UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934



 For the Fiscal Year Ended                            Commission file number
     December 31, 1998                                         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. [  ]

       The aggregate  market value of the voting stock held by  nonaffiliates on
March 2, 1999 amounted to $8,052,000.

       Indicate the number of shares outstanding of each of the issuer's classes
of common  stock as of the latest  practicable  date,  March 2, 1999:  2,523,261
shares, Common Stock, $1.00 par value.

       Documents  incorporated by reference:  Portions of the registrant's proxy
statement  dated  April  27,  1999 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.

         The  Company  is  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
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.
<PAGE>
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.
The Company makes  approximately 30% of its domestic core material product sales
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 1998, approximately 42% 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 1998,  1997 or
1996.

Backlog

         As of December  31, 1998 and 1997,  the Company had a backlog of orders
believed to be firm in the amounts of $12,488,000 and $8,367,000,  respectively.
The 1998 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
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.
<PAGE>
         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  $609,000  during  1998  for
research  and  development,  compared  to  expenditures  of $331,000 in 1997 and
$350,000 in 1996. 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  1,153  employees  in Ecuador,  152 in the
United States and 10 in Europe, aggregating 1,315 employees.

Seasonality

         The Company's business is not seasonal.
<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 each of the three years
in the period ended December 31, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
         Year           Core Materials          Shrimp                Total
         ----           --------------          ------                -----
<S>                        <C>                 <C>                  <C>    
         1998              $53,600             $14,095              $67,695
                                79%                 21%                 100%

         1997              $44,004             $12,136              $56,140
                                78%                 22%                 100%
 
        1996              $38,630              $9,736              $48,366
                                80%                 20%                 100%
</TABLE>

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  15,580  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.
<PAGE>
Item 2.           PROPERTIES

The Company owns or leases the properties indicated in the following table:

              Property and Location                                  Status 
              ---------------------                                  ------ 
                                                                            
One-story   concrete  and  steel  building   containing  the         Leased  
Company's   principal  offices,   manufacturing   plant  and                 
warehouse   space,   85,000  square  feet  on  4-1/2  acres.                 
(Northvale, New Jersey)                                                     
                                                                            
Approximately  58,000  square feet of  warehouse  and office         Leased  
space  in  three  buildings.  (Norwood  and  Northvale,  New                 
Jersey)                                                                      
                                                                            
Woodworking plant housed in several wood, concrete and steel         Owned  
buildings,  approximately  180,000 square feet.  (Guayaquil,                
Ecuador)                                                                    
                                                                            
Woodworking plant housed in several wood, concrete and steel         Owned  
buildings,  approximately  30,000  square feet on 7 acres of                
land. (Guayaquil, Ecuador)                                                  
                                                                            
15,580 acres of timberland in Ecuador.                               Owned  
                                                                            
2,000 acres of land for shrimp farming in Ecuador, including         Owned  
10  wood  buildings  and   one  concrete  building  totaling                
approximately 11,000 square feet.                                           
                                                                            
444 acres of land for shrimp farming in Ecuador, including 4         Leased 
concrete   buildings    and   4   wood   buildings  totaling                
approximately 4,357 square feet.                                            
                                                                            
Shrimp hatchery housed in several concrete  buildings on 3.7         Owned  
acres of land. (San Pablo, Ecuador)                                         
                                                                            
Shrimp  packing  plant  housed in three  concrete  and steel         Owned  
buildings on 2.6 acres of land. (Duran, Ecuador)                            
                                                                            
Woodworking   plant  housed  in  four   concrete  and  steel         Owned  
buildings,  165,000 square feet on approximately 28 acres of                
land. (Santo Domingo de los Colorados, Ecuador)                             
                                                                            
Woodworking   plant  housed  in  four   concrete  and  steel         Owned  
buildings,  62,000 square feet on  approximately  7 acres of                
land. (Manta, Ecuador)                                                      
                                                                            
Woodworking plant housed in one wood building, 26,000 square         Owned  
feet on approximately 8 acres of land. (Quevedo, Ecuador)                   
                                                                            
Maintenance facilities for the Balsa Raw Material Department         Owned  
in  a  concrete  and  wood  building,  16,875  square  feet.                
(Quevedo, Ecuador)                                                          
<PAGE>                                                                      
Office  space  in  concrete  building, 8,489  square  feet.          Owned  
(Guayaquil, Ecuador)                                                        
                                                                            
Office  space  in  concrete  building, 1,000  square  feet.          Leased 
(Croydon, U.K.).                                                            
                                                                            
Office space in stone and wood building, 2,000 square feet.          Leased 
(Paris, France)                                                      
 

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

         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 1998.


<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.

                        1998                             1997
                 ------------------               ------------------ 
                   HIGH         LOW                HIGH         LOW

1st Quarter      $10.50       $7.63               $8.13       $6.75
2nd Quarter       12.00        8.75                7.88        6.25
3rd Quarter       10.81        8.53                9.75        7.50
4th Quarter       11.75        9.75               10.25        7.25


         The Company had approximately 157 stockholders of record as of March 2,
1999.

         No cash dividends were paid during the past two years.



