BALTEK CORPORATION AND SUBSIDIARIES









       CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
                      AS OF DECEMBER 31, 2001 AND 2000 AND
        FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2001








                       PREPARED FOR FILING AS PART OF THE
                            ANNUAL REPORT (FORM 10-K)
                    TO THE SECURITIES AND EXCHANGE COMMISSION
                      FOR THE YEAR ENDED DECEMBER 31, 2001

                                   **********
<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, 2001
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                              Page
<S>                                                                                            <C>

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

  Consolidated Balance Sheets as of December 31, 2001 and 2000......................................2

  Consolidated Statements of Income and Comprehensive Income for Each of the Three Years in
           the Period Ended December 31, 2001.......................................................3

  Consolidated Statements of Stockholders' Equity for Each of the Three Years in the Period Ended
           December 31, 2001........................................................................4

  Consolidated Statements of Cash Flows for Each of the Three Years in the Period Ended December
           31, 2001.................................................................................5

  Notes to Consolidated Financial Statements for Each of the Three Years in the Period Ended
           December 31, 2001........................................................................6-19

FINANCIAL STATEMENT SCHEDULE AS OF AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER
31, 2001:

II - Valuation and Qualifying Accounts..............................................................20
</TABLE>


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, 2001 and
2000, and the related consolidated statements of income and comprehensive income
, stockholders'  equity and cash flows for each of the three years in the period
ended  December  31, 2001.  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 auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes 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, 2001 and 2000, and the results of their  operations and their
cash flows for each of the three years in the period ended  December 31, 2001 in
conformity with accounting principles generally accepted in the United States of
America.  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.

As discussed in Note 12 to the consolidated financial statements,  on January 1,
2001 the Company changed its method of accounting for derivative  instruments to
conform to Statement of Financial Accounting Standards No. 133.


/S/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey

March 20, 2002

<PAGE>



                       BALTEK CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                  (Dollars in thousands, except per share data)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                        December 31,
ASSETS                                                               2001        2000

<S>                                                              <C>         <C>
CURRENT ASSETS:
   Cash and cash equivalents                                     $    573    $  1,338
   Accounts receivable (less allowance for doubtful
        accounts - 2001, $260; 2000, $275)                          7,860      10,370
   Inventories                                                     19,933      20,421
   Prepaid expenses                                                   708         539
   Other                                                            2,610       1,779
                                                                 --------    --------
      Total current assets                                         31,684      34,447

PROPERTY, PLANT AND EQUIPMENT - Net                                13,129      13,062
TIMBER AND TIMBERLANDS                                              9,963       9,073
OTHER ASSETS                                                        1,006         949
                                                                 --------    --------
TOTAL ASSETS                                                     $ 55,782    $ 57,531
                                                                 ========    ========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Notes payable                                                 $  8,700    $ 10,605
   Accounts payable                                                 2,431       3,863
   Income taxes payable                                               274         143
   Accrued salaries, wages and bonuses payable                        587       1,190
   Accrued expenses and other liabilities                           2,676       1,494
   Current portion of long-term debt                                  113          44
   Current portion of obligation under capital lease                   82         465
                                                                 --------    --------
        Total current liabilities                                  14,863      17,804


OBLIGATION UNDER CAPITAL LEASE                                         --          82

LONG-TERM DEBT
                                                                      302          46

UNION EMPLOYEE TERMINATION BENEFITS                                   210         121
                                                                 --------    --------

           Total liabilities                                       15,375      18,053
                                                                 --------    --------

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                                    2,523       2,523
   Additional paid-in capital                                       2,157       2,157
   Retained earnings                                               36,380      34,798
   Accumulated other comprehensive loss                              (147)         --
   Treasury stock, at cost: 66,439 shares                            (506)         --
                                                                 --------    --------
        Total stockholders' equity                                 40,407      39,478
                                                                 --------    --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                       $ 55,782    $ 57,531
                                                                 ========    ========
</TABLE>

See notes to consolidated financial statements



                                       2
<PAGE>



                       BALTEK CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                            AND COMPREHENSIVE INCOME
                  (Dollars in thousands, except per share data)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                Year Ended December 31,
                                                           2001           2000           1999

<S>                                                 <C>            <C>            <C>
NET SALES                                           $    78,068    $    89,060    $    86,027

COST OF PRODUCTS SOLD                                    59,709         68,364         66,337

SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES                                15,085         14,865         14,145
                                                    -----------    -----------    -----------

