U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC  20549


                                  FORM 10-KSB

(Mark One)
[x]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
     For the Fiscal Year Ended:  December 31, 2003

                                       OR

[  ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934
      For the transition period from ___________ to       ___________.

Commission File Number:  0-26588

                          BALTIC INTERNATIONAL USA, INC.
                 (Name of small business issuer in its charter)

                  Texas                                   76-0336843
     (State or other jurisdiction                      (IRS Employer
     of incorporation or organization)                Identification No.)

                          2925 Briarpark Dr., Suite 930
                               Houston, Texas 77042
           (Address of principal executive offices, including zip code)

                                 (713) 961-9299
                 (Issuer's telephone number, including area code)


     Securities registered under Section 12(b) of the Exchange Act:  None

     Securities registered under Section 12(g) of the Exchange Act:

                           Common Stock, $.01 par value
                                    Warrants
                                (Title of Class)

Common Stock, $0.01 par value
Warrants
(Title of Class)

     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.  Yes [  ]
No [X]

     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 this Form 10-
KSB or any amendment to this Form 10-KSB.  [X]

     Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).  Yes [X] No [ ].

     Issuer's revenues for the year ended December 31, 2003 were $0.

     The issuer's common stock has had limited trading volume. The aggregate
market value was $39,035 as of February 28, 2007 for stock held by non-
affiliates, based on the last trading price.

     As of February 28, 2007, there were 10,975,760 shares of common stock
outstanding.


     Transitional  Small  Business  Disclosure  Format:  Yes  [ ]  No  [X]


                                TABLE OF CONTENTS
                                                                           Page

PART I
     Item 1.   Description of Business                                       3

     Item 2.   Description of Property                                       5

     Item 3.   Legal Proceedings                                             5

     Item 4.   Submission of Matters to a Vote of Security Holders           5


PART II
     Item 5.   Market for Common Equity and Related Stockholder Matters      6

     Item 6.   Management's Discussion and Analysis or Plan of Operation     6

     Item 7.   Financial Statements                                         12

     Item 8.   Changes In and Disagreements With Accountants on
                 Accounting and Financial Disclosure                        12

     Item 8A.  Controls and Procedures                                      12

     Item 8B.  Other Information                                            12


PART III
     Item 9.   Directors and Executive Officers of the Registrant           13

     Item 10.  Executive Compensation                                       14

     Item 11.  Security Ownership of Certain Beneficial Owners and
                 Management                                                 15

     Item 12.  Certain Relationships and Related Transactions               16

     Item 13.  Exhibits                                                     17

SIGNATURES



This 10-KSB together with those of the years 2001 through 2006 are intended to
bring our required filings up to date. The financial information contained
herein relates to the specific year of the required filing, but most of the
textual information is based on the now current factual information.


PART I

Item 1.     DESCRIPTION OF BUSINESS

     Baltic International USA, Inc. ("BIUSA") is a Texas corporation that has
provided capital, management, and technical services to start-up and
established private companies.  In most instances, we are directly involved in
management, and in all instances assists in allocation of capital either
directly from us or through the investment of third parties. BIUSA has not
taken significant profits or management fees from these investments.

     During 1999, we decided to sell most of our business interests in Eastern
Europe and to focus on utilizing our assets to achieve profitability by
acquiring business operations based in the United States.  We have limited cash
resources available for investment purposes.

Advanced Reclamation Company

     In February 2000, we purchased the units of Advanced Reclamation Company,
L.L.C. ("ARC") from the Nicol Family Partnership.  We purchased all of the
units of ARC for cash of $400,000, a total of 500,000 common shares, a note
payable to seller of an additional $400,000 and an earnout agreement.  ARC is a
complete refrigerant management company.  ARC provides a full range of
refrigerant services including, but not limited to, recovery, reclamation, and
the sale of new or reclaimed refrigerants.  In March 2003, we transferred
substantially all of the assets of ARC to an affiliate of the Nicol Family
Partnership ("NFP") in exchange for the release of all claims and liabilities
from Baltic and ARC to NFP.  The affiliate of NFP also assumed certain
liabilities of ARC.  We issued 1,000,000 shares of common stock in connection
with this transaction.

Competition

     Our business ventures face competition from other companies and
individuals.  Businesses that we may operate in the future will compete with
other entities, many of which may have greater financial, marketing and
technical resources.

Current Status As A Blank Check Shell Company

     Since March 2003, after we transferred substantially all of the assets of
ARC to an affiliate of the NFP, we have been classified as a "shell company".
Rule 12b-2 of the Securities and Exchange Act of 1934, as amended (the
"Securities Act") defines "shell company," as a company (other than an asset-
backed issuer), which has "no operations; and either no or nominal assets;
assets consisting of solely cash and cash equivalents; or assets consisting of
any amount of cash and cash equivalents and nominal other assets."

     We currently plan to investigate and, if such investigation warrants,
acquire a target company or business seeking the perceived advantages of being
a publicly held corporation.  Our principal business objective for the next 12
months and beyond, will be to achieve long-term growth potential through a
combination with a business rather than immediate, short-term earnings.  We
will not restrict our potential candidate target companies to any specific
business, industry or geographical location and, thus, may acquire any type of
business.

     The analysis of new business opportunities has and will be undertaken by
or under the supervision of our executive officers.  As of the date of this
filing, we have not entered into any definitive agreement with any party, nor
have there been any specific discussions with any potential business
combination candidate regarding business opportunities for us.  In our efforts
to analyze potential acquisition targets, we will consider the following kinds
of factors:

     (a)  Potential for growth, indicated by new technology, anticipated market
          expansion or new products;

     (b)  Competitive position as compared to other firms of similar size and
          experience within the industry segment as well as within the industry
          as a whole;

     (c)  Strength and diversity of management, either in place or scheduled
          for recruitment;

     (d)  Capital requirements and anticipated availability of required funds,
          to be provided by us or from operations, through the sale of
          additional securities, through joint ventures or similar arrangements
          or from other sources;

     (e)  The cost of participation by us as compared to the perceived tangible
          and intangible values and potentials;

     (f)  The extent to which the business opportunity can be advanced;

     (g)  The accessibility of required management expertise, personnel, raw
          materials, services, professional assistance and other required
          items; and

     (h)  Other relevant factors.

     In applying the foregoing criteria, no one of which will be controlling,
our management will attempt to analyze all factors and circumstances and make a
determination based upon reasonable investigative measures and available data.
Potentially available business opportunities may occur in many different
industries, and at various stages of development, all of which will make the
task of comparative investigation and analysis of such business opportunities
extremely difficult and complex.  Due to the limited capital we have available
for investigation, we may not discover or adequately evaluate adverse facts
about the opportunity to be acquired.

Form Of Acquisition

     The manner in which we participate in an opportunity will depend upon the
nature of the opportunity, our respective needs and desires as well as those of
the promoters of the opportunity, and the relative negotiating strength of us
and such promoters.

     It is likely that we will acquire our participation in a business
opportunity through the issuance of common stock or other securities.  This
could result in substantial additional dilution to the equity of those who were
our shareholders prior to such reorganization.  Our present shareholders will
likely not have control of a majority of our voting shares following a
reorganization transaction.  As part of such a transaction, all or a majority
of our directors may resign and new directors may be appointed without any vote
by shareholders.

     In the case of an acquisition, the transaction may be accomplished upon
the sole determination of our management without any vote or approval by
shareholders.  In the case of a statutory merger or consolidation directly
involving the Company, it will likely be necessary to call a shareholders'
meeting and obtain the approval of the holders of a majority of the outstanding
shares.  The necessity to obtain such shareholder approval may result in delay
and additional expense in the consummation of any proposed transaction and will
also give rise to certain appraisal rights to dissenting shareholders.  Most
likely, management will seek to structure any such transaction so as not to
require shareholder approval.

     It is anticipated that the investigation of specific business
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require substantial
management time and attention and substantial cost for accountants, attorneys
and others.  If a decision is made not to participate in a specific business
opportunity, the costs theretofore incurred in the related investigation would
not be recoverable.  Furthermore, even if an agreement is reached for the
participation in a specific business opportunity, the failure to consummate
that transaction may result in our loss of the related costs incurred.

Employees

     We currently employ no persons on a full-time basis and two persons on a
part-time basis.  We have in the past, and will continue in the future, to
employ independent contractors and to make extensive use of our outside
directors and others as consultants.  None of our employees and our
subsidiaries and joint operations are represented by a labor organization.

Item 2.     DESCRIPTION OF PROPERTY

     Our corporate office is currently at the offices of our chief financial
officer in Houston, Texas.

Item 3.     LEGAL PROCEEDINGS

     We are not aware of any material pending legal proceeding by or about us.

Item 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not applicable.


PART II

Item 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Due to our inability to timely file our Form 10-KSB for fiscal 2001, our
common stock was delisted from the OTC Bulletin Board effective with the open
of business on May 22, 2002.  Our common stock is currently traded on the over-
the-counter (OTC) market and is quoted on the Pink Sheets under the symbol
"BISA."  The following table sets forth the high and low sales prices of the
Common Stock for the years ended December 31, 2003 and 2002:


                            2003                       2002
                    -------------------        ---------------------
                      High         Low           High           Low
                      ----         ---           ----           ---

First Quarter       $0.02        $0.02         $0.20          $0.03
Second Quarter       0.02         0.02          0.12           0.0001
Third Quarter        0.02         0.02          0.02           0.0001
Fourth Quarter       0.02         0.0001        0.02           0.0001

     On February 28, 2007, the last sales price for the common stock was
$0.005, and we believe there were approximately 1,000 beneficial holders of our
common stock.

     We have not paid, and do not currently intend to pay, cash dividends on
our common stock.  The current policy of our Board of Directors is to retain
earnings, if any, to provide funds for operation and expansion of our business.
Such policy will be reviewed by our Board of Directors from time to time in
light of, among other things, our earnings and financial position.

