SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-K


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


For the fiscal year ended                                 Commission File Number
December 31, 1997                                                  2-44764

                               BALTEK CORPORATION
             (Exact name of registrant as specified in its charter)



             Delaware                              13-2646117
(State or other jurisdiction of                (I.R.S. Employer
 incorporation or  organization)               Identification No.)



                10 Fairway Court
                  P.O. Box 195                                  07647
             Northvale, New Jersey                           (Zip Code)
    (Address of principal executive offices)

                  Registrant's telephone number: (201) 767-1400

           Securities Registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $1.00 Par Value
                          -----------------------------
                                (Title of Class)


       Indicate by check mark whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                       Yes     [X[       No        [  ]

       Indicate by check mark if  disclosure of  delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of the  registrant's  knowledge,  in definitive proxy or information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ ]
<PAGE>

       The aggregate  market value of the voting stock held by  nonaffiliates on
March 2, 1998 amounted to $7,142,000.

       Indicate the number of shares outstanding of each of the issuer's classes
of common  stock as of the latest  practicable  date,  March 2, 1998:  2,523,261
shares, Common Stock, $1.00 par value.

       Documents  incorporated by reference:  Portions of the registrant's proxy
statement  dated  April  27,  1998 for use in  connection  with its 1998  annual
meeting of stockholders  are incorporated by reference in Part II of this Annual
Report on Form 10-K to the extent set forth in items 10, 11, and 12 hereof.
<PAGE>
                                     PART I

Item 1.           BUSINESS

Principal Products

         The registrant and its subsidiaries  (hereinafter collectively referred
to as the "Company") is a multinational manufacturing and marketing company. The
Company  operates  in two  lines  of  business:  1)  supplying  core  materials,
primarily balsa wood and balsa wood products,  linear and  cross-linked PVC foam
products,  and  non-woven  polyester  mat, and 2)  aquaculture,  the farming and
processing  of shrimp.  The foam and mat  products,  together with the Company's
balsa  products,  position the Company as a complete  supplier to the  composite
structural  core market.  The core materials are typically used by the Company's
customers to manufacture a variety of products by laminating metal or fiberglass
reinforced plastic skins to both sides of the core material,  thereby creating a
sandwich structure. The products manufactured by the Company's customers include
fiberglass boats, aircraft cargo pallets, aircraft flooring,  fiberglass storage
and processing tanks and fiberglass tub and shower bottoms. Balsa lumber is used
mostly by the hobby industry to manufacture model airplanes.

      The Company  mills and sells graded and finished  balsa lumber in standard
sizes and balsa wood strips and  blocks.  "Standard  sizes" of balsa  lumber are
measured in boardfeet  (12" x 12" x 1') for the English  system of measure or in
cubic meters for the metric system of measure.  Shipments to Europe  (except the
U.K.) and Japan are made in cubic  meters  while  shipments  to the U.S. and the
U.K. are in boardfeet.  The Company,  for production and  statistical  purposes,
converts all metric measurements into boardfeet,  thus the Company's  "standard"
is boardfeet. The Company also manufactures and sells custom-made bonded panels,
bonded  blocks of balsa  wood,  and a  flexible  balsa  wood  block  mat  called
"Contourkore."  Glued-up  balsa  blocks are  marketed in two ways.  Part is sold
directly  to  customers  in block or panel  form,  the balance is shipped to the
Company's factory in Northvale,  NJ for further  processing into Contourkore and
other products.

         The  Company's  mat products  are  imported  from Holland and Japan and
resold without further manufacturing.  This product is marketed as "Coremat" and
"BaltekMat," principally to the pleasure boat industry.

         In September 1995, the Company entered into an agreement with Alusuisse
Airex AG of Sins Switzerland,  a division of Alusuisse, to become the sole North
American  source and  nonexclusive  distributor  in Central and South America of
Airex(R)  (a  registered  trademark  of  Alusuisse  Airex  AG) and  Airlite(TM),
structural  PVC foam  products.  The foam is  purchased  from Airex for  further
processing  in the U.S. and is sold to customers as rigid or flexible  panels in
various thicknesses.

         The Company is also in the aquaculture  business,  specifically  shrimp
farming in Ecuador,  South America.  This operation consists of a hatchery,  two
farms and a packing  plant.  Shrimp  larvae are  supplied by the hatchery to the
farms,  and after  harvest,  transferred to the packing plant for processing and
shipment to customers in the United States and Europe.

         All the  Company's  balsa and  shrimp  are  produced  in  Ecuador.  The
dependence  on foreign  countries  for raw  materials  represents  some inherent
risks. However, the Company, or its predecessors,  have maintained operations in

                                      -1-
<PAGE>
Ecuador  since 1940.  The Company  does not  consider its reliance on Ecuador to
represent an undue business  risk; in fact, the Company  believes that operating
in Ecuador is one of its strengths,  where quality raw materials are produced at
a reasonable cost in a politically stable atmosphere conducive to business.

Principal Markets and Methods of Distribution

         The Company's  products are sold throughout the United States,  Canada,
Europe,  Japan,  Australia and Latin  America to  approximately  1,600  ultimate
users. The Company's  salesmen are used extensively in the sale of its products.
Approximately  40% of its core  material  product  sales are made by the Company
directly.  The remainder of the sales are handled through regional  distributors
in the United States,  Europe, Canada, and the Pacific Rim. Sales of Contourkore
to  customers  outside  the United  States are  handled  through a  wholly-owned
Foreign Sales Corporation.

         In 1997, approximately 32% of all the shrimp production was sold to the
U.S. market through food brokers; the balance was sold to the European market.

Competitive Conditions

         As part of their overall  business,  other  companies,  with  aggregate
facilities  and  financial  resources  substantially  greater  than those of the
Company,  manufacture and sell various natural and synthetic products for nearly
all the purposes for which balsa, foam and mat products are sold by the Company.
Some of these  competitive  products are produced and sold at a lower price than
the Company's products,  and sales of these competing products are substantially
greater than the Company's sales of core materials.

      In North  America  and Europe the  Company  also  directly  competes  with
companies,  some with greater  resources than the Company,  that manufacture and
sell balsa and foam  products at prices which may be lower than those offered by
the Company.

         The Company's  shrimp business  competes  against many larger companies
which produce shrimp through  similar  methods in addition to fishing for shrimp
in the traditional method of trawling.

Material Customer

         No customer  accounted  for more than 10% of revenues in 1997 and 1996.
In 1995 the Company had sales to one customer in excess of 10%.

Backlog

         As of December  31, 1997 and 1996,  the Company had a backlog of orders
believed  to be  firm  in  the  total  amounts  of  $8,367,000  and  $7,465,000,
respectively.  The 1997 backlog is  reasonably  expected to be filled within the
current fiscal year.

Sources and Availability of Raw Materials

         The Company  acquires,  partly from its own plantations and partly from
others,  substantially  all of its balsa wood from western and coastal  Ecuador,
accessible by roads so that the balsa lumber can be  transported by truck to its
sawmills.  The Company  considers  the timber  presently  standing in this area,
combined with its planned plantation  expansion  program,  to be ample to supply

                                      -2-
<PAGE>
all the  Company's  requirements  in the  foreseeable  future.  The Company also
receives  small  quantities of balsa from other Latin  American  countries.  The
Company has experienced no difficulties in purchasing its foam and mat materials
and  anticipates  that  the  manufacturers  will  be able  to  produce  adequate
quantities to meet demand.  The resins,  fiberglass and other  materials used in
the Company's  manufacturing  processes are available  from numerous  commercial
sources.  To date the Company has  experienced  no difficulty in obtaining  such
materials needed for its operations.

         The Company owns and operates two shrimp farms and a shrimp hatchery in
Ecuador  for the  production  of a steady and  plentiful  supply of shrimp.  The
hatchery supplies  substantially all the larvae required by the Company's ponds.
The  Company  also owns a shrimp  packing  plant in Ecuador,  thereby  achieving
complete vertical integration of the shrimp business.

Patents, Trademarks and Licenses

         The Company  features  its  registered  trademark  "Belcobalsa(R)"  for
lumber,  dimension  stock,  and  bonded  panels  and  blocks,  "Contourkore(R)",
"LamPrep(R)" and "AL-600/10(R)" for the flexible wood block mat,  "Durakore(R)",
a balsa hardwood  composite,  "D100(R)" for end-grain panels and "Decolite(R)" a
balsa  composite  panel  used as an  alternative  to  plywood,  and  low-density
laminate bulkers, marketed as "BaltekMat(R)".

