UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                                Washington, DC 20549

                                     FORM 10-KSB



ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
                                
                     FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

                       BALTIA AIR LINES, INC. (Baltia)
           (Exact name of registrant as specified in its charter)

STATE of NEW YORK                                    11-2989648            
(State of Incorporation)                  (IRS Employer Identification No.)

                63-25 SAUNDERS STREET, SUITE 7 I, REGO PARK, NY 11374
                      (Address of principal executive offices)

        Registrant's telephone number, including area code: (718) 275 5205

Securities Registered: 12 G #O-28502, SB-2 Registration Statement No.
333-20006-NY,



                        DESCRIPTION OF SECURITIES

The authorized capital stock of the Company consists of 100,000,000 shares of
Common Stock, $.0001 par value per share, and 15,000 shares of Preferred Stock,
$1.00 par value.  At the Effective Date, a total of 2,442,500 shares of Common
Stock are issued and outstanding and held by over 100 shareholders.  No shares
of Preferred Stock are issued and outstanding.  No stock was issued under 
333-21006-NY and all securities registered therein are carried forward into
Registration 333-37409 pending an effective date.  

Common Stock

All outstanding shares of Common Stock are, and the shares offered hereby will
be, duly authorized, validly issued, fully paid and non-assessable.  Holders of
Common Stock are entitled to receive dividends, when and if declared by the
board of directors, out of funds legally available therefor and, subject to
prior rights of holders of any Preferred Stock then outstanding, if any, to
share rateably 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, nor are there any redemption or sinking fund provisions associated with
the Common Stock.  The Certificate of Incorporation does not provide for
cumulative voting.  Shares of Common Stock have equal voting, dividend,
liquidation and other rights, and have no preference, exchange or appraisal
rights.

Lack of Control by Minority Shareholders

Holders of shares of Common Stock are entitled to one vote per share on all
matters requiring a vote of stockholders.  Since the Common Stock does not have
cumulative voting rights in electing directors, the holders of a majority of the
outstanding shares of Common Stock voting for the election of directors can
elect all of the directors, excepting one board seat reserved for the
Underwriter's nominee for three years.

Stock Transfer Agent

The Transfer Agent and Registrar for the shares of Common Stock is Continental
Stock Transfer and Trust Company, 2 Broadway, New York, NY 10004, telephone:
(212) 509-4000.

Warrants 

In the Offering under 333-37409 the Company will issue 1,100,000 Warrants. Each 
Warrant entitles the holder to purchase one share of Common Stock at $6.05
commencing six months from the date of this Prospectus until five years from the
date of this Prospectus.  The Company may redeem outstanding Warrants, once they
become exercisable at a price of $.10 per Warrant on not less than 30 days
written notice, provided the closing bid quotations of the Shares have exceeded
$10 for 20 consecutive trading days ending on the third day prior to the date on
which notice is given. Baltia intends to redeem the Warrants at the earliest
opportunity.  Warrants may not be exercised following redemption.  Therefore,
the investor may have to exercise the Warrant earlier than he or she intended. 
If the Warrants are called for redemption by the Company, an investor may have
to exercise the Warrants before maximum profit can be gained.  The Warrants
expire five years after the Effective Date, or sooner if the Warrants are called
for redemption. The Prospectus will become "stale" nine months following the
Effective Date. The Company will try to maintain, and will provide, a current
prospectus at such time as the Company may call for redemption, but assumes no
obligation to maintain a current prospectus otherwise.  Warrants may not be
exercised or redeemed in the absence of a current prospectus and the Company's
Warrant and Transfer agents are forbidden to accept Warrants unaccompanied a
current prospectus. 
 
Warrant Exercise Procedure

Warrants may be exercised by mailing or delivering a dully executed and
completed Warrant Subscription Certificate together with payment in full of the
subscription price of $6.50 per share of Common Stock.  Except as described
herein under "Late Delivery of Warrants," Warrant Subscription Certificates must
arrive on or before the Expiration Date and any subscriptions received after the
Expiration Date will not be honored.  Payment must be made in United States
dollars in cash or by bank certified or cashier's check, or by wire transfer of
good funds payable to the order of the Warrant Agent.  Once a holder has
exercised a Warrant, the exercise is irrevocable.  Certificates representing the
shares of Common Stock purchased upon the exercise of Warrants will be delivered
to the purchasers as soon as practicable after receipt of the Subscription
Agreement and funds.

The Warrant Agent is Continental Stock Transfer and Trust Company, 2 Broadway,
New York, NY 10004, telephone: (212) 509-4000.

The instructions in the Warrant Subscription Certificate should be read
carefully and followed in detail.  Do not send Warrant Subscription Certificates
or payment to the Company or to the Underwriters.  Except as described herein
under "Late Delivery of Warrants," no subscriptions will be accepted until the
Warrant Agent has received delivery of a duly executed Warrant Subscription
Certificate and payment of the subscription price.  The risk of delivery of
Warrant Subscription Certificates and payments to the Warrant Agent will be
borne by the holders of Warrants and not by the Company or the Warrant Agent. If
the mail is used to exercise Warrants, it is recommended that insured,
registered mail be used.  Any questions or requests for assistance concerning
the method of subscribing for shares or for additional copies of this Prospectus
should be directed to the Warrant Agent.

All questions as to the validity, form, eligibility and acceptance of any
exercise of Warrants will be determined by the Company at its sole discretion. 
The Company may waive any defect or irregularity, permit a defect or
irregularity to be corrected within such time as it may determine, or reject any
exercise of a Warrant which it determines to have been made improperly.

Late Delivery of Warrants

If on or before the Warrant Expiration Date the Warrant Agent receives the full
subscription price for the shares of Common Stock, together with a letter or
telegraphic guaranty from a bank or trust company which is a member of the New
York Clearing House (or is a correspondent of such a bank) or a member firm of
the New York Stock Exchange or American Stock Exchange or Nasdaq, that the
Warrant Subscription Certificate to which it relates will be surrendered to the
Warrant Agent within five business days after the Expiration Date, the
subscription will be accepted subject to receipt of the duly executed Warrant
Subscription Certificate within the five business days.

Purchase and Sale of Warrants

The Warrants are immediately detachable, exercisable and separately tradable.
The Company has applied for the Nasdaq listing symbol "BALTW" for Warrants.  No
assurance can be given that  a trading market for the Warrants will develop, or
if one does develop, whether it will sustain or at what price the Warrants will
trade.  Prior to this Offering, there has been no public market for the
Warrants.

Representative's Warrants 

At the Closing of this Offering the Company will sell to the Representative, for
a total purchase price of $100.00, Warrants entitling the Representative to
purchase up to 110,000 shares of Common Stock at $6.05 per Share (110% of
initial public offering price) and 110,000 Warrants at $.11 per Warrant (10%
of initial public offering price). Warrants underlying the Representative's
Warrants  differ from the Warrants offered to the public hereunder to the extent
that the Warrants are non-redeemable by the Company.  The exercise prices of the
Option and underlying Warrants are subject to anti-dilution adjustment under
certain conditions.  The Representative's Warrants are exercisable during the
four-year period commencing one year form the date of this Prospectus, and the
Warrants are non-transferable for one year except to the officers of the
Representative, members of the underwriting group and their respective officers
or partners.  The Securities issuable upon the exercise of the Representative's
Warrants  have been reserved by the Company and have been included in the
Registration Statement of which this Prospectus is a part. 

Preferred Stock 

The Company has authorized 15,000 Preferred Shares which may be issued from time
to time, as authorized by the board of directors.  Preferred shares have $1 par
value and no voting rights.  As of the present date thereof, no shares of
Preferred Stock are outstanding and the Company has no present plans to issue
any shares of Preferred Stock.
                    

                            BALTIA IS A CORPORATE ISSUER

The number of shares outstanding of each of the issuer's classes of 
common equity, as of December 31, 1997:  

      Class                                              Number of Shares   
Common Stock Par Value $.0001 Per Share                     2,442,500    
Preferred Stock No Par Value                                   -0-

Transitional Small Business Disclosure Format (Check one): No  X

                         DOCUMENTS INCORPORATED BY REFERENCE
              

Check whether the issuer (1) filed all reports required to be filed by Section 
13, or 15(d) of the Exchange Act during the past 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.  No  X  and Yes  X . 
Required reports filed herewith. 

Baltia's Initial Public Offering Registration Statement became effective 
September 16, 1996.  This is the second annual report to which Baltia is subject
to filing under Section 13 or 15(d) of the Exchange Act.  

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be 
contained, to the best of registrant's knowledge, in definitive proxy or 
information statements incorporated by reference in Part III of the Form 10-KSB
or any amendment to this Form 10-KSB.   X 
                                                                      
Baltia has not commenced revenue operations to date.  State issuer's revenues 
for its most recent fiscal year. $ -0-

State the aggregate market value of the voting stock held by non-affiliates 
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60 
days.  To date, there is no market for Baltia stock.
                                                       
                                       PART I

Item 1. Description of Business.

                       BUSINESS

Summary.

                      The Company

The  Company, a development stage U.S. airline, has been granted rights
by the U.S. government to provide scheduled full-service commercial 
passenger, freight, and mail transportation by air between New York City
and St. Petersburg, Russia.  With the proceeds from this Offering the 
Company intends to commence revenue flights as the U.S. designated carrier
on this route. 

St. Petersburg is the former capital of Russia, with  a population of 
just  under five million people,  which makes  it the second  largest 
city in  Russia and the  fourth largest  in  Europe.   It is  a  
central hub  for commercial activity in  the  Northwestern  Region  
of  Russia,  and  is  the  major intellectual, cultural, financial, 
and industrial center  of the Russian Federation. (Department of Commerce 
("DOC"), Bureau  of the Census). The Company believes that there is a large 
market of passengers and shippers desiring direct non-stop air transport 
between New York and St. Petersburg.  See "Business"       

Presently, the Company is the sole U.S. airline with 
authority to fly non-stop direct between the U.S. and St. Petersburg, Russia.
The authority to fly non-stop between the U.S. and Russia derives from an 
aviation agreement between the two countries and is delegated exclusively 
to airlines of the U.S. and Russia.  Thus, excepting Russian carriers, 
which have authority delegated by the Russian Government, all foreign air 
carriers (third-party carriers) providing service between the U.S. and 
Russia must stop in their respective home countries before flying onto 
Russia.  Presently, all third-party carriers change gauge in the home 
and operate a narrow-bodied aircraft into St. Petersburg. 
The U.S. Department of Transportation has granted to U.S. airlines 
all the authority currently available for service between the U.S. and 
Russia.  Until there is a new bilateral aviation agreement between the 
countries that would increase the number of flights permitted between 
the U.S. and Russia, Baltia expects to maintain exclusive U.S. non-stop 
authority to provide non-stop direct service between the U.S. and St. 
Petersburg.

