SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-K


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


For the fiscal year ended                                 Commission File Number
December 31, 1996                                                  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, Northvale, New Jersey 07647
          -------------------------------------------------------------
           (Address of principal executive offices)        (Zip Code)


Registrant's telephone number, including area code     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 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   [   ]
<PAGE>
The aggregate  market value of the voting stock held by non  affiliates on March
3, 1997 amounted to $6,739,000.

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock as of the latest practicable date, March 3, 1997: 2,523,261 shares,
Common Stock, $1.00 par value.

Documents  incorporated  by  reference:   Portions  of  the  registrant's  proxy
statement  dated  April  28,  1997 for use in  connection  with its 1997  annual
meeting of stockholders are incorporated by reference in Part III 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")  mill and sell 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,  blocks and beams of balsa wood, and a flexible balsa
wood block mat called "Contourkore ."

                  Glued-up  balsa  blocks are marketed in two ways. A portion is
sold directly to customers in block or panel form, and the balance is shipped to
the Company's factory in Northvale, N.J. for further processing into Contourkore
and other products.  Blocks and Contourkore are 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 balsa, thereby creating a sandwich
structure in which balsa is the core or center. 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.

                  In addition,  the Company sells a non-balsa  continuous strand
fabric,   imported   from   Holland  and  Japan  and  resold   without   further
manufacturing.  This product is marketed as  "Coremat"  and  "BaltekMat"  to the
pleasure boat industry.

                  In September  1995 the Company  entered into an agreement with
Alusuisse Airex AG of Sins, Switzerland,  a division of Alusuisse, to become the
sole North American source of Airex(R) (a registered  trademark of Airex AG) and
Airlite(TM)  structural PVC foam products.  These additional products,  together
with its Balsa products,  should solidify the Company's leadership as a complete
supplier  to  the  composite   structural  core  market  and  result  in  growth
opportunities for the future.


                                      - 2 -
<PAGE>
                  The Company is also in the aquaculture business,  specifically
shrimp farming in Ecuador, South America. This operation consists of a hatchery,
a farm and a packing  plant.  Shrimp  larvae are supplied by the hatchery to the
farm and after  harvest,  transferred  to the packing plant for  processing  and
shipment to customers in the United States and Europe.

                  All of 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 uninterrupted
operations  in Ecuador for over 50 years.  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  atmosphere  conducive  to
business.

                  Principal Markets and Methods of Distribution

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

                  In 1996,  approximately  32% of all the shrimp  production was
sold to the U.S.  market  through  food  brokers;  the  balance  was sold to the
European market.


                             Competitive Conditions

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

                  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

                  During  the  period  ended  December  31,  1995 and 1994,  the
Company had sales to one customer in excess of 10% of the Company's consolidated
revenues; no customer accounted for more than 10% of revenues in 1996.


                                      - 3 -
<PAGE>
                                     Backlog

                  As of December 31,  1996,  the Company had a backlog of orders
believed to be firm in the total amount of $7,465,000 all of which is reasonably
expected to be filled within the current fiscal year.

                  As of December 31,  1995,  the Company had a backlog of orders
believed to be firm in the total amount of $5,955,000.


                    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. In addition
to the balsa produced in Ecuador,  the Company also receives small quantities of
balsa from other Latin  American  countries.  The resins,  fiberglass  and other
materials  used in the Company's  manufacturing  processes  are  available  from
numerous  commercial  sources. To date the Company has experienced no difficulty
in obtaining such materials needed for its operations.

                  The  Company  owns and  operates  a  shrimp  farm and a shrimp
hatchery  in Ecuador  for the  production  of a steady and  plentiful  supply of
shrimp.  The hatchery  supplies  substantially all of the larvae required by the
Company's  ponds.  The Company  also owns a shrimp  packing  company 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(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)" and "Firet Coremat(R)".

                  The Company also features  "Airlite(TM)",  a cross-linked  PVC
foam, and "Airex(R)" (registered trademark of Airex AG) a linear foam.


                                      - 4 -
<PAGE>
                            Estimated Research Costs

                  The Company has incurred  approximately  $350,000  during 1996
for research and  development,  compared to expenditures of $415,000 in 1995 and
$447,000 in 1994. All expenditures are related to the balsa division and include
customer service activities.  The Company continues to actively explore possible
new applications and new manufacturing processes for its 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 994 employees in Ecuador, 127 in
the United States and 10 in Europe, aggregating 1,131 employees.

                                   Seasonality

                  The Company's business is not seasonal.

                               Classes of Products

                  The  following  table sets forth the amount and  percentage of
net sales  represented  by each of the  Company's  product  classes in the three
years ended December 31, 1996 (dollars in thousands):


                           Balsa Wood
Year                       Products          Shrimp              Total
----                       --------          ------              -----
                                                    
1994                       $32,833           $7,297             $40,130
                                82%              18%                100%
                                                    
1995                       $36,420           $9,364             $45,784
                                79%              21%                100%
                                                    
1996                       $38,630           $9,736             $48,366
                                80%              20%                100%
                                             

                                      - 5 -
<PAGE>
                               Segment Information

                  The  Company  is  engaged  in two lines of  business,  that of
manufacturing and supplying balsa wood and balsa wood products, laminate bulkers
and PVC foams, 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  Ecuadorean  subsidiaries,  owns and
operates five woodworking  plants and approximately  13,783 acres of forest land
in  Ecuador.  In  addition,  the  Company  owns and  operates  a shrimp  farm on
approximately 2,000 acres, a shrimp hatchery and a shrimp packing plant.

                  At the  Company's  woodworking  plants,  rough balsa lumber is
received from  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.


