UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                                Washington, DC 20549

                                     FORM 10-KSB

                                     Amendment 1

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
                                
                     FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

                       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 4,885,000 shares of Common
Stock are issued and outstanding and held by over 100 shareholders.  No shares
of Preferred Stock are issued and outstanding.

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 this Offering the Company will issue 3,000,000 Warrants. Each Warrant
entitles the holder to purchase one share of Common Stock at $6.50 during the
four-year period commencing one year from the date of this Prospectus.  The
Company may redeem outstanding Warrants, once they become exercisable at a price
of $.125 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 $10.00, Warrants entitling the Representative to
purchase up to 100,000 shares of Common Stock at $8.575 per Share (140% of
initial public offering price) and 300,000 Warrants at $.175 per Warrant (140%
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, 1996:  

      Class                                              Number of Shares   
Common Stock Par Value $.0001 Per Share                     4,350,000    
Preferred Stock No Par Value                                   -0-

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

                         DOCUMENTS INCORPORATED BY REFERENCE
                    SB-2 Registration Statement No. 333-20006-NY

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 first 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

The Company was incorporated in the State of New York on August 24,
1989, as a United States' airline, with an objective to provide full-
service commercial, passenger, cargo and mail transportation from the
US to the republics of the former Soviet Union.  Since 1989 the
Company's management has extensively traveled to Russia, the Baltics
and other nations of the former Soviet Union to conduct a market study,
make operating arrangements, and to evaluate first-hand the unfolding
of the free market enterprise system.  In 1990, The Company's
management predicted the separation of the former Soviet Union into
independent nations, and the subsequent emergence of commercial
opportunities for American business.  In 1991, the Company's Chief
Executive Officer, Mr. Dmitrowsky, testified before the House Aviation
Subcommittee on the implementation of the new US- former USSR bilateral
agreement by US airlines.  The Company's senior management team has
been approved by the Department of Transportation to operate a US flag
airline (DOT Order 96-1-24 and 96-2-51).  

In 1990, the Company competed with eleven carriers, American, TWA,
Continental, Delta, American Trans Air, Pan Am, Federal Express,
United, Alaska Airlines, UPS and Evergreen, for routes between the US
and USSR.  In 1991, the Department of Transportation granted the
Company authority to provide scheduled service non-stop from JFK to St.
Petersburg and non-stop from JFK to Riga, with online service to Minsk,
Kiev and Tbilisi.  Alaska Airlines was granted authority to serve
trans-Pacific routes to Magadan and Khabarovsk, which it currently
serves.  Delta, which currently serves Moscow, was not awarded routes
in the competition but subsequently purchased the former Pan Am routes
(Docket 47149, DOT Order 91-6-2).  Preparing to commence service on its
authorized routes, in 1992 the Company trained 30 pilots, 38 flight
attendants, 17 mechanics and 8 dispatchers and completed substantial
tasks toward its FAA air carrier certification requirements, but the
Company did not commence flight operations at the time due to
incomplete financing. On August 14, 1995, the Company reapplied to the
DOT to conduct JFK-St. Petersburg scheduled air service.

In 1996 the DOT reissued the Company's authority to serve the JFK - St.
Petersburg route.  The DOT authority is conditional upon the Company's
obtaining FAA air carrier certification and meeting the DOT regulatory
one-time financial requirement to have, upon commencement of flight
operations, working capital equal to an average three months operating
expenses. Prior to commencement of its JFK - St. Petersburg service,
the Company is required to complete its FAA air carrier certification 
which process is based on a 90-day schedule of events in which the
Company will submit manuals and train crews to operate the B747-100. 
The Company will also have to perform a mini-evacuation test and 50
hours of proving flights.  With the proceeds from this Offering the
Company intends to commence scheduled non-stop flights on the New York
- St. Petersburg route in 1998, providing full passenger, cargo and
mail service.

Description of the Market

In the Company's opinion, a first-time visitor to St. Petersburg would
find many similarities with a first-time visitor to New York, Paris or
Rome.  New York is a prime destination for international air
transportation due to the size of its population, the magnitude of its
port-of-entry position within the US, and its cultural, industrial and
commercial role in the nation.  Considering these same fundamental
indicators, St. Petersburg is a prominent gateway to Russia and,
indeed, to all of Northern Europe.  St. Petersburg is the leading
maritime and surface cargo center, and the Company expects it to become
Russia's air cargo center.  In its "Profile of St. Petersburg and the
Leningrad Oblast" the DOC describes the City as follows: 

  St. Petersburg, the former capital of Russia, has a population of
  just under five million people, and is the second largest city in
  Russia and the fourth largest city in Europe.  It is a central hub
  for commercial activity in the Northwest Region of Russia, and is
  a major intellectual, cultural, financial, and industrial center
  of the Russian Federation.  The city government is openly
  probusiness and has lead dynamic campaign of reform resulting in
  privatization of over 70% of the local enterprises as of July
  1994.  St. Petersburg is home to the largest commercial sea port,
  by volume, in Northwest Russia, and the city serves as a major
  transportation center for the Russian Federation and the Northwest
  Region.  . . .  A major share of the high technology sector of the
  former Soviet Union is concentrated in St. Petersburg with more
  than 400 scientific research institutes.  The City also has among
  the best educated and skilled work force in the Russian
  Federation.  One-tenth of all scientists in Russia work in St.
  Petersburg and over one-third of all employees have university or
  higher professional degrees.  A city of more than 50 museums
  (including the Hermitage), and approximately 40 theaters and
  concert halls, (such as the Marinsky), St. Petersburg is a major 
  historical and cultural center that attracts up to a million
  tourists annually.  The combination of its many attributes renders
  St. Petersburg one of the most dynamically evolving regions in
  Russia.
    US Dept of Commerce BISNIS 6-29-94 flash fax #3.

The DOC, Bureau of the Census, reported in 1994 that air cargo
traffic from the US to Russia grew from 14,000,000 lbs in 1992 to
30,800,000 lbs in 1993, a 120% increase.  Air cargo from Russia
to the US grew from 1,540,000 lbs in 1992 to 3,740,000 lbs in
1993, a 143% increase.  In 1993 IATA forecast a 21.1% annual
growth rate for freight traffic to and from Eastern Europe in the
period from 1993 to 1997.  The actual statistics available in
1994 demonstrate that the growth rate between 1992 and 1993  in
the US-Russia air cargo traffic was 5.8 times greater than the
IATA forecast.  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. 

According to the DOC, USTTA, in 1993 there were 478,950 American
passengers visiting Russia; and there were 126,158 Russian-
originating passengers who visited the United States. Because no
1993 city traffic statistics were available, using US-Russia
traffic, Baltia projected US-St Petersburg traffic to be 20% of 
1994 US-Russia traffic.  According to CIC Research (DOC
contractor), by 1995 actual traffic to St. Petersburg had doubled
Baltia's traffic projection.  The actual growth rate from 1995 to
the present is not publicly available.  St. Petersburg has a
growing number of private travel agencies that serve the new
segment of affluent Russian travelers who require quality
service.  IATA forecasts a 10.2% annual growth rate in passenger
traffic to and from Eastern Europe from 1993 to 1997.  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, and 4% from 1994 to
1995). 

The US-Russia Bilateral Agreement restricts foreign airlines,
excepting Russian airlines, from providing non-stop service
between the US and Russia, and, no Russian or US airline offers
non-stop service between JFK-St. Petersburg.  Thus, the Company
will offer the only non-stop service with a wide-body aircraft
from New York to St. Petersburg.  Unlike the domestic flights,
the international flights are conducted pursuant to bilateral
agreements between countries, and most countries  are considered
"limited entry markets."  The US-Russia market is a limited entry
market because only a restricted number of airlines from the two
nations are authorized  therein to operate between the US and
Russia.  Furthermore, the number of foreign airlines in the
market is limited by restrictions in bilateral agreements between
their respective countries and both the US and Russia. The
European carriers who serve this market are required to stop at
their national hubs en route.  

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:

Business and First Class

American business travelers generally choose reliable, high
quality, non-stop service and typically choose First, Business,
and full fare Voyager (coach) Class tickets. (Crane's, Feb. 21,
1994, Executive Travel)  Business travelers originate primarily
from New York, Washington, Boston, Chicago and Atlanta. (US DOC,
USTTA)  

General Tourism and Ethnic Travel

Americans traveling on leisure typically choose Excursion fares,
individually or as part of wholesale air and ground tour
packages. Americans with ethnic ties to Russia and other former
Soviet Republics, originating largely in New York, Chicago and
Los Angeles, generally book in advance and choose excursion
fares.  This category also includes US-bound emigrants and family
visitors originating in Russia with tickets pre-paid in the US.
(US Census Data on Distribution of Ethnic Populations in the US)

Special Interest Groups

Special interest groups represent a relatively new and
substantial category of travelers which is generated by the US
government, sister cities, educational institutions, and cultural
exchange programs.  Passengers typically originate in the US, but
many also originate in Russia using tickets pre-paid in the US. 
These exchange programs choose coach and business fares.  In
1993, 16,612 US-originating passengers attended conventions in
Russia, and 10,520 US-originating passengers studied in Russia. 
(US DOC, BISNIS, Government Programs to Russia)

Professional Exchanges

American-Russian professional exchanges are sponsored by trade
associations, the US government, cities, hospitals, colleges,
corporations, and performing arts institutions.  Example: In
December 1993, the Provost, Columbia University, NY, contacted
the Company regarding transportation needs of the Consortium
consisting of 82 US and Russian Universities.  (Also, DOC,
BISNIS, Internships and Professional Exchanges)

Government and Diplomatic Travel

The Fly America Act (41CFR301.3-6) requires US government and
diplomatic travelers to fly on a US carrier where one is
available.  They generally originate in Washington, DC and New
York.  The State Department and the US Counsel General in St.
Petersburg last contacted the Company in 1995 about using its
flights from JFK to St. Petersburg.  At this time the Company has
no specific contacts with the Counsel General or the State
Department.  As reported by the DOC BISNIS on-line information
service, among the agencies sending the most employees to Russia
are: the Department of State, the DOC, the Department of
Agriculture.  The DOC programs aimed at Russia transported over
16,000 passenger in 1993.

