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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                    FORM 10-Q

                                   ----------

        (Mark One)

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

                 For the quarterly period ended March 31, 2002

                                       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 333-64641

                                   ----------

                        Philipp Brothers Chemicals, Inc.
             (Exact name of registrant as specified in its charter)

            New York                                           13-1840497
   (State or other jurisdiction                             (I.R.S. Employer
of incorporation or organization)                          Identification No.)

                  One Parker Plaza, Fort Lee, New Jersey 07024
               (Address of principal executive offices) (Zip Code)

                                 (201) 944-6020
              (Registrant's telephone number, including area code)

                                   ----------

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 |_|

Number of shares of each class of common stock outstanding as of March 31, 2002:

                 Class A Common Stock, $.10 par value: 12,600.00
                 Class B Common Stock, $.10 par value: 11,888.50

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<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.

                                TABLE OF CONTENTS

                                                                          Page
                                                                          ----
PART I  FINANCIAL INFORMATION (UNAUDITED)

  Item 1. Condensed Financial Statements ..............................    3
          Condensed Consolidated Balance Sheets .......................    4
          Condensed Consolidated Statements of Operations and
            Comprehensive Income ......................................    5
          Condensed Consolidated Statements of Changes in Stockholders'
            Equity ....................................................    6
          Condensed Consolidated Statements of Cash Flows .............    7
          Notes to Condensed Consolidated Financial Statements ........    8

  Item 2. Management's Discussion and Analysis of Financial
          Condition and Results of Operations .........................   21

  Item 3. Quantitative and Qualitative Disclosures About Market Risk ..   27

PART II OTHER INFORMATION

  Item 5. Other Information ...........................................   28

  Item 6. Exhibits and Reports on Form 8-K ............................   28

SIGNATURES ............................................................   29


                                       2
<PAGE>

This Form 10-Q  contains  "forward-looking  statements"  within  the  meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities Exchange Act of 1934, as amended.  The Company's actual results could
differ  materially  from  those  set  forth in the  forward-looking  statements.
Certain  factors  that  might  cause  such a  difference  are  discussed  in the
Company's  Annual  Report on Form 10-K for its fiscal  year ended June 30,  2001
and/or  throughout  this Form 10-Q and in particular in Item 2 of Part I of this
Form  10-Q  under  the  caption  "Certain  Factors  Affecting  Future  Operating
Results." Unless the context  otherwise  requires,  references in this report to
the "Company" refers to the Company and/or one or more of its  subsidiaries,  as
applicable.

PART I -- FINANCIAL INFORMATION

Item 1. Condensed Financial Statements


                                       3
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

                                 (In Thousands)

                                                       March 31,       June 30,
                                                         2002            2001
                                                       ---------      ---------
                                     ASSETS
CURRENT ASSETS:
Cash and cash equivalents                              $  14,584      $  14,845
Trade receivables, less allowance
 for doubtful accounts of $2,593
 at March 31, 2002 and
 $2,369 at June 30, 2001                                  63,675         77,910
Other receivables                                          4,905          4,800
Inventories                                               98,269         83,796
Prepaid expenses and other current assets                 17,704         17,448
                                                       ---------      ---------
    TOTAL CURRENT ASSETS                                 199,137        198,799

PROPERTY, PLANT AND EQUIPMENT, net                        96,730        102,323

INTANGIBLES                                               12,413          5,832

OTHER ASSETS                                              23,350         23,065
                                                       ---------      ---------
                                                       $ 331,630      $ 330,019
                                                       =========      =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash overdraft                                         $   5,808      $   4,222
Loans payable to banks                                    43,922         28,463
Current portion of long-term debt                          5,467          5,404
Accounts payable                                          50,126         51,304
Accrued expenses and other current
 liabilities                                              32,602         35,378
                                                       ---------      ---------
    TOTAL CURRENT LIABILITIES                            137,925        124,771

LONG-TERM DEBT                                           143,660        139,464

OTHER LIABILITIES                                         10,355         12,926
                                                       ---------      ---------
    TOTAL LIABILITIES                                    291,940        277,161
                                                       ---------      ---------
COMMITMENTS AND CONTINGENCIES

