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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2007

OR



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

For the transition period from              to
            .

Commission File Number 333-129951



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INNOPHOS, INC.

(Exact Name of Registrant as Specified in its Charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 20-1380712                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|259 Prospect Plains Road Cranbury, New Jersey                  |  | 08512                               
|(Address of Principal Executive Offices)                       |  | (Zip Code)                          

Registrants Telephone Number, Including Area Code: (609) 495-2495



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Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).    Yes ̈No  x

As of August 1, 2007, the registrant has 1,000 shares of common stock outstanding



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##### Table of Contents

TABLE OF CONTENTS



|           |  |                                                                                       |  |   
|---------- |  | ------------------------------------------------------------------------------------- |  | --
|           |  | Page                                                                                 
|PART I     |  |                                                                                       |  |   
|Item 1.    |  | Financial Statements                                                                  |  | 3 
|Item 2.    |  | Managements Discussion and Analysis of Results of Operations and Financial Condition |  | 31
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risks                           |  | 38
|Item 4T.   |  | Controls and Procedures                                                               |  | 39
|           |  |                                                                                      
|PART II    |  |                                                                                       |  |   
|Item 1.    |  | Legal Proceedings                                                                     |  | 40
|Item 1A.   |  | Risk Factors                                                                          |  | 42
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 44
|Item 3.    |  | Defaults Upon Senior Securities                                                       |  | 44
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  | 44
|Item 5.    |  | Other Information                                                                     |  | 44
|Item 6.    |  | Exhibits                                                                              |  | 44
|           | 
|Signatures |  | 45                                                                                   



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##### Table of Contents

PART I

ITEM 1. FINANCIAL STATEMENTS

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(Dollars in thousands)



|                                           |  |              |         |                  |   |        
|------------------------------------------ |  | ------------ | ------- | ---------------- | - | -------
|                                           |  | June 30,2007 |         | December 31,2006
|ASSETS                                     |  |              |         |                  |   |        
|Current assets:                            |  |              |         |                  |   |        
|Cash and cash equivalents                  |  | $            | 19,077  |                  | $ | 29,618 
|Accounts receivable - trade                |  |              | 61,573  |                  |   | 56,316 
|Inventories                                |  |              | 75,699  |                  |   | 70,569 
|Other current assets                       |  |              | 15,396  |                  |   | 13,652 
|                                           |  |              |         |                  |   |        
|Total current assets                       |  |              | 171,745 |                  |   | 170,155
|Property, plant and equipment, net         |  |              | 267,085 |                  |   | 277,222
|Goodwill                                   |  |              | 47,268  |                  |   | 47,268 
|Intangibles and other assets, net          |  |              | 65,390  |                  |   | 66,944 
|                                           |  |              |         |                  |   |        
|Total assets                               |  | $            | 551,488 |                  | $ | 561,589
|                                           |  |              |         |                  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY       |  |              |         |                  |   |        
|Current liabilities:                       |  |              |         |                  |   |        
|Current portion of long-term debt          |  | $            | 1,446   |                  | $ | 1,524  
|Accounts payable, trade and other          |  |              | 37,900  |                  |   | 30,863 
|Other current liabilities                  |  |              | 37,910  |                  |   | 36,824 
|                                           |  |              |         |                  |   |        
|Total current liabilities                  |  |              | 77,256  |                  |   | 69,211 
|Long-term debt                             |  |              | 329,054 |                  |   | 337,476
|Other long-term liabilities                |  |              | 30,465  |                  |   | 33,713 
|                                           |  |              |         |                  |   |        
|Total liabilities                          |  |              | 436,775 |                  |   | 440,400
|                                           |  |              |         |                  |   |        
|Commitments and contingencies (see note 9) |  |              |         |                  |   |        
|Stockholders equity                       |  |              | 114,713 |                  |   | 121,189
|                                           |  |              |         |                  |   |        
|Total stockholders equity                 |  |              | 114,713 |                  |   | 121,189
|                                           |  |              |         |                  |   |        
|Total liabilities and stockholders equity |  | $            | 551,488 |                  | $ | 561,589
|                                           |  |              |         |                  |   |        

See notes to condensed consolidated financial statements



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##### Table of Contents

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Operations (Unaudited)

(Dollars in
thousands)



|                                    |  |                                 |         |   |                                 |   |         |  
|----------------------------------- |  | ------------------------------- | ------- | - | ------------------------------- | - | ------- | -
|                                    |  | Three months endedJune 30,
2007 |         |   | Three months endedJune 30,
2006 |  
|Net sales                           |  | $                               | 151,912 |   |                                 | $ | 139,281 |  
|Cost of goods sold                  |  |                                 | 119,969 |   |                                 |   | 115,778 |  
|                                    |  |                                 |         |   |                                 |   |         |  
|Gross profit                        |  |                                 | 31,943  |   |                                 |   | 23,503  |  
|                                    |  |                                 |         |   |                                 |   |         |  
|Operating expenses:                 |  |                                 |         |   |                                 |   |         |  
|Selling, general and administrative |  |                                 | 17,931  |   |                                 |   | 10,785  |  
|Research & development expenses     |  |                                 | 544     |   |                                 |   | 484     |  
|                                    |  |                                 |         |   |                                 |   |         |  
|Total operating expenses            |  |                                 | 18,475  |   |                                 |   | 11,269  |  
|                                    |  |                                 |         |   |                                 |   |         |  
|Operating income                    |  |                                 | 13,468  |   |                                 |   | 12,234  |  
|Interest expense, net               |  |                                 | 7,918   |   |                                 |   | 8,303   |  
|Foreign exchange loss (gain)        |  |                                 | 109     |   |                                 |   | (151    | )
|Other expense (income), net         |  |                                 | (156    | ) |                                 |   | 96      |  
|                                    |  |                                 |         |   |                                 |   |         |  
|Income before income taxes          |  |                                 | 5,597   |   |                                 |   | 3,986   |  
|Provision for income taxes          |  |                                 | 5,093   |   |                                 |   | 1,266   |  
|                                    |  |                                 |         |   |                                 |   |         |  
|Net income                          |  | $                               | 504     |   |                                 | $ | 2,720   |  
|                                    |  |                                 |         |   |                                 |   |         |  

See notes to condensed consolidated financial statements



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##### Table of Contents

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Operations (Unaudited)

(In thousands)



|                                    |  |                               |         |   |                               |   |         |  
|----------------------------------- |  | ----------------------------- | ------- | - | ----------------------------- | - | ------- | -
|                                    |  | Six months endedJune 30, 2007 |         |   | Six months endedJune 30, 2006 |  
|Net sales                           |  | $                             | 288,592 |   |                               | $ | 269,616 |  
|Cost of goods sold                  |  |                               | 235,667 |   |                               |   | 224,363 |  
|                                    |  |                               |         |   |                               |   |         |  
|Gross profit                        |  |                               | 52,925  |   |                               |   | 45,253  |  
|                                    |  |                               |         |   |                               |   |         |  
|Operating expenses:                 |  |                               |         |   |                               |   |         |  
|Selling, general and administrative |  |                               | 28,358  |   |                               |   | 21,180  |  
|Research & development expenses     |  |                               | 1,086   |   |                               |   | 766     |  
|                                    |  |                               |         |   |                               |   |         |  
|Total operating expenses            |  |                               | 29,444  |   |                               |   | 21,946  |  
|                                    |  |                               |         |   |                               |   |         |  
|Operating income                    |  |                               | 23,481  |   |                               |   | 23,307  |  
|Interest expense, net               |  |                               | 15,912  |   |                               |   | 17,300  |  
|Foreign exchange gains              |  |                               | (25     | ) |                               |   | (204    | )
|Other expense (income), net         |  |                               | (98     | ) |                               |   | (18     | )
|                                    |  |                               |         |   |                               |   |         |  
|Income before income taxes          |  |                               | 7,692   |   |                               |   | 6,229   |  
|Provision for income taxes          |  |                               | 7,343   |   |                               |   | 396     |  
|                                    |  |                               |         |   |                               |   |         |  
|Net income                          |  | $                             | 349     |   |                               | $ | 5,833   |  
|                                    |  |                               |         |   |                               |   |         |  

See notes to condensed consolidated financial statements



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INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in
thousands)



|                                                                                  |  |                               |         |   |                               |   |         |  
|--------------------------------------------------------------------------------- |  | ----------------------------- | ------- | - | ----------------------------- | - | ------- | -
|                                                                                  |  | Six months endedJune 30, 2007 |         |   | Six months endedJune 30, 2006 |  
|Cash flows from operating activities                                              |  |                               |         |   |                               |   |         |  
|Net income                                                                        |  | $                             | 349     |   |                               | $ | 5,833   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                               |         |   |                               |   |         |  
|Depreciation and amortization                                                     |  |                               | 22,749  |   |                               |   | 22,772  |  
|Amortization of deferred financing charges                                        |  |                               | 1,383   |   |                               |   | 1,978   |  
|Deferred income tax benefit                                                       |  |                               | (1,504  | ) |                               |   | (1,740  | )
|Deferred profit sharing                                                           |  |                               | 191     |   |                               |   | (350    | )
|Stock-based compensation                                                          |  |                               | 463     |   |                               |   |        |  
|Changes in assets and liabilities:                                                |  |                               |         |   |                               |   |         |  
|(Increase)/decrease in accounts receivable                                        |  |                               | (5,257  | ) |                               |   | 264     |  
|(Increase)/decrease in inventories                                                |  |                               | (5,130  | ) |                               |   | 521     |  
|(Increase)/decrease in other current assets                                       |  |                               | (1,744  | ) |                               |   | 3,639   |  
|Increase/(decrease) in accounts payable                                           |  |                               | 7,037   |   |                               |   | (6,660  | )
|Increase/(decrease) in other current liabilities                                  |  |                               | 1,086   |   |                               |   | (12,630 | )
|Changes in other long-term assets and liabilities                                 |  |                               | 1,836   |   |                               |   | 3,757   |  
|                                                                                  |  |                               |         |   |                               |   |         |  
|Net cash provided from operating activities                                       |  |                               | 21,459  |   |                               |   | 17,384  |  
|                                                                                  |  |                               |         |   |                               |   |         |  
|Cash flows from investing activities:                                             |  |                               |         |   |                               |   |         |  
|Capital expenditures                                                              |  |                               | (12,052 | ) |                               |   | (5,439  | )
|Purchase of assets                                                                |  |                               | (2,120  | ) |                               |   |        |  
|                                                                                  |  |                               |         |   |                               |   |         |  
|Net cash used for investing activities                                            |  |                               | (14,172 | ) |                               |   | (5,439  | )
|                                                                                  |  |                               |         |   |                               |   |         |  
|Cash flows from financing activities:                                             |  |                               |         |   |                               |   |         |  
|Cash return of capital to parent                                                  |  |                               | (9,328  | ) |                               |   |        |  
|Principal payments of term-loan                                                   |  |                               | (8,500  | ) |                               |   | (19,000 | )
|                                                                                  |  |                               |         |   |                               |   |         |  
|Net cash used for financing activities                                            |  |                               | (17,828 | ) |                               |   | (19,000 | )
|                                                                                  |  |                               |         |   |                               |   |         |  
|Net change in cash                                                                |  |                               | (10,541 | ) |                               |   | (7,055  | )
|Cash and cash equivalents at beginning of period                                  |  |                               | 29,618  |   |                               |   | 61,219  |  
|                                                                                  |  |                               |         |   |                               |   |         |  
|Cash and cash equivalents at end of period                                        |  | $                             | 19,077  |   |                               | $ | 54,164  |  
|                                                                                  |  |                               |         |   |                               |   |         |  

See notes to condensed consolidated financial statements



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

1. Basis of Statement Presentation:

Summary of Significant Accounting Policies

Innophos, Inc. is a wholly-owned subsidiary of Innophos
Investments Holdings, Inc. (Investments Holdings), incorporated under the laws of the State of Delaware. Innophos Investments Holdings, Inc. is a wholly-owned subsidiary of Innophos Holdings, Inc. (Holdings) On June 10,
2004, Innophos entered into a definitive purchase and sale agreement with affiliates of Rhodia to acquire certain assets and equity interests related to Rhodias North American specialty phosphates business, referred to herein as the Phosphates
Business. The acquisition of the Phosphates Business from Rhodia, referred to herein as the Acquisition, was consummated on August 13, 2004, at a closing purchase price of $473.4 million. A working capital dispute relating to the
August 13, 2004 closing balance sheet was settled in June 2007 with no further adjustment to the closing purchase price.

Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements of Innophos,
Inc. and Subsidiaries (Company) have been prepared in accordance with generally accepted accounting principles for interim financial reporting and do not include all disclosures required by generally accepted accounting principles for
annual financial reporting, and should be read in conjunction with the audited consolidated and combined financial statements of the Company at December 31, 2006 and for the three years then ended.

The accompanying unaudited condensed consolidated financial statements of the Company reflect all adjustments, consisting only of normal recurring
accruals, which management considers necessary for a fair statement of the results of operations for the interim periods and is subject to year end adjustments. The results of operations for the interim periods are not necessarily indicative of the
results for the full year.

Holdings Initial Public Offering

In November 2006, Holdings, our ultimate parent, completed an initial public offering (IPO) in which it sold 8,000,000 issued shares of Common
Stock at the price of $12.00 per share (before underwriting discounts and commissions). Prior to that offering, their capital structure was revised to convert two previously outstanding classes of common stock into one single class of Common Stock
and was also modified by a reverse stock split affecting the then outstanding shares. Prior to the offering, there was no established trading market for their equity securities. The equity issued by Holdings is not reflected in the consolidated
financial statements of Innophos, Inc. as included in this Form 10-Q. As all of the business for Holdings and Investments Holdings are transacted through Innophos, Inc. and Subsidiaries, Holdings and Investments Holdings are dependent on earnings
and the distribution of funds from Innophos, Inc. and Subsidiaries.

Stock Options

Effective January 1, 2006, we adopted SFAS No. 123(R), Share-Based Payment. The Company was required to use the prospective
transition method, therefore, prior period results were not restated. Prior to the adoption of SFAS 123(R), stock-based compensation expense related to stock options was not recognized in the results of operations if the exercise price was at least
equal to the market value of the common stock on the grant date, in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees.

In connection with the Holdings IPO, Holdings effected a recapitalization, through an amendment to our certificate of incorporation to declare a reverse
stock split to reduce the number of Class A Common Stock and Class L Common Stock and reclassify the Class A Common Stock and the Class L Common Stock to a single class of Common Stock. As a result of the recapitalization, the historical
stock option strips originally granted on April 1, 2005 were converted, as required under the terms of the original plan, to 1,116,944 stock options of the new class of Common Stock currently outstanding with the same vesting schedule. The
exercise price is $2.55 per option. Holdings accounts for the stock option plan using the intrinsic value method in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees. The valuation method that Holdings used under SFAS
No. 123 dictated the transition method that the Company used under SFAS No. 123(R). As permitted under SFAS No. 123, Holdings valued its stock options at the grant date using the minimum value method. Because Holdings used the minimum
value method under SFAS No. 123, we adopted SFAS No. 123(R) using the prospective transition method and therefore, prior periods were not restated and we have not recognized in the financial



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

statements the remaining compensation cost calculated under the minimum value method. The determination of the fair
value of the underlying common stock used to determine the exercise prices for the stock options granted on April 1, 2005 was performed contemporaneously with the issuance of these common stock option grants.

Under the prospective transition method, only new awards (or awards modified, repurchased, or cancelled after the effective date) are accounted for under
the provisions of SFAS No. 123(R). Holdings will continue to account for the outstanding awards under APB 25 until they are settled or modified. Upon the adoption of SFAS No. 123(R) and through December 31, 2006 and June 30,
2007, Holdings did not modify any existing stock option awards that were granted under SFAS No. 123. Holdings established a restricted stock program which is accounted for under SFAS No. 123(R). Since these programs benefit the employees
of Innophos, Inc. all amounts have been recorded in our consolidated results.

On May 24, 2007 the two independent directors of
Holdings were granted a total of 4,424 stock options which were fully vested with an exercise price of $15.37. These options are accounted for under the provisions of SFAS No. 123(R). The expense for these options is immaterial to the results
of operations, financial condition, and/or cash flows of Holdings.

A summary of stock option activity for Holdings during the six months
ended June 30, 2007, is presented below:



|                               |  |                  |   |  |                                |      
|------------------------------ |  | ---------------- | - |  | ------------------------------ | -----
|                               |  | Number ofOptions |   |  | Weighted AverageExercise Price
|Outstanding at January 1, 2007 |  | 1,116,944        |   |  | $                              | 2.55 
|Granted                        |  | 4,424            |   |  |                                | 15.37
|Forfeited                      |  | (55,050          | ) |  |                                | 2.55 
|Exercised                      |  | (344,238         | ) |  |                                | 2.55 
|                               |  |                  |   |  |                                |      
|Outstanding at June 30, 2007   |  | 722,080          |   |  | $                              | 2.63 
|                               |  |                  |   |  |                                |      
|Exercisable at June 30, 2007   |  | 381,411          |   |  | $                              | 2.70 
|                               |  |                  |   |  |                                |      

Restricted Stock

On November 2, 2006, Holdings Board of Directors awarded 173,568 shares of restricted stock with a fair value of $2.1 million to directors and
certain executive officers of Innophos, Inc. These awards accounted for under SFAS 123(R) are classified as equity awards and vest over nine quarters in equal installments of 11.11% per quarter beginning January 1, 2007. Declared dividends
will accrue on the restricted stock and will vest over the same period. Upon vesting, the restricted stock will convert into an equivalent number of shares of common stock. The related compensation expense is based on the date of grant share price
of $12. The compensation expense is amortized on a straight-line basis over the requisite service period. Holdings recognized approximately $0.2 million and $0.4 million of compensation expense in the three and six months ended June 30, 2007
and will record approximately $0.5 million of compensation expense during the remainder of 2007. As of June 30, 2007, there are 134,998 unvested shares and 38,570 shares which have vested.

Holdings Dividends

Dividends
paid per share for the six months ended June 30, 2007 was a cash dividend of $0.11 per share ($2,275 in the aggregate) declared on December 18, 2006 and paid on January 30, 2007 to holders of record on January 15, 2007.

Dividends paid per share for the three and six months ended June 30, 2007 and dividends declared per share for the six months ended
June 30, 2007 was a cash dividend of $0.17 per share ($3,533 in the aggregate) declared on March 29, 2007 and paid on April 30, 2007 to holders of record on April 13, 2007.

Dividends declared per share for the three and six months ended June 30, 2007 was a cash dividend of $0.17 per share ($3,534 in the aggregate)
declared on June 29, 2007 and payable on July 31, 2007 to holders of record on July 13, 2007.

As all of the business for
Holdings and Investments Holdings are transacted through Innophos, Inc. and Subsidiaries, Holdings and Investments Holdings are dependent on earnings and the distribution of funds from Innophos, Inc. and Subsidiaries. As such, Innophos, Inc.
distributed approximately $9.3 million to Holdings for the funding of the dividends.



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

Income Taxes

Effective January 1, 2007, the Company adopted FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes
 an Interpretation of FASB Statement No. 109. This interpretation prescribes a model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that it has taken or expects
to take on a tax return. The Company does not have any material uncertain income tax positions therefore the adoption of FIN 48 had no effect on its consolidated financial position or results of operations. If any material uncertain tax positions
did arise, the Companies policy is to accrue associated penalties in selling, general and administrative expenses and to accrue interest as part of net interest expense. All of the tax years since the Companys inception in 2004 are subject to
examination by the Canadian, Mexican and United States revenue authorities. The Company does not anticipate that total unrecognized tax benefits will significantly change prior to June 30, 2008.