On average, according to the DOC, USTTA, eight out of ten
Americans traveling to Russia visit St. Petersburg, the second
largest city in Russia with a population of 5 million.

Marketing Objective

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.  In order to accomplish
this objective, the management intends to compete for the
passenger segments that require quality by establishing and
maintaining quality standards which will assure the Company's
lead in service among the leading European airlines that are
providing connecting flights to St. Petersburg.  Although 40%
dilution of the average weighted fare is allocated for discount
promotions, the Company does not expect to be in direct
competition with deep discount airlines, including several East
European airlines and the offspring of the former Soviet airline
Aeroflot, which also provide connecting flights to St.
Petersburg.

Overall Market Strategy

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'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's initial marketing strategy is based on selected
travel and business 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 to conduct joint marketing
programs with the Company.  The Company has no contractual
relationships with Seawind Cruise Lines, Hilton Hotels or other
referenced businesses.  The Company will also advertise to the
general public throughout the US.  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 the Company's schedules and tariffs listed in the
Official Airline Guide ("OAG"), and worldwide access to
reservations on the Company's flights 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.  With respect to the CRS service, the Company
has proposals from Pars Worldspan, Sabre and Apollo reservations
and ticketing systems.  The Company intends to activate the
reservations service with the selected system when the DOT issues
its order authorizing the Company to sell advance tickets.

Marketing strategy relating to capacity and overall quality
experienced by passengers are important in the Company's aircraft
choice.  Four aircraft types which are capable of flying non-stop
on the JFK-St. Petersburg route, B747, DC10-30, B767, and B777,
reduce the travel time to approximately 8 hours.  Of these, the
Company's management believes that the cabin size of a Boeing
B747 aircraft offers the greatest degree of comfort and capacity
for the JFK-St. Petersburg market.  Its dispatch reliability lies
within the 97% range contributing to passenger confidence in the
Company's dependability (Boeing Report ID:RM 23004).  The
Company's dependability is further enhanced because B747, a four-
engine aircraft, is not subject to ETOPS regulations which could
limit flights during certain weather conditions.  "ETOPS" is an
acronym for Extended Range Twin Engine Operations which generally
requires that during year one a twin engine aircraft be operated
within 75 minutes from a suitable airport.  If one of the
airports on the Great Circle route is snowed in, or otherwise
unusable, a twin engine aircraft would not receive dispatch
clearance for a flight to St. Petersburg.  With B747 the Company
will 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.  Additionally, the
Company plans to market "Baltia Express", non-stop shipment of
express packages between the US and St. Petersburg.  The Company
also expects revenues from diplomatic mail and cargo.

Marketing Promotion

In addition to the above overall strategy and having its sales
specialists directly contact travelers and shippers, the Company
intends to have the following specialized marketing programs:

For the general tourism market, the Company plans to conduct
promotion through tour operators and wholesalers who specialize
in tourism to Russia, with attention to upscale tour packages.
(Example: 1994 Harvard Alumni Association's "Journey of the
Czars" cruise between Moscow and St. Petersburg)  To promote the
destination and the convenience of its non-stop flights into St.
Petersburg, the Company plans to organize periodic travel agency
familiarization trips, and to sponsor selected cultural and
performing arts events to emphasize the Company's policy to
provide quality of service.  As part of its marketing strategy to
associate the Company's service with culture and quality and
develop name recognition, in 1992, the Company sponsored the St.
Petersburg Festival at the Metropolitan Opera in New York, and
established promotional contacts in the St. Petersburg's
performing arts community, including the conductor, director and
management of the Kirov Opera & Ballet, as well as management of
Hotel Astoria, Grand Hotel Europa, and the Pribaltiyskaya Hotel
which the Company believes has value in obtaining future Company
publicity with the performing artists. By being able to associate
the Company's nonstop service to St. Petersburg with quality art
and performances, the inherent quality of the arts will be
associated with the name and  service of the Company.  Developing
name recognition is important to the Company.  The Company's
Director of Public Relations and V.P. of Marketing maintains
these relationships presently, but no specific promotion is
currently conducted.  The costs of future promotion of the arts
in St. Petersburg will not be paid from the  marketing 
allocation set forth in the  Use of Proceeds , but will be paid
from operating revenues.  Because the Company does not want to
advertise its service prematurely, it has not conducted recent
promotion.

For the ethnic passenger market, the Company plans to advertise
in selected ethnic publications, and on ethnic radio broadcasts
in the US.  The Company has planed direct mailings to ethnic
organizations and travel agencies to announce the service, and
plans to offer limited introductory fares, group travel packages,
and US pre-paid ticket arrangements.  In the US and in Russia the
Company plans to sponsor selected cultural and ethnic events to
promote interaction of people with like ethnic background between
the two countries.  

For educational associations (example: American Teachers of
Russian, Assn.) and colleges offering Russian studies and
language programs, mailings, limited introductory fares, group
travel packages, and US pre-paid ticket arrangements for Russian
travelers are planned. In the US and in Russia the Company plans
to sponsor selected cultural and ethnic events.  In December 1993
the Company initiated contact with Columbia University which
oversees a US-Russian university consortium consisting of 82 US
and Russian colleges.  Coordination with Columbia University and
the other 82 US universities and colleges in the US-Russia
alliance programs will be encouraged.  In July 1996 the Company
had its most recent contact with Columbia University.  Currently
the Company has no contract but expects the contacts to lead to
group travel by students and faculty either through contract or
group rate fares.  The Company's promotional materials may
describe this major academic and scientific exchange program
featuring Moscow and St. Petersburg universities as well as US
Universities.  For special group professional passenger market,
the Company plans direct mailings to trade associations,
foundations, educational institutions, and government agencies.

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 eighteen years,
most of the new carriers either merged with major carriers or
left the business.  Major carriers that could not adapt to the
changing times left the business, generally 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)   

History demonstrates that the industry is not uniform.  While
most small new carriers went out of business, while some major US
airlines had been losing money in operations blaming each other
for damaging price wars, Southwest Airlines has consistently
offered prices which are substantially below the "low" prices
offered by other airlines.  Since 1973, Southwest has been
consistently profitable, with an operating profit to operating
revenue ratio as high as 21%.  Air Transport World now uses
Southwest's operating results as a standard to which the
operating results of other airlines are compared.  Additionally,
Virgin Atlantic, North American Airlines, and Tower Air  all
began operating a single aircraft and are now significant
airlines.  Some large and some small airlines succeed and are
profitable while others are not.  (Air Transport World Magazine,
Dec 1994.  Also see UPI, 8 Apr 1996, <UsouthwestURpNC-
A@clarinet>)  

Competition

While the Company recognizes that it will commence revenue
operations with the only non-stop service, nonetheless, the
Company will face one-stop and two-stop service competition from
the leading 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.

The Company's management does not take the Company's non-stop
service advantage for granted.  The Company's management is
convinced that, when the Company commences revenue service, it
will have to compete by using operating efficiency and by
providing consistent quality service to passengers and cargo
shippers alike in order to establish the Company as a commercial
success in its market niche.  The Company will provide non-stop,
wide-body, First, Business and Voyager class passenger service,
and a palletized and containerized service for cargo.

The following is a Company 1997 survey of one and two stop
services in the US - St. Petersburg market.  The respective
airlines can change their flight schedules and frequency.  (April
1997 Official Airline Guide generally confirms the stated
competition.)

Finnair

Finnair flew between Helsinki and St. Petersburg daily.  Five
days a week, to connect with its flights from US to Helsinki, a
layover time of 1:15 hours was required east-bound, and 1:40
hours of layover was required west-bound.  Total en route time
east-bound was 11 hours, and total en route time west-bound was
11:30 hours.  The other two days required a layover of 5 hours
east-bound, and an overnight stay in Helsinki west-bound. Total
en route time east-bound was 19 hours, and west-bound 31 hours. 
The JFK - Helsinki flight was on a wide-body MD11 aircraft.  The
connecting flight from Helsinki to St. Petersburg was on a
narrow-body DC9 aircraft.  Finnair did not have First class
service, and did not have palletized and containerized cargo
service into St. Petersburg.  From the MD11, cargo must be
unpacked and manually loaded into the narrow-body DC9.
Scandinavian Airlines System (SAS)

SAS served St. Petersburg from Stockholm and Copenhagen daily. 
To connect with its flights from the US at Stockholm or
Copenhagen, east-bound layover time was 1:30 hours, and west-
bound required an overnight stay in either Copenhagen or
Stockholm.  Total en route time east-bound was 10:30 hours, and
total en route time west-bound was 30 hours through Stockholm and
31:30 hours through Copenhagen.  The Newark - Stockholm or Newark
- Copenhagen flight was on a wide-body B767 aircraft.  From
Stockholm or Copenhagen the connecting flight to St. Petersburg
was on a narrow-body DC9 aircraft.  SAS did not have First class
service, and did not have palletized and containerized cargo
service into St. Petersburg.  From the B767, cargo must be
unpacked and manually loaded into the narrow-body DC9.