         The Company  also  features  "Airlite(TM)",  a  cross-linked  PVC foam,
"AIREX(R)"(registered trademark of Alusuisse Airex AG), a linear foam and "Firet
Coremat(R)", also a low-density laminate bulker.

Estimated Research Costs

         The  Company  has  incurred  approximately  $331,000  during  1997  for
research  and  development,  compared  to  expenditures  of $350,000 in 1996 and
$415,000 in 1995. All  expenditures  are related to the core materials  segment.
The Company  continues to actively explore possible new applications of its core
materials and new processes to improve the manufacturing of those products.

Environmental Impact

         The  Company  has  experienced  no  material  impact  upon its  capital
expenditures,  earnings or  competitive  position as a result of its  compliance
with  federal,  state or local  provisions  relating  to the  protection  of the
environment.  Balsa  is not a  rainforest  species,  nor  does  it  grow  in the
rainforest.  It is usually  harvested  within five  years.  The fast growth rate
makes balsa similar to short-cycle  agricultural crops and an ideal tree species
for forest plantations.

Employees

         The Company has  approximately  1,138 employees in Ecuador,  131 in the
United States and 10 in Europe, aggregating 1,279 employees.

Seasonality

         The Company's business is not seasonal.

                                      -3-
<PAGE>
Classes of Products

         The following  table sets forth the amount and  percentage of net sales
represented  by each of the Company's  product  classes in the three years ended
December 31, 1997 (dollars in thousands):
<TABLE>
<CAPTION>

         Year             Core Materials         Shrimp                Total
         ----             --------------         ------                -----
<S>                         <C>                 <C>                  <C>
         1995               $36,420             $ 9,364              $45,784
                                 80%                 20%                 100%
         1996               $38,630             $ 9,736              $48,366
                                 80%                 20%                 100%
         1997               $44,004             $12,136              $56,140
                                 78%                 22%                 100%
</TABLE>
 


                                      -4-
<PAGE>
Segment Information

         The Company is engaged in two lines of business,  that of manufacturing
and  supplying  products  which are used  principally  as the core  material  in
various industries,  and in the aquaculture business,  namely, shrimp farming in
Ecuador.

         Reference is made to the  information set forth in Note 11 to the Notes
to Consolidated  Financial  Statements,  Part II, Item 8 hereof, with respect to
assets and operating results for different business segments.

Foreign Operations

         The Company,  through its  Ecuadorian  subsidiaries,  owns and operates
five  woodworking  plants  and  approximately  14,727  acres of  forest  land in
Ecuador.  In  addition,  the  Company  owns and  operates  two  shrimp  farms on
approximately 2,500 acres, a shrimp hatchery and a shrimp packing plant.

         At the  Company's  woodworking  plants,  rough balsa lumber is received
from plantations or independent  loggers and then processed into finished lumber
and other manufactured products.

         The  Company's  shrimp ponds are stocked with  larvae.  After  feeding,
controlling  the pond  environment and monitoring the growth of the shrimp for a
period of approximately six months, the shrimp are harvested, frozen, packed and
sold for export.

         The Company, through its European subsidiaries,  operates sales offices
in France, the United Kingdom and Denmark.

         Reference is made to the  information set forth in Note 11 to the Notes
to Consolidated  Financial  Statements,  Part II, Item 8 hereof, with respect to
assets and operating results by geographic areas.

         No prediction can be made as to any future  increase or decrease of the
Company's  foreign  business.   The  Company  has  experienced   differences  in
profitability  between  foreign and domestic  sales due to the changing value of
the U.S.  dollar in relation to the foreign  currencies  of countries  where its
products are sold.

                                      -5-
<PAGE>
Item 2.           PROPERTIES

         The Company owns or leases the  properties  indicated in the  following
table:
<TABLE>
<CAPTION>
Property and Location                                                                                  Status
---------------------                                                                                  ------
<S>                                                                                                    <C>
One-story  concrete  and  steel  building  containing  the  Company's  principal
offices,  manufacturing  plant and warehouse space,  85,000 square feet on 4-1/2
acres (Northvale, New Jersey).                                                                         Leased

Approximately  54,000 square feet of warehouse space in two buildings  (Norwood,
NJ).                                                                                                   Leased

Woodworking  plant  housed  in  several  wood,  concrete  and  steel  buildings,
approximately 180,000 square feet (Guayaquil, Ecuador).                                                Owned

Woodworking  plant  housed  in  several  wood,  concrete  and  steel  buildings,
approximately 30,000 square feet on 7 acres of land (Guayaquil, Ecuador).                              Owned

14,727 acres of timberland in Ecuador.                                                                 Owned

2,000 acres of land for shrimp  farming in Ecuador,  including 10 wood buildings
and one concrete building totaling approximately 11,000 square feet.                                   Owned

444 acres of land for shrimp farming in Ecuador,  including 4 concrete buildings
and 4 wood buildings totaling approximately 4,357 square feet.                                         Leased

Shrimp hatchery housed in several  concrete  buildings on 3.7 acres of land (San
Pablo, Ecuador).                                                                                       Owned

Shrimp packing plant housed in three  concrete and steel  buildings on 2.6 acres
of land (Duran, Ecuador).                                                                              Owned

Woodworking  plant housed in four concrete and steel  buildings,  165,000 square
feet  on  approximately  28  acres  of land  (Santo  Domingo  de los  Colorados,
Ecuador).                                                                                              Owned

Woodworking  plant housed in four  concrete and steel  buildings,  62,000 square
feet on approximately 7 acres of land (Manta, Ecuador).                                                Owned

Woodworking  plant  housed  in  one  wood  building,  26,000  square  feet  on d
approximately 8 acres of land (Quevedo, Ecuador)                                                       Owned
</TABLE>

                                      -6-
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                                                    <C>
Maintenance  facilities for the Balsa Raw Material  Department in a concrete and
wood building, 16,875 square feet (Quevedo, Ecuador).                                                  Owned

Office space in concrete building, 8,489 square feet (Guayaquil,                                       Owned
Ecuador)

Office space in concrete building, 1,000 square feet (Croydon, U.K.).                                  Leased

Office space in stone and wood building, 2,000 square feet (Paris,                                     Leased
France).
</TABLE>


All of the above properties except the shrimp farming land, hatchery and packing
plant are used in the core materials business.

         The lease of the property at  Northvale,  New Jersey,  continues  until
February 28, 2002, at an average annual rental of  approximately  $469,000.  The
warehouse space in Norwood,  New Jersey  continues until September 1, 2002 at an
average  rental of  approximately  $283,000.  The lease of the Company's  office
space in Paris continues until March 31, 1998 at an annual rental  equivalent to
approximately $27,000. The lease of the Company's office in Croydon, U.K.
runs until December 25, 2008 at an annual rental of approximately $14,000.

         All of the Company's properties, plants and equipment are considered to
be presently sufficient for their respective purposes.

Item 3.           LEGAL PROCEEDINGS

         Not applicable.

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

         There was no submission of matters to a vote of security holders during
the fourth quarter of 1997.

                                      -7-
<PAGE>

                                     PART II

Item 5.           MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                  STOCKHOLDER MATTERS

         The  Company's  Common  Stock is traded on the Nasdaq  National  Market
under the Symbol:  BTEK.  The  following is the range of high and low prices for
the last two years.
<TABLE>
<CAPTION>

                          1997                             1996
                   -----------------               ------------------ 

                    HIGH         LOW                 HIGH        LOW
<S>                <C>         <C>                 <C>          <C>
1st Quarter        $8.13       $6.75               $11.25       $8.25
2nd Quarter         7.88        6.25                11.13        8.63
3rd Quarter         9.75        7.50                 9.50        7.63
4th Quarter        10.25        7.25                 8.00        6.50
</TABLE>

         The Company had approximately 174 stockholders of record as of March 2,
1998.

         No cash dividends were paid during the past two years.