Although it recognizes that the air transport industry is very competitive, 
the Company understands that the passengers prefer direct non-stop flights 
with relative seating comfort on trans-Atlantic flights.  The Company also
believes that freight forwarders prefer to load cargo in containers, seal 
them, place them on a U.S carrier in New York and have them delivered 
directly to St. Petersburg.  The alternative is to ship cargo via Russian 
carrier, or via third-party carrier where cargo would be off-loaded in a 
third country, and reloaded as small packages into a narrow-bodied 
airplane for the flight from the third country into St. Petersburg. 

The Company's  business strategy  is to initially establish service 
between New York and St. Petersburg with one airplane.  The U.S. 
Department of Transportation, Office of Airline Analysis, found that 
the Company's plan was both comprehensive and reasonable.  As the 
market demands, the Company hopes to add a second airplane.  After
service between New York City and St. Petersburg, Russia is established,
the Company may expand service to other cities in Russia and the former
Soviet Union.  Eventually, the Company's goal is to be a leading
carrier in the US - Russia niche  market.  

The Company's marketing strategy is to associate the Company's  name  
with  quality  service while matching current ticket pricing structures.
The Company plans to operate a Boeing 747 configured with 316 seats to 
promote passenger comfort.  The Company's proposed three-class non-stop 
direct service should provide convenient 8 hour 30 minute transport 
between New York City and St.  Petersburg.     

Currently, the Company is in contract negotiations with Pacific Aviation 
Holding Company for a 3 to 5 year lease of a Boeing 747 and has allocated
$1 million for aircraft acquisition  deposit. See "Use of 
Proceeds." The Boeing 747 is capable of carrying standard freight containers 
and pallets in its belly.  The Company plans to provide non-stop palletized
and  containerized air cargo service between the United States and  St. 
Petersburg, a service  presently not offered by  any other U.S. airline.    
Also, the Company expects to be carrying U.S. mail.
    
The Company's  activities, from  inception  to  the present,  have  been
devoted to raising capital,  obtaining route authority and approval from
the  US   Department  of   Transportation  and   the  Federal   Aviation
Administration, and on market research and development of  the Company's
overall  marketing program. The Company's management has been found fit 
by the U.S. Department of Transportation to provide scheduled air service 
between New York and St. Petersburg.  Its management and business plan 
have had the benefit of cross examination by the major U.S. airlines when, 
in  1990 the Company competed with eleven airlines (American  Airlines,  
Delta, Continental, TWA, PanAm, Northwest Airlines, American  Trans Air, 
United Airlines, Alaska Airlines, Federal Express and  Evergreen 
International Airlines) before the  U.S. Department  of Transportation 
("DOT") for rights to fly to the former Soviet  Republics.  See 
"Business -  U.S. Carrier Operations Under Bilateral Rights."  
The Company won rights to serve St. Petersburg, Riga, Minsk, Kiev, 
Tblisi, and Moscow in June 1991, followed thereafter by an attempted coup 
d'etat of the Soviet government which disrupted the Company's financing.  
The Company's rights subsequently terminated for dormancy.  In 1996 the 
DOT again found the Company's management fit and reactivated its 
authority to serve St. Petersburg. 

BALTIA(R), VOYAGER CLASS(R), THE NEW  WAY TO EUROPE(TM), CLUB BALTIA(TM),
BALTIA CARGO(TM), AIR BALTIA(TM), and BALTIA EXPRESS(TM)  are trademarks 
of the Company.


FAA Air Carrier Certification

To assure that an airline, previously certified as fit by the 
DOT, uses safe operating procedures, its operating procedures 
and personnel must be certified by the FAA.  In order to 
accomplish this certification, the Company has prepared a 
detailed schedule of events of approximately ninety (90) days 
duration.  The certification process begins with providing the 
FAA with written documentation of the procedures to be used in 
its operations.  These written procedures, which include training
procedures, are reviewed by the FAA.  After the FAA is satisfied
with the documentation, the airline trains its personnel according
to its procedures under FAA supervision.  Finally the airline
employees demonstrate their mastery of the procedures to the FAA. 
Upon successful completion of demonstrations, an airline receives
its FAA air carrier certification. The FAA will require that the
Company submit its manuals and other documentation, train crews
for B747, conduct a mini-evacuation demonstration, and complete
50 hours of proving-flight demonstration from JFK to St.
Petersburg (equivalent of 3 round trips).  During the proving
flights the Company is not permitted to carry passengers but it
may carry freight. 

Regulatory Compliance

The Company intends to operate as a Part 121 carrier, a heavy jet
operator.  As such, following certification the Company is
required to maintain its 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 the
Company is required to submit periodic reports of its operations
to the DOT.  As a new airline, the Company is likely to be subjected
to a greater FAA scrutiny during the first year of its flight
operations than an established carrier.  Failure to maintain
compliance may cause suspension or revocation of air carrier
certificate.  The Company will be subject to FAA directives, including
those that may ground the Company's airplane.
 
US Carrier Operations Under Bilateral Rights

Prior to the conclusion of the 1990 US-USSR Bilateral Agreement,
only PanAm and Aeroflot were authorized to operate between their
respective countries.  All flights between the US and the former
Soviet Union were conducted between New York and Moscow, with
Washington and St. Petersburg (Leningrad) being served on a
limited level.  In 1990, shortly after the United States and the
former USSR concluded a new expanded bilateral air transportation
agreement, the Department of Transportation invited US airlines
to compete for the limited route rights under the new bilateral
agreement.  A total of 12 US airlines were admitted in the
competition:  the Company, American, Delta, Continental, United,
TWA, PanAm, Northwest, Alaska Airlines, American Trans Air,
Federal Express, and Evergreen.  In 1991, the Department of
Transportation awarded the Company rights (passengers, cargo and
mail) to fly from JFK to St. Petersburg, and to Riga non-stop;
with on-line service via Riga to Minsk, Kiev and Tbilisi.  Alaska
Airlines was awarded the right to fly to Russia's Magadan and
Khabarovsk in the US Pacific, which routes Alaska Airlines
currently serves.

After the USSR broke up, the US-Russia Bilateral Agreement of
1994 was signed reinforcing and expanding the former US-USSR
Bilateral Agreement of 1990.  Under the US-Russia Bilateral
Agreement the designated US airlines enjoy certain rights backed
by the US Government.  Russia has granted certain rights to the
United States and reciprocal rights were granted by the United
States to Russia.  Among the most important of the bilateral
rights the Company considers the following: (i) the right to fly
non-stop, (ii) the right of change gauge in Russia for beyond
service, and (iii) the ability to provide its own service within
Russia i.e. ground service of the aircraft, passenger services,
cargo service, etc.  Other rights enable the Company to conduct
normal business practices between the US and Russia, including
exemption form duties on materials usable in the Company's
business, and unimpeded currency transfers.  The Company holds
most beneficial the fact that no other foreign country can be a
party to the US-Russia Bilateral Agreement and thus, other
foreign airlines are excluded from direct service between the US
and Russia.

Unexpected political changes in Russia might affect the Company's
growth.  Airline services under bilateral agreements typically
continue even between countries that are adversarial.  A break in
diplomatic relations could be accompanied by interruption of air
service, but such extended occurrences are rare.  However,
adverse political direction in Russia could impede US-Russia 
commerce.

Aircraft Acquisition

The Company intends to operate Boeing 747 aircraft on the
JFK-St. Petersburg route.  The Company intends to lease one B-747 
aircraft that meets FAA airworthiness requirements.  The Company 
has budgeted $1 million deposit for the aircraft. Monthly 
acquisition costs will be paid from operating revenue.  See "Use
of Proceeds."

Description of the Market

Air Cargo.  Air cargo traffic from the US to Russia from 1995 to 
1996 grew 18% to $3.34 billion following a 120% growth from 1992 
to 1993.  Air cargo from Russia to the US grew 143% from 1992 to 
1993, declining slightly between 1995 and 1996 -- to $3.56 billion. 
(US Department of Commerce: Commercial Overview of Russia: Foreign 
Trade, BISNIS Home Page January 1998.)  In 1996 New York State exported 
$196,979,382 to Russia.  (Bureau of the Census, US Department of 
Commerce)  The Company has received offers from two JFK-based cargo 
agents.  Paramount Cargo Marketing, Inc. projects shipments of 20 tons 
per flight, and RAF International Sales projects shipments of 50 to 
75 tons weekly to St. Petersburg. 

Passenger Traffic.  AWAITING UPDATE DATA ON US TRAFFIC TO RUSSIA. 
According to the DOC statistics, 77% of all passengers visit only one 
country. St. Petersburg has a growing number of private travel agencies 
that serve the new segment of affluent Russian travelers who require 
quality service.  Russian passenger arriving in the US increased 
19% from 1995 to 1996.  The Company surveyed fares of the leading 
foreign airlines that are serving the US-Russia market.  Over the 
past several years, fares in the US-Russia market have remained 
stable and have incrementally risen (6% from 1993 to 1994, 4% from 
1994 to 1995, and AWAITING UPDATE). 

The US-Russia Bilateral Agreement restricts foreign airlines,
excepting Russian airlines, from providing non-stop service
between the US and Russia, and, no US airline offers
non-stop service between JFK-St. Petersburg.  The present 
US-Russia bilateral limits the aggregate number of round 
trips US carriers may make to Russian cities (frequencies).  
All frequencies available under the present US-Russia 
bilateral have been allocated by the US Department of 
Transportation for use by US carriers to serve Russian cities 
other than St. Petersburg. Thus, the Company expects to 
offer the only US non-stop service with a wide-body aircraft         
from New York to St. Petersburg. 

Effects of Seasonality Over the North Atlantic

The Company's business is affected by seasonal factors.  Airlines
serving routes over the North Atlantic are subjected to a pattern of
seasonal variation in traffic which the industry has termed the "North
Atlantic Seasonality" factor.  In general, the traffic peaks during the
summer season and dips during the winter season.  To mitigate this
seasonal trend, the Company intends a winter marketing program
featuring St. Petersburg's World-famous winter cultural activities of
museums and world class performances, such as the Hermitage Museum and
the Marinsky Theater.  The Company has no specific plans, but has
discussed with Air Exchange, Inc. and other charter users the
possibility of chartering the Company's aircraft for use in opposite
season markets during the days when the aircraft is not on scheduled
route service.  For example, JFK-Caribbean is an opposite season market
to JFK- St. Petersburg because JFK-St. Petersburg traffic peaks in
summer and the JFK-Caribbean traffic peaks in winter.