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

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

                                       1998           1997           1996           1995           1994
                                    ----------     ----------     ----------     ----------     ----------

                                  
<S>                                 <C>            <C>            <C>            <C>            <C>       
Net sales .....................     $   67,695     $   56,140     $   48,366     $   45,784     $   40,130

Net income ....................          3,259          1,841            450          1,962          1,212

Earnings per common share
                                          1.29            .73            .18            .78            .48

Total assets ..................         46,077         41,755         39,315         38,816         34,541

Long-term obligations .........          1,581          3,015          1,957          1,993          2,170

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

LIQUIDITY AND CAPITAL RESOURCES

         The  primary  sources  of  liquidity  historically  have  been  and are
expected to continue to be cash flow  generated  from  operations  and available
borrowings under short-term lines of credit. In 1996, this was supplemented by a
$400,000 five-year term loan used to finance equipment purchases. If the Company
continues  to expand at a rate  similar to 1998,  this is  expected to require a
higher level of capital  expenditures  than has been  experienced in the past to
support such growth. The Company may, accordingly,  seek long-term financing for
significant capital expenditures in the future.

         The Company's  financial position remains strong. At December 31, 1998,
the Company had working  capital of $13.8  million  compared to $14.6 million at
December 31, 1997.  Cash was  provided  and used in varying  amounts  during the
two-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 both  years due to new  products,  particularly  foam
products in 1997, 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.

         The Company had unused  lines of credit of  approximately  $2.2 million
with a domestic  bank,  approximately  $1.3  million with  Ecuadorian  banks and
approximately $0.7 million with European banks for working capital purposes. 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.


RESULT OF OPERATIONS FOR THE YEARS
ENDED DECEMBER 31, 1998, 1997 AND 1996

         Total  sales  increased  21%,  16%  and  6% in  1998,  1997  and  1996,
respectively.  The gains in all three years were due to increased core materials
and shrimp sales.

         Core material sales were  $53,600,000,  $44,004,000  and $38,630,000 in
1998, 1997 and 1996, respectively.  The continued robust economy has resulted in
strong demand in all industries that use core  materials,  including the largest
customer group,  the boating  industry.  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 1998 are also attributable to sales of foam products that were
introduced in 1996. The increase in core material sales in 1998 compared to 1997
was attributable to improved pricing and volume.
<PAGE>
         Shrimp sales were $14,095,000, $12,136,000 and $9,736,000 in 1998, 1997
and 1996,  respectively.  The  increases  in all three  years were the result of
higher volume of shrimp shipped; the average selling price decreased slightly in
1998 compared to 1997.

         The gross  margin  increased  in 1998 and 1997.  In 1998 and 1997,  the
margins for the  Company's  core  products  improved,  primarily due to improved
pricing.  The gross  margin from shrimp sales  decreased  in 1998 and 1997.  The
decrease in both years 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.

         Selling,  general and administrative  expenses as a percentage of sales
declined  in 1998 and 1997.  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.  In 1998,  the  Company
continued  to borrow  money for  working  capital  purposes  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 1998 as compared to 1997 but created a corresponding foreign
exchange gain.  The Company's  interest rate on U.S. loans was lower in 1998 and
its average  borrowings  were slightly  higher in 1998 as compared to 1997.  The
level of borrowing in all periods is related to the  Company's  working  capital
needs and cash flows generated from operations.

         The Company had a foreign exchange gain of $814,000 in 1998 compared to
losses of $84,000  and  $514,000  in 1997 and 1996,  respectively.  In March and
September of 1998, the  Ecuadorian  government  weakened its currency's  trading
band against the dollar  effectively  devaluing the local currency.  Translation
gains and 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
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.

         The effective  income tax rate amounted to 26% in 1998, 28% in 1997 and
31% in 1996.  Reconciliation of the effective rate with the U.S.  statutory rate
is detailed in Note 8 to the Notes to Consolidated Financial Statements.
<PAGE>
Conversion to the Euro Currency

         On January 1, 1999,  certain  member  countries of the  European  Union
established  fixed  conversion  rates between their existing  currencies and the
European Union's common  currency,  the "Euro".  Primarily  through its European
sales offices, the Company conducts business in member countries. The transition
period for the introduction of the Euro will be between January 1, 1999 and June
30, 2002. The Company is addressing the issues involved with the introduction of
the Euro, including converting information technology systems, currency risk and
processing tax and accounting issues. Based upon its review to date, the Euro is
not expected to have a significant impact on the Company's  business  operations
and  therefore  will not  have a  material  effect  on the  Company's  financial
condition or results of operations.


Year 2000

         The Year 2000 issue is the result of computer  programs  being  written
using two digits  rather than four  digits to define the  applicable  year.  Any
program software and hardware, as well as certain equipment and machinery,  that
are date  sensitive may recognize a date using "00" as the Year 1900 rather than
the Year 2000. This could result in a system failure or miscalculations  causing
disruptions of operations,  including, among other things, a temporary inability
to process  transactions  or engage in normal  business  activities for both the
Company and its customers who rely on its products.

         The  Company  has  divided  the Year 2000  issue  into two main  areas:
internal  information  technology ("IT") and non-IT systems,  including embedded
technology  such as  microprocessors;  and external  agents  including  critical
suppliers,  customers and other third  parties the Company  utilizes for various
processing functions.

