was formed as a U.S. airline on August 24, 1989 in the State of New York. Our objective is to provide scheduled air transportation from the U.S. to Russia, the Baltic States and Ukraine. In 1991, the Department of Transportation (DOT) granted the Company routes to provide nonstop passenger, cargo and mail service from JFK to St. Petersburg and from JFK to Riga, with online service to Minsk, Kiev and Tbilisi as well as back up service to Moscow. We have two registered trademarks, "BALTIA" and "VOYAGER CLASS," and five trademarks subject to registration. Our activities to date have been devoted principally to raising capital, obtaining route authority and approval from the DOT and the FAA, training crews, and conducting market research to develop the Company's marketing strategy.

 

Regulatory Compliance

 

We intend to operate as a Part 121 carrier, a heavy jet operator. As such, following certification we will be required to maintain our air carrier standards as prescribed by DOT and FAA regulation and as specified in the FAA approved Company manuals. As part of its regulatory compliance, we will be required to submit periodic reports of our operations to the DOT.


v3.3.1.900
Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2015
Notes to Financial Statements  
2. Summary of Significant Accounting Policies

Basis of Presentation

 

The financial statements have been presented in a "development stage" format. Since inception, our primary activities have been raising of capital, obtaining financing and of obtaining route authority and approval from the DOT and the FAA. We have not commenced our principal revenue producing activities.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires our management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.

 

Cash and Cash Equivalents

 

For financial statement presentation purposes, we consider those short-term, highly liquid investments with original maturities of three months or less to be cash or cash equivalents. There are no cash equivalents at December 31, 2015 and 2014.

 

Fair Value of Financial Instruments

 

FASB ASC Topic 825, Financial Instruments ("ASC 825"), requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. FASB ASC 825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At December 31, 2015 and 2014, the carrying value of certain financial instruments (cash and cash equivalents, accounts payable and accrued expenses.) approximates fair value due to the short-term nature of the instruments or interest rates, which are comparable with current rates.

 

Fair Value Measurements

 

FASB ASC Topic 820, - Fair Value Measurements and Disclosure ("ASC 820"), defines fair value and establishes a framework for measuring fair value and establishes a fair value hierarchy which prioritizes the inputs to the inputs to the valuation techniques. Fair value is the price that would be received to sell an asset or amount paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or cost approach, as specified by FASB ASC 820, are used to measure fair value.

 

Fair Value Hierarchy

 

FASB ASC 820 - specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs), or reflect the Company's own assumptions of market participant valuation (unobservable inputs). In accordance with FASB ASC 820, these two types of inputs have created the following fair value hierarchy:

 

Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly.

 

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

 

FASB ASC 820 requires the use of observable market data if such data is available without undue cost and effort.

 

Measurement of Fair Value

 

The Company measures fair value as an exit price using the procedures described below for all assets and liabilities measured at fair value. When available, the Company uses unadjusted quoted market prices to measure fair value and classifies such items within Level 1. If quoted market prices are not available, fair value is based upon internally developed models that use whenever possible current market-based or independently-sourced market parameters such as interest rates and currency rates. Items valued using internally generated models are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be inputs that are readily observable. If quoted market prices are not available, the valuation model used generally depends on the specific asset or liability being valued. The determination of fair value considers various factors including interest rate yield curves and time value underlying the financial instruments.

 

Property and Equipment

 

Property and equipment is stated at cost less accumulated depreciation and amortization. Improvements are amortized using the straight-line method over the shorter of the estimated useful lives of the respective assets or the lease term. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 5-15 years. Expenditures for renewals and betterments are capitalized. Expenditures for minor items, repairs, and maintenance are charged to operations as incurred. Gain or loss upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place.

 

Valuation of Long-Lived Assets

 

The Company periodically evaluates its long-lived assets for potential impairment in accordance with ASC 360, Property, Plant and Equipment, and records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. There was no impairment charges during the year ended December 31, 2014.

 

Stock-Based Compensation Plans

 

Stock-based awards are accounted for using the fair value method in accordance with ASC 718, Share-Based Payments. Our primary type of share-based compensation consists of stock options and stock-based awards. We use the Black-Scholes option pricing model in valuing options. The inputs for the valuation analysis of the options include the market value of the Company's common stock, the estimated volatility of the Company's common stock, the exercise price of the warrants and the risk free interest rate.