Item 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     The following discussions contain forward-looking information.  Readers
are cautioned that such information involves risks and uncertainties, including
those created by general market conditions, competition and the possibility of
events may occur which limit our ability to maintain or improve our operating
results or execute our primary growth strategy.  Although we believe that the
assumptions underlying the forward-looking statements are reasonable, any of
the assumptions could be inaccurate, and there can therefore be no assurance
that the forward-looking statements included herein will prove to be accurate.
The inclusion of such information should not be regarded as a representation by
us or any other person that our objectives and plans will be achieved.

     The following discussion should be read in conjunction with the financial
statements and notes thereto included elsewhere herein.

CURRENT PLAN OF OPERATIONS

     Our current business objective for the next 12 months is to investigate
and, if such investigation warrants, acquire a target company or business
seeking the perceived advantages of being a publicly held corporation.  Our
principal business objective for the next 12 months and beyond will be to
achieve long-term growth potential through a combination with a business rather
than immediate, short-term earnings.  We will not restrict our potential
candidate target companies to any specific business, industry or geographical
location and, thus, may acquire any type of business.

     We do not currently engage in any business activities that provide us with
positive cash flows.  As such, the costs of investigating and analyzing
business combinations for the next approximately 12 months and beyond will be
paid with our current cash on hand and through funds from financing to be
obtained.

     During the next 12 months we anticipate incurring costs related to filing
of Exchange Act reports and costs relating to consummating an acquisition.

     We believe we will be able to meet these costs with our current cash on
hand and additional amounts, as necessary, to be loaned to or invested in us by
our stockholders or other investors.

     We may consider a business which has recently commenced operations, is a
developing company in need of additional funds for expansion into new products
or markets, is seeking to develop a new product or service, or is an
established business which may be experiencing financial or operating
difficulties and is in need of additional capital.  In the alternative, a
business combination may involve the acquisition of, or merger with, a company
which does not need substantial additional capital, but which desires to
establish a public trading market for its shares, while avoiding, among other
things, the time delays, significant expense, and loss of voting control which
may occur in a public offering.

     Any target business that is selected may be a financially unstable company
or an entity in its early stages of development or growth, including entities
without established records of sales or earnings.  In that event, we will be
subject to numerous risks inherent in the business and operations of
financially unstable and early stage or potential emerging growth companies.
In addition, we may effect a business combination with an entity in an industry
characterized by a high level of risk, and, although our management will
endeavor to evaluate the risks inherent in a particular target business, there
can be no assurance that we will properly ascertain or assess all significant
risks.

     We anticipate that the selection of a business combination will be complex
and extremely risky.  Because of general economic conditions, rapid
technological advances being made in some industries and shortages of available
capital, our management believes that there are numerous firms seeking even the
limited additional capital which we will have and/or the perceived benefits of
becoming a publicly traded corporation.  Such perceived benefits of becoming a
publicly traded corporation include, among other things, facilitating or
improving the terms on which additional equity financing may be obtained,
providing liquidity for the principals of and investors in a business, creating
a means for providing incentive stock options or similar benefits to key
employees, and offering greater flexibility in structuring acquisitions, joint
ventures and the like through the issuance of stock.  Potentially available
business combinations may occur in many different industries and at various
stages of development, all of which will make the task of comparative
investigation and analysis of such business opportunities extremely difficult
and complex.

Liquidity and Capital Resources

     At December 31, 2003 we had a working capital deficit of $1,183,270
compared to working capital deficit of $1,041,150 at December 31, 2002.  The
increase in the working capital deficit is due primarily to the increase in
accrued liabilities.  We had shareholders' deficit of $1,183,270 at December
31, 2003.

     Net cash provided by operating activities was $18,494 for 2003, compared
to net cash used of $66,439 for 2002.  Net cash used by investing activities
was $0 for 2003, compared to $325 for 2002.  Net cash used in financing
activities was $19,079 for 2003, compared to net cash provided of $622 for
2002.

     We have incurred operating losses from inception through December 31,
2003.  We incurred operating losses of $32,462 in 2003 and $244,434 in 2002.
At December 31, 2003, we had an accumulated deficit of $15,140,118.

     Management believes that we will be able to achieve a satisfactory level
of liquidity to meet our business plan and capital needs through December 31,
2007.  During 2003 and 2002, we borrowed an aggregate principal amount of
$4,400 and $14,350, respectively, as bridge financing from our officers.  In
connection with these borrowings, we issued warrants to purchase 440 and 1,435
shares of common stock, respectively, at exercise prices of $0.0001 to $0.06
per share.  Additionally, management believes we have the ability to obtain
additional financing from key officers, directors and certain investors.
However, there can be no assurance that we will be able to generate sufficient
liquidity to maintain our operations.

     At December 31, 2003, we had cash of $516.  We have limited cash resources
available and have obligations due and past due.

Critical Accounting Policies

     Our financial statements have been prepared in accordance with accounting
principals generally accepted in the United States.  The preparation of these
financial statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of any contingent assets and liabilities.  On an on-going basis, we
evaluate our estimates, including those related to uncollectible receivable,
investment values, income taxes, the recapitalization and contingencies.  We
base our estimates on various assumptions that we believe to be reasonable
under the circumstances, the results of which form the basis for making
judgments about carrying values of assets and liabilities that are not readily
apparent from other sources.  Actual results may differ from these estimates
under different assumptions or conditions.

Risk Factors

     Our business is subject to numerous risk factors, including the following:

WE HAVE MINIMAL ASSETS AND HAVE HAD NO OPERATIONS AND GENERATED NO REVENUES FOR
APPROXIMATELY THE LAST THREE YEARS.

     We have had no operations nor any revenues or earnings from operations
since March 2003.  We have no significant assets or financial resources.  We
will, in all likelihood, sustain operating expenses without corresponding
revenues, at least until the consummation of a business combination.  This may
result in us incurring a net operating loss which will increase continuously
until we can consummate a business combination with a target company.  There is
no assurance that we can identify such a target company and consummate such a
business combination.

THERE MAY BE CONFLICTS OF INTEREST BETWEEN OUR MANAGEMENT AND OUR NON-
MANAGEMENT SHAREHOLDERS.

     Conflicts of interest create the risk that management may have an
incentive to act adversely to the interests of other investors.  A conflict of
interest may arise between our management's personal pecuniary interest and its
fiduciary duty to our shareholders.  Further, our management's own pecuniary
interest may at some point compromise its fiduciary duty to our shareholders.

THE NATURE OF OUR PROPOSED OPERATIONS IS HIGHLY SPECULATIVE.

     The success of our proposed plan of operation will depend to a great
extent on the operations, financial condition and management of the identified
target company.  While management will prefer business combinations with
entities having established operating histories, there can be no assurance that
we will be successful in locating candidates meeting such criteria.  In the
event we complete a business combination, of which there can be no assurance,
the success of our operations will be dependent upon management of the target
company and numerous other factors beyond our control.

THE COMPETITION FOR BUSINESS OPPORTUNITIES AND COMBINATIONS IS GREAT.

     We are and will continue to be an insignificant participant in the
business of seeking mergers with and acquisitions of business entities.  A
large number of established and well-financed entities, including venture
capital firms, are active in mergers and acquisitions of companies which may be
merger or acquisition target candidates for us.  Nearly all such entities have
significantly greater financial resources, technical expertise and managerial
capabilities than us and, consequently, we will be at a competitive
disadvantage in identifying possible business opportunities and successfully
completing a business combination.  Moreover, we will also compete with
numerous other small public companies in seeking merger or acquisition
candidates.

IT WILL BE IMPRACTICABLE FOR US TO CONDUCT AN EXHAUSTIVE INVESTIGATION PRIOR TO
ANY BUSINESS COMBINATION, WHICH MAY LEAD TO A FAILURE TO MEET OUR FIDUCIARY
OBLIGATIONS TO OUR SHAREHOLDERS.

     Our limited funds and the fact that we only have two part-time officers
will likely make it impracticable to conduct a complete and exhaustive
investigation and analysis of a target company.  The decision to enter into a
business combination, therefore, will likely be made without detailed
feasibility studies, independent analysis, market surveys or similar
information which, if we had more funds available to it, would be desirable.
We will be particularly dependent in making decisions upon information provided
by the principals and advisors associated with the business entity seeking our
participation.  Management may not be able to meet its fiduciary obligation to
us and our shareholders due to the impracticability of completing thorough due
diligence of a target company.  By our failure to complete a thorough due
diligence and exhaustive investigation of a target company, we are more
susceptible to derivative litigation or other shareholder suits.  In addition,
this failure to meet our fiduciary obligations increases the likelihood of
plaintiff success in such litigation.

WE HAVE NO CURRENT AGREEMENTS IN PLACE FOR A BUSINESS COMBINATION OR OTHER
TRANSACTION, AND WE CURRENTLY HAVE NO STANDARDS FOR POTENTIAL BUSINESS
COMBINATIONS.

     We have no current arrangement, agreement or understanding with respect to
engaging in a business combination with a specific entity.  There can be no
assurance that we will be successful in identifying and evaluating suitable
business opportunities or in concluding a business combination.  Management has
not identified any particular industry or specific business within an industry
for evaluation by us.  There is no assurance that we will be able to negotiate
a business combination on terms favorable to us.  We have not established a
specific length of operating history or a specified level of earnings, assets,
net worth or other criteria which we will require a target company to have
achieved, or without which we would not consider a business combination with
such business entity.  Accordingly, we may enter into a business combination
with a business entity having no significant operating history, losses, limited
or no potential for immediate earnings, limited assets, negative net worth or
other negative characteristics.

ANY FUTURE BUSINESS COMBINATION IS HIGHLY DEPENDENT ON THE ACTIONS OF OUR TWO
OFFICERS, WHO MAY ONLY HAVE A LIMITED AMOUNT OF TIME AVAILABLE TO CONCENTRATE
US.

     While seeking a business combination, management anticipates devoting only
a limited amount of time per month to our business.  Our officers have not
entered into a written employment agreement with us and they are not expected
to do so in the foreseeable future.  We have not obtained key man life
insurance on our officers.  Notwithstanding the combined limited experience and
time commitment of management, loss of the services of our officers would
adversely affect development of our business and likelihood of continuing
operations.