         The Company is in the process of  installing  a new,  fully  integrated
Enterprise Resource Planning ("ERP") system purchased from a third party vendor.
The ERP  software is Year 2000  compliant.  Implementation  of  mission-critical
systems  is  expected  to be  completed  in the second  quarter  of 1999;  other
non-critical  systems are scheduled to be completed  during the first and second
quarters of 1999.  The  decision to invest in a new ERP system was driven by the
need for a fully integrated management information system to support the planned
growth of the  Company  and not  specifically  to address  Year 2000  compliance
issues.  To fully utilize the capabilities of the ERP software and modernize its
existing systems the Company has invested approximately $272,000 in new computer
hardware and  networking  hardware and software in 1998.  An  investment of this
size  in  hardware  is not  expected  on an  annual  basis  hereafter,  although
additional  investments  will be required in the future to enhance the Company's
use of information technology and computer hardware.

         Efforts  to  implement  the ERP system and  address  certain  Year 2000
issues are being  accomplished  concurrently.  It is not practical  therefore to
distinguish and estimate certain Year 2000 compliance costs,  especially as they
relate to the  Company's  information  technology.  Total  internal and external
costs in 1998 to implement  the ERP system,  purchase new computer  hardware and
upgrade its existing network was  approximately  $341,000.  Additional  external
costs to  implement  the mission-critical and certain other modules are expected
to be  approximately  $150,000 in 1999.  Hardware  costs have been  capitalized;
<PAGE>
internal  costs and nearly all  external  costs have been  expensed as incurred.
Certain  expenditures  will be required in the future to maintain the technology
base of the  Company;  such  expenditures  in the future are not  expected to be
material.  The Company may decide to utilize additional  capabilities of its ERP
system and make use of other  information  technologies as they become available
in the marketplace.  These  expenditures  will be largely  discretionary in that
they are not mission-critical  systems and will be evaluated using a methodology
similar to that used by the Company to evaluate other capital expenditures.

         Current  plans  call for the ERP system to be  implemented  in the U.S.
only, not in the Company's European or Ecuadorian subsidiaries.  The Company has
identified  all  significant  IT  and  non-IT  applications  that  will  require
modification at these locations.  Completion of the modifications is expected by
the end of March 1999 in Ecuador and by June 1999 in Europe.

         The Company is in the process of assessing its Year 2000 exposure as it
pertains to non-IT  systems,  including  manufacturing  process  control and key
third party  relationships,  such as vendors and  customers.  This  includes the
process of identifying  and  prioritizing  critical  suppliers and customers and
communicating  with them about their plans and progress in  addressing  the Year
2000 problem.  The Company also utilizes third-party vendors for processing data
and  payments,  e.g.,  payroll  services,  401(k)  plan  administration,   check
processing,   medical  benefits  processing,  etc.  The  Company  has  initiated
communications  with these  vendors to  determine  the status of their  systems.
Should these  vendors not be compliant  in a timely  manner,  the Company may be
required to process transactions manually or delay processing until such time as
the vendors are Year 2000 compliant.  The review of non-IT systems and key third
party relationships is expected to be completed by the end of March 1999.

         Although the Company  anticipates that minimal business disruption will
occur as a result of Year  2000  issues,  there is no  guarantee  that  possible
"worst  case" Year 2000 issues of third party  vendors and  suppliers  would not
impact the Company.  To date the Company has not developed a formal  contingency
plan for  non-compliance  and will  develop  such  plans as  necessary  based on
information obtained from third parties, as well as the evaluation of its IT and
non-IT systems.

         The future costs of the Company's  Year 2000 efforts are expected to be
funded  through  existing cash resources and future  operating  cash flows.  The
requirements  for the  correction  of Year 2000 issues and the date on which the
Company  believes  it will  complete  the Year 2000  modifications  are based on
management's  current  best  estimates,  which were derived  utilizing  numerous
assumptions  of future events, including the continued  availability  of certain
resources,  third-party modification plans and other factors. However, there can
be no guarantee  that these  estimates will be achieved and actual results could
differ materially from those  anticipated.  Specific factors that may cause such
material  differences  include,  but are not  limited  to, the  availability  of
personnel  trained in this area,  the ability to locate and collect all relevant
computer data and similar uncertainties.

                                    * * * * *
 
Forward Looking Statements - Cautionary Factors

         The  foregoing   discussion  and  analysis   contains   forward-looking
statements  regarding  the Company.  Because such  statements  include risks and
uncertainties,  actual  results may differ  materially  from those  expressed or
implied by such  forward-looking  statements.  Factors  that could cause  actual
results  to  differ  materially  include,  but  are  not  limited  to,  economic
conditions  in the  United  States,  Europe and  Ecuador  that  affect  relative
interest rates, foreign exchange rates and other costs and prices related to the
Company's business.
<PAGE>
Item 7a.          QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         The Company is exposed to various  market risks,  including  changes in
commodity  prices,  foreign currency  fluctuations and interest rates. To manage
the volatility  associated with foreign currency  purchases of materials created
in the normal course of business,  the Company  enters into a limited  number of
derivative hedging  transactions.  Gains and losses related to qualifying hedges
of foreign  currency firm  commitments are deferred and included in the basis of
the underlying transactions.  The deferred gains and losses on these instruments
at December  31,  1998 were not  material.  The  Company  does not hold or issue
derivative financial instruments for speculative purposes.

         In addition,  in order to hedge currency  exposures  related to the net
investments  in foreign  subsidiaries,  the Company  utilizes local currency and
U.S. dollar denominated financing entered into by the subsidiaries.  The Company
manages  interest  rate cost  relating  to these  financings  by using  variable
interest  rates.  Although  the  use of  variable  interest  rate  bearing  debt
instruments  has the potential for market risk, the Company's  overall  interest
rate  exposure  as of and during the year ended  December  31, 1998 would not be
materially affected by a near-term change in interest rates.