Lufthansa

Lufthansa served St. Petersburg from Frankfurt daily.  To connect
with its flights from the US at Frankfurt, East-bound layover
time was 1:40 hours, and an overnight stay in Frankfurt was
required on West-bound flights.  Total en route time East-bound
was 13:10 hours, and total en route time West-bound was 25:20
hours.  The New York to Frankfurt flight was on a wide-body A340
aircraft.  From Frankfurt the connecting flight to St. Petersburg
was on a narrow-body A320 aircraft.  Lufthansa had First,
Business and Couch seating, but did not have palletized and
containerized cargo service into St. Petersburg.  From the A340,
cargo must be unpacked and manually loaded into the narrow-body
A320.

KLM Royal Dutch Airlines

KLM served St. Petersburg from Amsterdam daily.  To connect with
its flights from the US at Amsterdam, East-bound layover time was
1 hour, and West-bound layover time was 1 hour.  Total en route
time East-bound was 12:30 hours, and total en route time West-
bound was 15 hours.  The New York to Amsterdam flight was on a
wide-body B747 aircraft.  From Amsterdam the connecting flight to
St. Petersburg was on a narrow-body B737 aircraft.  KLM did not
have First class seating, and did not have palletized and
containerized cargo service into St. Petersburg.  From the B747,
cargo must be unpacked and manually loaded into the narrow-body
B737.

British Airways, Air France, Austrian Airlines, and Swissair

British Airways served St. Petersburg through London twice
weekly.  The return required overnight stay in London.  Air
France flew to St. Petersburg through Paris twice weekly and
required overnight stay in Paris on return.  Austrian Airlines
flew to St. Petersburg through Vienna four times a  week. 
Swissair flew to St. Petersburg through Zurich three times a
week.  The Company does not consider these, and other European
carriers with circuitous routing to St. Petersburg, as its
leading competitors.

Delta Air Lines (US carrier)

Delta Air Lines provided non-stop service to Moscow. In 1996
Delta ceased providing service to St. Petersburg  and has applied
to the DOT for authority to market St. Petersburg through code
sharing with foreign carriers.  Even though Delta is a US
carrier, Management believes that it is not a leading competitor
in the market based upon the market share carried by Delta
compared with that carried by Finnair and SAS.

Aeroflot (Russian carrier)

Aeroflot provided service to St. Petersburg through Moscow six
times a week.  Aeroflot did not offer arrival and departure times
for St. Petersburg's connecting flight at Moscow.  It estimated
the layover times at Moscow to be between 3 to 5 hours. 
Estimated total en route time East-bound was 14 hours, and
estimated total en route time West-bound was 15 hours.  Aeroflot
caters to the discount market of Russian travelers.

Summary of Competition

Finnair and SAS have been the leading foreign airlines in the US-
Russia market because of the geographical locations of Helsinki,
Stockholm and Copenhagen (change of gauge points - hubs).  Other
foreign airlines have to fly more circuitous routes through their
hubs.  A total of 36 world airlines provide some form of
connecting flights at varying levels of service from New York
City to St. Petersburg.

The Company will offer exclusive non-stop, wide-body service in
the market.  The Company's JFK - St. Petersburg non-stop block
time is conservatively listed at 8 hours and 34 minutes (includes
taxi times & estimated air traffic delays).  The normal JFK - St.
Petersburg flying time is approximately 7 hours and 20 minutes. 
The Company may reduce its listed block times to represent the
prevailing block times in the field.  Corporate, business and
first class travelers with a single destination logically prefer
non-stop service.

Interlining at JFK, LaGuardia and Newark Airports

The Company will inaugurate its JFK - St. Petersburg service with
one round trip flight per week.  Because its nonstop flight has
shorter en route time (relative to competing airlines), when
operating, the Company will be able to schedule departures and
arrivals which, according to the Company's survey, allows each
Company flight to connect at JFK, LaGuardia, and Newark airports
with 131 in-bound flights prior to the Company's departure for
St. Petersburg and with 143 flights out-bound after the Company's
arrival from St. Petersburg.  Each Company flight will meet with
TWA, United Airlines, Continental, Delta, US Air, American and US
Air Shuttle flights to and from the following cities:  Seattle,
Chicago, Denver, Phoenix, New Orleans, Pittsburgh, Miami,
Washington DC, Boston, Philadelphia, Dallas, Atlanta, Los
Angeles, San Francisco, San Diego, Orlando and Houston.  Flights
by airlines may be subject to change.  In calculating the number
of connections, the Company counted flights which permit adequate
connecting time.  The Company does not include flights arriving
and departing with less than the following minimum connecting
times: 45 minutes at JFK, 1:30 hours at LaGuardia, and 2 hours at
Newark.  The Company believes that convenient connection times
will maximize its traffic pool in the continental US.

The Company's proposed schedule assuming one round trip per week 
is:

Depart JFK at 17:00  . . . . . . . . . . . . . . . . . .   Mon
Arrive LED at  9:34 +1 . . . . . . . . . . . . . . . . . . Tue
Depart LED at 12:00  . . . . . . . . . . . . . . . . . . . Thu
Arrive JFK at 13:31  . . . . . . . . . . . . . . . . . . . Thu

The Company will not initiate service with five round trips per
week, but is authorized by the DOT to increase frequency of
service up to five round trips per week.  As the market allows,
the Company plans to increase frequency.  Ultimately, the Company
expects to operate five round trips per week.  The Company's
proposed schedule assuming five round trips per week is:

Depart JFK at 17:00  . . . . . . . . (Sun, Mon, Wed, Thu, Fri)
Arrive LED at  9:34 +1 . . . . . . . (Mon, Tue, Thu, Fri, Sat)

Depart LED at 12:00  . . . . . . . . (Mon, Tue, Thu, Fri, Sat)
Arrive JFK at 13:31  . . . . . . . . (Mon, Tue, Thu, Fri, Sat)

"LED" is the three-letter identifier for St. Petersburg's Pulkovo
Airport.  All times are local times and "+1" means next day.  The
Company may adjust the time and frequency of its flights.

The Company's Director of Marketing and Sales has held interline
discussions with his counterparts of other airlines.  Unlike some
of its competitors, the Company does not currently have interline
agreements with other airlines. The Company 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's calculation of year one results is based on: (i)
the number of passengers (93,431) multiplied by the Weighted
Average Fare After Dilution, plus (ii) the pounds of freight
(2,800,000) multiplied by the rate per pound.  Thus, along with
the passenger and cargo volume transported, fares and cargo rates
have a direct impact on revenues.  In general, traffic volume is
driven by the intensity of commerce between two countries,
depending on the underlying economic, social and political
factors.  In general, fares are market driven, depending on
demand for and supply of the transportation in the particular
market.  Fares may also be influenced by tradition and marketing
objectives of airlines.  All fares and cargo rates are subject to
change over time.  For discussion on passenger and cargo volume
see "Management Discussion and Analysis - Forecast Results of
Year One Operation."

In 1997, the Company surveyed the price structures of Finnair,
SAS, Lufthansa, Delta and Swissair to compare the published
market fares of one- and two-stop connection to St. Petersburg,
involving a change of gauge, with the Company's non-stop, wide-
body service from JFK to St. Petersburg.  The following table
summarizes the 1996 published one-way fares (source: Official
Airline Guide,1997):

<TABLE>

<CAPTION>
   Published Market Fares (one-stop, change of gauge)
                               First Business  Economy  Discount

 <S>                           <C>      <C>      <C>       <C>   
 Finnair . . . . . . . . . .     N/A   $2,177     $850     $570 
 SAS . . . . . . . . . . . .     N/A    2,302    1,227      594 
 Lufthansa . . . . . . . . .  $3,223    2,302    1,269      420 
 Swissair  . . . . . . . . .   3,223    2,302      850      670 
                                                 
 Average stop-over fare  . .  $3,223   $2,270   $1,049     $563 
                                                 
 Company's non-stop fare . .  $2,715   $1,595   $1,193     $555
</TABLE>

For marketing reasons to reflect the Company's exclusive non-stop
service, certain of the Company's published fares are planned
incrementally higher.  The Company may periodically adjust its
fares.  The Company focuses its marketing on the First class,
Business class and upscale tourism market, requiring non-stop,
high quality service.  Business and First class travelers are
currently paying between $1,707  to $2,660 more than a discount
fare.  It is reasonable to expect that travelers will prefer the
Company's non-stop service .  According to the DOC statistics,
77% of all passengers visit one country.

Aeroflot periodically offers round trip discount fares below
market average.  In 1994 Aeroflot advertised NY-Moscow ticket for
$450 round trip and round trip NY-St. Petersburg tickets were
offered for $650.  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 Seating Configuration and Average Occupancy

                   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>

The JFK - St. Petersburg passenger market has had its most
significant growth in business travel since 1992.  Consistent
with SAS report (Jax Fax Travel Marketing Magazine, Dec. 1993)
that there has been substantial growth specifically in business
travel, 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. 
The ratio of First Class and Business Class fares to Tourist
Fares impacts the revenue earned from any given number of
passengers.  The more First Class and Business Class tickets
sold, the more revenue earned from that given number of
passengers.  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 will
allocated 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
                                                                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  
 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.  Upon
receipt of financing from this Offering, a total of 26 staff and
managers will be actively working on air carrier certification
and marketing for a period of 90 days during which they will be
paid salaries reduced by 40% to 50%.  At 40% reduction, total 90-
day salaries and training allowances equal $230,000.  Immediately
prior to commencement of service the Company will employ a total
of 94 employees, including:  (i) 28 executive, administrative,
and sales personnel, (ii) 20 station personnel at JFK and St.
Petersburg, (iii) 5 captains, 10 first officers, 5 chief
stewards, and 26 stewards.  Shortly after commencement of 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.  The Company's policy is to
hire and retain only the highest quality personnel.  The Company
will neither pay very low nor excessively high salaries.  The
Company's management has sole discretion as to the number of
employees and employment requirements and conditions.  

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 will 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 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.  

