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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



QUARTERLY REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934.



For the quarterly period ended June 30, 2003



Commission File Number: 333-70011



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GEO SPECIALTY CHEMICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)



|Ohio                                                           |  | 34-1708689                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)



GEO Specialty
Chemicals, Inc.

3201 Enterprise Parkway, Suite 490

Cleveland, Ohio 44122

(Address, including Zip Code, of Principal Executive Offices)



(216) 464-5564

(Registrants Telephone Number, including Area Code)



Indicate by check mark whether the registrant: (l) has filed all reports required to be filed by Section 13 or l5(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 an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act).  Yes ̈No  x.



Indicate the number of shares outstanding of each of the issuers
classes of common stock, as of the latest practicable date.



Shares of Class A Voting Common Stock, $1.00 par value, as of August 14, 2003: 135.835.



Shares of Class B Nonvoting Common Stock, $1.00 par value, as of August 14, 2003: none.



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PART I

FINANCIAL INFORMATION



ITEM 1.
FINANCIAL STATEMENTS.



CONSOLIDATED BALANCE
SHEETS (UNAUDITED)

GEO SPECIALTY CHEMICALS, INC.



|                                                                                                                  |  | (IN THOUSANDS EXCEPT SHARE DATA)
|----------------------------------------------------------------------------------------------------------------- |  | --------------------------------
|                                                                                                                  |  | JUNE 30, 2003                   
|ASSETS                                                                                                            |  |                                 
|Current assets                                                                                                    |  |                                 
|Cash                                                                                                              |  | $                               
|Trade accounts receivable, net of allowance of $238 and $242 at June 30, 2003 and December 31, 2002, respectively |  |                                 
|Other receivables                                                                                                 |  |                                 
|Inventory                                                                                                         |  |                                 
|Prepaid expenses and other current assets                                                                         |  |                                 
|Deferred taxes                                                                                                    |  |                                 
|                                                                                                                  |  |                                 
|Total current assets                                                                                              |  |                                 
|Property and equipment, net                                                                                       |  |                                 
|Other assets                                                                                                      |  |                                 
|Intangible assets, net                                                                                            |  |                                 
|Goodwill, net                                                                                                     |  |                                 
|Other accounts receivable                                                                                         |  |                                 
|Deferred taxes                                                                                                    |  |                                 
|Other                                                                                                             |  |                                 
|                                                                                                                  |  |                                 
|Total other assets                                                                                                |  |                                 
|                                                                                                                  |  |                                 
|Total assets                                                                                                      |  | $                               
|                                                                                                                  |  |                                 



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|                                                                                                                                                |  | (IN THOUSANDS EXCEPT SHARE DATA) |        
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | -------
|                                                                                                                                                |  | JUNE 30, 2003                    |        
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                            |  |                                  |        
|Current liabilities                                                                                                                             |  |                                  |        
|Current portion of long-term debt                                                                                                               |  | $                                | 95,550 
|Revolving line of credit                                                                                                                        |  |                                  | 5,000  
|Accounts payable                                                                                                                                |  |                                  | 11,113 
|Other accounts payable                                                                                                                          |  |                                  | 106    
|Income taxes payable                                                                                                                            |  |                                  |       
|Accrued expenses and other current liabilities                                                                                                  |  |                                  | 10,234 
|                                                                                                                                                |  |                                  |        
|Total current liabilities                                                                                                                       |  |                                  | 122,003
|Long-term liabilities                                                                                                                           |  |                                  |        
|Senior subordinated notes                                                                                                                       |  |                                  | 120,000
|Fair value adjustment                                                                                                                           |  |                                  | 2,711  
|                                                                                                                                                |  |                                  |        
|Fair value of senior subordinated notes                                                                                                         |  |                                  | 122,711
|Term B facility                                                                                                                                 |  |                                  |       
|Other long-term liabilities                                                                                                                     |  |                                  | 6,129  
|Deferred taxes                                                                                                                                  |  |                                  | 167    
|                                                                                                                                                |  |                                  |        
|Total long-term liabilities                                                                                                                     |  |                                  | 129,007
|                                                                                                                                                |  |                                  |        
|Shareholders Equity                                                                                                                            |  |                                  |        
|Class A Voting Common Stock, $1.00 par value, 1,035 shares authorized, 136 shares issued and outstanding at June 30, 2003 and
December 31, 2002 |  |                                  |        
|Class B Nonvoting Common Stock, $1 par value, 215 shares authorized, 0 shares outstanding at June 30, 2003 and December 31,
2002                |  |                                  |        
|Additional paid-in capital                                                                                                                      |  |                                  | 20,901 
|Retained earnings                                                                                                                               |  |                                  | (1,185 
|Accumulated other comprehensive loss                                                                                                            |  |                                  | (3,234 
|                                                                                                                                                |  |                                  |        
|Total shareholders equity                                                                                                                      |  | $                                | 16,482 
|                                                                                                                                                |  |                                  |        
|Total liabilities and shareholders equity                                                                                                      |  | $                                | 267,492
|                                                                                                                                                |  |                                  |        