         For  quantitative   disclosure   regarding  the  Company's   derivative
instruments see Note 12 to the Consolidated Financial Statements.


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.



<PAGE>
                                    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.


<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, 1998, 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




<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, 1999

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 W. Kohn                           By  /s/ William F. Nicklin
    ---------------                                    ----------------------
     Margot W. Kohn,                                     William F. Nicklin
     Director                                            Director

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

By  /s/ Bernard J. Wald
    -------------------
     Bernard J. Wald
     Director


Dated March 18, 1999
<PAGE>







                       BALTEK CORPORATION AND SUBSIDIARIES









       CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
                      AS OF DECEMBER 31, 1998 AND 1997 AND
        FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1998








                       PREPARED FOR FILING AS PART OF THE
                            ANNUAL REPORT (FORM 10-K)
                    TO THE SECURITIES AND EXCHANGE COMMISSION
                      FOR THE YEAR ENDED DECEMBER 31, 1998

                                   **********


<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, 1998
--------------------------------------------------------------------------------


                                                                           Page

INDEPENDENT AUDITORS' REPORT.........................................        1

   Consolidated Balance Sheets as of December 31, 1998 and 1997......        2

   Consolidated Statements of Income for Each of the Three Years 
        in  the  Period  Ended  December 31, 1998.....................       3

   Consolidated Statements of Stockholders' Equity for Each of the 
        Three Years in the Period Ended December 31, 1998.............       4

   Consolidated Statements of Cash Flows for Each of the Three Years 
        in the Period Ended December 31, 1998.........................       5

   Notes to Consolidated Financial Statements for Each of the Three 
        Years in the Period Ended December 31, 1998...................    6-16

FINANCIAL STATEMENT SCHEDULE AS OF AND FOR EACH OF THE THREE YEARS IN THE PERIOD
ENDED DECEMBER 31, 1998:

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, 1998 and
1997, and the related consolidated  statements of income,  stockholders' equity,
and cash flows for each of the three  years in the  period  ended  December  31,
1998. 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, 1998 and 1997, and the results of their  operations and their
cash flows for each of the three years in the period ended  December 31, 1998 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 8, 1999
<PAGE>
<TABLE>
<CAPTION>
                               BALTEK CORPORATION AND SUBSIDIARIES
                                   CONSOLIDATED BALANCE SHEETS
                          (Dollars in Thousands, except per share data)

                                                                               December 31,
ASSETS                                                                       1998        1997
                                                                            -------     -------
<S>                                                                         <C>         <C>    
CURRENT ASSETS:
   Cash and cash equivalents ..........................................     $ 1,056     $ 1,177
   Accounts receivable (less allowance for doubtful
        accounts - 1998, $144; 1997, $73) .............................       6,942       5,103
   Inventories ........................................................      14,667      14,599
   Prepaid expenses ...................................................         425         298
   Other ..............................................................       1,148       1,326
                                                                            -------     -------

       Total current assets ...........................................      24,238      22,503

PROPERTY, PLANT AND EQUIPMENT - Net ...................................      13,114      11,738

TIMBER AND TIMBERLANDS ................................................       8,186       7,021

OTHER ASSETS ..........................................................         539         493
                                                                            -------     -------

TOTAL ASSETS ..........................................................     $46,077     $41,755
                                                                            =======     =======

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Notes payable ......................................................     $ 4,681     $ 1,550
   Accounts payable ...................................................       2,438       3,071
   Income taxes payable ...............................................         216          57
   Accrued salaries, wages and bonuses payable ........................       1,440       1,040
   Accrued expenses and other liabilities .............................         876         909
   Current portion of long-term debt ..................................         449         964
   Current portion of obligation under capital lease ..................         381         337
                                                                            -------     -------

         Total current liabilities ....................................      10,481       7,928

OBLIGATION UNDER CAPITAL LEASE ........................................         961       1,343

LONG-TERM DEBT ........................................................         620       1,672

UNION EMPLOYEE TERMINATION BENEFITS ...................................         235         291
                                                                            -------     -------

           Total liabilities ..........................................      12,297      11,234
                                                                            -------     -------
</TABLE>

                                       -2-
<PAGE>
<TABLE>
<CAPTION>
                               BALTEK CORPORATION AND SUBSIDIARIES
                                   CONSOLIDATED BALANCE SHEETS
                          (Dollars in Thousands, except per share data)

                                                                                December 31,
                                                                              1998        1997
                                                                            -------     -------
<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       2,523
   Additional paid-in capital .........................................       2,157       2,157
   Retained earnings ..................................................      29,100      25,841
                                                                            -------     -------

          Total stockholders' equity ..................................      33,780      30,521
                                                                            -------     -------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............................     $46,077     $41,755
                                                                            =======     =======
</TABLE>

See notes to consolidated financial statements.