Employee Termination Benefits

The Company does not have a written severance plan for its Mexican operations, nor does it offer similar termination benefits to affected employees in all Mexican restructuring initiatives. Accordingly, in situations where minimum statutory
termination benefits must be paid to the affected employees, the Company records employee severance costs associated with these restructuring activities in accordance with SFAS No. 112, Employers Accounting for Postemployment
Benefits. Charges associated with these activities are recorded when the payment of benefits is probable and can be reasonably estimated. In all other situations where the Company pays out termination benefits in Mexico, including supplemental
benefits paid in excess of statutory minimum amounts and benefits offered to affected employees based on managements discretion, the Company records these termination costs in accordance with SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities.

The timing of the recognition of charges for employee severance costs depends on
whether the affected employees are required to render service beyond their legal notification period in order to receive the benefits. If affected employees are required to render service beyond their legal notification period, charges are
recognized ratably over the future service period. Otherwise, charges are recognized when a specific plan has been confirmed by management and required employee communication requirements have been met.

Recently Issued Accounting Standards

The Financial Accounting Standards Board (FASB) recently issued SFAS No. 157 and SFAS No. 159, both of which are summarized below.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP),
and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, which for the Company is January 1, 2008. The Company is currently
assessing the impact this statement may have on its consolidated financial position or results of operations.

In February 2007, the FASB
issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair
value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge
accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Boards long-term measurement objectives for accounting for financial instruments. SFAS No. 159 is effective as of
the beginning of an entitys first fiscal year that begins after November 15, 2007, which for the Company is January 1, 2008. The Company is currently assessing the impact this statement will have on its consolidated financial
position or results of operations.

In June 2007, the FASB ratified Emerging Issues Task Force (EITF) Issue No. 06-11,
Accounting for the Income Tax Benefits of Dividends on Share-Based Payment Awards (EITF 06-11). EITF 06-11 provides that tax benefits associated with dividends on share-based payment awards be recorded as a component of additional
paid-in capital. EITF 06-11 is effective, on a prospective basis, for fiscal years beginning after December 15, 2007. The Company does not anticipate the adoption of EITF 06-11 will have a material effect on its consolidated financial position
or results of operations.

Certain reclassifications have been made to the June 30, 2006 consolidated financial statements and accompanying
notes to conform with the June 30, 2007 presentation.



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##### Table of Contents

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

2. Inventories:

Inventories consist of the following:



|                  |  |              |        |                  |   |       
|----------------- |  | ------------ | ------ | ---------------- | - | ------
|                  |  | June 30,2007 |        | December 31,2006
|Finished products |  | $            | 49,569 |                  | $ | 46,789
|Raw materials     |  |              | 18,681 |                  |   | 17,129
|Spare parts       |  |              | 7,449  |                  |   | 6,651 
|                  |  |              |        |                  |   |       
|                  |  | $            | 75,699 |                  | $ | 70,569
|                  |  |              |        |                  |   |       

Inventory reserves as of June 30, 2007 and December 31, 2006 were $8,539 and $7,471,
respectively.

3. Other Current Assets:

Other current assets consist of the following:



|                                     |  |              |        |                  |   |       
|------------------------------------ |  | ------------ | ------ | ---------------- | - | ------
|                                     |  | June 30,2007 |        | December 31,2006
|Creditable taxes (value added taxes) |  | $            | 4,810  |                  | $ | 243   
|Prepaid income taxes                 |  |              | 178    |                  |   | 2,718 
|Prepaids                             |  |              | 10,072 |                  |   | 10,585
|Other                                |  |              | 336    |                  |   | 106   
|                                     |  |              |        |                  |   |       
|                                     |  | $            | 15,396 |                  | $ | 13,652
|                                     |  |              |        |                  |   |       



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

4. Intangibles and Other Assets, net:

Intangibles and other assets consist of the following:



|                                                                                                                     |  |                    |  |              |        |                  |   |       
|-------------------------------------------------------------------------------------------------------------------- |  | ------------------ |  | ------------ | ------ | ---------------- | - | ------
|                                                                                                                     |  | Useful life(years) |  | June 30,2007 |        | December 31,2006
|Developed technology and application patents, net of accumulated amortization of $5,444 for 2007 and $4,500 for 2006 |  | 10-20              |  | $            | 31,156 |                  | $ | 32,100
|Customer relationships, net of accumulated amortization of $1,590 for 2007 and $1,240 for 2006                       |  | 5-15               |  |              | 9,740  |                  |   | 8,861 
|Tradenames and license agreements, net of accumulated amortization of $1,859 for 2007 and $1,536 for 2006            |  | 5-20               |  |              | 7,501  |                  |   | 7,764 
|Capitalized software, net of accumulated amortization of $1,485 for 2007 and $1,210 for 2006                         |  | 3-5                |  |              | 2,001  |                  |   | 2,089 
|Non-compete agreement, net of accumulated amortization of $0 for 2007 and $714 for 2006                              |  | 5                  |  |              | 630    |                  |   |      
|                                                                                                                     |  |                    |  |              |        |                  |   |       
|Total Intangibles                                                                                                    |  |                    |  | $            | 51,028 |                  | $ | 50,814
|                                                                                                                     |  |                    |  |              |        |                  |   |       
|Deferred financing costs, net of accumulated amortization of $ 9,921 for 2007 and $8,538 for 2006                    |  |                    |  | $            | 11,582 |                  | $ | 12,966
|Deferred income taxes                                                                                                |  |                    |  |              | 2,257  |                  |   | 2,779 
|Other assets                                                                                                         |  |                    |  |              | 523    |                  |   | 385   
|                                                                                                                     |  |                    |  |              |        |                  |   |       
|Total other assets                                                                                                   |  |                    |  | $            | 14,362 |                  | $ | 16,130
|                                                                                                                     |  |                    |  |              |        |                  |   |       
|                                                                                                                     |  |                    |  | $            | 65,390 |                  | $ | 66,944
|                                                                                                                     |  |                    |  |              |        |                  |   |       

5. Other Current Liabilities:

Other current liabilities consist of the following:



|                      |  |              |        |                  |   |       
|--------------------- |  | ------------ | ------ | ---------------- | - | ------
|                      |  | June 30,2007 |        | December 31,2006
|Payroll related       |  | $            | 7,472  |                  | $ | 8,902 
|Interest              |  |              | 6,601  |                  |   | 6,641 
|Freight and rebates   |  |              | 6,643  |                  |   | 4,668 
|Benefits and pensions |  |              | 5,336  |                  |   | 5,087 
|Taxes                 |  |              | 5,402  |                  |   | 4,418 
|Legal                 |  |              | 583    |                  |   | 307   
|Non-trade payable     |  |              |       |                  |   | 1,310 
|Other                 |  |              | 5,873  |                  |   | 5,491 
|                      |  |              |        |                  |   |       
|                      |  | $            | 37,910 |                  | $ | 36,824
|                      |  |              |        |                  |   |       



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

6. Debt and Interest:

Short-term borrowings and long-term debt consist of the following:



|                          |  |              |         |                  |   |        
|------------------------- |  | ------------ | ------- | ---------------- | - | -------
|                          |  | June 30,2007 |         | December 31,2006
|Senior credit facility    |  | $            | 140,500 |                  | $ | 149,000
|Senior subordinated notes |  |              | 190,000 |                  |   | 190,000
|                          |  |              |         |                  |   |        
|                          |  | $            | 330,500 |                  | $ | 339,000
|Less current portion      |  |              | 1,446   |                  |   | 1,524  
|                          |  |              |         |                  |   |        
|                          |  | $            | 329,054 |                  | $ | 337,476
|                          |  |              |         |                  |   |        

The senior credit facility provides for interest based upon a fixed spread above the banks
prime lending rate or the LIBOR lending rate. The borrowings under the term loan portion of the senior credit facility bear interest at June 30, 2007 at 7.6%. The amount outstanding on the term loan facility as of June 30, 2007 was $140.5
million.

There was no amount outstanding on the revolving portion of the senior credit facility at June 30, 2007. The Company has
issued approximately $4.1 million of letters of credit under the sub-facility as of June 30, 2007.

In April 2006, Innophos, Inc.
executed two rate cap derivative instruments each with a notional amount of $100 million. The terms of the first instrument is a rate cap of 7%, a referenced index based on a three month LIBOR and an expiration date of this instrument is April 2009.
The fair value of this rate cap derivative instrument is $4 as of June 30, 2007. The second rate cap instrument is a rate cap of 7%, a referenced index based on a one month LIBOR and an expiration date of this instrument is April 2008. The fair
value of this rate cap derivative instrument is $0 as of June 30, 2007.

The Company is required within five days from the issuance of
the 2007 annual financial statements to make a prepayment of the term loan in an amount equal to 75% of the excess cash flow (as defined in our credit agreement) in addition to the quarterly principal payments. The Company made an $8.0 million
voluntary prepayment of the term loan on March 30, 2007. In the first quarter of 2007 this prepayment resulted in the accelerated write off of deferred financing charges of approximately $0.2 million. The amount recorded as current portion of
long term debt is the required principal payments for the term loan.

On April 16, 2007, Holdings issued and sold to qualified
institutional buyers relying on Rule 144A under the Securities Act of 1933, as amended, a total of $66.0 million in principal amount of its Senior Unsecured Notes due April 15, 2012. The Senior Unsecured Notes were sold pursuant to a Purchase
Agreement dated April 11, 2007, or the Purchase Agreement, between Innophos and Credit Suisse Securities (USA) LLC, or the Initial Purchaser, and issued under the provisions of an Indenture dated as of April 16, 2007, or the Notes
Indenture, between Innophos and U.S. Bank National Association, as trustee, or the Trustee.

The Senior Unsecured notes accrue interest from the issue date at a rate of 91/2% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, commencing October 15, 2007. As all of the business for Holdings and Innophos
Investments Holdings, Inc. are transacted through Innophos, Inc. and Subsidiaries, Holdings and Innophos Investments Holdings, Inc. are dependent on earnings and distribution of funds from Innophos, Inc. and Subsidiaries.

The proceeds from the sale of the Senior Unsecured notes, together with $0.5 million of cash on hand, were applied to pay expenses and redeem the
entire remaining outstanding amount of Floating Rate Senior Notes due 2015 (including the payment of principal, premium and accrued interest) issued by our parent, Innophos Investments Holdings, Inc. Fees and expenses related to the Senior Unsecured
notes offering were approximately $1.8 million. This amount was recorded as deferred financing costs and will be amortized over the life of the Senior Unsecured notes using the effective interest method.

On April 16, 2007, Innophos Investments Holdings, Inc. called for the redemption of the remaining $60.8 million in principal of its Floating Rate
Senior Notes due 2015 effective May 17, 2007. The redemption of the Floating Rate Senior Notes resulted in an approximate $1.5 million charge to earnings for the acceleration of deferred financing charges and a $1.8 million charge to earnings
for the call premium. The $3.3 million charge was recorded in interest expense for the three months ended June 30, 2007. As all of the business for Holdings and Innophos Investments Holdings, Inc. are transacted through Innophos, Inc. and
Subsidiaries, Holdings and Innophos Investments Holdings, Inc. are dependent on earnings and distribution of funds from Innophos, Inc. and Subsidiaries.



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

In connection with the refinancing transaction, the Company and its lenders amended the senior credit
facility to permit the Company to, among other things, (i) incur up to $120.0 million in unsecured indebtedness of Innophos Holdings, Inc. or Innophos Investments Holdings, Inc., including the notes offered in the refinancing and any other
future debt issuances, (ii) redeem the entire outstanding amount of the Companys Floating Rate Senior Notes, as well as any premiums and penalties resulting from such redemption, (iii) service the interest on the notes offered hereby
through Innophos, Inc. making payments of such amounts to Innophos Investments Holdings, Inc. and Innophos Holdings, Inc. and (iv) to permit Innophos, Inc. to make payments to Innophos Investments Holdings, Inc. and Innophos Holdings, Inc. for
the payment by Innophos Holdings, Inc. of dividends on its common stock of $0.75 per share (adjusted pro-rata for any future stock splits) up to a maximum of $17.5 million per year. As all of the business for Holdings and Innophos Investments
Holdings, Inc. are transacted through Innophos, Inc. and Subsidiaries, Holdings and Innophos Investments Holdings, Inc. are dependent on earnings and distribution of funds from Innophos, Inc. and Subsidiaries.

As of June 30, 2007, management believes the Company was in full compliance with all debt covenant requirements.

The interest installment paid on February 15, 2007 for Innophos Investments Holdings, Inc. Floating Rate Senior Notes was $2.0 million. The
final interest payment (including the $1.8 million call premium) on the Innophos Investments Holdings, Inc. Floating Rate Senior Notes was $3.9 million paid on May 17, 2007. Innophos Investments Holdings, Inc. was dependent on the earnings and
distributions from Innophos, Inc. and subsidiaries to fund this obligation.

Total interest cash payments by the Company for all
indebtedness for the six month period ended June 30, 2007 and June 30, 2006 was $15,061 (excluding the cash interest paid by Innophos Investments Holdings, Inc. of $5,933)and $17,108, respectively.

Interest expense, net consists of the following:



|                            |  |                    |       |   |                  |   |       |              |  |   |              |   |  |   |        |  
|--------------------------- |  | ------------------ | ----- | - | ---------------- | - | ----- | ------------ |  | - | ------------ | - |  | - | ------ | -
|                            |  | Three months ended |       |   | Six months ended |  
|                            |  | June 30,2007       |       |   | June 30,2006     |   |       | June 30,2007 |  |   | June 30,2006 |  
|Interest expense            |  | $                  | 7,497 |   |                  |   | 8,174 |              |  | $ | 15,019       |   |  | $ | 16,565 |  
|Deferred financing cost     |  |                    | 610   |   |                  |   | 702   |              |  |   | 1,384        |   |  |   | 1,978  |  
|Interest income             |  |                    | (189  | ) |                  |   | (573  | )            |  |   | (491         | ) |  |   | (1,243 | )
|                            |  |                    |       |   |                  |   |       |              |  |   |              |   |  |   |        |  
|Total interest expense, net |  | $                  | 7,918 |   |                  | $ | 8,303 |              |  | $ | 15,912       |   |  | $ | 17,300 |  
|                            |  |                    |       |   |                  |   |       |              |  |   |              |   |  |   |        |  

7. Other Long-term liabilities:

Other long-term liabilities consist of the following:



|                                                             |  |              |        |                  |   |       
|------------------------------------------------------------ |  | ------------ | ------ | ---------------- | - | ------
|                                                             |  | June 30,2007 |        | December 31,2006
|Environmental liabilities                                    |  | $            | 1,100  |                  |   | 1,100 
|Profit sharing liabilities                                   |  |              | 1,318  |                  |   | 1,127 
|Deferred income taxes                                        |  |              | 19,484 |                  |   | 21,511
|Pension and post retirement liabilities (US and Canada only) |  |              | 4,228  |                  |   | 6,035 
|Other Liabilities                                            |  |              | 4,335  |                  |   | 3,940 
|                                                             |  |              |        |                  |   |       
|                                                             |  | $            | 30,465 |                  | $ | 33,713
|                                                             |  |              |        |                  |   |       



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

8. Income Taxes:

A reconciliation of the U.S statutory rate and income tax follows:



|                      |  |                                   |         |   |                                |   |        |                                     |  |   |                             |   |  |   |        |  
|--------------------- |  | --------------------------------- | ------- | - | ------------------------------ | - | ------ | ----------------------------------- |  | - | --------------------------- | - |  | - | ------ | -
|                      |  | Six months ended June 30, 2007    |         |   | Six months ended June 30, 2006 |  
|                      |  | Income /(loss) beforeIncome taxes |         |   | Income taxexpense/(benefit)    |   |        | Income / (loss) before Income taxes |  |   | Income taxexpense/(benefit) |  
|US                    |  | $                                 | (13,240 | ) |                                |   | 140    |                                     |  | $ | (515                        | ) |  | $ | 140    |  
|Canada/Mexico         |  |                                   | 20,932  |   |                                |   | 7,203  |                                     |  |   | 6,744                       |   |  |   | 256    |  
|                      |  |                                   |         |   |                                |   |        |                                     |  |   |                             |   |  |   |        |  
|Total                 |  | $                                 | 7,692   |   |                                |   | 7,343  |                                     |  |   | 6,229                       |   |  |   | 396    |  
|                      |  |                                   |         |   |                                |   |        |                                     |  |   |                             |   |  |   |        |  
|Current income taxes  |  |                                   |         |   |                                |   | 8,847  |                                     |  |   |                             |   |  | $ | 2,136  |  
|Deferred income taxes |  |                                   |         |   |                                |   | (1,504 | )                                   |  |   |                             |   |  |   | (1,740 | )
|                      |  |                                   |         |   |                                |   |        |                                     |  |   |                             |   |  |   |        |  
|Total                 |  |                                   |         |   |                                | $ | 7,343  |                                     |  |   |                             |   |  | $ | 396    |  
|                      |  |                                   |         |   |                                |   |        |                                     |  |   |                             |   |  |   |        |  



|                                               |  |                               |       |   |                               |   |        |  
|---------------------------------------------- |  | ----------------------------- | ----- | - | ----------------------------- | - | ------ | -
|                                               |  | Six months endedJune 30, 2007 |       |   | Six months endedJune 30, 2006 |  
|Income tax expense at the U.S. statutory rate  |  | $                             | 2,692 |   |                               | $ | 2,180  |  
|State income taxes (net of federal tax effect) |  |                               | 43    |   |                               |   | 38     |  
|Foreign tax rate differential                  |  |                               | (37   | ) |                               |   | (2,049 | )
|Change in valuation allowance                  |  |                               | 4,672 |   |                               |   | 245    |  
|Non-deductible permanent items                 |  |                               | 69    |   |                               |   | 40     |  
|Other                                          |  |                               | (96   | ) |                               |   | (58    | )
|                                               |  |                               |       |   |                               |   |        |  
|Provision for income taxes                     |  | $                             | 7,343 |   |                               | $ | 396    |  
|                                               |  |                               |       |   |                               |   |        |  

Income taxes paid were $5,911 and $6,395 for the six months ended June 30, 2007 and
June 30, 2006, respectively.

Pursuant to Section 382 of the Internal Revenue Code, as amended, the annual utilization of the
Companys U.S. net operating loss carryforwards may be limited, if the Company experiences a change in ownership of more than 50% within a three year period. The Company believes it has experienced an ownership change on April 2, 2007 that
limits the utilization of net operating losses to offset future taxable income. The Company maintains a full valuation allowance for its U.S. net deferred tax assets and net operating loss carryforwards as realization of the U.S. net deferred tax
asset is not reasonably assured. Therefore, as a result of the full valuation allowance for the U.S. net deferred tax assets, the Company believes that the ownership change pursuant to Section 382 will not have a financial statement impact.

9. Commitments and Contingencies:

Environmental

The Companys operations are subject to extensive and changing federal and state environmental
laws and regulations. The Companys manufacturing sites have an extended history of industrial use, and soil and groundwater contamination have or may have occurred in the past and might occur or be discovered in the future.