FAA Air Carrier Certification

To assure that an airline, that has been conditionally certified
as fit by the DOT, uses safe operating procedures, as a condition
to the DOT certificate, the airline must provide 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 will 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, which proprietary data is kept confidential for two
years.  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. 
 
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 the rapid
growth in US-Russia commerce, i.e. it might slow the future
growth in traffic for the Company.

Pending Aircraft Acquisition

The Company's preference is to operate Boeing 747 aircraft on the
JFK-St. Petersburg route. The Company is currently in discussion
with United Airlines for the acquisition of one B747 to be
delivered in 1997, with additional sister ships available in
1998. The Company will acquire aircraft that meet FAA air
worthiness requirements.  The aircraft purchase package would
include a spare engine, parts pool, heavy maintenance service,
adoption of a maintenance program, crew training, and certain
ground equipment. The Company may purchase or lease depending
upon the final arrangements available to the Company at the time
of aircraft acquisition. The Company has budgeted $1 million
deposit for the aircraft. Monthly acquisition costs are similar
under both lease and purchase scenarios and will be paid from
operating revenue.



Item 2.  Description of Property.  Intentionally Omitted.

Item 3.  Legal Proceedings.    Intentionally Omitted.

Item 4.  Submission of Matters to a Vote of Security Holders.
         Intentionally Omitted.
                                       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
"Selected Financial and Operating Data" and all of the financial
statements and notes thereto and included elsewhere in this Prospectus.

General

The Company was formed as a United States' airline on August 24, 1989
in the State of New York.  The Company's objective is to provide
scheduled air transportation from the US to Russia.  In 1991, 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.  That
authority expired in 1993.  Following the Company's 1995 application,
in 1996 the DOT reissued authority to the Company to serve JFK-St.
Petersburg.  The Company has two registered trademarks "BALTIA" and
"VOYAGER CLASS," and five trademarks subject to registration.

The Company's activities to date have been devoted principally to
raising capital, obtaining route authority and approval from the
Department of Transportation and the Federal Aviation Administration,
training crews, and conducting market research to develop the Company's
marketing strategy.  Following the receipt of the proceeds from this
Offering the Company intends to commence scheduled non-stop service on
the JFK - St. Petersburg route.

Difficulty of Financing an Airline in 1991-1992

No revenue operations have commenced on authorities granted in 1991
because the Company had not completed financing in 1992.  At the time
the Company received authority in 1991, the capital markets were slow,
the airline industry was in a down-turn, and the USSR was transforming
into separate nations, all of which the Company believed limited its
access to public or private financing for commencement of flight
service. Several of the Company's shareholders who are knowledgeable in
financial matters  tried to make introductions, but their efforts were
useless.  Nobody wanted to hear about an airline. Private funding did
not materialize and resources of the Company's officers and directors
were insufficient to commence revenue operations.  Due to incomplete
financing, the DOT withdrew the Company's authorities in 1993. In 1995,
believing the capital markets to be favorable, the airline industry to
be in an up-turn, and Russia to have expanded its political and
economic ties with the United States, which were reflected in the
growth of passenger traffic and freight, the Company reapplied for JFK-
St. Petersburg authority.  Based upon the Company's planned IPO and
reexamination of the Company's operating plan and fitness as a US air
carrier, in 1996 the DOT reissued JFK-St. Petersburg route authority to
the Company.

Market Statistics

Facts set forth below were filed with the DOT in 1995 and 1997, and
were used as part of the Company's application for fitness to serve the
JFK-St. Petersburg route, Docket OST-95-396 and 97-2763.  The DOT
examined the Company's pre-operating  projected expenses, the year-one
estimated traffic, fare calculations, resulting  passenger and freight
revenues, and year-one operating cost estimates projected from these
facts, and found them to be comprehensive.  DOT also compared the
Company's projected aircraft operating costs per block hour with the
average of the aircraft operating costs per block hour reported to the
DOT for the first quarter of 1995 by carriers operating B747-100
equipment and found the Company's projections to be reasonable (DOT
Order 96-1-24, p.6).  The DOT specifically does not project that any
particular company applying these facts will or will not be profitable.

In estimating passenger traffic, the Company used the following
statistics.  The 1994 DOC, United States Travel and Tourism
Administration ("USTTA"), traffic statistics show that 605,108
passengers traveled between US and Russia. Prior to 1995, no study
identified the traffic that entered or departed through St. Petersburg,
but a USTTA survey reported that  8 of 10 Americans visiting Russia,
visit St. Petersburg.  Using 1994 USTTA statistics and assuming that
20% of the US-Russia traffics would arrive in or depart form St.
Petersburg, Baltia conservatively projected St. Petersburg traffic for
1996 for use in its business plan.  A subsequent 1995 survey by CIC
Research (DOC contractor) reports that US-St. Petersburg traffic more
than doubled that which Baltia projects.  The International Air
Transport Association ("IATA") forecast annual growth of 10.2%.  Also
see  Business - Pricing. 

In estimating cargo revenues, the Company used the following data.  The
1993 US-Russia cargo volume was 34,540,000 lbs.  The DOC, Bureau of the
Census, air cargo statistics for 1994 report that between 1992 and 1993
air cargo transported from US to Russia grew from 14,000,000 lbs to
30,800,000 lbs, a 120% increase.  In the same period, air cargo
transported from Russia to the US grew, from 1,540,000 lbs to 3,740,000
lbs, a 143% increase.  In 1993 IATA had forecast a 21.1% annual growth
rate for freight traffic to and from all of Eastern Europe for the
period from 1993 to 1997.  The statistics demonstrate that the 1992 to
1993 growth rate in US-Russia air cargo traffic was 5.8 times greater
than the IATA forecast.  The B747-100 aircraft offers wide-body
palletized and containerized cargo capacities to meet the needs of US-
Russia passenger and cargo traffic growth.  The Company will offer non-
stop, B747-100 service from the JFK into the St. Petersburg market. 
The Company has received two offers from JFK-based cargo forwarders. 
Paramount Cargo Marketing, Inc. projected shipping 20 tons of cargo
five times a week and RAF International Sales, Inc. projected shipping
50 to 75 tons per week to St. Petersburg.  Smaller additional freight
forwarders have expressed interest in using the Company's cargo
services.  Following is a list of such carriers including their
previous shipment patterns.  In 1993, the Transatlantic Royal Company,
Inc., Long Island City, NY, shipped on average 120,000 lbs of freight
per month to Russia.  The International Grapevine, San Francisco, CA
ships each month 1,000 cases of American wine from New York into St.
Petersburg.  Quantum International Forwarding, Ltd., Jamaica, NY, ships
between 400 to 4,000 lbs of consolidated air freight twice a week from
JFK to St. Petersburg.  American Export Lines, JFK, NY, as of December
1994, had shipped in the previous six months 92,000 lbs of air freight
to the NIS. Contracts with cargo transporters are expected to be signed
after the IPO closes.  No contracts presently exist.

Currently US mail is channeled through Moscow because non-stop US
service to St. Petersburg is not available.  The US Postal Service
advised the Company's management at a meeting in May of 1994, that the
Company can be expected to carry about half of all US mail to Russia
and the Newly Independent States, which at May 1994 was about 28,000
lbs per month.  With one flight per week, the Company would carry 3,500
pounds of mail per flight, approximately 7% of its cargo capacity, at
cargo rates.  Mail carriage does not impact the Company's flight
schedule. 

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.

Twelve Months Operating Plan

The Company believes that assuming one round trip per week for twelve
months net proceeds from this Offering and the Lateko Bank line of
credit ("LOC") will satisfy the Company's cash requirements for twelve
months without the need for additional funds.  At Closing the Company
receives net proceeds in the amount of $5.4 million. The LOC in the
amount of $6.5 million, is available to the Company upon opening an
account with the Lateko Bank. (Latvian law requires that to open a bank
account, a foreign entity must register a subsidiary.  This requirement
is similar to requirements in the US where a NY corporation doing
business in another state must register as a foreign corporation in
that state.  During the first year of operations, the Company has no
plans for having target programs in the territory of the Republic of
Latvia so the Company is not required to have any specified amount of
currency in the account.  The Board of Directors of Lateko are required
to authorize specific draws provided the Company gives the Bank two
weeks notice.  The interest rate and repayment schedule will be in
accordance with the then effective lending rates and terms at the
Lateko Bank.)  Thus the Company expects resources totaling $11.9
million.

The Company's believes its cash requirements for twelve months is $11.8
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 $.8 million.

In addition to the IPO proceeds and LOC, the Company may issue $6
million in bonds through W.R. Lazard. Further, potential proceeds from
the exercise of Warrants in this issue may provide additional cash
reserve following this twelve month period. 

Background. Since its inception in 1989 Baltia has focused its efforts
exclusively on developing the necessary elements for the commencement
of international air service from the US to Russia.  The Company has
invested $6 million in development which enables it to commence
carrying revenue passengers and cargo in 90 days upon obtaining a
certificate for safe operational procedures from the FAA ("FAA
Certificate").  In total, the Company has expensed $6 million as
developmental costs during the periods in which they occurred.  During
six years of development the Company has accumulated $.8 million in
total liabilities (includes current liabilities).  Of the total
liabilities, approximately $0.5 million has been owed to outside
entities and the balance (approximately $.3 million) has been owed for
the past three years to shareholders.