See accompanying notes
to consolidated financial statements.



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CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

GEO SPECIALTY CHEMICALS, INC.



|                                            |  | (IN THOUSANDS)                |       
|------------------------------------------- |  | ----------------------------- | ------
|                                            |  | APRIL 1 THROUGH JUNE 30, 2003 |       
|Net sales                                   |  | $                             | 39,650
|Costs of sales                              |  |                               | 35,310
|                                            |  |                               |       
|Gross profit                                |  |                               | 4,340 
|Selling general and administrative expenses |  |                               | 4,050 
|                                            |  |                               |       
|Income before interest and taxes            |  |                               | 290   
|Net interest expense                        |  |                               | 5,343 
|Loss before taxes                           |  |                               | (5,053
|Provision for taxes (benefit)               |  |                               | (1,945
|                                            |  |                               |       
|Net loss                                    |  | $                             | (3,108
|                                            |  |                               |       
|Total comprehensive loss                    |  | $                             | (2,903
|                                            |  |                               |       



See accompanying notes
to consolidated financial statements.



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CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

GEO SPECIALTY CHEMICALS, INC.



|                                                                        |  | (IN THOUSANDS)              |       
|----------------------------------------------------------------------- |  | --------------------------- | ------
|                                                                        |  | JAN 1 THROUGH JUNE 30, 2003 |       
|Cash flows from operating activities                                    |  |                             |       
|Net loss                                                                |  | $                           | (6,077
|Adjustments to reconcile net loss to net cash from operating activities |  |                             |       
|Depreciation, depletion and amortization                                |  |                             | 7,556 
|Deferred income tax (benefit)                                           |  |                             | (3,775
|Gain on derivative instruments                                          |  |                             |      
|Change in assets and liabilities                                        |  |                             |       
|Trade accounts receivable                                               |  |                             | (1,046
|Other accounts receivable                                               |  |                             | 465   
|Inventories                                                             |  |                             | (686  
|Prepaid expense and other assets                                        |  |                             | (409  
|Accounts payable                                                        |  |                             | (1,436
|Other liabilities                                                       |  |                             | (20   
|                                                                        |  |                             |       
|Net cash from operating activities                                      |  |                             | (5,428
|                                                                        |  |                            
|Cash flows from investing activities                                    |  |                             |       
|Purchases of property, plant and equipment                              |  |                             | (961  
|                                                                        |  |                             |       
|Net cash flows from investing activities                                |  |                             | (961  
|                                                                        |  |                            
|Cash flows from financing activities                                    |  |                             |       
|Borrowings under revolving line of credit                               |  |                             | 5,000 
|Payments on Term B notes                                                |  |                             | (975  
|Payments on deferred financing Costs                                    |  |                             | (423  
|                                                                        |  |                             |       
|Net cash from financing activities                                      |  |                             | 3,602 
|Net change in cash                                                      |  |                             | (2,787
|Cash at beginning of period                                             |  |                             | 11,420
|Cash at end of period                                                   |  |                             | 8,633 
|                                                                        |  |                             |       
|Supplemental disclosure of cash flow                                    |  |                             |       



5



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|Information   |  |   |       |  |   |      
|------------- |  | - | ----- |  | - | -----
|Cash paid for |  |   |       |  |   |      
|Interest      |  | $ | 9,472 |  | $ | 9,015
|Taxes         |  |   |      |  |   | 3,485



See accompanying notes
to consolidated financial statements.