                                      -8-
<PAGE>
Item 6.           SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>

(Dollars in thousands except per share amounts)
YEARS ENDED DECEMBER 31,

                               1997           1996           1995           1994           1993
                            ----------     ----------     ----------     ----------     ----------        
<S>                         <C>            <C>            <C>            <C>            <C>
Net sales .............     $   56,140     $   48,366     $   45,784     $   40,130     $   32,270

Net income ............          1,841            450          1,962          1,212            113

Basic earnings per
  common share ........            .73            .18            .78            .48            .04

Total assets ..........         41,756         39,315         38,816         34,541         33,385

Long-term
  obligations .........          3,015          1,957          1,993          2,170          2,379

Cash dividends declared
  per common share ....           --             --             --             --             --

Average shares
  Outstanding .........      2,523,261      2,523,261      2,523,261      2,523,261      2,523,261

</TABLE>

                                      -9-
<PAGE>
Item 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

         The Company's  working capital ratio (current assets divided by current
liabilities) increased in 1997 to 2.84:1 from 2.56:1 in 1996 and 2.50:1 in 1995.

         Cash was provided  and used in varying  amounts  during the  three-year
period, principally as a result of changes in the elements of current assets and
current  liabilities  and  in  the  amount  of  cash  provided  by  net  income.
Inventories increased in all three years due to new products,  particularly foam
products in 1997 and 1996, and buildup for anticipated increases in sales.

         Cash used in investing  activities for the three-year period was due to
increased  investments  in  balsa  plantations,  replacement  of old  equipment,
structural  improvements  of the  shrimp  ponds and  purchase  of new  equipment
required for the  manufacture of the Company's new products.  The Company has no
material commitments for capital expenditures.

         In 1996, the Company borrowed  $400,000 in the form of a five-year term
loan to finance equipment purchases.  The Company may continue to seek financing
for  significant  capital  expenditures  in the future.  The  Company's  working
capital  borrowings  decreased  in 1997 and 1996 due to improved  cash flow from
operations.  The working  capital debt increased in 1995 due to working  capital
and investment requirements.

         The Company had unused  lines of credit of  approximately  $3.0 million
with a domestic  bank,  approximately  $1.7  million with  Ecuadorian  banks and
approximately  $0.7 million with European banks for working capital purposes and
lines of credit  totaling  $1.5  million for  equipment  purchases.  The Company
expects  that future  operations  and its unused  lines of credit  will  provide
sufficient resources to support its planned expansion and maintain its favorable
liquid position.

Year 2000
         The Company began  implementation of a new Enterprise Resource Planning
(ERP) computer system in 1997. The implementation  costs incurred in 1997, which
are included in S,G&A,  accounted  for a small amount of the dollar  increase in
1997  as  compared  to  1996.  The  ERP  system  is  Year  2000  compliant.  The
implementation  is expected to be completed in 1998; the Company  therefore does
not anticipate any material Year 2000 compliance  costs.  The Company is not yet
able to estimate  the status of Year 2000  compliance  with respect to customers
and suppliers;  based on a preliminary  review,  management does not expect that
noncompliance  by customers and suppliers will have a material adverse effect on
the future consolidated  results of operations of the Company.  The Company will
utilize  internal and external  resources to ensure  compliance of the customers
and suppliers with respect to the Year 2000 issue.

RESULT OF OPERATIONS FOR THE YEARS
ENDED DECEMBER 31, 1997, 1996 AND 1995

         Total  sales  increased  16%,  6%  and  14% in  1997,  1996  and  1995,
respectively.  The gains in all three years were due to increased core materials
sales together with substantial increases in shrimp sales.

         Core material sales were  $44,004,000,  $38,630,000  and $36,420,000 in
1997, 1996 and 1995, respectively. The robust economy in 1997 resulted in strong

                                      -10-
<PAGE>
demand in all industries that use core materials, including the largest customer
group: the boating industry.  The boating industry represents  approximately 40%
of the Company's  core material  sales.  Many of the Company's end user markets,
including  boating,  are highly  cyclical.  Demand  within those  industries  is
dependent  upon,  among other  factors,  inflation,  interest rates and consumer
confidence.  Fluctuating interest rates and other changes in economic conditions
make it  difficult  to forecast  short or long range  trends.  Increases in core
material sales in 1997 and 1996 are also  attributable to sales of foam products
which were  introduced  in 1996. A portion of the  increase in 1997  compared to
1996 was  attributable  to  increased  pricing and, to a lesser  extent,  volume
increases.

         Shrimp sales were $12,136,000,  $9,736,000 and $9,364,000 in 1997, 1996
and 1995,  respectively.  The  increases  in all three  years were the result of
increased yield at the Company's  shrimp farm and increased  worldwide prices in
1997 and 1995. The increase in 1997 is also  attributable  to a higher volume of
shrimp which was purchased  from outside  suppliers,  then processed and sold by
the Company.

         The gross margin  increased in 1997 after  decreasing  in 1996 from the
1995 amount.  In 1997,  the margins for the  Company's  core  products  improved
compared to 1996. This was primarily due to improved pricing  especially  during
the second half of the year. Additionally,  the results for 1996 were negatively
affected by start-up expenses of the new foam product line,  competitive pricing
pressure on the Company's Balsa and Foam products and inflationary  pressures on
costs at the Company's facilities in Ecuador. The gross margin from shrimp sales
decreased in 1997 compared to 1996 and in 1996 compared to 1995. The decrease in
1997 is  attributable  to a higher  volume  of  shrimp  purchased  from  outside
suppliers,  which have lower  margins  than shrimp  grown at the  Company's  own
farms. The decrease in 1996 is due to significantly lower worldwide prices.

         Selling,  general and administrative  expenses as a percentage of sales
declined  in 1997 and 1996.  The  decline in both years was due  primarily  to a
better  absorption  of fixed  expenses,  primarily  general  and  administrative
expenses, as a result of increased sales.

         Sales and expenses  were  affected in all three years by the  different
exchange  rates  applied in  translating  the books of accounts of the Company's
foreign subsidiaries.

         Interest  expense  increased all three years.  During 1997, the Company
began  borrowing in Ecuador in local  currency  (sucre)  denominated  loans as a
natural hedge of the net investment in Ecuador. Although these loans bear higher
interest rates than U.S. dollar loans,  the Company expects to partially  offset
these higher interest rates with gains  resulting from the expected  devaluation
of the sucre. This practice  increased  interest expense in 1997 and reduced the
Company's  foreign  exchange losses.  The Company's  interest rate on U.S. loans
decreased  in 1997 and its  average  borrowings  were also  lower in 1997  after
increasing  in 1996.  The  level of  borrowing  in all years is  related  to the
Company's working capital needs and cash flow generated from operations.

         Translation   losses  varied  greatly  during  the  three-year  period.
Translation  losses are mainly caused by the  relationship of the U.S. dollar to
the foreign  currencies in the countries where the Company  operates,  and arise
when translating foreign currency balance sheets into U.S. dollars.  The Company
utilizes foreign exchange contracts to hedge certain inventory purchases and may
also employ certain  strategies  whose  objective is to reduce earnings and cash

                                      -11-
<PAGE>
flow volatility  associated with foreign exchange rate changes.  The Company has
not and  does not  intend  to  enter  into  foreign  currency  transactions  for
speculative purposes. Management is unable to forecast the impact of translation
gains or losses on future periods due to the unpredictability in the fluctuation
of foreign exchange rates.

         The effective  income tax rate amounted to 28% in 1997, 31% in 1996 and
21% in 1995.  Reconciliation of the effective rate with the U.S.  statutory rate
is detailed in Note 8 to the Notes to Consolidated Financial Statements.

New Accounting Pronouncements
         In June 1997, the Financial  Accounting Standards Board Issued SFAS No.
  130,  "Reporting  Comprehensive  Income" and SFAS No. 131,  "Disclosures about
  Segments of an Enterprise  and Related  Information."  Both  standards for the
  Company are effective  beginning in 1998. The Company is currently  evaluating
  the impact of these new standards on its financial statements.


                                      -12-
<PAGE>
Item 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The   consolidated   financial   statements  of  the   registrant   and
subsidiaries, and supplemental schedule are annexed hereto and made part hereof.

Item 9.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE

         None.


                                    PART III


Item 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         Omitted from this Report since a definitive Proxy  Statement,  pursuant
to Regulation 14A containing  the required  information,  will be filed with the
Commission not later than 120 days after the close of registrant's fiscal year.