The LOC is conditional 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, and providing the Bank with two weeks written notice. 
The funds should not be employed for primary funding of capital
investments.  Following the Closing, the Company will open an account
with Lateko Bank to hold $10,000 of the reserve from net proceeds. 
This will require that the Company register a subsidiary in Latvia, 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 Lateko account.  Excepting its
aircraft and associated parts and equipment for which primary
investment is made from net IPO proceeds as described in Use of
Proceeds, the Company has no plans for capital investments during the
twelve months following the Closing unless traffic demands frequency
increases.  Finally, the Lateko Board of Directors shall authorize
specific draws up to $6.5 million provided the Company gives two weeks
written notice.  Repayment term and interest rate will be those in
effect at Lateko Bank at the time of the draw against the LOC.  The LOC
funds will be automatically available to the Company upon two weeks
written notice without further action by the Company. 

FAA certification.  In June 1997 the Company's president met with the
FAA regarding the air carrier certification process which is based upon
a 90-day schedule of events consisting of document approval, crew
training, and flight demonstration.  As a result of the meeting, the
FAA is awaiting receipt of the Company's Pre-application of Intent Form
which the Company will submit on or before the Closing and will
commence this process.  See  Use of Proceeds. 

Viability discussion.  The FAA air carrier certification activities are
highly regulated and controlled by the FAA.  The costs associated with
these tasks are reasonably ascertained and verifiable because the
activities are tightly controlled and details of the Company's proposed
operations are publicly filed with the DOT and available for industry
criticism.  The Company's proposed operations were reviewed by the DOT
Office of Aviation Analysis prior to issuing to the Company its airline
fitness certification which is conditional upon obtaining FAA air
carrier certification.  Revenue flight operating costs, for the same
reasons, are also reasonably ascertained, verifiable and are publicly
filed with the DOT. The DOT required the Company to submit its
projected air carrier certification and revenue operational costs for
review and comment to Delta Airlines, United Airlines, American Trans
Air, TWA, Northwest Airlines, FAA Flight Standards District Office, FAA
Flight Standards Division, and the Air Transport Association.  Neither
airlines nor the Air Transport Association criticized or commented on
the Company's projected air carrier certification and revenue
operational costs.  Nor was there any criticism filed by the FAA Flight
Standards District Office or FAA Flight Standards Division.  If there
had been any, FAA criticisms or comments and those of other airlines
and the Air Transport Association would have been recited in the DOT
Order that was issued at the closing of the comment period, but there
were none.  That DOT Order 96-1-24 found the Company's costs to be
comprehensive and reasonable.

Results During Development

During the developmental stage, the Company has expensed its activities
in each year since inception and has an accumulated deficit and a
working capital deficit at June 30, 1997, of $6,288,016 and $837,419
respectively, which results in a per share loss of $1.29 and
stockholders' per share deficit of $.09.  The Company has net operating
loss carry forward of $4,929,707 at December 31, 1996, available to
offset future taxable income.  These carry forwards expire between the
years 2005-2012.  As of December 31, 1996, and 1995, a net deferred tax
benefit has not been reflected for 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 recovery.  Rent expense for
years ended December 31, 1996, and 1995 was $13,200 and $3,968,
respectively.  In October 1995, the Company began leasing office space
on month to month basis in the East Wing at the International Arrival
Building, JFK International Airport at a rate of $1,200 per month. 
Upon commencement of scheduled operations, the Company will expand
facilities at JFK and expects an additional terminal use fee of
approximately $750 per aircraft turn-around (an aircraft's arrival and
departure) to be paid from operating revenue.   

During year ended December 31, 1995, the Company issued 306,150 shares
of Common Stock for $107,848.  Of the 1995 shares issued, 25,000 shares
were issued as prepaid interest on $50,000 borrowed, and $63,500 was
charged to interest expense on the financial statement year ended
December 31, 1995.  Of the 306,150 common shares sold in 1995, 50,000
were redeemable, but in June 1997 the shareholders owning those
redeemable shares surrendered their option to sell the shares back to
the Company.  Thus, there are no redeemable shares at this date. No
additional shares were issued in 1996. In 1992 the Company issued
promissory notes to certain of its stockholders in exchange for
$1,048,000.  These notes were due on demand and all interest was to be
paid upon principal payment at an annual rate of six and one half
percent from the issuance date to the date of repayment. No interest
has been paid on these notes.  Accrued interest related to such notes
amounted to $321,168 on Dec. 31, 1996.  As of June 30, 1997, total
notes payable to stockholders equals $223,850.

On December 21, 1995, the Company received a $6.5 million line of
credit ("LOC").  The facility is to be used as back up for operations
and should not be utilized for primary funding of capital investments. 
Monies are available when the Company: (a) has registered a subsidiary
in the Republic of Latvia and opened an account with the Bank, (b)
maintains convertible currency in the account to meet the requirements
of any Company target programs in Latvia, and (c) gives the Bank
fourteen day written notice.  In Latvia in order to open a business
bank account, a foreign company must register a subsidiary.  The
Latvian subsidiary would not be operational and would have no impact on
the Company.  The requirement is similar to the requirement in the US
that a company register as a foreign corporation while doing business
in a state in which it was not incorporated. Since the Company will
have no target programs in Latvia within twelve months following the
Closing, there is no required amount of funds to be maintained in the
Lateko Bank account.  Terms of any borrowing against the LOC will be
those in effect at Lateko Bank, Riga, Latvia, at the borrowing date. 
The LOC may be used for additional working purposes, but there are no
current plans to use it.  If the LOC were available and the Company
were to borrow against it today, the Lateko Bank would schedule
repayment within five years and charge interest at 10% to 15% annually. 


The Company believes it unlikely that liabilities will be called
earlier than their scheduled repayment because the debt is held by
entities with vested interests in seeing the Company succeed, its
vendors and stockholders, and the Company has advised these creditors
that repayment will be made promptly from operating revenue.  The
Company assumes that the approximately 50 vendors to whom the Company
has owed for three years $0.5 million in current liabilities, and who
have expressed the desire to supply the Company once it starts revenue
operations, may foresee years of income from providing the Company with
goods and services.  Likewise, the present stockholders to whom current
liabilities are owed, have invested considerable time and money to
develop the Company to the point of commencing revenue operations.  If
the Company is successful, they have the potential of selling their
shares for a profit and/or have the potential to share in the Company's
future profits. Persons who invested in the Company for a profit may
not call debt earlier than scheduled and in so doing jeopardize their
potential return on investment just at a time when that potentiality is
coming to fruition.  

The LOC conditions may not jeopardize the repayment of liabilities if
they are called early.  As of June 30, 1997, total liabilities were
$843,572, including current liabilities.  Respecting the current
liabilities, there is only one condition relevant to the use of LOC
funds, i.e. that they should not be used for primary investments. 
Early calls made on outstanding current liabilities would not be a
primary investment by the Company.  If Company funds are not allocated
for operations, they will be used to repay liabilities.  Should such
calls deplete what otherwise would have been necessary operating funds,
the Company may draw upon the LOC to maintain operations and maintain
the aim of the LOC which is to develop air commerce between the Baltic
Region and the United States. The Company does not project zero revenue
from its flights operations, but rather expects that its revenues will
be more than sufficient to repay total liabilities over two years.

The DOT has authority to withdraw the US airline authority from any US
airline should it find that non-US citizens directly or indirectly
control that airline.  Since the Lateko Bank is a foreign entity, in
the event of default, the Company is required to notify the DOT.  Since
the LOC specifically states that its goal is to develop international
trade associated with cargo and passengers' transport by air between
the United States and the Baltic Region, impliedly the value of the
Company to Lateko lies in its U.S. airline certification.  If the
Company should draw against the Lateko Bank credit facility and
subsequently default on repayment, and although in management's opinion
the Company and Lateko should have a continued common interest in
retaining U.S. control of the airline, it is not certain what action
Lateko would take in the event the Company defaults.  

Liquidity and Capital Resources     

Upon completion of the Offering, assuming net proceeds in addition to
cash as of June 30, 1997, the Company will have cash and cash
equivalents of $5,426,153, total assets of $5,822,243 and total
liabilities of $843,572. Accordingly, the Company's debt to total
capitalization ratio will be 1:6.

The Company expects to meet its short-term liquidity requirements from
the proceeds of the Offering, as herein stated, and from cash flow
provided by operating revenue when the Company commences its service on
the JFK - St. Petersburg route.  From its operating revenues the
Company intends to retire its remaining total liabilities of $753,572
(net of $90,000 reserve from IPO proceeds,  See Use of Proceeds,)
within two years. Any early calling for payment of these liabilities
may not seriously impact the Company's operations because the Company
has a $6.5 million LOC operational back up, which is an amount greater
than total liabilities. If the Company fails to meet the requirements
necessary to make the $6.5 million LOC available, any early calling for
repayment of liabilities may impact the Company's operations.  For
details of the requirements and the Company's compliance with them, see
Risk of Default to Lateko Bank.   Of total liabilities, half a million
is owed to approximately 50 outside entities many of whom will continue
being suppliers to the Company when it becomes operational, and the
balance is owed to shareholders who have a vested interest in the
Company's success ("Results During Development").  Therefore, the
Company does not expect early calling or the need to draw against its
LOC. The Company has no current plans to use the LOC.

Additional potential sources of financing include: (i) Over-Allotment
of $848,250 (after deducting Underwriting discounts and the 3%
allowance), up to $19,500,000 from the exercise of Warrants, and (ii)
up to $3,482,500 from the exercise of Representative's Warrants 
(including the exercise of the underlying Warrants).  The Company's
international route authority may or may not have resale value within
the airline industry after one year's operation by the Company.  The
Company has two registered trademarks: "BALTIA" and "VOYAGER CLASS." 

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.

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. 


        SELECTED FINANCIAL AND OPERATING DATA

The following table sets forth selected historical data for the Company
as of and for the six months ended June 30, 1996 and 1995 (unaudited),
and years ended December 31, 1996 and 1995, as well as results since
inception to June 30,1997.  The financial data of the Company for the
fiscal years ended December 31, 1996 and 1995, are derived from the
Company's audited financial statements.  The information below should
be read in conjunction with "Management Discussion and Analysis". 