REDEEMABLE SECURITIES:
Series B and C preferred stock                            54,673         48,980
Common stock                                                  --            378
Common stock of subsidiary                                    95             95
                                                       ---------      ---------
    TOTAL REDEEMABLE SECURITIES                           54,768         49,453
                                                       ---------      ---------
STOCKHOLDERS' EQUITY:
Series A preferred stock                                     521            521
Common stock                                                   2              2
Paid-in capital                                              878            878
Retained earnings                                         (9,088)         9,741
Accumulated other comprehensive
  income (loss)
  gain on derivative instruments                             542             --
  currency translation adjustment                         (7,933)        (7,737)
                                                       ---------      ---------
    TOTAL STOCKHOLDERS' EQUITY                           (15,078)         3,405
                                                       ---------      ---------
                                                       $ 331,630      $ 330,019
                                                       =========      =========

       See notes to unaudited Condensed Consolidated Financial Statements.


                                       4
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES

    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                                  (Unaudited)

                                 (In Thousands)

<TABLE>
<CAPTION>
                                                      Three Months Ended        Nine Months Ended
                                                          March 31,                 March 31,
                                                      2002          2001        2002         2001
                                                    ---------    ---------    ---------    ---------
<S>                                                 <C>          <C>          <C>          <C>
NET SALES                                           $  96,310    $ 103,802    $ 288,956    $ 259,941

COST OF GOODS SOLD (2002 includes $4,783               73,343       75,312      207,637      188,912
    of incremental depreciation for planned
    asset shutdown - See Note 2)
                                                    ---------    ---------    ---------    ---------
    GROSS PROFIT                                       22,967       28,490       81,319       71,029

SELLING, GENERAL AND ADMINISTRATIVE
 EXPENSES                                              26,696       27,174       79,025       70,695
                                                    ---------    ---------    ---------    ---------

  OPERATING INCOME                                     (3,729)       1,316        2,294          334

OTHER:

  Interest expense                                      4,609        5,183       13,926       13,202

  Interest (income)                                        (8)          16         (311)        (387)

  Other expense, net                                       93        1,137        1,118        1,234
                                                    ---------    ---------    ---------    ---------

  LOSS BEFORE INCOME TAXES                             (8,423)      (5,020)     (12,439)     (13,715)

PROVISION (BENEFIT) FOR INCOME TAXES                      649       (1,171)         697       (4,129)
                                                    ---------    ---------    ---------    ---------

  NET LOSS                                             (9,072)      (3,849)     (13,136)      (9,586)

OTHER COMPREHENSIVE INCOME (LOSS)-
  Gain on derivative instruments                          109         (168)         542           --
  Change in currency translation adjustment              (984)      (3,955)        (196)      (4,727)
                                                    ---------    ---------    ---------    ---------

    COMPREHENSIVE LOSS                              $  (9,947)   $  (7,972)   $ (12,790)   $ (14,313)
                                                    =========    =========    =========    =========
</TABLE>

       See notes to unaudited Condensed Consolidated Financial Statements.


                                       5
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                  (Unaudited)

            For the Three Months and Nine Months Ended March 31, 2002
                                 (In Thousands)

<TABLE>
<CAPTION>
                                              Preferred
                                                Stock           Common Stock                                 Accumulated
                                              ----------    ---------------------                               Other
                                                Series       Class        Class      Paid-in     Retained   Comprehensive
                                                 "A"          "A"          "B"       Capital     Earnings   (loss) income-   Total
                                               --------     --------     --------    --------    --------   -------------  --------
<S>                                            <C>          <C>          <C>         <C>         <C>          <C>          <C>
BALANCE, JULY 1, 2001                          $    521     $      1     $      1    $    878    $  9,741     $ (7,737)    $  3,405

 Accretion of redeemable
  preferred securities to fair
  market value                                                                                       (590)                     (590)

 Dividends on Series B and C
  redeemable preferred stock                                                                       (1,837)                   (1,837)

 Gain on derivative
  instruments                                                                                                      145          145

 Foreign currency
  translation adjustment                                                                                        (1,566)      (1,566)

 Net loss                                                                                          (2,365)                   (2,365)
                                               --------     --------     --------    --------    --------     --------     --------
BALANCE, SEPTEMBER 30, 2001                    $    521     $      1     $      1    $    878    $  4,949     $ (9,158)    $ (2,808)
                                               ========     ========     ========    ========    ========     ========     ========
 Accretion of redeemable
  preferred securities to fair
  market value                                                                                     (2,085)                   (2,085)