 [CHART depicting seasonal passenger traffic variation throughout
 year varying approximately as follows: Jan -20%, Feb -25%, Mar -12%,
 Apr -5%, May +3%, Jun +10%, Jul +23%, Aug +45%, Sep +14%, Oct -.5%,
 Nov -10%, Dec -21%] 

The above chart depicts monthly distribution of hypothetically 93,431
passengers, adjusted to the North Atlantic monthly seasonality
variation (data from AVMARK, industry analysts).  Specific seasonal
variation on the JFK-St. Petersburg route may differ from the North
Atlantic average variation and cannot be specifically determined until
the service has been operated.
 
Marketing

The Company's objective is to establish itself as a leading
quality carrier in its market niche over the North Atlantic with
operations that are profitable over time.  The Company intends to 
compete for the passenger segments that choose quality.  Although
the Company has allocated 40% dilution of the average weighted fare 
for discount promotions, the Company does not expect to be in 
direct competition with deep discount airlines.

The Company will operate between two of the largest nations in
one of the world's fastest growing markets providing non-stop,
wide-body passenger service with First, Business, and Voyager
Class accommodations.  The Company has identified several market 
segments in the US-Russia Market: (i) Business Travelers, 
(ii) General Tourism, (iii) Ethnic Travelers, (iv) Special Interest 
Groups, (v)Professional Exchanges, and (vi) Government and Diplomatic
Travel. The Company's passenger market strategy is
tailored to particular preferences  of the various segments of
its customers with marketing attention particularly focused on
American business travelers with interests in Russia who require
high quality, non-stop service from the US to Russia. 

The Company intends to advertise in selected publications, 
supplemented by direct mailings to corporate travel 
planners, and individual American businesses
that are currently involved in Russia.  The Company plans to
sponsor selected industry and trade events in the US and in St.
Petersburg, and to implement a controlled frequent flyer program
for frequent business travelers.  Seawind Cruise Lines and Hilton
Hotels have expressed interest in conducting joint marketing
programs with the Company, but the Company has no current contractual
relationships with any businesses.  In June 1997, the Company
issued 65,000 shares to Trent Trading for the purchase of
$396,090 in media placements (advertising space in U.S. NEWS &
WORLD REPORT, BUSINESS WEEK and NEW YORK LAW JOURNAL).

In addition to listing its schedules and tariffs in the
Official Airline Guide ("OAG"), and through a Computer
Reservations and Ticketing System ("CRS"), the Company intends to
provide customer service and reservations centers in New York and
in St. Petersburg.  The Company intends to activate CRS
reservations service when the DOT issues its order authorizing the 
Company to sell advance tickets.

The Company believes aircraft choice is part of marketing.  
Believing it offers the greatest degree of comfort and capacity
for the JFK-St. Petersburg market, the Company intends to operate 
a Boeing B747 aircraft  Its dispatch reliability lies
within the 97% range. (Boeing Report ID:RM 23004).  The Company 
intends to provide non-stop wide-body cargo service from the JFK 
to St. Petersburg, offering containers, pallets, and block space
arrangements in the aircraft's cargo bay. 

Description of the Industry

Until the Airline Deregulation Act of 1978, the domestic airline
industry was economically regulated by the Civil Aeronautics
Board ("CAB").  Deregulation brought numerous new carriers into
the domestic scheduled airline business challenging the industry
fares, work rules, and wages.  Over the ensuing years,
most of the new carriers either merged with major carriers or
left the business.  Now, major carriers are creating alliances, 
bringing to a close the period of adjustment to jet travel under 
deregulation, and the Company believes, setting the stage for a new era of
profitability in the airline industry.  Generally, major US
airlines are currently either making a profit or decreasing their
annual loss. (See generally http://www.bts.gov/oia/indicators,
Bureau of Transportation Statistics, U.S. DOT)   

Competition

The Company recognizes that it will face non-stop competition from 
Aeroflot as well as one-stop and two-stop service competition from
the leading European airlines and competition from US airlines with
marketing arrangements with European airlines. The European airlines 
provide connections to St. Petersburg through their European hubs.  In
1996 Delta ceased serving St. Petersburg and has since applied
to the DOT for authority to market St. Petersburg through code
sharing with foreign carriers.

Acknowledging that the competition is bigger, has more money,
has name recognition, the Company believes it can compete successfully
by responding quickly to changes and opportunities, providing quality
service, offering exclusive US non-stop service between two 
very large cultural and business centers, and enabling freight forwarders
to handle containerized shipments.  However, there is no guaranty that
the Company will be successful.

The Company does not currently have interline agreements with other 
airlines and intends to sign interline agreements with other airlines 
after the Company commences service, but there is no assurance that the such
agreement would contain discounts equal to those of its
competitors.  Interline agreements allow participating carriers
to reduce the total cost of a multi-legged ticket involving two
or more airlines, each airline contributing a certain discount
for the leg on which it provides service in order to bring down
the overall price of such a ticket.  Prior to the Company's
signing interline agreements with other airlines, at their local
travel agent through the CRS, passengers will be able to purchase
a multi-leg ticket where the Company is one of the air carriers
without interline discount, but it may be more expensive that a
multi-leg ticket on a competitive airline that has interline
agreements in place. 

Pricing

The Company intends to focus its marketing on the First class, Business 
class and upscale tourist, who choose non-stop, quality service.  
Business and First class travelers are currently paying between $1,707  
to $2,660 more than a discount passenger.  Although the Company does not
intends to be a discount carrier, it intends to remain competitive in 
all classes of tickets.  When the Company commences revenue service, it
will use a 40% dilution factor, a dilution of the weighted
average fare used in forecasting revenues which results when
passengers purchase a discounted ticket.  This percent of
dilution will allow the Company to compete periodically with
discount programs without compromising its revenue forecasts. 
See fare calculation below. 

The following table represents the seating configuration and
class occupancy ratio of 93,431 passengers forecast for year one:

<TABLE>
<CAPTION>
 Baltia's B747 Intended Seating Configuration and Assumed Average Occupancy
                         Assumed     Assumed
                   Available   Passengers    Percent     Percent of
                       Seats   per Flight   Occupancy    Passengers

 <S>                   <C>         <C>      <C>          <C>                     
                       
 First . . . .           16           6      37.5%         3.3%
 Business  . .           32          17      53.1%         9.5%
 Economy . . .           64          37      57.8%        20.6%
 Discounts . .          204         120      58.7%        66.6%
                                             
 Total . . . .          316         180      56.9%         100%
</TABLE>

1994 DOC statistics report that between 1992 and 1993 the
distribution of US passengers to Russia among First, Business and
Tourist and Economy Classes was 6%, 14%, and 80% respectively. 
Being conservative, the Company calculates its fare revenues based on a
3.3%, 9.5%, and 87.2% class distribution ratio among passengers. 
However, recognizing the fact that in the market the requirement
for First and Business class service is strong, the Company intends
to allocate appropriate seating capacities for its First and
Business classes (16 First, 32 Business, and 268 Economy and
Discount class seats in Baltia's B747 layout). The following
table shows the Company's weighted average passenger fare
calculation.

<TABLE>

<CAPTION>
               The Company's JFK - St. Petersburg Fare Calculation
                                      Assumed      Assumed     Contrib. to
                                     Published    Percent of     Weighted 
                                       Fare       Passengers     Av. Fare 
 
<S>                                   <C>            <C>         <C>    
 First . . . . . . . . . . . . . . . .$2,715          3.3%       $90.66  
 Business  . . . . . . . . . . . . . . 1,595          9.5%       150.91  
 Economy <FN1>  . . . . . . .  . . . . 1,193         20.6%       245.67  
 Discount Fares  . . . . . . . . . . .   555         66.6%       369.67  

 
<S>                                                           <C>
 Weighted Average Fare - Undiluted . . . . . . . . . . . . .  $856.91  
 Dilution Factor @ 40% for promotion/discount programs . . .  $342.76
 Weighted Average Fare - After Dilution  . . . . . . . . . .  $514.15 <FN2>

<FN>
<FN1>
(1)  Company trademark: "Voyager Class".
<FN2>
(2)  Yield @ 3,900 NM (av. distance JFK-LED in nautical miles) is 
     13.18 cents per mile
</FN>
</TABLE>

Personnel

The DOT Order 96-1-24 and 96-2-51 found the Company's management
fit to operate its scheduled international air service. See
"Management."  At present eight staff members are actively
working on the Company's financing and aircraft acquisition; none
are currently receiving compensation from the Company.  During the 
FAA certification procedure, the total of 26 staff and managers actively 
working on the procedure and marketing will be paid salaries reduced 
by 50%.  At 50% reduction, total salaries and training allowances 
equal $196,000.  Immediately prior to commencement of service the 
Company expects to employ a total of 94 employees, including:  
(i) 28 executive, administrative, and sales personnel, (ii) 33 station 
personnel at JFK and St. Petersburg, (iii) 2 captains, 2 first officers, 
2 chief stewards, and 18 stewards.  Shortly after commencing the JFK
- St. Petersburg service, the Company intends to bring the total
number of employees to 131.  Certain employees must be FAA
qualified for specific positions. 

Facilities

The Company presently subleases facilities on a month-to-month
basis from Iceland Air, a permanent tenant in the East Wing of
the International Arrivals Building ("IAB"), JFK International
Airport, New York, at a rate of $1,200 per month.  Upon receipt
of IPO proceeds the Company should have an approximate date for
commencing revenue service, and will sign a written lease with
Iceland Air for larger space as need requires with increase in
frequency (aircraft turn-around).  Negotiations indicate that the
monthly rent presently charged will be replaced by a charge equal
to $750.00 per aircraft turn-around, i.e. one aircraft's landing,
servicing and departure.  As the US carrier providing
international service, the Company believes it is eligible for required 
gate space and other facilities at JFK and at Pulkovo airport in St.
Petersburg.  Prior to leasing space from Iceland Air, the Company
leased office space from the Company's president at his residence
at $400 per month.  


Currently Texaco quotes fuel at $0.62/gal at JFK and Aer Rianta quotes
fuel at $0.96/gal at St. Petersburg.  Fuel and other industry operating
costs are subject to variation.


Intellectual Property.

The laws of foreign countries may treat the protection of proprietary 
rights of the Company differently from, and may not protect the Company's 
proprietary rights to the same extent as do laws in the United States.  

Item 2.  Description of Property.  Intentionally Omitted.

Item 3.  Legal Proceedings.    Intentionally Omitted.