<TABLE>
<CAPTION>
                               Six Months Ended           Years Ended             Aug 24,1989  
                                   June 30,               December 31,          (Inception) to
                                                                                 
                                     1997         1996        1996       1995     June 30,1997  
STATEMENT OF OPERATION:                                                        
(Development Stage) 

<S>                               <C>         <C>          <C>        <C>          <C>      
Operating income  . . . . . .            0           0           0           0              0 
                                                                       
Expenses:                                                                      
   General and administrative      $43,646     $24,174     $92,749     $98,017     $2,047,316 
   Professional fees  . . . .            0       2,650      77,817     279,543      1,927,320 
   Service contributions  . .            0      58,876           0     397,856      1,352,516 
   Training expenses  . . . .            0           0           0           0        225,637 
   Abandoned fixed asset acq             0           0           0           0        205,162 
   Salaries and benefits  . .            0           0           0           0        137,702 
   Interest expense, net  . .            0      34,090      68,120     134,635        392,363 
Net (loss) during development     $(43,646)  $(119,790)  $(238.686)  $(910,051)   $(6,288,016)
                                               

Net (loss) per share  . . . .        $(.00)      $(.03)      $(.05)      $(.20)        $(1.29)

</TABLE>
                                                               June 30, 1997  
Stockholders' per share deficit . . . . . . . . . . . . . . . . . .   $(.09) 
Common shares outstanding . . . . . . . . . . . . . . . .  . . .   4,885,000

BALANCE SHEET DATA:
(Development Stage)  June 30, 1997

Working capital (deficit) . . . .      $(837,419)
Total assets  . . . . . . . . . .        402,243 
Total liabilities . . . . . . . .        843,572 
Stockholders' deficit . . . . . .       (441,329)




<AUDIT-REPORT>

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

                            BALTIA AIR LINES, INC.
                             FINANCIAL STATEMENTS
<PAGE>
                              TABLE OF CONTENTS

      Contents                                              Page

      Independent Auditors' Report                          F-2

      Financial Statements:

        Balance Sheet - December 31, 1996 and
          (Unaudited) June 30, 1997                         F-3

        Statement of Operations - Years ended
          December 31, 1996 and 1995 and the 
          (Unaudited) six months ended June 30, 
          1997 and 1996                                     F-4

        Statement of Cash Flows - Years ended
          December 31, 1996 and 1995 and the 
          (Unaudited) six months ended June 30, 
          1997 and 1996                                  F-5 - F-6

        Statement of Changes in Stockholders' 
          Deficit - Years ended December 31, 1996 
          and 1995 and the (Unaudited) six months
          ended June 30, 1997                            F-7 - F-8

        Notes to the Financial Statements - Years
          ended December 31, 1996 and 1995 and the
          (Unaudited) six months ended June 30, 1997     F-9 - F- 18


                                     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, 1996 and  1995 and
      the related statements of operations, cash flows, and changes  in
      stock-holders'  deficit for  the  year ended  December 31,  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, 1996  and 1995 and
      the results  of its operations  and its cash  flows for  the year
      ended December  31, 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 discussed in
      Note 1  (C) to the financial statements,  the Company has been in
      the development stage since its inception on August 24, 1989.  If
      the Company does not raise sufficient working capital, such as is
      expected  from  the  Company's  proposed Public  Offering  as  is
      discussed in  Note 6 (E),  commence scheduled revenue  service on
      its New  York  to St.  Petersburg,  Russia route  and  ultimately
      achieve profitable  operations, there is substantial  doubt as to
      its  ability to  continue  as a  going  concern.   The  financial
      statements  do  not  include  any  adjustments  relating  to  the
      recoverability  and class-ification  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 
       
                         
      September 8, 1997 


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

                                BALANCE SHEET
                                                 June 30,                  
                                                  1997              December 31,
                                               (Unaudited)          1996

 <S>                                           <C>               <C>
 Assets

 Current Assets:
   Cash                                      $       6,153     $        340
   Prepaid expenses                                396,090                0

     Total Assets - Current                  $     402,243     $        340

 Liabilities and Stockholders' Deficit

 Current Liabilities:
   Accounts payable                          $     554,405     $    553,405
   Accounts payable to 
     stockholders                                   65,317          176,012 
   Accrued expenses to
     stockholders                                        0          270,928
   Interest payable to
     stockholders                                        0          321,168
   Other liabilities to
     stockholders                                        0           22,142
   Notes payable to stock-
     holders                                       223,850        1,223,391
    Total current liabilities                      843,572        2,567,046

 Accounts payable to stock-
   holder                                                0        1,628,432
    Total liabilities                              843,572        4,195,478

 Commitments and contingencies

 Redeemable common stock                                 0          400,000

 Stockholders' deficit:
   Preferred stock - no par value; 
     15,000 shares authorized, 0 
     shares issued and outstand-
     ing at June 30, 1997 and 
     December 31, 1996, respectively                     0                0
   Common stock - $.0001 par
     value; 100,000,000 shares
     authorized, 4,885,000 and
     4,350,000 shares issued and 
     outstanding at June 30, 1997
     and December 31, 1996, respectively               488              435 
   Additional paid-in capital                    5,846,199        1,648,797
   Deficit accumulated during
     development stage                          (6,288,016)      (6,244,370)
     Total stockholders' 
       deficit                                  (  441,329)      (4,595,138)
     Total liabilities and 
       stockholders' deficit                  $    402,243     $        340

 </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

                                                            
                                                            
                        Six Months                               August  24,
 1989
                      Ended June 30,         Years Ended      (Inception) to
                      1997      1996         December 31,      June 30, 1997
                       (Unaudited)          1996       1995     (Unaudited) 

 <S>                 <C>       <C>        <C>        <C>         <C>
                 
 Revenues          $      0   $      0   $       0  $       0  $          0

 Expenses
   General and 
    Administrative   42,646     24,174      92,749     98,017     2,185,018
   Professional   
    fees              1,000      2,650      77,817    279,543     1,927,320
   Service 
    contributions         0          0           0    397,856     1,352,516
   Training Expense       0          0           0          0       225,637
   Abandoned fixed 
    assets                0          0           0          0       205,162
  
     Total expenses  43,646     26,824     170,566    775,416     5,895,653 

 Interest expense         0     34,060      68,120    134,635       392,363
  
 Net loss          $(43,646)  $(60,884)  $(238,686) $(910,051)  $(6,288,016)

 Net loss per 
   common share      $(0.01)     (0.01)     $(0.05)    $(0.20)       $(1.29)

</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
                        Six Months                                August 24,
 1989
                      Ended June 30,         Years Ended      (Inception) to
                      1997      1996         December 31,      June 30, 1997
                       (Unaudited)          1996       1995     (Unaudited) 
 <S>                <C>         <C>        <C>       <C>        <C>
 Cash flows from 
  operating activities:                

 Net loss          $(   43,646) $(60,884) $(238,686) $(910,051) $(6,288,016)
  Adjustment to 
  reconcile net 
  loss to net cash 
  provided by oper-
  ations:
   Depreciation              0         0          0          0      219,410
   Contributed 
     services          293,070         0          0    397,856    1,645,586
   (Increase) in 
    prepaid expense (  396,090)        0          0          0   (  396,090)
   Increase(Decrease)
    in accounts 
    payable         (  109,695)  (19,150)    38,217    237,963    2,248,154
   Increase(Decrease)
    in accrued
    expenses        (  270,928)        0          0          0            0
   Increase(Decrease)
    in other 
    liabilities     (   22,142)        0          0          0            0
   Increase(Decrease)
    in interest
    payable         (  321,168)   34,060     68,120     67,990            0

      Net cash 
      (used) for 
      operating 
      activities    (  870,599)  (45,974)  (132,349)  (206,242)  (2,570,956)

 Cash flows from invest-
  ing activities:

   Purchase of 
    equipment                          0          0          0   (  219,410)

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

 Cash flows from 
   financing activities:

     Proceeds from 
     shareholder 
     loans (net)    (2,627,973)   55,500    125,776     40,326   (1,404,582)
 </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
                        Six Months                               August  24, 1989
                      Ended June 30,         Years Ended      (Inception) to
                      1997      1996         December 31,      June 30, 1997
                       (Unaudited)          1996       1995     (Unaudited) 

     <S>            <C>         <C>       <C>        <C>        <C>   
     Proceeds from 
     issuance of 
     common stock  $        53  $      0  $       0  $ 107,851  $ 1,133,272 
     Increase
       paid-in 
       capital       3,504,332         0          0     63,497    3,567,829
     Purchase and 
      retirement 
      of treasury
      stock                  0         0          0          0   (  500,000)

        Net cash 
        provided 
        from
        financing 
        activities     876,412    55,500    125,776    211,674    2,796,519

 Net increase 
  (decrease)
  in cash                5,813     9,526   (  6,573)     5,432        6,153

 Cash at begin-
  ning of period           340     6,913      6,913      1,481            0

 Cash at end 
  of period        $     6,153  $ 16,439  $     340  $   6,913  $     6,153

 Supplemental Cash
 Flow Information  

 Cash paid for 
   interest        $         0  $      0  $       0  $       0  $         0

 Cash paid for 
   income taxes    $         0  $      0  $      52  $     677  $     3,437

 Non-Cash Items:

   Reclassification
     of redeemable
     common stock  $         0  $      0  $       0  $  400,00  $   400,000

   Surrender of rights
     to redeem common
     stock         $(  400,000) $      0  $       0  $       0  $(  400,000)
     
   Contributed    
     services      $   293,070  $      0  $       0  $ 397,856  $ 1,645,586
    