THERE IS SUBSTANTIAL DOUBT AS TO WHETHER WE CAN CONTINUE AS A GOING CONCERN.

     We have not generated any revenues since March 2003, nor have we had any
operations since March 2003.  We had an accumulated deficit of $15,140,118 as
of December 31, 2003.  These factors among others indicate that we may be
unable to continue as a going concern, particularly in the event that we cannot
obtain additional financing and/or attain profitable operations.  The
accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty and if we cannot continue as a
going concern, your investment in us could become devalued or even worthless.

REPORTING REQUIREMENTS MAY DELAY OR PRECLUDE AN ACQUISITION.

     Section 13 of the Securities Exchange Act of 1934 (the "Exchange Act")
requires companies subject thereto to provide certain information about
significant acquisitions including audited financial statements for the company
acquired and a detailed description of the business operations and risks
associated with such company's operations.  The time and additional costs that
may be incurred by some target companies to prepare such financial statements
and descriptive information may significantly delay or essentially preclude
consummation of an otherwise desirable acquisition by us.  Additionally,
acquisition prospects that do not have or are unable to obtain the required
audited statements may not be appropriate for acquisition so long as the
reporting requirements of the Exchange Act are applicable.

WE HAVE NOT CONDUCTED ANY MARKET RESEARCH REGARDING ANY POTENTIAL BUSINESS
COMBINATIONS.

     We have neither conducted, nor have others made available to it, market
research indicating that demand exists for the transactions contemplated by us.
Even in the event demand exists for a transaction of the type contemplated by
us, there is no assurance we will be successful in completing any such business
combination.

WE DO NOT PLAN TO DIVERSIFY OUR OPERATIONS IN THE EVENT OF A BUSINESS
COMBINATION.

     Our proposed operations, even if successful, will in all likelihood result
in our engaging in a business combination with only one target company.
Consequently, our activities will be limited to those engaged in by the
business entity which we will merge with or acquire.  Our inability to
diversify its activities into a number of areas may subject us to economic
fluctuations within a particular business or industry and therefore increase
the risks associated with our operations.

ANY BUSINESS COMBINATION WILL LIKELY RESULT IN A CHANGE IN CONTROL AND IN OUR
MANAGEMENT.

     A business combination involving the issuance of our common stock will, in
all likelihood, result in shareholders of a target company obtaining a
controlling interest in the Company.  Any such business combination may require
our shareholder to sell or transfer all or a portion of their common stock.

REDUCTION OF PERCENTAGE SHARE OWNERSHIP FOLLOWING BUSINESS COMBINATION.

     Our primary plan of operation is based upon a business combination with a
business entity which, in all likelihood, will result in our issuing securities
to shareholders of such business entity.  The issuance of previously authorized
and unissued common stock would result in a reduction in percentage of shares
owned by our present shareholders and could therefore result in a change in
control of our management.

FEDERAL AND STATE TAXATION RULES COULD ADVERSELY EFFECT ANY BUSINESS
COMBINATION WE MAY UNDERTAKE.

     Federal and state tax consequences will, in all likelihood, be major
considerations in any business combination we may undertake.  Currently, such
transactions may be structured so as to result in tax-free treatment to both
companies, pursuant to various federal and state tax provisions.  We intend to
structure any business combination so as to minimize the federal and state tax
consequences to both us and the target company; however, there can be no
assurance that such business combination will meet the statutory requirements
of a tax-free reorganization or that the parties will obtain the intended tax-
free treatment upon a transfer of stock or assets.  A non-qualifying
reorganization could result in the imposition of both federal and state taxes
which may have an adverse effect on both parties to the transaction.

WE MAY BE FORCED TO RELY ON UNAUDITED FINANCIAL STATEMENTS IN CONNECTION WITH
ANY BUSINESS COMBINATION.

     We will require audited financial statements from any business entity we
propose to acquire.  No assurance can be given; however, that audited
financials will be available to us prior to a business combination.  In cases
where audited financials are unavailable, we will have to rely upon unaudited
information that has not been verified by outside auditors in making our
decision to engage in a transaction with the business entity.  The lack of the
type of independent verification which audited financial statements would
provide increases the risk that we, in evaluating a transaction with such a
target company, will not have the benefit of full and accurate information
about the financial condition and operating history of the target company.
This risk increases the prospect that a business combination with such a
business entity might prove to be an unfavorable one for us.

WE MAY BE SUBJECT TO FURTHER GOVERNMENT REGULATION WHICH WOULD ADVERSELY AFFECT
OUR OPERATIONS.

     Although we will be subject to the reporting requirements under the
Exchange Act, management believes we will not be subject to regulation under
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
since we will not be engaged in the business of investing or trading in
securities.  If we engage in business combinations which result in our holding
passive investment interests in a number of entities, we could be subject to
regulation under the Investment Company Act.  If so, we would be required to
register as an investment company and could be expected to incur significant
registration and compliance costs.  We have obtained no formal determination
from the Securities and Exchange Commission as to our status under the
Investment Company Act and, consequently, violation of the Act could subject us
to material adverse consequences.

OUR BUSINESS WILL HAVE NO REVENUES UNLESS AND UNTIL WE MERGE WITH OR ACQUIRE AN
OPERATING BUSINESS.

     We have had no revenues from operations for approximately the past three
years.  We have had no operations for approximately the past two years.  We may
not realize any revenues unless and until we successfully merge with or acquire
an operating business.

THE COMPANY MAY ISSUE MORE SHARES IN CONNECTION WITH A MERGER OR ACQUISITION,
WHICH WOULD RESULT IN SUBSTANTIAL DILUTION.

     Our Certificate of Incorporation authorizes the issuance of a maximum of
40,000,000 shares of common stock and a maximum of 500,000 shares of preferred
stock.  Any merger or acquisition effected by us may result in the issuance of
additional securities without shareholder approval and may result in
substantial dilution in the percentage of our common stock held by our then
existing shareholders.  Moreover, the common stock issued in any such merger or
acquisition transaction may be valued on an arbitrary or non-arm's-length basis
by our management, resulting in an additional reduction in the percentage of
common stock held by our then existing shareholders.  Our Board of Directors
has the power to issue any or all of such authorized but unissued shares
without shareholder approval.  To the extent that additional shares of common
stock or preferred stock are issued in connection with a business combination
or otherwise, dilution to the interests of our shareholders will occur and the
rights of the holders of common stock might be materially adversely affected

WE CANNOT ASSURE YOU THAT FOLLOWING A BUSINESS COMBINATION WITH AN OPERATING
BUSINESS, OUR COMMON STOCK WILL BE LISTED ON NASDAQ OR ANY OTHER SECURITIES
EXCHANGE.

     Following a business combination, we may seek the listing of our common
stock on NASDAQ or the American Stock Exchange.  However, we cannot assure you
that following such a transaction, we will be able to meet the initial listing
standards of either of those or any other stock exchange, or that we will be
able to maintain a listing of our common stock on either of those or any other
stock exchange.  After completing a business combination, until our common
stock is listed on the NASDAQ or another stock exchange, we expect that our
common stock would be eligible to trade on the OTC Bulletin Board, or another
over-the-counter quotation system," where our shareholders may find it more
difficult to dispose of shares or obtain accurate quotations as to the market
value of our common stock.  In addition, we would be subject to an SEC rule
that, if it failed to meet the criteria set forth in such rule, imposes various
practice requirements on broker-dealers who sell securities governed by the
rule to persons other than established customers and accredited investors.
Consequently, such rule may deter broker-dealers from recommending or selling
our common stock, which may further affect its liquidity.  This would also make
it more difficult for us to raise additional capital following a business
combination.  Additionally, there can be no assurances that we will be able to
obtain listing on the OTC Bulletin Board, which failure could cause our common
stock become worthless.

WE HAVE PREFERRED STOCK AUTHORIZED, WHICH PREFERRED STOCK MAY BE ISSUED BY OUR
BOARD OF DIRECTORS WITHOUT FURTHER SHAREHOLDER APPROVAL AND WHICH MAY HAVE
RIGHTS AND PREFERENCES GREATER THAN OUR COMMON STOCK.

     Our Certificate of Incorporation authorizes the issuance of up to 500,000
shares of preferred stock with designations, rights and preferences determined
from time to time by its Board of Directors.  Accordingly, our Board of
Directors is empowered, without shareholder approval, to issue preferred stock
with dividend, liquidation, conversion, voting, or other rights which could
adversely affect the voting power or other rights of the holders of the common
stock.  In the event of issuance, the preferred stock could be utilized, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in control of the Company.  Although we have no present intention to
issue any shares of its authorized preferred stock, there can be no assurance
that the Company will not do so in the future.

Item 7.  FINANCIAL STATEMENTS

     The information required hereunder is included in this report as set forth
in the "Index to Consolidated Financial Statements" on page F-1.

Item 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     None.

Item 8A.  CONTROLS AND PROCEDURES.

(a)      Evaluation of disclosure controls and procedures. Our Chief Executive
Officer and Chief Financial Officer, after evaluating the effectiveness of our
"disclosure controls and procedures" (as defined in the Securities Exchange Act
of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by
this Annual Report on Form 10-KSB (the "Evaluation Date"), has concluded that
as of the Evaluation Date, our disclosure controls and procedures were not
effective to provide reasonable assurance that information we are required to
disclose in reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission rules and forms, and that such information
is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure.  Our controls were not effective
because we failed to allocate sufficient resources to our accounting function
to timely file our 2001-2005 annual reports and 2006 quarterly reports.

(b)      Changes in internal control over financial reporting. Moving forward,
our current management intends to allocate sufficient resources to bring us
current in our reporting obligations with the Commission and to timely file our
periodic and current reports with the Commission.  Additionally, as our current
management has significant experience with publicly reporting companies, we
believe that once our reports are current, we will be able to timely file all
required reports on an ongoing basis.