Item 11.          EXECUTIVE COMPENSATION

         Omitted from this Report since a definitive Proxy  Statement,  pursuant
to Regulation 14A containing  the required  information,  will be filed with the
Commission not later than 120 days after the close of registrant's fiscal year.

Item 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT

         Omitted from this Report since a definitive Proxy  Statement,  pursuant
to Regulation 14A containing  the required  information,  will be filed with the
Commission not later than 120 days after the close of registrant's fiscal year.

Item 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Inapplicable.



                                      -13-
<PAGE>


                                     PART IV

Item 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
                  FORM 8-K

                    (a)(1) and (2)     Consolidated Financial Statements and  
                                       Financial Statement Schedule 

                                       See Index to Consolidated Financial  
                                       Statements and Financial Statement   
                                       Schedule annexed hereto and made part
                                       hereof.                              
                                       
                    (b)                Reports on Form 8-K 

                                       No reports on form 8-K were filed by or
                                       on behalf of the registrant for the    
                                       quarter ended December 31, 1997, the   
                                       last quarter in the period covered by  
                                       this Annual Report on Form 10-K.       
                                       
                    (c)                       List of Exhibits

               Exhibit No.            Item                           Filing
               -----------            ----                           ------

                    3         Articles of Incorporation (Bylaws)  Pre-Filed

                    10        Material Contracts                  None

                    21        Subsidiaries of Registrant          Filed Herewith

                    27        Financial Data Schedule             Filed Herewith



                  -14-
<PAGE>


SIGNATURES



Pursuant to the  requirements of Section 13 of 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.



                                                    BALTEK CORPORATION
                                                       Registrant



                                                By  /s/ Jacques Kohn
                                                        ------------
                                                        Jacques Kohn,
                                                        President
                                                        Director



                                                By  /s/ Ronald Tassello
                                                        ---------------
                                                        Ronald Tassello,
                                                        Controller (Principal
                                                        Financial Officer and
                                                        Principal Accounting
                                                        Officer)

Dated:  March 18, 1998

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the date indicated:

By  /s/ Jacques Kohn                           By  /s/ Benson J. Zeikowitz
    ----------------                               -----------------------
     Jacques Kohn,                                  Benson J. Zeikowitz
     Director                                       Director

By  /s/ Margot Kohn
    ---------------
     Margot Kohn,
     Director

By  /s/ Henri-Armand Kohn
    ---------------------
     Henri-Armand Kohn,
     Director

By   -------------
     Theodore Ness,
     Director


Dated March 18, 1998
<PAGE>




                       BALTEK CORPORATION AND SUBSIDIARIES









       CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
                      AS OF DECEMBER 31, 1997 AND 1996 AND
        FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997








                       PREPARED FOR FILING AS PART OF THE
                            ANNUAL REPORT (FORM 10-K)
                    TO THE SECURITIES AND EXCHANGE COMMISSION
                      FOR THE YEAR ENDED DECEMBER 31, 1997

                                   **********



<PAGE>

BALTEK CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
  FINANCIAL STATEMENT SCHEDULE
PREPARED FOR FILING AS PART OF THE ANNUAL REPORT
  (FORM 10-K) TO THE SECURITIES AND EXCHANGE COMMISSION
YEAR ENDED DECEMBER 31, 1997
--------------------------------------------------------------------------------

                                                                        Page

INDEPENDENT AUDITORS' REPORT                                              1

   Consolidated Balance Sheets as of December 31, 1997 and 1996           2

   Consolidated Statements of Income for Each of the Three Years
     in the Period Ended December 31, 1997                                3

   Consolidated Statements of Stockholders' Equity
     for Each of the Three Years in the Period Ended December 31, 1997    4

   Consolidated Statements of Cash Flows for Each of the Three Years
     in the Period Ended December 31, 1997                                5

   Notes to Consolidated Financial Statements for Each of the Three
     Years in the Period Ended December 31, 1997                        6-16

FINANCIAL STATEMENT SCHEDULE AS OF AND FOR EACH OF 
   THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997:

   II - Valuation and Qualifying Accounts                                17


All other schedules for which provision is made in the applicable regulations of
the Securities and Exchange  Commission have been omitted because of the absence
of the  conditions  under  which  they are  required  or  because  the  required
information called for is set forth in the consolidated  financial statements or
notes thereto.
<PAGE>


INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
Baltek Corporation and Subsidiaries

We  have  audited  the  accompanying   consolidated  balance  sheets  of  Baltek
Corporation and  subsidiaries  (the  "Corporation")  as of December 31, 1997 and
1996, and the related consolidated  statements of income,  stockholders' equity,
and cash flows for each of the three  years in the  period  ended  December  31,
1997. Our audits also included the financial  statement  schedule  listed in the
accompanying index. These financial  statements and financial statement schedule
are the responsibility of the Corporation's management. Our responsibility is to
express an opinion on the financial  statements and financial statement schedule
based on our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects, the financial position of Baltek Corporation and subsidiaries
as of December 31, 1997 and 1996, and the results of their  operations and their
cash flows for each of the three years in the period ended  December 31, 1997 in
conformity with generally accepted accounting principles.  Also, in our opinion,
such  financial  statement  schedule,  when  considered in relation to the basic
consolidated  financial  statements  taken as a whole,  presents  fairly  in all
material respects the information set forth therein.


/s/DELOITTE & TOUCHE LLP
------------------------
DELOITTE & TOUCHE LLP
Parsippany, New Jersey

March 18, 1998

<PAGE>
<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
---------------------------------------------------------------------------------------------- 

ASSETS                                                                1997            1996
<S>                                                               <C>             <C>
CURRENT ASSETS:
  Cash and cash equivalents .................................     $ 1,177,003     $ 1,114,659
  Accounts receivable (less allowance for doubtful
    accounts - 1997, $72,963; 1996, $62,611) ................       5,102,719       4,820,544
  Inventories (Note 3) ......................................      14,599,348      13,713,660
  Prepaid expenses ..........................................         298,398         308,850
  Other .....................................................       1,325,572       1,487,121
                                                                  -----------     -----------

           Total current assets .............................      22,503,040      21,444,834

PROPERTY, PLANT AND EQUIPMENT - Net (Notes 4 and 10) ........      11,737,754      10,759,258

TIMBER AND TIMBERLANDS (Note 5) .............................       7,021,392       6,445,828

OTHER ASSETS ................................................         493,371         665,495
                                                                  -----------     -----------
TOTAL ASSETS ................................................     $41,755,557     $39,315,415
                                                                  ===========     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Notes payable (Note 6) ....................................     $ 1,550,000     $ 3,600,000
  Accounts payable ..........................................       3,071,482       2,860,363
  Income taxes payable ......................................          56,712            --
  Accrued salaries, wages and bonuses payable ...............       1,040,388         596,139
  Accrued expenses and other liabilities ....................         908,581         911,243
  Current portion of long-term debt (Note 7) ................         964,354         108,922
  Current portion of obligation under capital lease (Note 10)         336,791         294,784
                                                                  -----------     -----------

           Total current liabilities ........................       7,928,308       8,371,451

OBLIGATION UNDER CAPITAL LEASE (Note 10) ....................       1,343,199       1,679,985

LONG-TERM DEBT (Note 7) .....................................       1,671,647         276,620

UNION EMPLOYEE TERMINATION BENEFITS (Note 9) ................         290,763         306,367
                                                                  -----------     -----------
           Total liabilities ................................      11,233,917      10,634,423
                                                                  -----------     -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
---------------------------------------------------------------------------------------------- 

                                                                      1997            1996
<S>                                                               <C>             <C>
STOCKHOLDERS' EQUITY:
  Preferred stock, $1.00 par; 5,000,000 shares
    authorized and unissued .................................            --              --
  Common stock, $1.00 par; 10,000,000 shares authorized,
    2,523,261 shares issued and outstanding .................       2,523,261       2,523,261
  Additional paid-in capital ................................       2,157,492       2,157,492
  Retained earnings .........................................      25,840,887      24,000,239
                                                                  -----------     -----------
           Total stockholders' equity .......................      30,521,640      28,680,992
                                                                  -----------     -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................     $41,755,557     $39,315,415
                                                                  ===========     ===========
</TABLE>                                    
See  notes  to  consolidated   financial statements.