Environmental efforts are difficult to assess for numerous reasons, including the discovery of new remedial sites, discovery of new information and
scarcity of reliable information pertaining to certain sites, improvements in technology, changes in environmental laws and regulations, numerous possible remedial techniques and solutions, difficulty in assessing the involvement of and the
financial capability of other potentially responsible parties and the extended time periods over which remediation occurs. Other than the items listed below, the Company is not aware of material environmental liabilities which are reasonably
probable and estimable. As the Companys environmental contingencies are more clearly determined, it



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

is reasonably possible that amounts accrued may be necessary. However, management does not believe, based on current
information, that environmental remediation requirements will have a material impact on the Companys results of operations, financial position or cash flows.

Under the Agreement of Purchase and Sale between the Company and several affiliates within the Rhodia S.A. Group according to which the Company acquired the Phosphates Business and related assets, the Company has
certain rights of indemnification from the sellers for breach of representations, warranties, covenants and other agreements. With respect to undisclosed environmental matters, such indemnification rights are subject to certain substantial
limitations and exclusions.

Future environmental spending is probable at our site in Nashville, Tennessee, the eastern portion of which
had been used historically as a landfill, and a western parcel previously acquired from a third party, which reportedly had housed, but no longer does, a fertilizer and pesticide manufacturing facility. We have an estimated liability with a range of
$0.9-$1.2 million. The remedial action plan has yet to be finalized, and as such, the Company has recorded a liability, which represents the Companys best estimate, of $1.1 million as of June 30, 2007.

Maintaining compliance with health and safety and environmental laws and regulations has resulted in ongoing costs for us. Currently, we are involved in
several compliance and remediation efforts and agency inspection matters concerning health and safety and environmental matters. The EPA has indicated that compliance at facilities in the phosphate industry is a high enforcement priority. In 2004,
the EPA conducted a multi-media inspection and in 2005 followed up on issues regarding compliance with air, water and hazardous waste regulations at our Geismar, Louisiana plant. In August 2006, we received a report in connection with that
inspection identifying certain areas of concern raised by the EPA under its hazardous waste regulations. We believe that we operate our Geismar facility in material compliance with all applicable environmental laws and regulations, including those
of the EPA, and have responded to those concerns by explaining how in our judgment our operations meet applicable regulations or exclusions. Nevertheless, we could incur significant expenses pursuant to new laws, regulations or governmental
policies, or new interpretations of existing laws, regulations or governmental policies, or as a result of the development or discovery of new facts, events, circumstances or conditions at any of our facilities. In March 2007, we received a further
EPA request for additional information concerning hazardous waste, air pollution controls and materials handling at the Geismar plant. We have provided the requested information in a timely manner.

Litigation

Mexican CNA
Water Tax Claims

On November 1, 2004 Innophos Fosfatados, received notice of the Fresh Water Claims from the CNA relating to
extraction and use of fresh water at our Coatzacoalcos, Veracruz, Mexico plant from 1998-2002. As initially assessed by the CNA, the claims total approximately $30.9 million at current exchange rates as of July 25, 2007, including basic charges
of $10.7 million for interest, inflation and penalties.

Management believes that Innophos Fosfatados has valid bases for challenging the
CNA Fresh Water claims, and we are vigorously defending that matter as well.

CNA Administrative Proceedings; Appeals. On
January 17, 2005, Innophos Fosfatados filed documents with the CNA seeking revocation and dismissal of all Fresh Water Claims made by that agency. On August 29, 2005, the CNA rejected the substantive challenges as to the Fresh Water Claims
(although the CNA agreed that certain corrections were required as to its surcharge calculations), confirming the original claims. On November 3, 2005, Innophos Fosfatados filed an appeal with the Mexican Federal Court of Fiscal and
Administrative Justice. It is not known when our appeal of the Fresh Water Claims will be decided by the court.

Rhodia
Indemnification. Under the terms of the Rhodia Agreement according to which our business was purchased, we believe we are entitled to be indemnified fully against a number of contingencies, including claims for Taxes (as defined in the Rhodia
Agreement) such as those asserted by the CNA, as well as any additional duties, taxes and charges which may be



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##### Table of Contents

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

assessed by the CNA for periods after 2002.Rhodia has acknowledged its responsibility for the Fresh Water
Claims, but under a different indemnification obligation, asserting that the applicable indemnification is for breach of representations and warranties, which would subject the liabilities relating to the CNA claims to a deductible amount of $15.9
million and a limit of $79.5 million above that. Nevertheless, Rhodia has assumed control of the defense of the CNA claims.

On
December 16, 2004, we sued Rhodia in New York State Supreme Court (New York County) seeking a determination that we are entitled to full indemnification under the Rhodia Agreement. On June 13, 2005, the court granted us summary judgment,
declaring that the CNA claims were Taxes under the Rhodia Agreement and that Rhodia was obligated to provide any necessary security to guarantee the claims to the Mexican government. Rhodia appealed the decision to the Appellate Division, First
Department, which affirmed the lower courts rulings in our favor on March 22, 2007. Rhodia then filed for leave to appeal to New Yorks highest court, the Court of Appeals, on the issue of the CNA claims as Taxes. On
May 29, 2007, Rhodias motion was granted. Briefing and argument are scheduled for the fall of 2007. Rhodia did not seek an appeal on the issue of its responsibility for security.

Further Proceedings.A final determination of the CNA Fresh Water matter may require appeals to the Mexican Supreme Court and remands to the CNA or
to lower courts, a process that might continue for several years. In the event that the appeals were to be decided against us, we could be required to pay a judgment for the entire amount claimed.

If the CNA Fresh Water Claims were sustained for the period 1998-2002, it is possible that CNA would seek to claim similar higher duties, fees and other
charges for fresh water extraction and usage from 2003 on into the future. Management estimates that such charges would be approximately $8.5 million of additional basic charges to date, excluding interest, inflation, and penalties, and, under
current operating conditions, approximately $1.7 million of additional basic charges per year. We believe Rhodia would be responsible to indemnify us fully for those additional Taxes arising on or before the August 2004 closing, and for post-closing
losses caused by breaches of covenants, which we have claimed.

Based upon advice of counsel and our review of the CNA Fresh Water Claims,
the facts and applicable law, we have determined that liability is reasonably possible, but is neither probable nor reasonably estimable. Accordingly, we have not established a liability on the balance sheet as of June 30, 2007. As additional
information is gained, we will reassess the potential liability and establish the amount of any loss reserve as appropriate. The ultimate liability amount could be material to our results of operations and financial condition. Furthermore, Rhodia
has a significant amount of debt, a non-investment grade credit rating and has reported losses in recent fiscal years. As a result, we cannot be sure we will ultimately collect any amounts due from Rhodia under our Rhodia Agreement indemnification
rights.

A series of claims by CNA concerning salt water extraction and use for 1998 and 1999, the Salt Water Claims, totaling approximately
$107 million (including interest, inflation and penalties), was recently nullified in a unanimous order of the Mexican Court of Fiscal and Administrative Justice, which was determined by order of the same court to be final and unappealable as of
July 10, 2007.

Mexican Water Recycling System  PAMCAR Agreement

Innophos Fosfatados is the successor to the PAMCAR Agreement which required specified improvements at the Coatzacoalcos plant to be completed by
December 31, 2004. Under the terms of the PAMCAR Agreement and subject to its compliance, the CNA temporarily exempted Innophos Fosfatados from the payment of certain waste water discharge duties, taxes and related charges that normally would
have been payable. On January 10, 2005, after bringing on line newly installed water recycling equipment, Innophos Fosfatados notified the CNA of its position that it complied with the applicable requirements of the PAMCAR Agreement as of
December 31, 2004.

Innophos Fosfatados waste water discharges had been the subject of an earlier study by the National
University of Mexico, which concluded in October 2004 that the discharges did not adversely affect the receiving water bodies or the environment. In addition to a previous request by Innophos Fosfatados to update the relevant waste water discharge
permit with new operating information, in October 2004, Innophos Fosfatados filed a petition with the CNA to reflect the results of the university study and to revise upward the discharge limits which its operations (including as improved by the
water recycling installation) could satisfy. In 2005, Innophos Fosfatados received a new Concession Title (containing a waste water discharge permit and limits) granting the requested relief as to all discharge limits.

Although there has been no formal action, CNA regional officials may take the position that compliance with the PAMCAR Agreement was to be determined by
the previous Concession Title which contained a permit with stricter discharge limits. Consequently, while Mexican counsel has advised us that, as a matter of applicable law, compliance should be determined upon the new, revised, discharge limits,
CNA regional officials could find that Innophos Fosfatados was not in compliance for the duration of the PAMCAR Agreement. In that event, the exempted taxes, duties and related charges



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##### Table of Contents

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

through December 31, 2004, could be reinstated. We estimate that the amount of exempted duties and related charges
through December 31, 2004 may range up to $10.6 million at current exchange rates as of July 25, 2007 (including inflation and interest). In addition, we have been advised it is possible under applicable law that a penalty could be imposed
of up to an additional $11.2 million at current exchange rates as of July 25, 2007. We believe that the above amounts represent the upper range of possible liability based on a finding of noncompliance involving pH levels rather than
phosphorus, and, accordingly, could be significantly reduced. We do not know whether the CNA will make a finding of noncompliance as to any aspect of the PAMCAR Agreement or what discharge limits would constitute the basis for a finding of
noncompliance as to water quality requirements.

Based upon currently available information and advice of counsel, we would take
appropriate steps to challenge any claim stemming from an alleged violation of the PAMCAR Agreement before the CNA and/or Mexican courts, and if any such claim were presented, evaluate potential indemnification rights against Rhodia. Based upon
advice of counsel and our review of the CNA claims, the facts and applicable law, we have determined that liability is reasonably possible, but is neither probable nor reasonably estimable. Accordingly, we did not establish a liability on the
balance sheet as of June 30, 2007.

SCT Concession Title

In late March 2007, Innophos Fosfatados received a follow up to an earlier request for information from the SCT related to our Concession Title to use
national port facilities for the Coatzacoalcos plant. Innophos Fosfatados had been granted a 20 year Concession Title in 1993 covering land, pier and water areas, and the SCT is the agency with authority to oversee compliance with that Concession
Title, including the payment of required taxes and fees, and to take enforcement action, including revocation or refusal to renew a Concession Title. In our review of the matter, we determined that there was a probable liability and, in response to
the SCT demand that we undertake a regularization (that is, a settlement) of omitted or insufficient payments of taxes and fees under the Concession Title, in June/July 2007, we completed an updated appraisal of the pier-related
facilities, made required filings and paid approximately $2.0 million which is included in cost of goods sold in the three months ended June 30, 2007. The payments consisted of approximately $1.7 million for the periods November 1996 through
August 13, 2004 and approximately $0.3 million for the periods August 14, 2004 through May 2007. By completing the regularization process, management was informed by the agency that no penalties would be imposed. Although the appraisal we
obtained which established values for the taxes and fees due may be accepted by the SCT for settlement purposes, the SCT is entitled, and we believe likely, to order a new appraisal of the port facilities, which could result in a further adjustment
of amounts due on our account, which management believes would not be material.

We believe the liability arising from the SCT
regularization, to the extent applicable to periods prior to the August 2004 closing of the acquisition, is fully indemnified by Rhodia under the Rhodia Agreement. We have put Rhodia on notice and made a demand for indemnification amounting to a
total of $1.7 million of pre-acquisition Tax claims. We also believe we are indemnified under other provisions of the Rhodia Agreement, subject to satisfaction of any applicable deductibles, for some or all of the remaining amounts of the
regularization payments for periods after the closing and likewise have made a claim for those amounts. Thus far, Rhodia has maintained that the SCT charges are not Taxes as defined under the Rhodia Agreement and that otherwise there are
defenses to the SCT claims. Therefore, although we intend to pursue indemnification from Rhodia vigorously, it is possible that we will not prevail in any required legal action or that Rhodia will not be able to pay us if we do. The SCT related
claims are considered a gain contingency and therefore no receivable has been recorded as of June 30, 2007.

Other Legal Matters

In June 2005, Innophos Canada, Inc. was contacted by representatives of The Mosaic Company (a division of Cargill Corporation), or
Mosaic, seeking a meeting to discuss the status of an ongoing remedial investigation and clean-up Mosaic is conducting at its currently closed fertilizer manufacturing site located north of Innophos Canadas Pt. Maitland, Ontario Canada plant
site. The remediation is being overseen by the Provincial Ministry of Environment, or MOE. Mosaic stated that, in its view, we and Rhodia (our predecessor in interest prior to 2004) were responsible for some phosphorus compound contamination at a
rail yard between the Innophos Canada, Inc. and Mosaic sites, and will be asked to participate in the clean-up. We have determined that this contingent liability is neither probable nor estimable at this time, but liability is reasonably possible.
We have notified Rhodia of the Mosaic claim under the Rhodia Agreement, and we will seek all appropriate indemnification.

In addition, we
are party to legal proceedings that arise in the ordinary course of our business. Except as to the matters specifically discussed, we do not believe that these legal proceedings represent probable or reasonably possible liabilities. However, these
matters cannot be predicted with certainty and an unfavorable resolution of one or more of them could have a material adverse effect on our business, results of operations, financial condition, and/or cash flows.



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Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

Other contingencies

Holdings is a party to a 2004 Registration Rights Agreement with Bain Capital and others. On May 30, 2007, as required in response to a demand under
that agreement, Holdings filed a registration statement with the U.S. Securities and Exchange Commission covering 5.0 million shares of its common stock proposed to be offered to the public through underwriters by selling stockholders under the
agreement. Under the Registration Rights Agreement, Holdings would be required to bear the costs of such an offering, except for underwriting discounts and commissions, although Holdings will not receive proceeds from it. On August 9, 2007, due to
adverse market conditions, Bain Capital requested Holdings to withdraw the registration statement.

This report does not constitute an
offer to sell, or the solicitation of an offer to buy, any securities of Holdings, nor shall there be any sale of securities in any state in which an offer, solicitation or sale would be unlawful prior to registration or qualification under the
securities laws of that state.

10. Pension:

Net periodic benefit expense for the United States plans for the three months ended June 30, 2007:



|                                            |  |             |     |   |                              |   |     |       |  |   |     |  
|------------------------------------------- |  | ----------- | --- | - | ---------------------------- | - | --- | ----- |  | - | --- | -
|                                            |  | 2007        |    
|                                            |  | PensionPlan |     |   | Otherpost-retirementbenefits |   |     | Total | 
|Service cost                                |  | $           | 38  |   |                              | $ | 84  |       |  | $ | 122 |  
|Interest cost                               |  |             | 18  |   |                              |   | 35  |       |  |   | 53  |  
|Expected return on assets                   |  |             | (6  | ) |                              |   |    |       |  |   | (6  | )
|Amortization of prior service cost          |  |             | 15  |   |                              |   | 72  |       |  |   | 87  |  
|Amortization of unrecognized (gains)/losses |  |             |    |   |                              |   | (27 | )     |  |   | (27 | )
|Curtailment expense for plan amendment      |  |             | 203 |   |                              |   |    |       |  |   | 203 |  
|                                            |  |             |     |   |                              |   |     |       |  |   |     |  
|Net periodic benefit expense                |  | $           | 268 |   |                              | $ | 164 |       |  | $ | 432 |  
|                                            |  |             |     |   |                              |   |     |       |  |   |     |  

Net periodic benefit expense for the United States plans for the three months ended June 30,
2006:



|                                            |  |                |     |   |               |   |     |       |  |   |     |  
|------------------------------------------- |  | -------------- | --- | - | ------------- | - | --- | ----- |  | - | --- | -
|                                            |  | 2006           |    
|                                            |  | DB PensionPlan |     |   | Otherbenefits |   |     | Total | 
|Service cost                                |  | $              | 91  |   |               |   | 83  |       |  | $ | 174 |  
|Interest cost                               |  |                | 29  |   |               |   | 24  |       |  |   | 53  |  
|Expected return on assets                   |  |                | (4  | ) |               |   | 72  |       |  |   | 68  |  
|Amortization of prior service cost          |  |                | 34  |   |               |   |    |       |  |   | 34  |  
|Amortization of unrecognized (gains)/losses |  |                |    |   |               |   | (35 | )     |  |   | (35 | )
|                                            |  |                |     |   |               |   |     |       |  |   |     |  
|Net periodic benefit expense                |  | $              | 150 |   |               | $ | 144 |       |  | $ | 294 |  
|                                            |  |                |     |   |               |   |     |       |  |   |     |  



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

Net periodic benefit expense for the United States plans for the six months ended June 30, 2007:



|                                            |  |             |     |   |                              |   |     |       |  |   |     |  
|------------------------------------------- |  | ----------- | --- | - | ---------------------------- | - | --- | ----- |  | - | --- | -
|                                            |  | 2007        |    
|                                            |  | PensionPlan |     |   | Otherpost-retirementbenefits |   |     | Total | 
|Service cost                                |  | $           | 125 |   |                              | $ | 168 |       |  | $ | 293 |  
|Interest cost                               |  |             | 61  |   |                              |   | 70  |       |  |   | 131 |  
|Expected return on assets                   |  |             | (20 | ) |                              |   |    |       |  |   | (20 | )
|Amortization of prior service cost          |  |             | 49  |   |                              |   | 144 |       |  |   | 193 |  
|Amortization of unrecognized (gains)/losses |  |             |    |   |                              |   | (54 | )     |  |   | (54 | )
|Curtailment expense for plan amendment      |  |             | 203 |   |                              |   |    |       |  |   | 203 |  
|                                            |  |             |     |   |                              |   |     |       |  |   |     |  
|Net periodic benefit expense                |  | $           | 418 |   |                              | $ | 328 |       |  | $ | 746 |  
|                                            |  |             |     |   |                              |   |     |       |  |   |     |  



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

Net periodic benefit expense for the United States plans for the six months ended June 30, 2006:



|                                            |  |                |     |   |               |   |     |       |  |   |     |  
|------------------------------------------- |  | -------------- | --- | - | ------------- | - | --- | ----- |  | - | --- | -
|                                            |  | 2006           |    
|                                            |  | DB PensionPlan |     |   | Otherbenefits |   |     | Total | 
|Service cost                                |  | $              | 182 |   |               |   | 166 |       |  | $ | 348 |  
|Interest cost                               |  |                | 58  |   |               |   | 48  |       |  |   | 106 |  
|Expected return on assets                   |  |                | (8  | ) |               |   | 144 |       |  |   | 136 |  
|Amortization of prior service cost          |  |                | 68  |   |               |   |    |       |  |   | 68  |  
|Amortization of unrecognized (gains)/losses |  |                |    |   |               |   | (70 | )     |  |   | (70 | )
|                                            |  |                |     |   |               |   |     |       |  |   |     |  
|Net periodic benefit expense                |  | $              | 300 |   |               | $ | 288 |       |  | $ | 588 |  
|                                            |  |                |     |   |               |   |     |       |  |   |     |  

We made our entire cash contributions of $1.9 million for our U.S. defined contribution plan
during the first quarter of 2007 for the plan year 2006. The U.S. defined benefit cash contributions will be, at a minimum, approximately $0.6 million for 2007.

