UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 8-K/A

                                 Current Report

     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

        Date of report (date of earliest event reported): March 19, 2007

                               Balchem Corporation
             (Exact name of registrant as specified in its charter)

Maryland                                   1-13648           13-257-8432
(State or other jurisdiction of   (Commission File Number)   (IRS Employer
incorporation)                                               Identification No.)

                       P.O. Box 600, New Hampton, NY 10958
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (845) 326-5600

         Check the  appropriate  box below if the Form 8-K filing is intended to
simultaneously  satisfy the filing obligation of the registrant under any of the
following provisions:

[_]      Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)

[_]      Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)

[_]      Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))

[_]      Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))

<page>


Item 2.01 Completion of Acquisition of Assets

         Balchem  Corporation (the "Company")  previously filed a Current Report
on Form  8-K on  March  21,  2007 to  announce  that the  Company,  through  its
wholly-owned  subsidiary BCP Ingredients,  Inc.  ("BCP"),  entered into an asset
purchase agreement (the "Asset Purchase  Agreement") with Chinook Global Limited
("Chinook"),  a  privately  held  Ontario  corporation,  pursuant  to which  BCP
acquired certain of Chinook's  choline  chloride  business assets for a purchase
price of $29,000,000 plus the value of certain product inventories  estimated at
approximately  $1,840,000.  The acquisition  closed effective the same date. The
inventory  purchase price is subject to adjustment  based upon Chinook's  actual
finished  goods and raw materials  inventory as of the closing date. The parties
have  agreed to hold  approximately  $276,000  of the  purchase  price in a cash
escrow  account for a brief  period  after the  closing to secure such  purchase
price  adjustment.  The  Company  indicated  on the Form 8-K that it would  file
financial information required under Item 9.01 below no later than 71 days after
the date on which the initial report on Form 8-K was required to be filed.  This
Amendment No. 1 is filed to provide the required financial information.

         Pursuant to Item 9.01 of Form 8-K,  set forth  below are the  Financial
Statements and Pro Forma Financial Information relating to the acquisition. Such
information  should be read in conjunction with the Company's Current Reports on
Form 8-K filed on March 21, 2007, relating to the acquisition.


Item 9.01 Financial Statements and Exhibits

(a)      Financial Statements of Business Acquired

         Independent  Auditor's Report on Consolidated Balance Sheet,  Statement
         of Earnings, Stockholders' Equity and Cash Flows.

         Consolidated  Balance  Sheet as of December  31, 2006 and  Consolidated
         Statements of Earnings,  Stockholders'  Equity,  and Cash Flows for the
         twelve month period ended December 31, 2006.


(b)      Pro Forma Financial Information

         Unaudited Pro Forma Combined Balance Sheet as of December 31, 2006, and
         Unaudited Pro Forma Combined Statement of Operations for the year ended
         December 31, 2006.

<page>

Item 9.01(a) Financial Statements of Businesses Acquired




                             CHINOOK GLOBAL LIMITED
                        Consolidated Financial Statements
                                December 31, 2006
                   (With Independent Auditors' Report Thereon)



<page>

                             CHINOOK GLOBAL LIMITED
                        Consolidated Financial Statements
                                December 31, 2006



                                Table of Contents


                                                                            Page


Independent Auditors' Report                                                   1

Consolidated Balance Sheet                                                     2

Consolidated Statement of Earnings                                             3

Consolidated Statement of Stockholders' Equity and Comprehensive Income        4

Consolidated Statement of Cash Flows                                           5

Notes to Consolidated Financial Statements                                6 - 24


<page>

                          Independent Auditors' Report
                          ----------------------------

The Shareholders of Chinook Global Limited

We have audited the  accompanying  consolidated  balance sheet of Chinook Global
Limited as of December  31,  2006,  and the related  consolidated  statement  of
earnings,  stockholders' equity and comprehensive income, and cash flows for the
twelve month period then ended. These consolidated  financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement. An audit includes consideration of
internal  control  over  financial  reporting  as a basis  for  designing  audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the  effectiveness  of the Company's  internal  control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by  management,  as well as evaluating the
overall financial statement  presentation.  We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the  financial  position of Chinook  Global
Limited as of December 31, 2006,  and the results of their  operations and their
cash flows for the twelve  month  period  then ended in  conformity  with United
States generally accepted accounting principles.


Signed "KPMG LLP"

Chartered Accountants, Licensed Public Accountants

May 14, 2007

<page>

                             CHINOOK GLOBAL LIMITED
                           Consolidated Balance Sheet
            Twelve month period ended December 31, 2006, (note 1(a))
                               (US $ in thousands)

                                          Assets
Current assets:
     Cash                                                               $  1,121
     Trade accounts receivable, less allowance for doubtful
         accounts of nil                                                   4,900
     Inventories:
         Finished goods                                                    1,543
         Raw materials                                                       790
         Supplies                                                            120
                                                                        --------
                   Total inventories                                       2,453

     Unrealized gain, derivative instrument (note 3)                         492

     Other current assets                                                    334
                                                                        --------
                   Total current assets                                    9,300

Property, plant, and equipment (note 4)                                      613

                                                                        --------
                       Total assets                                     $  9,913
                                                                        ========
                               Liabilities and Stockholders' Equity
Current liabilities:
     Trade accounts payable                                             $  1,926
     Accrued liabilities                                                   3,171
     Current portion of fines payable (note 6)                               480
     Railcar retirement obligation (note 5)                                  115
     Unrealized loss, derivative instruments (note 3)                        352
                                                                        --------
                     Total current liabilities                             6,044
     Fines payable (note 6)                                                  516
                                                                        --------
                     Total liabilities                                     6,560
Stockholders' equity (note 8):
     Unlimited Class A common shares with no par value;
         issued and outstanding 80,000 shares                                  1
     Unlimited Class E common shares with no par value;
         issued and outstanding 20,000 shares                                  1
     Additional paid in capital                                              237
     Retained earnings                                                     3,114
                                                                        --------
                     Total stockholders' equity                            3,353
Commitments and contingencies (notes 11 and 14)
Subsequent events (note 17)
                                                                        --------
                     Total liabilities and stockholders' equity         $  9,913
                                                                        ========
See accompanying notes to consolidated financial statements.


                                       2
<page>
<table>
<caption>

                                CHINOOK GLOBAL LIMITED
                          Consolidated Statement of Earnings
               Twelve month period ended December 31, 2006, (note 1(a))
                    (US $, in thousands, except per share amounts)

--------------------------------------------------------------------------------------
                                                            January 1         April 7
                                                           to April 6   to December 31
--------------------------------------------------------------------------------------
                                                           (note 1(a))     (note 1(a))

                                                              <c>             <c>

Net sales                                                 $     10,790    $     32,347

Cost of goods sold (note 13)                                     8,899          25,916
                                                          ------------    ------------
                    Gross profit                                 1,891           6,431

Selling, general, and administrative expenses                    1,278           1,983

Amortization                                                        89              39

Other income (expense):
     Foreign exchange                                                1             (85)
     Interest, net                                                  (1)             46
     Interest, fines payable (note 6)                               --            (122)
     Unrealized loss on derivative instruments (note 3)             98            (168)
                                                          ------------    ------------
                                                                    98            (329)
                                                          ------------    ------------

Earnings before income taxes                                       622           4,080

Income taxes (note 7)                                               --              --
                                                          ------------    ------------
Earnings before extraordinary gain                                 622           4,080

Extraordinary gain - negative goodwill (note 2)                     --           1,684
                                                          ------------    ------------
                    Net earnings                          $        622    $      5,764
                                                          ============    ============


Earnings before extraordinary gain                        $       5.65    $      40.80

Extraordinary gain - negative goodwill (note 2)                     --           16.84
                                                          ------------    ------------

Earnings per share                                        $       5.65    $      57.64
                                                          ============    ============

Weighted average number of shares outstanding                      110             100
                                                          ------------    ------------

See accompanying notes to consolidated financial statements.