                                       -2-
<PAGE>
<TABLE>
<CAPTION>

BALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997
------------------------------------------------------------------------------------------- 
                                                1997              1996             1995
<S>                                        <C>               <C>               <C>
NET SALES ............................     $ 56,140,303      $ 48,366,127      $ 45,783,629

COST OF PRODUCTS SOLD ................       42,322,546        36,986,131        32,759,376

SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES ............       10,422,947         9,617,327         9,743,221
                                           ------------      ------------      ------------

           Operating income ..........        3,394,810         1,762,669         3,281,032
                                           ------------      ------------      ------------

OTHER INCOME (EXPENSES):
  Interest expense (Notes 6, 7 and 10)         (759,791)         (602,254)         (530,231)
  Foreign exchange loss ..............          (84,470)         (514,035)         (307,716)
  Interest income ....................            3,630             5,064            36,669
  Other, net .........................            1,707             2,513            10,969
                                           ------------      ------------      ------------

           Total .....................         (838,924)       (1,108,712)         (790,309)
                                           ------------      ------------      ------------

INCOME BEFORE INCOME TAXES ...........        2,555,886           653,957         2,490,723

INCOME TAX PROVISION (Note 8) ........          715,238           204,014           528,470
                                           ------------      ------------      ------------

NET INCOME ...........................     $  1,840,648      $    449,943      $  1,962,253
                                           ============      ============      ============

BASIC EARNINGS PER COMMON SHARE ......     $       0.73      $       0.18      $       0.78
                                           ============      ============      ============

</TABLE>

                See notes to consolidated financial statements.

                                      -3-
<PAGE>
<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997
-------------------------------------------------------------------------------- 


                                                                     Additional
                                    Common Stock,       Paid-in       Retained
                                       $1 Par           Capital       Earnings
                                     -----------     -----------     -----------
<S>                                  <C>             <C>             <C>

BALANCE, JANUARY 1, 1995 .......     $ 2,523,261     $ 2,157,492     $21,588,043

  Net income - 1995 ............            --              --         1,962,253
                                     -----------     -----------     -----------
BALANCE, DECEMBER 31, 1995 .....       2,523,261       2,157,492      23,550,296

  Net income - 1996 ............            --              --           449,943
                                     -----------     -----------     -----------

BALANCE, DECEMBER 31, 1996 .....       2,523,261       2,157,492      24,000,239

  Net income - 1997 ............            --              --         1,840,648
                                     -----------     -----------     -----------

BALANCE, DECEMBER 31, 1997 .....     $ 2,523,261     $ 2,157,492     $25,840,887
                                     ===========     ===========     ===========

</TABLE>
See notes to consolidated financial statements.

                                      -4-
<PAGE>
<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997
------------------------------------------------------------------------------------------------------------------ 
                                                                       1997             1996             1995
                                                                   -----------      -----------      -----------
<S>                                                                <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income .................................................     $ 1,840,648      $   449,943      $ 1,962,253
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
    Depreciation and amortization ............................       2,324,482        2,330,124        1,905,415
    Foreign exchange loss ....................................          84,470          514,035          307,716
    Deferred taxes ...........................................         (59,268)          (8,399)         (68,107)
    Changes in assets  and  liabilities,
       net  of  the  effect  of  foreign
       currency translation and acquisition:
        Accounts receivable ..................................        (555,485)         572,203         (432,057)
        Income tax payable/receivable ........................         128,788          (46,121)        (702,623)
        Inventories ..........................................        (831,826)        (838,457)      (3,471,987)
        Prepaid expenses and other current assets ............         207,047         (122,416)        (124,577)
        Other assets .........................................         183,756           12,705          (12,050)
        Accounts payable and accrued expenses ................         626,215          661,564          324,813
        Other ................................................         (17,290)           1,329          100,011
                                                                   -----------      -----------      -----------
           Net cash provided by (used in) operating activities       3,931,537        3,526,510         (211,193)
                                                                   -----------      -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Net acquisitions of property, plant and equipment ..........      (1,680,905)      (1,245,208)      (1,626,255)
  Increase in timber and timberlands .........................      (1,338,327)        (811,893)      (1,205,006)
  Acquisition of shrimp farm-net of cash acquired ............         (67,854)            --               --
                                                                   -----------      -----------      -----------
           Net cash used in investing activities .............      (3,087,086)      (2,057,101)      (2,831,261)
                                                                   -----------      -----------      -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 (continued)
------------------------------------------------------------------------------------------------------------------ 
                                                                       1997             1996             1995
                                                                   -----------      -----------      -----------
<S>                                                                <C>              <C>              <C>

CASH FLOWS FROM FINANCING ACTIVITIES:
  (Decrease) increase in notes payable .......................      (2,050,000)        (824,911)       2,691,892
  Borrowings of long-term debt ...............................       2,527,995          400,000             --
  Payments of long-term debt .................................        (535,269)         (95,658)         (23,863)
  Principal payments under capital lease .....................        (294,779)        (188,064)        (174,517)
                                                                   -----------      -----------      -----------
           Net cash (used in) provided by financing activities        (352,053)        (708,633)       2,493,512

EFFECT OF EXCHANGE RATE CHANGES ON CASH ......................        (430,054)        (487,173)        (306,217)
                                                                   -----------      -----------      -----------
NET INCREASE (DECREASE) IN
  CASH AND CASH EQUIVALENTS ..................................          62,344          273,603         (855,159)

CASH AND CASH EQUIVALENTS,
  BEGINNING OF YEAR ..........................................       1,114,659          841,056        1,696,215
                                                                   -----------      -----------      -----------
CASH AND CASH EQUIVALENTS,
  END OF YEAR ................................................     $ 1,177,003      $ 1,114,659      $   841,056
                                                                   ===========      ===========      ===========
SUPPLEMENTAL DISCLOSURES OF
  CASH FLOW INFORMATION:
  Cash paid during the year for:
    Interest .................................................     $   471,557      $   448,863      $   268,808
                                                                   ===========      ===========      ===========

    Income taxes .............................................     $   683,636      $   256,379      $ 1,388,134
                                                                   ===========      ===========      ===========
</TABLE>
See notes to financial statements.

                                      -5-
<PAGE>
BALTEK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997
--------------------------------------------------------------------------------

1.    NATURE OF OPERATIONS

      Baltek  Corporation  and  subsidiaries  (the "Company") is a multinational
      manufacturing and marketing company.  The Company operates in two lines of
      business: supplying core materials,  principally balsa wood and balsa wood
      products,  linear and cross-linked PVC Foam and non-woven polyester mat to
      various  composite   industries;   and  farming  and  processing   shrimp.
      Approximately 80% of Baltek's revenues are derived from its core materials
      segment and 20% from the shrimp segment.

      The  principal  market for the Company's  core  materials is in the United
      States,  while the shrimp market is divided  between the United States and
      Europe.

      The balsa and shrimp products are produced in Ecuador,  South America. The
      supply of raw materials has been without  interruption  for over 50 years.
      The balsa and shrimp  identifiable assets located at various facilities in
      Ecuador are included in the Company's consolidated balance sheet and total
      approximately  $23 million at December 31, 1997. Foam and mat products are
      purchased from outside vendors; the foam products are further processed by
      the Company for sale to customers.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Principles  of  Consolidation  -  The  consolidated  financial  statements
      include the accounts of the Company and its wholly-owned subsidiaries. All
      significant intercompany accounts and transactions have been eliminated in
      consolidation.

      Cash and Cash Equivalents - Cash equivalents  consist of short-term highly
      liquid investments with maturities of three months or less when purchased.

      Cash flows from Baltek's  operations in foreign  countries are  calculated
      based on their reporting currencies.  As a result of this, amounts related
      to  changes  in  assets  and  liabilities  reported  on  the  consolidated
      statement  of cash  flows  will not  necessarily  agree to  changes in the
      corresponding  balances on the consolidated  balance sheets. The effect of
      exchange  rate  changes on cash  balances  held in foreign  currencies  is
      reported on a separate line below cash flows from financing activities.

      Inventories - Inventories are valued at the lower of cost or market.  Cost
      is determined by use of the first-in, first-out (FIFO) method.