 

Loss per Common Share

 

The Company complies with accounting and disclosure requirements of ASC 262, Earnings Per Share. Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per common share incorporates the dilutive effect of common stock equivalents on an average basis during the period. No adjustment was made to the weighted-average number of shares outstanding in the calculation of loss per share for the years ended December 31, 2015 and 2014.

 

Income Taxes

 

Income taxes are recorded in accordance with ASC Topic 740, Accounting for Income Taxes ("ASC 740"), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The Company determines its deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are provided, when necessary, to reduce the deferred income tax assets to the amount expected to be realized.

 

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of December 31, 2015 and 2014, the Company did not have any uncertain tax positions.

 

Generally, tax fillings are no longer subject to income tax examinations by major taxing authorities for years before 2012. Any potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with U.S. federal, state, and local tax laws. The Company's management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

 

The Company's policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of December 31, 2015 and 2014, the Company has not accrued interest or penalties related to uncertain tax positions.

 

Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing the tax benefit associated with the use of the carryforwards and will recognize a deferred tax asset at that time.

 

Recent Accounting Pronouncements

 

In June 2014, the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition of the award. A reporting entity should apply existing guidance in Accounting Standards Codification Topic 718, Compensation-Stock Compensation, as it relates to such awards. The guidance is effective for fiscal years beginning after December 15, 2015, and may be applied prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this guidance will have on the Company's financial statements and related disclosures.

 

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. The guidance requires an entity to evaluate whether there are conditions or events, in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the financial statements are available to be issued when applicable) and to provide related footnote disclosures in certain circumstances. The guidance is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early application is permitted. We do not believe the adoption of this guidance will have a significant impact the Company's financial statements and related disclosures.

 

In November 2014, the FASB issued ASU 20-14-16, Derivatives and Hedging - Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The guidance requires an entity to determine the nature of the host contract by considering the economic characteristics and risks of the entire hybrid financial instrument, including the embedded derivative feature. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 and interim periods beginning after December 15, 2016. Early adoption, including adoption in an interim period, is permitted The Company is currently evaluating the impact that the adoption of this guidance will have on the Company's financial statements and related disclosures.

 

In January 2015, the FASB issued ASU 2015-1, Income Statement – Extraordinary and Unusual – Simplifying Income Presentation by Eliminating the Concept of Extraordinary Items. The guidance eliminates from GAAP the concept of extraordinary items. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted The Company is currently evaluating the impact that the adoption of this guidance will have on the Company's financial statements and related disclosures.

 

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the "SEC") did not or are not believed by management to have a material impact on the Company's present or future financial statements.


v3.3.1.900
Shares of Common Stock to be canceled
12 Months Ended
Dec. 31, 2015
Notes to Financial Statements  
3. Shares of Common Stock to be canceled

After the death of the CEO/Founder in January 2016, the Company discovered that he was holding approximately 45M in common stock certificates issued in 2015 and previous fiscal years but never distributed to various service providers. For the years these certificates were originally issued, the value of the services was expensed to Operating Expenses in the Income Statement. For 2015 the Company is recording a benefit of $1,488,536 to Operating Expenses in the Income Statement. In 2016, the Company will be canceling these certificates.


v3.3.1.900
Property and Equipment
12 Months Ended
Dec. 31, 2015
Notes to Financial Statements  
4. Property and Equipment

A summary of property and equipment is as follows:

 

   

Estimated

Useful Life

  2015     2014  
                 
Airplane   10- 15 years   $ -     $ 2,079,135  
Office equipment and other   5 - 7 years     448,751       433,751  
Less accumulated depreciation         (409,123 )     (196,850 )
                     
        $ 39,628     $ 2,316,036  
                     
Current depreciation       $ 212,273     $ 56,094  

 

Impairment of Long-Lived Assets and Amortizable Intangible Assets

 

The Company follows ASC 360-10, "Property, Plant, and Equipment," which established a "primary asset" approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. During the 2015 year the company determined that its airplane valued at $2,079,135 was fully impaired and recorded a charge to income for that amount.