GEO SPECIALTY CHEMICALS,
INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS)



NOTE 1NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES



Nature of Business: GEO Specialty Chemicals, Inc. was incorporated in the state of Ohio for the purpose of owning and operating specialty
chemical businesses. GEOs manufacturing process produces a variety of specialty chemical products for use in various major chemical markets. GEO produces more than 300 products. These products are used primarily in the construction, paper,
water treatment, electronic, automotive and oil field industries. GEO sells these products to customers located worldwide.



GEO operates in an environment with many financial and operating risks, including, but not limited to, intense competition, fluctuations in cost and supply of raw
materials, technological changes, and environmental matters. GEO has a high level of indebtedness, which creates liquidity and debt service risks.



INTERIM RESULTS (UNAUDITED): The accompanying consolidated balance sheet at June 30, 2003 and the consolidated statements of operations and cash flows for the three and
six month periods ended June 30, 2003 and 2002 are unaudited. In the opinion of management, these statements have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of only normal recurring
adjustments, necessary for the fair presentation of the results of the interim periods. The data disclosed in these notes to the consolidated financial statements for those interim periods are also unaudited. The consolidated results of operations
for the three and six month periods ended June 30, 2003 are not necessarily indicative of the results expected for the full calendar year. Because all of the disclosures required by generally accepted accounting principles are not included, these
interim statements should be read in conjunction with GEOs consolidated financial statements for the year ended December 31, 2002, and the notes thereto, which are included in GEOs Annual Report on Form 10-K filed with the Securities and
Exchange Commission on April 15, 2003.



PRINCIPLES OF CONSOLIDATION: The
accompanying consolidated financial statements include the accounts of GEO and its wholly-owned subsidiaries, GEO Specialty Chemicals Ltd., GEO Holdings (Europe) SARL, GEO Gallium S.A., Ingal Stade GmbH and GEO Pinjarra Pty, Ltd. All significant
intercompany balances and transactions have been eliminated.



COMPREHENSIVE
INCOME (LOSS): Comprehensive income (loss) consists of GEOs net income (loss), the effects of foreign exchange translation adjustments, the recognition of an additional minimum liability associated with GEOs defined benefit pension plans
and the effective gain or losses on financial instruments.



RECLASSIFICATIONS:
Certain prior year amounts have been reclassified to conform to current year presentation. There is no effect on net income (loss) as a result of the reclassification.



NOTE 2CREDIT FACILITY AND LONG-TERM BORROWINGS



On April 14, 2003, the senior credit agreement originally entered into in May 2001, and later
amended in May 2002, with Deutsche Bank Trust Company Americas, formerly known as Bankers Trust Company, and various other financial institutions, was amended. Pursuant to the amendment, the borrowings on the $20 million Revolving



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Credit Facility in excess of $5.0 million must be supported by a letter of credit issued by GEOs major shareholder,
Charter Oak Partners. Also, the interest margin on the Term B Loan Facility was increased.



As part of the amendment, effective March 31, 2003, certain covenants of the senior credit facility were changed for the period January 1, 2003 until December 31, 2003. During this twelve month period less rigorous
leverage and interest coverage ratios are effective. Also, the limit on annual capital expenditures was reduced from $10.0 million to $7.0 million. Restrictions remain on any capital expenditures pertaining to GEOs Pinjarra Project during the
twelve month period.



Several other sections of the Senior Credit Agreement
were amended. These amendments were made primarily to limit GEOs ability to make acquisitions without the approval of the lenders, provide for the use of additional shareholder or other subordinating funding for certain major projects, limit
the amount of cash GEO can hold, reduce the amount of cash GEO can retain from divestments and to clarify certain definitions and reporting requirements.



As of June 30, 2003, GEO was not in compliance with the leverage and interest coverage ratios contained in its senior credit agreement, as amended on April 14, 2003. On
July 30, 2003, GEO obtained a retrospective waiver of this noncompliance from its senior lenders from June 30, 2003 through August 22, 2003. On August 1, 2003, GEO failed to make the interest payment on its 101/8% Senior Subordinated Notes due 2008. As a result, GEO is in default under the indenture governing these Notes. At
this time, GEO is engaged in on-going negotiations with its senior lenders and shareholders in an effort to consummate the sale and purchase of a senior promissory note of GEO in the amount of $6,100,000. If the sale of this senior promissory note
is consummated during August, it will permit GEO to make the interest payment and default interest due on its Notes within the applicable 30-day grace period. GEO has engaged CIBC World Markets to assist it in negotiating new terms of GEOs
senior debt. However, as with any negotiation, there can be no assurance as to when and if an agreement among the parties will be finalized. If an agreement is not reached, GEO will be in default under its senior credit agreement and the indenture
governing its Notes. This will adversely affect GEOs principal resources of liquidity and its ability to meet future cash requirements. Such limitations could force GEO to consider alternatives that may include negotiating further amendments
to the senior credit agreement and the indenture governing the Notes, attempting to obtain commitments for additional debt or equity capital, asset sales, or other alternatives appropriate for the circumstances.