                                  Foreign Sales

                  Approximately  31% of the  Company's  net  sales  for the year
ended  December 31, 1996 was derived from sales to customers  outside the United
States.

                  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.

                                      - 6 -
<PAGE>
Item 2.  Properties.

                  The Company  owns or leases the  properties  indicated  in the
following table:
<TABLE>
<CAPTION>
Property and Location                                                                    Status                                     
---------------------                                                                    ------                                     
<S>                                                                                      <C>      
One story concrete and steel building containing the Company's principal offices
and the plant for manufacturing  Contourkore(R) and other Balsa products, 85,000
square feet on 4-1/2 acres (Northvale, New Jersey).                                      Leased
                                                                                               
Approximately 16,000 square feet of warehouse space  (Norwood, N.J.)                     Leased
                                                                                               
Woodworking  plant  housed  in  several  wood,  concrete  and  steel  buildings,         
approximately 180,000 square feet (Guayaquil, Ecuador).                                  Owned
                                                                                               
Woodworking plant housed in several wood and concrete  buildings,  approximately     
30,000 square feet on 7 acres of land (Guayaquil, Ecuador).                              Owned
                                                                                               
13,783 acres of Timberland in Ecuador.                                                   Owned                                     
                                                                                               
2,000 acres of land for shrimp farming in Ecuador,  including ten wood buildings
and one concrete building totaling approximately 11,000 square feet.                     Owned

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

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

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

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



                                                              - 7 -
<PAGE>
<CAPTION>
Property and Location (continued)                                                        Status                                     
---------------------                                                                    ------                                     
<S>                                                                                      <C>      
Woodworking   plant  housed  in  one  wood  building,   26,000  square  feet  on
approximately 8 acres of land (Quevedo, Ecuador).                                        Owned

Maintenance  facilities for the Balsa Raw Material  Department in a concrete and
wood building, 16,875 square feet (Quevedo, Ecuador).                                    Owned

Office space in concrete building, 7,100 square feet (Guayaquil, Ecuador).               Owned

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

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

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

                  The lease of the property at Northvale,  New Jersey  continues
until February 28, 2002, at an average annual rental of approximately  $462,000.
The lease of the Company's  office space in Paris continues until March 31, 1998
at an  annual  rental  equivalent  to  approximately  $27,000.  The lease of the
Company's  office in Croydon,  U.K.  runs until  December  25, 2008 at an annual
rental of approximately $14,000.

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


Item 3.     Legal Proceedings.

                  Not Applicable.


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

                  There  was no  submission  of  matters  to a vote of  security
holders during the fourth quarter of 1996.

                                     - 8 -
<PAGE>
                                     PART II

Item 5.     Market for the Registrant's Common
              Equity and Related Stockholder Matters.

                  The  Company's  common  stock  trades on the  NASDAQ  National
Market tier of the NASDAQ Stock Market under the Symbol:  BTEK. The following is
the bid price range for the last two years.
<TABLE>
<CAPTION>
                                                      1996                                       1995
                                            ------------------------               ---------------------------
                                            HIGH              LOW                       HIGH              LOW


<S>                                    <C>              <C>                        <C>              <C>       
1st Quarter                            $    11.25       $     8.25                 $     8.25       $     6.25
2nd Quarter                                 11.13             8.63                       9.00             7.00
3rd Quarter                                  9.50             7.63                      10.25             7.50
4th Quarter                                  8.00             6.50                       9.25             8.25
</TABLE>

                  The Company had approximately 191 stockholders of record as of
March 3, 1997.

                  No cash dividends were paid during the past two years.


                                      - 9 -
<PAGE>
Item 6.     Selected Financial Data.
<TABLE>
<CAPTION>
                                    (Dollars in thousands except per share amounts)
                                            YEAR ENDED DECEMBER 31,



                              1996              1995                1994              1993                1992
                          -----------        -----------        -----------        -----------        -----------
<S>                       <C>                <C>                <C>                <C>                <C>        
Net Sales                 $    48,366        $    45,784        $    40,130        $    32,370        $    28,366

Income (loss)             $       450        $     1,962        $     1,212        $       113        $      (543)

Income (loss) per         $       .18        $       .78        $       .48        $       .04        $      (.22)
common share

Total Assets              $    39,315        $    38,816        $    34,541        $    33,385        $    30,646

Long Term                 $     2,263        $     2,298        $     2,388        $     2,616        $     2,715
obligations (a)

Cash dividends de-               --                 --                 --                 --                 --
clared per common
share

Average shares              2,523,261          2,523,261          2,523,261          2,523,261          2,523,261
outstanding

</TABLE>

Note (a): Excluding deferred income taxes.

                                     - 10 -
<PAGE>
                  Management's Discussion and Analysis of
Item 7.         Financial Condition and Results of Operations

                         LIQUIDITY AND CAPITAL RESOURCES

                  The Company's working capital ratio (current assets divided by
current  liabilities)  increased in 1996 to 2.56:1 from 2.50:1, after decreasing
in 1995 from 2.97:1.

                  Cash was provided and used in varying amounts during the three
year  period,  principally  as a result of  changes in the  elements  of current
assets and current liabilities and in the amount of cash provided by net income.
Inventories  increased in 1996 and 1995 but  decreased in 1994.  The increase in
1996 and 1995 was due to new  products  and  inventory  buildup for  anticipated
increases  in  sales.  The 1994  decrease  was  caused  by  greater  sales  than
anticipated.

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

                  In 1996 the  Company  borrowed  $400,000 in the form of a five
year term loan to finance equipment purchases.  The Company may continue to seek
financing for  significant  capital  expenditures  in the future.  The Company's
working  capital  borrowings  decreased  in 1996 due to improved  cash flow from
operations.  The working  capital debt increased in 1995 due to working  capital
and investment requirements.  In 1994 the company repaid debt of $1,887,000 from
funds generated by profits.