      Property - Property,  plant and equipment is stated at cost.  Depreciation
      is provided for depreciable assets over their estimated useful lives using
      various accepted  depreciation  methods. The asset under capital lease and
      leasehold improvements are amortized over their estimated useful lives, or
      the life of the lease, whichever is shorter.

                                      -6-
<PAGE>
      Income  Taxes - Taxes on current  income are  provided  by the Company and
      each  subsidiary as prescribed by local tax laws.  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.

      Timber and Timberlands - Timberlands are carried at cost.  Timber-deferred
      cultivation  costs  represent the cost of preparing,  clearing and seeding
      the Company's balsa wood plantations. Amortization of deferred cultivation
      costs  is  based on units of  production.  Timber  carrying  costs,  which
      include  the  regular  maintenance  and  overseeing  of  timberlands,  are
      expensed as incurred.

      Foreign Currency  Translation - The financial  statements of the Company's
      foreign  subsidiaries  are  remeasured  into U.S.  dollars,  the Company's
      functional currency.

      Foreign  Currency  Risk  Management  - The Company  uses  forward  foreign
      currency exchange  contracts to reduce currency exchange rate risk on firm
      commitment  purchases  denominated in foreign currencies.  Gains or losses
      resulting  from these  contracts  are  deferred  and are  included  in the
      purchase  price of the materials.  The maximum term of these  contracts is
      less than one year.  The Company does not intend to enter into  derivative
      financial instruments for trading purposes.

      Common  Stock - Holders of the  Company's  Common  Stock have full voting,
      dividend and liquidation preferences in the Company.

      Concentrations of Credit Risk - Baltek's core material  products,  as well
      as shrimp products,  are sold to a number of markets,  including  boating,
      transportation,  military,  hobby, and the retail food industry.  Baltek's
      products are sold throughout the United States,  Canada, Europe, Japan and
      Australia to  approximately  1,600 ultimate users.  Credit risk related to
      Baltek's trade receivables is limited due to the large number of customers
      in differing industries and geographic areas.

      Research and Development - Research and  development  costs are charged to
      expense as incurred.  Research  and  development  expenditures  charged to
      operations  were  approximately  $331,000,  $350,000 and $415,000 in 1997,
      1996 and 1995, respectively.

      Basic  Earnings  per  Common  Share  - In  February  1997,  the  Financial
      Accounting Standards Board issued SFAS No. 128, "Earnings per Share". This
      standard  revises the methodology for computing  earnings per common share
      and requires  the  reporting  of two  earnings  per share  figures:  basic
      earnings  per share and diluted  earnings  per share.  Basic  earnings per
      share is computed by dividing net income by the weighted-average number of
      common shares outstanding.  The  weighted-average  number of common shares
      outstanding for all periods  presented is 2,523,261.  The Company does not
      have any potentially dilutive common shares;  therefore,  the reporting of
      diluted  earnings per share is not  applicable.  This new standard did not
      have a material effect on prior year amounts disclosed herein.

      Use of Estimates - The Company's  financial  statements include the use of
      estimates and assumptions which have been developed by management based on
      available  facts and  information.  Actual results could differ from those
      estimates.

      Reclassifications  - Certain  amounts in prior year  financial  statements
      have been reclassified to conform with the current year presentation.

                                      -7-
<PAGE>
3.    INVENTORIES

      Inventories  of the core  materials and shrimp  segments are summarized as
      follows:
<TABLE>
<CAPTION>
                                        1997            1996
                                    -----------     -----------
<S>                                 <C>             <C>
                Raw materials .     $ 5,288,736     $ 4,718,296
                Work-in-process       4,300,532       4,250,538
                Finished goods        5,010,080       4,744,826
                                    -----------     -----------
                Inventories ...     $14,599,348     $13,713,660
                                    ===========     ===========
</TABLE>
      Included in the above  amounts are  inventories  relating to the Company's
      shrimp  operations of $1,657,960  and  $1,159,914 at December 31, 1997 and
      1996, respectively.

4.    PROPERTY, PLANT AND EQUIPMENT

      Property, plant and equipment is comprised of the following:
<TABLE>
<CAPTION>
                                                      Estimated
                                                    Useful Lives       1997            1996
                                                    ------------       ----            ----
<S>                                                 <C>            <C>             <C>
Land .........................................                     $   125,311     $   125,311
Shrimp properties ............................      5-20 years      16,332,199      14,745,215
Buildings and improvements ...................        20 years       1,572,708       1,334,589
Machinery and equipment ......................      5-10 years       9,782,483       9,146,164
Leasehold improvements .......................                         835,867         793,956
Assets under capital lease ...................                       2,498,719       2,498,719
Construction-in-progress .....................                          93,527         173,954

Total ........................................                      31,240,814      28,817,908

Less accumulated depreciation and amortization                      19,503,060      18,058,650
                                                                   -----------     -----------
Property, plant and equipment - net ..........                     $11,737,754     $10,759,258
                                                                   ===========     ===========

</TABLE>
      On October 1, 1997, the Company acquired a 444-acre shrimp farm in Ecuador
      for approximately $436,000, including liabilities assumed. The acquisition
      was accounted for as a purchase with the purchase price being allocated to
      the assets and  liabilities  acquired  based upon their fair values at the
      date of  acquisition.  The results of  operations of the acquired farm are
      included in the statement of income from the date of  acquisition.  Due to
      the  immateriality  of  the  acquisition,  pro-forma  information  is  not
      presented herein.

      Shrimp  properties  consist  principally of shrimp ponds, a hatchery and a
      packing plant. Accumulated amortization related to the asset under capital
      lease  at  December  31,  1997 and 1996  was  $1,457,603  and  $1,207,727,
      respectively.

                                      -8-
<PAGE>
5.    TIMBER AND TIMBERLANDS

      Timber and Timberlands are comprised of the following:
<TABLE>
<CAPTION>
                                                1997           1996
                                              ----------     ----------
<S>                                           <C>            <C>

        Timberlands .....................     $3,311,782     $2,839,820
        Timber-deferred cultivation costs      3,709,610      3,606,008
                                              ----------     ----------
        Timber and Timberlands ..........     $7,021,392     $6,445,828
                                              ==========     ==========
</TABLE>

6.    NOTES PAYABLE

      Notes payable under various agreements consist of the following:
<TABLE>
<CAPTION>
                                                                    1997           1996
                                                                 ----------     ----------
<S>                                                              <C>            <C>

U.S. Bank loan, with interest at prime less 1/2% in 1997 and
  prime in 1996 (8% and 8.25% at 1997 and 1996,
  respectively) ............................................     $1,550,000     $2,150,000

Ecuadorian bank loans, payable in U.S. dollars, due within
  one year from the origination date, with interest rates
  between  8% and 9% .......................................           --        1,450,000
                                                                 ----------     ----------
Notes payable ..............................................     $1,550,000     $3,600,000
                                                                 ==========     ==========
</TABLE>

      The U.S. Bank loan represents borrowings under an unsecured revolving line
      of credit with a domestic bank. The maximum credit limit under the line is
      $4,600,000, with interest at the bank's prime rate less 1/2%. This line of
      credit, which is renewable annually, expires on May 31, 1998. The Company
      was in compliance with all related loan covenants at December 31, 1997.

      The credit facilities discussed above do not require compensating balances
      or the payment of commitment  fees. The weighted  average interest rate on
      borrowings  outstanding  at December  31, 1997 and 1996 was 8.0% and 8.5%,
      respectively.

      The  Company  also  has  lines of  credit  with two  banks  for  equipment
      financing  totalling  $1,500,000.  One of the  lines,  in  the  amount  of
      $1,000,000,  expires June 1, 1998 and contains affirmative covenants and a
      negative  covenant  related to net worth.  No amounts were  outstanding at
      December 31, 1997 related to these lines.


                                      -9-
<PAGE>
7.    LONG-TERM DEBT

      Long-term debt consists of the following:
<TABLE>
<CAPTION>
                                                                  1997             1996
                                                              -----------      -----------
<S>                                                           <C>              <C>
Equipment loan, payable in equal monthly
  principal installments of $6,667 through
  January 2001, plus interest at prime ..................     $   253,333      $   333,333
  (8.5% and 8.25% at 1997 and 1996, respectively)

Ecuadorian bank loans payable in sucres, bearing interest       2,300,925             --
  rates between 31.3% and 35.0%

Other notes, with interest rates between
  4.4% and 6.0%, due at various dates through 2001 ......          81,743           52,209
                                                              -----------      -----------
                                                                2,636,001          385,542
Less current portion ....................................        (964,354)        (108,922)
                                                              -----------      -----------

Long-term debt ..........................................     $ 1,671,647      $   276,620
                                                              ===========      ===========
</TABLE>

      The equipment  loan payable is secured by certain  machinery and equipment
      at the Company's Northvale, New Jersey facilities.