                                          3
</table>
<page>
<table>
<caption>

                                                 CHINOOK GLOBAL LIMITED
                         Consolidated Statement of Stockholders' Equity and Comprehensive Income
                                Twelve month period ended December 31, 2006, (note 1(a))
                                     (US $, in thousands, except per share amounts)

                                                                                               Accumulated
                                                Total              Additional                     other         Total
                                         Common stock (note 8)       paid in      Retained    comprehensive  stockholders'
                                         Number          $           capital      earnings        loss         equity
                                       ----------    ----------    ----------    ----------    ----------    ----------

                                     <c>               <c>    <c>           <c>           <c>           <c>
Balances at January 1, 2006               110,365           411    $       --    $    7,039    $   (2,455)   $    4,995
     Net earnings                              --            --            --           622            --           622

Revision of share structure (note 8)      (10,365)        1,318            --            --            --         1,318

Share reorganization (note 8)                  --        (1,727)        1,727            --            --            --
Dividends paid (note 8(c)):
     Common stock - Class A                    --            --            --        (1,644)           --        (1,644)
     Common stock - Class E                    --            --            --            --            --            --
                                       ----------    ----------    ----------    ----------    ----------    ----------

Balances at April 6, 2007                 100,000             2    $    1,727    $    6,017    $   (2,455)   $    5,291

Impact of acquisition (note 2)                 --            --        (1,727)       (6,017)        2,455        (5,289)

     Net earnings                              --            --            --         5,764            --         5,764

Redemption of notes payable (note 9)           --            --           237            --            --           237

Dividends paid (note 8(c)):
     Common stock - Class A                    --            --            --        (2,139)           --        (2,139)
     Common stock - Class E                    --            --            --          (511)           --          (511)
                                       ----------    ----------    ----------    ----------    ----------    ----------
Balances at December 31, 2006             100,000             2    $      237    $    3,114    $       --    $    3,353
                                       ==========    ==========    ==========    ==========    ==========    ==========

See accompanying notes to consolidated financial statements.


                                                           4
</table>
<page>
<table>
<caption>

                                   CHINOOK GLOBAL LIMITED
                            Consolidated Statement of Cash Flows
                                  Twelve month period ended
                               December 31, 2006, (note 1(a))
                                     (US $ in thousands)

                                                                  January 1         April 7
Cash provided by (used in):                                      to April 6  to December 31

                                                                      <c>             <c>
Operating activities:
     Net earnings                                              $        622    $      5,764
     Items not involving cash:
         Extraordinary gain - negative goodwill (note 2)                 --          (1,684)
         Amortization, plant and equipment                               89              39
         Unrealized gain on derivative instruments (note 3)             (98)            168
         Accretion of railcar retirement obligation (note 5)              1               4
     Interest, fines payable (note 6)                                    --             123

     Changes in non-cash operating working capital (note 12)            786              51
                                                               ------------    ------------
                                                                      1,400           4,465

Financing activities:
     Repayment of note from a company under common control
         (note 10)                                                     (500)             --
     Reduction of fines payable (note 6)                               (120)           (360)
     Proceeds from issuance of notes payable (note 9)                 1,644              --
     Repayment of notes payable (note 9)                                 --          (1,407)
     Dividends paid (note 8)                                         (1,644)         (2,650)
                                                               ------------    ------------
                                                                       (620)         (4,417)

Investing activities:
     Acquisition (note 2)                                                --              (1)
     Additions to plant and equipment                                   (24)           (524)
     Proceeds on sale of property, plant and equipment                  445              --
                                                               ------------    ------------
                                                                        421            (525)
                                                               ------------    ------------

Increase (decrease) in cash                                           1,201            (477)

Cash, beginning of period                                               397              --

Cash and cash equivalents acquired on acquisition (note 2)               --           1,598

                                                               ------------    ------------
Cash and cash equivalents, end of period                       $      1,598    $      1,121
                                                               ============    ============


See accompanying notes to consolidated financial statements.

                                             5
</table>
<page>


                             CHINOOK GLOBAL LIMITED
                   Notes to Consolidated Financial Statements
                                December 31, 2006
                               (US $ in thousands)


(1)  Summary of significant accounting policies:

     (a)  Basis of presentation

          Chinook Group  Limited,  amalgamated  with Chinook  Canada  Limited on
          February 1, 2005 to form Chinook Global Limited ("CGL").

          While the Company's  fiscal period ends on March 31st, these financial
          statements  have been  prepared as at and for the twelve  months ended
          December 31, 2006.

          On April 6, 2006,  new  investors,  being members of management  ("new
          investors")  acquired  95.6% of the  Company  not  previously  held by
          management  representing all the issued and outstanding Class A common
          stock of the Company.

          The  acquisition  was  accounted  for using the purchase  method under
          Statement of Financial  Accounting  Standards (SFAS) No. 141 "Business
          Combinations"  and  SFAS  No.  142,  "Goodwill  and  Other  Intangible
          Assets". Under the purchase method of accounting,  the assets acquired
          and  liabilities  assumed were recorded at estimated fair value at the
          date of the  acquisition  and these values were  "pushed  down" to the
          Company's financial statements in accordance with push down accounting
          rules.

          As a result of the  acquisition,  both the  operating  results  of the
          Company prior to April 7, 2006 and the operating results post April 6,
          2006 are presented in these financial statements.

     (b)  Description of business

          Chinook  Global  Limited is engaged in the business of  producing  and
          selling choline chloride and specialty choline derivatives  throughout
          the world.  Choline  chloride is a vitamin B4 feed  supplement that is
          broadly used primarily in the swine, poultry and pet food industry.

     (c)  Principles of consolidation

          The consolidated financial statements include the financial statements
          of Chinook  Global  Limited  and its wholly  owned  subsidiaries.  All
          significant   intercompany   balances  and   transactions   have  been
          eliminated in  consolidation.  In addition,  the Company evaluates its
          relationships  with  other  entities  to  identify  whether  they  are
          variable  interest entities as defined by FASB  Interpretation  No. 46
          (R),  Consolidation of Variable  Interest  Entities ("FIN 46R") and to
          assess whether it is the primary beneficiary of such entities.  If the
          determination  is made that the  Company is the  primary  beneficiary,
          then that entity is included in the consolidated  financial statements
          in accordance with FIN 46(R).  The Company has no  relationships  with
          variable interest entities.

                                       6
<page>

                             CHINOOK GLOBAL LIMITED
                   Notes to Consolidated Financial Statements
                                December 31, 2006
                               (US $ in thousands)

(1)  Summary of significant accounting policies (continued):

     (d)  Trade accounts receivable

          Trade accounts  receivable are recorded at the invoiced  amount and do
          not  bear  interest.  The  allowance  for  doubtful  accounts  is  the
          Company's  best  estimate of the amount of probable  credit losses for
          doubtful accounts in the Company's existing accounts  receivable.  The
          Company  determines  the allowance  based on an individual  account by
          account review of all accounts  outstanding at the balance sheet date.
          Account balances are charged off against the allowance after all means
          of  collection  have been  exhausted and the potential for recovery is
          considered  remote.  The Company  does not have any  off-balance-sheet
          credit exposure related to its customers.

     (e)  Inventories

          Inventories are valued at the lower of cost or market determined using
          the weighted average method and net realizable value.

     (f)  Property, plant, and equipment

          Land is  stated  at  cost.  Buildings  and  equipment  are  stated  at
          amortized cost. Amortization is provided on a straight-line basis over
          the estimated useful life of the asset as follows:

          Asset                                                          Rate
          -----                                                          ----

          Buildings, roads and sidings                               25 years
          Production equipment                                    15-20 years
          Pollution control equipment                                10 years
          Furniture and fixtures                                      5 years

     (g)  Income taxes

          Income taxes are accounted  for under the asset and liability  method.
          Deferred tax assets and  liabilities are recognized for the future tax
          consequences   attributable  to  differences   between  the  financial
          statement  carrying  amounts of existing  assets and  liabilities  and
          their  respective  tax bases and  operating  loss and tax credit carry
          forwards.  Deferred  tax assets and  liabilities  are  measured  using
          enacted tax rates  expected to apply to taxable income in the years in
          which those  temporary  differences  are  expected to be  recovered or
          settled. The effect on deferred tax assets and liabilities of a change
          in tax rates is  recognized  in income in the period that includes the
          enactment date.