           Operating income                               3,274          5,831          5,545
                                                    -----------    -----------    -----------

OTHER INCOME (EXPENSE):
  Interest expense                                       (1,000)          (937)        (1,356)
  Foreign exchange gain (loss)                               53           (328)          (336)
  Interest income                                             7             14             15
  Other, net                                                (11)            (6)            --
                                                    -----------    -----------    -----------

           Total                                           (951)        (1,257)        (1,677)
                                                    -----------    -----------    -----------

INCOME BEFORE TAXES                                       2,323          4,574          3,868

INCOME TAX PROVISION                                        741          1,692          1,052
                                                    -----------    -----------    -----------

NET INCOME                                                1,582          2,882          2,816

OTHER COMPREHENSIVE (LOSS):
       Change in fair value of interest rate swap          (131)            --             --
       Cumulative effect of adopting SFAS 133               (16)            --             --
                                                    -----------    -----------    -----------

COMPREHENSIVE INCOME                                $     1,435    $     2,882    $     2,816
                                                    -----------    -----------    -----------
BASIC AND DILUTED EARNINGS
   PER COMMON SHARE                                 $      0.64    $      1.14    $      1.12
                                                    ===========    ===========    ===========

WEIGHTED AVERAGE SHARES OUTSTANDING                   2,468,472      2,523,261      2,523,261
                                                    ===========    ===========    ===========


See notes to consolidated financial statements

</TABLE>

                                       3
<PAGE>


                       BALTEK CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  (Dollars in thousands, except per share data)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                 Accum.
                                           Common  Additional                     Other
                                           Stock,   Paid-in        Retained       Comp.    Treasury
                                          $1 Par    Capital        Earnings      (Loss)      Stock

<S>                                      <C>        <C>             <C>        <C>         <C>
BALANCE, JANUARY 1, 1999                 $  2,523   $  2,157        $ 29,100    $     --    $     --

  Net income - 1999                            --         --           2,816          --          --

BALANCE, DECEMBER 31, 1999                  2,523      2,157          31,916          --          --

  Net income - 2000                            --         --           2,882          --          --

BALANCE, DECEMBER 31, 2000                  2,523      2,157          34,798          --          --


  Cumulative effect of adopting SFAS 133       --         --              --         (16)         --

  Change in value of interest rate swap        --         --              --        (131)         --

  Purchase of treasury stock                   --         --              --          --        (506)

  Net income - 2001                            --         --           1,582          --          --
                                         --------   --------        --------    --------    --------

BALANCE, DECEMBER 31, 2001               $  2,523   $  2,157        $ 36,380    $   (147)   $   (506)
                                         ========   ========        ========    ========    ========

</TABLE>

See notes to consolidated financial
statements.


                                       4
<PAGE>

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

                                                                Year Ended December 31,
                                                             2001       2000       1999
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                       <C>        <C>        <C>
  Net income                                              $ 1,582    $ 2,882    $ 2,816
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Depreciation and amortization                           2,772      3,038      3,002
    Foreign exchange (gain) loss                              (53)       328        336
    Deferred taxes                                             27       (384)      (180)
    Changes in assets and liabilities, net of the effect
       of foreign currency translation and
       acquisition:
        Accounts receivable                                 2,499     (1,086)    (2,338)
        Income tax payable/receivable                         135        (68)       (15)
        Inventories                                           489     (1,943)    (3,390)
        Prepaid expenses and other current assets          (1,131)      (446)        36
        Other assets                                           45        (29)       (14)
        Accounts payable and accrued expenses                (984)      (174)     1,839
        Other                                                  99         34       (234)
                                                          -------    -------    -------

           Net cash provided by operating activities        5,480      2,152      1,858
                                                          -------    -------    -------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Net acquisitions of property, plant and equipment        (1,831)    (1,746)    (2,410)
  Increase in timber and timberlands                       (1,516)    (1,615)      (943)
  Acquisition of seafood assets, net of cash acquired          --         --       (491)
                                                          -------    -------    -------

           Net cash used in investing activities           (3,347)    (3,361)    (3,844)

CASH FLOWS FROM FINANCING ACTIVITIES:
  (Decrease) increase in notes payable                     (1,905)     2,526      3,398
  Payments of long-term debt                                  (69)      (210)    (1,357)
  Principal payments under capital lease                     (465)      (415)      (382)
  Purchase of treasury stock                                 (506)        --         --
                                                          -------    -------    -------