NOTE 3INVENTORY



Inventory consists of the following components:



|                 |  | June 30, 2003 |        | December 31, 2002
|---------------- |  | ------------- | ------ | -----------------
|Raw materials    |  | $             | 8,271  |                  
|Work in progress |  |               | 133    |                  
|Finished goods   |  |               | 19,266 |                  
|                 |  |               |        |                  
|                 |  | $             | 27,670 |                  
|                 |  |               |        |                  



NOTE
4LITIGATION



On January 29th, 2003, Citibank N.A. purported to terminate
two interest rate swap contracts to which GEO was a party, and claimed GEO owed it $615,000 upon termination. Citibanks action took place days before it was due to pay GEO $739,181.25 pursuant to the contracts. At the time, GEO disputed
Citibanks purported termination of the contracts and any amount Citibank claimed it was owed. On June 16, 2003, Citibank filed suit in the Southern District of New York against GEO seeking the $615,000 it claimed it is owed, as well as
attorneys fees and costs. GEO is vigorously defending the suit and has counterclaimed for Citibanks breach of the contracts. GEO is seeking damages based on the amount GEO expected to be paid over the full term of the contracts, which is
in excess of  $2 million.



NOTE
5MANAGEMENTS PLAN REGARDING CONTINUING OPERATIONS



As of June 30,
2003 due to various unfavorable factors, the Companys financial performance was below prior period levels. Management is responding proactively to these factors and is confident that operations will continue. Foremost in this regard are the
Companys efforts to negotiate an amendment to its Senior Credit Agreement to improve the Companys liquidity and reduce financial covenant constraints. As part of this process, the Company has engaged an investment banker for strategic
advice and is negotiating the terms of a new debt investment by its majority shareholders.



Operationally, during the last twelve months, the Company has undertaken initiatives to reduce operating and logistical expenses, increase the prices of its products to offset higher raw material costs and to
introduce new products to improve the Companys market position and increase revenue.



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



Results of Operations



The following table sets forth certain operations data of GEO for the second quarter of 2002
and 2003 and the first six months of 2002 and 2003 expressed in millions of dollars and as a percentage of net sales for the respective periods.



|                                 |  | Three Months Ended June 30, |      |   | Six Months Ended June 30, |      
|-------------------------------- |  | --------------------------- | ---- | - | ------------------------- | -----
|                                 |  | 2002                        |      |   | 2003                      |      
|                                 |  | $                           |      |   | %                         |      
|Net Sales                        |  | $                           | 43.5 |   |                           | 100.0
|Gross Profit                     |  |                             | 8.5  |   |                           | 19.5 
|Income Before Interest and Taxes |  |                             | 3.2  |   |                           | 7.4  
|Net Interest Expense and Taxes   |  |                             | 4.4  |   |                           | 10.1 
|Net Loss                         |  |                             | (1.2 | ) |                           | (2.8 
|Capital expenditures             |  |                             | 1.3  |   |                           | 3.0  



THREE MONTHS ENDED JUNE 30, 2003
COMPARED TO THREE MONTHS ENDED JUNE 30, 2002



Net Sales.Net sales
for the three months ended June 30, 2003 were $39.6 million, representing a $3.9 million or 8.9% decrease compared to $43.5 million of net sales during the same period in 2002. Reduced sales of organic peroxide products to the wire and cable market
accounted for $3.3 million of the revenue decline. This decrease was due to lower volumes, down by 47%, and lower prices, down by 26%. Another significant decrease in revenue, $1.7 million, was attributable to the termination of a supply agreement
with Cognis. Partially offsetting these reductions was a $1.1 million increase in sales of organic peroxides to the rubber and plastics markets.