Item 4.  Submission of Matters to a Vote of Security Holders.
The Company's Annual Meeting was held on August 25, 1997 at which time 
the following four persons were unanimously re-elected to the four 
member Board of Directors by 1,646,667 affirmative votes representing 
67% of total voting shares:  Igor Dmitrowsky, Walter Kaplinsky, 
Adris Rukmanis, and Anita Schiff-Spielman.  
                                                                       
                            PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.
 No present market. 
                    
Item 6.  Management's Discussion and Analysis or Plan of Operation.  

        MANAGEMENT DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the
all of the Financial
Statements and Notes included.

Overview

Baltia is a development stage US Airline focused on the US-Russian 
market.  The Company has not commenced revenue operation and has 
not received any revenues for air transport.  In preparing for revenue 
flight operations as a US designated airline on an international route, 
over eight years, the Company has invested approximately $6 million, 
half in cash and half contributed services.  The officers and directors 
of the Company have been compensated with Shares.  At December 31, 1997 the 
Company had an accumulated deficit of $1,084,691.

The Company has been financed to date by officers, directors, key personnel, 
and their families and friends.  In early 1991 the Company raised 
approximately $200,000 in a Regulation D offering as seed money to be 
followed by major financing upon receipt of route authority.  In June the
Department of Transportation granted the Company routes to provide non-stop 
passenger, cargo and mail service from JFK to St. Petersburg and from JFK 
to Riga, with online service to Minsk, Kiev and Tbilisi.  In August the 
Company's financing efforts were destroyed by the attempted Soviet coup 
d'etat.  Subsequently the route authorities terminated for dormancy.   

In 1995, the Company reapplied for JFK-St. Petersburg authority.  In 1996 the 
DOT reissued JFK-St. Petersburg route authority to the Company based upon 
reexamination of the Company's operating plan and fitness as a US air 
carrier.  The Company's Registration Statement for a best-efforts 
underwriting became effective in September 1996.  Due to the underwriter's 
internal problems, in spring 1997, the underwriting was mutually terminated 
unsuccessfully.  The offering is presently underwritten on a firm commitment 
basis and the DOT has renewed the Company's JFK-St. Petersburg route 
authority until August 7, 1998 to show evidence of FAA certification, 
operating capital and liability insurance coverage.  


Twelve Months Operating Plan

For twelve months the Company will operate from one weekly round trip 
flight between New York and St. Petersburg, increasing the frequency 
as market demands, up to five weekly round trips carrying passengers, 
cargo and mail.  If sufficient capital is raised, the Company may 
apply to the DOT to serve additional cities in the former Soviet 
Russia, but there is no specific plan to do so at this time.  
Assuming zero revenue, and thus zero traffic, service would remain at 
one round trip per week.

The Company believes its cash requirements to operate one Boeing 747 
between NY and St. Petersburg, Russia once a week for twelve months 
is $12.1 million, which includes three months pre-operating expenses 
at $2.7 million as detailed in Use of Proceeds, nine months operating 
expenses at $8.3 million as submitted to the DOT, and the Company's 
total liabilities at $1.1 million as affirmed in Financial Statements 
within this prospectus.  (DOT Order 97-9-11, p.5. Nine months operating 
expenses equal DOT average three months expenses of $2.7 million times 
3.)  The pre-operating and operating expenses include, but not 
exclusively, aircraft leasing costs of $2.2 million, aircraft insurance 
in the amount of $1.1 million, personnel expenses of approximately $4 
million.  Complete budget projections of expenses expressed in regulated 
categories is available in OST 96-2032 and OST 97-2763.

To provide this service, aside from office equipment, capital 
expenditures include aircraft acquisition, spare parts and ground 
equipment.  There will be no more capital assets acquired unless 
there is market demand, in which case there will be revenue from 
which to make the capital purchase. The funds to acquire the initial 
capital items are listed in the Use of Proceeds table.  Monthly 
aircraft lease payment is expected to be paid from revenue.  Even 
assuming zero revenue, there are sufficient funds available from 
the IPO and LainBanka line of credit ("LOC") to make lease payments 
for one year.  (Total annual expenses $12.1 million and available 
resources $13.1 million as discussed below.)

The LainBanka LOC was issued in 1998 and has never been drawn upon.
The LOC, in the amount of $6.2 million has been immediately 
available to the Company upon the Company's opening 
an account including registering a subsidiary in Latvia, maintaining 
sufficient convertible currency in the account to perform any target 
programs the Company may have in Latvia.  The funds should not be 
employed for primary funding of capital investments.  

Following the Closing, the Company expects to open an account with 
LainBanka to hold $10,000 of the reserve from net proceeds. 
This will require that the Company register a subsidiary in Latvia, 
which it will do in a manner similar to registering as a foreign 
corporation in another state of the US should the Company, at some 
time in the future, do business in a state other than NY where it 
is incorporated.  The Company will not conduct any target program 
in Latvia during the first twelve months following the Closing and 
therefore has no requirement to maintain a specific amount in the 
LainBanka account.  The interest rate and repayment schedule will 
be in accordance with the then effective lending rates (10% to 14%)
and terms at the LainBanka.  There is no assurance that the terms,
then in effect in Latvia, will be acceptable to the Company. 

At Closing, the Company receives net proceeds in the amount of $6.9 
million, which together with the LOC makes available resources 
totaling $13.1 million. 

In addition to the IPO proceeds and LOC, the Company may issue $6
million in bonds through W.R. Lazard.  The Company has no specific 
present intent to issue the bonds, but has an agreement with  W.R. 
Lazard to effect optimum timing of the bond issue should the 
Company so choose.  If the Company were to issue bonds it would 
incur debt equal to the amount of bonds issued plus a current 
monthly liability for 10% to 15% interest on the debt. Further, 
potential proceeds from the exercise of Warrants in this issue 
may provide additional cash following this twelve month period. 

FAA certification.  The Company expects to complete FAA 
certification expediently, but cannot guaranty completion by 
a specific date.  FAA air carrier certification process which 
is based upon a 90-day schedule of events consisting of document 
approval, crew training, and flight demonstration.

Inflation

The Company belongs to a capital-intensive industry, and extended
periods of inflation could have an impact on the Company's earnings by
causing operating expenses to increase.  If the Company is unable to
pass through increased costs, operating results of the Company could be
adversely affected.  The Company will conduct a certain amount of its
transactions in foreign currencies, including Western currencies and
Russia and NIS currencies.  The inflation rate of foreign currencies
has been more significant than inflation domestically.

Currency Exchange Fluctuations

The Company expects that for the foreseeable future the majority of its
business will be transacted in US dollars, however a portion of the
transactions will be conducted in foreign currencies.  In order to
limit significant impact due to possible fluctuations in currency
exchange, the Company has a policy which governs periodic price
adjustments depending on currency deviations from the US dollar. 
Because a Company's marketing policy is to maintain an apparent pricing
stability for its customers who purchase the Company's services abroad
using foreign currencies, pricing adjustments are made at intervals,
not continuously.  Similarly, periodic currency adjustments will be
made in the rates of those Company employees who are compensated in
non-US currency.  Thus, a certain amount of exchange risk is inherent. 
The Russian government began freeing prices in 1992 which sparked
devaluation of the Ruble.

Insurance Coverage and Expense

In 1997 AON Risk Services, Inc. of Virginia informed the Company that
current insurance costs associated with the Company's operating a B747
would total $1,100,000.  This estimate includes hull insurance,
comprehensive airline liability coverage up to $500,000,000 any one
occurrence, and war risks.  Comprehensive liability premium is coverage
for third party personal injury and property damage, general liability
and facilities, plus per seat passenger liability coverage.  The
Company will pay the aggregate annual premium in monthly installments
commencing after the Company begins revenue service.  The Company has
no influence over insurance rates which are known to fluctuate. 
Regardless of the insurance costs, the Company will purchase coverage. 
Further, in the event of a serious accident, there is no guaranty that
claims would not exceed the insurance coverage purchased.  



Item 7.  Financial statements. 


                              BALTIA AIR LINES, INC.

                          (A DEVELOPMENT STAGE COMPANY)

                               FINANCIAL STATEMENTS



                              BALTIA AIR LINES, INC.

                               FINANCIAL STATEMENTS

                                TABLE OF CONTENTS



Contents                                              Page

Independent Auditors' Report                          F-2


Financial Statements:

  Balance Sheet - December 31, 1997                   F-3

  Statement of Operations - Years ended
    December 31, 1997 and 1996 and (Unaudited)
    August 24, 1989 (Inception) through 
    December 31, 1997                                 F-4

  Statement of Cash Flows - Years ended
    December 31, 1997 and 1996 and (Unaudited)
    August 24, 1989 (Inception) through 
    December 31, 1997                              F-5 - F-6

  Statement of Changes in Stockholders' 
    Deficit - Years ended December 31, 1997 
    and 1996 and (Unaudited) the balance at 
    December 31, 1992 (not covered by 
    Auditors' Report) the years ended 
    December 31, 1993, 1994 and 1995               F-7 - F-8

  Notes to the Financial Statements                F-9 - F-20



                                       F-1
<PAGE>
Independent Auditors' Report

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

We have audited the balance sheet of Baltia Air Lines, Inc. (A Development Stage
Company) as of December 31, 1997 and the related statements of operations, cash
flows, and changes in stockholders' deficit for the years ended December 31,
1997 and 1996.  These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit also includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.  We believe that our audits 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. as of
December 31, 1997 and the results of its operations and its cash flows for the
years ended December 31, 1997 and 1996, in conformity with generally accepted
accounting principles.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern.  As shown in the financial statements, the
Company has not generated any revenues and has incurred losses in excess of
$6,500,000 since its inception.  In addition, the Company has a capital deficit
and substantial excess of current liabilities over current assets.  These
factors, and the others discussed in Note 1 (C), raise substantial doubt about
the Company's ability to continue as a going concern.  Management's plans in
respect to these matters are referenced in Note 1 (C).  The financial statements
do not include any adjustments relating to the recoverability and classification
of recorded assets, or the amounts and classification of liabilities that might
be necessary in the event the Company cannot continue in existence. 