Item 8B.  OTHER INFORMATION.

       None.


PART III

Item 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Executive Officers and Directors

     The following table gives certain information with respect to our
executive officers and directors:

     Name                    Age     Position
     ----                    ---     --------
     Robert L. Knauss (3)     76     Chairman of the Board and Chief Executive
                                      Officer, Director
     David A. Grossman        43     Chief Financial Officer, Corporate
                                      Secretary and Director
     Paul R. Gregory (1)(2)   66     Director
     Juris Padegs (1)(2)(3)   75     Director
     Ted Reynolds (1)(2)      76     Director
___________________________
(1)  Member of the Audit Committee.
(2)  Member of the Compensation Committee.
(3)  Member of the Nominating Committee.

     Mr. Knauss has served as Chairman of the Board since our inception in
March 1991, and as Chief Executive Officer since January 1994.  Mr. Knauss
currently serves as an Independent Director on the Boards of the Equus Total
Return Inc., The Mexico Fund, XO Holdings, and Westpoint International. He
previously served as Chairman of Philip Services Corporation from 1998 to 2000,
and from 2002 to 2003, and as a Director of Seitel Inc. from June 2002 to June
2004. Mr. Knauss also previously served as the Dean of the University of
Houston Law Center, and of the Vanderbilt University Law School. Mr. Knauss
holds a JD from the University of Michigan, and BA from Harvard College.

     Mr. Grossman has served as chief financial officer since September 1997
and as corporate secretary since December 1996.  He served as president from
November 1998 until May 2000 when he resigned as a full-time employee of BIUSA.
He served as comptroller from November 1995 until September 1997.  Mr. Grossman
was chief financial officer of LynkTel, Inc. from May 2000 to January 2003.
From February 2003 to January 2005, he served as operations controller of BHP
Billiton.  He has been an audit partner of Malone & Bailey, PC since January
2005.  Prior to joining BIUSA, he was an audit senior manager for Deloitte &
Touche LLP.  Mr. Grossman is a certified public accountant and graduated from
Indiana University in 1985 with a BS degree in accounting.

     Dr. Gregory served as our treasurer, on a part-time basis, since our
inception in March 1991 until August 1995.  Dr. Gregory is the Cullen Professor
of Economics and Finance at the University of Houston where he has been a
faculty member since 1972.  He was involved in creating the Petroleum
Legislation Project with Russia and he served as project coordinator of the
Russian Securities Project in conjunction with the Russian State Committee for
Property Management and the various Russian stock exchanges.  He serves as
advisor to a number of major United States corporations on their Russian
business activities, and has been active in the former Soviet Union for 25
years.  He has served as chairman of the board of Amsovco International
Consultants, Inc. since 1988.  He has also served as a consultant to the World
Bank.  Dr. Gregory graduated from Harvard University with a Ph.D. in economics
and is fluent in Russian and German.  Dr. Gregory is the author of a text on
the Soviet and Russian economies.

     Mr. Padegs served as a managing director of Scudder, Stevens & Clark, an
international investment management firm from 1985 to 1996, was employed with
Scudder, Stevens & Clark since 1964 and was an Advisory Managing Director at
that firm (later known as Zurich Scudder Investments, Inc.) until 2002.  Mr.
Padegs was born in Latvia and holds a Bachelor of Arts and a law degree from
Yale University.  Mr. Padegs is fluent in Latvian and German.  In July 1994, he
was appointed by President Clinton to the board of the Baltic American
Enterprise Fund, a $50 million fund to promote private enterprise in the Baltic
States.

     Mr. Reynolds has been president of Houston Grain Company since 1983 and
vice president of Mid-America Grain Commodities since 1976.  He also formed and
is owner of Red River Grain Company.  He is actively involved in various
international business transactions.  Mr. Reynolds is a graduate of Texas
Christian University.

     Directors hold office until their successors are elected and qualified.
The Audit Committee reviews and reports to the Board on the financial results
of our operations and the results of the audit services provided by our
independent accountants, including the fees and costs for such services.  The
Compensation Committee reviews compensation paid to management and recommends
to the Board of Directors appropriate executive compensation.  The Nominating
Committee selects director nominees for election to the Board of Directors.
Officers are elected annually and serve at the discretion of the Board of
Directors.  There is no family relationship between or among any of our
directors and executive officers.

Director Compensation

     Outside directors are entitled to receive options to purchase 10,000
shares of Common Stock in their first year of service and options to purchase
5,000 shares of Common Stock per year thereafter as compensation in addition to
reimbursement of out-of-pocket expenses to attend board meetings.  No such
options were granted in 2003 and 2002.

Compliance with Section 16(a) of the Exchange Act

     Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers and persons who own more than ten percent of a
registered class of our equity securities to file reports with the Securities
and Exchange Commission relating to transactions and holdings in our common
stock.  We believe that during the fiscal year ended December 31, 2003 all such
filing requirements were satisfied.

Item 10.  EXECUTIVE COMPENSATION

     The following table sets forth information with respect to our chief
executive officer and chief financial officer.  No other employee received
total annual salary and bonus for the fiscal year ended December 31, 2003 in
excess of $100,000.

<TABLE>
<CAPTION>
                                 Summary Compensation Table


                                                                      Long-Term Compensation
                                                                    --------------------------
                                    Annual Compensation (1)(2)                     Securities
                                ---------------------------------                  Underlying
Name and Principal    Fiscal                         All Other      Restricted      Options
Position               Year      Salary    Bonus     Compensation   Stock Awards  and Warrants
<S>                    <C>     <C>        <C>            <C>            <C>         <C>
Robert Knauss,         2003     $      0   $     0          $0       $     0               0
 Chief Executive       2002        2,000         0           0             0               0
  Officer              2001       48,000         0           0             0               0

David Grossman,        2003     $      0   $     0     $     0       $     0               0
 Chief Financial       2002        4,000         0           0             0               0
  Officer              2001       36,000         0           0             0               0
</TABLE>

 (1)  None of the named executive officers received perquisites or other
      benefits valued in excess of 10% of the total of reported annual salary
      and bonus.
 (2)  Unpaid salaries of $22,000 and $20,000 for Mr. Knauss and Mr. Grossman,
      respectively, in 2002 have been accrued.  Unpaid salaries of $24,000 and
      $24,000 for Mr. Knauss and Mr. Grossman, respectively, in 2003 have been
      accrued.

Stock Options

     In September 1992, we adopted our 1992 Equity Incentive Plan ("Plan"),
which was amended effective March 1995, December 1995 and September 1997.  The
Plan provides for the issuance of incentive stock options and non-qualified
options.  An aggregate of 1,500,000 shares of our Common Stock may be issued
pursuant to options granted under the Plan to employees, non-employee directors
and consultants, subject to evergreen provisions included in the Plan.  The
compensation committee of our Board of Directors administers the Plan. The
compensation committee has the authority to determine, among other things, the
size, exercise price and other terms and conditions of awards made under the
Plan.  Subject to certain restrictions, the exercise price of incentive stock
options may be no less than 100% of fair market value of a share of Common
Stock on the date of grant.  As of February 28, 2007, no options were
outstanding under the Plan.

     The following table shows, as to the named executive officers, information
concerning individual grants of stock options during 2003.

<TABLE>
<CAPTION>
                       Option Grants in Last Fiscal Year

                      Number of     Percentage of Total
                      Securities      Options/Warrants
                      Underlying         Granted to
                   Options/Warrants     Employees in    Exercise Price   Expiration
Name                   Granted              2003          Per Share         Date
<S>                  <C>                <C>             <C>             <C>
Robert L. Knauss            0               0.0%             N/A             N/A
David A. Grossman           0               0.0%             N/A             N/A
</TABLE>

     The following table shows, as to the named executive officers, information
concerning aggregate stock option and warrant exercises during 2003 and the
stock option and warrant values as of December 31, 2003.

<TABLE>
<CAPTION>
      Aggregated Option and Warrant Exercises in Last Fiscal Year
                 and Year End Option and Warrant Values

                                           Number of Securities
                                               Underlying        Value of Unexercised
                                              Unexercised            In-the-Money
                                           Options/Warrants at   Options/Warrants at
                   Shares                  December 31, 2003    December 31, 2003
                 Acquired on      Value       Exercisable/          Exercisable/
Name               Exercise      Realized    Unexercisable         Unexercisable
<S>                <C>             <C>      <C>                   <C>
Robert L. Knauss         0          $0       296,350 / 0                $0 / $0
David A. Grossman        0           0       318,000 / 0                $0 / $0
</TABLE>

     We have not established, nor does it provide for, long-term incentive
plans or defined benefit or actuarial plans.

Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth, as of February 28, 2007, certain
information with respect to the beneficial ownership of our Common Stock by (i)
each person known to us who beneficially owns more than 5% of our outstanding
Common Stock; (ii) each director; (iii) each named executive officer; and (iv)
all directors and officers as a group:

                                              Shares Beneficially Owned
Name of Beneficial Owner                    Number                Percent

Nicol Family Partnership (1)             1,500,000                 13.67%
Robert L. Knauss                         1,073,891  (2)             9.54
Citibank (Switzerland) (1)               1,000,000                  9.11
Paul R. Gregory                            515,369                  4.70
Juris Padegs                               286,727  (3)             2.59
David A. Grossman                          220,499  (4)             1.98
Ted Reynolds                                83,000                  0.76
All 5 directors and executive officers   2,179,558  (5)            18.97

 (1)  The business address for Citibank (Switzerland) is P. O. Box 244, Zurich,
      Switzerland CH-8021.  The business address for the Nicol Family
      Partnership is P.O. Box 278, Grapeland, Texas 75844.
 (2)  Includes an aggregate of 285,687 shares subject to warrants and Series A
      Preferred Stock that are currently exercisable/convertible.
 (3)  Includes an aggregate of 89,286 shares subject to Series A Preferred
      Stock that are currently convertible.
 (4)  Includes an aggregate of 135,832 shares subject to warrants and Series A
      Preferred Stock that are currently exercisable/convertible.
 (5)  Includes an aggregate of 510,805 shares subject to warrants and Series A
      Preferred Stock that are currently exercisable/convertible.

Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Management believes that all prior related party transactions are on terms
no less favorable to us as could be obtained from unaffiliated third parties.
All ongoing and future transactions with such persons, including any loans to
such persons, will be approved by a majority of disinterested, independent
outside members of our Board of Directors.


Item 13.  EXHIBITS

     Exhibits identified in parentheses below, on file with the Securities and
Exchange Commission, are incorporated herein by reference as exhibits hereto.

   Exhibit No.     Identification of Exhibit

     2.1        Plan and Agreement of Recapitalization   (Exhibit 2.1 to
                Form SB-2, No. 33-74654-D)

     3.1(a)     Restated Articles of Incorporation   (Exhibit 3.1(a) to
                Form SB-2, No. 33-74654-D)

     3.1(b)     Amended Articles of Incorporation   (Exhibit 3.1(b) to
                Form SB-2, No. 33-74654-D)

     3.1(c)     Articles of Correction   (Exhibit 3.1(c) to Form SB-2,
                No. 33-74654-D)

     3.2        Bylaws   (Exhibit 3.2 to Form SB-2, No. 33-74654-D)

     3.3        Statement of Resolution Establishing and Designating a Series
                of Shares of the Company, Series A Cumulative Preferred Stock,
                $10.00 par value   (Exhibit 3.3 to Form SB-2, No. 33-74654-D)

     3.4        Certificate of Elimination of Shares Designated as Series A
                Cumulative Preferred Stock   (Exhibit 3.4 to Form 10-QSB for
                the quarter ended June 30, 1995, File No. 0-26588)

     3.5        Certificate of the Designation, Preference, Rights and
                Limitations of Convertible Redeemable Series A Preferred Stock
                (Exhibit 3.5 to Form 10-QSB for the quarter ended June 30,
                1995, File No. 0-26588)

     4.1        Common Stock Specimen   (Exhibit 4.1 to Form SB-2,
                No. 33-74654-D)

     10.1       1992 Equity Incentive Plan, as amended   (Exhibit 10.3 to
                Form S-8, No. 33-90030)

     10.2       Employment Agreement between the Company and Robert L. Knauss
                (Exhibit 10.4 to Form SB-2, No. 33-74654-D)

     10.3       Statement of the Designation, Preferences, Rights and
                Limitations of Series B Convertible Redeemable Preferred Stock,
                as amended   (Exhibit 10.45 to Form SB-2, File No. 333-860)

     10.4       Unit Purchase Agreement for Advanced Reclamation Company,
                L.L.C.   (Exhibit 10.1 to Form 8-K dated February 2, 2000,
                File No. 0-26588)

     31.1 *     Chief Executive Officer Certification pursuant to Section 302
                of the Sarbanes-Oxley Act of 2002

     31.2 *     Chief Financial Officer Certification pursuant to Section 302
                of the Sarbanes-Oxley Act of 2002

     32.2 *     Chief Executive Officer Certification pursuant to Section 906
                of the Sarbanes-Oxley Act of 2002

     32.2 *     Chief Financial Officer Certification pursuant to Section 906
                of the Sarbanes-Oxley Act of 2002

* Attached hereto.




                         BALTIC INTERNATIONAL USA, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)
                                                                        Page

Consolidated balance sheets at December 31, 2003 and 2002                F-2

Consolidated statements of operations for the years ended
  December 31, 2003 and 2002                                             F-3

Consolidated statements of shareholders' equity (deficit) for the
  years ended December 31, 2003 and 2002                                 F-4

Consolidated statements of cash flows for the years ended
  December 31, 2003 and 2002                                             F-6

Notes to consolidated financial statements                               F-7


                        BALTIC INTERNATIONAL USA, INC.
                         Consolidated Balance Sheets
                                (Unaudited)


                                                 December 31,      December 31,
                                                     2003               2002
ASSETS

CURRENT ASSETS
 Cash and cash equivalents                         $       516    $     1,101
                                                   -----------    -----------
    Total current assets                                   516          1,101

PROPERTY AND EQUIPMENT, net                                  -             30
ASSETS HELD FOR SALE                                         -        189,909
                                                   -----------    -----------
    Total assets                                   $       516    $   191,040
                                                   ===========    ===========


LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES
 Accounts payable and accrued liabilities          $   144,308    $   165,173
 Dividends payable                                   1,020,728        862,728
 Short-term debt                                        18,750         14,350
                                                   -----------    -----------
    Total current liabilities                        1,183,786      1,042,251

LIABILITIES ASSOCIATED WITH ASSETS HELD FOR SALE             -        129,839
LONG-TERM DEBT, net of current portion                       -        400,000
                                                   -----------    -----------
    Total liabilities                                1,183,786      1,572,090
                                                   -----------    -----------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' DEFICIT
Preferred stock:
  Series A, convertible, $10 par value,
   499,930 shares authorized, 123,000 shares
   issued and outstanding                            1,230,000      1,230,000
  Series B, convertible, $10 par value,
   $25,000 stated value, 70 shares authorized,
   14 shares issued and outstanding                    350,000        350,000
 Common stock, $.01 par value, 40,000,000 shares
  authorized, 16,629,229 and 15,629,229 shares
  issued and 10,975,760 and 9,975,760 shares
  outstanding                                          166,292        156,292
 Additional paid-in capital                         13,015,130     13,005,130
 Accumulated deficit                               (15,140,118)   (15,317,898)
 Treasury stock, at cost                              (804,574)      (804,574)
                                                   -----------    -----------
    Total shareholders' deficit                     (1,183,270)    (1,381,050)
                                                   -----------    -----------
    Total liabilities and shareholders' deficit    $       516    $   191,040
                                                   ===========    ===========

     See accompanying notes to consolidated financial statements.


                        BALTIC INTERNATIONAL USA, INC.
                    Consolidated Statements of Operations
                                (Unaudited)


                                                    Year Ended December 31,

                                                    2003              2002

REVENUES                                       $         -       $         -
                                                ----------        ----------

OPERATING EXPENSES:
 Personnel and consulting                           26,930            73,745
 Legal and professional                              1,500             1,503
 Depreciation and amortization                          30               477
 Other general and administrative                    4,002           168,709
                                                ----------        ----------
    Total operating expenses                        32,462           244,434
                                                ----------        ----------

LOSS FROM OPERATIONS                               (32,462)         (244,434)
                                                ----------        ----------

OTHER INCOME (EXPENSE):
 Interest expense                                  (12,188)          (40,989)
                                                ----------        ----------
     Total other income (expense)                  (12,188)          (40,989)
                                                ----------        ----------

LOSS BEFORE INCOME TAXES AND DISCONTINUED
 OPERATIONS                                        (44,650)         (285,423)

INCOME TAX EXPENSE                                       -                 -
                                                ----------        ----------
LOSS FROM CONTINUING OPERATIONS                    (44,650)         (285,423)

DISCONTINUED OPERATIONS:
 Income (loss) from discontinued operations          6,645          (108,789)
 Gain on disposal of discontinued operations       373,785                 -
                                                ----------        ----------
NET INCOME (LOSS)                              $   335,780       $  (394,212)
                                                ==========        ==========


INCOME (LOSS) PER SHARE AMOUNTS:
Basic:
  Continuing operations                        $     (0.02)      $     (0.05)
  Discontinued operations                      $      0.04       $     (0.01)
  Total                                        $      0.02       $     (0.06)

Diluted:
  Continuing operations                        $     (0.02)      $     (0.05)
  Discontinued operations                      $      0.02       $     (0.01)
  Total                                        $      0.00       $     (0.06)

WEIGHTED AVERAGE OUTSTANDING SHARES:
Basic                                            9,975,760         9,975,825
Diluted                                         20,754,883         9,975,825



     See accompanying notes to consolidated financial statements.

<TABLE>
<CAPTION>
                        BALTIC INTERNATIONAL USA, INC.
           Consolidated Statements of Shareholders' Equity (Deficit)
                                (Unaudited)


                                                            Preferred Stock
                                                    Series A                  Series B              Common Stock
                                Warrants      Shares        Amount       Shares      Amount         Shares         Amount
<S>                           <C>            <C>         <C>            <C>       <C>            <C>           <C>
Balance, December 31, 2001     $  252,793     123,000     $1,230,000       14      $  350,000     15,629,229      156,292
Expiration of warrants           (252,793)
Net loss
Dividends on preferred stock:
 Series A, $1.00 per share
 Series B, $2500 per share
                               ----------    --------     ----------      ---      ----------     ----------      -------
Balance, December 31, 2002     $        -     123,000     $1,230,000       14      $  350,000     15,629,229      156,292
Shares issued with sale of ARC                                                                     1,000,000       10,000
Net income
Dividends on preferred stock:
 Series A, $1.00 per share
 Series B, $2500 per share
                               ----------    --------     ----------      ---      ----------     ----------      -------
Balance, December 31, 2003     $        -     123,000     $1,230,000       14      $  350,000     16,629,229      166,292
                               ==========    ========     ==========      ===      ==========     ==========      =======
</TABLE>







     See accompanying notes to consolidated financial statements.

<TABLE>
<CAPTION>
                        BALTIC INTERNATIONAL USA, INC.
           Consolidated Statements of Shareholders' Equity (Deficit)
                                (Continued)
                                (Unaudited)


                                   Additional
                                     paid-in      Accumulated           Treasury stock
                                     capital         deficit         Shares        Amount        Total
<S>                              <C>            <C>              <C>           <C>          <C>
Balance, December 31, 2001       $12,752,337    $(14,765,686)      5,653,469    $(804,574)   $  (828,838)
Expiration of warrants               252,793                                                           -
Net loss                                            (394,212)                                   (394,212)
Dividends on preferred stock:
 Series A, $1.00 per share                          (123,000)                                   (123,000)
 Series B, $2500 per share                           (35,000)                                    (35,000)
                                  -----------    ------------     -----------    ---------    -----------
Balance, December 31, 2002       $13,005,130    $(15,317,898)      5,653,469    $(804,574)   $(1,381,050)
Shares issued with sale of ARC        10,000                                                      20,000
Net income                                           335,780                                     335,780
Dividends on preferred stock:
 Series A, $1.00 per share                          (123,000)                                   (123,000)
 Series B, $2500 per share                           (35,000)                                    (35,000)
                                  -----------    ------------     -----------    ---------    -----------
Balance, December 31, 2003       $13,015,130    $(15,140,118)      5,653,469    $(804,574)   $(1,183,270)
                                  ===========    ============     ===========    =========    ===========
</TABLE>







     See accompanying notes to consolidated financial statements.