Gross Profit. Gross profit for the three months ended June 30, 2003 was $4.3 million, or 10.9% of net sales, representing a $4.2 million or 49.4% decrease compared
with gross profit of $8.5 million, or 19.5% of net sales, during the same period in 2002. The decline in sales accounted for approximately $2.2 million of the reduction in gross profit. The remaining difference was primarily due to sales mix and
higher raw material costs, reflected by the increase in raw material cost to 48.8% of net sales from 43.1% in the same period in 2002. Compared to the same period in 2002, most of the increase in raw material costs was for methanol, naphthalene and
cumene. Plant operating costs were slightly lower, $0.3 million, compared to the same period in 2002.



Income Before Interest and Taxes.Income before interest and taxes for the three months ended June 30, 2003 was $0.3 million, or 0.8% of net sales, representing a $2.9 million decrease compared with income
before interest and taxes of $3.2 million, or 7.4% of net sales, during the same period in 2002. The decrease was due to the decline in gross profit. Partially offsetting the impact of lower gross margin were a $0.6 million decrease in direct
selling, general and administrative expenses, primarily lower employment costs and savings from consolidating administrative sites, and a $0.1 million reduction in amortization and corporate depreciation.



Net Interest Expenses and Taxes.Net interest expenses for the three months ended June
30, 2003 was $5.3 million, or 13.4% of net sales, similar to the net interest expense of $5.2 million, or 12.0% of net sales, during the same period in 2002. The income tax provision for three months ended June 30, 2003 was a credit of $1.9 million
versus a credit of $0.8 million in 2002, reflecting the larger pre-tax loss in 2003.



Net Loss. Net loss for the three months ended June 30, 2003 was ($3.1) million, or (7.8%) of net sales, representing a $1.9 million decrease compared with net loss of ($1.2) million, or (2.8%) of net sales, during the same period in
2002. The increase in net loss was primarily attributable to the decline in income before interest and taxes of $2.9 million offset by a more favorable provision for income taxes or tax benefit of $1.1 million.



Capital Expenditures. Capital expenditures for the three months ended June 30, 2002
were $0.5 million or a $0.8 million decrease compared to $1.3 million of capital expenditures during the same period in 2002.



SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO SIX MONTHS ENDED JUNE 30, 2002



Net Sales.Net sales for the six months ended June 30, 2003 were $78.9 million, representing a $5.0 million or 6.0% decrease compared with net sales of $83.9
million during the same period in 2002. The decrease in net sales was primarily attributable to the reduction in organic peroxide sales to the wire and coatings market of 57% or $5.9 million and to Cognis of $2.5 million. Volumes sold to the wire
and cable industry were 41% lower than the same period in 2002. These decreases were partially offset primarily by additional organic peroxide sales to the plastics market of $3.0 million and higher merchant clay sales, especially in the first
quarter of 2003.



Gross Profit. Gross profit for the six months ended
June 30, 2003 was $8.6 million, or 10.9% of net sales, representing a $6.8 million or 44.2% decrease compared to gross profit of $15.4 million, or 18.4% of net sales, during the same period in 2002. Lower sales accounted for approximately $2.6
million of the decrease in gross profit. Lower net sales due to lower sales prices, higher raw material costs and product mix resulted in an unfavorable gross profit variance of $3.8 million. The remaining difference in gross profit of $0.4 million
was due to freight costs relative to sales, especially in the first quarter. Plant operating costs were essentially flat compared to the first six months of 2002.



Income Before Interest and Taxes.Income before interest and taxes for the six months ended June 30, 2003 was $0.3 million, or 0.4%
of net sales, representing a $5.1 million decrease compared with income before interest and taxes of $5.4 million, or 6.4% of net sales, during the same period in 2002. The decrease in income before interest and taxes was attributable to the $6.8
million decline in gross profit, partially offset by lower selling, general and administrative costs of $1.3 million, which includes $0.8 million in lower direct costs and $0.4 million less amortization and corporate depreciation.