v3.3.1.900
Stockholders' Equity
12 Months Ended
Dec. 31, 2015
Notes to Financial Statements  
5. Stockholders' Equity

Description of Securities

 

Common Stock

 

We are authorized to issue 7,986,000,000 shares of common Stock at $.0001 par value per share. As of December 31, 2015, a total of 7,555,715,234 shares of common Stock were issued and outstanding and held by approximately 4,500 shareholders. Holders of common Stock are entitled to receive dividends, when and if declared by the board of directors, subject to prior rights of holders of any Preferred Stock then outstanding and to share ratably in the net assets of the company upon liquidation. Holders of common Stock do not have preemptive or other rights to subscribe for additional shares. The Certificate of Incorporation does not provide for cumulative voting. Shares of common Stock have equal voting, dividend, liquidation and other rights, and have no preference, exchange, or appraisal rights.

 

Preferred Stock

 

We are authorized to issue up to a maximum of two million shares of preferred stock. At December 31, 2015, 66,500 shares of preferred stock were issued and outstanding. We can issue these shares upon the adoption of a resolution by the board of directors. Our preferred stock is not entitled to share in any dividends declared on the Common Stock and has no voting rights. Each share is convertible in to 3 shares of common. The liquidation preference is set by this conversion formula and results in a pro rata claim on the Company's assets based upon the underlying common shares issuable (199,500) upon conversion.

 

Recent Issuance of Unregistered Securities

 

2014:

 

Stock Issued for Cash

 

We issued 1,974,255,019 shares of our common stock in exchange for receiving a total of $9,904,443 in cash net of offering expenses. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.

 

2014:

 

Stock Issued for Services

 

We issued 232,534,764 shares of our common stock in exchange for services. The shares were valued at $4,084,127 or approximately $0.018 per share, which reflected the weighted average market value at the time of issuance.

 

2015:

 

Stock Issued for Cash

 

We issued 2,075,755,030 shares of our common stock in exchange for receiving a total of $6,433,799 in cash net of offering expenses. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.

 

Stock Issued for Services

 

We issued (net of cancellations) (17,455,567) shares of our common stock in exchange for services. The shares were valued at $102,223 or approximately $0.058 per share, which reflected the weighted average market value at the time of issuance.


v3.3.1.900
Stock options and Warrants
12 Months Ended
Dec. 31, 2015
Notes to Financial Statements  
6. Stock options and Warrants

Stock Options

 

No stock options were issued during the year ended December 31, 2015.

 

Warrants

 

For the years ended December 31, 2015 and 2014, warrant activity was as follows:

 

    Number of     Weighted     Remaining  
    Warrants     Average     Term  
    Outstanding     Price     (In Years)  
                   
Warrants outstanding at December 31, 2013     72,328,008     $ 0.05       0.80  
                       
Granted in 2014     327,500                  
Exercised     -                  
Canceled in 2014     47,233,675                  
                         
Warrants outstanding at December 31, 2014     25,421,833     $ 0.06       0.80  
                         
Granted in 2015                        
Exercised                        
Canceled in 2015     25,421,833                  
Warrants outstanding at December 31, 2015     -                  

v3.3.1.900
Income Taxes
12 Months Ended
Dec. 31, 2015
Notes to Financial Statements  
7. Income Taxes

The Company has approximately $71.8 million in available net operating loss carryovers available to reduce future income taxes. These carryovers expire at various dates through the year 2034. The Company has adopted ASC 740, Accounting for Income Taxes which provides for the recognition of a deferred tax asset based upon the value the loss carry-forwards will have to reduce future income taxes and management's estimate of the probability of the realization of these tax benefits. We have determined it more likely than not that these timing differences will not materialize and have provided a valuation allowance against our entire net deferred tax asset of approximately $24.2 million.

 

Utilization of federal and state NOL and tax credit carry-forwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of NOL and tax credit carry-forwards before full utilization.


v3.3.1.900
Commitments and Contingencies
12 Months Ended
Dec. 31, 2015
Notes to Financial Statements  
8. Commitments and Contingencies

The Company leases office space for its administrative offices which expired on August 15, 2015. The Company also leases an airport terminal facility on a month to month basis. The payments are charged to rental expense as incurred. Rental payments for these two operating leases for the years ended December 31, 2015 and 2014 were $533,000 and $438,000 and are included in general administrative expenses in the statement of operations.