                        BALTIC INTERNATIONAL USA, INC.
                   Consolidated Statements of Cash Flows
                                (Unaudited)

                                                    Year Ended December 31,

                                                    2003              2002
Cash flows from operating activities:
 Net income (loss)                              $   335,780       $  (394,212)
 Income (loss) from discontinued operations        (380,430)          108,789
 Noncash adjustments:
  Write-off of notes receivable                           -           132,500
  Depreciation and amortization                          30               478
  Increase/decrease in current assets and
   current liabilities:
   Accounts receivable                                    -             4,603
   Prepaid and other                                      -             1,200
   Accounts payable and accrued liabilities          39,998            89,450
                                                -----------     -------------
     Net cash provided (used) by operating
      activities:
       Continuing operations                         (4,622)          (57,192)
       Discontinued operations                       23,116            (9,247)
                                                -----------     -------------
     Net cash provided (used) by operating
      activities                                     18,494           (66,439)
                                                -----------     -------------

Cash flows from investing activities:
       Continuing operations                              -                 -
       Discontinued operations                            -              (325)
                                                -----------     -------------
     Net cash used by investing activities                -              (325)
                                                -----------     -------------

Cash flows from financing activities:
 Borrowings of debt from officers                     4,400            14,350
                                                -----------     -------------
     Net cash provided (used) by financing
      activities:
       Continuing operations                          4,400            14,350
       Discontinued operations                      (23,479)          (13,728)
                                                -----------     -------------
     Net cash provided (used) by financing
      activities                                    (19,079)              622
                                                -----------     -------------

Net increase (decrease) in cash and cash
 equivalents                                           (585)          (66,142)
Cash and cash equivalents, beginning of period        1,101            67,243
                                                -----------     -------------
Cash and cash equivalents, end of period        $       516     $       1,101
                                                ===========     =============


Supplemental disclosures:
 Interest paid                                  $         -     $           -
 Income taxes paid                              $         -     $           -

Noncash investing and financing activities:
 Dividends declared and unpaid                  $   158,000     $     158,000



     See accompanying notes to consolidated financial statements.


                        BALTIC INTERNATIONAL USA, INC.
                  Notes to Consolidated Financial Statements
                                (Unaudited)


NOTE 1 - BUSINESS OPERATIONS AND FINANCIAL CONDITION

Business operations

Baltic International USA, Inc., a Texas corporation, was organized on March 1,
1991 to identify, form and participate in aviation-related and other business
ventures in the former Soviet Union.

We initially pursued our plans to participate in airline service in Latvia
through a 49% interest in a newly formed start-up airline - Baltic
International Airlines ("BIA"), a limited liability company registered in the
Republic of Latvia.  We made significant investments in and advances to BIA,
which has incurred losses since inception.  On October 1, 1995, the routes and
passenger service operations of BIA were transferred as part of our capital
contribution to a new Latvian carrier, Air Baltic Corporation SIA ("Air
Baltic").  We owned an 8.02% interest in Air Baltic.  We sold our interest in
Air Baltic in January 1999 to SAS for $2,144,333 in cash under the terms of the
option agreement between us and SAS.  We used the proceeds from the sale to
repay the $2 million loan from ORESA Ventures N.V.  BIA has no current
operations and has not conducted any substantial business operations since
October 1995.

We were also engaged in providing aviation catering services to Air Baltic and
other airlines through our interest in AIRO Catering Services ("AIRO").  As
discussed in Note 5, we sold a 23% interest in AIRO to ORESA Ventures N.V. and
Celox S.A. in July 1999.  In October 1999, we sold the remaining 23% of AIRO to
ORESA Ventures N.V. and Celox S.A. for $1,145,000 in cash and forgiveness of
approximately $200,000 in debt.  In June 2000, we ceased the operations as a
food and beverage distribution company through our wholly owned subsidiary,
American Distributing Company ("ADC").  In August 1998, we ceased operations as
a cargo marketer to Air Baltic and other airlines through our wholly owned
subsidiary, Baltic World Air Freight ("BWAF").

In February 2000, we purchased Advanced Reclamation Company, L.L.C. ("ARC")
from the Nicol Family Partnership.  We purchased all of the units of ARC for
cash of $400,000, a total of 500,000 common shares, a note payable to seller of
an additional $400,000 and an earnout agreement.  ARC is a complete refrigerant
management company.  ARC provides a full range of refrigerant services
including, but not limited to, recovery, reclamation, and the sale of new or
reclaimed refrigerants.  In March 2003, we transferred substantially all of the
assets of ARC to an affiliate of the Nicol Family Partnership ("NFP") in
exchange for the release of all claims and liabilities from Baltic and ARC to
NFP.  The affiliate of NFP also assumed certain liabilities of ARC.  We issued
1,000,000 shares of common stock in connection with this transaction.  The
consolidated statements reflect the operating results of the discontinued
operations separately from continuing operations.

Financial condition

We have incurred operating losses since inception through December 31, 2003.
We incurred operating losses of $32,462 in 2003 and $244,434 in 2002.  At
December 31, 2003, we had an accumulated deficit of $15,140,118.  Net cash
provided by operating activities was $18,494 in 2003 and net cash used of
$66,439 in 2002.  At December 31, 2003, we had cash of $516.  We currently have
limited cash resources available and have obligations due and past due.

Management believes that we will be able to achieve a satisfactory level of
liquidity to meet our business plan and capital needs through December 31,
2007.  During 2003 and 2002, we borrowed an aggregate principal amount of
$4,400 and $14,350, respectively, as bridge financing from our officers.  In
connection with these borrowings, we issued warrants to purchase 440 and 1,435
shares of common stock at exercise prices of $0.0001 to $0.1562 per share.
Additionally, management believes we have the ability to obtain additional
financing from key officers, directors and certain investors.  However, there
can be no assurance that we will be able to generate sufficient liquidity to
maintain our operations.  In addition, management believes that we can continue
to defer certain amounts payable by us that are either currently due or past
due.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

The consolidated financial statements include the accounts of BIUSA and our
wholly owned subsidiary (ARC).  All significant intercompany accounts and
transactions have been eliminated.  Our interest in BIA is accounted for using
the cost method because BIA has no current operations.  Our interest in
Lithuanian Aircraft Maintenance Corporation ("LAMCO") was accounted for using
the cost method because we owned only 2.6% of LAMCO and it had no operations
since our inception.

Revenue recognition

Revenues are recognized when realizable and earned and expenses are recognized
when the goods and services are acquired or provided.

Inventory

Inventory is stated at the lower of cost or market.  Cost is determined using
the weighted average cost method.

Property, equipment and depreciation

Property and equipment are recorded at cost.  Depreciation is computed over the
estimated useful lives of the assets using the straight-line method for
financial reporting purposes and accelerated methods for income tax purposes.
Maintenance and repairs are charged to operations as incurred.

Debt issuance costs

Debt issuance costs are amortized using the interest method until the maturity
date of the related note payable.

Goodwill

Goodwill is the result of the purchase of ARC.  Goodwill was being amortized
over 20 years.  As of December 31, 2001, we determined that the goodwill was
impaired and wrote off the remaining balance.

Long-lived assets

We periodically evaluate the carrying value of long-lived assets, including
goodwill, for potential impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.

Income taxes

Deferred income taxes result from temporary differences between the financial
statements and tax basis of assets and liabilities.

Income (loss) per common share

Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding during
the period.  Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings.  Stock warrants and options are
considered to be dilutive for earnings per share purposes if the average market
price during the period ending on the balance sheet date exceeds the exercise
price and we had earnings from continuing operations for the period.

Cash and cash equivalents

For purposes of the statement of cash flows, we consider all highly liquid
investments purchased with original maturities of three months or less to be
cash equivalents.

Use of estimates

The preparation of 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 disclosure 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 results could differ from those estimates.

Concentration of credit risk

Financial instruments that potentially subject us to concentrations of credit
risk consist of cash, cash equivalents and trade receivables.  We consider such
risk in placing our cash and cash equivalents in financial institutions and
other instruments.  We perform ongoing credit evaluations of our customers'
financial condition.

Contingencies

Liabilities for loss contingencies, including environmental remediation costs,
arising from claims, assessments, litigation, fines and penalties and other
sources are recorded when it is probable that a liability has been incurred and
the amount of the assessment and/or remediation can be reasonably estimated.

Foreign currency translation

Portions of our operations were conducted in convertible foreign currencies and
are translated into U.S. dollars at average current rates during each period
reported.  Foreign currency transaction gains and losses are included in
operations.  Net exchange gains or losses resulting from the translation of
assets and liabilities are accumulated as a separate component of joint venture
partners' equity.  Any translation gains or losses are not significant and
therefore have not been recorded on our consolidated balance sheets as of
December 31, 2003 and 2002.

New accounting pronouncements

In June 2001, the Financial Accounting Standards Board issued SFAS No. 142,
"Goodwill and Other Intangible Assets", which requires that goodwill no longer
be amortized.  Instead, goodwill will be tested for impairment and written down
if our fair value declines below our carrying amount.  Goodwill amortization
ceased as of January 1, 2002.  The implementation of SFAS No. 142 did not have
a significant impact on our financial condition or results of operations.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. SFAS No. 144
develops one accounting model (based on the model in SFAS No. 121) for long-
lived assets that are to be disposed of by sale, as well as addresses the
principal implementation issues. SFAS No. 144 requires that long-lived assets
that are to be disposed of by sale be measured at the lower of book value or
fair value less cost to sell. We adopted SFAS 144 as of January 1, 2002. The
adoption of this statement did not have a material effect on our financial
condition or results of operations.