                                       7
<page>

                             CHINOOK GLOBAL LIMITED
                   Notes to Consolidated Financial Statements
                                December 31, 2006
                               (US $ in thousands)

(1)  Summary of significant accounting policies (continued):

     (h)  Revenue recognition

          The  Company  recognizes  revenue  when  products  are shipped and the
          customer takes  ownership and assumes risk of loss,  collection of the
          relevant   receivable  is  probable,   persuasive   evidence  that  an
          arrangement  exists  and the  sales  price is  fixed or  determinable.
          Volume  discounts  earned by customers  are applied to invoices at the
          time of invoicing  and are  accounted  for as a reduction of revenues.
          Given the nature of the  products  sold,  the  Company  does not allow
          customers  product  returns or allowances  unless the product does not
          meet pre-established  product  specification.  Early payment discounts
          are given to select customers only.

     (i)  Derivative instruments

          The  Company  accounts  for  derivatives  and  hedging  activities  in
          accordance  with FASB  Statement No. 133,  Accounting  for  Derivative
          Instruments and Certain Hedging activities, as amended, which requires
          that all  derivative  instruments  be recorded on the balance sheet at
          their respective fair values. Accordingly, each derivative contract is
          adjusted to fair value at the balance  sheet date with changes in fair
          value being recognized in earnings in the current period.  The Company
          does not enter into financial  instruments  for trading or speculative
          purposes.

          The Company  determines  the fair value of its  financial  instruments
          based on quoted  market  values or cash flow  analyses.  The  recorded
          amounts  of  financial  instruments  in these  consolidated  financial
          statements approximate their fair values.

     (j)  Impairment of long-lived assets

          In accordance  with FASB Statement No. 144,  Accounting for Impairment
          on Disposal of Long-Lived Assets,  property,  plant, and equipment are
          reviewed for impairment  whenever  events or changes in  circumstances
          indicate that the carrying  amount of an asset may not be recoverable.
          Recoverability  of  assets  to be  held  and  used  is  measured  by a
          comparison   of  the   carrying   amount  of  an  asset  to  estimated
          undiscounted  future cash flows expected to be generated by the asset.
          If the carrying  amount of an asset exceeds its estimated  future cash
          flows,  an impairment  charge is recognized by the amount by which the
          carrying  amount of the asset  exceeds  the fair  value of the  asset.
          Assets to be disposed of would be separately  presented in the balance
          sheet and reported at the lower of the  carrying  amount or fair value
          less  costs to sell,  and are no longer  depreciated.  The  assets and
          liabilities of a disposal  group  classified as held for sale would be
          presented  separately in the appropriate asset and liability  sections
          of the balance sheet.

                                       8
<page>

                             CHINOOK GLOBAL LIMITED
                   Notes to Consolidated Financial Statements
                                December 31, 2006
                               (US $ in thousands)

(1)  Summary of significant accounting policies (continued):

     (k)  Asset retirement obligation

          In  accordance  with FASB  Statement  No.  143,  Accounting  for Asset
          Retirement  Obligations,  ("Statement 143") the Company recognizes the
          fair value of a future asset  retirement  obligation as a liability in
          the period in which it incurs a legal  obligation  associated with the
          retirement of tangible long-lived assets or leased assets that results
          from the acquisition, construction,  development, and/or normal use of
          the  assets.  The  Company  concurrently  recognizes  a  corresponding
          increase in the carrying amount of the related  long-lived  asset that
          is amortized  over the life of the asset.  The fair value of the asset
          retirement  obligation  is  estimated  using  the  expected  cash flow
          approach  that reflects a range of possible  outcomes  discounted at a
          credit-adjusted  risk-free  interest  rate.  Subsequent to the initial
          measurement, the asset retirement obligation is adjusted at the end of
          each  period  to  reflect  the  passage  of time  and  changes  in the
          estimated future cash flows underlying the obligation.  Changes in the
          obligation due to the passage of time are recognized in interest,  net
          expense using the interest  method.  Changes in the  obligation due to
          changes in estimated cash flows are recognized as an adjustment of the
          carrying  amount  or value of the  related  long-lived  asset  that is
          amortized over the remaining life of the asset.

     (l)  Commitments and contingencies

          Liabilities   for   loss   contingencies,    including   environmental
          remediation  costs not within the scope of Statement 143, 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.  Legal costs  incurred in connection  with loss
          contingencies  are expensed as incurred.  Recoveries of  environmental
          remediation   costs  from  third   parties,   which  are  probable  of
          realization,  are  separately  recorded as assets,  and are not offset
          against the related environmental  liability,  in accordance with FASB
          Interpretation  No.  39,  Offsetting  of  Amounts  Related  to Certain
          Contracts.

          The  Company  accrues  for  losses   associated   with   environmental
          remediation  obligations  not within the scope of  Statement  143 when
          such  losses are  probable  and  reasonably  estimable.  Accruals  for
          estimated losses from environmental  remediation obligations generally
          are  recognized no later than  completion of the remedial  feasibility
          study. Such accruals are adjusted as further  information  develops or
          circumstances  change.  Costs of future  expenditures  for environment
          remediation obligations are not discounted to their present value.

                                       9
<page>

                             CHINOOK GLOBAL LIMITED
                   Notes to Consolidated Financial Statements
                                December 31, 2006
                               (US $ in thousands)

(1)  Summary of significant accounting policies (continued):

     (m)  Foreign currency translation

          Monetary assets and liabilities  denominated in foreign currencies are
          translated  at the  prevailing  rates of exchange at the balance sheet
          date.  Revenue and  expenses  are  translated  at the  exchange  rates
          prevailing on the transaction date.  Realized and unrealized  exchange
          gains and losses are included in earnings.

     (n)  Accounting for foreign currencies

          The  functional  currency of the Company is the United States  dollar.
          All  transactions  denominated  in a foreign  currency are  translated
          using an estimated rate on the day the transaction occurs.

          The Company's  functional currency changed to the United States dollar
          effective  April 1, 2003. At this time the financial  statements  were
          remeasured  into United States dollars using the  historical  exchange
          rate for  property,  plant and  equipment,  equity and  certain  other
          non-monetary assets and liabilities and related  amortization on these
          assets and  liabilities.  The Company  used the  exchange  rate at the
          balance sheet date for the remaining  monetary assets and liabilities.
          A weighted average exchange rate was used for each prior year revenues
          and  expenses.  Translation  adjustments,  which  were  based upon the
          exchange rate at the balance sheet date for assets and liabilities and
          historical  exchange rates for non-monetary assets and liabilities and
          the  weighted  average  rate for prior  year  income  statements,  are
          recorded as cumulative  translation  adjustment in  accumulated  other
          comprehensive loss in Stockholders' equity.

     (o)  Use of estimates

          The  preparation of the  consolidated  financial  statements  requires
          management   of  the  Company  to  make  a  number  of  estimates  and
          assumptions relating to the reported amounts of assets and liabilities
          and the disclosure of contingent assets and liabilities at the date of
          the  consolidated  financial  statements  and the reported  amounts of
          revenues and expenses during the period.  Significant items subject to
          such estimates and assumptions include the carrying value of property,
          plant and  equipment,  the railcar  retirement  obligation,  valuation
          allowances  for  receivables,  inventories  and  deferred  income  tax
          assets,   environmental   liabilities   and  valuation  of  derivative
          instruments. Actual results could differ from those estimates.

                                       10
<page>

                             CHINOOK GLOBAL LIMITED
                   Notes to Consolidated Financial Statements
                                December 31, 2006
                               (US $ in thousands)

(2)  Acquisition:

     On  April  6,  2006  new  investors  being  members  of  management   ("new
     investors"),  acquired  the 95.6% of the  Company  representing  all of the
     issued  and  outstanding  Class A common  stock of the  Company  for  total
     consideration of $1.00, from the prior stockholders.