                                      -3-
<PAGE>
<TABLE>
<CAPTION>
                               BALTEK CORPORATION AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF INCOME
                          (Dollars in Thousands, except per share data)


                                                             Year Ended December 31,
                                                      1998              1997              1996
                                                   --------          --------          --------
<S>                                                <C>               <C>               <C>     
NET SALES ................................         $ 67,695          $ 56,140          $ 48,366

COST OF PRODUCTS SOLD ....................           50,607            42,322            36,986

SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES ................           11,954            10,423             9,617
                                                   --------          --------          --------

           Operating income ..............            5,134             3,395             1,763
                                                   --------          --------          --------

OTHER INCOME (EXPENSES):
  Interest expense .......................           (1,554)             (760)             (602)
  Foreign exchange gain (loss) ...........              814               (84)             (514)
  Interest income ........................                4                 3                 5
  Other, net .............................                5                 2                 2
                                                   --------          --------          --------

           Total .........................             (731)             (839)           (1,109)
                                                   --------          --------          --------

INCOME BEFORE TAXES ......................            4,403             2,556               654

INCOME TAX PROVISION .....................            1,144               715               204
                                                   --------          --------          --------

NET INCOME ...............................         $  3,259          $  1,841          $    450
                                                   ========          ========          ========

EARNINGS PER COMMON SHARE ................         $   1.29          $   0.73          $   0.18
                                                   ========          ========          ========

</TABLE>

See notes to consolidated financial statements.

                                      -4-
<PAGE>
<TABLE>
<CAPTION>
                       BALTEK CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                             (Dollars in Thousands)
 


                                           Common       Additional
                                            Stock,        Paid-in       Retained
                                           $1 Par         Capital       Earnings
                                           -------        -------        -------
<S>                                        <C>            <C>            <C>    
BALANCE, JANUARY 1, 1996 ..........        $ 2,523        $ 2,157        $23,550

  Net income - 1996 ...............             --             --            450
                                           -------        -------        -------

BALANCE, DECEMBER 31, 1996
                                             2,523          2,157         24,000

  Net income - 1997 ...............             --             --          1,841
                                           -------        -------        -------

BALANCE, DECEMBER 31, 1997
                                             2,523          2,157         25,841

  Net income - 1998 ...............             --             --          3,259
                                           -------        -------        -------

BALANCE, DECEMBER 31, 1998 ........        $ 2,523        $ 2,157        $29,100
                                           =======        =======        =======

</TABLE>

See notes to consolidated financial statements.


                                      -4-
<PAGE>
<TABLE>
<CAPTION>
                                 BALTEK CORPORATION AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        (Dollars in Thousands)


                                                                        Year Ended December 31,
                                                                     1998         1997         1996
                                                                   -------      -------      -------
<S>                                                                <C>          <C>          <C>    
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income .................................................     $ 3,259      $ 1,841      $   450
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
    Depreciation and amortization ............................       2,492        2,324        2,330
    Foreign exchange (gain) loss .............................        (814)          84          514
    Deferred taxes ...........................................         (93)         (59)          (8)
                                                                                    
    Changes in assets and  liabilities,  net of the  effect
     of foreign  currency translation and acquisition:
         Accounts receivable ..................................      (1,829)       (555)         572
         Income tax payable/receivable ........................         206         129          (46)
         Inventories ..........................................         (67)       (832)        (838)
         Prepaid expenses and other current assets ............          17         207         (122)
         Other assets .........................................          (2)        184           13
         Accounts payable and accrued expenses ................        (405)        626          662
         Other ................................................         (72)        (17)           1
                                                                   -------      -------      -------

           Net cash provided by operating activities .........       2,692        3,932        3,528
                                                                   -------      -------      -------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Net acquisitions of property, plant and equipment ..........      (3,296)      (1,681)      (1,245)
  Increase in timber and timberlands .........................      (1,737)      (1,338)        (812)
  Acquisition of shrimp farm-net of cash acquired ............        --            (68)          --
                                                                   -------      -------      -------

           Net cash used in investing activities .............      (5,033)      (3,087)      (2,057)
                                                                   -------      -------      -------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                 BALTEK CORPORATION AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        (Dollars in Thousands)


                                                                        Year Ended December 31,
                                                                     1998         1997         1996
                                                                   -------      -------      -------
<S>                                                                <C>          <C>          <C>    
CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase (decrease) in notes payable .......................       1,529       (2,050)        (825)
  Borrowings of long-term debt ...............................       1,428        2,528          400
  Payments of long-term debt .................................      (1,756)        (535)         (96)
  Principal payments under capital lease .....................        (337)        (295)        (188)
                                                                   -------      -------      -------

           Net cash provided by (used in) financing activities         864         (352)        (709)
                                                                   -------      -------      -------

EFFECT OF EXCHANGE RATE CHANGES ON CASH ......................       1,356         (431)        (488)
                                                                   -------      -------      -------
NET (DECREASE) INCREASE IN
  CASH AND CASH EQUIVALENTS ..................................        (121)          62          274
                                                                                    
CASH AND CASH EQUIVALENTS,
  BEGINNING OF YEAR ..........................................       1,177        1,115          841
                                                                   -------      -------      -------
CASH AND CASH EQUIVALENTS,
  END OF YEAR ................................................     $ 1,056      $ 1,177      $ 1,115
                                                                   =======      =======      =======
SUPPLEMENTAL DISCLOSURES OF
  CASH FLOW INFORMATION:
  Cash paid during the year for:
    Interest .................................................     $ 1,292      $   472      $   449
                                                                   =======      =======      =======

    Income taxes .............................................     $ 1,025      $   684      $   256
                                                                   =======      =======      =======
</TABLE>

See notes to consolidated financial statements.


                                                 -5-
<PAGE>
BALTEK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1998
--------------------------------------------------------------------------------


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  $25 million at December 31, 1998. 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 speculative 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  $609,000,  $331,000 and $350,000 in 1998,
      1997 and 1996, respectively.