 

The Company also leases office space, an airport terminal facility at Willow Run Airport, and other facilities under terms of an operating lease, which expire on August 31, 2016. The payments are charged to rental expense as incurred. Rental payments for the years ended December 31, 2015 and 2014 were $151,000 and $23,000, respectively, and are included in general administrative expenses in the statement of operations. Future minimum payments are $20,800 for the years ended December 31, 2016.

 

The Company also leases office space for its administrative offices in St. Petersburg, Russia under the terms of an operating lease which expires on February 1, 2017. The payments are charged rental expense as incurred. Rental payments for the year ended 2015 and 2014 were approximately $18,000 and $15,000 respectively, and are included in general administrative expenses in the statement of operations. Future minimum payments are $18,000 for the years ended December 31, 2016.


v3.3.1.900
Long-Term Debt-Related Party
12 Months Ended
Dec. 31, 2015
Notes to Financial Statements  
9. Long-Term Debt-Related Party

On December 1, 2010, the Company entered into a loan arrangement with a company owned or controlled by one of our directors for a total amount of $1,150,000. The Company issued a note ("Note") bearing interest at 9% per annum, payable quarterly, with a maturity date of March 31, 2013. Under terms of the Note dated December 1, 2010, the Company was obligated to repay the $1,150,000 prior to the maturity date upon raising $4 million or from proceeds of operating revenue. In connection with the terms of the Note, the Company issued the lender 6.8 million shares of common stock and 3.4 million warrants. The Company recorded the relative fair value of the shares and warrants of $294,297 as additional paid-in capital and established a discount on the debt. The discount was amortized over 24 months at an effective rate of 14.98%. The note is secured by aircraft to a limit of $2.9 million.

 

On March 31, 2013, the repayment terms of the Note were modified, wherein the Company is obligated to repay the principal amount of $1,150,000 to the lender on or before the second anniversary of the date upon which the Company commences its revenue flight operations. The modification further provides that the Company will pay accrued interest to date on or before the first anniversary of the date upon which the Company commences its revenue flight operations. There were no other changes to the terms of the original note.


v3.3.1.900
Development Stage Activities and Going Concern
12 Months Ended
Dec. 31, 2015
Notes to Financial Statements  
10. Development Stage Activities and Going Concern

The Company is currently in the development stage and has not as of yet generated any revenue from its planned operation to provide scheduled air transportation from the United States to Russia, the Baltic States, and the Ukraine.

 

The accompanying financial statements have been prepared using the accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business.

 

Currently, the Company has a minimum cash balance available for the payment of ongoing operating expenses, which would allow it to cover its operational costs and allow it to continue as a going concern, and it has incurred operating losses and experienced negative cash flows from operations since inception. The Company has a deficit accumulated as of December 31, 2015 of approximately $118.8 million. The Company has funded its activities through December 31, 2015 almost exclusively from debt and equity financings. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

 

For the years ended December 31, 2015 and 2014, the Company raised approximately $6.6 and $9.9 million, respectively, from private placements, funds needed to continue with the certification process, a process that must be completed before it can launch nonstop revenue service to Russia with its 747 aircraft. In addition to raising funds from private placements, the Company supplemented the financing of its ongoing operations through the issuance of common stock to pay operating expenses not paid with cash raised from the private placements. The continued operations of the Company over the long-term is dependent upon implementing airline service that will generate profits; until such time, however, it will continue to require substantial funds to continue with its aircraft and operational certification and carry out its business plan. In order to meet its ongoing operating cash requirements, management's plans include financing activities such as private placements of its common stock and the continued issuance of common stock for services rendered by vendors, consultants, and other professionals. Management has also considered the overall pipeline effect that enhances the initial cash position of a startup carrier. It is the industry practice for passengers to purchase tickets in advance of their flights while service vendors bill the carrier later. So that a new airline will not fly empty on day one, approximately 30 days prior to the expected inaugural date, the DOT authorizes sales of tickets and cargo. Such funds from advance sales, estimated at approximately $3 million for the company, accumulate in an escrow account, and are released upon the issuance of the air carrier certificate.