     The  acquisition  by  Management  has been  accounted  for by the  purchase
     method,  whereby the identifiable  assets acquired and liabilities  assumed
     are recorded at fair value. The allocation of the purchase price to the net
     assets  acquired and  liabilities  assumed at their  assigned  values is as
     follows:

     Cash and cash equivalents                                          $  1,598
     Accounts receivable                                                   4,918
     Inventories                                                           2,832
     Property, plant and equipment, available for sale                       128
     Unrealized gain on derivative contract                                  308
     Other current assets                                                    500
     ---------------------------------------------------------------------------

            Total assets acquired                                         10,284

     Trade accounts payable                                                3,973
     Accrued liabilities                                                   1,638
     Fines payable                                                         1,234
     Railcar retirement obligation                                           111
     Notes payable                                                         1,644
     ---------------------------------------------------------------------------

            Total liabilities assumed                                      8,600
     ---------------------------------------------------------------------------

     Net assets acquired                                                   1,684

     Cash consideration                                                     1.00

     ---------------------------------------------------------------------------
     Extraordinary gain                                                 $  1,684
     ---------------------------------------------------------------------------

     The fair value of tangible and intangible assets acquired was $29,298.  The
     fair value of liabilities assumed was $8,600 resulting in negative goodwill
     of $20,698.  Negative  goodwill was  allocated to the acquired  assets on a
     pro-rata basis in accordance with SFAS 141, "Business  Combinations".  As a
     result of the allocation, all property, plant and equipment acquired, other
     than  that  held  for sale  and  intangible  assets  were  reduced  to nil.
     Following  the  allocation,  $1,684 of negative  goodwill  remained and was
     recorded as an extraordinary gain.

                                       11
<page>

                             CHINOOK GLOBAL LIMITED
                   Notes to Consolidated Financial Statements
                                December 31, 2006
                               (US $ in thousands)

(3)  Derivative instruments:

     The Company uses commodity  derivatives to manage its exposure to commodity
     price fluctuations.

     By using derivative  financial  instruments to hedge economic  exposures to
     changes in commodity prices,  the Company exposes itself to credit risk and
     market  risk.  Credit  risk is the failure of the  counterparty  to perform
     under  the  terms of the  derivative  contract.  When  the fair  value of a
     derivative contract is positive,  the counterparty owes the Company,  which
     creates  credit risk for the  Company.  When the fair value of a derivative
     contract is negative, the Company owes the counterparty and, therefore,  it
     does not possess  credit  risk.  The Company  minimizes  the credit risk in
     derivative  instruments  by entering into  transactions  with  high-quality
     counterparties.

     Market risk is the adverse  effect on the value of a derivative  instrument
     that results from a change in commodity prices.  The market risk associated
     with  commodity-price  contracts is managed by establishing  and monitoring
     parameters  that  limit  the types  and  degree of market  risk that may be
     undertaken.

     The Company maintains a commodity-price-risk  management strategy that uses
     derivative  instruments  to minimize  significant,  unanticipated  earnings
     fluctuations caused by commodity-price volatility. The manufacturing of the
     Company's  products requires a significant  volume of raw materials.  Price
     fluctuations of raw materials cause market values of raw material inventory
     to differ from its cost and for the actual  purchase price of raw materials
     to differ from the contract price.

     The Company has the following derivative instruments at December 31, 2006:

     (a)  On May 5, 2006, the Company entered into a natural gas swap agreement.
          The swap expires on March 31, 2007 and requires the Company to pay (or
          receive from) a counterparty on a monthly basis the difference between
          prevailing  market rates and the contract price. The prevailing market
          price at December 31, 2006 was lower than the contract price.

     (b)  On December 15, 2006, the Company  entered into a contract to purchase
          a raw  material  and to fix the price of the  material.  The  contract
          expires in January 2007 and  requires the Company to take  delivery of
          the  contracted  amount of the raw  material.  The  prevailing  market
          forward price at December 31, 2006 is in excess of the contract price.

     (c)  At December 31, 2006,  the Company had an  obligation to deliver a raw
          material  input  to a  supplier  based  on  the  amount  of  processed
          materials  already  received from the supplier.  The fair value of the
          obligation to deliver the raw material  component has been  determined
          using the spot price of the raw  material  component  at December  31,
          2006, which exceeds the contract price.

                                       12
<page>

                             CHINOOK GLOBAL LIMITED
                   Notes to Consolidated Financial Statements
                                December 31, 2006
                               (US $ in thousands)

(3)  Derivative instruments (continued):

     The following  table  presents the carrying  amounts and fair values of the
     Company's derivative instruments at December 31, 2006  (asset/(liability)):

                                                                    Carrying and
                                                                      fair value

     Natural gas swap agreement (a)                                   $    (249)
     Raw material purchase contract (b)                                     492
     Process material purchase contract (c)                                (103)

(4)  Property, plant and equipment:

     Buildings, roads and sidings                                     $      --
     Production equipment                                                   524
     Pollution control equipment                                             --
     Furniture and fixtures                                                  --
     Less accumulated amortization                                           39
                                                                      ---------
                                                                            485
     Assets held for sale                                                   128
                                                                      ---------
                                                                      $     613
                                                                      =========

     The  carrying  value of all  property,  plant  and  equipment,  other  than
     property held for sale,  was reduced to nil as a result of the  acquisition
     (note 2).

(5)  Railcar retirement obligation:

     The Company has a railcar  retirement  obligation arising from requirements
     to perform certain  activities at the time that certain leased equipment is
     returned to the lessor.  The liability was initially measured at fair value
     and  subsequently  is  adjusted  for  accretion  expense and changes in the
     amount or timing of the estimated cash flows. The corresponding  retirement
     costs  are  capitalized  and  amortized  over  the term of the  lease.  The
     following table presents the activity for the railcar retirement obligation
     for the twelve month period ended December 31, 2006:

                                                     January 1,         April 7,
                                                     to April 6   to December 31

     Beginning balance                             $        110    $        111
     Additional liabilities incurred                         --              --
     Liabilities settled in current period                   --              --
     Revisions to estimates                                  --              --
     Accretion expense                                        1               4
                                                   ------------    ------------
     Ending balance                                $        111    $        115
                                                   ============    ============

                                       13
<page>

                             CHINOOK GLOBAL LIMITED
                   Notes to Consolidated Financial Statements
                                December 31, 2006
                               (US $ in thousands)


(6)  Fines payable:

     Fines payable at December 31, 2006 consists of the following (note 14(a)):

     Unsecured non-interest bearing amounts, payable in equal
          quarterly installments of $120, due June 2009             $      1,180
           Less amounts representing interest at 7%                          184
                                                                    ------------
                                                                             996
           Less current installments                                         480
                                                                    ------------
           Fines payable                                            $        516
                                                                    ============

(7)  Income taxes:

     Income tax expense  attributable to income from  continuing  operations was
     nil for the 96-day period ended April 6, 2006 and the 269-day  period ended
     December 31, 2006,  and differed from the amounts  computed by applying the
     Canadian Federal income tax rate of 22.12% and Ontario  Provincial tax rate
     of 14% to  pretax  income  from  continuing  operations  as a result of the
     following:

<table>
<caption>
                                                                    January 1,        April 7,
                                                                    to April 6  to December 31

                                                                        <c>             <c>

     Computed "expected" tax expense                              $        225    $      2,082
     Increase (reduction) in income taxes resulting from:
     Non-deductible expenses                                               163             120
     Non-taxable extraordinary gain (note 2)                                --            (605)
     Manufacturing and processing deduction                                (22)            (88)
     Change in the beginning-of-the-period balance of the
          valuation allowance for deferred tax assets allocated
          to income tax expense                                           (366)         (1,509)
                                                                  ------------    ------------
               Total income tax expense                           $         --    $         --
                                                                  ============    ============
</table>

     The Company is not subject to income taxes in any foreign jurisdiction.

     The tax  effects of  temporary  differences  that give rise to  significant
     portions  of the  deferred  tax  assets and  deferred  tax  liabilities  at
     December 31, 2006 are presented below.

     Deferred tax assets:
       Non-capital losses carried forward                          $ 4,201
       Equipment and machinery                                       1,208
       Other                                                           175
                                                                   -------
         Total gross deferred tax assets                             5,584
     Less valuation allowance                                       (5,584)
                                                                   -------
         Net deferred tax assets                                   $    --
                                                                   =======

                                       14
<page>

                             CHINOOK GLOBAL LIMITED
                   Notes to Consolidated Financial Statements
                                December 31, 2006
                               (US $ in thousands)


(7)  Income taxes (continued):

     In assessing the realizability of deferred tax assets, management considers
     whether it is more likely than not that some portion or all of the deferred
     tax assets will not be realized.  The ultimate  realization of deferred tax
     assets is dependent upon the generation of future taxable income during the
     periods in which those temporary differences become deductible.