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Net Interest Expenses and Taxes.Net interest expenses for the six months ended June 30, 2003 was $10.5 million,
or 13.4% of net sales, representing a $1.0 million increase compared to the net interest expense of $9.5 million, or 11.3% of net sales, during the same period in 2002. As noted previously, actual interest charges increased by $0.7 million and
amortization related to deferred financing costs increased by $0.3 million. The increase was related primarily to the termination of interest rate swap contracts in the first quarter of 2003 by Citibank that generated net interest savings of
approximately $0.7 million semi-annually. The income tax provision for the six months ended June 30, 2003 was a credit of $4.1 million versus a credit of $1.4 million in 2002, reflecting the larger pre-tax loss in 2003.



Net Loss. Net loss for the six months ended June 30, 2003 was ($6.1) million, or
(7.7%) of net sales, representing a $3.4 million decrease compared with net loss of ($2.7) million, or (3.2)% of net sales, during the same period in 2002. The increase in net loss was due primarily to the decline in income before interest and taxes
of $5.6 million. Actual net interest expense increased by $0.7 million and amortization of deferred financing costs increased by $0.3 million. These increases were attributable to the additional deferred financing costs incurred in amending the
senior credit agreement, the expensing of remaining deferred financing costs from the prior amendment and the unfavorable impact of the termination of interest rate swap contracts. A more favorable income tax provision contributed $2.6 million to
net income compared to 2002.



Capital Expenditures. Capital expenditures
for the six months ended June 30, 2003 were $1.0 million or a $1.1 million decrease compared to $2.1 million of capital expenditures during the same period in 2002. The decrease in capital expenditures reflects the controls placed on capital
projects in light of market conditions, financial performance during the first six months of 2003 and restrictions under the amended credit facility.



Liquidity and Capital Resources



GEOs primary cash needs are for working capital, capital expenditures and debt service. In the past, GEO has financed these needs from internally generated cash
flow, in addition to periodic draws on GEOs credit facility. At the present time GEO is experiencing what it believes is a temporary lack of liquidity. This situation is forcing GEO to seek additional debt finance and implement a number of
cash saving and other strategic measures.



As of June 30, 2003, GEO was not in
compliance with the leverage and interest coverage ratios contained in its senior credit agreement, as amended on April 14, 2003. On July 30, 2003, GEO obtained a retrospective waiver of this noncompliance from its senior lenders from June 30, 2003
through August 22, 2003. On August 1, 2003, GEO failed to make the interest payment on its 101/8% Senior
Subordinated Notes due 2008. As a result, GEO is in default under the indenture governing these Notes. At this time, GEO is engaged in on-going negotiations with its senior lenders and shareholders in an effort to consummate the sale and purchase of
a senior promissory note of GEO in the amount of $6,100,000. If the sale of this senior promissory note is consummated during August, it will permit GEO to make the interest payment and default interest due on its Notes within the applicable 30-day
grace period. GEO has engaged CIBC World Markets to assist it in negotiating new terms for GEOs senior debt. However, as with any negotiation, there can be no assurance as to when and if an agreement among the parties will be finalized. If an
agreement is not reached, GEO will be in default under its senior credit agreement and the indenture governing its Notes. This will adversely affect GEOs principal resources of liquidity and its ability to meet future cash requirements. Such
limitations could force GEO to consider alternatives that may include negotiating further amendments to the senior credit agreement and the indenture governing the Notes, attempting to obtain commitments for additional debt or equity capital, asset
sales, or other alternatives appropriate for the circumstances.



As of
June 30, 2003, GEOs cash balance was $8.6 million versus a balance of $6.3 million as of June 30, 2002. As of June 30, 2003, the debt repayments due within the next 12 months were $100.5 million compared to $1.0 million as of June 30, 2002. As
of June 30, 2003, GEOs revolving loan balance was $5.0 million compared to no revolving loan balance as June 30, 2002.



Net cash provided from operations for the six months ended June 30, 2002 and 2003 was ($3.7) million and ($5.4) million, respectively. The $1.7 million change was due
primarily to the decrease in net income of $3.4 million, lower non-cash charges of $0.5 million and net change in deferred income tax benefits and other gains of $2.2 million, offset partially by a more favorable use of working capital of $4.3
million.



As of June 30, 2003, GEO had no material commitments for capital
expenditures except for a $0.8 million boiler replacement project at the Allentown, PA. plant. Of the $0.8, GEO had spent $0.2 million and had commitments for $0.5 million of additional expenditures as of June 30, 2003. Overall, total capital
expenditures for the six month period ending June 30, 2003 were $1.0 million compared to $2.1 million during the same period in 2002.