 

In the event we do not generate sufficient funds from revenues or financing through the issuance of our common stock or from debt financing, we may be unable to fully implement our business plan and pay our obligations as they become due, any of which circumstances would have a material adverse effect on our business prospects, financial condition, and results of operations

 

While the Company believes it will be successful in obtaining the necessary financing to fund its operations, there are no assurances that such additional funding will be achieved and that it will succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might be necessary should the Company be unable to continue in existence.


v3.3.1.900
Related Party
12 Months Ended
Dec. 31, 2015
Notes to Financial Statements  
11. Related Party

During the years ended December 31, 2015 and 2014 the President and CEO received salary of $44,534 and $121,600, respectively. A second officer, vice president – finance, was paid salary and additional compensation of $95,877 and $427,350 for the years ended December 31, 2015 and 2014, respectively, which represents amounts paid him for negotiating services in connection with the raise of new equity capital. A third officer, vice president, was paid salary and additional compensation of $91,867 and $107,800 for services provided the Company during the years ended December 31, 2015 and 2014, respectively. A fourth officer, corporate secretary, was additional compensation of $17,905 and $11,968 for services provided the Company during the years ended December 31, 2015 and 2014, respectively.

 

During the year related parties have continually invested material operating capital into the company at various times in exchange for shares discounted from closing market quotations due to liquidity and selling restrictions impacting the value of such transactions.


v3.3.1.900
Subsequent Events
12 Months Ended
Dec. 31, 2015
Notes to Financial Statements  
12. Subsequent Events

On February 22, 2016 the Company, and St. George Investments, LLC, a Utah limited liability company ("Lender"), entered into a Securities Purchase Agreement for the sale of (i) an unsecured promissory note (the "Note") in the principal amount of $655,000 and (ii) a warrant (the "Warrant") exercisable for five years for 125,961,538 shares of common stock of the Company. The Company received net proceeds from the issuance of the Note in the amount of $500,000. The Note is due on August 22, 2016.


v3.3.1.900
Summary of Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2015
Summary Of Significant Accounting Policies Policies  
Basis of Presentation

The financial statements have been presented in a "development stage" format. Since inception, our primary activities have been raising of capital, obtaining financing and of obtaining route authority and approval from the DOT and the FAA. We have not commenced our principal revenue producing activities.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires our management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.

Cash and Cash Equivalents

For financial statement presentation purposes, we consider those short-term, highly liquid investments with original maturities of three months or less to be cash or cash equivalents. There are no cash equivalents at December 31, 2015 and 2014.

Fair Value of Financial Instruments

FASB ASC Topic 825, Financial Instruments ("ASC 825"), requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. FASB ASC 825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At December 31, 2015 and 2014, the carrying value of certain financial instruments (cash and cash equivalents, accounts payable and accrued expenses.) approximates fair value due to the short-term nature of the instruments or interest rates, which are comparable with current rates.

Fair Value Measurements

FASB ASC Topic 820, - Fair Value Measurements and Disclosure ("ASC 820"), defines fair value and establishes a framework for measuring fair value and establishes a fair value hierarchy which prioritizes the inputs to the inputs to the valuation techniques. Fair value is the price that would be received to sell an asset or amount paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or cost approach, as specified by FASB ASC 820, are used to measure fair value.

Fair Value Hierarchy

FASB ASC 820 - specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs), or reflect the Company's own assumptions of market participant valuation (unobservable inputs). In accordance with FASB ASC 820, these two types of inputs have created the following fair value hierarchy:

 

Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly.

 

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

 

FASB ASC 820 requires the use of observable market data if such data is available without undue cost and effort.

Measurement of Fair Value

The Company measures fair value as an exit price using the procedures described below for all assets and liabilities measured at fair value. When available, the Company uses unadjusted quoted market prices to measure fair value and classifies such items within Level 1. If quoted market prices are not available, fair value is based upon internally developed models that use whenever possible current market-based or independently-sourced market parameters such as interest rates and currency rates. Items valued using internally generated models are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be inputs that are readily observable. If quoted market prices are not available, the valuation model used generally depends on the specific asset or liability being valued. The determination of fair value considers various factors including interest rate yield curves and time value underlying the financial instruments.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and amortization. Improvements are amortized using the straight-line method over the shorter of the estimated useful lives of the respective assets or the lease term. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 5-15 years. Expenditures for renewals and betterments are capitalized. Expenditures for minor items, repairs, and maintenance are charged to operations as incurred. Gain or loss upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place.