 </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
                                                 Accumulated     
                                   Additional     During the      Total
                 Common Stock       Paid-in      Development  Stockholders'
             Shares   Par Value     Capital         Stage        Deficit   

 <S>           <C>       <C>         <C>          <C>            <C>   
 August 24,
 1989
 (Inception)
 through
 December 31,
 1992      
 (Unaudited)  1,116,400      $112    $   978,428   $(4,190,584)  $(3,212,044)

 Issuance 
 of Common
 Stock        2,737,350       273         42,063             0        42,336

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

 Balance at
 December 
 31, 1993     3,853,750      $385    $ 1,020,491   $(4,457,473)  $(3,436,597)

 Issuance 
 of Common
 Stock          190,100      $ 19    $     1,883   $         0   $     1,902

 Contributed 
 Capital              0         0        457,250             0       457,250

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

 Balance at
 December 
 31, 1994     4,043,850      $404    $ 1,479,624   $(5,095,633)  $(3,615,605)

 Issuance 
 of Common
 Stock          281,150      $ 28    $   107,820   $         0   $   107,848

 Issuance 
 of Common
 Stock as
 non-refund-
 able prepaid 
 interest        25,000         3         63,497             0        63,500

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

 </TABLE>
 The accompanying notes are an integral part of the financial statements.
                                     F-7
<PAGE>
 <TABLE>
 <CAPTION>
                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT


                                                   Deficit
                                                 Accumulated     
                                   Additional     During the      Total
                 Common Stock       Paid-in      Development  Stockholders'
             Shares   Par Value     Capital         Stage        Deficit   


 <S>          <C>            <C>     <C>           <C>           <C>
 Contributed 
 Capital              0      $  0    $   397,856   $         0   $   397,856

 Net Loss             0         0                   (  910,051)   (  910,051)

 Balance at
 December 
 31, 1995     4,350,000      $435    $ 1,648,797   $(6,005,684)  $(4,356,452)

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

 Balance at
 December 
 31, 1996     4,350,000      $435    $ 1,648,797   $(6,244,370)  $(4,595,138)


 (Unaudited)

 Issuance 
 of Common
 Stock          535,000      $ 53    $ 3,504,332   $         0   $ 3,504,385

 Contributed 
 Capital              0         0        293,070             0       293,070

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

 Net Loss             0         0              0    (   43,646)   (   43,646)

 Balance at
 June 30, 
 1997         4,885,000      $488    $ 5,846,199   $(6,288,016)  $(  441,329)

 </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. Kennedy 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 sustained sub-
  stantial loses during the development stage since its  inception and has an 
  accumulated deficit at June 30, 1997 and  December 31, 1996 of $6,288,016
  and $6,244,370, respectively.

  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.

  If the Company is unable to raise sufficient capital and/or  obtain      
  sufficient financing such as described in Note 6 (E), Proposed  Public   
  Offering, it is  doubtful that  it will be  able to  commence scheduled  air
  line service and  thus, generate operating revenues, which in  management's
  judgement,  shall be adequate  to fund all  current expenses and retire
  current outstanding debt.

  As of  June 30,  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 Expense

On June 23, 1997 the Company entered into an agreement with Kent Trading,
Inc., a media placement company whereby, the Company exchanged 65,000 common 

                                     F-9
<PAGE>
                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO FINANCIAL STATEMENTS

 2. ACCOUNTING POLICIES (Continued)

 (B) Prepaid Expense (Continued)

 stock shares  for future media placements in various international and  
 national media publications,  with a current value of $396,090 as based on
 the related publications 1997 advertising rates.  Kent Trading, Inc. may
 terminate the Agreement if the  closing of the proposed Public Offering has  
 not occurred prior to December 31, 1997.

 At June 30, 1997, the Company has recorded a  prepaid asset in the amount 
 of $396,090, the current value of the future media placements.  At such time
 as the Company utilizes the media  placements, the Company will charge of  
 the related costs to expense.

 (C) Property & 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 and 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 passen- 
 ger 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
 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.

                                    F-10
<PAGE>
                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO FINANCIAL STATEMENTS

 2. ACCOUNTING POLICIES (Continued)

 (D) Start-up Activities (Continued)

 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 July 24, 1997, the Company applied for an additional six (6) month     
 extension of time to commence operations, through February 7, 1998.

 Obtaining Federal Aviation Administration air carrier certification and   
 meeting Department of  Transportation financial requirements are prerequi-
 sites 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 liabil-
 ities  to which they  relate.  Deferred taxes arising from temporary differ- 
 ences 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.

 3. RELATED PARTY TRANSACTIONS

 The Company's legal  counsel, Steffanie Lewis, of the International Business 
 Law Firm, P.C. owns 380,000 shares of common stock at June 30, 1997 and 
 80,000  shares of common stock at December 31, 1996 or approximately 7.78% 
 and 1.84%, respectively, of the Company's issued and outstanding common stock. 
 The 300,000 

                                F-11
<PAGE>
                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO FINANCIAL STATEMENTS

 3. RELATED PARTY TRANSACTIONS (Continued)
 
 shares  were issued in June 1997 in exchange for legal work performed in 
 connection  with various certifications, authorities and financial matters. 
 The 80,000 shares were issued 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, 1996, the total
 legal costs incurred in the amount of $1,757,262 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 (Unaudited) 
 six months ended June 30, 1997, 1996 and years ended December 31, 1996, and
 1995 total $0, $0, $2,100, $234,543, respectively.

 At June 30, 1997 and December 31, 1996 the account payable to this shareholder 
 totals $0 and $1,628,432, respectively.

 On June 30, 1997, Steffanie Lewis was issued 300,000 common shares at par, 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 
 6 (D) totaling $150,000 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 June 30, 1997 
 (Unaudited) and December 31, 1996, total $65,317 and $176,012, respectively.

 On June 23, 1997, Airline Economics International, Inc., a shareholder, was 
 issued 20,000 common shares at par, in exchange for the total due them, in the 
 amount of $110,695.

 Other liabilities to shareholders at June 30, 1997 (Unaudited) and December 31,
 1996, total $0 and $22,142, respectively.

 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.

 4. 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 1/5%),
 from the date of issuance to the date of repayment.

 On June 24, 1997 certain shareholders were issued 150,000 common shares at par,
 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 (Unaudited) six months 
 ended June 30, 1997 and year ended December 31, 1996, totaled $0 and $68,120, 
 respectively.

                                    F-12
<PAGE>
                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                       NOTES TO  FINANCIAL STATEMENTS

 4. NOTES PAYABLE - STOCKHOLDERS (Continued)

 At June 30, 1997 (Unaudited) and December 31, 1996, interest expense related
 to the above incurred since inception totals $321,168, $321,168, respectively.

 In 1996 the Company borrowed net $125,776 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,
 25,000 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 $2.54.

 5. INCOME TAXES

 At December 31, 1996, the Company has a net operating loss carryforward of 
 $4,929,707, which is available to offset future taxable income.  The carry- 
 forwards expire between the year 2005 and 2012. The Company is still liable
 for certain minimum state taxes.

 As of December 31, 1996, a net deferred tax benefit has not been reflected to 
 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.

 6. STOCKHOLDERS' DEFICIT

 (A) Stock Options

  In 1992, the Company granted options to purchase 104,600 shares of common
  stock, at $33.33  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 June 30, 1997, no options 
  have been exercised.

  In July 1997, the Company granted options to purchase 800,000 shares of 
  common stock, at $6.125 per share, to certain of its management.  These
  options are exercisable for a four-year period commencing one year from
  the closing of the Company's public offering.

  As of June 30, 1997, no options have been exercised.

 (B) Retirement of Stock

  On November 4, 1992, the Company issued 25,000 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. All references in the accompanying
  financial statements to the number of common shares issued have been 
  restated to reflect the reverse stock split.

                               F-13       
<PAGE>
                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO FINANCIAL STATEMENTS

 6. STOCKHOLDERS' DEFICIT (Continued)
 
 (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 Global Equities Group, Inc. to underwrite 
  the Company's proposed Public Offering on a firm-commitment basis.

  On June 3, 1997, the Company entered into an agreement with Global Equities
  Group,Inc.  to act as the Managing 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 7 (A) (2).
     
  The Company intends to offer for sale 1,000,000 shares of common stock of 
  $.0001 par value, at a price of $6.125 per share and 3,000,000 Redeemable 
  Common Stock Purchase Warrants at $.125 per Warrant. 

  Each Warrant entitles the holder to purchase one Share for $6.50 during the
  four-year period commencing one year from the date of the proposed Public 
  Offering.  The Company may redeem outstanding Warrants, once they become
  exercisable at a price of $.125 per Warrant on not less then 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.

  The Agreement with the Underwriter sets forth the following terms and 
  conditions in relation to the Company's currently issued and outstanding 
  common stock;

  (1) The Company maintains that on the effective date of the proposed Public
    Offering, the common stock issued and outstanding shall not exceed  
    4,885,000 common shares.

  (2) The Company will not issue or register with the Securities and exchange
      Commission any additional common stock, options, warrants or conver- 
      tible securities for a period of twenty-four (24) consecutive months 
      after  the closing date of the proposed Public Offering without the 
      consent of the Managing Underwriter.

  (3) Holders of at minimum, ninety-five percent (95%) of the issued and out-
      standing common stock, warrants and any securities convertible in to
      common stock prior to the proposed Public Offering, will have a signed 
      two (2) year Lock-up Agreement on their respective holdings.

 (E) Stock Buy-Back Requirements

  As of  December 31, 1996 the Company was required to buy-back 50,000 shares 
  $8 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 as referred in Note 6 (D) (3), and was denied such a waiver by the  
  Managing Underwriter. 


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

 6. STOCKHOLDERS' DEFICIT (Continued)

 (E) Stock Buy-Back Requirements (Continued)

  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.