On April 14, 2003, GEOs senior credit agreement was amended effective March 31, 2003. As part of the amendment, use of the revolving credit facility was modified to
require letters of credit from GEOs major shareholder to support borrowing in excess of $5.0 million. Additionally, the interest margins paid under the term debt facility were increased. As of March 31, 2003, GEO had $5.0 million of borrowings
outstanding on its



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$20.0 million revolving credit facility. Borrowings under the revolving credit facility bear interest, at GEOs
option, at:



| |  |  | 3.75% above the higher of the Federal Funds Effective rate plus 0.5% or the prime lending rate of Bankers Trust Company; or
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | an adjusted Eurodollar rate plus 4.50%.
| | - |  | ---------------------------------------



The term loan under the senior credit agreement bears interest, at GEOs option, at:



| |  |  | 4.75% above the higher of the Federal Funds Effective rate plus 0.5% or the prime lending rate of the Bankers Trust Company: or
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | an adjusted Eurodollar rate plus 6.00%.
| | - |  | ---------------------------------------



The base rate and the Eurodollar rate margin for both the revolving credit facility and the term loan can vary from fiscal quarter to fiscal quarter depending on
GEOs net leverage ratio (i.e. net indebtedness divided by EBITDA for the four previous quarters).



As of June 30, 2003, based on the amendment to the senior credit agreement, GEOs interest rates under the term debt and the revolving credit facility were approximately 7.375% and 5.6875%, respectively. The
senior revolving credit facility contains customary covenants including the maintenance of certain financial ratios, which were also amended effective March 31, 2003.



Cash paid for interest during the six month period ending June 30, 2003 was $9.5 million, versus $9.0 million during the same period in
2002. Net financing charges, excluding amortization of financing fees, were $9.5 million during the six month period ending June 30, 2003, versus $8.8 million during the same period in 2002.



Cash paid for taxes during the six month period ended June 30, 2003 was zero compared to $3.5
million during the same period in 2002.



GEO has the following contractual and
commercial commitment obligations as of June 30, 2003 that can impact its liquidity:



|Contractual Obligations (in thousands) |  | Principal Payments Due by Period
|-------------------------------------- |  | --------------------------------
|                                       |  | Total                           
|Long-Term Debt                         |  | $                               
|Line of Credit                         |  |                                 
|Operating Leases                       |  |                                 
|                                       |  |                                 
|Total Contractual Cash Obligations     |  | $                               



|Other Commercial Commitments (in thousands) |  | Amount of Commitment Expiration per Period
|------------------------------------------- |  | ------------------------------------------
|                                            |  | Total Amounts Committed                   
|Lines of Credit                             |  | $                                         
|Standby Letters of Credit                   |  |                                           
|Total Commercial Commitments                |  | $                                         



GEOs management has taken steps
to improve cash flow from operations, including selected price increases, reducing overhead through consolidation of functions and personnel reductions across GEOs businesses. GEO believes that its underlying businesses are likely to see
improvements in the coming quarters and it has adequate liquidity to meet all operating and trade obligations in the ordinary course. However, there can be no assurance that its efforts will be successful in improving cash flow from operations or
that future performance of GEOs businesses will improve sufficiently to enable GEO to continue to meet its obligations for the payment principal or interest under its debt agreements and capital expenditures necessary to maintain its existing
businesses. There can be no assurance GEO will be able to comply with the financial covenants of its debt agreements, particularly if the existing negotiations with its senior lenders and shareholders prove to be unsuccessful.



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The overall effects of inflation on GEOs business during the periods discussed have not been significant. GEO
monitors the prices it charges for its products on an ongoing basis and believes that it will be able to adjust those prices to take into account any future changes in the rate of inflation.