      Earnings per Common Share - 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
      instruments; therefore, the reporting of diluted earnings per share is not
      applicable.

      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 (amounts in thousands):


                                                  1998                1997   
                                                                             
                    Raw materials ........      $ 6,407             $ 5,289  
                    Work-in-process ......        4,476               4,300  
                    Finished goods .......        3,784               5,010  
                                                -------             -------  
                                                                             
                    Inventories ..........      $14,667             $14,599  
                                                =======             =======  
                                                                             
      Included in the above  amounts are  inventories  relating to the Company's
      shrimp  operations of $1,566,000  and  $1,658,000 at December 31, 1998 and
      1997, respectively.

4.    PROPERTY, PLANT AND EQUIPMENT

      Property,  plant and equipment is comprised of the  following  (amounts in
      thousands):
<TABLE>
<CAPTION>
                                                             Estimated
                                                           Useful Lives                     1998                1997
                                                  
<S>                                                         <C>                       <C>                   <C>     
          Land                                                                        $      125            $    125
          Shrimp properties                                 5-20 years                    17,694              16,332  
          Buildings and improvements                        20 years                       1,826               1,573  
          Machinery and equipment                           5-10 years                    11,202               9,782  
          Leasehold improvements                                                             890                 836  
          Assets under capital lease                                                       2,499               2,499  
          Construction-in-progress                                                             6                  94    
                                                                                       ---------            -------- 
                                                                                                                     
          Total                                                                           34,242              31,241
                                                                                                             
          Less accumulated depreciation and amortization                                  21,128              19,503
                                                                                       ---------            --------
          Property, plant and equipment -net                                           $  13,114            $ 11,738
                                                                                       =========            ======== 
</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,  1998  and  1997  was  $1,707,000  and
        $1,457,000, respectively.

                                      -8-
<PAGE>
5.    TIMBER AND TIMBERLANDS

      Timber  and  Timberlands  are  comprised  of  the  following  (amounts  in
      thousands):

<TABLE>
<CAPTION>

                                                      1998               1997

<S>                                               <C>                <C>       
        Timberlands                               $    3,813         $    3,312
        Timber-deferred cultivation costs              4,373              3,709
                                                  ----------         ----------

        Timber and Timberlands                    $    8,186         $    7,021
                                                  ==========         ==========
</TABLE>

6.    NOTES PAYABLE

      Notes payable under various  agreements  consist of the following (amounts
      in thousands):
<TABLE>
<CAPTION>

                                                                                     1998               1997
<S>                                                                               <C>                 <C>      

        U.S. Bank loan, with interest at prime less 3/4% in 1998 and
        prime less 1/2% in 1997 (7% and 8% at December 31, 1998 and 1997,
        respectively)                                                             $   2,800           $   1,550

        Ecuadorian bank loans, payable in U.S. dollars, due within one year from
        the origination  date, with interest rates between 7.88% and 15.43% (see
        also Note 7)                                                                  1,881                  --
                                                                                  ---------           ---------

        Notes payable                                                            $    4,681           $   1,550
                                                                                 ===========          =========
</TABLE>

      The U.S. Bank loan,  which is renewable  annually,  represents  borrowings
      under an  unsecured  revolving  line of credit with a domestic  bank.  The
      maximum  credit limit under the line is  $5,000,000.  This line of credit,
      which was renewed on July 31, 1998,  expires on May 31, 1999.  The Company
      was in compliance with all related loan covenants at December 31, 1998.

      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, 1998 and 1997 was  approximately
      8.2% and 8.0%, respectively.

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

      Long-term debt consists of the following (amounts in thousands):
<TABLE>
<CAPTION>
                                                                                      1998                     1997
<S>                                                                                <C>                      <C>       
        Equipment loan,  payable in equal monthly  principal  installments of $7
        through January 2001, plus interest at prime (7.75% and 8.5% at December
        31, 1998 and 1997, respectively)                                           $      173               $      253
 
        Ecuadorian bank loans, payable in sucres                                          827                    2,301

        Other notes, with interest rates between 4.4% and 6.0%, due at
        various dates through 2002                                                         69                       82
                                                                                   ----------               ----------

                                                                                        1,069                    2,636
        Less current portion                                                             (449)                    (964)
                                                                                   ----------               ----------

        Long-term debt                                                             $      620               $    1,672
                                                                                   ==========               ========== 
</TABLE>

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

      At December 31,  1998,  the Company had a line of credit  available  under
      Ecuadorian  borrowing  arrangements of $4,000,000,  of which approximately
      $1,292,000 was unused. Borrowings under the line are secured by a mortgage
      on certain  land and  buildings  and a  negative  pledge  against  certain
      machinery.