    Net cash (used in) provided by financing activities    (2,945)     1,901      1,659
                                                          -------    -------    -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                        47       (321)       238
                                                          -------    -------    -------
(DECREASE) INCREASE
  CASH AND CASH EQUIVALENTS                                  (765)       371        (89)

CASH AND CASH EQUIVALENTS,
  BEGINNING OF YEAR                                         1,338        967      1,056
                                                          -------    -------    -------

CASH AND CASH EQUIVALENTS,
  END OF YEAR                                             $   573    $ 1,338    $   967
                                                          =======    =======    =======

SUPPLEMENTAL DISCLOSURES OF
  CASH FLOW INFORMATION AND NON-CASH TRANSACTIONS:
  Cash paid during the year for:
    Interest                                              $   895    $   897    $ 1,281
                                                          =======    =======    =======

    Income taxes                                          $   631    $ 2,199    $ 1,509
                                                          =======    =======    =======

    Proceeds from equipment loan used to reduce working
        capital debt                                      $   370    $    --    $    --
                                                          =======    =======    =======
</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, 2001
--------------------------------------------------------------------------------


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 in the seafood  business,  as a shrimp
     producer  and,  for the first nine months of 2001,  as a seafood  importer.
     Approximately  74% of Baltek's revenues are derived from its core materials
     segment and 26% from the seafood segment.

     The  principal  market for the  Company's  core  materials is in the United
     States,  while the seafood 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 60 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  $27 million at December 31, 2001.  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.

     Investments - All  investments  held by the Company are recorded as trading
     securities and included in other current assets.

     Property - Property, plant and equipment is stated at cost. Depreciation is
     provided for depreciable assets over their estimated useful lives using the
     straight-line  method.  In previous years,  various  accepted  depreciation
     methods  had  been  used.   The  effect  of   switching   entirely  to  the
     straight-line method in 2001 on a prospective basis was insignificant.  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.

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

     Foreign  Currency  Translation - The financial  statements of the Company's
     European and Japanese  subsidiaries are remeasured into U.S.  dollars,  the
     Company's  functional  currency.  The  statements  of  the  Ecuadorian  and
     Uruguayan subsidiaries are maintained in U.S. dollars.

     Financial  Instruments - Derivative  financial  instruments are used by the
     Company to manage its interest rate and foreign currency exposure (see Note
     12).  Effective January 1, 2001, the Company adopted Statement of Financial
     Accounting  Standards  No. 133 (as  amended),  "Accounting  for  Derivative
     Instruments and Hedging Activities".

     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 two years.  The Company does not intend to enter into  derivative
     financial instruments for speculative purposes.

     Concentrations of Credit Risk - Baltek's core material products, as well as
     shrimp  and  other  seafood  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.

     Fair Value of Financial  Instruments  - At December 31, 2001 and 2000,  the
     carrying value of cash and cash equivalents,  accounts receivable, accounts
     payable and other financial instruments approximated their fair values. The
     carrying  amount of notes payable and other debt  obligations  approximates
     fair value based on the nature and terms of the loans,  including borrowing
     rates and other terms available to the Company for loans with similar terms
     and conditions.


                                       7
<PAGE>


     Research and  Development - Research and  development  costs are charged to
     expense as  incurred.  Research  and  development  expenditures  charged to
     operations were approximately $665,000, $565,000 and $597,000 in 2001, 2000
     and 1999, respectively.

     Basic  and  Diluted  Earnings  per  Common  Share -  Earnings  per share is
     computed by dividing  net income by the  weighted-average  number of common
     shares  outstanding.  The Company  does not have any  potentially  dilutive
     instruments;  therefore, the reporting of diluted earnings per share is not
     applicable.

     Revenue  Recognition - Product  revenues are recognized  when title passes.
     For the majority of the Company's sales,  this occurs when the products are
     shipped. Sales are reported net of discounts and allowances.

     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.

     New Accounting  Pronouncements - In October 2001, The Financial  Accounting
     Standard Board ("FASB"), issued Statement of Financial Accounting Statement
     ("SFAS") No. 144,  "accounting  for the Impairment or Disposal of long-live
     Assets,  "which addresses financial  accounting and reporting for long-live
     assets. The Company expects to adopt this standard during the first quarter
     of fiscal  20002,  Management  does not believe  that the  adoption of this
     standard will have a material impact on the Company's financial position or
     results of operations.