Valuation of Long-Lived Assets

The Company periodically evaluates its long-lived assets for potential impairment in accordance with ASC 360, Property, Plant and Equipment, and records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. There was no impairment charges during the year ended December 31, 2014.

Stock-Based Compensation Plans

Stock-based awards are accounted for using the fair value method in accordance with ASC 718, Share-Based Payments. Our primary type of share-based compensation consists of stock options and stock-based awards. We use the Black-Scholes option pricing model in valuing options. The inputs for the valuation analysis of the options include the market value of the Company's common stock, the estimated volatility of the Company's common stock, the exercise price of the warrants and the risk free interest rate.

Loss per Common Share

The Company complies with accounting and disclosure requirements of ASC 262, Earnings Per Share. Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per common share incorporates the dilutive effect of common stock equivalents on an average basis during the period. No adjustment was made to the weighted-average number of shares outstanding in the calculation of loss per share for the years ended December 31, 2015 and 2014.

Income Taxes

Income taxes are recorded in accordance with ASC Topic 740, Accounting for Income Taxes ("ASC 740"), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The Company determines its deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are provided, when necessary, to reduce the deferred income tax assets to the amount expected to be realized.

 

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of December 31, 2015 and 2014, the Company did not have any uncertain tax positions.

 

Generally, tax fillings are no longer subject to income tax examinations by major taxing authorities for years before 2012. Any potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with U.S. federal, state, and local tax laws. The Company's management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

 

The Company's policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of December 31, 2015 and 2014, the Company has not accrued interest or penalties related to uncertain tax positions.

 

Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing the tax benefit associated with the use of the carryforwards and will recognize a deferred tax asset at that time.

Recent Accounting Pronouncements

In June 2014, the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition of the award. A reporting entity should apply existing guidance in Accounting Standards Codification Topic 718, Compensation-Stock Compensation, as it relates to such awards. The guidance is effective for fiscal years beginning after December 15, 2015, and may be applied prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this guidance will have on the Company's financial statements and related disclosures.

 

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. The guidance requires an entity to evaluate whether there are conditions or events, in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the financial statements are available to be issued when applicable) and to provide related footnote disclosures in certain circumstances. The guidance is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early application is permitted. We do not believe the adoption of this guidance will have a significant impact the Company's financial statements and related disclosures.

 

In November 2014, the FASB issued ASU 20-14-16, Derivatives and Hedging - Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The guidance requires an entity to determine the nature of the host contract by considering the economic characteristics and risks of the entire hybrid financial instrument, including the embedded derivative feature. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 and interim periods beginning after December 15, 2016. Early adoption, including adoption in an interim period, is permitted The Company is currently evaluating the impact that the adoption of this guidance will have on the Company's financial statements and related disclosures.

 

In January 2015, the FASB issued ASU 2015-1, Income Statement – Extraordinary and Unusual – Simplifying Income Presentation by Eliminating the Concept of Extraordinary Items. The guidance eliminates from GAAP the concept of extraordinary items. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted The Company is currently evaluating the impact that the adoption of this guidance will have on the Company's financial statements and related disclosures.

 

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the "SEC") did not or are not believed by management to have a material impact on the Company's present or future financial statements.


v3.3.1.900
Property and Equipment (Tables)
12 Months Ended
Dec. 31, 2015
Property And Equipment Tables  
Property and Equipment

A summary of property and equipment is as follows:

 

   

Estimated

Useful Life

  2015     2014  
                 
Airplane   10- 15 years   $ -     $ 2,079,135  
Office equipment and other   5 - 7 years     448,751       433,751  
Less accumulated depreciation         (409,123 )     (196,850 )
                     