 Dividends on Series B and C
  redeemable preferred stock                                                                       (1,882)                   (1,882)

 Gain on derivative
  instruments                                                                                                      288          288

 Foreign currency
  translation adjustment                                                                                         2,354        2,354

 Net loss                                                                                          (1,699)                   (1,699)
                                               --------     --------     --------    --------    --------     --------     --------
BALANCE, DECEMBER 31, 2001                     $    521     $      1     $      1    $    878    $   (717)    $ (6,516)    $ (5,832)
                                               ========     ========     ========    ========    ========     ========     ========

 Accretion of redeemable
  preferred securities to fair
  market value                                                                                      2,675                     2,675

 Dividends on Series B and C
  redeemable preferred stock                                                                       (1,974)                   (1,974)

 Gain on derivative
  instruments                                                                                                      109          109

 Foreign currency
  translation adjustment                                                                                          (984)        (984)

 Net loss                                                                                          (9,072)                   (9,072)
                                               --------     --------     --------    --------    --------     --------     --------
BALANCE, MARCH 31, 2002                        $    521     $      1     $      1    $    878    $ (9,088)    $ (7,391)    $(15,078)
                                               ========     ========     ========    ========    ========     ========     ========
</TABLE>


       See notes to unaudited Condensed Consolidated Financial Statements.


                                       6
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

                For the Nine Months Ended March 31, 2002 and 2001

                                 (In Thousands)

                                                             2002        2001
                                                           --------    --------
OPERATING ACTIVITIES:
  Net loss                                                 $(13,136)   $ (9,586)
    Adjustments to reconcile net loss to
     net cash provided
     by operating activities:
     Depreciation and amortization                           17,159      10,256
     Other                                                    2,154      (2,038)

     Changes in operating assets and liabilities
      net of effect of businesses acquired:
      Accounts receivable                                    13,199       1,138
      Inventories                                           (16,152)     (1,202)
      Prepaid expenses and other current assets              (2,038)        854
      Other assets                                             (842)     (3,165)
      Accounts payable                                       (1,450)      5,683
      Accrued expenses and other current liabilities          1,520        (360)
                                                           --------    --------
      NET CASH PROVIDED BY OPERATING ACTIVITIES                 414       1,580
                                                           --------    --------
INVESTING ACTIVITIES:
  Capital expenditures                                       (8,665)    (10,326)
  Acquisition of a business                                  (7,182)    (51,700)
  Other investing                                               561        (457)
                                                           --------    --------
      NET CASH USED IN INVESTING ACTIVITIES                 (15,286)    (62,483)
                                                           --------    --------
FINANCING ACTIVITIES:
  Cash overdraft                                              1,481       3,344
  Net increase in short-term debt                            15,248      25,485
  Proceeds from long-term debt                                2,316       1,578
  Proceeds from issuance of redeemable
   preferred stock                                               --      45,000
  Payments of long-term debt                                 (4,324)       (836)
  Other financing                                                --        (942)
                                                           --------    --------
     NET CASH PROVIDED BY FINANCING ACTIVITIES               14,721      73,629
                                                           --------    --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                        (110)        (45)
                                                           --------    --------
     NET (DECREASE) INCREASE IN CASH AND
      CASH EQUIVALENTS                                         (261)     12,681

CASH AND CASH EQUIVALENTS at beginning of period             14,845       2,403
                                                           --------    --------
     CASH AND CASH EQUIVALENTS at end of period            $ 14,584    $ 15,084
                                                           ========    ========


       See notes to unaudited Condensed Consolidated Financial Statements.


                                       7
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                 (In Thousands)

1. General

      In the  opinion  of the  Company,  the  accompanying  unaudited  condensed
consolidated  financial  statements contain all adjustments  (consisting only of
normal recurring adjustments,  except for the incremental depreciation of $4,783
in 2002 for the planned asset shutdown - See Note 2) necessary to present fairly
its financial  position as of March 31, 2002 and its results of  operations  and
cash flows for the three months and nine months ended March 31, 2002 and 2001.