                  The Company had unused  lines of credit of $2.5 million with a
domestic bank, $1.6 million with Ecuadorean banks and $0.7 million with European
banks. The Company expects that future operations and its unused lines of credit
will  provide  sufficient  resources  to support  its planned  expansion  and to
maintain its favorable liquid position.

                       RESULTS OF OPERATIONS FOR THE YEARS
                     ENDED DECEMBER 31, 1996, 1995 AND 1994

                  Total sales  increased 6%, 14% and 24% in 1996, 1995 and 1994,
respectively.  The gains in all three years were due to  increased  demands from
all industries using our balsa products together with increases in shrimp sales.

                  Balsa sales were favorably affected by the continuing recovery
of  the  pleasure  boat  industry.   The  pleasure  boat  industry   represented
approximately 40% of the Company's 1996 balsa sales.  Fluctuating interest rates
make it  impossible  to  forecast  short or long  range  trends  in the  boating
industry.  The  increases  in balsa  sales in all three years were due to volume
increases, and increased sales of value-added products. The Company continues to
explore and develop alternative applications for its balsa products.

                  Shrimp sales were  $9,736,000,  $9,364,000  and  $7,297,000 in
1996,  1995 and 1994,  respectively.  The  increases in all three years were the
result of increased yield at the Company's  shrimp farm and increased  worldwide
prices in 1995 and 1994. The Company's  program to increase yields at its shrimp
farm  commenced  in the middle of 1993 and has proved  successful.  The  program
should be concluded in 1997.

                                     - 11 -
<PAGE>
                  Cost of products  sold as a percentage  of sales  increased in
1996 after  remaining  approximately  the same in 1995 and 1994. The increase in
1996 was due to reduced shrimp selling prices, start-up expenses of the new form
product  line  and  competitive  pricing  pressure.   The  Company's  Ecuadorian
operations  were affected in all three years in varying  degrees by inflationary
pressures on operating  expenses  partially  offset by currency  devaluation and
operating  efficiencies  resulting  from  the 1994  and  earlier  restructuring.
Additionally,  1995 and 1994  benefitted  from increased  absorption of overhead
expenses due to increased  production.  The Company recorded a special charge of
$323,977  in  1994  associated  with  a  decision  to  reduce  costs  by  making
operational and personnel  changes at the Company's  factories in Ecuador.  This
charge was effected within the year with no related reserve balance remaining at
year end.

                  Selling,  general and administrative  expenses as a percentage
of sales declined in 1996 by 1% to 20% and was  approximately  21% in 1995 as in
1994.  The slight  decline in 1996 was due  primarily to a better  absorption of
fixed  expenses  as a result of  increased  sales.  In 1995 and 1994 the Company
added sales personnel to market existing and new products and to support efforts
to develop new markets and applications.
 These additions were offset by increased absorption of fixed expenses.

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

                  Interest  expense  increased  all  three  years  due to rising
interest  rates in 1995 and 1994 and  increased  average  borrowings  during the
years ended December 31, 1996, 1995 and 1994.

                  Translation  losses  varied  greatly  during  the  three  year
period.  Translation losses are 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 in order to
present consolidated financial statements.  Management is unable to forecast the
impact  of   translation   gains  or  losses  on  future   periods  due  to  the
unpredictability in the fluctuation of foreign exchange rates.

                  The effective  income tax rate amounted to 31% in 1996, 21% in
1995,  and 39% in  1994.  Reconciliation  of the  effective  rate  with the U.S.
statutory rate is detailed in footnote 8 to the financial statements.



                                     - 12 -
<PAGE>
Item 8.     Financial Statements and Supplementary Data.

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


             Changes in and Disagreements With Accountants
Item 9.      on Accounting and Financial Disclosure.

                  None.



                                    PART III

Item 10.     Directors and Executive Officers of the Registrant.

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


Item 11.     Executive Compensation.

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


               Security Ownership of Certain Beneficial
Item 12.       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 the  registrant's
fiscal year.


Item 13.  Certain Relationships and Related Transactions.

                  Inapplicable.




                                     - 13 -
<PAGE>
                                     PART IV

           Exhibits, Financial Statement
Item 14.   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,
                                                     1996, 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                   Pre-Filed
                                 (Bylaws)

    10                Material Contracts                          None

    21                Subsidiaries of Registrant                  Filed Herewith

    27                Financial Data Schedule                     Filed Herewith

                                     - 14 -
<PAGE>
                                   SIGNATURES



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



                                                BALTEK CORPORATION
                                                      Registrant



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



                                       By /s/ Ronald Tassello
                                          ------------------------------
                                                Ronald Tassello,
                                                Comptroller (Principal
                                                Financial officer and
                                                Principal accounting
                                                officer)

Dated:    March 21, 1997
<PAGE>
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/ Margot W. Kohn                       By /s/ Jacques Kohn
   --------------------------------            -----------------------
         Margot W. Kohn,                           Jacques Kohn,
         Director                                  Director



By /s/ Theodore Ness                        By /s/ Benson J. Zeikowitz
   --------------------------------            -----------------------
         Theodore Ness,                            Benson J. Zeikowitz,
         Director                                  Director


Dated:   March 21, 1997
<PAGE>
                       BALTEK CORPORATION AND SUBSIDIARIES









       CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
                      AS OF DECEMBER 31, 1996 AND 1995 AND
        FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996