      At December 31,  1997,  the Company had a line of credit  available  under
      Ecuadorian borrowing arrangements  amounting to approximately  $4,000,000,
      of which approximately  $1,700,000 was unused. Included in the outstanding
      line of credit  are sucre  denominated  unsecured  90 day bank loans and a
      term loan. The bank loans contain  renewable  terms every 90 days and only
      require payment of 10% of the original principal loan amount at the end of
      each term. The Company intends to pay only the required minimum  principal
      payments in accordance with the renewal terms.  The portion not due within
      one  year  has been  classified  as long  term.  The  Company  also has an
      unsecured  Ecuadorian  term loan,  which  requires  principal and interest
      payments of approximately $245,000 every six months commencing March 1998,
      with a final payment due in September 2000.

      Additionally,  the  Company  has  unused  lines of credit  under  European
      borrowing arrangements amounting to approximately $700,000.

      The  aggregate  maturities  of long-term  debt at December 31, 1997 are as
      follows:

                      1999                                    $ 1,024,961
                      2000                                        623,244
                      2001                                         23,442
                                                              -----------
                                                              $ 1,671,647
                                                              ===========



                                      -10-
<PAGE>
8.    INCOME TAXES

      Income (loss) before income taxes is comprised of:
<TABLE>
<CAPTION>
                             1997           1996            1995
                          ----------     ----------      ----------
<S>                       <C>            <C>             <C>
             Domestic     $1,752,410     $  989,628      $1,717,492
             Foreign         803,476       (335,671)        773,231
                          ----------     ----------      ----------

             Total ..     $2,555,886     $  653,957      $2,490,723
                          ==========     ==========      ==========
</TABLE>
      The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
                             1997           1996           1995
                           ---------      ---------      ---------
<S>                        <C>            <C>            <C>
            Federal:
              Current      $ 665,893      $ 171,716      $ 519,517
              Deferred       (59,268)        (8,399)       (68,107)
            State ....        99,724         33,081         87,885
            Foreign ..         8,889          7,616        (10,825)
                           ---------      ---------      ---------

            Total ....     $ 715,238      $ 204,014      $ 528,470
                           =========      =========      =========
</TABLE>
      The  reconciliation  between  the  Company's  effective  tax  rate and the
      statutory Federal tax rate is as follows:
<TABLE>
<CAPTION>
                                                         1997       1996       1995
                                                          ----       ----       ----
<S>                                                       <C>        <C>       <C>
Statutory Federal tax rate ........................       35.0%      35.0%      35.0%
Increase (decrease) in taxes resulting from:
Foreign income - effect of rates
  differing from statutory rates, effect
  of nontaxable exchange gains and losses,
  and foreign losses producing no current benefit .       (9.6)      11.4      (11.8)
Refunds and reversal of current valuation allowance       (0.7)     (17.6)      (6.4)
State taxes, net of Federal income
  tax benefit .....................................        2.5        3.3        2.3
Other - net .......................................        0.8       (0.9)       2.1
                                                          ----      -----      -----
Effective tax rate ................................       28.0%      31.2%      21.2%
                                                          ====       ====       ==== 
</TABLE>
      In 1997, the Company utilized foreign tax loss carryforwards,  for which a
      full  valuation  allowance had been recorded in prior years.  In 1996, the
      Company  included  the income  from the  reversal  of a current  valuation
      allowance in the tax provision.  In 1995, the Company utilized foreign tax
      credit carryforwards of $140,000, for which a full valuation allowance had
      been recorded in prior years.

      As a result of various incentives  provided by the Ecuadorian  government,
      the effective  foreign tax rate is lower than the U.S.  Federal  statutory
      tax rate.
                                      -11-
<PAGE>
      Significant components of the Company's deferred tax assets and
      liabilities are as follows:
<TABLE>
<CAPTION>
                                                      1997           1996
                                                   ---------      ---------
<S>                                                <C>            <C>
    Current assets (liabilities):
      Inventory capitalization ...............     $  96,349      $  91,727
      Unexpired insurance ....................       (76,995)       (86,626)
      Reserve amounts not currently deductible        39,156          3,456
      Other - net ............................        24,881         (1,188)
                                                   ---------      ---------
    Total current asset, net .................     $  83,391      $   7,369
                                                   =========      =========

    Noncurrent assets:
      Capital lease ..........................       210,245        226,999
      Foreign tax loss carryforwards .........         3,027         67,352
    Less valuation allowance .................        (3,027)       (67,352)
                                                   ---------      ---------
    Total noncurrent asset, net ..............     $ 210,245      $ 226,999
                                                   =========      =========
</TABLE>
      As of  December  31,  1997 and  1996,  the  Company  had a full  valuation
      allowance recorded against its foreign tax loss  carryforwards  related to
      certain  European  locations.  Management  believes that it is more likely
      than not that the remaining carryforwards will expire unutilized.

      The total current and noncurrent  amounts  presented above are included in
      other assets (current and noncurrent) in the consolidated balance sheet.

      The  Company  has not accrued  federal  income  taxes on the equity in the
      undistributed  earnings of its  foreign  subsidiaries,  which  amounted to
      approximately  $6,682,000 at December 31, 1997,  because such earnings are
      permanently  reinvested.  It  is  not  practicable  to  estimate  the  tax
      liability that might arise if these earnings were remitted.

9.    EMPLOYEE BENEFIT PLANS

      The Company has a profit-sharing  plan under which an annual  contribution
      may be paid from  accumulated  profits at the  discretion  of the Board of
      Directors  for the benefit of eligible  employees  upon their  retirement.
      Contributions  to  this  plan by the  Company  amounted  to  approximately
      $313,000,  $180,000  and  $327,000 in 1997,  1996 and 1995,  respectively.
      Additionally,  the plan  allows for all  participants  to defer  between 2
      percent and 10 percent of salary. Amounts deferred are paid to the trustee
      of the plan. The plan does not provide for matching Company contributions.

      Certain  employees of the Company's  Ecuadorian  subsidiary  companies are
      covered by termination and retirement plans  incorporated  under statutory
      requirements of labor laws and collective bargaining agreements.  Included
      in  the  accompanying  consolidated  balance  sheets  are  union  employee
      termination  benefits which approximate  unpaid vested benefits under such
      plans. The amount of benefits to be received by an employee is established
      by the collective  bargaining agreements and is based on length of service
      and  compensation.   Provisions  of  approximately  $75,000,  $64,000  and
      $111,000 were charged to income during 1997, 1996 and 1995, respectively.

      The Company  participates  in a  multiemployer  pension plan for the union
      employees  at  the   Northvale,   New  Jersey   facility.   Provisions  of
      approximately  $139,000,  $112,000  and  $101,000  were  charged to income
      during 1997, 1996 and 1995, respectively.

                                      -12-
<PAGE>
10.   LEASES

      The Company leases its office space and plant facilities in Northvale, New
      Jersey under a long-term  capital lease  agreement  which expires in 2002.
      The lease provides that the Company pay all real estate taxes, maintenance
      and insurance relating to the facilities.

      The Company also leases  warehouse space under a five-year lease agreement
      which expires in 2002. The lease requires that the Company pay real estate
      taxes and certain maintenance and insurance costs related to the facility.
      The Company also leases warehouse space under a month-to-month lease.

      Rent expense under operating leases relates principally to warehouse space
      and office  buildings  and amounted to  $204,000,  $122,000 and $53,000 in
      1997, 1996 and 1995, respectively.