On April 26, 2007, the Company and the Union for the hourly employees at our Nashville facility agreed that it would freeze its defined benefit pension plan (the Plan) as of August 1, 2007. The
accrual of additional benefits or increase in the current level of benefits under the Plan will cease as of August 1, 2007, after which the Nashville union employees will participate in the Companys existing non contributory defined
contribution benefit plan. As of January 1, 2007, Plan assets were less than the projected benefit obligation. Freezing of the Plan was accounted for as a curtailment under SFAS No. 88, Employers Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits. The Company remeasured the pension obligation during the three months ended June 30, 2007 and as a result, reduced the projected benefit obligation by $1.2
million and recognized $1.4 million largely attributable to the recognition of prior service cost, resulting in a net curtailment loss of $0.2 million to earnings.

Net periodic benefit expense for the Canadian plans for the three months ended June 30, 2007:



|                                              |  |             |      |   |                              |   |       |  |   |      |  
|--------------------------------------------- |  | ----------- | ---- | - | ---------------------------- | - | ----- |  | - | ---- | -
|                                              |  | 2007        |     
|                                              |  | PensionPlan |      |   | Otherpost-retirementbenefits |   | Total | 
|Service cost                                  |  | $           | 53   |   |                              |   | 13    |  | $ | 66   |  
|Interest cost                                 |  |             | 97   |   |                              |   | 11    |  |   | 108  |  
|Expected return on assets                     |  |             | (130 | ) |                              |   |      |  |   | (130 | )
|Amortization of initial transition obligation |  |             |     |   |                              |   | 7     |  |   | 7    |  
|Amortization of unrecognized (gains)/losses   |  |             | 11   |   |                              |   | 3     |  |   | 14   |  
|                                              |  |             |      |   |                              |   |       |  |   |      |  
|Net periodic benefit expense                  |  | $           | 31   |   |                              | $ | 34    |  | $ | 65   |  
|                                              |  |             |      |   |                              |   |       |  |   |      |  

Net periodic benefit expense for the Canadian plans for the three months ended June 30, 2006:



|                                              |  |                |      |   |               |   |       |  |   |      |  
|--------------------------------------------- |  | -------------- | ---- | - | ------------- | - | ----- |  | - | ---- | -
|                                              |  | 2006           |     
|                                              |  | DB PensionPlan |      |   | Otherbenefits |   | Total | 
|Service cost                                  |  | $              | 54   |   |               |   | 12    |  | $ | 66   |  
|Interest cost                                 |  |                | 95   |   |               |   | 11    |  |   | 106  |  
|Expected return on assets                     |  |                | (101 | ) |               |   |      |  |   | (101 | )
|Amortization of initial transition obligation |  |                |     |   |               |   | 4     |  |   | 4    |  
|Amortization of (gains)/losses                |  |                | 18   |   |               |   | 8     |  |   | 26   |  
|                                              |  |                |      |   |               |   |       |  |   |      |  
|Net periodic benefit expense                  |  | $              | 66   |   |               | $ | 35    |  | $ | 101  |  
|                                              |  |                |      |   |               |   |       |  |   |      |  



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

Net periodic benefit expense for the Canadian plans for the six months ended June 30, 2007:



|                                              |  |             |      |   |                              |   |       |  |   |      |  
|--------------------------------------------- |  | ----------- | ---- | - | ---------------------------- | - | ----- |  | - | ---- | -
|                                              |  | 2007        |     
|                                              |  | PensionPlan |      |   | Otherpost-retirementbenefits |   | Total | 
|Service cost                                  |  | $           | 106  |   |                              |   | 26    |  | $ | 132  |  
|Interest cost                                 |  |             | 194  |   |                              |   | 22    |  |   | 216  |  
|Expected return on assets                     |  |             | (260 | ) |                              |   |      |  |   | (260 | )
|Amortization of initial transition obligation |  |             |     |   |                              |   | 14    |  |   | 14   |  
|Amortization of unrecognized (gains)/losses   |  |             | 22   |   |                              |   | 6     |  |   | 28   |  
|                                              |  |             |      |   |                              |   |       |  |   |      |  
|Net periodic benefit expense                  |  | $           | 62   |   |                              | $ | 68    |  | $ | 130  |  
|                                              |  |             |      |   |                              |   |       |  |   |      |  

Net periodic benefit expense for the Canadian plans for the six months ended June 30, 2006:



|                                              |  |                |      |   |               |   |       |  |   |      |  
|--------------------------------------------- |  | -------------- | ---- | - | ------------- | - | ----- |  | - | ---- | -
|                                              |  | 2006           |     
|                                              |  | DB PensionPlan |      |   | Otherbenefits |   | Total | 
|Service cost                                  |  | $              | 108  |   |               |   | 24    |  | $ | 132  |  
|Interest cost                                 |  |                | 190  |   |               |   | 22    |  |   | 212  |  
|Expected return on assets                     |  |                | (202 | ) |               |   |      |  |   | (202 | )
|Amortization of initial transition obligation |  |                |     |   |               |   | 8     |  |   | 8    |  
|Amortization of (gains)/losses                |  |                | 36   |   |               |   | 16    |  |   | 52   |  
|                                              |  |                |      |   |               |   |       |  |   |      |  
|Net periodic benefit expense                  |  | $              | 132  |   |               | $ | 70    |  | $ | 202  |  
|                                              |  |                |      |   |               |   |       |  |   |      |  

We made cash contributions to our Canadian defined benefit plan of 0.8 million during the six
months ended June 30, 2007. We expect to make cash contributions to our Canadian defined benefit plans of $0.7 million during the remainder of 2007.

11. Early Cancellation of Rhodia Sales Agency Agreement

Effective June 30, 2007 Innophos and Rhodia, Inc. completed a
transaction, which resulted in the early cancellation of the companies 2004 pharma global sales agency agreement, and the acquisition of related business assets by Innophos. Under the 2004 agreement, which had a term of 10 years,
Rhodia and its affiliates provided sales, marketing, R&D and technical services for Innophos calcium phosphate pharmaceutical excipients and nutritional supplement products.

The early cancellation, mutually agreed upon by the parties, will result in Innophos directly marketing those products through its own sales
organization, and assuming all product development activities. Rhodia agreed to five year global non-competition and non-solicitation covenants with respect to the products and applications involved, and conveyed certain contracts, R&D
equipment, patents, trade names, and intellectual property rights to Innophos.

The overall transaction resulted in payments by Innophos to
Rhodia of $9.0 million, subject to certain minor post-closing adjustments which will occur during the transition period. The transaction resulted in a charge of approximately $6.3 million to selling, general and administrative expenses in the second
quarter of 2007 related to the contract cancellation value. Prepaid transition costs of $0.6 million and the business related assets, both tangible and intangible, of $2.1 million were also recorded in the second quarter of 2007. The lives of the
business related assets were between five and seven years. In 2006, the commissions paid by Innophos to Rhodia under this agreement totaled $3.7 million.

12. Segment Reporting:

The Company discloses certain financial and supplementary information about its reportable segments,
revenue by products and revenues by geographic area. Operating segments are defined as components of an enterprise about which separate discrete financial information is evaluated regularly by the chief operating decision maker, in order to decide
how to allocate resources and assess performance. The primary key performance indicators for the chief operating decision maker are Sales and Operating Income. The Company reports its operations in three reporting segmentsUnited States, Mexico
and Canada, each of which sells the entire portfolio of products.



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)



|                                         |  |               |         |   |        |   |         |  |              |        |  |       |         |   |  |   |        
|---------------------------------------- |  | ------------- | ------- | - | ------ | - | ------- |  | ------------ | ------ |  | ----- | ------- | - |  | - | -------
|For the three months ended June 30, 2007 |  | United States |         |   | Mexico |   | Canada  |  | Eliminations |        |  | Total
|Sales                                    |  | $             | 84,051  |   |        | $ | 60,374  |  | $            | 7,487  |  | $     |        |   |  | $ | 151,912
|Intersegment sales                       |  |               | 7,307   |   |        |   | 8,510   |  |              | 14,418 |  |       | (30,235 | ) |  |   |       
|                                         |  |               |         |   |        |   |         |  |              |        |  |       |         |   |  |   |        
|Total sales                              |  | $             | 91,358  |   |        | $ | 68,884  |  | $            | 21,905 |  | $     | (30,235 | ) |  | $ | 151,912
|                                         |  |               |         |   |        |   |         |  |              |        |  |       |         |   |  |   |        
|Operating income (loss)                  |  | $             | (3,035  | ) |        | $ | 15,194  |  | $            | 1,309  |  | $     |        |   |  | $ | 13,468 
|                                         |  |               |         |   |        |   |         |  |              |        |  |       |         |   |  |   |        
|                                         |  |               |         |   |       
|For the three months ended June 30, 2006 |  | United States |         |   | Mexico |   | Canada  |  | Eliminations |        |  | Total
|Sales                                    |  | $             | 79,625  |   |        | $ | 51,888  |  | $            | 7,768  |  | $     |        |   |  | $ | 139,281
|Intersegment sales                       |  |               | 7,327   |   |        |   | 5,994   |  |              | 14,819 |  |       | (28,140 | ) |  |   |       
|                                         |  |               |         |   |        |   |         |  |              |        |  |       |         |   |  |   |        
|Total sales                              |  | $             | 86,952  |   |        | $ | 57,882  |  | $            | 22,587 |  | $     | (28,140 | ) |  | $ | 139,281
|                                         |  |               |         |   |        |   |         |  |              |        |  |       |         |   |  |   |        
|Operating income (loss)                  |  | $             | 3,044   |   |        | $ | 9,033   |  | $            | 157    |  | $     |        |   |  | $ | 12,234 
|                                         |  |               |         |   |        |   |         |  |              |        |  |       |         |   |  |   |        
|                                         |  |               |         |   |       
|For the six months ended June 30, 2007   |  | United States |         |   | Mexico |   | Canada  |  | Eliminations |        |  | Total
|Sales                                    |  | $             | 160,178 |   |        | $ | 113,413 |  | $            | 15,001 |  | $     |        |   |  | $ | 288,592
|Intersegment sales                       |  |               | 14,134  |   |        |   | 13,189  |  |              | 29,329 |  |       | (56,652 | ) |  |   |       
|                                         |  |               |         |   |        |   |         |  |              |        |  |       |         |   |  |   |        
|Total sales                              |  | $             | 174,312 |   |        | $ | 126,602 |  | $            | 44,330 |  | $     | (56,652 | ) |  | $ | 288,592
|                                         |  |               |         |   |        |   |         |  |              |        |  |       |         |   |  |   |        
|Operating income (loss)                  |  | $             | (2,397  | ) |        | $ | 23,147  |  | $            | 2,731  |  | $     |        |   |  | $ | 23,481 
|                                         |  |               |         |   |        |   |         |  |              |        |  |       |         |   |  |   |        
|                                         |  |               |         |   |       
|For the six months ended June 30, 2006   |  | United States |         |   | Mexico |   | Canada  |  | Eliminations |        |  | Total
|Sales                                    |  | $             | 158,589 |   |        | $ | 96,560  |  | $            | 14,467 |  | $     |        |   |  | $ | 269,616
|Intersegment sales                       |  |               | 18,095  |   |        |   | 10,356  |  |              | 31,044 |  |       | (59,495 | ) |  |   |       
|                                         |  |               |         |   |        |   |         |  |              |        |  |       |         |   |  |   |        
|Total sales                              |  | $             | 176,684 |   |        | $ | 106,916 |  | $            | 45,511 |  | $     | (59,495 | ) |  | $ | 269,616
|                                         |  |               |         |   |        |   |         |  |              |        |  |       |         |   |  |   |        
|Operating income (loss)                  |  | $             | 11,731  |   |        | $ | 10,596  |  | $            | 980    |  | $     |        |   |  | $ | 23,307 
|                                         |  |               |         |   |        |   |         |  |              |        |  |       |         |   |  |   |        



|                        |  |                    |         |                  |   |              |  |              |         |  |   |        
|----------------------- |  | ------------------ | ------- | ---------------- | - | ------------ |  | ------------ | ------- |  | - | -------
|                        |  | Three months ended |         | Six months ended
|Geographic Revenues     |  | June 30,2007       |         | June 30,2006     |   | June 30,2007 |  | June 30,2006
|US                      |  | $                  | 75,528  |                  | $ | 72,670       |  | $            | 145,149 |  | $ | 145,353
|Mexico                  |  |                    | 28,668  |                  |   | 30,018       |  |              | 67,385  |  |   | 64,209 
|Canada                  |  |                    | 8,222   |                  |   | 8,782        |  |              | 16,066  |  |   | 16,411 
|Other foreign countries |  |                    | 39,494  |                  |   | 27,811       |  |              | 59,992  |  |   | 43,643 
|                        |  |                    |         |                  |   |              |  |              |         |  |   |        
|Total                   |  | $                  | 151,912 |                  | $ | 139,281      |  | $            | 288,592 |  | $ | 269,616
|                        |  |                    |         |                  |   |              |  |              |         |  |   |        



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

13. Condensed Combining Financial Statements:

The following condensed combined financial data is presented to segregate the assets, liabilities, and results of operations and cash flows of the US
operations (the Guarantors) and the Canadian and Mexican operations (the Non-guarantors). Innophos Inc. has issued debt and the Guarantor subsidiary is a 100% wholly owned subsidiary of Innophos Inc. The Non-guarantors are
100% wholly-owned subsidiaries of the Guarantors. Innophos, Inc. and the Guarantor subsidiary will fully and unconditionally and jointly and severally, guarantee the Companys obligations under the Companys senior credit facility and
Innophos, Inc.s Senior Subordinated Notes due 2014. Investments in subsidiaries are accounted for by the guarantor using the equity method of accounting. The Non-guarantors are presented on a combined basis. The principal combining adjustments
are to eliminate intercompany balances and transactions.



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheet

As of June 30, 2007

(In thousands)



|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|----------------------------------------------------------- |  | -------------- | ------- | ------------------- | - | ----------------------- |  | -------------------------- | ------- |  | ----- | -------- | - |  | - | -------
|                                                            |  | Innophos, Inc. |         | GuarantorSubsidiary |   | Non-GuarantorSubsidiary |  | AdjustmentsandEliminations |         |  | Total
|ASSETS                                                      |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Current Assets:                                             |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Cash and cash equivalents                                   |  | $              | 4,064   |                     | $ | 6                       |  | $                          | 15,007  |  | $     |         |   |  | $ | 19,077 
|Accounts receivable                                         |  |                | 124,466 |                     |   |                        |  |                            | 117,309 |  |       | (180,202 | ) |  |   | 61,573 
|Inventories                                                 |  |                | 44,181  |                     |   |                        |  |                            | 31,518  |  |       |         |   |  |   | 75,699 
|Other current assets                                        |  |                | 10,100  |                     |   |                        |  |                            | 6,024   |  |       | (728     | ) |  |   | 15,396 
|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Total current assets                                        |  |                | 182,811 |                     |   | 6                       |  |                            | 169,858 |  |       | (180,930 | ) |  |   | 171,745
|Property, plant and equipment, net                          |  |                | 135,113 |                     |   |                        |  |                            | 131,972 |  |       |         |   |  |   | 267,085
|Goodwill                                                    |  |                | 7,237   |                     |   |                        |  |                            | 40,031  |  |       |         |   |  |   | 47,268 
|Investment in subsidiaries                                  |  |                | 90,990  |                     |   | 57,254                  |  |                            |        |  |       | (148,244 | ) |  |   |       
|Intercompany notes                                          |  |                | 116,109 |                     |   |                        |  |                            |        |  |       | (116,109 | ) |  |   |       
|Intangibles and other assets, net                           |  |                | 52,583  |                     |   |                        |  |                            | 12,807  |  |       |         |   |  |   | 65,390 
|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Total                                                       |  | $              | 584,843 |                     | $ | 57,260                  |  | $                          | 354,668 |  | $     | (445,283 | ) |  | $ | 551,488
|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY                        |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Current Liabilities:                                        |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Short term borrowings and current portion of long-term debt |  | $              | 1,446   |                     | $ |                        |  | $                          |        |  | $     |         |   |  | $ | 1,446  
|Accounts payable                                            |  |                | 111,729 |                     |   |                        |  |                            | 106,373 |  |       | (180,202 | ) |  |   | 37,900 
|Other current liabilities                                   |  |                | 23,699  |                     |   |                        |  |                            | 14,939  |  |       | (728     | ) |  |   | 37,910 
|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Total current liabilities                                   |  |                | 136,874 |                     |   |                        |  |                            | 121,312 |  |       | (180,930 | ) |  |   | 77,256 
|Long-term debt                                              |  |                | 329,054 |                     |   |                        |  |                            | 116,109 |  |       | (116,109 | ) |  |   | 329,054
|Other long-term liabilities                                 |  |                | 4,202   |                     |   |                        |  |                            | 26,263  |  |       |         |   |  |   | 30,465 
|Total stockholders equity                                  |  |                | 114,713 |                     |   | 57,260                  |  |                            | 90,984  |  |       | (148,244 | ) |  |   | 114,713
|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Total                                                       |  | $              | 584,843 |                     | $ | 57,260                  |  | $                          | 354,668 |  | $     | (445,283 | ) |  | $ | 551,488
|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        



24



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##### Table of Contents

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheet

As of December 31, 2006

(In thousands)



|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|----------------------------------------------------------- |  | -------------- | ------- | ------------------- | - | ----------------------- |  | -------------------------- | ------- |  | ----- | -------- | - |  | - | -------
|                                                            |  | Innophos, Inc. |         | GuarantorSubsidiary |   | Non-GuarantorSubsidiary |  | AdjustmentsandEliminations |         |  | Total
|ASSETS                                                      |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Current Assets:                                             |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Cash and cash equivalents                                   |  | $              | 14,687  |                     | $ | 6                       |  | $                          | 14,925  |  | $     |         |   |  | $ | 29,618 
|Accounts receivable                                         |  |                | 111,939 |                     |   |                        |  |                            | 98,334  |  |       | (153,957 | ) |  |   | 56,316 
|Inventories                                                 |  |                | 42,617  |                     |   |                        |  |                            | 27,952  |  |       |         |   |  |   | 70,569 
|Other current assets                                        |  |                | 20,628  |                     |   |                        |  |                            | 3,961   |  |       | (10,937  | ) |  |   | 13,652 
|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Total current assets                                        |  |                | 189,871 |                     |   | 6                       |  |                            | 145,172 |  |       | (164,894 | ) |  |   | 170,155
|Property, plant and equipment, net                          |  |                | 144,667 |                     |   |                        |  |                            | 132,555 |  |       |         |   |  |   | 277,222
|Goodwill                                                    |  |                | 7,237   |                     |   |                        |  |                            | 40,031  |  |       |         |   |  |   | 47,268 
|Investment in subsidiaries                                  |  |                | 77,259  |                     |   | 45,430                  |  |                            |        |  |       | (122,689 | ) |  |   |       
|Intercompany notes                                          |  |                | 111,780 |                     |   |                        |  |                            |        |  |       | (111,780 | ) |  |   |       
|Intangibles and other assets, net                           |  |                | 53,300  |                     |   |                        |  |                            | 13,644  |  |       |         |   |  |   | 66,944 
|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Total                                                       |  | $              | 584,114 |                     | $ | 45,436                  |  | $                          | 331,402 |  | $     | (399,363 | ) |  | $ | 561,589
|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY                        |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Current Liabilities:                                        |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Short term borrowings and current portion of long-term debt |  | $              | 1,524   |                     | $ |                        |  | $                          |        |  | $     |         |   |  | $ | 1,524  
|Accounts payable                                            |  |                | 92,217  |                     |   |                        |  |                            | 92,603  |  |       | (153,957 | ) |  |   | 30,863 
|Other current liabilities                                   |  |                | 26,101  |                     |   |                        |  |                            | 21,660  |  |       | (10,937  | ) |  |   | 36,824 
|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Total current liabilities                                   |  |                | 119,842 |                     |   |                        |  |                            | 114,263 |  |       | (164,894 | ) |  |   | 69,211 
|Long-term debt                                              |  |                | 337,476 |                     |   |                        |  |                            | 111,780 |  |       | (111,780 | ) |  |   | 337,476
|Other long-term liabilities                                 |  |                | 5,607   |                     |   |                        |  |                            | 28,106  |  |       |         |   |  |   | 33,713 
|Total stockholders equity                                  |  |                | 121,189 |                     |   | 45,436                  |  |                            | 77,253  |  |       | (122,689 | ) |  |   | 121,189
|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Total                                                       |  | $              | 584,114 |                     | $ | 45,436                  |  | $                          | 331,402 |  | $     | (399,363 | ) |  | $ | 561,589
|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        