                       PREPARED FOR FILING AS PART OF THE
                            ANNUAL REPORT (FORM 10-K)
                    TO THE SECURITIES AND EXCHANGE COMMISSION
                      FOR THE YEAR ENDED DECEMBER 31, 1996

                                   **********
<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, 1996
--------------------------------------------------------------------------------

INDEPENDENT AUDITORS' REPORT                                                    

   Consolidated Balance Sheets as of December 31, 1996 and 1995                 

   Consolidated Statements of Income for Each of the Three Years
     in the Period Ended December 31, 1996                                      

   Consolidated Statements of Stockholders' Equity
     for Each of the Three Years in the Period Ended December 31, 1996          

   Consolidated Statements of Cash Flows for Each of the Three Years
     in the Period Ended December 31, 1996                                      

   Notes to Consolidated Financial Statements for Each of the Three

     Years in the Period Ended December 31, 1996                                


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


   II - Valuation and Qualifying Accounts                                       

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>
Deloitte &
  Touche LLP
[GRAPHIC -- COMPANY LOGO]
                    ____________________________________________________________
                    Two Hilton Court                   Telephone: (201) 631-7000
                    P.O. Box 319                       Facsimile: (201) 631-7459
                    Parsippany, New Jersey 07054-0319



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 as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three  years in the period  ended  December  31,  1996.  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 these 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, 1996 and 1995, and the results of their  operations and their
cash flows for each of the three years in the period ended  December 31, 1996 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

March 11, 1997
<PAGE>
<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
-----------------------------------------------------------------------------------------
                                                                    1996         1995
                                                                -----------   -----------
<S>                                                             <C>           <C>        
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents .................................   $ 1,114,659   $   841,056
   Accounts receivable (less allowance for doubtful
    accounts - 1996, $62,611; 1995, $92,759) ................     4,820,544     5,350,211
  Inventories (Note 3) ......................................    13,713,660    12,875,203
  Prepaid expenses ..........................................       308,850       287,861
  Other .....................................................     1,487,121     1,374,637
                                                                -----------   -----------

           Total current assets .............................    21,444,834    20,728,968

PROPERTY, PLANT AND EQUIPMENT - Net (Notes 4 and 10) ........    10,759,258    11,079,132

TIMBER AND TIMBERLANDS (Note 5) .............................     6,445,828     6,338,152

OTHER ASSETS ................................................       665,495       670,244
                                                                -----------   -----------

TOTAL ASSETS ................................................   $39,315,415   $38,816,496
                                                                ===========   ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Notes payable (Note 6) ....................................   $ 3,600,000   $ 4,424,783
  Accounts payable ..........................................     2,860,363     1,910,642
  Income tax payable ........................................          --           9,952
  Accrued salaries, wages and bonuses payable ...............       596,139       927,739
  Accrued expenses and other liabilities ....................       911,243       808,835
  Current portion of long-term debt (Note 7) ................       108,922        17,558
  Current portion of obligation under capital lease (Note 10)       294,784       188,065
                                                                -----------   -----------

           Total current liabilities ........................     8,371,451     8,287,574

OBLIGATION UNDER CAPITAL LEASE (Note 10) ....................     1,679,985     1,974,768

LONG-TERM DEBT (Note 7) .....................................       276,620        17,910

UNION EMPLOYEE TERMINATION BENEFITS (Note 9) ................       306,367       305,195
                                                                -----------   -----------

           Total liabilities ................................    10,634,423    10,585,447
                                                                -----------   -----------
<PAGE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
-----------------------------------------------------------------------------------------
                                                                    1996         1995
                                                                -----------   -----------
<S>                                                             <C>           <C>        
STOCKHOLDERS' EQUITY:
  Preferred stock, $1.00 par; 5,000,000 shares
    authorized and unissued .................................          --            --
  Common stock, $1.00 par; 10,000,000 shares authorized,
    2,523,261 shares issued and outstanding .................     2,523,261     2,523,261
  Additional paid-in capital ................................     2,157,492     2,157,492
  Retained earnings .........................................    24,000,239    23,550,296
                                                                -----------   -----------

           Total stockholders' equity .......................    28,680,992    28,231,049
                                                                -----------   -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................   $39,315,415   $38,816,496
                                                                ===========   ===========
</TABLE>

See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
-------------------------------------------------------------------------------------

                                             1996            1995            1994
                                         ------------    ------------    ------------
<S>                                      <C>             <C>             <C>         
NET SALES ............................   $ 48,366,127    $ 45,783,629    $ 40,129,579

COST OF PRODUCTS SOLD ................     36,986,131      32,759,376      28,784,739

SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES ............      9,617,327       9,743,221       8,509,343

SPECIAL CHARGE (Note 12) .............           --              --           323,977
                                         ------------    ------------    ------------

           Operating income ..........      1,762,669       3,281,032       2,511,520
                                         ------------    ------------    ------------

OTHER INCOME (EXPENSES):
  Interest expense (Notes 6, 7 and 10)       (602,254)       (530,231)       (452,352)
  Foreign exchange loss ..............       (514,035)       (307,716)        (96,001)
  Interest income ....................          5,064          36,669          28,047
  Other ..............................          2,513          10,969            --
                                         ------------    ------------    ------------

           Total .....................     (1,108,712)       (790,309)       (520,306)
                                         ------------    ------------    ------------

INCOME BEFORE INCOME TAXES ...........        653,957       2,490,723       1,991,214

INCOME TAX PROVISION (Note 8) ........        204,014         528,470         778,756
                                         ------------    ------------    ------------

NET INCOME ...........................   $    449,943    $  1,962,253    $  1,212,458
                                         ============    ============    ============

NET INCOME PER COMMON SHARE ..........   $       0.18    $       0.78    $       0.48
                                         ============    ============    ============