Disclosure Regarding Forward-Looking Statements Contained in this Report



Some of the statements made in this report, including statements containing the words
believes, anticipates, intends, expects, should, may, will, continue and estimate, and similar words, constitute forward-looking statements
under the federal securities laws. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of GEO or its industry to be materially different
from any future results, performance or achievements expressed or implied by such forward-looking statements. Some of the factors that could cause actual results to differ materially from GEOs expectations include the following: (1) GEOs
inability to make required interest or principal payments under its existing long-term debt due to decreased sales and financial performance; (2) GEOs loss of access to its revolving credit facility due to a covenant violation, which could
hinder its ability to obtain working capital or make required interest or principal payments under its existing long-term debt; (3) GEOs inability to repay or refinance its existing long-term debt at such time as the principal amounts thereof
become payable or are accelerated; (4) the refusal of GEOs lenders to make accommodations or extend additional credit in the event of a covenant violation by GEO or GEOs failure to make required interest or principal payments; (5)
GEOs inability to generate sufficient cash flow, or to cut operating costs, to allow it to meet its working capital and other payment obligations; (6) the acceleration of GEOs obligations under its existing long-term debt due to its
failure to timely make scheduled interest or principal payments or to comply with its covenants or other obligations under the applicable debt agreements; (7) the further worsening of general economic or specific market conditions that cause further
declines in the demand for GEOs products; (8) the increased risk during economic downturns that GEOs customers may declare bankruptcy or experience payment difficulties; (9) GEOs inability to effect additional acquisitions or
dispositions; and (10) GEOs failure to effectively integrate, or maintain or grow the sales of, acquired businesses, or its incurrence of greater than expected expenses in connection with operating acquired businesses. Given these
uncertainties, you should not place undue reliance upon such forward-looking statements.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.



As a result of GEOs global operating activities, GEO is exposed to market risks from changes in interest rates and in foreign currency
exchange rates which may adversely affect GEOs operating results and financial position. GEOs goal is to minimize its risks from interest and foreign currency exchange rate fluctuations through its normal operating activities and
financing activities and, when deemed appropriate, through the use of derivative financial instruments. GEO does not use derivative financial instruments for trading or other speculative purposes and does not use leveraged derivative financial
instruments.



GEOs foreign operations are subject to the usual risks that
may affect such operations. They include, among other things, exchange controls and currency restrictions, currency fluctuations, changes in local economic conditions, unsettled political conditions and foreign government-sponsored boycotts of
GEOs products or services for noncommercial reasons. Most of the identifiable assets associated with foreign operations are located in countries where GEO believes such risks to be minimal. In addition, GEO does not consider the market risk
exposure relating to currency exchange to be material.



The fair value of
GEOs fixed rate long-term notes is sensitive to changes in interest rates. Interest rate changes would result in gains/losses in the fair value of the notes due to differences between the market interest rates and rates at the date of the
issuance of the notes. Based on a hypothetical immediate 100 basis point increase in interest



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rates at June 30, 2003, the fair value of GEOs fixed rate long-term notes would be impacted by a net decrease of
$3.3 million. Conversely, a 100 basis point decrease in interest rates would result in a net increase in the fair value of GEOs fixed rate long-term notes at June 30, 2003 of $3.5 million.



ITEM 4. CONTROLS AND PROCEDURES.



As of June 30, 2003, an evaluation of the effectiveness of the design and
operation of GEOs disclosure controls and procedures was performed under the supervision and with the participation of GEOs Chief Executive Officer (CEO) and Chief Financial Officer (CFO). Based on this
evaluation, GEOs CEO and CFO concluded that GEOs disclosure controls and procedures were effective as of June 30, 2003.



There was no change in GEOs internal control over financial reporting during the three months ended June 30, 2003 that has materially affected or is reasonably
likely to materially affect, GEOs internal control over financial reporting.



PART II

OTHER INFORMATION



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.



| | (a) |  | Exhibits.
| | --- |  | ---------



Exhibit 10.1

Waiver and Third Amendment to Amended and Restated Credit Agreement dated July 30, 2003Exhibit 10.2

First Amended and Restated Employment and Noncompetition Agreement with George P. AhearnExhibit 10.3

First Amended and Restated Employment and Noncompetition Agreement with William P. EckmanExhibit 31.1

Rule 13a  14(a)/15d  14(a) Certification of Chief Executive OfficerExhibit 31.2

Rule 13a  14(a)/15d  14(a) Certification of Chief Financial OffiicerExhibit 32.1

Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States CodeExhibit 32.2

Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code




| | (b) |  | Reports on Form 8-K.
| | --- |  | --------------------



None.



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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.



|                |  |  |  | GEO SPECIALTY CHEMICALS, INC.
|--------------- |  |  |  | -----------------------------
|                |  |  | 
|August 14, 2003 |  |  |  | By:                          
|                |  |  |  |