In December 2004, the FASB issued SFAS No. 123R, "Accounting for Stock-Based
Compensation".  SFAS No. 123R establishes standards for the accounting for
transactions in which an entity exchanges its equity instruments for goods or
services.  This Statement focuses primarily on accounting for transactions in
which an entity obtains employee services in share-based payment transactions.
SFAS No. 123R requires that the fair value of such equity instruments be
recognized as expense in the historical financial statements as services are
performed.  Prior to SFAS No. 123R, only certain pro forma disclosures of fair
value were required.  SFAS No. 123R shall be effective for us as of January 1,
2006.  The adoption of this new accounting pronouncement is not expected to
have a material impact on our financial statements.

The following table illustrates the effect on net income (loss) as if we had
applied the fair value recognition provisions of SFAS No. 123 for its stock-
based employee compensation plans.

                                                     Year ended December 31,
                                                      2003             2002

Net income (loss), as reported                   $   335,780      $  (394,212)
Stock-based compensation, net of tax under
 the intrinsic method                                      -                -
Less stock-based compensation determined
 under fair value based method                          (339)          (4,409)
                                                 -----------      -----------
Net income (loss), pro forma                     $   335,441      $  (398,621)
                                                 ===========      ===========

Basic income (loss) per common share:
  As reported                                    $      0.02      $     (0.06)
  Pro forma                                      $      0.02      $     (0.06)
Diluted income (loss) per common share:
  As reported                                    $      0.00      $     (0.06)
  Pro forma                                      $      0.00      $     (0.06)

Reclassifications

Certain prior year amounts have been reclassified to conform to the current
presentation.

NOTE 3 - DISCONTINUED OPERATIONS

Advanced Reclamation Company

In February 2000, we purchased Advanced Reclamation Company ("ARC") from the
Nicol Family Partnership.  This transaction was recorded as a purchase.  In
March 2003, we transferred substantially all of the assets of ARC to an
affiliate of the Nicol Family Partnership.  The consolidated statements reflect
the operating results of the discontinued operations separately from continuing
operations.  Operating results for the discontinued operations of ARC were:

                                                     Year ended December 31,
                                                      2003             2002

Operating revenues                               $    72,327      $   365,294
Loss from operations                             $    (6,404)     $  (103,832)
Net income (loss)                                $     6,645      $  (108,789)

Balance sheet items related to ARC are as follows:

                                               As of December 31,
                                                      2002

Assets of discontinued operations                $   189,909
Liabilities of discontinued operations           $   129,839

NOTE 4 - JOINT OPERATIONS

Pembrooke Calox

In February 2000, we acquired a 10% interest in Pembrooke Calox.  We acquired
this interest in exchange for our efforts during 1999 and 2000 to develop the
business plan and negotiate operating agreements and debt financing for
Pembrooke Calox.  We have a note receivable from Pembrooke Calox, Inc., a
start-up company.  The note bears interest at 10% and was due on January 31,
2000.  At December 31, 2003, the gross amount of the note is $109,492 and
accrued interest is $47,022.  These amounts have been fully reserved due to the
uncertainty about collectibility.

Baltic International Airlines

We entered into a joint venture agreement with the Latvian Civil Aviation
Department, an agency of the Government of Latvia, on June 6, 1991 to create
BIA as a limited liability company in the Republic of Latvia.  We currently own
an 89% interest in BIA.

As discussed in Note 1, BIA experienced significant losses that have been
recognized in our financial statements through a reserve of our investment in
BIA.  In conjunction with the transfer of BIA's passenger service operations to
Air Baltic, we entered into negotiations with our partner to restructure BIA
and obtain full ownership.  We also made advances on behalf of BIA in 1996 to
facilitate the termination of operations of BIA.  In March 1997, our Latvian
partner in BIA agreed to contribute real estate and a promissory note with a
combined value of at least $1,000,000 to BIA.  In May 1997, we capitalized $6.3
million of BIA's debt to us that was previously reserved by us.  BIA will
assign the promissory note from the Latvian partner to us.  Management believes
that the Latvian partner's contribution will be made in the future.  We have
agreed with the Latvian partner that it will forgive the promissory note of the
Latvian partner in exchange for the transfer of the Latvian partner's ownership
in BIA.  BIA will then become our wholly owned subsidiary.

We recorded a reserve against the investment in BIA of $1,143,115 in 1998 as a
result of the uncertainty of the characteristics of the contribution from the
Latvian partner and the length of time that has transpired since the Latvian
partner committed to make the contribution.

NOTE 5 - NOTES RECEIVABLE

During 2001, we loaned a total of $132,500 to LynkTel, Inc. and its chief
executive officer.  LynkTel was a telecommunications and advertising company
that created a new advertising medium utilizing leading edge technology to
combine voice, data and video capabilities.  Our chief financial officer was
also chief financial officer of LynkTel.  The loans bear interest at 10% and
were due on demand.  In June 2002, we recorded a reserve against the loans due
to the uncertainty about collectibility.  LynkTel ceased operations in 2003.

NOTE 6 - DEBT

Debt consists of the following:


                                                           December 31,
                                                      2003             2002

Note payable for purchase of ARC, interest
payable quarterly at 10% per annum, secured
by the fixed assets of ARC, due
January 1, 2005                                  $         -      $   400,000

Notes payable to officers, unsecured,
interest rate of 13%, due on demand                   18,750           14,350
                                                  ----------       ----------
Total debt                                            18,750          414,350
Less short-term debt                                 (18,750)         (14,350)
                                                  ----------       ----------
Long-term debt, net                              $         -      $   400,000
                                                  ==========       ==========

NOTE 7 - INCOME TAXES

The components of net deferred tax assets consist of the following:

                                                           December 31,
                                                      2003             2002

Deferred tax assets:
 Net operating loss carryforward                 $ 2,730,606      $ 2,849,454
 Capital loss carryforward                            26,705           26,705
 Reserve on investment                                37,227           37,227
 Losses from joint operations and subsidiaries        76,707           76,698
 Amortization and depreciation                       302,794          302,932
                                                  ----------       ----------
Total deferred tax assets                          3,174,039        3,293,105
                                                  ----------       ----------

Deferred tax liabilities:
 Earnings of subsidiaries                                  -            4,901
 Other                                                 1,977            1,977
                                                  ----------       ----------
Total deferred tax liabilities                         1,977            6,878
                                                  ----------       ----------
Net deferred tax assets before valuation
 allowance                                         3,172,062        3,286,227
Valuation allowance                               (3,172,062)      (3,286,227)
                                                  ----------       ----------
Net deferred tax assets                          $         -      $         -
                                                  ==========       ==========

Differences between the effective income tax rate and the statutory federal
income tax rate were primarily the result of net operating losses for which
valuation reserves have been fully provided.

As of December 31, 2003, we had net operating loss carryforwards of
approximately $8,000,000 available to offset future taxable income.  These
carryforwards will expire at various dates beginning in 2009.

NOTE 8 - COMMON STOCK

In March 2003, we issued 1,000,000 shares of common stock in connection with
the transfer of substantially all of the assets of ARC to an affiliate of the
Nicol Family Partnership ("NFP") in exchange for the release of all claims and
liabilities from Baltic and ARC to NFP.  The affiliate of NFP also assumed
certain liabilities of ARC.

At December 31, 2003 and 2002, we have 5,653,469 and 5,653,469 treasury shares,
respectively.

NOTE 9 - OPTIONS

In 1992, we adopted an Equity Incentive Plan (the "Plan") under which an
aggregate of 800,000 shares of common stock may be issued.  In December 1995,
the board of directors adopted a resolution subject to shareholder approval to
increase the number of shares that may be issued under the Plan to 1,500,000
shares.  The Plan provides for the grant of options or rights, including
incentive stock options and nonqualified stock options to officers, directors,
employees and consultants to us for the purpose of providing incentive to those
persons to work for or provide services to us.

At December 31, 2003, we had 815,350 shares of common stock reserved for
issuance upon exercise of outstanding options, and no options were available
for future grant under the Plan.  A summary of changes in outstanding options
is as follows:


<TABLE>
<CAPTION>

                                               Year Ended December 31,
                                           2003                         2002
                                                  Weighted                   Weighted
                                                   Average                    Average
                                     Shares    Exercise Price     Shares   Exercise Price
<S>                              <C>           <C>             <C>         <C>
Shares under option, beginning
 of period                        1,108,700       $  0.26      1,189,700       $  0.26
Changes during the period:
  Granted                                 -             -         25,000          0.11
  Canceled                         (293,350)         0.36       (106,000)         0.26
  Exercised                               -             -              -             -
                                  ---------                    ---------
Shares under option, end of
 period                             815,350       $  0.22      1,108,700       $  0.26
                                  =========                    =========
Options exercisable, end of
 period                             812,225       $  0.21      1,093,075       $  0.26
                                  =========                    =========
</TABLE>

The exercise prices of the options outstanding at December 31, 2003 range from
$0.09 to $0.42.  The weighted average contractual life of the options
outstanding at December 31, 2003 was 1.5 years.  The options granted in  2002
were issued to officers, directors and employees with an exercise price equal
to the market price of our common stock on the grant date.  The weighted-
average grant-date fair value of options granted during 2002 was $0.11.  The
fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used for grants in  2002:  risk-free interest rate of 5.17%;
expected dividend yield of 0%; expected life of 7 years, respectively; and
expected volatility of 277%.

