UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, DC 20549
FORM 10-K
Mark One
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[ X ]
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the Fiscal Year ended December 31,
2015
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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BALTIA AIR LINES, INC.
(Exact name of Registrant as specified in its charter)
NEW YORK
(State of Incorporation)
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11-2989648
(IRS Employer Identification No.)
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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)
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Title of each class
-None-
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Name of each Exchange on which registered
-None-
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Securities Registered pursuant to Section
12(g) of the Exchange Act:
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Common Stock,
(Title of Class)
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$.0001 Par Value
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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]
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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]
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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 [ ]
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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 [ ]
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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):
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Large accelerated filer [ ]
Non-accelerated
filer [ ]
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Accelerated filer [ ]
Smaller reporting company
[X]
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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]
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The aggregate market value of the voting common
equity held by non-affiliates as of December 31, 2015 is
$ 6,703,843
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The number of shares of the registrant's common
stock outstanding as of March 31, 2016 was
8,111,449,414
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TABLE OF CONTENTS
PART 1
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Item 1.
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Business
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Item 1A.
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Risk Factors
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Item 1B.
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Unresolved Staff Comments
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Item 2.
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Properties
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Item 3.
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Legal Proceedings
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PART II
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Item 5.
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Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
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Item 6.
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Selected Financial Information
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Item 7.
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Management's Discussion and Analysis of Financial Condition and
Results of Operations
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Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk
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Item 8.
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Financial Statement Supplementary Data
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Item 9.
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Changes in and Disagreements with Accountants on Accounting And
Financial Disclosures
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Item 9A
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Controls and Procedures
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Item 9B
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Other Information - Required FD Disclosure of Nonpublic Material
Information
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PART III
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Item 10.
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Directors and Executive Officers of the Registrant
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Item 11.
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Executive Compensation
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
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Item 13.
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Certain Relationships and Related Transactions
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Item 14.
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Principal Accountant Fees and Services
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PART IV
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Item 15.
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Financial Statements and Other Exhibits
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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
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High
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Low
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March 31, 2014
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.04
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.01
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June 30,2014
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.03
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.02
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September 30, 2014
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.02
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.01
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December 31, 2014
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.02
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.01
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March 31, 2015
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.0109
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.0099
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June 30, 2015
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.0047
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.0035
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September 30, 2015
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.0048
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.0038
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December 31, 2015
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.0015
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.0012
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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.
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.
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.
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.
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.
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.
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.
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
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.
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.
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
c
ommon 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.
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
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
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.
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.
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)