      The condensed  consolidated  balance sheet as of June 30, 2001 was derived
from audited financial statements, but does not include all disclosures required
by generally accepted accounting  principles.  Additionally,  it should be noted
that the  accompanying  condensed  consolidated  financial  statements and notes
thereto have been prepared in accordance with accounting  standards  appropriate
for  interim  financial   statements.   While  the  Company  believes  that  the
disclosures  presented are adequate to make the information contained herein not
misleading,  it  is  suggested  that  these  financial  statements  be  read  in
conjunction with the Company's  consolidated  financial  statements for the year
ended June 30, 2001.

      Certain  prior year  amounts in the  accompanying  condensed  consolidated
financial  statements and related notes have been reclassified to conform to the
fiscal 2002 presentation.  Such reclassifications  include a reclassification of
freight  income of $1,599 and $4,612 for the three  months and nine months ended
March 31, 2001, respectively,  from selling, general and administrative expenses
to net  sales  on the  Condensed  Consolidated  Statements  of  Operations  and
Comprehensive  Income,  as a result of the adoption of the Emerging  Issues Task
Force Issue No. 00-10 "Accounting for Shipping and Handling Revenues and Costs."

      In June 2001, the Financial  Accounting  Standards Board issued Statements
of Financial  Accounting  Standards No. 141 "Business  Combinations"  ("SFAS No.
141") and No. 142 "Goodwill and Other  Intangibles"  ("SFAS No. 142").  SFAS No.
141 and No. 142 are  effective  for the  Company  on July 1, 2002.  SFAS No. 141
requires  that the  purchase  method  of  accounting  be used  for all  business
combinations  initiated  after June 30, 2001.  The  statement  also  establishes
specific criteria for recognition of intangible assets separately from goodwill.
SFAS No. 142 primarily  addresses  the  accounting  for goodwill and  intangible
assets subsequent to their acquisition. The statement requires that goodwill and
indefinite  lived  intangible  assets no longer be  amortized  and be tested for
impairment at least annually.  The amortization period of intangible assets with
finite lives will no longer be limited to forty years.  The Company is currently
assessing the impact of these statements.

      In June 2001, the Financial Accounting Standards Board issued Statement of
Financial   Accounting  Standards  No.  143  "Accounting  for  Asset  Retirement
Obligations" ("SFAS No. 143"). SFAS No. 143 is effective for the Company on July
1, 2002. The statement establishes  accounting standards for the recognition and
measurement  of  an  asset  retirement   obligation  and  its  associated  asset
retirement  cost.  The  Company  is  currently  assessing  the  impact  of  this
statement.

      In August 2001, the Financial  Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144 "Accounting for Impairment or Disposal
of  Long-Lived  Assets"  ("SFAS No.  144").  SFAS No. 144 is  effective  for the
Company on July 1, 2002. The statement addresses  significant issues relating to
the  implementation  of FASB Statement No. 121 "Accounting for the Impairment of
Long-Lived  Assets and for Long-Lived Assets to Be Disposed Of" ("FAS No. 121"),
and the  development  of a  single  accounting  model,  based  on the  framework
established  in FAS No. 121,  for  long-lived  assets to be disposed of by sale,
whether  previously  held and used or newly  acquired.  The Company is currently
assessing the impact of this statement.

      The results of operations for the three months and nine months ended March
31, 2002 and 2001 may not be indicative of results for the full year.

2. Risks and Uncertainties

      Due to lower levels of economic activity and increased global competition,
the Company  believes that cash flows from  operations  and available  borrowing
arrangements may not provide sufficient working capital to operate the Company's
existing  business,  to  make  budgeted  capital  expenditures,  and to  service
interest and current  principal  coming due on outstanding debt over the ensuing
12 month period.  Accordingly,  the Company is  considering  the  divestiture of
certain business  operations,  reducing the level of capital  expenditures,  and
initiating  additional  cost reduction  programs to provide funds to meet future
obligations  on a timely  basis.  At March 31, 2002,  the Company had $4,400 and
$8,100  available on its domestic and foreign credit  facilities,  respectively,
and is in  compliance  with its  financial  covenant  requirements  under  these
facilities.