      Future minimum lease payment obligations, as of December 31, 1997, for the
      capital lease described above, as well as operating leases, are summarized
      below.  The  operating  leases are for space at the  Company's  offices in
      England and France and warehouse space in New Jersey.
<TABLE>
<CAPTION>
                                                  Capital          Operating
Year                                               Lease             Leases
----                                               -----             ------
<S>                                            <C>               <C>
1998                                           $   448,565       $   229,373
1999                                               466,365           207,655
2000                                               469,926           207,655
2001                                               487,726           207,655
2002                                                81,886           143,129
Remainder                                               -             84,462
                                               -----------       -----------
Minimum lease payments                           1,954,468       $ 1,079,929
                                                                 ===========
Less amounts representing interest                (274,478)
                                               -----------
Capital lease obligation                       $ 1,679,990
                                               ===========

</TABLE>
11.   SEGMENT INFORMATION

      The Company and its subsidiaries  operate primarily in two segments,  as a
      manufacturer   and  supplier  of  core  materials  to  various   composite
      industries,  and in the shrimp  farming  business.  Information  about the
      Company's operations by segment is as follows:
<PAGE>
<TABLE>
<CAPTION>
                                                  (In Thousands)
                                         1997          1996          1995
                                       --------      --------      --------
<S>                                    <C>           <C>           <C>
   Sales to unaffiliated customers

   Core materials segment ........     $ 44,004      $ 38,630      $ 36,420
   Shrimp segment ................       12,136         9,736         9,364
                                       --------      --------      --------
   Total sales ...................     $ 56,140      $ 48,366      $ 45,784
                                       ========      ========      ========

   Operating income

   Core materials segment ........     $  3,905      $  2,383      $  2,776
   Shrimp segment ................        1,380           999         2,327
   General corporate expenses ....       (1,890)       (1,619)       (1,822)
                                       --------      --------      --------
   Total operating income ........     $  3,395      $  1,763      $  3,281
                                       ========      ========      ========
</TABLE>
                                      -13-
<PAGE>
<TABLE>
<CAPTION>
                                                                 (In Thousands)
                                                        1997          1996          1995
                                                     --------      --------      --------
<S>                                                  <C>           <C>           <C>
Income before income taxes

Core materials segment .........................     $  3,688      $  1,947      $  2,608
Shrimp segment .................................        1,512           921         2,187
General corporate expenses .....................       (1,890)       (1,619)       (1,822)
                                                     --------      --------      --------
Operating income after foreign exchange loss ...        3,310         1,249         2,973
Interest expense ...............................         (760)         (602)         (530)
Other income - net .............................            6             7            48
                                                     --------      --------      --------
Income before income taxes .....................     $  2,556      $    654      $  2,491
                                                     ========      ========      ========  
Identifiable assets

Core materials segment .........................     $ 31,388      $ 30,318      $ 29,647
Shrimp segment .................................       10,368         8,997         9,170
                                                     --------      --------      --------
Total identifiable assets ......................     $ 41,756      $ 39,315      $ 38,817
                                                     ========      ========      ========
Capital expenditures, net, including timberlands
  and capital leases

Core materials segment .........................     $  2,305      $  1,524      $  2,169
Shrimp segment .................................          737           579           694
                                                     --------      --------      --------
Total capital expenditures .....................     $  3,042      $  2,103      $  2,863
                                                     ========      ========      ========
Depreciation expense

Core materials segment .........................     $    882      $    851      $    778
Shrimp segment .................................          680           760           736
                                                     --------      --------      --------
Total depreciation expense .....................     $  1,562      $  1,611      $  1,514
                                                     ========      ========      ========

</TABLE>
<PAGE>
      Information pertaining to the Company's operations in different geographic
      areas is as follows:
<TABLE>
<CAPTION>
                                                     (In Thousands)
                                              1997        1996        1995
                                            -------     -------     -------
<S>                                         <C>         <C>         <C>
     Sales to unaffiliated customers

     United States - domestic .........     $38,835     $33,473     $32,453
     United States - export ...........      11,642       8,856       7,534
     Ecuador ..........................         116         123          87
     Europe ...........................       5,547       5,914       5,710
                                            -------     -------     -------
     Total sales ......................     $56,140     $48,366     $45,784
                                            =======     =======     =======

     Transfers between geographic areas

     United States ....................     $ 2,264     $ 2,248     $ 2,167
     Ecuador ..........................      21,506      18,083      17,781
                                            -------     -------     -------
     Total transfers ..................     $23,770     $20,331     $19,948
                                            =======     =======     =======

</TABLE>
                                      -14-
<PAGE>
<TABLE>
<CAPTION>
                                                (In Thousands)
       Operating income ........         1997         1996          1995
<S>                                  <C>          <C>           <C>
       United States ...........     $  2,658     $  1,762      $  2,422
       Ecuador .................          499          107         1,055
       Europe ..................          238         (106)         (196)
                                     --------     --------      --------
       Total operating income ..     $  3,395     $  1,763      $  3,281
                                     ========     ========      ========

       Identfiable assets

       United States ...........     $ 15,458     $ 14,264      $ 12,576
       Ecuador .................       22,672       21,543        22,732
       Europe ..................        3,626        3,508         3,509
                                     --------     --------      --------
       Total identifiable assets     $ 41,756     $ 39,315      $ 38,817
                                     ========     ========      ========

</TABLE>

      Transfers between geographic areas are at prices which permit the recovery
      of manufacturing costs and a reasonable  operating profit. The majority of
      export  sales  from  the  Company's  United  States   operations  were  to
      unaffiliated customers in Europe.

      No  customer  accounted  for more than 10% of  revenues  in 1997 and 1996.
      Sales  to one  customer  from  the  core  materials  segment  amounted  to
      approximately 13% of total revenues in 1995.

12.   FINANCIAL INSTRUMENTS

      The table below presents the carrying values and estimated fair values for
      the Company's financial instruments. Estimated fair values were determined
      based on the terms of the various instruments.
<TABLE>
<CAPTION>
                                           1997                                 1996
                                               Estimated Fair                          Estimated Fair
                            Carrying Value         Value         Carrying Value             Value
                            --------------         -----         --------------             -----
<S>                           <C>               <C>               <C>                   <C>
Cash and cash equivalents     $1,177,003        $1,177,003        $1,114,659            $1,114,659
Notes payable ...........      1,550,000         1,550,000         3,600,000             3,600,000
Long term debt ..........      2,636,001         2,636,001           385,542               385,542
</TABLE>
      The carrying  amount of the notes  payable  approximates  their fair value
      based on the short term nature and the terms of the loans.

      The carrying  amount of the long term debt  approximates  their fair value
      since a majority of the amounts contain 90 day renewal clauses.

      At December 31, 1997, the Company held forward foreign  currency  exchange
      contracts  for the  purchase of French  francs  with a notional  amount of
      approximately  $341,000  and  maturity  dates  ranging from March 31, 1998
      through  September 30, 1998. Firm commitments exist which correlate to the
      maturity dates of the forward exchange  contracts.  The amount of deferred
      gains and losses at year-end are not  material.  At December 31, 1996,  no
      forward exchange contracts were outstanding.

                                      -15-
<PAGE>
13.   NEW ACCOUNTING PRONOUNCEMENTS

      In June 1997,  the Financial  Accounting  Standards  Board Issued SFAS No.
      130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about
      Segments of an Enterprise and Related Information." Both standards for the
      Company  are  effective  beginning  in  1998.  The  Company  is  currently
      evaluating the impact of these new standards on its consolidated financial
      statements.



                                     ******

                                      -16-
<PAGE>
<TABLE>
<CAPTION>

                                                                     Schedule II

BALTEK CORPORATION AND SUBSIDIARIES

FINANCIAL STATEMENT SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS 
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 



                                                    Additions
                                     Balance at     Charged to                   Balance
                                     Beginning       Costs and                    at End
Description                           of Year        Expenses       Deductions    of Year
-----------                           -------        --------       ----------    -------

<S>                                 <C>              <C>             <C>         <C>
YEAR ENDED DECEMBER 31, 1997:
  Allowance for doubtful
  accounts receivable               $ 62,611         $ 30,127        $ 19,775    $ 72,963


    
YEAR ENDED DECEMBER 31, 1996:
  Allowance for doubtful
  accounts receivable               $ 92,759         $ 70,380        $100,528    $ 62,611

YEAR ENDED DECEMBER 31, 1995:
  Allowance for doubtful
  accounts receivable               $ 75,985         $ 97,176        $ 80,402    $ 92,759

 </TABLE>

See notes to consolidated financial statements.



                                      -17-