3.   INVENTORIES

     Inventories  of the core  materials and shrimp  segments are  summarized as
     follows (amounts in thousands):

                                     2001      2000
                                     ----      ----

                Raw materials     $ 9,131   $ 5,314
                Work-in-process     4,844     3,273
                Finished goods      5,958    11,834
                                  -------   -------

                Inventories       $19,933   $20,421
                                  =======   =======


     Included in the above  amounts are  inventories  relating to the  Company's
     seafood  operations of $1,068,000  and  $5,964,000 at December 31, 2001 and
     2000, respectively.

     As part of its  decision to  terminate  its  seafood  import  business,  in
     September  2001,  the Company  signed an agreement  with  National Fish and
     Seafood,  Inc. ("NFS").  The agreement provided that NFS assist the Company
     in selling its inventory to third parties. Under the agreement, the Company
     invoiced NFS for each sale at an amount net of commissions and NFS invoiced
     the ultimate  customer  and carried the credit risk.  At December 31, 2001,
     substantially all of the inventory was sold.

                                       8
<PAGE>


4.   PROPERTY, PLANT AND EQUIPMENT

     Property,  plant and  equipment is comprised of the  following  (amounts in
     thousands):

<TABLE>
<CAPTION>
                                                 Estimated
                                                Useful Lives               2001            2000

<S>                                              <C>                     <C>             <C>
        Land                                                            $   125         $   125
        Shrimp properties                        5-20 years              19,671          19,306
        Buildings and improvements                20 years                2,242           2,062
        Machinery and equipment                  5-10 years              14,190          12,897
        Leasehold improvements                                            1,323           1,002
        Assets under capital lease                                        2,499           2,499
        Construction-in-progress                                             56             330
                                                                        -------         -------
        Total                                                            40,106          38,221
        Less accumulated depreciation and amortization                   26,977          25,159
                                                                        -------         -------
        Property, plant and equipment -net                              $13,129         $13,062
                                                                        =======         =======
</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,  2001  and 2000  was  $2,457,000  and  $2,207,000,
     respectively.

5.   TIMBER AND TIMBERLANDS

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


                                                      2001     2000

                Timberlands                         $4,967   $4,528
                Timber-deferred cultivation costs    4,996    4,545
                                                    ------   ------

                Timber and Timberlands              $9,963   $9,073
                                                    ======   ======

     Amortization  of deferred  cultivation  costs was  approximately  $626,000,
     $742,000 and $928,000 for the years ended December 31, 2001, 2000 and 1999,
     respectively.




                                       9
<PAGE>


6.   NOTES PAYABLE

     Notes payable under various agreements consist of the following (amounts in
     thousands):





                                                                 2001      2000

     U.S. bank loan                                           $ 6,700   $ 6,825

     Ecuadorian bank loans, payable in U.S. dollars, due
     within one year from the origination date, with
     interest rates between 10.25% and 10.50% in 2001 and
     9.87% and 18.0% in 2000                                    2,000     3,780
                                                              -------   -------
     Notes payable                                             $ 8,700   $10,605
                                                               =======   =======



     In  January  2001,  the  Company  signed a new  $16.5  million,  three-year
     domestic  loan  facility.  Borrowings  under  the line are  secured  by the
     Company's  domestic  accounts  receivable  and  inventory.  The  amount  of
     eligible  borrowings is based on a formula of eligible accounts  receivable
     and eligible inventory. The agreement contains two financial covenants (net
     worth and debt service  requirements) as well as non-financial  affirmative
     and negative covenants,  and limits the amount of dividends the Company may
     declare. The Company is also required to pay a commitment fee on the unused
     portion of its credit line on a quarterly  basis. At the Company's  option,
     all or a portion of the amounts  outstanding  may be tied to the prime rate
     (prime  less  3/4%,  4.00%  and  8.75%  at  December  31,  2001  and  2000,
     respectively) or LIBOR plus 1.50% (3.64% and 8.28% at December 31, 2001 and
     2000, respectively).  The Company was in compliance with all loan covenants
     at December 31, 2001.  Although by its terms the loan does not expire until
     2003, the Company has classified the borrowings as a current liability. The
     loan facility was structured to finance  working capital  requirements  and
     repayments  may be required at any time based on the formula  contained  in
     the loan  agreement  comparing  the  borrowing  base of  eligible  accounts
     receivable and inventory to outstanding borrowings.