NOTE 10 - WARRANTS

At December 31, 2003, we had 429,556 shares of common stock reserved for
issuance upon exercise of outstanding warrants.  A summary of changes in
outstanding warrants is as follows:

<TABLE>
<CAPTION>

                                               Year Ended December 31,
                                           2003                         2002
                                                  Weighted                    Weighted
                                                   Average                     Average
                                     Shares    Exercise Price     Shares   Exercise Price
<S>                             <C>            <C>            <C>          <C>
Shares under warrant,
beginning of period                 429,116     $  5.60        2,296,931     $  1.55
Changes during the period:
  Granted                               440        0.02            1,435        0.04
  Canceled                                -           -       (1,869,250)       0.62
  Exercised                               -           -                -           -
                                 ----------                   ----------
Shares under warrant, end of
period                              429,556     $  5.60          429,116     $  5.60
                                 ==========                   ==========
Warrants exercisable, end of
period                              429,556     $  5.60          429,116     $  5.60
                                 ==========                   ==========
</TABLE>

The exercise prices of the warrants outstanding at December 31, 2003 range from
$0.0001 to $6.00.  The weighted average contractual life of the warrants
outstanding at December 31, 2003 was 0.4 years.  The weighted-average grant-
date fair value of warrants granted during 2003 was $0.02.  During 2003 and
2002, we issued warrants to purchase 440 and 1,435 shares of common stock,
respectively, at exercise prices of $0.0001 to $0.06 per share in connection
with bridge financing aggregating $4,400 and $14,350, respectively, from our
officers.

NOTE 11 - PREFERRED STOCK

Effective June 30, 1995, we created our Convertible Redeemable Series A
Preferred Stock ("Series A Preferred Stock"), 500,000 shares authorized $10 par
value, and issued 123,000 shares thereof upon conversion of $1,230,000 in
aggregate principal amount of long-term indebtedness.  The Series A Preferred
Stock: (i) is redeemable only at our option and only during the thirty day
period beginning on December 31 and June 30 of each year that the Series A
Preferred Stock is outstanding; (ii) is convertible at any time by the holders
thereof at the initial conversion price of $2 per share; (iii) carries a
liquidation preference of $10 per share; (iv) is non-voting; and (v) accrues
cumulative cash dividends per share at an annual rate equal to 10% of the
stated value per share, payable in equal quarterly installments.  The voting
rights of the holders of our common stock will be diluted upon conversion of
the Series A Preferred Stock and the holders of the Series A Preferred Stock
will have preferential dividend and liquidation rights over the holders of
common stock.  The conversion price of the Series A Preferred Stock is
adjustable for certain issuances of securities at less than 90% of the
conversion price.  At December 31, 2003, the conversion price was $0.84 per
share.

Effective February 22, 1996, we created our Series B Convertible Redeemable
Preferred Stock ("Series B Preferred Stock"), 70 shares authorized $25,000
stated value per share and $10 par value, and issued 50 shares thereof for net
proceeds of $1,090,200 in February and March 1996.  The Series B Preferred
Stock:  (i) is not entitled to receive dividends; (ii) is convertible at any
time by the holders thereof on or after the 55th day after the date that the
shares were issued at the conversion price of the lesser of $2 per share or 82%
of the 5-day average closing bid price of our common stock; (iii) is non-
voting; (iv) carries a liquidation preference of $25,000 per share and an
amount equal to 10% per annum since the issuance date after payment in full of
the Series A Preferred Stock; and (v) is redeemable only at our option if the
conversion price is $0.75 or less per share.  In October 1996, we amended the
conversion price to the lesser of $0.55 per share or 82% of the 5-day average
closing bid price of our Common Stock.  During 2003 and 2002, there were no
conversions of Series B Preferred Stock into shares of our common stock.

NOTE 12 - INCOME (LOSS) PER SHARE

Supplemental disclosures for income (loss) per share are as follows:

                                                     Year ended December 31,
                                                      2003             2002
Basic and diluted
Net income (loss) to be used to compute
 income (loss) per share:
  Net income (loss)                               $  335,780      $  (394,212)
 Less preferred dividends                           (158,000)        (158,000)
                                                  ----------       ----------
Net income (loss) attributable to common
 shareholders - basic                             $  177,780      $  (552,212)
  Plus preferred dividends available to
   preferred shareholders                            158,000                -
                                                  ----------       ----------
Net income (loss) attributable to common
 shareholders - diluted                           $  335,780      $  (552,212)
                                                  ==========       ==========

Weighted average number of shares:
  Average common shares outstanding - basic       10,762,061        9,975,760
  Plus incremental shares from assumed
   conversion of preferred stock                  10,779,123                -
                                                  ----------       ----------
  Average common shares - diluted                 21,541,184        9,975,760
                                                  ==========       ==========

Basic income (loss) per common share                 $  0.02         $  (0.06)
                                                  ==========       ==========
Diluted income (loss) per common share               $  0.00         $  (0.06)
                                                  ==========       ==========

NOTE 13 - COMMITMENTS AND CONTINGENCIES

We lease certain equipment and office space under operating leases.  Rental
expense under operating leases was $0 and $5,111 for 2003 and 2002,
respectively.  We have no future minimum lease payments under noncancelable
operating leases as of December 31, 2003.

We are from time to time party to litigation in the ordinary course of
business.  There are currently no pending legal proceedings that, in
management's opinion, would have a material adverse effect on our operating
results or financial position.

Some of ARC's products and services are regulated by the Federal Clean Air Act
(the "Clean Air Act") and the regulations promulgated thereunder by the
Environmental Protection Agency ("EPA"), as well as certain state environmental
regulations.  As such, ARC's business is affected by the requirements of the
Clean Air Act, the EPA and other regulations and the degree of enforcement
thereof.


                                  SIGNATURES

     In accordance with the requirements of Section 13 or 15(d) of the Exchange
Act, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 2nd day of March, 2007.

                              BALTIC INTERNATIONAL USA, INC.


                              /s/ Robert L. Knauss
                              -------------------------------------------------
                              ROBERT L. KNAUSS
                              Chairman of the Board and Chief Executive Officer


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

Signature                         Title                           Date


/s/ Robert L. Knauss      Chairman of the Board and Chief       March 2, 2007
-----------------------    Executive Officer (Principal
ROBERT L. KNAUSS           Executive Officer)

/s/ David A. Grossman     Chief Financial Officer, Corporate    March 2, 2007
-----------------------    Secretary and Director
DAVID A. GROSSMAN          (Principal Financial and
                           Accounting Officer)


/s/ Paul R. Gregory       Director                              March 2, 2007
-----------------------
PAUL R. GREGORY


/s/ Juris Padegs          Director                              March 2, 2007
-----------------------
JURIS PADEGS


/s/ Ted Reynolds          Director                              March 2, 2007
-----------------------
TED REYNOLDS




EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert L. Knauss, certify that:

1. I have reviewed this Annual Report on Form 10-KSB of Baltic International
USA, Inc.;

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

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

4. As the small business issuer's certifying officer, I am responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and
have:

   a. Designed such disclosure controls and procedures, or caused such
   disclosure controls and procedures to be designed under my supervision, to
   ensure that material information relating to the small business issuer,
   including its consolidated subsidiaries, is made known to me by others
   within those entities, particularly during the period in which this report
   is being prepared;

   b. Paragraph omitted in accordance with SEC transition instructions
   contained in SEC Release No. 33-8238, and an extension of the compliance
   date in accordance with SEC Release No. 33-8545 and Release No. 33-8618;

   c. Evaluated the effectiveness of the small business issuer's disclosure
   controls and procedures and presented in this report my conclusions about
   the effectiveness of the disclosure controls and procedures, as of the end
   of the period covered by this report based on such evaluation; and

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

5. I have disclosed, based on my most recent evaluation of internal control
over financial reporting, to the audit committee of the small business issuer's
board of directors (or persons performing the equivalent functions):

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

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

Date: March 2, 2007

                              /s/ Robert L. Knauss
                              -------------------------------------------------
                              Robert L. Knauss
                              Chief Executive Officer



EXHIBIT 31.2

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David A. Grossman, certify that:

1. I have reviewed this Annual Report on Form 10-KSB of Baltic International
USA, Inc.;

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

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

4. As the small business issuer's certifying officer, I am responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and
have:

   a. Designed such disclosure controls and procedures, or caused such
   disclosure controls and procedures to be designed under my supervision, to
   ensure that material information relating to the small business issuer,
   including its consolidated subsidiaries, is made known to me by others
   within those entities, particularly during the period in which this report
   is being prepared;

   b. Paragraph omitted in accordance with SEC transition instructions
   contained in SEC Release No. 33-8238, and an extension of the compliance
   date in accordance with SEC Release No. 33-8545 and Release No. 33-8618;

   c. Evaluated the effectiveness of the small business issuer's disclosure
   controls and procedures and presented in this report my conclusions about
   the effectiveness of the disclosure controls and procedures, as of the end
   of the period covered by this report based on such evaluation; and

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

5. I have disclosed, based on my most recent evaluation of internal control
over financial reporting, to the audit committee of the small business issuer's
board of directors (or persons performing the equivalent functions):

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

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

Date: March 2, 2007

                              /s/ David A. Grossman
                              -------------------------------------------------
                              David A. Grossman
                              Chief Financial Officer


EXHIBIT 32.1


CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

       I, Robert L. Knauss, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the
Annual Report of Baltic International USA, Inc. on Form 10-KSB for the fiscal
year ended December 31, 2003 fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and that information
contained in such Form 10-KSB fairly presents in all material respects the
financial condition and results of operations of Baltic International USA, Inc.

Date: March 2, 2007

                              /s/ Robert L. Knauss
                              -------------------------------------------------
                              Robert L. Knauss
                              Chief Executive Officer




EXHIBIT 32.2


CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

       I, David A. Grossman, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the
Annual Report of Baltic International USA, Inc. on Form 10-KSB for the fiscal
year ended December 31, 2003 fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and that information
contained in such Form 10-KSB fairly presents in all material respects the
financial condition and results of operations of Baltic International USA, Inc.

Date: March 2, 2007

                              /s/ David A. Grossman
                              -------------------------------------------------
                              David A. Grossman
                              Chief Financial Officer