                                       8
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                 (In Thousands)

      The Company's Odda, Norway operation has suffered  operating losses during
fiscal 2001 and for the nine months  ended March 31,  2002.  Odda is included in
the  Industrial  Chemicals  segment and had third party  revenues of $18,188 and
$15,932,  and  operating  losses  (before  the effect of the $4,783  incremental
depreciation  discussed below) of $4,399 and $3,195,  for the nine month periods
ended March 31, 2002 and 2001,  respectively.  The  Company  has  initiated  and
completed  a  number  of  cost  cutting  and  efficiency  initiatives.  However,
continued   competitive   pricing  pressures  on  Odda's  primary  products  and
increasing raw material and production costs have more than offset the favorable
impact of  initiatives  undertaken to date. The Company has evaluated the future
operation of Odda under a number of scenarios,  ranging from ceasing  production
of certain  products to a complete  shutdown of the operation.  During the third
quarter of fiscal 2002 the Company decided to cease  production of two of Odda's
three  primary  products as of June 30,  2002,  and focus its  resources  on the
remaining  product line. Third party revenues of the remaining product line were
$9,647  for the  nine  months  ended  March  31,  2002.  The  decision  to cease
production  of these  two  products  requires  the  Company  to  accelerate  the
depreciation of the directly  related  property,  plant,  and equipment so these
assets  will be fully  depreciated  by June 30,  2002.  This  change in expected
remaining useful life has increased  depreciation and amortization by $4,783 for
the three months and nine months ended March 31, 2002, with an additional charge
to depreciation and  amortization of $9,305 planned for the fourth quarter.  The
Company  is also in  negotiations  with the  government  of Norway  for  certain
financial assistance.

      The  Company  has  evaluated  this  decision  to cease  production  of two
products  and the  related  estimated  undiscounted  future  cash flows from the
remaining product line under Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-lived Assets and For Long-lived Assets To
Be Disposed Of" and believes no impairment of long-lived  assets of Odda (with a
carrying value of $18,946) exists at March 31, 2002.

      The Company has a domestic net deferred tax asset of approximately $12,219
at March 31, 2002.  The Company has incurred  domestic  losses in recent  fiscal
years;  however,  with the  acquisition of the Pfizer animal health business and
the sale of the  Agtrol  crop  protection  business  in 2001,  the  Company  had
anticipated  a return to  profitability  in fiscal  2002 and,  accordingly,  the
Company  has  considered  the  deferred  tax  assets  more  likely  than  not of
realization.  As indicated previously,  the Company has experienced lower levels
of economic activity than anticipated  across its global  operations,  including
the United  States.  As a result,  the  Company  currently  anticipates  a small
domestic loss for fiscal 2002. As indicated  above,  significant  cost reduction
activities have already been undertaken in several domestic businesses to adjust
the  cost  base  to  current  levels  of  economic  activity,  and  the  Company
anticipates domestic profitability for fiscal 2003 and beyond. Consequently, the
Company  continues  to consider  the deferred tax assets more likely than not of
recovery and no valuation  allowance has been provided.  The Company's  position
will  continue  to be  reassessed  each  reporting  period in light of  domestic
operating performance.

3. Acquisition

      On November 30, 2000, the Company  purchased the animal health business of
Pfizer, Inc. and certain of its subsidiaries ("Pfizer").  Under the terms of the
purchase  agreement,  the Company is required to pay Pfizer contingent  purchase
price based on a percentage of future net revenues of a particular product.  The
term of the  contingent  payments  is five years from  November  30,  2000.  The
maximum  contingent  purchase  price due under  this  arrangement  is limited to
$55,000,  with a maximum  annual payment of $12,000.  Contingent  purchase price
paid will be allocated to related production  equipment and product intangibles.
The Company has recorded $7,469,  allocated to related production equipment, and
$7,249,  related to product intangibles,  under this arrangement as of March 31,
2002, of which $8,123 has been paid as of March 31, 2002. Under the terms of the
agreement, the Company has elected to defer $5,682 of the payment until June 30,
2006. The deferred payment bears interest at an annual rate of 13%. In addition,
the Company is required to pay Pfizer contingent  purchase price up to a maximum
of $10,000  over five years on other  products  based on  certain  gross  profit
levels of the medicated  feed additives  business.  No amounts have been accrued
under this arrangement.