     At December  31,  2001,  the Company had a line of credit  available  under
     Ecuadorian  borrowing  arrangements of $4,000,000,  of which  approximately
     $2,000,000 was unused.  Borrowings under the line are secured by a mortgage
     on  certain  land and  buildings  and a  negative  pledge  against  certain
     machinery.

     Additionally,  at December 31, 2001, under European borrowing arrangements,
     the Company had lines of credit  amounting to  approximately  $682,000,  of
     which  $514,000  was  unused,  and  foreign  exchange  facilities  totaling
     approximately $869,000.

     The weighted  average  interest rate on borrowings  outstanding at December
     31, 2001 and 2000 was approximately 5.2% and 10.1%, respectively.




                                       10
<PAGE>


7.   LONG-TERM DEBT

     Long-term debt consists of the following (amounts in thousands):


                                                                2001     2000
     Notes with interest rates between 4.0% and 6.4%, due at
     various dates through 2004                                $  63    $  90

     Equipment loan                                              352       --
                                                               -----    -----
                                                                 415       90

     Less current portion                                       (113)     (44)
                                                               -----    -----

     Long-term debt                                            $ 302    $  46
                                                               =====    =====


     In  September  2001,  the Company  obtained a $370,000  loan to finance the
     previous  purchase  of  equipment.  The  loan  is  secured  by the  related
     equipment,  and is repayable in equal  monthly  principal  installments  of
     approximately  $6,167 over a five-year  period . The loan bears interest at
     the 30 day LIBOR rate.  The proceeds of this loan were used  simultaneously
     to reduce the Company's working capital debt.

     The  aggregate  maturities  of  long-term  debt at December 31, 2001 are as
     follows (amounts in thousands):

                                              2002        $113
                                              2003          92
                                              2004          81
                                              2005          74
                                              2006          55
                                                          ----

                                                          $415
                                                          ====




                                       11
<PAGE>


8.   INCOME TAXES

     Income before income taxes is comprised of (amounts in thousands):

                                               2001       2000        1999

                                Domestic    $ 1,889    $ 4,651     $ 3,566
                                Foreign         434        (77)        302
                                            -------    -------     -------

                                Total       $ 2,323    $ 4,574     $ 3,868
                                            =======    =======     =======




     The  provision  for income  taxes  consists  of the  following  (amounts in
     thousands):


                                                 2001        2000        1999

                                Federal:
                                  Current     $   385     $ 1,732     $ 1,049
                                  Deferred         23
                                                             (327)       (176)
                                State:
                                  Current          37         288         154
                                  Deferred          4         (57)         (4)
                                Foreign           292          56          29
                                              -------     -------     -------

                                Total         $   741     $ 1,692     $ 1,052
                                              =======     =======     =======



     The  reconciliation  between  the  Company's  effective  tax  rate  and the
     statutory Federal tax rate is as follows:


                                                 2001        2000        1999

   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                  (4.1)        1.8        (2.0)
   State taxes, net of Federal income tax
   benefit                                        1.2         3.3         2.6
   Foreign tax credits                            0.0         0.0        (4.9)
   Other - net                                   (0.3)       (3.1)       (3.5)
                                                 ----        ----        ----

   Effective tax rate                            31.8%       37.0%       27.2%
                                                 ====        ====        ====




                                       12
<PAGE>


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


                                                 2001      2000
  Current assets (liabilities):
    Inventory capitalization                    $ 270     $ 237
    Unexpired insurance                          (251)     (177)
    Reserve amounts not currently deductible      166       210
    Other - net                                    15        59
                                                -----     -----
  Total current asset, net                      $ 200     $ 329
                                                =====     =====

  Noncurrent assets:
    Capital lease                               $  16     $  39
    Deferred compensation                         399       243
    Other                                         307       338
    Foreign tax loss carryforwards                554       166
    Less valuation allowance                     (554)     (166)
                                                -----     -----
  Total noncurrent asset, net                   $ 722     $ 620
                                                =====     =====



     As of  December  31,  2001  and  2000,  the  Company  had a full  valuation
     allowance  recorded against its foreign tax loss  carryforwards  related to
     certain Ecuadorean and European  subsidiaries.  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 sheets.

     The  Company  has not  accrued  Federal  income  taxes on the equity in the
     undistributed  earnings  of its  foreign  subsidiaries,  which  amounted to
     approximately  $8,457,000  at December 31, 2001,  because such earnings are
     permanently reinvested. It is not practicable to estimate the tax liability
     that might arise if these earnings were remitted.