  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 connections 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.

 7. 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 (Unaudited) six months ended June 30, 1997 and 1996 
      and years ended December 30, 1996 and 1995 totaled $7,200, $7,200,  
      $13,200 and $3,600, respectively.

      In January 1993, the Company leased office space form its President at 
      his residence.  The lease term is on a month to month basis through 
      December 31, 1997.  Rent expense charged to operations for the   
      (Unaudited) six months ended June 30, 1997 and 1996 and years  ended 
      December 30, 1996 and 1995 totaled $2,287, $2,400,  $5,392 and $3,968, 
      respectively.

  (2) Underwriter - Proposed Public Offering

      On June 3, 1997, the Company entered into an agreement with Global 
      Equities Group, Inc. to act as the Managing  Underwriter in connection  
      with a proposed Public Offering of securities.

                                    F-15
<PAGE>
                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO FINANCIAL STATEMENTS

 7. COMMITMENTS AND CONTINGENCIES (Continued)

 (A) Commitments (Continued)

  (2) Underwriter - Proposed Public Offering (Continued)

      The Agreement sets forth the following terms and conditions;

      (a) The Managing Underwriter shall receive a dealers 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 nonaccountable expense  allowance of three percent
          (3%) of the total offering.

     (c) The Managing Underwriter shall receive upon signing the Agreement
         an advance on the non-accountable expenses in the amount of $20,000,
         which is  part of item 2 (B).  If the offering is canceled for any
         reason, the advance will be applied to cover the  Managing Under- 
         writer's accountable out-of-pocket expenses only.

      (d)  The Company shall sell to the Managing Underwriter an option to 
          purchase 100,000 common shares at a price of $8.575 per  share and  
          300,000 Warrants at a price of $.175 per Warrant, at closing of the
          proposed Public Offering.  The Warrants are exercisable over a 
          period of four years (4) commencing one year (1) from the date of 
          the closing of the proposed Public Offering.

  (3) Line of Credit

     On December 12, 1995, the Company was granted a credit line of    
     $6,500,000 through January 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.

 (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.

                                    F-16
<PAGE>
                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO FINANCIAL STATEMENTS

 7. COMMITMENTS AND CONTINGENCIES (Continued)

 (B) Contingencies (Continued)

  (1) Scandinavian Airline Systems (Continued)

     In 1992, the Company forwarded a deposit to SAS for  the purchase of a
     Boeing 767 aircraft.  SAS incurred costs totaling $114,000 beyond the 
     initial deposits for the preparation  of the aircraft for the delivery
     and subsequent de-modification 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
     reversed the lower courts Order and the case was dismissed.

  (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.  The Flight coupon in not a security.  
     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 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 

                                    F-17
<PAGE>
                            BALTIA AIR LINES, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO FINANCIAL STATEMENTS

 7. COMMITMENTS AND CONTINGENCIES (Continued)

 (B) Contingencies (Continued)

(4) Compensation (Continued)

   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 compen-   
   sation 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' agree-  
   ment for the temporarily reduced salaries was documented.

                                    F-18
</AUDIT-REPORT>
<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

The management of a US airline is subject to review by the
Department of Transportation.  Having examined the Company's
management, its background and qualifications, the Department of
Transportation found the Company's management fit to operate the
proposed routes as a US flag carrier.  (DOT Order 96-1-24, and
96-2-51).  In addition to meeting requirements specific to the
DOT, certain management personnel are also qualified by the FAA
for specific positions.

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, Chairman and 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 restrict 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 three years, at the
     option of the Lead-Manager.  Officers and Directors
     have a one year term and are elected at, and after, the
     Annual Meeting in August.
</FN>
</TABLE>

Igor Dmitrowsky has served as Chairman of the Board and President
of the Company since its inception in August 24, 1989.  In 1990,
he testified before the House Aviation Subcommittee on the
implementation of the United States' authorities by US airlines,
and was instrumental in 1991 in obtaining the DOT authority to
serve St. Petersburg, Riga, Minsk, Kiev and Tbilisi, with backup
authority for Moscow.  In 1996 Mr. Dmitrowsky was instrumental in
the Company's obtaining authority to provide air service from JFK
to St. Petersburg.  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 interests and has financed aircraft and
automotive projects, speaks fluent Latvian and Russian, and
together with the staff of the Company, has traveled extensively
in the republics of the former Soviet Union.

Walter Kaplinsky, a US citizen, has been with the Company since
1990.  In 1993, Mr. Kaplinsky became secretary and a director of
the board.  Mr. Kaplinsky has worked on behalf of the Company in
American - Russian marketing, and financing.  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.  During the 1990 DOT Route
Authority proceedings, he established the Company's relations
with business and ethnic communities, generating public support
for the Company's bid for routes to the former Soviet Union.  Mr.
Glynn has also been active in the financing of the Company.  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. 
Mr. Rukmanis represents the Company and makes service
arrangements for the Company in St. Petersburg.  During the
Company's certification process in 1992, he worked at the
Company's JFK office to prepare the Company's overseas services. 
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.  In 1992 she helped organize office systems at
JFK and helped formulate the Company's employment policy,
passenger service standards, and cost accountability.  Ms.
Schiff-Spielman has owned Schiff Dental Labs, New York, NY, for
the past fifteen years.

Significant Personnel

Nina Morozova, 47 years of age, a US citizen, serves as Director
of Accounting.  She joined the Company in 1992.  Prior to joining
the Company, from 1978 through 1991, Ms. Morozova was accounting
manager at Pan American Airways.  From 1970 through 1978, Ms.
Morozova was manager economics at Scandinavian Airlines System.

Robert Hughes, 64 years of age, a US citizen, serves as Director
of Technical Services.  He joined the Company in 1992.  Prior to
joining the Company, Mr. Hughes operated Arel Aviation Service,
Inc., an FAA approved repair station which provided services in
aircraft component repairs, acceptance of large aircraft,
inspection of records, maintenance review, and aircraft
appraisal.  Mr. Hughes was one of the co-founders of New York Air
and, from 1980 to 1982, served as vice president of operations. 
From 1978 through 1989, Mr. Hughes was the director of product
support and purchasing at Seaboard World Airlines.

Jonathan Hill,  44 years of age, a US citizen, is Director of
Sales and Reservations.  He joined the Company in 1992.  Prior to
joining the Company, from 1988 to 1992, Mr. Hill was Marketing
Manager for Aeroflot, USA.  Since 1985, Mr. Hill has also been a
lecturer teaching PARS Computer Reservations System (CRS) to
airline reservations specialists at the Travel and Tourism
Department of Kingsborough College.

Victoria Charlton, 54 years of age, a citizen of UK, is Director
of Promotion & Advertising.  She joined the Company in 1992.  Ms.
Charlton has a background in international promotions.  In 1992,
she organized the Company's promotional sponsorship of the St.
Petersburg Festival at the Met.  During various periods from 1975
through 1992, Ms. Charlton served as executive director of
Gateway Projects representing merchandising rights for Paramount
Studios, LCA (Warner), MCA (Universal Studios, and De Laurentis
Studios).  Ms. Charlton has presented exhibitions from the
Hermitage Museum in St. Petersburg, and organized performances
for Russian artists and the leading companies in the US.  In 1993
she organized a lecture tour for Mikhail Gorbachev in England.

Captain John Hodge, 50 years of age, a US citizen, will serve as
Director of Flight Standards, pending completion of the Company's
financing.  Presently, he maintains his professional
qualifications with North American Airlines.  Mr. Hodge has
twenty years experience in aviation operations, including FAA Air
Carrier Inspector, Check Airman, Operations Group Coordinator,
Regional Investigator in charge during accident investigation of
Continental Airlines Flight 1713, Regional Staff Specialist
dealing with rules and regulations, Flight Standard District
Officer, Flight Instructor, CFI-A & CFI-I, wind tunnel test
background at McDonnell Douglas, flight test background and data
analysis at McDonnell Douglas.




Item 10.  Executive Compensation.  Management, Compensation.

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 the period of 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>

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 <FN2>.  Each person named in the table has
sole voting and investment power with respect to all shares shown
as beneficially owned by such person.  The percentage owned after
the Offering reflects the sale of 1,000,000 Shares and 3,000,000
Warrants <FN1>. 
<CAPTION>
                            Common Shares             
                          Beneficially Owned  Percent of Total     Percent of Total
                          After the Offering   Before Offering     After Offering <FN1>
 Directors and Officers

 <S>                                 <C>                 <C>                <C>    
 Igor Dmitrowsky . . . . . .         3,034,100           62.1%               51.6%
 63-26 Saunders St., Suite 7I
 Rego Park, NY 11374
 Walter Kaplinsky  . . . . .           146,500           3.0%                 2.5%
 2000 Quentin Rd.
 Brooklyn, NY 11229 

 Brian Glynn . . . . . . . .           100,000           2.0%                 1.7%
 148 Claremont Rd.
 Bernardsville, NJ 07924

 Andris Rukmanis . . . . . .            51,000           1.0%                 0.9%
 Kundzinsala, 8 Linija 9.
 Riga, Latvia LV-1005
 Anita Schiff-Spielman . . .             4,500           0.1%                 0.1%
 1149 Kensington Rd.
 Teaneck, NJ 07666

 All directors and officers          3,336,100           68.2%               56.8%
(Five persons)
<FN>
<FN1>
(1) Does not reflect the exercise of Over-Allotment Warrants or
Representative's Warrants.

<FN2>
(2)  Steffanie J. Lewis, The IBLF P.C., 3511 North 13th St.,
Arlington, VA 22201, owns 380,000 shares which is 7.8% of
total shares before the Offering and 6% of total shares
after the Offering.
</FN>
</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