      The unaudited  consolidated  results of operations on a pro-forma basis as
if such acquisition had occurred at the beginning of the nine-month period ended
March 31, 2001 are as follows:

      Net sales ....................................            $ 307,534
      Net (loss) income ............................              (10,413)

      The impact of purchase  accounting  adjustments  relating to the inventory
acquired from Pfizer increased the loss before income taxes for the three months
and nine months ended March 31, 2002 by $343 and $3,257,  respectively,  and for
the three  months and nine  months  ended  March 31,  2001 by $4,601 and $5,682,
respectively.  Exclusive of these  charges the loss before  income taxes for the
three  months and nine  months  ended  March 31, 2002 would have been $8,080 and
$9,182,


                                       9
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                 (In Thousands)

respectively,  and for the three  months and nine  months  ended  March 31, 2001
would have been $419 and $8,033, respectively.

4. Inventories

      Inventories are valued at the lower of cost or market. Cost is principally
determined using the first-in,  first-out  (FIFO) and average methods;  however,
certain subsidiaries of the Company use the last-in, first-out (LIFO) method for
valuing inventories.

      Inventories at March 31, 2002 and June 30, 2001 consist of the following:

                                                 March 31,         June 30,
                                                   2002              2001
                                                 ---------         --------
      Raw materials                               $30,028          $22,614
      Work-in-process                               3,722            4,257
      Finished goods                               64,519           56,925
                                                  -------          -------
      Total inventory                             $98,269          $83,796
                                                  =======          =======

5. Contingencies

      a. Litigation

      The  Company's  subsidiary,   Phibro-Tech,  Inc.,  has  been  named  as  a
potentially  responsible party ("PRP") in connection with an action commenced by
the  EPA,  involving  a third  party  fertilizer  manufacturing  site  in  South
Carolina. Phibro-Tech, Inc. was also named as a PRP involving a third party site
in  California.  Settlements  have been  reached  in both of these  actions  and
adequate reserves have been established.

      The Company and its  subsidiary,  C.P.  Chemicals,  Inc.,  are involved in
litigation  alleging  that  operations  at the  Sewaren,  New  Jersey  site have
affected the adjoining  owner's  property.  Active  settlement  discussions  are
taking  place and at this time the  Company  does not  believe  there  will be a
material net cost to any settlement.

      The  Company  and its  subsidiaries  are a party to a number of claims and
lawsuits   arising  in  the  normal   course  of  business,   including   patent
infringement,   product   liability  and  governmental   regulation   concerning
environmental  and other  matters.  Certain  of these  actions  seek  damages in
various amounts.  All such claims are being contested,  and the Company believes
the  resolution of these  matters will not  materially  affect the  consolidated
financial position, results of operations, or cash flows of the Company.

      b. Environmental Remediation

      The Company's domestic subsidiaries are subject to various federal,  state
and local  environmental  laws and  regulations  which govern the  management of
chemical  wastes.  The  most  significant  regulation  governing  the  Company's
recycling  activities  is the  Resource  Conservation  and  Recovery Act of 1976
("RCRA").  The Company has been issued final RCRA "Part B" permits to operate as
hazardous waste  treatment and storage  facilities at its facilities in Santa Fe
Springs,  California;  Garland, Texas; Joliet, Illinois;  Sumter, South Carolina
and Sewaren,  New Jersey.  The Company has ceased  operations at its Union City,
California facility. Costs for closure cannot be determined at this time.

      On or about  November  15,  2001,  the Company was advised by the State of
California that the State intended to file a civil complaint against the Company
for  alleged  violations  arising  out of  operations  at the Santa Fe  Springs,
California  facility.  The Company is engaged in negotiations  with the State of
California at this time.  The amount of any penalty that may be assessed  cannot
be determined at this time, but is not expected to be material.

      On or about  April 5, 2002,  the  Company  was  served,  as a  potentially
responsible   party,  with  an  information   request  from  the  United  States
Environmental  Protection  Agency  relating to a third party  superfund  site in
Rhode Island.  The Company is investigating the matter,  which relates to events
in the 1950's and 1960's.

      In  connection  with  applying for RCRA "Part B" permits,  the Company has
been  required  to  perform  extensive  site  investigations  at  certain of its
operating  facilities and inactive sites to identify possible  contamination and
to provide the regulatory  authorities with plans and schedules for remediation.
Some soil and  groundwater  contamination  has been  identified at several plant
sites and will require corrective action over the next several years.