                                       13
<PAGE>


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
     $179,000,  $417,000  and  $329,000  in 2001,  2000 and 1999,  respectively.
     Additionally,  the plan allows for all participants to defer between 1% and
     15% of their salary.  Amounts deferred are paid to the trustee of the plan.
     The plan does not match employee contributions.

     The Company  adopted a  non-qualified  deferred  compensation  plan for the
     benefit of certain  eligible  employees.  The plan allows  participants  to
     defer up to 100% of their  compensation.  The Company  does not  contribute
     into the plan. The plan is not an employee  pension benefit plan as defined
     by Section 3(2) of the Employment  Retirement  Income  Security Act of 1974
     ("ERISA"),  and is not  qualified  under  Section  401(a)  of the  Internal
     Revenue  Code of 1986,  as  amended  (the  "Code").  As a result,  employee
     contributions are not protected against risk of loss to the Company. Due to
     the fact that this is a  non-qualified  plan,  the value of the plan assets
     are  maintained  on the Company's  consolidated  balance sheet along with a
     liability to the plan participants.  Fluctuations in the fair market values
     of the  shares of the  optioned  securities  are  recognized  in the income
     statement as other income and  expense,  net,  which is offset by a similar
     change in  selling,  general  and  administrative  expense.  The assets and
     liabilities  recorded on the Company's  consolidated balance sheet are also
     impacted by changes in the fair value of the investments. The value of plan
     assets and liabilities recorded in the Company's consolidated balance sheet
     at December 31, 2001 and 2000 was $914,000 and $650,000, respectively.

     The non-qualified  deferred compensation plan does not fall under the scope
     of either APB Opinion No. 25, Accounting for Stock Issued to Employees (APB
     No. 25), or FASB Statement No. 123, Accounting for Stock Based Compensation
     (SFAS 123),  as both of these  standards  provide  guidance  for  employers
     compensating their employees by the employer company issuing its own equity
     instruments.

     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 $102,000, $22,000 and $27,000
     were charged to income during 2001, 2000 and 1999, respectively.

     The Company  participates  in a  multiemployer  pension  plan for the union
     employees  at  the   Northvale,   New  Jersey   facility.   Provisions   of
     approximately $152,000, $174,000 and $200,000 were charged to income during
     2001, 2000 and 1999, respectively.


                                       14
<PAGE>


10.  LEASES

     The Company  leases its primary U.S.  manufacturing  facility in Northvale,
     New Jersey under a long-term  capital lease agreement that expires in 2002.
     During 2000,  the Company  signed a new lease  agreement for these premises
     that will begin at the expiration of the existing lease and expire in 2010.
     The current and new lease both provide that the Company pay all real estate
     taxes, maintenance and insurance relating to the facilities.  The new lease
     also contains a purchase option subject to certain terms and conditions and
     a five-year renewal option.

     The Company also has operating  lease  agreements  for warehouse and office
     space in the United States and Europe. The longest lease obligation extends
     to 2015.  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 $814,000,
     $622,000 and $502,000 in 2001, 2000 and 1999, respectively.

     Future  minimum lease payment  obligations as of December 31, 2001, for the
     capital lease described above, as well as operating leases,  are as follows
     (amounts in thousands):

                                                        Capital   Operating
      Year                                                Lease     Leases

      2002                                               $ 82      $  1,191
      2003                                                 --         1,321
      2004                                                 --         1,221
      2005                                                 --         1,150
      2006                                                 --         1,167
      Thereafter                                           --         2,735
                                                        -----      --------

      Minimum lease payments                               82      $  8,785
                                                        =====      ========


      Less amounts representing interest                   --
                                                        -----

      Capital lease obligation                           $ 82
                                                         ====


                                       15
<PAGE>


11.  SEGMENT INFORMATION

     The Company and its subsidiaries operate in two segments, as a manufacturer
     and supplier of  structural  core  materials in composite  applications  to
     various  industries and in the seafood industry,  as a shrimp producer and,
     for the first nine months of 2001, as a seafood importer.  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 2001,
     2000 or 1999.