</TABLE>

See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
--------------------------------------------------------------------------------

                                                      Additional
                                    Common Stock,      Paid-in        Retained
                                       $1 Par          Capital        Earnings
                                     -----------     -----------     -----------

<S>                                  <C>             <C>             <C>        
BALANCE, DECEMBER 31, 1993 .....     $ 2,523,261     $ 2,157,492     $20,375,585

  Net income - 1994 ............            --              --         1,212,458
                                     -----------     -----------     -----------

BALANCE, DECEMBER 31, 1994 .....       2,523,261       2,157,492      21,588,043

  Net income - 1995 ............            --              --         1,962,253
                                     -----------     -----------     -----------

BALANCE, DECEMBER 31, 1995 .....       2,523,261       2,157,492      23,550,296

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

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

</TABLE>

See notes to consolidated financial statements.

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

CONSOLIDATED STATEMENTS OF CASH FLOWS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
----------------------------------------------------------------------------------------------------------

                                                                     1996           1995          1994
                                                                 -----------    -----------    -----------
<S>                                                              <C>            <C>            <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income .................................................   $   449,943    $ 1,962,253    $ 1,212,458
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
    Depreciation and amortization ............................     2,330,124      1,905,415      1,839,453
    Foreign exchange loss ....................................       514,035        307,716         96,001
    Deferred taxes ...........................................        (8,399)       (68,107)       (20,404)
    Decrease (increase) in accounts receivable ...............       572,203       (432,057)      (829,872)
    (Decrease) increase in income tax payable/receivable .....       (46,121)      (702,623)       854,250
    (Increase) decrease in inventories .......................      (838,457)    (3,471,987)       844,158
    Increase in prepaid expenses and other current assets ....      (122,416)      (124,577)      (143,782)
    Decrease (increase) in other assets ......................        12,705        (12,050)         4,451
    Increase in accounts payable and accrued expenses ........       661,564        324,813      1,219,862
    Other ....................................................         1,329        100,011        (20,675)
                                                                 -----------    -----------    -----------

           Net cash provided by (used in) operating activities     3,526,510       (211,193)     5,055,900
                                                                 -----------    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Net acquisitions of property, plant and equipment ..........    (1,245,208)    (1,626,255)      (859,662)
  Increase in timber and timberlands .........................      (811,893)    (1,205,006)    (1,055,691)
                                                                 -----------    -----------    -----------

           Net cash used in investing activities .............    (2,057,101)    (2,831,261)    (1,915,353)
                                                                 -----------    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  (Decrease) increase in notes payable .......................      (824,911)     2,691,892     (1,673,709)
  Borrowings (payments) of long-term debt ....................       304,342        (23,863)       (66,134)
  Principal payments under capital lease .....................      (188,064)      (174,517)      (147,748)
                                                                 -----------    -----------    -----------

           Net cash (used in) provided by financing activities      (708,633)     2,493,512     (1,887,591)
                                                                 -----------    -----------    -----------

EFFECT OF EXCHANGE RATE CHANGES ON CASH ......................      (487,173)      (306,217)       (75,538)
                                                                 -----------    -----------    -----------
<PAGE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
----------------------------------------------------------------------------------------------------------

                                                                     1996           1995          1994
                                                                 -----------    -----------    -----------
<S>                                                              <C>            <C>            <C>        
NET INCREASE (DECREASE) IN
  CASH AND CASH EQUIVALENTS ..................................       273,603       (855,159)     1,177,418

CASH AND CASH EQUIVALENTS,
  BEGINNING OF YEAR ..........................................       841,056      1,696,215        518,797
                                                                 -----------    -----------    -----------

CASH AND CASH EQUIVALENTS,
  END OF YEAR ................................................   $ 1,114,659    $   841,056    $ 1,696,215
                                                                 ===========    ===========    ===========

SUPPLEMENTAL DISCLOSURES OF
  CASH FLOW INFORMATION:
  Cash paid during the year for:
    Interest .................................................   $   448,863    $   268,808    $   407,383
                                                                 ===========    ===========    ===========

    Income taxes .............................................   $   256,379    $ 1,388,134    $    56,690
                                                                 ===========    ===========    ===========
</TABLE>

See notes to consolidated financial statements.
<PAGE>
BALTEK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
--------------------------------------------------------------------------------


1.    NATURE OF OPERATIONS

      Baltek Corporation is a multinational manufacturing and marketing company.
      The Company's lines of business are supplying core materials  (principally
      balsa products) to various composite industries, manufacturing and selling
      balsa  lumber and other balsa wood  products,  and farming and  processing
      shrimp.  The Company reported its sales in two segments in 1996: the balsa
      segment,  including  all  balsa  sales  and  other  materials  sold to the
      composite industry (80%), and the shrimp segment (20%).

      The principal  market for the Company's  core materials and balsa products
      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 $22 million at December 31, 1996.

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.
      Investments are carried at cost, which approximates market.

      In accordance  with  Statement of Financial  Accounting  Standards No. 95,
      "Statement of Cash Flows," 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 assets under capital leases and
      leasehold  improvements are amortized over their useful lives, or the life
      of the lease,  whichever  is shorter.  The cost of major  improvements  to
      existing facilities is capitalized.  The cost of repairs,  maintenance and
      replacements which do not significantly  improve or extend the life of the
      respective assets is charged to expense as incurred.
<PAGE>
      Income  Taxes - Taxes on current  income are  provided  by the Company and
      each  subsidiary as prescribed by local tax laws. The Company  follows the
      practice of comprehensive interperiod income tax allocation.  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.  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,  in accordance with Statement of Financial Accounting
      Standards  No. 52,  "Foreign  Currency  Translation."  The majority of the
      foreign exchange gains and losses relate to the  manufacturing  process in
      Ecuador,  and such  amounts  are  separately  stated  in the  accompanying
      consolidated statements of income.