25



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##### Table of Contents

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Operations

For the three months ended
June 30, 2007

(In thousands)



|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|---------------------------------------------------- |  | -------------- | ------ | - | ------------------- | - | ------ | ----------------------- |  | - | -------------------------- | - |  | ----- | ------- | - |  | - | ------- | -
|                                                     |  | Innophos, Inc. |        |   | GuarantorSubsidiary |   |        | Non-GuarantorSubsidiary |  |   | AdjustmentsandEliminations |   |  | Total |        
|Net Sales                                            |  | $              | 91,358 |   |                     | $ |       |                         |  | $ | 90,790                     |   |  | $     | (30,236 | ) |  | $ | 151,912 |  
|Cost of goods sold                                   |  |                | 78,695 |   |                     |   |       |                         |  |   | 71,510                     |   |  |       | (30,236 | ) |  |   | 119,969 |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Gross Profit                                         |  |                | 12,663 |   |                     |   |       |                         |  |   | 19,280                     |   |  |       |        |   |  |   | 31,943  |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Operating expenses:                                  |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Selling, general and administrative expenses and R&D |  |                | 15,698 |   |                     |   |       |                         |  |   | 2,777                      |   |  |       |        |   |  |   | 18,475  |  
|In-process R&D                                       |  |                |       |   |                     |   |       |                         |  |   |                           |   |  |       |        |   |  |   |        |  
|Restructuring                                        |  |                |       |   |                     |   |       |                         |  |   |                           |   |  |       |        |   |  |   |        |  
|Other operating expenses                             |  |                |       |   |                     |   |       |                         |  |   |                           |   |  |       |        |   |  |   |        |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Total operating expenses                             |  |                | 15,698 |   |                     |   |       |                         |  |   | 2,777                      |   |  |       |        |   |  |   | 18,475  |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Operating income                                     |  |                | (3,035 | ) |                     |   |       |                         |  |   | 16,503                     |   |  |       |        |   |  |   | 13,468  |  
|Interest expense, net                                |  |                | 5,374  |   |                     |   |       |                         |  |   | 2,544                      |   |  |       |        |   |  |   | 7,918   |  
|Foreign exchange (gains)/losses                      |  |                | 16     |   |                     |   |       |                         |  |   | 93                         |   |  |       |        |   |  |   | 109     |  
|Other expenses (income)                              |  |                | (112   | ) |                     |   |       |                         |  |   | (44                        | ) |  |       |        |   |  |   | (156    | )
|Equity (income) loss                                 |  |                | (8,887 | ) |                     |   | (7,889 | )                       |  |   |                           |   |  |       | 16,776  |   |  |   |        |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Income (loss) before income tax                      |  |                | 574    |   |                     |   | 7,889  |                         |  |   | 13,910                     |   |  |       | (16,776 | ) |  |   | 5,597   |  
|Provision (benefit) for income taxes                 |  |                | 70     |   |                     |   |       |                         |  |   | 5,023                      |   |  |       |        |   |  |   | 5,093   |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net income (loss)                                    |  | $              | 504    |   |                     | $ | 7,889  |                         |  | $ | 8,887                      |   |  | $     | (16,776 | ) |  | $ | 504     |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Operations

For the six months ended
June 30, 2007

(In thousands)



|                                                     |  |                |         |   |                      |   |         |                          |  |   |                             |   |  |       |         |   |  |   |         |  
|---------------------------------------------------- |  | -------------- | ------- | - | -------------------- | - | ------- | ------------------------ |  | - | --------------------------- | - |  | ----- | ------- | - |  | - | ------- | -
|                                                     |  | Innophos, Inc. |         |   | Guarantor Subsidiary |   |         | Non-Guarantor Subsidiary |  |   | Adjustmentsand Eliminations |   |  | Total |        
|                                                     |  |                |         |  
|Net Sales                                            |  | $              | 174,313 |   |                      | $ |        |                          |  | $ | 170,932                     |   |  | $     | (56,653 | ) |  | $ | 288,592 |  
|Cost of goods sold                                   |  |                | 153,107 |   |                      |   |        |                          |  |   | 139,213                     |   |  |       | (56,653 | ) |  |   | 235,667 |  
|                                                     |  |                |         |   |                      |   |         |                          |  |   |                             |   |  |       |         |   |  |   |         |  
|Gross Profit                                         |  |                | 21,206  |   |                      |   |        |                          |  |   | 31,719                      |   |  |       |        |   |  |   | 52,925  |  
|                                                     |  |                |         |   |                      |   |         |                          |  |   |                             |   |  |       |         |   |  |   |         |  
|Operating expenses:                                  |  |                |         |   |                      |   |         |                          |  |   |                             |   |  |       |         |   |  |   |         |  
|Selling, general and administrative expenses and R&D |  |                | 23,603  |   |                      |   |        |                          |  |   | 5,841                       |   |  |       |        |   |  |   | 29,444  |  
|Other operating expenses                             |  |                |        |   |                      |   |        |                          |  |   |                            |   |  |       |        |   |  |   |        |  
|                                                     |  |                |         |   |                      |   |         |                          |  |   |                             |   |  |       |         |   |  |   |         |  
|Total operating expenses                             |  |                | 23,603  |   |                      |   |        |                          |  |   | 5,841                       |   |  |       |        |   |  |   | 29,444  |  
|                                                     |  |                |         |   |                      |   |         |                          |  |   |                             |   |  |       |         |   |  |   |         |  
|Operating income                                     |  |                | (2,397  | ) |                      |   |        |                          |  |   | 25,878                      |   |  |       |        |   |  |   | 23,481  |  
|Interest expense, net                                |  |                | 10,814  |   |                      |   |        |                          |  |   | 5,098                       |   |  |       |        |   |  |   | 15,912  |  
|Foreign exchange (gains)/losses                      |  |                | 30      |   |                      |   |        |                          |  |   | (55                         | ) |  |       |        |   |  |   | (25     | )
|Other expenses (income)                              |  |                |        |   |                      |   |        |                          |  |   | (98                         | ) |  |       |        |   |  |   | (98     | )
|Equity (income) loss                                 |  |                | (13,730 | ) |                      |   | (11,824 | )                        |  |   |                            |   |  |       | 25,554  |   |  |   |        |  
|                                                     |  |                |         |   |                      |   |         |                          |  |   |                             |   |  |       |         |   |  |   |         |  
|Income (loss) before income tax                      |  |                | 489     |   |                      |   | 11,824  |                          |  |   | 20,933                      |   |  |       | (25,554 | ) |  |   | 7,692   |  
|Provision (benefit) for income taxes                 |  |                | 140     |   |                      |   |        |                          |  |   | 7,203                       |   |  |       |        |   |  |   | 7,343   |  
|                                                     |  |                |         |   |                      |   |         |                          |  |   |                             |   |  |       |         |   |  |   |         |  
|Net income (loss)                                    |  | $              | 349     |   |                      | $ | 11,824  |                          |  | $ | 13,730                      |   |  | $     | (25,554 | ) |  | $ | 349     |  
|                                                     |  |                |         |   |                      |   |         |                          |  |   |                             |   |  |       |         |   |  |   |         |  



26



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##### Table of Contents

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Operations

For the three months ended
June 30, 2006

(In thousands)



|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|---------------------------------------------------- |  | -------------- | ------ | - | ------------------- | - | ------ | ----------------------- |  | - | -------------------------- | - |  | ----- | ------- | - |  | - | ------- | -
|                                                     |  | Innophos, Inc. |        |   | GuarantorSubsidiary |   |        | Non-GuarantorSubsidiary |  |   | AdjustmentsandEliminations |   |  | Total |        
|Net Sales                                            |  | $              | 86,952 |   |                     | $ |       |                         |  | $ | 80,469                     |   |  | $     | (28,140 | ) |  | $ | 139,281 |  
|Cost of goods sold                                   |  |                | 75,558 |   |                     |   |       |                         |  |   | 68,360                     |   |  |       | (28,140 | ) |  |   | 115,778 |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Gross Profit                                         |  |                | 11,394 |   |                     |   |       |                         |  |   | 12,109                     |   |  |       |        |   |  |   | 23,503  |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Operating expenses:                                  |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Selling, general and administrative expenses and R&D |  |                | 8,441  |   |                     |   |       |                         |  |   | 2,828                      |   |  |       |        |   |  |   | 11,269  |  
|In-process R&D                                       |  |                |       |   |                     |   |       |                         |  |   |                           |   |  |       |        |   |  |   |        |  
|Restructuring                                        |  |                |       |   |                     |   |       |                         |  |   |                           |   |  |       |        |   |  |   |        |  
|Other operating expenses                             |  |                |       |   |                     |   |       |                         |  |   |                           |   |  |       |        |   |  |   |        |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Total operating expenses                             |  |                | 8,441  |   |                     |   |       |                         |  |   | 2,828                      |   |  |       |        |   |  |   | 11,269  |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Operating income                                     |  |                | 2,953  |   |                     |   |       |                         |  |   | 9,281                      |   |  |       |        |   |  |   | 12,234  |  
|Interest expense, net                                |  |                | 5,740  |   |                     |   |       |                         |  |   | 2,563                      |   |  |       |        |   |  |   | 8,303   |  
|Foreign exchange (gains)/losses                      |  |                | (144   | ) |                     |   |       |                         |  |   | (7                         | ) |  |       |        |   |  |   | (151    | )
|Other expenses (income)                              |  |                | 119    |   |                     |   |       |                         |  |   | (23                        | ) |  |       |        |   |  |   | 96      |  
|Equity (income) loss                                 |  |                | (5,552 | ) |                     |   | (5,064 | )                       |  |   |                           |   |  |       | 10,616  |   |  |   |        |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Income (loss) before income tax                      |  |                | 2,790  |   |                     |   | 5,064  |                         |  |   | 6,748                      |   |  |       | (10,616 | ) |  |   | 3,986   |  
|Provision (benefit) for income taxes                 |  |                | 70     |   |                     |   |       |                         |  |   | 1,196                      |   |  |       |        |   |  |   | 1,266   |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net income (loss)                                    |  | $              | 2,720  |   |                     | $ | 5,064  |                         |  | $ | 5,552                      |   |  | $     | (10,616 | ) |  | $ | 2,720   |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  



27



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##### Table of Contents

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Operations

For the six months ended
June 30, 2006

(In thousands)



|                                                     |  |                |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|---------------------------------------------------- |  | -------------- | ------- | - | ------------------- | - | ------ | ----------------------- |  | - | -------------------------- | - |  | ----- | ------- | - |  | - | ------- | -
|                                                     |  | Innophos, Inc. |         |   | GuarantorSubsidiary |   |        | Non-GuarantorSubsidiary |  |   | AdjustmentsandEliminations |   |  | Total |        
|Net Sales                                            |  | $              | 176,684 |   |                     | $ |       |                         |  | $ | 152,427                    |   |  | $     | (59,495 | ) |  | $ | 269,616 |  
|Cost of goods sold                                   |  |                | 148,924 |   |                     |   |       |                         |  |   | 134,934                    |   |  |       | (59,495 | ) |  |   | 224,363 |  
|                                                     |  |                |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Gross Profit                                         |  |                | 27,760  |   |                     |   |       |                         |  |   | 17,493                     |   |  |       |        |   |  |   | 45,253  |  
|                                                     |  |                |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Operating expenses:                                  |  |                |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Selling, general and administrative expenses and R&D |  |                | 16,029  |   |                     |   |       |                         |  |   | 5,917                      |   |  |       |        |   |  |   | 21,946  |  
|In-process R&D                                       |  |                |        |   |                     |   |       |                         |  |   |                           |   |  |       |        |   |  |   |        |  
|Restructuring                                        |  |                |        |   |                     |   |       |                         |  |   |                           |   |  |       |        |   |  |   |        |  
|Other operating expenses                             |  |                |        |   |                     |   |       |                         |  |   |                           |   |  |       |        |   |  |   |        |  
|                                                     |  |                |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Total operating expenses                             |  |                | 16,029  |   |                     |   |       |                         |  |   | 5,917                      |   |  |       |        |   |  |   | 21,946  |  
|                                                     |  |                |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Operating income                                     |  |                | 11,731  |   |                     |   |       |                         |  |   | 11,576                     |   |  |       |        |   |  |   | 23,307  |  
|Interest expense, net                                |  |                | 12,247  |   |                     |   |       |                         |  |   | 5,053                      |   |  |       |        |   |  |   | 17,300  |  
|Foreign exchange (gains)/losses                      |  |                | (120    | ) |                     |   |       |                         |  |   | (84                        | ) |  |       |        |   |  |   | (204    | )
|Other expenses (income)                              |  |                | 119     |   |                     |   |       |                         |  |   | (137                       | ) |  |       |        |   |  |   | (18     | )
|Equity (income) loss                                 |  |                | (6,488  | ) |                     |   | (5,783 | )                       |  |   |                           |   |  |       | 12,271  |   |  |   |        |  
|                                                     |  |                |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Income (loss) before income tax                      |  |                | 5,973   |   |                     |   | 5,783  |                         |  |   | 6,744                      |   |  |       | (12,271 | ) |  |   | 6,229   |  
|Provision (benefit) for income taxes                 |  |                | 140     |   |                     |   |       |                         |  |   | 256                        |   |  |       |        |   |  |   | 396     |  
|                                                     |  |                |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net income (loss)                                    |  | $              | 5,833   |   |                     | $ | 5,783  |                         |  | $ | 6,488                      |   |  | $     | (12,271 | ) |  | $ | 5,833   |  
|                                                     |  |                |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  



28



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

For the six months ended
June 30, 2007

(In thousands)



|                                                                                 |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|-------------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------------- | - | ------- | ----------------------- |  | - | -------------------------- | - |  | ----- | ------- | - |  | - | ------- | -
|                                                                                 |  | Innophos, Inc |         |   | GuarantorSubsidiary |   |         | Non-guarantorSubsidiary |  |   | AdjustmentsandEliminations |   |  | Total |        
|Cash Flows from operating activities                                             |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net income (loss)                                                                |  | $             | 349     |   |                     | $ | 11,824  |                         |  | $ | 13,730                     |   |  | $     | (25,554 | ) |  | $ | 349     |  
|Adjustments to reconcile net income to netcash provided by operating activities: |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Depreciation and amortization                                                    |  |               | 13,293  |   |                     |   |        |                         |  |   | 9,456                      |   |  |       |        |   |  |   | 22,749  |  
|Amortization of deferred financing charges                                       |  |               | 1,383   |   |                     |   |        |                         |  |   |                           |   |  |       |        |   |  |   | 1,383   |  
|Deferred income taxes/(benefits)                                                 |  |               | 90      |   |                     |   |        |                         |  |   | (1,594                     | ) |  |       |        |   |  |   | (1,504  | )
|Deferred profit sharing                                                          |  |               |        |   |                     |   |        |                         |  |   | 191                        |   |  |       |        |   |  |   | 191     |  
|Stock-based compensation                                                         |  |               | 463     |   |                     |   |        |                         |  |   |                           |   |  |       |        |   |  |   | 463     |  
|Equity (income) loss in non-guarantor subsidiaries                               |  |               | (13,730 | ) |                     |   | (11,824 | )                       |  |   |                           |   |  |       | 25,554  |   |  |   |        |  
|Changes in assets and liabilities:                                               |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|(Increase)/decrease in accounts receivable                                       |  |               | (12,527 | ) |                     |   |        |                         |  |   | (18,975                    | ) |  |       | 26,245  |   |  |   | (5,257  | )
|(Increase)/decrease in inventories                                               |  |               | (1,564  | ) |                     |   |        |                         |  |   | (3,566                     | ) |  |       |        |   |  |   | (5,130  | )
|(Increase)/decrease in other current assets                                      |  |               | 343     |   |                     |   |        |                         |  |   | (2,063                     | ) |  |       | (24     | ) |  |   | (1,744  | )
|(Decrease)/increase in accounts payable                                          |  |               | 19,512  |   |                     |   |        |                         |  |   | 13,770                     |   |  |       | (26,245 | ) |  |   | 7,037   |  
|(Decrease)/increase in other current liabilities                                 |  |               | (2,402  | ) |                     |   |        |                         |  |   | 3,464                      |   |  |       | 24      |   |  |   | 1,086   |  
|Changes in other long-term assets and liabilities, net                           |  |               | (3,205  | ) |                     |   |        |                         |  |   | 5,041                      |   |  |       |        |   |  |   | 1,836   |  
|                                                                                 |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net cash provided from operating activities                                      |  |               | 2,005   |   |                     |   |        |                         |  |   | 19,454                     |   |  |       |        |   |  |   | 21,459  |  
|                                                                                 |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Cash flows from investing activities:                                            |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Capital expenditures                                                             |  |               | (2,865  | ) |                     |   |        |                         |  |   | (9,187                     | ) |  |       |        |   |  |   | (12,052 | )
|Purchase of assets                                                               |  |               | (2,120  | ) |                     |   |        |                         |  |   |                           |   |  |       |        |   |  |   | (2,120  | )
|                                                                                 |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net Cash used for investing activities                                           |  |               | (4,985  | ) |                     |   |        |                         |  |   | (9,187                     | ) |  |       |        |   |  |   | (14,172 | )
|                                                                                 |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Cash flows from financing activities:                                            |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net change in borrowings with Innophos, Inc                                      |  |               |        |   |                     |   |        |                         |  |   | (10,185                    | ) |  |       | 10,185  |   |  |   |        |  
|Repayments from subsidiaries                                                     |  |               | 10,185  |   |                     |   |        |                         |  |   |                           |   |  |       | (10,185 | ) |  |   |        |  
|Cash return of capital to parent                                                 |  |               | (9,328  | ) |                     |   |        |                         |  |   |                           |   |  |       |        |   |  |   | (9,328  | )
|Principal payment of term loans                                                  |  |               | (8,500  | ) |                     |   |        |                         |  |   |                           |   |  |       |        |   |  |   | (8,500  | )
|                                                                                 |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net cash (used for) financing activities                                         |  |               | (7,643  | ) |                     |   |        |                         |  |   | (10,185                    | ) |  |       |        |   |  |   | (17,828 | )
|                                                                                 |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net change in cash                                                               |  |               | (10,623 | ) |                     |   |        |                         |  |   | 82                         |   |  |       |        |   |  |   | (10,541 | )
|Cash and cash equivalents at beginning of period                                 |  |               | 14,687  |   |                     |   | 6       |                         |  |   | 14,925                     |   |  |       |        |   |  |   | 29,618  |  
|                                                                                 |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Cash and cash equivalents at end of period                                       |  | $             | 4,064   |   |                     | $ | 6       |                         |  | $ | 15,007                     |   |  | $     |        |   |  | $ | 19,077  |  
|                                                                                 |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  