     Management  considers the scheduled  reversal of deferred tax  liabilities,
     projected future taxable income, and tax planning strategies in making this
     assessment.  In order to fully realize the deferred tax asset,  the Company
     will need to generate future taxable income of approximately  $12,312 prior
     to the  expiration of the net operating  loss carry forwards and investment
     tax credit carry forwards as follows:

                                                Investment             Loss
                                               tax credits   carry forwards
                                               -----------   --------------

     2010                                     $         47     $         --
     2011                                               13            1,191
     2012                                               11               --
     2013                                               16               --
     2015                                               --            7,820
     2016                                               --            3,301
                                              ------------     ------------

                                              $         87     $     12,312
                                              ============     ============

     Based  upon the level of  historical  taxable  income and  projections  for
     future  taxable  income over  periods in which the  deferred tax assets are
     deductible, management believes it is more likely than not that the Company
     will not realize the benefits of these  deductible  differences at December
     31, 2006.

     Subsequent  to year end,  the  Company  sold  certain of its  assets  (note
     17(b)).  The future tax asset attributed to loss carry forwards  previously
     reduced to nil, through the recognition of a valuation  allowance,  will by
     utilized by the Company as a result of the sale.

                                       15
<page>
<table>
<caption>

                                                       CHINOOK GLOBAL LIMITED
                                             Notes to Consolidated Financial Statements
                                                          December 31, 2006
                                              (US $ in thousands, except share amounts)

(8)  Capital stock (table expressed in dollars):


                                                      Class C                Class D                 Class E
                           Common stock            common stock           common stock            common stock
                         Number                  Number                  Number                  Number
                    outstanding      Amount outstanding      Amount outstanding      Amount outstanding      Amount

                     <c>         <c>             <c>     <c>            <c>      <c>           <c>       <c>

Balances at
  January 1, 2006        92,717   $ 411,245       8,824   $       6       4,412   $       3       4,412  $       3

Elimination on
  Revision of
  capital structure
  (note 8 (b(i)))       (92,717)   (411,245)     (8,824)         (6)     (4,412)         (3)         --         --
Increase
  (reduction) in
  the stated capital
   (note  8 (b(i)))          --          --          --          --          --          --          --      1,046
------------------------------------------------------------------------------------------------------------------
Balances at
  April 6, 2006              --          --          --          --          --          --       4,412      1,049

Exchange of
  Class A
  common stock
  for Class E
  common stock
  (note 8 (b(vi)))           --          --          --          --          --          --      15,588         --
------------------------------------------------------------------------------------------------------------------

Balances at
  December 31, 2006          --   $      --          --   $      --          --   $      --      20,000  $   1,049
==================================================================================================================
<caption>
                                                                           Class A              Class B
                              Class A                  Total           preferred stock       preferred stock             Total
                           common stock            common stock       (note 7 (a)(ii))     (note 7 (a) (iii))      preferred stock
                         Number                  Number                  Number                Number                Number
                   outstanding       Amount outstanding      Amount outstanding   Amount  outstanding    Amount outstanding   Amount

               <c>                 <c>        <c>        <c>            <c>    <c>          <c>      <c>           <c>       <c>
Balances at
  January 1, 2006          --   $        --     110,365  $  411,257       1,000  $   --       92,717   $     --      93,717    $  --

Elimination on
  Revision of
  capital
   structure
  (note 8
   (b(i)))             95,588     1,728,579     (10,365)  1,317,325      (1,000)     --      (92,717)        --     (93,717)      --
Increase
  (reduction)
  in the stated
  capital (note
  8 (b(i)))                --    (1,727,824)         --  (1,726,778)         --      --           --         --          --       --
------------------------------------------------------------------------------------------------------------------------------------
Balances at
  April 6, 2006        95,588           755     100,000       1,804          --      --           --         --          --       --

Exchange of
  Class A
  common stock
  for Class E
  common stock
  (note 8 (b(vi)))    (15,588)           --          --          --          --      --           --         --          --       --
------------------------------------------------------------------------------------------------------------------------------------

Balances at
  December 31, 2006    80,000   $       755     100,000  $    1,804          --  $   --           --   $     --          --    $  --
====================================================================================================================================
</table>

                                                                 16
<page>

                             CHINOOK GLOBAL LIMITED
                   Notes to Consolidated Financial Statements
                                December 31, 2006
                               (US $ in thousands)

(8)   Capital stock (continued):

      (a)   Capital stock:

            At  January  1,  2006,  the  outstanding  classes  of stock  had the
            following features:

            Authorized:

            (i)   Unlimited common stock;  Class A, Class C, Class D and Class E
                  common stock with no par value.

            (ii)  Unlimited  Class A voting  preferred  stock,  retractable  and
                  redeemable, at $1,317 per share,  non-cumulative cash dividend
                  of 0.5% of  redemption  price,  preference  in  winding up and
                  payment of  dividends in priority to all other stock except to
                  Class B preferred stock which rank in priority. This preferred
                  stock has certain  characteristics  which  require  them to be
                  classified as a liability on the balance  sheet.  Accordingly,
                  any  dividends  authorized  on  this  stock  are  recorded  as
                  interest expense.

            (iii) Unlimited Class B non-voting preferred stock,  retractable and
                  redeemable at 0.001 per share, non-cumulative cash dividend of
                  3.0% of redemption price, preference on winding up and payment
                  of dividends in priority to all other  stock.  This  preferred
                  stock has certain  characteristics  which  require  them to be
                  classified as a liability on the balance  sheet.  Accordingly,
                  any  dividends  authorized  on  this  stock  are  recorded  as
                  interest expense.

      (b)   Transactions:

            (i)   On March 30, 2006, the Company obtained  stockholder  approval
                  and filed articles of amendment to consolidate its Class A and
                  Class B preferred stock, its Class C and Class D voting common
                  stock and common stock to 95,588 Class A voting  common stock.
                  Following the consolidation, the Class A and Class B preferred
                  stock,  the  common  stock  and the Class C and Class D voting
                  common  stock  were  cancelled.   In  addition  to  the  stock
                  consolidation,  the Company  reduced the stated capital of its
                  Class A voting common stock to less than $1, and increased the
                  stated  capital of the Class E voting  common stock to $1. The
                  net reduction in stated capital of $1,727 was  reclassified to
                  additional  paid in  capital.  The  Class A and Class E voting
                  common  stock rank  equally in their  rights  with  respect to
                  payment of dividends and amounts upon liquidation, dissolution
                  or winding up.

            (ii)  On April 6, 2006,  the  Directors  of Chinook  Global  Limited
                  passed a resolution declaring a capital dividend in the amount
                  of  $1,644 on the Class A common  shares  held by the  selling
                  shareholders.

                                       17
<page>

                             CHINOOK GLOBAL LIMITED
                   Notes to Consolidated Financial Statements
                                December 31, 2006
                               (US $ in thousands)

(8)   Capital stock (continued):

      (b)   Transactions:

            (iii) Immediately  following the  declaration  of the dividend,  the
                  $1,644 dividend was paid.

            (iv)  Immediately following the payment of the capital dividend, the
                  Directors  of  Chinook  Global  Limited  passed  a  resolution
                  approving  the  issuance  of notes  payable to the two Class A
                  stockholders  of Chinook  Global Limited in the amount of $924
                  and $720,  respectively.  Interest on the notes was calculated
                  at 3% per annum with blended  interest and principal  payments
                  monthly.

            (v)   Immediately  following  the  foregoing  transactions,  the two
                  Class A stockholders sold all of their Class A common stock to
                  the new investors.

            (vi)  Following  the change in control,  one  stockholder  exchanged
                  15,588 Class A common shares for 15,588 Class E common shares.