      Foreign  Currency  Risk  Management - The Company  uses  foreign  currency
      forward 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.

      Concentrations of Credit Risk - Baltek's principal products,  balsa lumber
      and related end 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,  including
      customer service activities, charged to operations were $350,333, $414,675
      and $447,311 in 1996, 1995 and 1994, respectively.

      Income Per Common  Share - Income per common  share  amounts are  computed
      based on the  weighted  average  number of shares  outstanding  during the
      period.  The weighted  average  number of common  shares  outstanding  was
      2,523,261 in 1996, 1995 and 1994.

      Use of  Estimates  - In  conformity  with  generally  accepted  accounting
      principles,   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.

      Revenue Recognition - The Company generally recognizes revenues when goods
      are shipped.

      Reclassifications  - Certain  amounts in prior year  financial  statements
      have been reclassified to conform with the current year presentation.
<PAGE>
3.    INVENTORIES

      Inventories of the balsa and shrimp segments are summarized as follows:
<TABLE>
<CAPTION>
                                                   1996                  1995
                                               -----------           -----------
<S>                                            <C>                   <C>        
Raw materials ......................           $ 4,718,296           $ 3,913,332
Work-in-process ....................             4,250,538             4,075,895
Finished goods .....................             4,744,826             4,885,976
                                               -----------           -----------

Inventories ........................           $13,713,660           $12,875,203
                                               ===========           ===========
</TABLE>

      Included in the above  amounts are  inventories  relating to the Company's
      shrimp  operations of $1,159,914  and  $1,337,154 at December 31, 1996 and
      1995, respectively.

4.    PROPERTY, PLANT AND EQUIPMENT

      Property, plant and equipment is comprised of the following:
<TABLE>
<CAPTION>
                                                          1996           1995
                                                      -----------    -----------
<S>                                                   <C>            <C>        
Land .............................................    $   125,311    $   125,311
Shrimp properties ................................     14,745,215     14,166,327
Buildings and improvements .......................      1,334,589      1,309,330
Machinery and equipment ..........................      9,146,164      9,034,964
Leasehold improvements ...........................        793,956        677,817
Assets under capital leases ......................      2,498,719      2,498,719
Construction-in-progress .........................        173,954          5,000
                                                      -----------    -----------

Total ............................................     28,817,908     27,817,468

Less accumulated depreciation and amortization ...     18,058,650     16,738,336
                                                      -----------    -----------

Property, plant and equipment - net ..............    $10,759,258    $11,079,132
                                                      ===========    ===========
</TABLE>

      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, 1996 and 1995 was $1,207,727 and $957,851, respectively.
<PAGE>
5.    TIMBER AND TIMBERLANDS

      Timber and Timberlands are comprised of the following:
<TABLE>
<CAPTION>
                                                      1996               1995
                                                   ----------         ----------
<S>                                                <C>                <C>       
Timberlands ..............................         $2,839,820         $2,897,973
Deferred cultivation costs ...............          3,606,008          3,440,179
                                                   ----------         ----------

Timber and Timberlands ...................         $6,445,828         $6,338,152
                                                   ==========         ==========
</TABLE>

6.    NOTES PAYABLE

      Notes payable under various agreements consist of the following:
<TABLE>
<CAPTION>
                                                            1996         1995
                                                         ----------   ----------
<S>                                                      <C>          <C>       
U.S. Bank loan, with interest at prime
  (8.25% at December 31, 1996) .......................   $2,150,000   $     --

Bank loan - France, with interest at 11.5% ...........         --          4,783

Ecuadorean bank loans, payable in U.S. dollars,
  due within one year from the origination date,
  with interest rates between 8% and 9% in 1996 and
  9% and 17% in 1995 .................................    1,450,000    4,420,000
                                                         ----------   ----------

Notes payable ........................................   $3,600,000   $4,424,783
                                                         ==========   ==========
</TABLE>

      The U.S. Bank loan represents borrowings under an unsecured revolving line
      of credit with a domestic bank. The maximum credit limit under the line is
      $4,600,000,  with interest at the bank's prime rate.  This line of credit,
      which is renewable  annually,  expires on May 31, 1997. The Company was in
      compliance with all related loan covenants at December 31, 1996.

      The  Ecuadorian  bank loans are  unsecured.  At December 31, 1996,  unused
      lines of credit available under Ecuadorian borrowing arrangements amounted
      to approximately  $1,550,000,  and under European  borrowing  arrangements
      amounted to approximately $772,000.

      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, 1996 and 1995 was 8.5% and 14.0%,
      respectively.  The carrying amount of the notes payable approximates their
      fair value based on the short-term nature and the terms of the loans.
<PAGE>
7.    LONG-TERM DEBT

      Long-term debt consists of the following:
<TABLE>
<CAPTION>
                                                            1996        1995
                                                         ----------   ----------
<S>                                                      <C>          <C>       
Equipment loan, payable in equal monthly
  principal installments of $6,667 through
  January 2001, plus interest at prime
  (8.25% at December 31, 1996) .....................    $ 333,333     $    --

Other notes, with interest rates between
  5% and 6%, due at various dates through 1999 .....       52,209        35,468
                                                        ---------     ---------
                                                          385,542        35,468
Less current portion ...............................     (108,922)      (17,558)
                                                        ---------     ---------

Long-term debt .....................................    $ 276,620     $  17,910
                                                        =========     =========
</TABLE>

      The equipment  loan payable is secured by certain  machinery and equipment
      at the Company's Northvale, New Jersey facilities.  The carrying amount of
      the loan payable  approximates its fair value due to the variable interest
      rate of the loan.