J.R. Lupo, P.A. CPA
Verona, NJ 
 
                   
June 4, 1998    





                                       F-2
<PAGE>
<TABLE>
<CAPTION>
                              BALTIA AIR LINES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                                  BALANCE SHEET


                                                                        
                                                                December 31,
                                                                   1997

<S>                                                           <C>
Assets

Current Assets:
  Cash                                                        $      3,135

    Total Assets                                              $      3,135
 

Liabilities and Stockholders' Deficit

Current Liabilities:
  Accounts payable                                            $    571,154
  Accounts payable to 
    stockholders                                                    65,318 
  Accrued interest                                                       0
  Notes payable                                                          0
  Notes payable to stock-
    holders                                                        303,572
   Total current liabilities                                       940,044

Commitments and contingencies

Stockholders' deficit:
  Preferred stock - no par value; 
    15,000 shares authorized, 0 
    shares issued and outstand-
    ing at December 31, 1997                                             0
  Common stock - $.0001 par
    value; 100,000,000 shares
    authorized, 2,442,500 shares 
    issued and outstanding at 
    December 31, 1997                                                  245    
Additional paid-in capital                                     5,846,442
  Prepaid media costs                                           (  396,090)
  Deficit accumulated during
    development stage                                           (6,387,506)
    Total stockholders' 
      deficit                                                   (  936,909)
    Total liabilities and 
      stockholders' deficit                                   $      3,135


</TABLE>







The accompanying notes are an integral part of the financial statements.
                                       F-3
<PAGE>
<TABLE>
<CAPTION>
                              BALTIA AIR LINES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                             STATEMENT OF OPERATIONS

                                                           
                                                           
                                                             August 24, 1989
                                                             (Inception) to
                                            Years Ended        December 31, 
                                            December 31,          1997
                                           1997       1996     (Unaudited) 
<S>                                      <C>       <C>        <C>

                
Revenues                                        0  $       0  $          0

Expenses
  General and 
   Administrative                          84,512     92,749     2,226,883
  Professional   
   fees                                    58,625     77,817     1,984,945
  Service 
   contributions                                0          0     1,352,516
  Training Expense                              0          0       225,637
  Abandoned fixed 
   assets                                       0          0       205,162
 
    Total expenses                        143,137    170,566     5,995,143

Interest expense                                0     68,120       392,363
 
Net loss                                $(143,137) $(238,686)  $(6,387,506)

Net loss per 
  common share -
  basic and
  diluted                                  $(0.06)    $(0.11)      $(2.62)

</TABLE>





















     The accompanying notes are an integral part of the financial statements.
                                       F-4
<PAGE>
<TABLE>
<CAPTION>
                              BALTIA AIR LINES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                             STATEMENT OF CASH FLOWS

                                                             August 24, 1989
                                                             (Inception) to
                                            Years Ended        December 31,      
                                            December 31,           1997
                                           1997       1996     (Unaudited) 
<S>                                      <C>        <C>        <C>               

Cash flows from 
 operating activities:                

Net loss                                 $(143,137) $(238,686) $(6,387,506)
 Adjustment to 
 reconcile net 
 loss to net cash 
 provided by oper-
 ations:
  Depreciation                                   0          0      219,410
  Stock issued for interest                      0          0       63,500
  Contributed services                           0          0    1,352,516
  Increase in accounts 
   payable                                  17,749     24,407    2,375,598
 
     Net cash 
     (used) for 
     operating 
     activities                           (125,388)  (214,279)  (2,376,482)

Cash flows from invest-
 ing activities:

  Purchase of equipment                          0          0   (  219,410)

     Net cash (used)
     for investing  
     activities                           (      0)         0   (  219,410)

Cash flows from 
  financing activities:

    Proceeds from 
    shareholder 
    loans (net)                            128,183    207,706    1,351,573 
    Proceeds from 
    issuance of 
    common stock                                 0          0    1,133,214 
    Increase paid-in
      capital                                    0          0      614,240
   Purchase and 
     retirement 
     of treasury
     stock                              $        0  $       0  $(  500,000)

       Net cash
       provided from
       financing 
       activities                          128,183    207,706    2,599,027

</TABLE>
The accompanying notes are an integral part of the financial statements.
                                       F-5
<PAGE>
<TABLE>
<CAPTION>
                              BALTIA AIR LINES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                             STATEMENT OF CASH FLOWS

                                                             August 24, 1989
                                                             (Inception) to
                                            Years Ended        December 31,      
                                       December 31,           1997
                                           1997       1996     (Unaudited) 
<S>                                       <C>        <C>        <C> 
Net increase (decrease)
 in cash                                     2,795   (  6,573)       3,135

Cash at begin-
 ning of period                                340      6,913            0

Cash at end 
 of period                              $    3,135  $     340  $     3,135

Supplemental Cash
Flow Information  

Cash paid for 
  interest                              $        0  $       0  $         0

Cash paid for 
  income taxes                          $      776  $      52  $     3,057

Non-Cash Items:

Acquisition of prepaid 
  media costs                           $  396,090  $       0  $   396,090   
Conversion        
  of liabilities                        $3,130,437  $       0  $ 3,130,437 

Reclassification of
  redeemable
  common stock                          $        0  $       0  $(  400,000)

Surrender of rights
  to redeem common
  stock                                 $  400,000  $       0  $   400,000 
    
Contributed    
  services                              $  270,928  $       0  $ 1,081,588
  
Stock issued
  for interest                          $        0  $       0  $    63,500

</TABLE>










The accompanying notes are an integral part of the financial statements.
                                       F-6
<PAGE>
<TABLE>
<CAPTION>

                              BALTIA AIR LINES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                  STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
  
                                           Deficit
                  Common                  Accumulated     
                  Stock       Additional   During the   Prepaid      Total
                        Par    Paid-in    Development    Media    Stockholders'
              Shares   Value   Capital       Stage       Costs      Deficit   
<S>           <C>     <C>     <C>         <C>           <C>      <C>
August 24,
1989
(Inception)
through
December 31,
1992      
(Unaudited)   558,200   $ 56  $   978,484 $(4,190,584)$       0   $(3,212,044)

1993 *;

Issuance 
of Common
Stock       1,368,675    137       42,199           0         0        42,336

Net Loss            0      0            0  (  266,889)        0    (  266,889)

1994 *;

Issuance 
of Common
Stock          95,050     10  $     1,892           0         0         1,902

Contributed 
Capital             0      0      457,250           0         0       457,250

Net Loss            0      0            0  (  638,160)        0    (  638,160)

1995 *;

Issuance 
of Common
Stock         140,575     14      107,834           0         0       107,848

Issuance 
of Common
Stock as
non-refund-
able prepaid 
interest       12,500      1       63,499           0         0        63,500

Reclassification
of redeemable 
Common Stock        0      0   (  400,000)          0         0    (  400,000)

</TABLE>



* - Not covered by accompanying Auditors' Report.

The accompanying notes are an integral part of the financial statements.

<PAGE>                                 F-7

<TABLE>
<CAPTION>
                              BALTIA AIR LINES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                  STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT

                                            Deficit
                  Common                  Accumulated     
                  Stock       Additional   During the   Prepaid      Total
                        Par    Paid-in    Development    Media    Stockholders'
              Shares   Value   Capital       Stage       Costs      Deficit   
<S>           <C>      <C>    <C>         <C>           <C>      <C> 
Contributed 
Capital             0   $  0  $   397,856 $         0 $       0   $   397,856
 
Net Loss            0      0               (  910,050)$       0    (  910,050)

Balance at
December 
31, 1995    2,175,000   $218  $ 1,649,014 $(6,005,683)$       0   $(4,356,451)

Net Loss            0   $  0  $         0 $(  238,686)$       0   $(  238,686)

Balance at
December 
31, 1996    2,175,000   $218  $ 1,649,014 $(6,244,369)$       0   $(4,595,137)
 
Net Loss            0   $  0  $         0 $(  143,137)$       0   $(  143,137)
 
Acquisition of 
  prepaid 
  media costs  32,500      3      396,087           0  (396,090)            0 

Conversion of       
  liabilities 235,000     24    3,130,413           0         0     3,130,437

Contributed 
capital             0      0      270,928           0         0       270,928

Surrender of
rights to     
redeem common 
Stock               0      0      400,000           0         0       400,000

Balance at
December 31, 
1997        2,442,500   $245  $ 5,846,442 $(6,387,506)$(396,090)  $(  936,909)

</TABLE>


     The accompanying notes are an integral part of the financial statements.
                                       F-8
<PAGE>

                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION, NATURE OF OPERATIONS, GOING CONCERN CONSIDERATIONS
                                   
   (A) Organization

 The Company was incorporated under the laws of the state of New York on
August 24, 1989.

   (B) Nature of Operations

 The Company was formed to provide commercial, passenger, cargo and mail
air transportation between New York and Russia.

 Since inception, the Company's primary activities have been the raising of
capital, obtaining financing and obtaining Route Authority and approval
from the U.S. Department of Transportation. The Company has not yet 
commenced revenue producing activities.  Accordingly, the Company is deemed
to be a Development Stage Company.

 The Company currently maintains office space at J.F.K. Airport, New York.
   
   (C) Going Concern Considerations

 The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern.  However, the Company has
not generated any revenues and sustained substantial losses during the
development stage since its inception and has an accumulated deficit at
December 31, 1997 of $6,387,506.
 
 The Company's ability to continue as a going concern is dependent on its
ability to raise sufficient capital and/or obtain sufficient financing, to
be used for the commencement of operations and the satisfaction of current
obligations and ultimately to achieve profitable operations.

 If the Company is unable to raise sufficient capital and/or obtain
sufficient financing, such as described in Note 8 (D), Proposed Public
Offering, it is doubtful that it will be able to commence scheduled air
line service. Management believes that if it is able to commence operations
it will be able to generate operating revenues, which in its judgement,
shall be adequate to fund all current expenses and retire currently
outstanding debt.

 As of December 31, 1997 the Company has not yet commenced its scheduled
air line service.

2. ACCOUNTING POLICIES

   (A) Cash and Equivalents

 The Company considers cash and cash equivalents to be all short-term
investments which have an initial maturity of three months or less.

   (B) Prepaid Media Costs

 On June 23, 1997 the Company entered into an agreement with Kent Trading,
Inc., a media placement company whereby, the Company exchanged 32,500
common

                                     F-9


                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO FINANCIAL STATEMENTS

2. ACCOUNTING POLICIES (Continued)

   (B) Prepaid Media Costs (Continued)

 stock shares, as negotiated with the management of the Company, for future
media placements in various international and national media publications,
with a current value of $396,090 as based on the related publications
published advertising rates. Kent Trading, Inc. may terminate the Agreement
if the closing of the proposed Public Offering has not occurred prior to
August 30, 1998.  The Company has recorded prepaid media costs as a 
reduction to equity, in a manner similar to accounting for a stock
subscription receivable. At such time the Company utilizes the media 
placements, the Company will charge off the related costs to expense.

 The Company retains the right to resell the media placements to third
parties, although it has no current plans to do so.  Although as current
market rates for media placements are stable, if rates were to decline the
Company could realize a loss on resale.  To the extent that the carrying
amount is determined not to be realizable, it will be charged off to
expense.