29



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##### Table of Contents

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

For the six months ended
June 30, 2006

(In thousands)



|                                                                                  |  |               |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|--------------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------------- | - | ------ | ----------------------- |  | - | -------------------------- | - |  | ----- | ------- | - |  | - | ------- | -
|                                                                                  |  | Innophos, Inc |         |   | GuarantorSubsidiary |   |        | Non-guarantorSubsidiary |  |   | AdjustmentsandEliminations |   |  | Total |        
|Cash Flows from operating activities                                              |  |               |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net income (loss)                                                                 |  | $             | 5,833   |   |                     | $ | 5,783  |                         |  | $ | 6,488                      |   |  | $     | (12,271 | ) |  | $ | 5,833   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |               |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Depreciation and amortization                                                     |  |               | 11,913  |   |                     |   |       |                         |  |   | 10,859                     |   |  |       |        |   |  |   | 22,772  |  
|Amortization of deferred financing charges                                        |  |               | 1,978   |   |                     |   |       |                         |  |   |                           |   |  |       |        |   |  |   | 1,978   |  
|Deferred income taxes/(benefits)                                                  |  |               | 90      |   |                     |   |       |                         |  |   | (1,830                     | ) |  |       |        |   |  |   | (1,740  | )
|Deferred profit sharing                                                           |  |               |        |   |                     |   |       |                         |  |   | (350                       | ) |  |       |        |   |  |   | (350    | )
|Equity (income) loss in non-guarantorsubsidiaries                                 |  |               | (6,488  | ) |                     |   | (5,783 | )                       |  |   |                           |   |  |       | 12,271  |   |  |   |        |  
|Changes in assets and liabilities:                                                |  |               |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|(Increase)/decrease in accounts receivable                                        |  |               | (18,116 | ) |                     |   |       |                         |  |   | (17,869                    | ) |  |       | 36,249  |   |  |   | 264     |  
|(Increase)/decrease in inventories                                                |  |               | (2,756  | ) |                     |   |       |                         |  |   | 3,277                      |   |  |       |        |   |  |   | 521     |  
|(Increase)/decrease in other current assets                                       |  |               | 2,712   |   |                     |   |       |                         |  |   | 867                        |   |  |       | 60      |   |  |   | 3,639   |  
|(Decrease)/increase in accounts payable                                           |  |               | 10,569  |   |                     |   |       |                         |  |   | 19,020                     |   |  |       | (36,249 | ) |  |   | (6,660  | )
|(Decrease)/increase in other current liabilities                                  |  |               | (5,268  | ) |                     |   |       |                         |  |   | (7,302                     | ) |  |       | (60     | ) |  |   | (12,630 | )
|Changes in other long-term assets and liabilities, net                            |  |               | (2,866  | ) |                     |   |       |                         |  |   | 6,623                      |   |  |       |        |   |  |   | 3,757   |  
|                                                                                  |  |               |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net cash provided from operating activities                                       |  |               | (2,399  | ) |                     |   |       |                         |  |   | 19,783                     |   |  |       |        |   |  |   | 17,384  |  
|                                                                                  |  |               |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Cash flows from investing activities:                                             |  |               |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Capital expenditures                                                              |  |               | (4,040  | ) |                     |   |       |                         |  |   | (1,399                     | ) |  |       |        |   |  |   | (5,439  | )
|                                                                                  |  |               |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net Cash used for investing activities                                            |  |               | (4,040  | ) |                     |   |       |                         |  |   | (1,399                     | ) |  |       |        |   |  |   | (5,439  | )
|                                                                                  |  |               |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Cash flows from financing activities:                                             |  |               |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net change in borrowings with Innophos, Inc.                                      |  |               |        |   |                     |   |       |                         |  |   | (9,000                     | ) |  |       | 9,000   |   |  |   |        |  
|Repayments from subsidiaries                                                      |  |               | 9,000   |   |                     |   |       |                         |  |   |                           |   |  |       | (9,000  | ) |  |   |        |  
|Principal payment of term loans                                                   |  |               | (19,000 | ) |                     |   |       |                         |  |   |                           |   |  |       |        |   |  |   | (19,000 | )
|                                                                                  |  |               |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net cash (used for) financing activities                                          |  |               | (10,000 | ) |                     |   |       |                         |  |   | (9,000                     | ) |  |       |        |   |  |   | (19,000 | )
|                                                                                  |  |               |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net change in cash                                                                |  |               | (16,439 | ) |                     |   |       |                         |  |   | 9,384                      |   |  |       |        |   |  |   | (7,055  | )
|Cash and cash equivalents at beginning of period                                  |  |               | 51,522  |   |                     |   |       |                         |  |   | 9,697                      |   |  |       |        |   |  |   | 61,219  |  
|                                                                                  |  |               |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Cash and cash equivalents at end of period                                        |  | $             | 35,083  |   |                     | $ |       |                         |  | $ | 19,081                     |   |  | $     |        |   |  | $ | 54,164  |  
|                                                                                  |  |               |         |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  



30



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##### Table of Contents

ITEM 2. MANAGEMENTS DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS

This
discussion contains forward-looking statements about our markets, the demand for our products and services and our future results. We based these statements on assumptions that we consider reasonable. Actual results may differ materially from those
suggested by our forward-looking statements for various reasons including those discussed in the Risk Factors as contained in our 2006 Annual Report on Form 10-K and Forward-Looking Statements sections of this report.

Overview

Innophos, Inc. is a
wholly-owned subsidiary of Innophos Investments Holdings, Inc. (Investments Holdings), incorporated under the laws of the State of Delaware. Innophos Investments Holdings, Inc. is a wholly-owned subsidiary of Innophos Holdings, Inc.
(Holdings) On June 10, 2004, Innophos entered into a definitive purchase and sale agreement with affiliates of Rhodia to acquire certain assets and equity interests related to Rhodias North American specialty phosphates
business, referred to herein as the Phosphates Business. The acquisition of the Phosphates Business from Rhodia, referred to herein as the Acquisition, was consummated on August 13, 2004, at a closing purchase price of $473.4
million. A working capital dispute relating to the August 13, 2004 closing balance sheet was settled in June 2007 with no further adjustment to the closing purchase price.

Below is a summary chart of the corporate structure of our direct subsidiaries.

LOGO



31



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##### Table of Contents

Historical Performance

Results of Operations

The following table sets forth a summary of the Companys operations and
their percentages of total revenue for the periods indicated.



|                                                        |  |                                 |       |   |                                 |       |   |        |   |       |   |  |       |  
|------------------------------------------------------- |  | ------------------------------- | ----- | - | ------------------------------- | ----- | - | ------ | - | ----- | - |  | ----- | -
|                                                        |  | Three months endedJune 30,
2007 |       |   | Three months endedJune 30,
2006 |      
|                                                        |  | Amount                          |       |   | %                               |       |   | Amount |   |       | % | 
|Net sales                                               |  | $                               | 151.9 |   |                                 | 100.0 |   |        | $ | 139.3 |   |  | 100.0 |  
|Cost of goods sold                                      |  |                                 | 120.0 |   |                                 | 79.0  |   |        |   | 115.8 |   |  | 83.1  |  
|                                                        |  |                                 |       |   |                                 |       |   |        |   |       |   |  |       |  
|Gross profit                                            |  |                                 | 31.9  |   |                                 | 21.0  |   |        |   | 23.5  |   |  | 16.9  |  
|Operating expenses: Selling, general and administrative |  |                                 | 17.9  |   |                                 | 11.8  |   |        |   | 10.8  |   |  | 7.8   |  
|Research & Development Expenses                         |  |                                 | 0.6   |   |                                 | 0.4   |   |        |   | 0.5   |   |  | 0.4   |  
|                                                        |  |                                 |       |   |                                 |       |   |        |   |       |   |  |       |  
|Operating income                                        |  |                                 | 13.4  |   |                                 | 8.8   |   |        |   | 12.2  |   |  | 8.8   |  
|Interest expense, net                                   |  |                                 | 7.9   |   |                                 | 5.2   |   |        |   | 8.3   |   |  | 6.0   |  
|Foreign exchange (gains)/losses, net                    |  |                                 | 0.1   |   |                                 | 0.1   |   |        |   | (0.2  | ) |  | (0.1  | )
|Other expense (income)                                  |  |                                 | (0.2  | ) |                                 | (0.1  | ) |        |   | 0.1   |   |  | 0.1   |  
|Provision for income taxes                              |  |                                 | 5.1   |   |                                 | 3.4   |   |        |   | 1.3   |   |  | 0.9   |  
|                                                        |  |                                 |       |   |                                 |       |   |        |   |       |   |  |       |  
|Net income                                              |  | $                               | 0.5   |   |                                 | 0.3   |   |        | $ | 2.7   |   |  | 1.9   |  
|                                                        |  |                                 |       |   |                                 |       |   |        |   |       |   |  |       |  



|                                                        |  |                               |       |   |                               |       |   |        |   |       |   |  |       |  
|------------------------------------------------------- |  | ----------------------------- | ----- | - | ----------------------------- | ----- | - | ------ | - | ----- | - |  | ----- | -
|                                                        |  | Six months endedJune 30, 2007 |       |   | Six months endedJune 30, 2006 |      
|                                                        |  | Amount                        |       |   | %                             |       |   | Amount |   |       | % | 
|Net sales                                               |  | $                             | 288.6 |   |                               | 100.0 |   |        | $ | 269.6 |   |  | 100.0 |  
|Cost of goods sold                                      |  |                               | 235.7 |   |                               | 81.7  |   |        |   | 224.3 |   |  | 83.2  |  
|                                                        |  |                               |       |   |                               |       |   |        |   |       |   |  |       |  
|Gross profit                                            |  |                               | 52.9  |   |                               | 18.3  |   |        |   | 45.3  |   |  | 16.8  |  
|Operating expenses: Selling, general and administrative |  |                               | 28.4  |   |                               | 9.8   |   |        |   | 21.2  |   |  | 7.9   |  
|Research & Development Expenses                         |  |                               | 1.1   |   |                               | 0.4   |   |        |   | 0.8   |   |  | 0.3   |  
|                                                        |  |                               |       |   |                               |       |   |        |   |       |   |  |       |  
|Operating income                                        |  |                               | 23.4  |   |                               | 8.1   |   |        |   | 23.3  |   |  | 8.6   |  
|Interest expense, net                                   |  |                               | 15.9  |   |                               | 5.5   |   |        |   | 17.3  |   |  | 6.4   |  
|Foreign exchange (gains)/losses, net                    |  |                               |      |   |                               |      |   |        |   | (0.2  | ) |  | (0.1  | )
|Other expense (income)                                  |  |                               | (0.1  | ) |                               | (0.0  | ) |        |   |      |   |  |      |  
|Provision for income taxes                              |  |                               | 7.3   |   |                               | 2.5   |   |        |   | 0.4   |   |  | 0.1   |  
|                                                        |  |                               |       |   |                               |       |   |        |   |       |   |  |       |  
|Net income                                              |  | $                             | 0.3   |   |                               | 0.1   |   |        | $ | 5.8   |   |  | 2.2   |  
|                                                        |  |                               |       |   |                               |       |   |        |   |       |   |  |       |  

Three months ended June 30, 2007 compared to the three months ended June 30, 2006

Net Sales

Net
sales represent the selling price of the products, net of any customer-related rebates, plus freight and any other items invoiced to customers. Net sales for the three months ended June 30, 2007 were $151.9 million, an increase of $12.6
million, or 9.1%, as compared to $139.3 million for the same period in 2006. Volume and mix impacts upon revenue had a positive impact of 3.9% or $5.4 million that occurred primarily in Specialty Salts and Specialty Acids. Sales price impact on
revenue had a positive impact of 5.2% or $7.2 million that occurred primarily in STPP and Other Products and Specialty Salts and Specialty Acids.

The following table illustrates for the three months ended June 30, 2007 the percentage changes in net sales by reportable segment compared with the prior year, including the effect of price and volume/mix impacts upon revenue:



|              |  |       |    |  |            |    |  |       |   
|------------- |  | ----- | -- |  | ---------- | -- |  | ----- | --
|              |  | Price |    |  | Volume/Mix |    |  | Total |   
|United States |  | 1.1   | %  |  | 4.5        | %  |  | 5.6   | % 
|Canada        |  | (2.7  | )% |  | (0.9       | )% |  | (3.6  | )%
|Mexico        |  | 12.6  | %  |  | 3.8        | %  |  | 16.4  | % 



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##### Table of Contents

The following table illustrates for the three months ended June 30, 2007 the percentage changes for
net sales by major product lines compared with the prior year, including the effect of price and volume/mix impacts upon revenue:



|                                    |  |       |    |  |            |    |  |       |   
|----------------------------------- |  | ----- | -- |  | ---------- | -- |  | ----- | --
|                                    |  | Price |    |  | Volume/Mix |    |  | Total |   
|Purified Phosphoric Acid            |  | (0.8  | )% |  | (1.6       | )% |  | (2.4  | )%
|Specialty Salts and Specialty Acids |  | 2.0   | %  |  | 7.6        | %  |  | 9.6   | % 
|STPP & Other Products               |  | 16.9  | %  |  | 2.5        | %  |  | 19.4  | % 

Gross Profit

Gross profit represents net sales less cost of goods sold. Gross profit for the three months ended June 30, 2007 was $31.9 million, an increase of $8.4 million, or 35.7%, as compared to $23.5 million for the same
period in 2006. Gross profit percentage increased to 21.0% for the three months ended June 30, 2007 versus 16.9% for the same period in 2006. The change in gross profit was due to higher selling prices with a favorable impact of $7.2 million,
and favorable sales volume and mix impacts upon revenue being partially offset by higher raw material, higher freight costs, and higher manufacturing costs, which had a combined favorable impact of $2.3 million. There was also a favorable impact of
$0.9 million due to costs incurred during the same period in 2006 related to our planned non-annual major maintenance outage at our Geismar, Louisiana facility. Finally, there was an unfavorable impact of $2.0 million of unusual expense in the
current period related to the settlement of certain taxes covering the periods 1996 to 2006 on the Companys port facilities in Mexico.

Operating Expenses and Research and Development

Operating expenses consist primarily of selling, general and
administrative, and R&D expenses. For the three months ended June 30, 2007, these costs were $18.5 million, an increase of $7.2 million, or 63.7%, as compared to $11.3 million for the same period in 2006. The variance is mainly due to $6.3
million of unusual expense incurred in the current quarter in connection with the early cancellation of the companys pharma sales agency arrangement with Rhodia, Inc., and the transfer of business related assets and intellectual
property to Innophos. There was also a net favorable variance on all other unusual items of $1.1 million, coming from $0.4 million of secondary offering preparation costs in the current quarter compared to $1.6 million of various professional and
sponsor fees in the same quarter of 2006. Operating expenses were also negatively impacted by $1.3 million of increased corporate governance costs related to internal audits and our Sarbanes Oxley compliance initiative, $0.4 million for increased
commercial and R&D efforts, $0.2 million for vesting of restricted stock awards, and $0.2 million of all other costs.

Operating
Income

Operating income for the three months ended June 30, 2007 was $13.4 million, an increase of $1.2 million, or 9.8%, as
compared to $12.2 million for the same period in 2006. Operating income as a percentage of net sales was 8.8% for both periods.

Interest Expense, net

Net interest expense, including deferred financing amortization expense, for the three months ended
June 30, 2007 was $7.9 million, a decrease of $0.4 million, compared to $8.3 million for the same period in 2006. This decrease is due to lower interest expense of $0.7 million primarily due to the decreased debt level of our Term Loan, lower
deferred financing expense of $0.1 million, which is partially offset by lower interest income of $0.4 million.

Foreign Exchange

Foreign exchange loss for the three months ended June 30, 2007 was $0.1 million compared to a gain of $0.2 million for the same period
in 2006. The U.S. dollar is the functional currency of our Mexican and Canadian operations. Consequently, foreign exchange gain or loss is recorded on remeasurement of non-U.S. dollar denominated monetary assets and liabilities. Such gains and
losses fluctuate from period to period as the foreign currencies strengthen or weaken against the U.S. dollar and the amount of non-U.S. dollar denominated assets and liabilities increases or decreases.

Provision for Income Taxes

Provision
for income tax expense for the three months ended June 30, 2007 was $5.1 million compared to $1.3 million for the comparable period of 2006. Income from Mexico is fully taxable, so increases in our Mexican earnings, as we had in the second
quarter 2007, would normally be expected to result in increased income tax expense.

Net Income

Net income for the three months ended June 30, 2007 was $0.5 million, a decrease of $2.2 million, compared to net income of $2.7 million for the same
period in 2006, due to the factors described above.



33



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##### Table of Contents

Six months ended June 30, 2007 compared to the six months ended June 30, 2006

Net Sales

Net sales represent the
selling price of the products, net of any customer-related rebates, plus freight and any other items invoiced to customers. Net sales for the six month period ended June 30, 2007 were $288.6 million, an increase of $19.0 million, or 7.0%, as
compared to $269.6 million for the comparable period in 2006. Selling price increases had a positive impact of 2.5% or $6.7 million on sales that occurred primarily in STPP and Other Products in Mexico. Volume and mix impacts upon revenue had a
positive effect of 4.5% or $12.3 million which occurred across all product lines.

The following table illustrates for the six months ended
June 30, 2007 the percentage changes in net sales by reportable segment compared with the comparable period in 2006, including the effect of price and volume/mix impacts upon revenue:



|              |  |       |    |  |            |   |  |       |  
|------------- |  | ----- | -- |  | ---------- | - |  | ----- | -
|              |  | Price |    |  | Volume/Mix |   |  | Total |  
|United States |  | 0.0   | %  |  | 1.0        | % |  | 1.0   | %
|Canada        |  | (2.2  | )% |  | 5.9        | % |  | 3.7   | %
|Mexico        |  | 7.2   | %  |  | 10.3       | % |  | 17.5  | %

The following table illustrates for the six months ended June 30, 2007 the percentage changes
for net sales by major product lines compared with the comparable period in 2006, including the effect of price and volume/mix impacts upon revenue:



|                                    |  |       |    |  |            |   |  |       |   
|----------------------------------- |  | ----- | -- |  | ---------- | - |  | ----- | --
|                                    |  | Price |    |  | Volume/Mix |   |  | Total |   
|Purified Phosphoric Acid            |  | (1.7  | )% |  | 0.7        | % |  | (1.0  | )%
|Specialty Salts and Specialty Acids |  | 0.4   | %  |  | 4.0        | % |  | 4.4   | % 
|STPP and Other                      |  | 10.9  | %  |  | 9.4        | % |  | 20.3  | % 

Gross Profit

Gross profit represents net sales less cost of goods sold. Gross profit for the six month period ended June 30, 2007 was $52.9 million, an increase of $7.6 million, or 16.8%, as compared to $45.3 million for the
comparable period in 2006. Gross profit percentage increased to 18.3% for the six month period ended June 30, 2007 versus 16.8% for the comparable period in 2006. The change in gross profit was primarily due to higher selling prices which had a
favorable impact of $6.7 million, as positive volume and mix impacts on revenue were essentially offset by higher raw material, freight and manufacturing costs, resulting in a net positive variance of $0.4 million. Gross profit was also positively
impacted by $3.9 million from our planned non-annual major maintenance outages at our Geismar, Louisiana and Coatzacoalcos, Mexico facilities that occurred in the six month period ending June 30, 2006. Finally, gross profit was negatively
impacted by unusual expenses in the current period of $1.4 million for the involuntary separation of twenty seven people and the fringe benefit buy-back program in Mexico, and a charge of $2.0 million related to the settlement of certain taxes
covering the periods 1996 to 2006 on the companys port facilities in Mexico.