      Included in the outstanding  line of credit are dollar  denominated  short
      term loans (see Note 6) and sucre  denominated  term loans. The term loans
      require principal payments every three or six months and interest payments
      every three  months.  The  interest  rates on sucre  denominated  loans at
      December 31, 1998 were  approximately  69.1% and 63.8%, and are adjustable
      quarterly. Final payments on both loans are 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, 1998 are as
      follows (amounts in thousands):


            1999                                                $    449
            2000                                                     585
            2001                                                      29
            2002                                                       6
                                                                -------- 

                                                                $  1,069
                                                                ========

                                      -10-
<PAGE>
8.    INCOME TAXES

      Income before income taxes is comprised of (amounts in thousands):
<TABLE>
<CAPTION>
                                         1998            1997              1996

<S>                                    <C>              <C>              <C>   
Domestic ...................           $2,697           $1,753           $  990
Foreign ....................            1,706              803             (336)
                                       ------           ------           ------

Total ......................           $4,403           $2,556           $  654
                                       ======           ------           ======
</TABLE>
      The  provision  for income  taxes  consists of the  following  (amounts in
thousands):
<TABLE>
<CAPTION>
                                      1998              1997              1996
<S>                                 <C>               <C>               <C>    
Federal:
  Current ................          $   966           $   666           $   172
  Deferred ...............              (93)              (59)               (8)
State ....................              142               100                33
Foreign ..................              129                 8                 7
                                    -------           -------           -------

Total ....................          $ 1,144           $   715           $   204
                                    =======           =======           =======
</TABLE>
      The  reconciliation  between  the  Company's  effective  tax  rate and the
      statutory Federal tax rate is as follows:
<TABLE>
<CAPTION>
                                                                  1998              1997              1996

<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                                        (12.0)              (9.6)            11.4
        Refunds and change in current valuation   allowance         0.0               (2.5)           (17.6)
        State taxes, net of Federal income tax benefit              2.0                2.5              3.3
        Foreign tax credits                                        (2.5)               0.0              0.0
        Other - net                                                 3.5                2.6             (0.9)
                                                                  -----               ----            ----- 

        Effective tax rate                                         26.0%              28.0%            31.2%
                                                                  =====               ====            ===== 
</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.

                                      -11-
<PAGE>
      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.

      Significant   components  of  the   Company's   deferred  tax  assets  and
      liabilities are as follows (amounts in thousands):

<TABLE>
<CAPTION>
                                                             1998          1997
<S>                                                         <C>           <C>  
Current assets (liabilities):
  Inventory capitalization .........................        $ 105         $  96
  Unexpired insurance ..............................         (127)          (77)
  Reserve amounts not currently deductible .........          116            39
  Other - net ......................................           39            25
                                                            -----         -----
Total current asset, net ...........................        $ 133         $  83
                                                            =====         =====

Noncurrent assets:
  Capital lease ....................................        $ 182         $ 210
  Other ............................................           71          --
  Foreign tax loss carryforwards ...................           91             3
  Less valuation allowance .........................          (91)           (3)
                                                            -----         -----
Total noncurrent asset, net ........................        $ 253         $ 210
                                                            =====         =====
</TABLE>
      As of  December  31,  1998 and  1997,  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  $8,154,000 at December 31, 1998,  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
      $350,000,  $313,000  and  $180,000 in 1998,  1997 and 1996,  respectively.
      Additionally,  the plan  allows for all  participants  to defer  between 2
      percent and 10 percent of their 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


                                      -12-
<PAGE>
      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 $54,000, $75,000 and $64,000
      were charged to income during 1998, 1997 and 1996, respectively.

      The Company  participates  in a  multiemployer  pension plan for the union
      employees  at  the   Northvale,   New  Jersey   facility.   Provisions  of
      approximately  $174,000,  $139,000  and  $112,000  were  charged to income
      during 1998, 1997 and 1996, respectively.

10.   LEASES

      The  Company  leases its  primary  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 has operating  lease  agreements for warehouse and office
      space in the United  States  and  Europe.  The  longest  lease  obligation
      extends to 2008.  Certain  leases  contain  renewal  options and generally
      require the  Company to pay other  facility  related  costs such as taxes,
      maintenance  and  insurance.  Rent expense  under these  operating  leases
      amounted  to  $361,000,  $204,000  and  $122,000  in 1998,  1997 and 1996,
      respectively.

      Future minimum lease payment obligations, as of December 31, 1998, for the
      capital lease described above, as well as operating leases, are as follows
      (amounts in thousands):
<TABLE>
<CAPTION>
                                                     Capital        Operating
        Year                                           Lease          Leases

<S>                                                    <C>            <C>   
        1999                                           $ 466          $  278
        2000                                             470             278
        2001                                             488             278
        2002                                              82             204
        2003                                               -              44
        Thereafter                                         -             170
                                                       -----          ------ 

        Minimum lease payments                         1,506          $1,252
                                                                      ====== 

        Less amounts representing interest              (164)
                                                     -------
                   
        Capital lease obligation                     $ 1,342
                                                     =======
</TABLE>
                                      -13-
<PAGE>
11.   SEGMENT INFORMATION

      In 1997 the FASB  issued SFAS No. 131,  "Disclosure  about  Segments of an
      Enterprise  and  Related  Information."  SFAS No.  131,  which the Company
      adopted in 1998, supercedes SFAS No. 14, "Financial Reporting for Segments
      of a Business  Enterprise."  SFAS No. 131  requires  the Company to report
      segment  information in line with the  information  used by management for
      making operating  decisions and assessing  performance.  SFAS No. 131 also
      requires  disclosures  about products and services,  geographic areas, and
      major customers.  All information  previously  presented under SFAS No. 14
      has been modified to conform to the provisions of SFAS No. 131.

      The  Company  and  its  subsidiaries   operate  in  two  segments,   as  a
      manufacturer   and  supplier  of  core  materials  to  various   composite
      industries,  and in the shrimp farming business.  The segments are managed
      and reported separately because of the difference in products they produce
      and markets they serve.  The  accounting  policies of the segments are the
      same as those described in the summary of significant accounting policies.
      The Company evaluates  performance based on operating income, i.e. results
      of operations before interest, income taxes and foreign exchange gains and
      losses. There are no intersegment sales.