        $ 39,628     $ 2,316,036  
                     
Current depreciation       $ 212,273     $ 56,094  


v3.3.1.900
Stock options and Warrants (Tables)
12 Months Ended
Dec. 31, 2015
Stock Options And Warrants Tables  
Stock options and warrants of option activity
    Number of     Weighted     Remaining  
    Warrants     Average     Term  
    Outstanding     Price     (In Years)  
                   
Warrants outstanding at December 31, 2013     72,328,008     $ 0.05       0.80  
                       
Granted in 2014     327,500                  
Exercised     -                  
Canceled in 2014     47,233,675                  
                         
Warrants outstanding at December 31, 2014     25,421,833     $ 0.06       0.80  
                         
Granted in 2015                        
Exercised                        
Canceled in 2015     25,421,833                  
Warrants outstanding at December 31, 2015     -                  

v3.3.1.900
Property and Equipment (Details) - USD ($)
12 Months Ended 316 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Less accumulated depreciation $ (409,123) $ (196,850) $ (409,123)
Net 39,628 2,316,036 39,628
Current Depreciation $ 212,273 56,094 $ 654,795
Airplane [Member]      
Property and Equipment 2,079,135
Airplane [Member] | Minimum [Member]      
Estimated Useful Life 10 years    
Airplane [Member] | Maximum [Member]      
Estimated Useful Life 15 years    
Office equipment and other [Member]      
Property and Equipment $ 448,751 $ 433,751 $ 448,751
Office equipment and other [Member] | Minimum [Member]      
Estimated Useful Life 5 years    
Office equipment and other [Member] | Maximum [Member]      
Estimated Useful Life 7 years    

v3.3.1.900
Stockholders' Equity (Details Narrative) - USD ($)
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Stockholders Equity Details Narrative      
Common stock, shares issued 7,555,715,234 5,497,415,771  
Common stock, shares outstanding 7,555,715,234 5,497,415,771  
Preferred stock, shares issued 66,500 66,500  
Preferred stock, shares outstanding 66,500 66,500  
Stock issued and issuable for cash, Amount $ 9,904,443    
Stock issued and issuable for cash, Shares 1,974,255,019 701,621,438  
Shares issued for services, Amount $ 102,223 $ 4,084,127 $ 2,285,967
Shares issued for services, Shares 232,534,764 127,967,500  

v3.3.1.900
Stock options and Warrants (Details 1) - $ / shares
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Warrant [Member]    
Number of warrants, outstanding    
Warrants outstanding, Beginning 25,421,833 72,328,008
Granted   327,500
Exercised  
Canceled   47,233,675
Warrants outstanding, Ending   25,421,833
Weighted average exercise price    
Warrants outstanding, Beginning $ 0.06 $ 0.05
Exercised  
Warrants outstanding, Ending   $ 0.06
Remaining Term (In Years)    
Warrants outstanding Remaining Term at December 31, 2013   9 months 18 days
Warrants outstanding Remaining Term at December 31, 2014   9 months 18 days
Warrants [Member]    
Number of warrants, outstanding    
Warrants outstanding, Beginning 25,421,833  
Warrants outstanding, Ending 25,421,833 25,421,833
Weighted average exercise price    
Exercised  
Remaining Term (In Years)    
Warrants outstanding Remaining Term at December 31, 2013 9 months 18 days  
Warrants outstanding Remaining Term at December 31, 2014 9 months 18 days  

v3.3.1.900
Commitments and Contingencies (Details Narrative) - USD ($)
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Commitments And Contingencies Details Narrative    
Operating Leases, Rent Expense $ 533,000 $ 438,000
Operating Leases, Rent Expense, Net 151,000 23,000
Office Rent Expense $ 18,000 $ 15,000

v3.3.1.900
Development Stage Activities and Going Concern (Details Narrative) - USD ($)
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Development Stage Activities And Going Concern Details Narrative    
Retained Earnings (Accumulated Deficit) $ (118,882,056) $ (110,543,922)
Company raised $ 6,600,000 $ 9,900,000

v3.3.1.900
Related Party (Details Narrative) - USD ($)
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Salary $ 44,534 $ 121,600
Officers And Directors [Member]    
Officers' Compensation 91,867 107,800
Vice President Finance [Member]    
Officers' Compensation 95,877 427,350
Corporate Secretary [Member]    
Officers' Compensation $ 17,905 $ 11,968

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