   (C) Property and Equipment

 The cost of property and equipment is depreciated over the estimated use-
 ful lives of the related assets.  Leasehold improvements are depreciated
over the lesser of the term of the related lease or the estimated lives of
the assets.  Depreciation is computed on the straight line method for 
 financial reporting purposes and modified accelerated recovery method for
 tax purposes.

   (D) Start-up Activities
 
 On July 5, 1990, the Company filed an application for a Certificate of 
Authority to engage in foreign scheduled air transportation between New
York
 and St. Petersburg, Russia.
 
 On March 28, 1991, the U.S. Department of Transportation granted to the
Company an exclusive Route Authority to fly between New York and Russia.
The Order found the company to be fit, willing and able to conduct
scheduled passenger service.  However, the Order stipulated that if
scheduled passenger service did not commence within one year from the date
of the Fitness determination, March 28, 1991, the Route Authority would be
revoked.

 On September 20, 1991, the U.S. Department of Transportation granted the
Company an extension of time to commence operations, through April 1, 1992.

 On April 14, 1992, the U.S. Department of Transportation granted a further
extension of time to commence operations, through August 31, 1992.

 On April 8, 1993, the Company again requested an extension of time to
commence operations however, the U.S. Department of Transportation denied
 the request.

 On August 14, 1995, the Company re-filed its application with the U.S. 
Department of Transportation for the Certificate of Route Authority.

 On January 22, 1996, the U.S. Department of Transportation issued an Order
                                     F-10


                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO FINANCIAL STATEMENTS

2. ACCOUNTING POLICIES (Continued)

   (D) Start-up Activities (Continued)

 of Show Cause, whereby, they tentatively concluded that the Company is
fit, willing and able to provide scheduled air transportation between New
York and Russia and, should be issued a Certificate of Public Convenience
and Necessity authorizing such operations.

 On February 26, 1996, the U.S. Department of Transportation issued a Final
Order thereby, authorizing the Company to engage in foreign scheduled air
transportation between New York and St. Petersburg, Russia.

 On February 6, 1997, the U.S. Department of Transportation granted the 
Company an extension of time to commence operations, through August 7,
1997.

 On September 10, 1997, the U.S. Department of Transportation granted the
Company an extension of time to commence operations, through February 7,
1998.

 On February 11, 1998, the U.S. Department of Transportation granted the
Company an extension of time to commence operations, through August 7,
1998.

 Obtaining Federal Aviation Administration air carrier certification and
meeting Department of Transportation financial requirements are
prerequisites to the Company's commencement of revenue service.

 Costs associated with the development and approval of the authorized
route, such as legal and consulting fees, have been written off in the
period in
 which the expense was incurred.

   (E) Income Taxes

 Deferred income taxes arise from temporary differences between the
recording of assets and/or liabilities reported for financial accounting
and tax  purposes in different periods.  Deferred taxes are classified as
current or non-current, depending on the classification of the assets and
liabilities to which they  relate.  Deferred taxes arising from temporary
differences that are not related to an asset or liability are classified as
current or non-current depending on the periods in which the temporary 
differences are expected to reverse.  To the extent the total of deferred
tax assets are not realized, a reserve is established.

   (F) Accounting Estimates

 The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual amounts could differ from those
estimates.
 
 (G) Fair Value of Financial Instruments
 
 The Company considers the carrying value of its financial instruments
(cash and liabilities) to approximate their fair value.

                                     F-11


                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO FINANCIAL STATEMENTS


3. DEFERRED FINANCING COSTS

   (A) Bridge Loan

 On February 27, 1998 the Company borrowed $250,000, a Bridge Loan (see
Note 6) and in consideration issued two-hundred fifty thousand (250,000) 
Warrants, to be designated as "Class B Bridge Warrants". The Company has
estimated the fair value of the Warrants to be $250,000 as based on the
Black-Scholes model of option-pricing.  The Company shall amortize deferred
financing costs based on the Interest Method, over a period of five (5)
months beginning March 1, 1998 and ending July 31, 1998, the estimated 
period the loan will be outstanding.

 (B) Additional Bridge Loan

  In June 1998, the Company anticipates borrowing $550,000, an "additional"
Bridge Loan (see Note 6) and in consideration plans to issue five-hundred
fifty thousand (550,000) Warrants, to be designated as "Class A Bridge 
Warrants". The Company estimates the fair value of the Warrants to be
$600,000 as based on the Black-Scholes model of option-pricing.  The
Company shall  amortize deferred financing costs based on the Interest 
Method, over a period of two (2) months beginning June 1998 and ending July
1998, the estimated period the loan will be outstanding.

4. RELATED PARTY TRANSACTIONS

 The Company's legal counsel, Steffanie Lewis, of the International
Business Law  Firm, P.C. owns 190,000 shares of common stock at December
31, 1997 or approximately 7.78% of the Company's issued and outstanding
common stock.  Ms. Lewis  was issued 150,000 common shares in June 1997 in
exchange for legal work per formed in connection with various
certifications, authorities and financial matters.  She was previously
issued 40,000 of common shares in exchange for the  first six months
preparation of the 1990 application to the Department of  Transportation
for Air Line Fitness Certification. 

 For the period beginning January 1990 through December 31, 1997 the total
legal costs incurred in the amount of $1,760,062 were for legal work
performed by Steffanie Lewis for the Company in connection with various
certifications, authorities and financial matters.

 Legal costs incurred and charged to professional fees for the years ended 
December 31, 1997 and 1996 total $4,875, $2,100, respectively.

 At December 31, 1997 the account payable to this shareholder totaled $0.

 On June 30, 1997, Steffanie Lewis was issued 150,000 common shares, as 
negotiated with the management of the Company, in exchange for the total
due to her, in the amount of $1,628,432.

 Legal costs associated with the proposed Public Offering, as described in
Note 8(D) totaling $150,000 have not been accrued and are only payable in
the event of a successful offering and shall be charged against the
Offering proceeds.

 Additionally, other current accounts payable to shareholders at December
31, 1997 total $65,318.

                                     F-12


                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO  FINANCIAL STATEMENTS


4. RELATED PARTY TRANSACTIONS (Continued)

 On June 23, 1997, Airline Economics International, Inc., a shareholder,
was issued 10,000 common shares, as negotiated with the management of the
Company, in exchange for the total due them, in the amount of $110,695.

 See Note 5 relating to Other Liabilities to shareholders.

 On June 23, 1997, Igor Dmitrowsky, President of the Company and a
shareholder, relinquished the amount due to him totaling $22,142. 
Accordingly, the Company has recorded Contributed Capital in the amount of
$22,142.

 On March 30, 1998, various shareholders including Igor Dmitrowsky,
President  of the Company relinquished the amounts due to them totaling
$160,983. Accordingly, the Company recorded Contributed Capital in the
amount of $160,983.

5. NOTES PAYABLE STOCKHOLDERS

 In 1992 the Company issued Promissory Notes to certain shareholders in
exchange for $1,048,000.  The Notes were due on demand and all interest was
payable upon principal repayment, at an annual rate of six and one half
percent(6 1/2%), from the date of issuance to the date of repayment.

 On June 24, 1997 certain shareholders were issued 75,000 common shares, as
negotiated with the management of the Company, in exchange for the total
due  them, in the amount of $1,369,168, inclusive of principal of
$1,048,000 and accrued interest of $321,168.


 Interest expense related to the above incurred for the years ended
December 31,  1997 and 1996 $0 and $68,120, respectively.

 At December 31, 1997, interest expense related to the above incurred since 
inception totals $321,168.

 In 1997 and 1996 the Company borrowed net $128,183 and $207,706,
respectively,  from certain shareholders.  The net borrowings are non-
interest bearing and are  due on demand.

 In 1995 the Company issued a short-term Promissory Note to a certain
shareholder  in exchange for $50,000.  The Company issued to this
shareholder, 12,500 shares  of common stock as a non-refundable prepayment
of interest from the date of the  loan through repayment of the loan.

 For the year ended December 31, 1995, the Company charged $63,500 to
interest  expense for the shares issued in connection with the non-
refundable interest  prepayment, based on an average price per share of
$5.08.

6. NOTES PAYABLE

   (A) Bridge Loan

 On February 27, 1998 the Company borrowed $250,000, a Bridge Loan, from
Hobbs Melville & Co., Inc.  The Note is due and payable in full on the date 



                                     F-13
<PAGE>

                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO FINANCIAL STATEMENTS

6. NOTES PAYABLE (Continued)

   (A) Bridge Loan (Continued)

 of and at the time as, the closing of the proposed public offering of
securities, at an annual rate of interest of ten (10) percent per annum. 
 For and in consideration of the Bridge Loan, the Company has issued to 
Hobbs Melville & Co., Inc. two-hundred fifty thousand (250,000) Warrants,
to be designated as "Class B Bridge Warrants", each entitling them to
purchase one share of Common Stock for $6.05 during the four (4) year
period commencing one year from the date of the closing of the proposed
public offering.  The Company may redeem outstanding Warrants, once they
become exercisable, at a price of $.10 per warrant on a less than thirty
(30) day prior notice, provided the closing bid quotations of the common
shares shall have exceeded $10 for ten (10) consecutive trading days ending
on the third day prior to the date on which notice is given. (See Note 3)
  
 In the event the Company fails to secure, maintain full force and effect,
any required license, permission, franchise, consent, approval, contract,
lease agreement, or other material requirement to operate its proposed 
airline passenger service and/or fails to close the proposed public
offering on or before June 30, 1998, the Note shall become immediately due
and payable.

   (B) Additional Bridge Loan

 In June 1998, the Company anticipates borrowing $550,000, an "additional"
Bridge Loan, from various private investors.  The Notes shall be due on the
earlier of ninety (90) days from the date of the Note or the first break of
escrow on the Company's proposed public offering of securities, at an
annual rate of interest of ten (10)percent per annum.

 For and in consideration of the "additional" Bridge Loan, the Company
plans to issue to the private investors five-hundred fifty thousand
Warrants in aggregate, designated as "Class A Bridge Warrants", each
entitling them to purchase one share of Common Stock for $6.05 during a
five ( 5) year period commencing six (6) months from the date of the
closing of the proposed  public offering.  The Company may redeem
outstanding warrants, once they become exercisable, at a price of $.10 per
warrant on a less than thirty (30) day prior notice, provided the closing
bid quotations of the common shares shall have exceed $10 for ten (10)
consecutive trading days ending on the third day prior to the date on which
notice is given. (See Note 3)

 In the event the Company fails to timely make any payments on the
"additional" Bridge Loan, defaults, ceases to carry on business on a
regular basis, enters into an agreement to sell substantially all of its
assets, merges or consolidates with or is acquired by any other business,
makes an assignment for the benefit of creditors, makes any election to
wind up, or dissolves, the "additional" Bridge Loan shall become
immediately due and payable. 