Operating Expenses and Research and Development

Operating expenses in the current period consist primarily of selling, general and administrative and R&D expenses. Operating expenses
for the six month period ended June 30, 2007 were $29.5 million, an increase of $7.5 million, or 34.1%, as compared to $22.0 million for the same period in 2006. The variance is mainly due to $6.3 million of unusual expense incurred in the
current period in connection with the early cancellation of the companys pharma sales agency arrangement with Rhodia, Inc., and the transfer of business related assets and intellectual property to Innophos. There was also a net
favorable variance on all other unusual items of $2.6 million, coming from $0.4 million of secondary offering preparation costs in the current period compared to $3.1 million of various professional and sponsor fees in the same period of 2006.
Operating expenses were also negatively impacted by $1.7 million of increased corporate governance costs related to internal audits and our Sarbanes Oxley compliance initiative, $1.0 million for increased commercial and R&D efforts, $0.5 million
for vesting of restricted stock awards, and $0.7 million of all other costs.



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##### Table of Contents

Operating Income

Operating income for the six month period ended June 30, 2007 was $23.4 million, an increase of $0.1 million compared to $23.3 million for the comparable period in 2006. Operating income percentages decreased to
8.1% for the six month period ended June 30, 2007 from 8.6% for the comparable period in 2006, as a result of the factors described above.

Interest Expense

Net interest expense for the six month period ended June 30, 2007 was $15.9 million, a decrease of
$1.4 million, compared to $17.3 million for the comparable period in 2006. This decrease is primarily due to lower interest expense of $1.5 million primarily due to the decreased debt level of our Term Loan, and lower deferred financing expense of
$0.2 million, which was partially offset by lower interest income of $0.7 million. There was a favorable impact of $0.4 million in accelerated deferred financing due to our debt retirement during the same period of 2006.

Foreign Exchange

Foreign exchange
gain for the six month period ended June 30, 2007 was $0.0 million, a decrease of $0.2 million, as compared to $0.2 million for the comparable period in 2006. The U.S. dollar is the functional currency of our Mexican and Canadian operations.
Consequently, foreign exchange gain or loss is recorded on remeasurement of non-U.S. dollar denominated monetary assets and liabilities. Such gains and losses fluctuate from period-to-period as the foreign currencies strengthen or weaken against the
U.S. dollar and the amount of non-U.S. dollar denominated assets and liabilities increases or decreases.

Provision for Income Taxes

Provision for income tax expense for the six month period ended June 30, 2007 was $7.3 million, compared to $0.4 million for the
comparable period of 2006. Income from Mexico is fully taxable, so increases in our Mexican earnings, as we had in the first six months of 2007, would normally be expected to result in increased income tax expense.

Net Income

Net income for the six
month period ended June 30, 2007 was $0.3 million, a decrease of $5.5 million, compared to a net income of $5.8 million for the comparable period in 2006, due to the factors described above.



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##### Table of Contents

Segment Reporting

The company reports its operations in three reporting segmentsUnited States, Mexico and Canada, each of which sells the entire portfolio of products. The primary performance indicators for the chief operating
decision maker are sales and operating income, with sales on a ship-from basis. The following table sets forth the historical results of these indicators by segment:



|                                        |  |                                 |         |    |                                 |   |         |                    |  |      |   
|--------------------------------------- |  | ------------------------------- | ------- | -- | ------------------------------- | - | ------- | ------------------ |  | ---- | --
|                                        |  | Three months endedJune 30, 2007 |         |    | Three months endedJune 30, 2006 |   |         | Net Sales % Change | 
|Segment Net Sales                       |  |                                 |         |    |                                 |   |         |                    |  |      |   
|United States                           |  | $                               | 84,051  |    |                                 | $ | 79,625  |                    |  | 5.6  | % 
|Mexico                                  |  |                                 | 60,374  |    |                                 |   | 51,888  |                    |  | 16.4 | % 
|Canada                                  |  |                                 | 7,487   |    |                                 |   | 7,768   |                    |  | (3.6 | )%
|                                        |  |                                 |         |    |                                 |   |         |                    |  |      |   
|Total                                   |  | $                               | 151,912 |    |                                 | $ | 139,281 |                    |  | 9.1  | % 
|                                        |  |                                 |         |    |                                 |   |         |                    |  |      |   
|Segment Operating Income                |  |                                 |         |    |                                 |   |         |                    |  |      |   
|United States                           |  | $                               | (3,035  | )  |                                 | $ | 3,044   |                    |  |      |   
|Mexico                                  |  |                                 | 15,194  |    |                                 |   | 9,033   |                    |  |      |   
|Canada                                  |  |                                 | 1,309   |    |                                 |   | 157     |                    |  |      |   
|                                        |  |                                 |         |    |                                 |   |         |                    |  |      |   
|Total                                   |  | $                               | 13,468  |    |                                 | $ | 12,234  |                    |  |      |   
|                                        |  |                                 |         |    |                                 |   |         |                    |  |      |   
|Segment Operating Income % of net sales |  |                                 |         |    |                                 |   |         |                    |  |      |   
|United States                           |  |                                 | (3.6    | )% |                                 |   | 3.8     | %                  |  |      |   
|Mexico                                  |  |                                 | 25.2    | %  |                                 |   | 17.4    | %                  |  |      |   
|Canada                                  |  |                                 | 17.5    | %  |                                 |   | 2.0     | %                  |  |      |   
|                                        |  |                                 |        
|                                        |  | Six months endedJune 30, 2007   |         |    | Six months endedJune 30, 2006   |   |         | Net Sales % Change | 
|Segment Net Sales                       |  |                                 |         |    |                                 |   |         |                    |  |      |   
|United States                           |  | $                               | 160,178 |    |                                 | $ | 158,589 |                    |  | 1.0  | % 
|Mexico                                  |  |                                 | 113,413 |    |                                 |   | 96,560  |                    |  | 17.5 | % 
|Canada                                  |  |                                 | 15,001  |    |                                 |   | 14,467  |                    |  | 3.7  | % 
|                                        |  |                                 |         |    |                                 |   |         |                    |  |      |   
|Total                                   |  | $                               | 288,592 |    |                                 | $ | 269,616 |                    |  | 7.0  | % 
|                                        |  |                                 |         |    |                                 |   |         |                    |  |      |   
|Segment Operating Income                |  |                                 |         |    |                                 |   |         |                    |  |      |   
|United States                           |  | $                               | (2,397  | )  |                                 | $ | 11,731  |                    |  |      |   
|Mexico                                  |  |                                 | 23,147  |    |                                 |   | 10,596  |                    |  |      |   
|Canada                                  |  |                                 | 2,731   |    |                                 |   | 980     |                    |  |      |   
|                                        |  |                                 |         |    |                                 |   |         |                    |  |      |   
|Total                                   |  | $                               | 23,481  |    |                                 | $ | 23,307  |                    |  |      |   
|                                        |  |                                 |         |    |                                 |   |         |                    |  |      |   
|Segment Operating Income % of net sales |  |                                 |         |    |                                 |   |         |                    |  |      |   
|United States                           |  |                                 | (1.5    | )% |                                 |   | 7.4     | %                  |  |      |   
|Mexico                                  |  |                                 | 20.4    | %  |                                 |   | 11.0    | %                  |  |      |   
|Canada                                  |  |                                 | 18.2    | %  |                                 |   | 6.8     | %                  |  |      |   

Three months ended June 30, 2007 compared to the three months ended June 30, 2006

Segment Net Sales:

In
the United States net sales increased 5.6% for the three months ended June 30, 2007 when compared with the same period in 2006. Selling prices increased sales 1.1%, mainly in Specialty Salts and Specialty Acids. Volume and mix impact upon
revenue was an increase of 4.5% with positive variances across all product lines.



36



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##### Table of Contents

In Mexico net sales increased 16.4% for the three months ended June 30, 2007 when compared with the
same period in 2006. Selling prices increased sales 12.6%, primarily in STPP & Other Products. Volume and mix impact upon revenue was an increase of 3.8%, primarily in Specialty Salts and Specialty Acids.

In Canada net sales decreased 3.6% for the three months ended June 30, 2007 when compared with the same period in 2006. Selling price decreased
sales 2.7%, with negative variances across all product lines. Volume and mix impact upon revenue was a decrease of 0.9%, primarily in STPP and Other Products.

Segment Operating Income % of Net Sales:

There was a 7.4% decrease in the United States for the three months ended
June 30, 2007 compared with the same period in 2006. This was mainly due to the costs incurred for the early cancellation of the companys pharma sales agency arrangement with Rhodia, Inc., and the transfer of business related
assets and intellectual property to Innophos, as well as increased corporate governance costs.

The 7.8% increase in Mexico for the three
months ended June 30, 2007 compared with the same period in 2006 is due to increased selling prices, and increased volume and mix impacts upon revenue which were partially offset by increased raw material prices, and increased costs of $2.0
million related to settlement of certain taxes covering the periods 1996 to 2006 on the companys port facilities in Mexico.

The
15.5% increase in Canada for the three months ended June 30, 2007 compared with the same period in 2006 is due to favorable impacts from lower manufacturing costs including depreciation and amortization expense which exceeded negative impacts
from lower sales revenue.

During the three month period ending June 30, 2007 depreciation and amortization expense was $6.4 million
in the United States, $0.4 million in Canada, and $4.4 million in Mexico.

Six months ended June 30, 2007 compared to the six months ended
June 30, 2006

Segment Net Sales:

In the United States net sales increased 1.0% for the six months ended June 30, 2007 when compared with the same period in 2006. Selling prices had no impact on sales. Volume and mix impact upon revenue was an
increase of 1.0%, primarily in Purified Phosphoric Acid.

In Mexico net sales increased 17.5% for the six months ended June 30, 2007
when compared with the same period in 2006. Selling prices increased sales 7.2%, primarily in STPP & Other Products. Volume and mix impact upon revenue was an increase of 10.3%, primarily in STPP & Other Products and Specialty
Salts and Specialty Acids.

In Canada net sales increased 3.7% for the six months ended June 30, 2007 when compared with the same
period in 2006. Selling price decreased sales 2.2% with negative variances across all product lines. Volume and mix impact upon revenue was an increase of 5.9%, primarily in Specialty Salts and Specialty Acids.

Segment Operating Income % of Net Sales:

The
8.9% decrease in the United States for the six months ended June 30, 2007 compared with the same period in 2006 is mainly due to the costs incurred in the current period for the early cancellation of the companys pharma sales
agency arrangement with Rhodia, Inc., and the transfer of business related assets and intellectual property to Innophos, as well as increased corporate governance costs, as selling prices and sales volume/mix have had minimal impacts on profits.

The 9.4% increase in Mexico for the six months ended June 30, 2007 compared with the same period in 2006 is due to favorable selling
prices and higher volume and mix impacts upon revenue partially offset by the increased cost associated with the involuntary separation of 27 personnel and the fringe benefit buy-back program, and expense of $2.0 million related to settlement of
certain taxes covering the periods 1996 to 2006 on the companys port facilities in Mexico. There was a favorable impact due to costs incurred in the same period of 2006 associated with the planned non-annual sulfuric acid maintenance outage
that occurred at our Coatzacoalcos facility.

The 11.4% increase in Canada for the six months ended June 30, 2007 compared with the
same period in 2006 is due to positive volume and mix impacts upon revenue, and lower manufacturing costs including depreciation and amortization expense which exceeded slightly lower selling prices.



37



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##### Table of Contents

During the six month period ending June 30, 2007 depreciation and amortization expense was $13.3
million in the United States, $0.7 million in Canada, and $8.7 million in Mexico.

Liquidity and Capital Resources

The following table sets forth a summary of the Companys cash flows for the periods indicated.



|                     |  |                               |       |   |                               |   |       |  
|-------------------- |  | ----------------------------- | ----- | - | ----------------------------- | - | ----- | -
|                     |  | Six months endedJune 30, 2007 |       |   | Six months endedJune 30, 2006 |  
|Operating Activities |  | $                             | 21.5  |   |                               | $ | 17.4  |  
|Investing Activities |  |                               | (14.2 | ) |                               |   | (5.4  | )
|Financing Activities |  |                               | (17.8 | ) |                               |   | (19.0 | )

Six months ended June 30, 2007 compared to six months ended June 30, 2006

Net cash provided by operating activities was $21.5 million for the six months ended June 30, 2007 as compared to $17.4 million for the same period
in 2006, an increase of $4.1 million. The increase in operating activities is due to favorable changes of $10.9 million in net working capital, and $0.6 million in non-cash items affecting net income which is partially offset by unfavorable changes
of $5.5 million in net income, as described earlier, and $1.9 million in non-current accounts.

Non-cash items affecting net income were
favorable by $0.6 million primarily due to increased deferred profit sharing expense.

Changes in non-current accounts had an unfavorable
impact on cash of $1.9 million. This was mainly due to increased long term liabilities in 2006 which were mostly pension related.

The
change in net working capital is a use of cash of $4.0 million in 2007 compared to a use in 2006 of $14.9 million, a decrease in the use of cash of $10.9 million. Increases in accounts payable and other liabilities in 2007 were relatively close to
the increases in accounts receivable, inventory and other assets, leading to the $4.0 million use of cash. In 2006, reductions in accounts payable and other liabilities far exceeded the reductions in accounts receivable, inventory and other assets,
leading to the $14.9 million use of cash.

Net cash used for investing activities was $14.2 million for the six months ended June 30,
2007, compared to $5.4 million for the same period in 2006, an increase in the use of cash of $8.8 million. This is mainly due to increased capital spending related to the cogeneration project in Coatzacoalcos, Mexico, and the purchase of certain
assets from Rhodia related to the early cancellation of our 2004 ten-year pharma sales agency agreement.

Net cash from
financing activities for the six months ended June 30, 2007 was a use of $17.8 million, compared to a use of $19.0 million in for the same period in 2006, a decrease in the use of cash of $1.2 million. This is due to $10.5 million lower Term
Loan principal payments in 2007 partially offset by $9.3 million of capital returned to our parent in 2007.

On April 16, 2007
Innophos Holdings, Inc. issued $66.0 million of 9.5% Senior Unsecured notes due 2012 which had net proceeds of $64.4 million after fees. The proceeds plus approximately $0.5 million of cash on hand were used for full redemption of the $60.8 million
Floating Rate Senior notes issued by Innophos Investments Holdings, Inc. and to pay related expenses.

The Company and the Union in Mexico
reached an agreement, which was ratified by the Union on March 27, 2007. As a result, the Company paid approximately $0.9 million for the severance and benefits for the elimination of 27 personnel and approximately $0.5 million for benefit
reductions for continuing employees, all in the second quarter of 2007.



|                                            |  |                           |  |        |  |        |  |         |  |         |  |        |  |           
|------------------------------------------- |  | ------------------------- |  | ------ |  | ------ |  | ------- |  | ------- |  | ------ |  | ----------
|                                            |  | Years ending December 31,
|Contractual Obligations                     |  | Total                     |  | 2007   |  | 2008   |  | 2009    |  | 2010    |  | 2011   |  | Thereafter
|Senior credit facility (1)                  |  | 140,500                   |  | 723    |  | 1,446  |  | 35,431  |  | 102,900 |  | 0      |  | 0         
|2004 Senior Subordinated Notes Due 2014 (2) |  | 318,577                   |  | 16,863 |  | 16,862 |  | 16,863  |  | 16,862  |  | 16,863 |  | 234,264   
|Future service pension benefits             |  | 6,737                     |  | 368    |  | 419    |  | 499     |  | 570     |  | 619    |  | 4,262     
|Other (3)                                   |  | 516,637                   |  | 42,851 |  | 44,801 |  | 44,801  |  | 44,801  |  | 44,801 |  | 294,582   
|Operating leases                            |  | 20,789                    |  | 4,532  |  | 3,736  |  | 3,193   |  | 2,764   |  | 2,178  |  | 4,386     
|                                            |  |                           |  |        |  |        |  |         |  |         |  |        |  |           
|Total contractual cash obligations          |  | 1,003,240                 |  | 65,337 |  | 67,264 |  | 100,787 |  | 167,897 |  | 64,461 |  | 537,494   
|                                            |  |                           |  |        |  |        |  |         |  |         |  |        |  |           

---

|(1) | Amounts do not include variable rate interest payments, any voluntary principal prepayments, and excess cash flow requirements as defined by the credit agreement. Estimated annual
interest payments would be approximately $10.0 million assuming a 7% interest rate. The Company made a prepayment of $8.0 million on March 30, 2007 and a $0.5 million payment on June 29, 2007. Amounts exclude the $50.0 million revolving portion of
the senior credit facility which has no amount outstanding as of June 30, 2007. The Company has issued approximately $4.1 million of letters of credit under the sub-facility which reduces the available credit to $45.9 million.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Amounts include fixed rate interest payments at 8.875% for years 2007 and thereafter.
|--- | -------------------------------------------------------------------------------------

|(3) | Represents minimum annual purchase commitments to buy raw materials from a supplier that extends through 2018.
|--- | --------------------------------------------------------------------------------------------------------------

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain market risks as
part of our ongoing business operations. Primary exposures include changes in interest rates, as borrowings under our senior credit facility will bear interest at floating rates based on LIBOR or the base rate, in each case plus an applicable
borrowing margin. We will manage our interest rate risk by balancing the amount of fixed-rate and floating-rate debt. For fixed-rate debt, interest rate changes do not affect earnings or cash flows. Conversely, for floating-rate debt, interest rate
changes generally impact our earnings and cash flows, assuming other factors are held constant.



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##### Table of Contents

At June 30, 2007, we had $190 million principal amount of fixed-rate debt and $190.5 million of
available floating-rate debt, including $50.0 million under our revolving credit facility. Based on $140.5 million outstanding as floating rate debt as borrowings under our senior credit facility, an immediate increase of one percentage point would
cause an increase to cash interest expense of approximately $1.4 million per year. In addition, Innophos Holdings, Inc. has $66.0 million of senior unsecured notes. These senior unsecured notes are not included in the consolidated results of
Innophos, Inc. As all of the business for Innophos Holdings, Inc. is transacted through Innophos, Inc. and its subsidiaries, Innophos Holdings, Inc. is dependent on the earnings and the distribution of funds from Innophos, Inc. and subsidiaries.

Changes in economic conditions could result in higher interest rates, thereby increasing our interest expense and other operating expenses
and reducing our funds available for capital investment, operations or other purposes. In addition, a substantial portion of our cash flow must be used to service debt, which may affect our ability to make future acquisitions or capital
expenditures. We may from time to time use interest rate protection agreements to minimize our exposure to interest rate fluctuation. However, there can be no assurance that hedges will achieve the desired effect. We may experience economic loss and
a negative impact on earnings or net assets as a result of interest rate fluctuations.

We do not currently hedge our commodity or currency
rate risks. In April 2006, we entered into two interest rate cap derivative instruments each with a notional amount of $100 million with rate caps of 7%, one with a referenced index based on a three month LIBOR expiring in April 2009 and one based
on a one month LIBOR expiring in April 2008.