     Information about the Company's operations by segment is as follows:
<TABLE>
<CAPTION>

                                                                      (In Thousands)
                                                         2001         2000         1999
<S>                                                  <C>          <C>          <C>
Net sales to unaffiliated customers

Core materials segment                               $ 57,871     $ 63,175     $ 58,938
Seafood segment                                        20,197       25,885       27,089
                                                     --------     --------     --------

Total net sales                                      $ 78,068     $ 89,060     $ 86,027
                                                     ========     ========     ========

Operating income (loss)

Core materials segment                               $  5,333     $  7,758     $  4,569
Seafood segment                                        (2,059)      (1,927)         976
                                                     --------     --------     --------

Total operating income                               $  3,274     $  5,831     $  5,545
                                                     ========     ========     ========


Identifiable assets

Core materials segment                               $ 45,450     $ 39,023     $ 35,728
Seafood segment                                        10,332       18,508       17,177
                                                     --------     --------     --------

Total identifiable assets                            $ 55,782     $ 57,531     $ 52,905
                                                     ========     ========     ========


Capital expenditures, including timberlands
and capital leases

Core materials segment                                $ 3,448      $ 2,818      $ 2,197
Seafood segment                                           295          590        1,271
                                                     --------     --------     --------

Total capital expenditures                            $ 3,743      $ 3,408      $ 3,468
                                                     ========     ========     ========

</TABLE>


                                       16
<PAGE>


     Information  pertaining to the Company's operations in different geographic
     areas is as follows:


                                               (In Thousands)
                                          2001       2000       1999

Net sales to unaffiliated customers

United States - domestic               $56,060    $71,534    $65,293
United States - export                   7,311      7,434     11,263
Ecuador                                    160         47         87
Europe                                  14,537     10,045      9,384
                                       -------    -------    -------
Total net sales                        $78,068    $89,060    $86,027
                                       =======    =======    =======




Identifiable assets

United States                          $22,160    $27,540    $24,781
Ecuador                                 27,252     24,964     23,957
Europe                                   6,225      4,978      4,167
Japan, Uruguay                             145         49         --
                                       -------    -------    -------

Total identifiable assets              $55,782    $57,531    $52,905
                                       =======    =======    =======


                                       17
<PAGE>


12.  FINANCIAL INSTRUMENTS

     Effective  January 1, 2001,  the Company  adopted  Statement  of  Financial
     Accounting   Standards   ("SFAS")  No.  133,   Accounting   for  Derivative
     Instruments and Hedging Activities,  as amended by SFAS 137, Accounting for
     Derivative  Instruments and Hedging  Activities - Deferral of the Effective
     Date of FASB  Statement No. 133, and SFAS No. 138,  Accounting  for Certain
     Derivative  Instruments  and Certain  Hedging  Activities - an amendment of
     FASB Statement No. 133 (collectively "SFAS 133"). SFAS 133 requires that an
     entity  recognize all derivatives as either assets or liabilities  measured
     at fair value and establishes criteria for designation and effectiveness of
     hedging relationships. For derivatives designated as fair value hedges, the
     changes in the fair value of both the derivative  instrument and the hedged
     item are  recorded in earnings.  For  derivatives  designated  as cash flow
     hedges,  the effective  portions of changes in fair value of the derivative
     are reported in other  comprehensive  income  ("OCI") and are  subsequently
     reclassified into earnings when the hedged item affects  earnings.  Changes
     in  fair  value  of  derivative   instruments  not  designated  as  hedging
     instruments and  ineffective  portions of hedges are recognized in earnings
     in the current period. Adoption of the new accounting standards resulted in
     an after-tax reduction in OCI of approximately $16,000.

     The Company is exposed to fluctuations in foreign currency  exchange rates,
     interest  rates  and raw  material  prices.  To  manage  certain  of  these
     exposures,  the Company uses derivative instruments including interest rate
     swaps and forward contracts. Derivative instruments used by the Company are
     considered  risk  management   tools  and  are  not  used  for  trading  or
     speculative purposes.

     All relationships  between hedging instruments and hedged items, as well as
     its risk management  objective and strategy for  undertaking  various hedge
     transactions are formally  documented.  The Company  formally  assesses the
     effectiveness of its hedging  relationships both at the hedge inception and
     on at least a  quarterly  basis  in  accordance  with  its risk  management
     policy.

     The Company  purchases  certain raw materials in currencies  other than the
     U.S.  dollar.  To reduce  currency  exchange  risk on these  firm  purchase
     commitments,  the Company enters into foreign currency  forward  contracts.
     The  forward  contracts  are  designated  as fair value  hedges of the firm
     commitments  and do not extend  beyond 24  months.  The gains and losses on
     those  derivative  instruments  are  reported in cost of products  sold and
     largely offset gains and losses on the purchase commitments.  The amount of
     ineffectiveness recorded in net income for the year ended December 31, 2001
     was not  material.  Currently,  the  Company  does not hold any  derivative
     contracts  that hedge its net  investments in foreign  operations,  but may
     consider such strategies in the future.