      No single  customer  provided  more than 10% of the  Company's  revenue in
      1998, 1997 or 1996.

      Information about the Company's operations by segment is as follows:
<TABLE>
<CAPTION>
                                                        (In Thousands)
                                                 1998         1997         1996
<S>                                            <C>          <C>          <C>    
Net sales to unaffiliated customers

Core materials segment ..................      $53,600      $44,004      $38,630
Shrimp segment ..........................       14,095       12,136        9,736
                                               -------      -------      -------

Total net sales .........................      $67,695      $56,140      $48,366
                                               =======      =======      =======

Operating income

Core materials segment ..................      $ 3,721      $ 1,635      $   167
Shrimp segment ..........................        1,413        1,760        1,596
                                               -------      -------      -------
                                                                           
Total operating income ..................      $ 5,134      $ 3,395      $ 1,763
                                               =======      =======      =======
Identifiable assets

Core materials segment ..................      $35,105      $31,387      $30,318
Shrimp segment ..........................       10,972       10,368        8,997
                                               -------      -------      -------

Total identifiable assets ...............      $46,077      $41,755      $39,315
                                               =======      =======      =======
</TABLE>

                                      -14-
<PAGE>
<TABLE>
<CAPTION>
Capital expenditures, net, including timberlands
  and capital leases

<S>                                                  <C>        <C>        <C>   
Core materials segment .........................     $3,641     $2,305     $1,524
Shrimp segment .................................      1,392        737        579
                                                     ------     ------     ------

Total capital expenditures .....................     $5,033     $3,042     $2,103
                                                     ======     ======     ======
</TABLE>

      Information pertaining to the Company's operations in different geographic
      areas is as follows:
<TABLE>
<CAPTION>
                                                       (In Thousands)
                                                1998         1997          1996
<S>                                            <C>          <C>          <C>    
Net sales to unaffiliated customers

United States - domestic ................      $49,399      $38,835      $33,473
United States - export ..................       11,289       11,642        8,856
Ecuador .................................          131          116          123
Europe ..................................        6,876        5,547        5,914
                                               -------      -------      -------

Total net sales .........................      $67,695      $56,140      $48,366
                                               =======      =======      =======


 Identifiable assets

 United States ..........................      $16,973      $15,457      $14,264
 Ecuador ................................       25,217       22,672       21,543
 Europe .................................        3,887        3,626        3,508
                                               -------      -------      -------

 Total identifiable assets ..............      $46,077      $41,755      $39,315
                                               =======      =======      =======

</TABLE>
                                      -15-

<PAGE>
12.   FINANCIAL INSTRUMENTS

      The table below presents the carrying values and estimated fair values for
      the Company's financial instruments (amounts in thousands).
<TABLE>
<CAPTION>

                                                           1998                                   1997

                                           Carrying        Estimated Fair Value     Carrying      Estimated Fair Value
                                             Value                                    Value
                                            -------        ---------------------    -------       ---------------------  
<S>                                         <C>                   <C>               <C>                    <C>    
       Cash and cash equivalents            $ 1,056               $ 1,056           $ 1,177                $ 1,177
       Accounts receivable                  $ 6,942               $ 6,942           $ 5,103                $ 5,103
       Notes payable                        $ 4,681               $ 4,681           $ 1,550                $ 1,550
       Long term debt                       $ 1,069               $ 1,069           $ 2,636                $ 2,636
       Capital lease obligation             $ 1,342               $ 1,342           $ 1,680                $ 1,680

</TABLE>

      Estimated  fair values were  determined  based on the terms of the various
      instruments.  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 based
      upon  the  borrowing  rates  and  other  terms  and  conditions  currently
      available to the Company for loans with similar terms and maturities.

      At December 31, 1998, the Company held forward foreign  currency  exchange
      contracts  for the  purchase of French  francs  with a notional  amount of
      approximately  $269,000 and maturity dates of March 31, 1999 and April 30,
      1999. 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.



13.   NEW ACCOUNTING PRONOUNCEMENTS

      In June 1998,  the Financial  Accounting  Standards  Board issued SFAS No.
      133, "Accounting for Derivative  Instruments and Hedging Activities." This
      statement is effective for all fiscal  quarters of fiscal years  beginning
      after June 15, 1999, thus it becomes  effective for the Company during the
      fiscal year ending  December 31, 2000 and is applicable to interim periods
      during that fiscal year. The Company is currently evaluating the impact of
      this new standard 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, 1998
                                                Dollars in Thousands

                                                                     
                                                                        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, 1998:
  Allowance for doubtful
    accounts receivable                              $        73        $        74     $           3     $      144
                                                     ===========        ===========     =============     ==========

  Inventory                                          $        90        $       176     $           -     $      266
                                                     ===========        ===========     =============     ==========

YEAR ENDED DECEMBER 31, 1997:
  Allowance for doubtful
    accounts receivable                              $        63        $        30     $          20     $       73
                                                     ===========        ===========     =============     ========== 

  Inventory                                          $         -        $        90     $           -     $       90
                                                      ==========        ===========     =============     ========== 
                                                               

YEAR ENDED DECEMBER 31, 1996:
  Allowance for doubtful
    accounts receivable                              $        93        $        70     $         100     $       63
                                                     ===========       ============     =============     ========== 
</TABLE>