We believe that our concentration of credit risk related to trade accounts receivable is
limited since these receivables are spread among a number of customers and are geographically dispersed. No one customer accounted for more than 10% of our sales in the last 3 years.

Foreign Currency Exchange Rates

The U.S. dollar is the functional currency of the Canadian and
Mexican operations. Accordingly, these operations monetary assets and liabilities are translated at current exchange rates, non-monetary assets and liabilities are translated at historical exchange rates, and revenue and expenses are
translated at average exchange rates and at historical exchange rates for the related revenue and expenses of non-monetary assets and liabilities. All translation gains and losses are included in net income.

Our principal source of exchange rate exposure in our foreign operations consists of expenses, such as labor expenses, which are denominated in the
foreign currency of the country in which we operate. A decline in the value of the U.S. dollar relative to the local currency would generally cause our operational expenses (particularly labor costs) to increase (conversely, a decline in the value
of the foreign currency relative to the U.S. dollar would cause these expenses to decrease). We believe that normal exchange rate fluctuations consistent with recent historical trends would have a modest impact on our expenses, and would not
materially affect our financial condition or results of operations. Nearly all of our sales are denominated in U.S. dollars and our exchange rate exposure in terms of sales revenues is minimal.

Inflation and changing prices

Our costs and expenses
will be subject to inflation and price fluctuations. Significant price fluctuations in raw materials, freight, and energy costs, could have a material effect on our financial condition and results of operations.

Off-Balance Sheet Arrangements

We do not have any
relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes.

ITEM 4T. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures (as defined in Rule
13a-15(e) of the Securities Exchange Act of 1934) that are designed to provide reasonable assurance that information required to be reported in the Companys consolidated financial statements and filings is recorded, processed, summarized and
reported within the periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to the Companys management, including its principal executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding required disclosure.

As of June 30, 2007, the Company completed an evaluation under
the supervision and with the participation of the Companys management, including the Companys principal executive officer and principal financial officer, of the



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effectiveness of the design and operation of the Companys disclosure controls and procedures. Based upon that evaluation, the Principal Executive
Officer and Principal Financial Officer concluded that the Companys disclosure controls and procedures are effective.

For the year
ending December 31, 2007, pursuant to Section 404 of the Sarbanes-Oxley Act, management will be required to deliver a report that assesses the effectiveness of our internal controls over financial reporting. The year ending
December 31, 2007 annual report will not include an attestation report of the Companys registered public accounting firm regarding internal control over financial reporting. Managements report is not subject to attestation by the
Companys registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only managements report in the year ending December 31, 2007 annual report. We have a
substantial effort underway to implement appropriate processes, document the system of internal control over key processes, assess their design, remediate any deficiencies identified and test their functionality.

There have been no changes in our internal control over financial reporting during or with respect to the second quarter of 2007 that have materially
affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

Mexican CNA Water Tax Claims

On November 1, 2004 Innophos Fosfatados, received notice of the Fresh Water Claims from the CNA relating to extraction and use of fresh water at our
Coatzacoalcos, Veracruz, Mexico plant from 1998-2002. As initially assessed by the CNA, the claims total approximately $30.9 million at current exchange rates as of July 25, 2007, including basic charges of $10.7 million for interest, inflation
and penalties.

Management believes that Innophos Fosfatados has valid bases for challenging the CNA Fresh Water claims, and we are
vigorously defending that matter as well.

CNA Administrative Proceedings; Appeals. On January 17, 2005, Innophos Fosfatados
filed documents with the CNA seeking revocation and dismissal of all Fresh Water Claims made by that agency. On August 29, 2005, the CNA rejected the substantive challenges as to the Fresh Water Claims (although the CNA agreed that certain
corrections were required as to its surcharge calculations), confirming the original claims. On November 3, 2005, Innophos Fosfatados filed an appeal with the Mexican Federal Court of Fiscal and Administrative Justice. It is not known when our
appeal of the Fresh Water Claims will be decided by the court.

Rhodia Indemnification. Under the terms of the Rhodia
Agreement according to which our business was purchased, we believe we are entitled to be indemnified fully against a number of contingencies, including claims for Taxes (as defined in the Rhodia Agreement) such as those asserted by the CNA, as well
as any additional duties, taxes and charges which may be assessed by the CNA for periods after 2002.Rhodia has acknowledged its responsibility for the Fresh Water Claims, but under a different indemnification obligation, asserting that the
applicable indemnification is for breach of representations and warranties, which would subject the liabilities relating to the CNA claims to a deductible amount of $15.9 million and a limit of $79.5 million above that. Nevertheless, Rhodia has
assumed control of the defense of the CNA claims.

On December 16, 2004, we sued Rhodia in New York State Supreme Court (New York
County) seeking a determination that we are entitled to full indemnification under the Rhodia Agreement. On June 13, 2005, the court granted us summary judgment, declaring that the CNA claims were Taxes under the Rhodia Agreement and that
Rhodia was obligated to provide any necessary security to guarantee the claims to the Mexican government. Rhodia appealed the decision to the Appellate Division, First Department, which affirmed the lower courts rulings in our favor on
March 22, 2007. Rhodia then filed for leave to appeal to New Yorks highest court, the Court of Appeals, on the issue of the CNA claims as Taxes. On May 29, 2007, Rhodias motion was granted. Briefing and argument are
scheduled for the fall of 2007. Rhodia did not seek an appeal on the issue of its responsibility for security.

Further Proceedings.A final determination of the CNA Fresh Water matter may require appeals to the Mexican Supreme Court and remands to the CNA or to lower courts, a process that might continue for several years. In the event that the appeals were to be decided
against us, we could be required to pay a judgment for the entire amount claimed.



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If the CNA Fresh Water Claims were sustained for the period 1998-2002, it is possible that CNA would seek
to claim similar higher duties, fees and other charges for fresh water extraction and usage from 2003 on into the future. Management estimates that such charges would be approximately $8.5 million of additional basic charges to date, excluding
interest, inflation, and penalties, and, under current operating conditions, approximately $1.7 million of additional basic charges per year. We believe Rhodia would be responsible to indemnify us fully for those additional Taxes arising on or
before the August 2004 closing, and for post-closing losses caused by breaches of covenants, which we have claimed.

Based upon advice of
counsel and our review of the CNA Fresh Water Claims, the facts and applicable law, we have determined that liability is reasonably possible, but is neither probable nor reasonably estimable. Accordingly, we have not established a liability on the
balance sheet as of June 30, 2007. As additional information is gained, we will reassess the potential liability and establish the amount of any loss reserve as appropriate. The ultimate liability amount could be material to our results of
operations and financial condition. Furthermore, Rhodia has a significant amount of debt, a non-investment grade credit rating and has reported losses in recent fiscal years. As a result, we cannot be sure we will ultimately collect any amounts due
from Rhodia under our Rhodia Agreement indemnification rights.

A series of claims by CNA concerning salt water extraction and use for 1998
and 1999, the Salt Water Claims, totaling approximately $107 million (including interest, inflation and penalties), was recently nullified in a unanimous order of the Mexican Court of Fiscal and Administrative Justice, which was determined by order
of the same court to be final and unappealable as of July 10, 2007.

Mexican Water Recycling System  PAMCAR Agreement

Innophos Fosfatados is the successor to the PAMCAR Agreement which required specified improvements at the Coatzacoalcos plant to be
completed by December 31, 2004. Under the terms of the PAMCAR Agreement and subject to its compliance, the CNA temporarily exempted Innophos Fosfatados from the payment of certain waste water discharge duties, taxes and related charges that
normally would have have been payable. On January 10, 2005, after bringing on line newly installed water recycling equipment, Innophos Fosfatados notified the CNA of its position that it complied with the applicable requirements of the PAMCAR
Agreement as of December 31, 2004.

Innophos Fosfatados waste water discharges had been the subject of an earlier study by the
National University of Mexico, which concluded in October 2004 that the discharges did not adversely affect the receiving water bodies or the environment. In addition to a previous request by Innophos Fosfatados to update the relevant waste water
discharge permit with new operating information, in October 2004, Innophos Fosfatados filed a petition with the CNA to reflect the results of the university study and to revise upward the discharge limits which its operations (including as improved
by the water recycling installation) could satisfy. In 2005, Innophos Fosfatados received a new Concession Title (containing a waste water discharge permit and limits) granting the requested relief as to all discharge limits.

Although there has been no formal action, CNA regional officials may take the position that compliance with the PAMCAR Agreement was to be determined by
the previous Concession Title which contained a permit with stricter discharge limits. Consequently, while Mexican counsel has advised us that, as a matter of applicable law, compliance should be determined upon the new, revised, discharge limits,
CNA regional officials could find that Innophos Fosfatados was not in compliance for the duration of the PAMCAR Agreement. In that event, the exempted taxes, duties and related charges through December 31, 2004, could be reinstated. We estimate
that the amount of exempted duties and related charges through December 31, 2004 may range up to $10.6 million at current exchange rates as of July 25, 2007 (including inflation and interest). In addition, we have been advised it is
possible under applicable law that a penalty could be imposed of up to an additional $11.2 million at current exchange rates as of July 25, 2007. We believe that the above amounts represent the upper range of possible liability based on a
finding of noncompliance involving pH levels rather than phosphorus, and, accordingly, could be significantly reduced. We do not know whether the CNA will make a finding of noncompliance as to any aspect of the PAMCAR Agreement or what discharge
limits would constitute the basis for a finding of noncompliance as to water quality requirements.

Based upon currently available
information and advice of counsel, we would take appropriate steps to challenge any claim stemming from an alleged violation of the PAMCAR Agreement before the CNA and/or Mexican courts, and if any such claim were presented, evaluate potential
indemnification rights against Rhodia. Based upon advice of counsel and our review of the CNA claims, the facts and applicable law, we have determined that liability is reasonably possible, but is neither probable nor reasonably estimable.
Accordingly, we did not establish a liability on the balance sheet as of June 30, 2007.

SCT Concession Title

In late March 2007, Innophos Fosfatados received a follow up to an earlier request for information from the SCT related to our Concession Title to use
national port facilities for the Coatzacoalcos plant. Innophos Fosfatados had been granted a 20 year Concession Title in 1993 covering land, pier and water areas, and the SCT is the agency with authority to



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oversee compliance with that Concession Title, including the payment of required taxes and fees, and to take enforcement action, including revocation or
refusal to renew a Concession Title. In our review of the matter, we determined that there was a probable liability and, in response to the SCT demand that we undertake a regularization (that is, a settlement) of omitted or insufficient
payments of taxes and fees under the Concession Title, in June/July 2007, we completed an updated appraisal of the pier-related facilities, made required filings and paid approximately $2.0 million which is included in cost of goods sold in the
three months ended June 30, 2007. The payments consisted of approximately $1.7 million for the periods November 1996 through August 13, 2004 and approximately $0.3 million for the periods August 14, 2004 through May 2007. By
completing the regularization process, management was informed by the agency that no penalties would be imposed. Although the appraisal we obtained which established values for the taxes and fees due may be accepted by the SCT for settlement
purposes, the SCT is entitled, and we believe likely, to order a new appraisal of the port facilities, which could result in a further adjustment of amounts due on our account, which management believes would not be material.

We believe the liability arising from the SCT regularization, to the extent applicable to periods prior to the August 2004 closing of the acquisition, is
fully indemnified by Rhodia under the Rhodia Agreement. We have put Rhodia on notice and made a demand for indemnification amounting to a total of $1.7 million of pre-acquisition Tax claims. We also believe we are indemnified under other provisions
of the Rhodia Agreement, subject to satisfaction of any applicable deductibles, for some or all of the remaining amounts of the regularization payments for periods after the closing and likewise have made a claim for those amounts. Thus far, Rhodia
has maintained that the SCT charges are not Taxes as defined under the Rhodia Agreement and that otherwise there are defenses to the SCT claims. Therefore, although we intend to pursue indemnification from Rhodia vigorously, it is
possible that we will not prevail in any required legal action or that Rhodia will not be able to pay us if we do. The SCT related claims are considered a gain contingency and therefore no receivable has been recorded as of June 30, 2007.

Other Legal Matters

In June 2005,
Innophos Canada, Inc. was contacted by representatives of The Mosaic Company (a division of Cargill Corporation), or Mosaic, seeking a meeting to discuss the status of an ongoing remedial investigation and clean-up Mosaic is conducting at its
currently closed fertilizer manufacturing site located north of Innophos Canadas Pt. Maitland, Ontario Canada plant site. The remediation is being overseen by the Provincial Ministry of Environment, or MOE. Mosaic stated that, in its view, we
and Rhodia (our predecessor in interest prior to 2004) were responsible for some phosphorus compound contamination at a rail yard between the Innophos Canada, Inc. and Mosaic sites, and will be asked to participate in the clean-up. We have
determined that this contingent liability is neither probable nor estimable at this time, but liability is reasonably possible. We have notified Rhodia of the Mosaic claim under the Rhodia Agreement, and we will seek all appropriate indemnification.

In addition, we are party to legal proceedings that arise in the ordinary course of our business. Except as to the matters specifically
discussed, we do not believe that these legal proceedings represent probable or reasonably possible liabilities. However, these matters cannot be predicted with certainty and an unfavorable resolution of one or more of them could have a material
adverse effect on our business, results of operations, financial condition, and/or cash flows.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in our
2006 Annual Report on Form 10-K other than as mentioned below.

We may be adversely affected by environmental, safety, and production and product
regulations or concerns.

Our operations involve the use, handling, processing, storage, transportation and disposal of hazardous
materials and some of our products are ingredients in foods, nutritional supplements or pharmaceutical excipients that are used in finished products consumed or used by humans or animals. As a result, we are subject to extensive and frequently
changing environmental and other regulatory requirements and periodic inspection by federal, state, and local authorities, including the U.S. Environmental Protection Agency, or EPA, the FDA, and the USDA, as well as other regulatory authorities and
those with jurisdiction over our foreign operations. Our operations also expose us to the risk of claims for environmental remediation and restoration or for exposure to hazardous materials. Our production facilities require various operating
permits that are subject to renewal or modification. Violations of environmental laws, regulations, or permits may result in restrictions being imposed on operating activities, substantial fines, penalties, damages, the rescission of operating
permits, third-party claims for property damage or personal injury, or other costs.

Maintaining compliance with health and safety and
environmental laws and regulations has resulted in ongoing costs for us. Currently, we are involved in several compliance and remediation efforts and agency inspections concerning health, safety and environmental matters.



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EPA has indicated that compliance at facilities in the phosphate industry is a high enforcement priority.
In 2004, EPA conducted a multi-media inspection and in 2005 followed up on issues regarding compliance with air, water and hazardous waste regulations at our Geismar, Louisiana plant. In August 2006, we received a report in connection with that
inspection identifying certain areas of concern raised by EPA under its hazardous waste regulations. We believe that we operate our Geismar facility in material compliance with all applicable environmental laws and regulations, including those of
EPA, and have responded to those concerns by explaining how in our judgment our operations meet applicable regulations or exclusions. In March 2007, we received a further EPA request for additional information concerning hazardous waste, air
pollution controls and materials handling at the Geismar plant. We have provided the requested information in a timely manner. Nevertheless, if EPA were to issue notices of violation and it were determined finally that our operations at Geismar were
out of compliance, we might have to pay fines and penalties and invest in remedial facilities to achieve compliance, developments that, in the aggregate, could be material to our operations. If the same were to occur at our acid suppliers
interconnected plant at Geismar, it is possible that its operations could be interrupted for an extended time while it sought to achieve compliance, the impact of which events could also be material to our operations, as our Geismar facility cannot
operate economically under current market conditions without raw materials from the suppliers interconnected plant. Depending upon the facts, circumstances and developments arising from any non-compliance, our long-term raw materials supply
contract at Geismar may be adversely affected, and its provisions may not afford us full relief against losses we may suffer.

Some
existing environmental laws and regulations impose liability and responsibility on present and former owners, operators or users of facilities and sites for contamination at those locations without regard to causation or knowledge of contamination.
Many of our sites have an extended history of industrial use. Soil and groundwater contamination have been detected at some of our sites, and additional contamination might occur or be discovered at these sites or other sites (including sites to
which we may have sent hazardous waste) in the future. We continue to investigate, monitor or clean-up contamination at most of these sites. Due to the uncertainties associated with environmental investigations and clean-ups and the ongoing nature
of the investigations and clean-ups at our sites, we cannot predict precisely the nature, cost, and timing of our future remedial obligations with respect to our sites.

Additional laws or regulations focused on phosphate-based products may be implemented in the future. For example, a number of states are moving to effectively ban the use of phosphate-based products in consumer
automatic dishwashing detergents. In 2006, Washington State enacted legislation of that type, to be effective in several counties in 2008 and state-wide in 2010. Maryland, Minnesota and Vermont have also recently enacted similar legislation
effective in 2010, and comparable bills are being considered by the legislatures of several other states. In 2007, the trade association that includes major manufacturers of consumer automatic dishwashing detergents began actively to support these
efforts, increasing the likelihood they will become widespread. This trend and related changes in consumer preferences could have a significant impact on our business to the extent we are not able to react in a timely and adequate manner to our
customers reformulations of automatic dishwashing detergent products and resulting market changes by adjusting our sales and manufacturing plans. Furthermore, although already banned in home laundry detergents in many U.S. States, phosphates
are still permitted for those applications in many Latin American regions. We cannot be sure that such a ban for use in home laundry detergents may not be implemented in some or all of these Latin American markets in the future, although the
geological and hydrological conditions (i.e., river and lake regions) differ substantially from the U.S. Additional laws or regulations focused on reduced use of other phosphate-based products could occur in the future. For example, some
jurisdictions have threatened to further regulate or ban the use of polyphosphoric acid and orthophosphoric acid in asphalt road construction. Such a ban, if instituted in multiple jurisdictions or throughout the U.S., could have significant impact
on our business.



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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS



| | (a) | Exhibits. The following exhibits are filed or furnished as part of this report:
| | --- | -------------------------------------------------------------------------------



|            |  |                                                                                                                             
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                 
|            | 
|31.1        |  | Certification of Principal Executive Officer dated August 10, 2007 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|            | 
|31.2        |  | Certification of Principal Financial Officer dated August 10, 2007 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|            | 
|32.1*       |  | Certification of Principal Executive Officer dated August 10, 2007 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|            | 
|32.2*       |  | Certification of Principal Financial Officer dated August 10, 2007 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

---

|* | Not to be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that section, nor deemed to be incorporated by
reference into any filing under that Act or the Securities Act of 1933.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES

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



INNOPHOS, INC./s/ Randolph GressBy:

Randolph GressIts:

Chief Executive Officer and Director (Principal
Executive Officer)Dated: August 10, 2007INNOPHOS, INC./s/ Richard HeyseBy:

Richard HeyseIts:

Vice President and Chief Financial Officer (Principal
Financial Officer)Dated: August 10, 2007




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EXHIBIT INDEX



|            |  |                                                                                                                             
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                 
|31.1        |  | Certification of Principal Executive Officer dated August 10, 2007 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|            | 
|31.2        |  | Certification of Principal Financial Officer dated August 10, 2007 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|            | 
|32.1        |  | Certification of Principal Executive Officer dated August 10, 2007 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|            | 
|32.2        |  | Certification of Principal Financial Officer dated August 10, 2007 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



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