                                     F-14
<PAGE>
   
                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO FINANCIAL STATEMENTS

6. NOTE PAYABLE (Continued)

   (B) Additional Bridge Loan (Continued)

 In the event the Company fails to make any amount payable under the 
"additional" Bridge Loan before the Due Date, then such amount will bear
interest from and after the Due Date until paid at an annual rate of
interest equal to or greater of fifteen (15) percent, the advance rate to
member banks as established by the Federal Reserve Bank of New York plus
five (5) percent or the maximum rate permitted by law.  In addition the
Company shall pay a late payment processing fee in an amount each month
equal to six (6) percent of the amount due.  In addition, the Company will
also pay the lender each month that the note is in default a penalty of
five thousand (5,000) shares of the Company's common stock.
   
7. INCOME TAXES

 At December 31, 1997, the Company has a net operating loss carryforward of
$5,072,844, which is available to offset future taxable income.  The carry-
forwards expire between the year 2006 and 2013.  The Company is still
liable for certain minimum state taxes.

 As of December 31, 1997, a net deferred tax benefit has not been reflected
to  record temporary differences between the amount of assets and
liabilities  recorded for financial reporting and income tax purposes due
to the establishment of a 100% valuation allowance relating to the
uncertainty of recoverability.

8. STOCKHOLDERS' DEFICIT

 (A) Stock Options

 In 1992, the Company granted options to purchase 52,300 shares of common
stock, at $66.67 per share, to certain private investors.  These options
expire upon the passing of thirty full calendar months after the Company 
 has made a public sale of securities in compliance with the Securities
 Act of 1933, as amended, or the passing of twenty years from the date of
said agreements, whichever is earlier.  As of March 31, 1998, no options
have been exercised.

   (B) Retirement of Stock

 On November 4, 1992, the Company issued 12,500 shares of stock for
$500,000 to a private investor.  On November 24, 1992, these shares were
repurchased for the same amount from the investor and subsequently retired.

   (C) Reverse Stock Split

 On August 24, 1995, the Board of Directors authorized and the majority of
the current shareholders ratified a ten for one reverse stock split of the
 Company's $.0001 par value common stock.  

 On December 30, 1997, the Board of Directors authorized and the majority
of the current shareholders ratified a two for one reverse stock split of
the Company's $.0001 par value common stock.  


                                     F-15
<PAGE>

                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO FINANCIAL STATEMENTS


8. STOCKHOLDERS' DEFICIT (Continued)

   (C) Reverse Stock Split (Continued)

 All references in the accompanying  financial statements to the number of
common shares and per share amounts have been restated to reflect the
reverse stock splits.
 
   (D) Proposed Public Offering

 In 1996 the Company had engaged an underwriter to underwrite the Company's
 Initial Public Offering on a best-efforts basis. The Offering did not
raise the required minimum of $6,000,000 and was withdrawn.  Subsequently,
the Company received an offer from Hornblower & Weeks, Inc. to underwrite
the Company's proposed Public Offering on a firm-commitment basis.

 In June 1998, the Company entered into an agreement with Hornblower &
Weeks, Inc. to act as the Managing Underwriter and Madison Capital Markets
Corp. as the Co-Manager Underwriter, in connection with a proposed firm
commitment Public Offering of securities and plans to file an amended
registration statement with the Securities Exchange Commission, as is
described in Note 9 (A) (2).
  
 The Company intends to offer for sale 1,100,000 shares of common stock of
$.0001 par value, at a price of $5.50 per share and 1,100,000 Redeemable
Common Stock Purchase Warrants at $.10 per Warrant.  Each Warrant entitles
the holder to purchase one Share for $6.05 during the five (5) year period
commencing six months from the date of the proposed Public Offering.  

 The Agreement with the Underwriter sets forth that on the Effective Date,
before giving effect to all shares of Common Stock and Warrants to be sold
in the proposed public offering, the Common Stock issued and outstanding
shall not exceed 2,442,500 common shares.

   (E) Stock Buy-Back Requirements

 As of December 31, 1997 the Company was required to buy-back 25,000 shares
at $16 per share, from certain current investors, if in the event said 
investor wanted to sell his/her common stock within the two (2) year Lock-
up period and was denied such a waiver by the Underwriter.  

 On June 23, 1997 all current investors with redemption options referred to
above surrendered their redemption options.  Accordingly, the Company
recorded Additional Paid-in Capital in the amount of $400,000.

   (F) Contributed Capital

 The Company has recorded service contributions from certain key officers
who have worked for and on behalf of the Company.  The service contribution
amounts have been calculated based on a normal rate of compensation, on
either a full or part time basis, as based on the number of hours worked by
each individual.




                                     F-16
<PAGE>

                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO FINANCIAL STATEMENTS

8. STOCKHOLDERS' DEFICIT (Continued)

   (F) Contributed Capital (Continued)

 The Company maintains no obligation, present or future, to pay or repay
for any and all service contributions received.  Accordingly, the Company
has not recorded a liability for, accrued for, and/or accounted for any 
monetary reserves in connection with the service contributions.

 On June 23, 1997, certain of the Company's management relinquished the 
amount due them for back-pay totaling $270,928.  Accordingly, the Company
has recorded Contributed Capital in the amount of $270,928.

   (G) Stock Issuance

 The following schedule summarizes common shares issued for cash;
                                                               
        Year             Number              Range of
       Issued          of Shares         Amounts Per Share  

        1989             250,000      $  0.2000 to $  0.2000 
        1990             136,300      $  0.9766 to $ 20.0000   
        1991              32,700      $  2.0000 to $ 20.0000
        1992             139,200      $  2.0000 to $ 20.0000
        1993           1,368,675      $  0.0040 to $ 20.0000
        1994              95,050      $  2.0000 to $ 20.0000
        1995             140,575      $  0.2000 to $ 15.7616

 The following schedule summarizes common shares issued in non-cash 
 exchanges (See Notes 2 (B), 4 and 5).;
                                                
        Year             Number              Range of
       Issued          of Shares         Amounts Per Share  

        1995              12,500      $  5.0800 to $  5.0800
        1997             267,500      $ 10.8562 to $ 18.2556

9.  COMMITMENTS AND CONTINGENCIES

    (A) Commitments

  (1) Lease Obligations

 In October, 1995 the Company entered into a lease with Iceland Air,  J.F.
Kennedy Airport, New York, to occupy space.  The lease term is  on a month
to month basis.

 Currently, the Company is leasing space from Iceland Air for $1,200  per
month at J.F. Kennedy Airport, New York.  Rent expense charged to 
operations for the years ended December 30, 1997 and 1996 totaled $12,000
and $13,200, respectively.
 
 In January 1993, the Company leased office space from its President  at
his residence.  The lease term is on a month to month basis through 
December 31, 1998.  Rent expense charged to operations for the years  ended
December 30, 1997 and 1996 totaled $5,215 and $5,392, respectively. 
                                     F-17
<PAGE>

                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO FINANCIAL STATEMENTS

9.  COMMITMENTS AND CONTINGENCIES (Continued)

 (A) Commitments (Continued)

  (2) Underwriter Proposed Public Offering 

 In June 1998, the Company entered into an agreement with Hornblower  &
Weeks, Inc. to act as the Managing Underwriter and Madison Capital  Markets
Corp as the Co-Managing Underwriter, in connection with a proposed Public
Offering of securities.

 The Agreement sets forth the following terms and conditions;

 (a) The Managing Underwriter shall receive a dealer's concession of ten
percent (10%) of the proposed Public Offering price.

 (b) The Managing Underwriter shall receive at closing of the proposed
Public Offering a non-accountable expense allowance of three percent (3%)
of the total offering.  In June 1998, the Under writer received a ten
thousand ($10,000) dollar non-refundable advance against the non-
accountable expense allowance.  Upon filing of the registration statement
in connection with the proposed  public offering, the Underwriter shall
receive an additional advance of forty thousand ($40,000) dollars.
  
 (c) The Company shall sell to the Managing Underwriter five (5) year
warrants to purchase such number of shares of Common Stock and/or Warrants
as shall equal ten (10) percent of the number of shares of Common Stock and
Warrants (excluding the overallotment option) being underwritten for the
account of the Company at a price of the lesser of $.001 each or $100 in
aggregate.  The Warrants shall be exercisable at any time during a period
of four (4) years commencing at the beginning of the second year after
their issuance and sale at a price equaling 110% of the respective initial
public offering price.
                                       
  (3) Line of Credit

 On March 16, 1998, the Company was granted a credit line in the amount  of
$6,200,000 through December 31, 1998, with a foreign bank.  Monies  are
available as follows;

 (a) When the Company registers a subsidiary in the Republic of 
 Latvia, pursuant to local applicable regulations and, opens
 an account with the bank.

 (b) This credit facility cannot be utilized for primary funding of 
 capital investments.

 (c) Terms of the borrowing's will be determined at the borrowing 
 date.  Upon receipt of a written notice furnished by the Company.
 Such notice must be received fourteen days (14) in advance of the
 requested borrowing date.

 (d) The interest rate will be between ten (10) to fourteen (14) percent
 per annum.

                                     F-18
<PAGE>

                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO FINANCIAL STATEMENTS


9.  COMMITMENTS AND CONTINGENCIES (Continued)

 (B) Contingencies

  (1) Scandinavian Airline Systems

 The Company will be liable to Scandinavian Airline Systems (SAS), for
 expenses incurred by SAS on behalf of the Company should the Company 
 eventually purchase an aircraft from SAS.
 
 In 1992, the Company forwarded a deposit to SAS for the purchase of  a
Boeing 767 aircraft, which the Company has since forfeited.  SAS incurred
costs totaling $114,000 beyond the initial deposits for the  preparation of
the aircraft for the delivery and subsequent demodification back to SAS
upon the Company's failure to obtain  financing. SAS has agreed to collect
these amounts at the time of any  aircraft sale to the Company should such
a sale occur.  Should no sale  occur, the Company will not be liable to SAS
for the $114,000

  (2) Transaction Management, Inc.

 On October 11, 1991, the Company was required by an arbitrator to pay 
Transaction Management, Inc. (TMI) an unspecified "finders fee".  The 
Company refused to pay TMI and on December 1994 filed a motion to
Reconsider, citing 17 substantial errors In Fact, in the prior court's 
Order.  

 On November 2, 1995, the court ordered that the Company's motion for 
Reconsideration be denied.  