     The Company utilizes interest rate swaps to hedge the Company's exposure to
     movement  in  interest  rates.  At  December  31,  2001,  the Company had a
     one-year and a two-year interest rate swap that converted $2 million and $4
     million of  outstanding  borrowings  from a floating to a fixed  rate.  The
     swaps  resulted in fixed rates of 6.0% and 6.50%.  The swaps expire on June
     1, 2002 and 2003.  The  interest  rate  swaps are  designated  as cash flow
     hedges  of  the  variability  of  the  forecasted  interest  payments.  The
     effective  portion of the change in fair value of the  interest  rate swaps
     was  recorded in OCI.  The  ineffectiveness  relating to the hedges was not
     material.  Amounts  accumulated in OCI are reclassified  into earnings when
     interest expense on the borrowings is recorded.  Approximately  $133,000 of
     the amount  recorded in accumulated  OCI is expected to be  reclassified to
     interest expense during the next twelve months.


                                       18
<PAGE>


13.  SELECTED QUARTERLY FINANCIAL DATA (Unaudited)

     The following is a summary of quarterly  financial data for the years ended
     December  31,  2001  and 2000  (dollars  in  thousands,  except  per  share
     amounts):



                                                  Quarter
                                  -------------------------------------------
                                   1st         2nd        3rd         4th
                                  --------  ---------- ----------  ----------
                  2001
      Net sales                   $21,151     $21,488    $19,509     $15,920
      Operating income                808         745      1,072         649
      Net income                      346         218        631         387
      Basic and diluted earnings
          per common share          $0.14       $0.09      $0.25       $0.16
                                  ========  ========== ==========  ==========

                  2000
      Net sales                   $21,225     $23,911    $22,213     $21,711
      Operating income              1,459       1,524      1,266       1,582
      Net income                      765         808        651         658
      Basic and diluted earnings
          per common share          $0.30       $0.32      $0.26       $0.26
                                  ========  ========== ==========  ==========


14.  COMMITMENTS

     In March 2001, the Company entered into an agreement with Jacques, Jean and
     Bernard Kohn, all stockholders of the Company.  The agreement  requires the
     Company to purchase,  in five equal installments,  the common stock held by
     Bernard Kohn. The purchases are subject to the  determination  by the Board
     of Directors  that the Company has  sufficient  available  capital.  If the
     Company  cannot  consummate  the  purchase,  or  cause  a  third  party  to
     consummate the purchase,  the installments  are deferred.  In the event any
     installments are deferred,  Bernard Kohn has the right to sell the deferred
     shares in the open market.  Purchase of the stock by a third party does not
     relieve the Company  from its  obligation  for future  purchases  under the
     agreement.

     Pursuant to the agreement,  the Company  completed two purchases,  each for
     66,439 shares,  for  approximately  $506,000 in March 2001, and $469,000 in
     January  2002.  The purchase  price of the shares for all  installments  is
     based on the  average  closing  prices for the stock for the 20-day  period
     prior to the purchase date specified in the agreement.

     The Kohn  individuals  have  agreed to vote their  shares as a single  unit
     during the term of the agreement.  The agreement  also  terminated a voting
     trust that existed among the Kohn shareholders.


                                     ******

                                       19
<PAGE>

                                                                     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, 2001
                              Dollars in thousands

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

YEAR ENDED DECEMBER 31, 2001:
  Allowance for doubtful
    accounts receivable           $275        $ 15       $ 30       $260
                                  ====        ====       ====       ====

  Inventory                       $380        $ --       $180       $200
                                  ====        ====       ====       ====

YEAR ENDED DECEMBER 31, 2000:
  Allowance for doubtful
    accounts receivable           $175        $129       $ 29       $275
                                  ====        ====       ====       ====

  Inventory                       $150        $230       $ --       $380
                                  ====        ====       ====       ====

YEAR ENDED DECEMBER 31, 1999:
  Allowance for doubtful
    accounts receivable           $144        $ 66       $ 35       $175
                                  ====        ====       ====       ====

  Inventory                       $266        $ --       $116       $150
                                  ====        ====       ====       ====




                                       20