      (c)   Dividends:

            (i)   Prior to April 7, 2006, the Company paid dividends as follows:

            Class of stock                      Date

            Class A common                    April 6              $   1,644
                                                                   =========

            (ii)  During the period April 7, to December  31, 2006,  the Company
                  paid dividends as follows:

            Class of stock                       Date

            Class A common                  August 22              $    119
                                           October 16                   100
                                           December 1                 1,920
                                                                   --------
                                                                      2,139

            Class E common                  August 22                     6
                                           October 16                    25
                                           December 1                   480
                                                                   --------
                                                                        511
                                                                   --------

      Total                                                        $  2,650
                                                                   ========

                                       18
<page>

                             CHINOOK GLOBAL LIMITED
                   Notes to Consolidated Financial Statements
                                December 31, 2006
                               (US $ in thousands)


(9)   Notes payable:

      On April 6, 2006,  the  Company  issued  notes  payable to the two Class A
      stockholders  of the Company in the amount of $1,644 maturing on March 31,
      2011 (note  8(b)).  Interest on the notes was  calculated  at 3% per annum
      with blended  principal and interest  payments  monthly.  The terms of the
      notes permitted the Company to redeem the notes in advance of their stated
      maturity  date at their face  amount.  On  December  1, 2006,  the Company
      redeemed  the notes for total  consideration  of $1,407.  The $237 benefit
      recognized by the Company, being the amount by which the redemption amount
      was less  than the  stated  principal  outstanding  has been  recorded  as
      additional paid in capital.

(10)  Related party transaction:

      During  the  period  ended  April  6,  2006,  the  Company  repaid  a $500
      obligation  under a revolving  credit  facility  bearing  interest at bank
      prime rate to a company under common  control.  Following the repayment of
      the obligation, the revolving credit facility was extinguished.

(11)  Lease commitments:

      The Company has several  noncancelable  operating  leases,  primarily  for
      transportation  equipment,  that expire over the next three  years.  These
      leases  generally  contain  renewal  options  at fair  value  prices to be
      determined  in the future.  The  Company is required to pay all  executory
      costs such as maintenance and insurance.  The Company is also obligated to
      perform certain  remediation  activities at the end of the lease (note 5).
      Rental payments  include minimum rentals plus contingent  rentals based on
      mileage.

      Minimum  rent  payments  under  operating   leases  are  recognized  on  a
      straight-line  basis over the term of the lease  including  any periods of
      free rent.  Rental  expense for operating  leases for the  ninety-six  day
      period ended April 6, 2006, and the 269 day period ended December 31, 2006
      were $28 and $83 respectively.

      Future minimum lease payments under  noncancelable  operating leases (with
      initial or remaining lease terms in excess of one year) as of December 31,
      2006 are:

      Twelve months ending December 31:
           2007                                              $   111
           2008                                                  111
           2009                                                   50
                                                             -------
                Total minimum lease payments                 $   272
                                                             =======

                                       19
<page>

                             CHINOOK GLOBAL LIMITED
                   Notes to Consolidated Financial Statements
                                December 31, 2006
                               (US $ in thousands)


(12)  Change in non-cash operating working capital:

                                                 January 1 to     April 7, to
                                                      April 6     December 31

      Trade accounts receivable                  $        120    $         18
      Inventories                                        (266)            379
      Other current assets                               (258)            166
      Trade accounts payable                            1,743          (2,046)
      Accrued liabilities                                (553)          1,534
                                                 ------------    ------------
                                                 $        786    $         51
                                                 ============    ============

(13)  Cost of goods sold:

                                                 January 1 to     April 7, to
                                                      April 6     December 31

      Cost of goods sold consists of:
          Raw materials                          $      6,577    $     19,233
          Production costs                              1,251           3,533
          Freight                                       1,071           3,150
                                                 ------------    ------------
                                                 $      8,899    $     25,916
                                                 ============    ============

                                       20
<page>

                             CHINOOK GLOBAL LIMITED
                   Notes to Consolidated Financial Statements
                                December 31, 2006
                               (US $ in thousands)


(14)  Commitments and contingencies:

      (a)   A predecessor  company of CGL pleaded guilty on January 24, 2000, to
            felony price fixing in the United  States.  This matter was resolved
            with the  United  States  Department  of  Justice  ("DOJ")  with the
            imposition  of a  non-interest  bearing  fine of  $5,000,  initially
            payable in escalating annual instalments over a five year period. On
            January 15, 2004, the U.S.  District Court for the Northern District
            of Texas  restructured the fine payment schedule to require payments
            in quarterly  instalments  of $120 with the final  instalment due in
            June 2009 (note 5). In addition,  all of the  predecessor  companies
            (collectively referred to as the "Chinook defendants") were named as
            co-defendants  in numerous  class action and non-class  civil action
            suits as a result of the charges  brought by the DOJ. As of December
            31,  2006,  virtually  all class action and  non-class  civil action
            suits  which  had  been  filed  against  one or more of the  Chinook
            defendants,  except as noted below, have been settled and no further
            amounts are owed by CGL in respect of these actions.

            CGL reached an agreement  in principle on March 1, 2005,  subject to
            review and execution of the necessary legal documentation, to settle
            the  Straus  and  Boies   Actions.   The   agreement   in  principle
            contemplated   a  payment  by  CGL  of   approximately   $200,   and
            accordingly,  this  amount  has  been  recorded  as a  liability  at
            December 31, 2006.  However,  as at December 31, 2006,  the Straus &
            Boies Actions,  an amalgamation of numerous state indirect purchases
            class action suits,  remains  unsettled  and  management is not in a
            position at this time to suggest a date when the above noted  matter
            will be fully resolved.

            Legal fees to represent the Company in these matters are expensed as
            incurred.

      (b)   The Company  entered into a  Participation  Agreement  with a former
            shareholder  pursuant to which the Company  agreed to pay 50% of the
            net proceeds realized from the sale of certain  property,  plant and
            equipment  assets  of the  Company,  if any,  less one  third of the
            aggregate  amount of fines and  surcharges in excess of $50 that may
            be required to be paid by the Company in relation to claims  brought
            against  the Company by the  Ministry  for the  Environment  for the
            Province of Ontario ("MOE") for violations  alleged to have occurred
            in 2004 and 2005 (see Note 17(b)).  "Net proceeds" is defined in the
            Participation  Agreement  to be  sale  proceeds  less  out-of-pocket
            expenses  incurred  by the  Company  in  respect  of the sale of the
            assets, including commissions,  legal fees and decommissioning costs
            of buildings  and/or  equipment  required to  facilitate  sale.  The
            former  shareholder  is not obligated to make any payments under the
            Participation  Agreement. At this time, the Company has not actively
            pursued   the  sale  of  the  assets   which  are   subject  to  the
            Participation Agreement.

                                       21
<page>

                             CHINOOK GLOBAL LIMITED
                   Notes to Consolidated Financial Statements
                                December 31, 2006
                               (US $ in thousands)


(15)  Business and credit concentrations:

      i)    Credit risk:

            Credit  risk  arises  from the  potential  default of a customer  in
            meeting its  financial  obligation  to the Company.  The Company has
            credit  evaluation,  approval and  monitoring  processes to mitigate
            potential credit risk.

            The Company evaluated the collectability of accounts  receivable and
            no allowance for doubtful accounts was considered necessary.

      ii)   Business concentration:

            The Company  supplies  products to a broad  range of  customers  who
            operate  in a number  of  industry  segments.  No  single  customer,
            identifiable  group of  customers  or business  segment  comprises a
            substantial  portion of the Company's sales. As such, the Company is
            not subjected to undue business concentration risk.

(16)  Segmented information:

      The following schedules provide required segmented information  disclosure
      for the period ended:

      January 1, 2006 to April 6, 2006:

                                             United
                                Canada       States  International      Total
                            -------------------------------------------------
      Net sales             $    1,356   $    7,386   $    2,048   $   10,790
      Property, plant and
        equipment                3,733           --           --        3,733

      April 7, 2006 to December 31, 2006:

                                             United
                                Canada       States  International      Total
                            -------------------------------------------------
      Net sales             $    5,610   $   20,934   $    5,803   $   32,347
      Property, plant and
        equipment                  613           --           --          613

      Geographic  segmentation of revenue is determined based on the location of
      the customer.