 In October 1996 the Federal Court of Appeals of the District of Columbia
released the Company from all TMI threat of liability and dismissed the
case.  

  (3) Subscribers' Flight Coupon Proposed Public Offering

 At the closing, the Company will issue Flight Coupons to the subscribers
in its proposed Public Offering.  For each 1,500 shares  of common stock
purchased, the subscriber receives on Flight Coupon.  One Flight Coupon
plus $650 will purchase two (2) Voyager Class round trip tickets.  Two (2)
Flight Coupons plus $650 will purchase two (2)  Business Class round-trip
tickets.  Three (3) flight Coupons plus $650 will purchase two (2) First
Class round-trip tickets.  

An estimate of the value of such a commitment by the Company cannot  be
determined at this time.  However, upon completion of the proposed  Public
Offering, the Company will record deferred revenues and offset  its costs
of rasing capital for all Subscribers' Flight Coupons issued.

  (4) Compensation

 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 the closing of the proposed Public Offering, the rate  

                                     F-19


                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO FINANCIAL STATEMENTS

9.  COMMITMENTS AND CONTINGENCIES (Continued)

 (B) Contingencies (Continued)

 (4) Compensation (Continued)

 of compensation for the Company's executive officers is: (i) President 
$186,000, (ii) Vice-President Marketing $82,000, and (iii) Vice-
 President Europe $68,000.  Pursuant to written agreement, during the 
 90-day period commencing once the offering proceeds are released to  the
Company from the escrow account, the President and the Vice Presidents will
receive compensation reduced to an amount equal to 50%  of budgeted
salaries.  Upon commencement of flight services 100% of  respective
budgeted salaries will be paid.  To this date, the Company  has paid
officers no salaries, nor otherwise have compensated officers.  Board
Directors are not presently compensated and shall receive no compensation
prior to commencement of revenue service.

 The following table identifies executive compensation to be paid.  No
 executive salaries have been paid to date and reduced salaries will  not
commence until proceeds are available from the proposed Public Offering
closes.

   Name                       Position                         Salary

   Igor Dmitrowsky            President                       $186,000
   Brian Glynn                Vice-President Marketing          82,000
   Andris Rukmanis            Vice-President Europe             68,000

   Inasmuch as the Company does not provide written individual contracts
 with its personnel, for clarification purposes, the executives' agreement
for the temporarily reduced salaries was documented.


                                     F-20
<PAGE>


Item 8.  Changes In and Disagreements with Accountants on 
         Accounting and Financial Disclosure.    Intentionally
         Omitted.

                        PART III

Item 9.  Directors, Executive officers, Promoters and Control Persons: 

Compliance With Section 16(a) of the Exchange Act.  Compliance confirmed.  

                       MANAGEMENT

Executive Officers and Directors

<TABLE>
<CAPTION>
The following table summarizes certain information with respect
to the executive officers and directors of the board <FN1>:    

Name                     Age  Position
<S>                     <C>  <C>
Igor Dmitrowsky . . . .  43   President, CEO, Director of the Board
Walter Kaplinsky  . . .  59   Secretary and Director of the Board
Andris Rukmanis . . . .  36   V.P. Europe and Director of the Board
Anita Schiff-Spielman    43   Director of the Board
Brian Glynn . . . . . .  52   Vice President Marketing

<FN>
<FN1>
(1)     The by-laws limit the number of directors on the
     board to a maximum of four, with a provision that an
     additional seat on the board is created for the Lead-
     Manager's designee for a period of five years, at the
     option of the Representative.  Officers and Directors
     have a one year term and are elected at, and after, the
     Annual Meeting in August.
</FN>
</TABLE>

Igor Dmitrowsky, President and Chief Executive Officer, founded 
the Company and served as Chairman of the Board from its inception 
in August 24, 1989 until 1998.   Mr. Dmitrowsky, a US citizen, born 
in Riga, Latvia, attended the State University of Latvia from 1972 to 1974
and Queens College from 1976 through 1979. In 1979, he founded
American Kefir Corporation, a dairy distribution company, which
completed a public offering in 1986, and from which he retired in
1987.  Mr. Dmitrowsky has financed aircraft and automotive projects, 
speaks fluent Latvian and Russian, and has traveled extensively 
in the republics of the former Soviet Union.  In 1990, he testified 
before the House Aviation Subcommittee on the implementation of 
United States' aviation authorities by US airlines.  

Walter Kaplinsky, a US citizen, has been with the Company since
1990.  In 1993, Mr. Kaplinsky became secretary and a director of
the board.  In 1979, together with Mr. Dmitrowsky, Mr. Kaplinsky 
was one of the co-founders of American Kefir Corporation, where 
from 1979 through 1982 Mr. Kaplinsky served as secretary and 
vice president.  Mr. Kaplinsky is the owner of Globe Enterprises, 
Brooklyn, NY, a private company that exports to Russia.

Brian Glynn, a US citizen, is V.P. of Marketing and Service.  He
joined the Company in 1990.  Mr. Glynn has a background in
marketing and public relations.  WILL GET EDUCATION AND WORK
EXPERIENCE FROM GLYNN.  From 1982 through 1989, Mr. Glynn was 
Vice President of American Kefir Corporation.

Andris Rukmanis, a citizen of Latvia, is the Company's Vice
President in Europe.  Mr. Rukmanis joined the Company in 1989. 
In Latvia, Mr. Rukmanis has worked as an attorney specializing in
business law.  From 1988 through 1989 he was Senior Legal Counsel
for the Town of Adazhi in Riga County, Latvia.  From 1989 to 1990
he served as Deputy Mayor of Adazhi.

Anita Schiff-Spielman, a US citizen, serves as a director of the
board. She has been associated with the Company since its
inception in 1989.  Ms. Schiff-Spielman has owned Schiff Dental 
Labs, New York, NY, for the past fifteen years.

Audit Committees

The Audit Committee consists of Mr.  Dmitrowsky, the Representative's 
Designee and Ms. Schiff-Spielman.  The functions of the Audit Committee 
are to review with the Company's independent public auditors the 
scope and adequacy of the audit to be performed by such independent 
public auditors; the accounting practices, procedures, and policies 
of the Company; and all related party transactions. The Committee was 
formed in 1996.Audit Review by the Board

New Nasdaq SmallCap standards require: (1) a minimum of 2 independent
directors; and, (2) an audit committee, a majority of which are
independent directors.  The Company has a small Board consisting
of four Directors, one of whom, Anita Schiff-Spielman, is 
independent and a member of the audit committee.  One additional 
independent directorship position is reserved for the
Representative's designee who will take a seat on
the board and on the audit committee simultaneously with the IPO
closing. 




Item 10.  Executive Compensation.  Management, Compensation.

Employment Agreements

The Company has no individual employment agreements.
Compensation

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 the closing of this Offering,
the rate of compensation for the Company's executive officers is:
(i) President $186,000, (ii) Vice President Marketing $82,000,
and (iii) Vice President Europe $68,000.  Pursuant to written
agreement, the President's and Vice Presidents' salaries will be
reduced to an amount equal to 50% of budgeted salary during the
90-day period commencing when funds are received at Closing  Upon
commencement of flight services 100% of respective budgeted
salaries will be paid. To this date, the Company has paid
officers no salaries, nor otherwise have compensated officers.
Board directors are not presently compensated and shall receive
no compensation prior to commencement of revenue service.  

The following table identifies executive compensation to be paid. 
The board of directors has established the compensation.  No
individual personnel contracts exist.  The officers have been
working on behalf of the Company in their respective offices for
six years.  No executive salaries have been paid to date, nor
will be paid until funds are received at the Closing, but normal
salaries have been treated as capital contributions.  See
footnote 6(G) of the Company's Financial Statement and
"Contributed capital".  To preserve the IPO proceeds designated
working capital , these officers have agreed to continue in
their offices at reduced salaries for approximately three months
between the Closing and commencement of revenue operations. 
Reduced salaries will not commence until proceeds are available
from this Offering.  The executive officers have provided written
affirmation that each will continue in his respective position at
reduced salary for the three months following the Closing.  

Name                      Position                      Salary
Igor Dmitrowsky           President                    $186,000
Brian Glynn               Vice President Marketing       82,000
Andris Rukmanis           Vice President Europe          68,000



Item 11.  Security Ownership of Certain Beneficial Owners and Management.  

  Principal Stockholders.
     

                 PRINCIPAL STOCKHOLDERS
<TABLE>
<CAPTION>

The following table sets forth, as of the date of this
Prospectus, 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
sole voting and investment power with respect to all shares shown
as beneficially owned by such person.

                               Common Shares                               
      
                            Beneficially Owned    Percent of Total   

 Directors and Officers

 <S>                                <C>                 <C>
 Igor Dmitrowsky . . . . . .          965,850           62.1%            
 63-26 Saunders St., Suite 7I
 Rego Park, NY 11374 

 Walter Kaplinsky  . . . . .           46,634            3.0%              
 2000 Quentin Rd.
 Brooklyn, NY 11229 

 Brian Glynn . . . . . . . .           31,832            2.0%              
 148 Claremont Rd.
 Bernardsville, NJ 07924

 Andris Rukmanis . . . . . .           16,234            1.0%             
 Kundzinsala, 8 Linija 9.
 Riga, Latvia LV-1005

 Anita Schiff-Spielman . . .            1,432            0.1%               
 1149 Kensington Rd.
 Teaneck, NJ 07666

 Counsel

 Steffanie J. Lewis . . . . .         120,962            7.8%              
 3511 North 13th St.
 Arlington, VA 22201            

 All directors, officers 
and counsel (Six people)            1,182,944           76.0%             

 

</TABLE> 


Item 12.  Certain Relationships and Related transactions.  
                         
Certain Transactions.

     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

No officers or directors hold Company shares purchased since
March 4, 1995, i.e. within one year of the Company's filing its
initial registration of this Offering.  All securities previously
purchased by officers and directors were purchased for fair
market value at the time they were purchased.  Excepting
Management Stock Options and the Company's renting office space
from its president prior to moving to JFK, no transaction exists
between officers and the Company or affiliates of either, and
there are no incentive plans or options for delayed compensation. 



Item 13.  Exhibits and Reports on Form 8-K. Financial Statements;
          Exhibits.  No report has been filed on Form 8-K.

                                     SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant 
caused this report to be signed on its behalf by the undersigned, thereunto
duly
authorized.
                                                                            

                                     Baltia Air Lines, Inc., Registrant    


Date:                _______________(SIGNATURE)__________________________ 
                                       By: Igor Dmitrowsky, President       

Date:                _______________(SIGNATURE)__________________________   
 
                                   By: Walter Kaplinsky, Secretary