      The  aggregate  maturities  of long-term  debt at December 31, 1996 are as
      follows:

                 1997                     $ 108,922
                 1998                        99,476
                 1999                        83,811
                 2000                        80,000
                 2001                        13,333
                                          ---------

                                          $ 385,542
                                          =========

8.    INCOME TAXES

      Income (loss) before income taxes is comprised of:
<TABLE>
<CAPTION>
                                 1996               1995               1994
                             -----------         -----------        -----------
<S>                          <C>                 <C>                <C>        
Domestic ............        $   989,628         $ 1,717,492        $ 2,242,143
Foreign .............           (335,671)            773,231           (250,929)
                             -----------         -----------        -----------

Total ...............        $   653,957         $ 2,490,723        $ 1,991,214
                             ===========         ===========        ===========
</TABLE>
<PAGE>
      The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
                                     1996              1995              1994
                                  ---------         ---------         ---------
<S>                               <C>               <C>               <C>      
Federal:
  Current ................        $ 171,716         $ 519,517         $ 770,788
  Deferred ...............           (8,399)          (68,107)          (20,404)
State ....................           33,081            87,885            94,649
Foreign ..................            7,616           (10,825)          (66,277)
                                  ---------         ---------         ---------

Total ....................        $ 204,014         $ 528,470         $ 778,756
                                  =========         =========         =========
</TABLE>

The  reconciliation  between the Company's  effective tax rate and the statutory
Federal tax rate is as follows:
<TABLE>
<CAPTION>
                                                          1996     1995     1994
                                                          ----     ----     ----
<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 ...     11.4    (11.8)     0.5
Refunds and reversal of current valuation allowance .    (17.6)    (6.4)    (1.4)
State and local taxes, net of Federal income
  tax benefit .......................................      3.3      2.3      3.1
Other - net .........................................     (0.9)     2.1      1.9
                                                          ----     ----     ----

Effective tax rate ..................................     31.2%    21.2%    39.1%
                                                          ====     ====     ==== 
</TABLE>

      In 1996,  the Company  included  the income from the reversal of a current
      valuation  allowance in the tax provision.  In 1995, the Company  utilized
      foreign tax credit  carryforwards of $140,000,  for which a full valuation
      allowance had been recorded in prior years.  The effect of the reversal of
      the valuation allowance has been included in the tax provision for 1995.

      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.
<PAGE>
      Significant   components  of  the   Company's   deferred  tax  assets  and
      liabilities are as follows:
<TABLE>
<CAPTION>
                                                        1996            1995
                                                     ---------        ---------
<S>                                                  <C>              <C>      
Current assets (liabilities):
  Inventory capitalization ...................       $  91,727        $  77,448
  Unexpired insurance ........................         (86,626)         (80,171)
  Other - net ................................           2,268           24,746
                                                     ---------        ---------
Total current asset, net .....................       $   7,369        $  22,023
                                                     =========        =========

Noncurrent assets:
  Capital lease ..............................         226,999          203,946
  Foreign tax loss carryforwards .............          67,352           52,770
Less valuation allowance .....................         (67,352)         (52,770)
                                                     ---------        ---------
Total noncurrent asset, net ..................       $ 226,999        $ 203,946
                                                     =========        =========
</TABLE>

      As of  December  31,  1996 and  1995,  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 these  carryforwards,  the  majority of which are  available
      until the year 2000, will expire unutilized.

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

      The  Company  does not accrue  Federal  income  taxes on the equity in the
      undistributed  earnings of its  foreign  subsidiaries,  which  amounted to
      approximately  $5,658,000 at December 31, 1996,  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
      $180,000  and  $327,000  in 1996 and  1995,  respectively.  There  were no
      contributions to the plan by the Company in 1994.  Additionally,  the plan
      allows for all  participants  to defer between 2 percent and 10 percent of
      salary.  Amounts  deferred  are paid to the trustee of the plan.  The plan
      does not provide for matching Company contributions.
<PAGE>
      Certain  employees of the Company's  Ecuadorian  subsidiary  companies are
      covered by termination and retirement plans  incorporated  under statutory
      requirements of labor laws and collective bargaining agreements.  Included
      in  the  accompanying  consolidated  balance  sheets  are  union  employee
      termination  benefits which approximate  unpaid vested benefits under such
      plans. The amount of benefits to be received by an employee is established
      by the collective  bargaining agreements and is based on length of service
      and  compensation.  Provisions  of  approximately  $64,000,  $111,000  and
      $63,000 were charged to income during 1996, 1995 and 1994, respectively.

10.   LEASES

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

      Rent  expense  under  operating  leases  relates   principally  to  office
      buildings and amounted to $122,135,  $53,343 and $51,210 in 1996, 1995 and
      1994, respectively.