                                       22
<page>

                             CHINOOK GLOBAL LIMITED
                   Notes to Consolidated Financial Statements
                                December 31, 2006
                               (US $ in thousands)

(17)  Subsequent events:

      (a)   Indirect California Actions:

            A predecessor  company of CGL pleaded guilty on January 24, 2000, to
            felony price fixing in the United  States.  This matter was resolved
            with the  United  States  Department  of  Justice  ("DOJ")  with the
            imposition  of a  non-interest  bearing  fine of  $5,000,  initially
            payable in escalating annual instalments over a five year period. On
            January 15, 2004, the U.S.  District Court for the Northern District
            of Texas  restructured the fine payment schedule to require payments
            in quarterly  instalments  of $120 with the final  instalment due in
            June 2009 (note 5). In addition,  all of the  predecessor  companies
            (collectively referred to as the "Chinook defendants") were named as
            co-defendants  in numerous  class action and non-class  civil action
            suits as a result of the charges  brought by the DOJ. As of December
            31,  2006,  virtually  all class action and  non-class  civil action
            suits  which  had  been  filed  against  one or more of the  Chinook
            defendants,  except as noted below, have been settled and no further
            amounts are owed by CGL in respect of these actions.

            On February 28, 2007, the Company  signed a Memorandum  Agreement to
            settle the Indirect  California  Actions for $275.  As the financial
            statements as at and for the twelve  months ended  December 31, 2005
            had not  been  issued  at the  time  of the  settlement,  they  were
            adjusted  for  the  resolution  of this  matter  and  therefore  the
            settlement had no effect on the results of operations for the twelve
            months ended December 31, 2006. Accordingly, a liability of $275 has
            been recorded in these financial statements.

      (b)   Sale of assets:

            On March 16, 2007,  the Company sold its inventory and customer list
            to a publicly listed company in the United States.

      (c)   Ministry of the Environment for the Province of Ontario:

            On September  28, 2006 CGL was charged with two counts of failing to
            comply, in October of 2004, with an amended  Certificate of Approval
            for Air contrary to Section 186(3) of the  Environmental  Protection
            Act for the  Province of Ontario and on  September  29, 2006 CGL was
            charged  with one count of failing  to  comply,  in October of 2004,
            with the daily  loading  limit for a regulated  element  contrary to
            Section 186(1) of the Environmental Protection Act.

            The MOE has identified that there are a number of charges beyond the
            above noted charges which could be laid and which pertain to failing
            to comply with the daily  loading  limit for  various  dates in July
            2005 and for failing to report same on one occasion  contrary to the
            Environmental  Protection Act. The MOE has indicated that there will
            be a financial penalty assessed.

                                       23
<page>

                             CHINOOK GLOBAL LIMITED
                   Notes to Consolidated Financial Statements
                                December 31, 2006
                               (US $ in thousands)


(17)  Subsequent events (continued):

      (c)   Ministry of the Environment for the Province of Ontario (continued):

            On May 4,  2007,  the  Company  reached an  agreement  to settle the
            outstanding charges laid by the MOE in September,  2006. The Company
            agreed to a settlement amount of $815. As the Company had previously
            recorded a liability for this amount, no adjustment to the financial
            statements was made as a result of the settlement.



                                       24
<page>

Item 9.01(b) Pro Forma Financial Information

1.    Description of Transaction and Basis of Presentation

On March  16,  2007,  the  Company,  through  its  wholly-owned  subsidiary  BCP
Ingredients,  Inc. ("BCP"), entered into an asset purchase agreement (the "Asset
Purchase Agreement") with Chinook Global Limited  ("Chinook"),  a privately held
Ontario corporation, pursuant to which BCP acquired certain of Chinook's choline
chloride  business  assets (the "Chinook  Acquisition")  for a purchase price of
$29,000,000  plus  the  value  of  certain  product  inventories   estimated  at
approximately  $1,840,000.  The acquisition  closed  effective the same date. On
March 16,  2007,  the Company and its  principal  bank  entered  into a new Loan
Agreement  (the "New Loan  Agreement")  providing for an unsecured  term loan of
$29,000,000  (the "New Term Loan"),  the proceeds of which were used to fund the
acquisition.  The New Term Loan is  payable  in equal  monthly  installments  of
principal,  each equal to 1/60th of the principal of the New Term Loan, together
with  accrued  interest,  with  remaining  principal  and  interest  payable  at
maturity. The New Term Loan has a maturity date of March 16, 2010 and is subject
to a monthly  interest  rate  equal to LIBOR  plus 1%. At March 31,  2007,  this
interest rate was 6.32%.

Because these unaudited pro forma condensed combined  financial  statements have
been prepared based on preliminary  estimates of fair values attributable to the
acquisition, the actual amounts recorded for the acquisition may differ from the
information  presented in these unaudited pro forma condensed combined financial
statements.  The Chinook  Acquisition  has been accounted for using the purchase
method of accounting and the purchase price of the acquisition has been assigned
to the net assets acquired based on the fair value of such assets at the date of
acquisition.

The pro forma information presented is for illustrative purposes only and is not
necessarily indicative of the operating results or financial position that would
have been  achieved if the  acquisition  had  occurred at the  beginning of each
period, nor is it indicative of future operating results or financial  position.
The unaudited pro forma condensed combined  financial  statements do not reflect
any operating  efficiencies and cost savings that we may achieve with respect to
the acquisition.  The pro forma  information  should be read in conjunction with
the  accompanying  notes  thereto,   and  in  conjunction  with  the  historical
consolidated   financial   statements   and   accompanying   notes  of   Balchem
Corporation's  annual reports on Form 10-K. The pro forma  adjustments are based
upon  available   information  and  certain  assumptions  that  we  believe  are
reasonable.



<page>

2.    Purchase Price

Preliminary Purchase Price Allocation

The preliminary  allocation of the total purchase price,  including  acquisition
costs, was based on the estimated fair values as of March 16, 2007.  Adjustments
to these  estimates  will be included in the allocation of the purchase price of
the  Chinook  Acquisition  upon  settlement  of any  working  capital  or  other
adjustments.  The  preliminary  purchase price has been allocated as follows (in
thousands):

----------------------------------------------------
                                 Fair Value Recorded
                                     in Purchase
                                     Accounting
----------------------------------------------------

Customer list                     $         29,201
Inventory                                    1,840
Short-term receivable                        1,850
Short-term obligation                         (870)
Other                                           73
----------------------------------------------------
         Total                    $         32,094
====================================================


<page>
<table>
<caption>

                                                    BALCHEM CORPORATION
                                        Unaudited Pro Forma Combined Balance Sheet
                                                     December 31, 2006
                                                      (In thousands)

                                                                 Historical
                                                         ---------------------------

                                                           (audited)     (audited)
                                                                                          Pro forma             Pro Forma
                             Assets                      (1) Balchem    (2) Chinook      Adjustments            Combined
                             ------                      ------------   ------------    ------------          ------------

                                                            <c>               <c>            <c>                <c>
Current assets:
    Cash and cash equivalents                            $      5,189   $      1,121    $     (4,215) (3)(7)  $      2,096
    Accounts receivable                                        11,578          4,900          (4,900)    (7)        11,578
    Inventories                                                 9,918          2,453            (613) (4)(7)        11,758
    Prepaid expenses and other                                  1,754            826           1,024  (4)(7)         3,604
    Deferred income taxes                                         416             --              --                   416
                                                         ------------   ------------    ------------          ------------
        Total current assets                                   28,855          9,300          (8,704)               29,452
                                                         ------------   ------------    ------------          ------------

Property, plant and equipment, net                             31,313            613            (498)    (7)        31,428
Goodwill                                                       25,253             --              --                25,253
Intangibles and other assets, net                               6,912             --          29,274  (4)(5)        36,186
Deferred financing costs                                           --             --              --                    --

                                                         ------------   ------------    ------------          ------------
            Total assets                                 $     92,333   $      9,913    $     20,072          $    122,318
                                                         ============   ============    ============          ============