      Future minimum lease payment obligations, as of December 31, 1996, for the
      capital lease described above, as well as operating leases, are summarized
      below.  The  operating  leases are for space at the  Company's  offices in
      England and France and warehouse space in New Jersey.
<TABLE>
<CAPTION>
                                                  Capital         Operating
Year                                               Lease           Leases
----                                           -------------     -----------
<S>                                            <C>               <C>        
1997                                           $     430,765     $    99,158
1998                                                 448,565          21,163
1999                                                 466,365          14,437
2000                                                 469,926          14,437
2001                                                 487,726          14,437
Remainder                                             81,881         101,059
                                               -------------     -----------

Minimum lease payments                             2,385,228      $  264,691

Less amounts representing interest                   410,459
                                               =============     ===========

Capital lease obligation                        $  1,974,769
                                                ============
</TABLE>
<PAGE>
11.   SEGMENT INFORMATION

      The Company and its subsidiaries  operate primarily in two segments,  as a
      manufacturer  and supplier of balsa wood  products used  principally  as a
      core material in various  industries,  and in the shrimp farming business.
      Information about the Company's operations by segment is as follows:
<TABLE>
<CAPTION>
                                                             (In Thousands)
                                                      1996        1995       1994
                                                   --------    --------    --------
<S>                                                <C>         <C>         <C>     
Revenues from unaffiliated customers

Balsa segment ..................................   $ 38,630    $ 36,420    $ 32,833
Shrimp segment .................................      9,736       9,364       7,297
                                                   --------    --------    --------

Total revenues .................................   $ 48,366    $ 45,784    $ 40,130
                                                   ========    ========    ========
Operating income

Balsa segment ..................................   $  2,383    $  2,776    $  2,639
Shrimp segment .................................        999       2,327       1,572
General corporate expenses .....................     (1,619)     (1,822)     (1,699)
                                                   --------    --------    --------

Total operating income .........................   $  1,763    $  3,281    $  2,512
                                                   ========    ========    ========

Income before income taxes

Balsa segment ..................................   $  1,947    $  2,608    $  2,618
Shrimp segment .................................        921       2,187       1,496
General corporate expenses .....................     (1,619)     (1,822)     (1,699)
                                                   --------    --------    --------

Operating income after exchange gain/loss ......      1,249       2,973       2,415
Interest expense ...............................       (602)       (530)       (452)
Other income - net .............................          7          48          28
                                                   --------    --------    --------

Income before income taxes .....................   $    654    $  2,491    $  1,991
                                                   ========    ========    ========
Identifiable assets

Balsa segment ..................................   $ 30,318    $ 29,647    $ 26,048
Shrimp segment .................................      8,997       9,170       8,493
                                                   --------    --------    --------

Total identifiable assets ......................   $ 39,315    $ 38,817    $ 34,541
                                                   ========    ========    ========
<PAGE>
<CAPTION>
                                                             (In Thousands)
                                                      1996        1995       1994
                                                   --------    --------    --------
<S>                                                <C>         <C>         <C>     
Capital expenditures, net, including timberlands
  and capital leases

Balsa segment ..................................   $  1,524    $  2,169    $  1,424
Shrimp segment .................................        579         694         492
                                                   --------    --------    --------

Total capital expenditures .....................   $  2,103    $  2,863    $  1,916
                                                   ========    ========    ========

Depreciation expense

Balsa segment ..................................   $    851    $    778    $    754
Shrimp segment .................................        760         736         708
                                                   --------    --------    --------

Total depreciation expense .....................   $  1,611    $  1,514    $  1,462
                                                   ========    ========    ========
</TABLE>

      Information pertaining to the Company's operations in different geographic
      areas is as follows:
<TABLE>
<CAPTION>
                                                         (In Thousands)
                                                 1996         1995         1994
                                               -------      -------      -------
<S>                                            <C>          <C>          <C>    
Revenues from unaffiliated sources

United States - domestic ................      $33,473      $32,453      $29,780
United States - export ..................        8,856        7,534        5,062
Ecuador .................................          123           87           87
Europe ..................................        5,914        5,710        5,201
                                               -------      -------      -------

Total revenues ..........................      $48,366      $45,784      $40,130
                                               =======      =======      =======

Transfers between geographic areas

United States ...........................      $ 2,248      $ 2,167      $ 1,628
Ecuador .................................       18,083       17,781       13,227
                                               -------      -------      -------

Total transfers .........................      $20,331      $19,948      $14,855
                                               =======      =======      =======

<PAGE>
<CAPTION>
                                                         (In Thousands)
                                           1996           1995           1994
                                         --------       --------       --------
<S>                                      <C>            <C>            <C>     
Operating income (loss)

United States .....................      $  1,762       $  2,422       $  3,412 
Ecuador ...........................           107          1,055           (656
Europe ............................          (106)          (196)          (244)
                                         --------       --------       --------

Total operating income ............      $  1,763       $  3,281       $  2,512 
                                         ========       ========       ========

Identifiable assets

United States .....................      $ 14,264       $ 12,576       $ 10,792 
Ecuador ...........................        21,543         22,732         20,370 
Europe ............................         3,508          3,509          3,379 
                                         --------       --------       --------

Total identifiable assets .........      $ 39,315       $ 38,817       $ 34,541 
                                         ========       ========       ========
</TABLE>

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

      Sales to one customer from the Balsa segment amounted to approximately 13%
      of total  revenues in 1995 and 1994.  No customer  accounted for more than
      10% of revenues in 1996.

12.   SPECIAL CHARGE

      In 1994,  the Company  recorded a special  charge of $323,977,  associated
      with a  decision  to  reduce  costs by  making  personnel  changes  at the
      Company's  mills in  Ecuador.  This  charge  was  comprised  primarily  of
      severance payments for 68 employees.  This action was effected within 1994
      and no related liability remained by year-end 1994.

                                     ******

<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, 1996
-----------------------------------------------------------------------------------------------------------------------

                                                                      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, 1996:
  Allowance for doubtful
    accounts receivable                              $    92,759       $    70,380        $  100,528       $    62,611
                                                     ===========       ===========        ==========       ===========

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

YEAR ENDED DECEMBER 31, 1994:
  Allowance for doubtful
    accounts receivable                              $   145,955       $    74,312       $   144,282       $    75,985
                                                     ===========       ===========       ===========       ===========

</TABLE>