       Liabilities and Stockholders' Equity
       ------------------------------------
Current liabilities:
    Trade accounts payable                                      3,010          1,926          (1,926)    (7)  $      3,010
    Accrued expenses                                            1,827          3,171          (3,171)    (7)         1,827
    Accrued compensation and other benefits                     1,869             --              --                 1,869
    Customer deposits and other deferred revenue                1,072             --              --                 1,072
    Dividends payable                                           1,596             --              --                 1,596
    Income tax payable                                            186             --              --                   186
    Current portion of long-term debt                              --             --           5,800     (6)         5,800
    Other current liabilities                                      --            947             (77) (4)(7)           870
                                                         ------------   ------------    ------------          ------------
        Total current liabilities                               9,560          6,044             626                16,230
                                                         ------------   ------------    ------------          ------------

Deferred income taxes                                           6,627             --              --                 6,627
Long-term debt                                                     --             --          23,200     (6)        23,200
Other long-term obligations                                       784            516            (401)    (7)           899
                                                         ------------   ------------    ------------          ------------
            Total liabilities                                  16,971          6,560          23,425                46,956
                                                         ------------   ------------    ------------          ------------

Stockholders' equity:
    Common stock                                                  788              2              (2)    (7)           788
    Additional paid-in capital                                 10,393            237            (237)    (7)        10,393
    Retained earnings                                          63,988          3,114          (3,114)    (7)        63,988
    Accumulated other comprehensive income                        193             --              --                   193
    Treasury stock                                                 --             --              --                    --
                                                         ------------   ------------    ------------          ------------
        Total stockholders' equity                             75,362          3,353          (3,353)               75,362

                                                         ------------   ------------    ------------          ------------
            Total liabilities and stockholders' equity   $     92,333   $      9,913    $     20,072          $    122,318
                                                         ============   ============    ============          ============

 See accompanying notes to unaudited pro forma combined financial statements

</table>

<page>
<table>
<caption>

                                                 BALCHEM CORPORATION
                                     Pro Forma Combined Statement of Operations
                                            Year ended December 31, 2006
                                   (In thousands, except earnings per share data)

                                                           Historical
                                                   ----------------------------
                                                    (audited)       (audited)
                                                                                     Pro Forma          Pro Forma
                                                   (8) Balchem     (9) Chinook      Adjustments          Combined
                                                   ------------    ------------    ------------        ------------

                                                <c>             <c>             <c>                 <c>

 Net sales                                         $    100,905    $     43,137              --        $    144,042

 Cost of sales                                           66,899          34,943            (128) (10)       101,714

                                                   ------------    ------------    ------------        ------------
 Gross profit                                            34,006           8,194             128              42,328

 Operating expenses:
    Selling, general and administrative expenses         14,844           3,261            (113) (11)        17,992

                                                   ------------    ------------    ------------        ------------
 Earnings from operations                                19,162           4,933             241              24,336

 Other income (expense):
   Interest income (expense) - net                          (61)             45          (1,650) (12)        (1,666)
   Other income (expense) - net                              --            (276)            276  (13)            --
                                                   ------------    ------------    ------------        ------------

 Earnings before income tax expense                      19,101           4,702          (1,133)             22,670

    Income tax expense                                    6,823              --           1,275  (14)         8,098
                                                   ------------    ------------    ------------        ------------

 Earnings before extraordinary gain                      12,278           4,702          (2,408)             14,572

    Extraordinary gain - negative goodwill                   --           1,684          (1,684)                 --

                                                   ------------    ------------    ------------        ------------
 Net earnings                                      $     12,278    $      6,386    $     (4,092)       $     14,572
                                                   ============    ============    ============        ============

 Net earnings per common share - basic             $       0.70                                        $       0.84
                                                   ============                                        ============

 Net earnings per common share - diluted           $       0.67                                        $       0.80
                                                   ============                                        ============

Weighted average shares outstanding - basic          17,427,857                                          17,427,857
                                                   ============                                        ============

Weighted average shares outstanding - diluted        18,247,241                                          18,247,241
                                                   ============                                        ============

 See accompanying notes to unaudited pro forma combined financial statements

</table>
<page>

                               Balchem Corporation
           Notes to Unaudited Pro Forma Combined Financial Statements
                                 (in thousands)

Balance Sheet:

1)    Represents  the  Company's  historical  consolidated  balance  sheet as of
      December 31, 2006.

2)    Represents Chinook's historical  consolidated balance sheet as of December
      31, 2006.

The pro forma combined financial statements have been adjusted for the items set
forth below:

3)    To record cash paid as if the acquisition  took place on December 31, 2006
      of $29,274 which includes $201 and $73 for acquisition  costs and deferred
      financing  costs  respectively,  incurred in  connection  with  borrowings
      pursuant to the $29,000 term loan used to finance the acquisition.

4)    The following  reflects the preliminary  allocation of the purchase price.
      These  allocations  may change based on actual  working  capital and other
      adjustments.

      ----------------------------------------------------
                                       Fair Value Recorded
                                           in Purchase
                                           Accounting
      ----------------------------------------------------

      Customer list                     $          29,201
      Inventory                                     1,840
      Short-term receivable                         1,850
      Short-term obligation                          (870)
      Other                                            73
      ----------------------------------------------------
               Total                    $          32,094
      ====================================================

5)    Reflects  the  deferred  financing  charges  incurred in  connection  with
      borrowings  pursuant  to  the  $29,000  term  loan  used  to  finance  the
      acquisition.  Such costs will be amortized  over 3 years,  the term of the
      related debt.

6)    To record  borrowings  pursuant  to the term loan of  $29,000  to fund the
      acquisition of the Chinook Acquisition.  The Term Loan is payable in equal
      monthly  installments of principal totaling  approximately  $483, together
      with  accrued  interest,  and has a  maturity  date  of  March  16,  2010.
      Borrowing under the term loan bears interest at LIBOR plus 1%.

7)    To eliminate the historical assets, liabilities, and equity of Chinook.

<page>
                               Balchem Corporation
           Notes to Unaudited Pro Forma Combined Financial Statements
                                 (in thousands)

Statement of Operations:

8)    Represents the Company's historical  consolidated  statement of operations
      for the year ended December 31, 2006.

9)    Represents Chinook's historical consolidated statement of earnings for the
      twelve month period ended December 31, 2006.

10)   Adjustment to decrease  depreciation  expense included in cost of sales by
      $128 to reflect the preliminary allocation of the purchase price which did
      not include acquired property, plant and equipment.

11)   Adjustment of $2,920 to reflect  amortization expense of the customer list
      acquired for the year ended December 31, 2006.  The Company  amortizes its
      customer  lists over 10 years.  Also reflects the  elimination of selling,
      general and administrative expenses that were not acquired.

      The Company adopted the provisions of SFAS No. 141, Business Combinations,
      and SFAS No. 142,  Goodwill and Other Intangible  Assets, as of January 1,
      2002.  These standards  require the use of the purchase method of business
      combination and define an intangible asset. Goodwill and intangible assets
      acquired in a purchase  business  combination  and  determined  to have an
      indefinite  useful  life  are  not  amortized,   but  instead  tested  for
      impairment at least annually in accordance with the provisions of SFAS No.
      142.  SFAS No. 142 also  requires that  intangible  assets with  estimable
      useful lives be amortized over their respective  estimated useful lives to
      their estimated residual values, and reviewed for impairment in accordance
      with SFAS No. 144,  Accounting  for  Impairment  or Disposal of Long-Lived
      Assets.

12)   Adjustment to reflect the Company's pro forma interest expense  associated
      with additional borrowings for the acquisitions. Interest is calculated on
      the  $29,000  Term Loan  (variable  rate  assumed at 6.32%)  resulting  in
      interest expense of  approximately  $1,650 for the year ended December 31,
      2006.

      The effects of a 1/8% increase or decrease in interest  rates would change
      annual interest expense by approximately $19.

13)   Elimination of fines, currency losses and derivative gains and losses.

14)   Adjustment  to  apply  the  Company's  effective  tax rate of 35.7% to the
      pretax   earnings/(loss)   of  the  pro  forma   adjustments  and  to  the
      earnings/(loss) of Chinook.  The effective tax rate used by the Company is
      higher  than  applicable  statutory  rates due to the  inclusion  of state
      income taxes.


<page>

                                    SIGNATURE

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                                     BALCHEM CORPORATION


                                                     By:/s/ Dino A. Rossi
                                                     ---------------------------
                                                     Dino A. Rossi, President &
                                                     Chief Executive Officer

Dated: May 31, 2007