                                       10
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                 (In Thousands)

      Based  upon  information  available,  the  Company  estimates  the cost of
further  investigation  and  remediation  of  identified  soil  and  groundwater
problems  at  operating  sites,  closed  sites  and  third  party  sites  to  be
approximately  $1,349 as of March 31,  2002,  which is  included  in current and
long-term liabilities.

6. Business Segments

      The Company has four  reportable  segments--Animal  Health and  Nutrition,
Industrial  Chemicals,  Distribution,  and All  Other.  The  Company  previously
reported two reportable segments - Agchem and Industrial Chemicals; however, due
principally  to  organizational  changes  during  fiscal 2001,  including  those
associated  with the  acquisition of the animal health  business from Pfizer and
the sale of the Agtrol crop protection  business,  segment reporting was revised
at June 30, 2001.  Prior period segment  information has been revised to conform
to  the  fiscal  2002  segment  presentation.   Reportable  segments  have  been
determined  primarily  on the basis of the nature of products  and  services and
certain  similar  operating  units have been  aggregated.  The Company's  Animal
Health and  Nutrition  segment  manufactures  and  markets a broad range of feed
additive  products  including  trace  minerals,   anticoccidials,   antibiotics,
vitamins,  vitamin  premixes,  and other animal health  products.  The Company's
Industrial Chemicals segment manufactures and markets pigments and other mineral
products  which  include  copper  oxide,  which  is  produced  by the  Company's
recycling  operation,  mineral  oxides,  and alkaline  etchants.  The  Company's
Distribution segment markets and distributes a variety of industrial,  specialty
and fine organic chemicals,  and intermediates produced by others. The Company's
All  Other  segment  manufactures  and  markets a variety  of  specialty  custom
chemicals  and  copper-based  fungicides,  as well as providing  management  and
recycling of coal combustion residues.

Segment  data for the three and nine months ended March 31, 2002 and 2001 are as
follows:

<TABLE>
<CAPTION>
                                                   Animal                                                  Corporate
                                                  Health &     Industrial                      All         Expenses &
                                                  Nutrition     Chemicals   Distribution      Other        Adjustments      Total
                                                  ---------     ---------   ------------     --------      -----------     --------
<S>                                               <C>           <C>            <C>           <C>            <C>            <C>
Three Months Ended March 31, 2002

Revenues -external customers                      $ 59,378      $ 19,249       $  8,326      $  9,357       $     --       $ 96,310
         -intersegment                                 874         3,590            658            87         (5,209)            --
                                                  --------      --------       --------      --------       --------       --------
Total revenues                                    $ 60,252      $ 22,839       $  8,984      $  9,444       $ (5,209)      $ 96,310
                                                  ========      ========       ========      ========       ========       ========
Operating income/(loss)                           $  6,246      $ (6,067)      $    635      $   (750)      $ (3,793)      $ (3,729)
                                                  ========      ========       ========      ========       ========       ========

<CAPTION>
                                                   Animal                                                  Corporate
                                                  Health &     Industrial                      All         Expenses &
                                                  Nutrition     Chemicals   Distribution      Other        Adjustments      Total
                                                  ---------     ---------   ------------     --------      -----------     --------
<S>                                               <C>           <C>            <C>           <C>            <C>            <C>
Three Months Ended March 31, 2001

Revenues -external customers                      $ 58,545      $ 20,001       $ 11,141      $ 14,115       $     --       $103,802
         -intersegment                               1,622         5,775            500            --         (7,897)            --
                                                  --------      --------       --------      --------       --------       --------
Total revenues                                    $ 60,167      $ 25,776       $ 11,641      $ 14,115       $ (7,897)      $103,802
                                                  ========      ========       ========      ========       ========       ========
Operating income/(loss)                           $  4,614      $   (397)      $  1,119      $ (1,744)      $ (2,276)      $  1,316
                                                  ========      ========       ========      ========       ========       ========

<CAPTION>
                                                   Animal                                                  Corporate
                                                  Health &     Industrial                      All         Expenses &
                                                  Nutrition     Chemicals   Distribution      Other        Adjustments      Total
                                                  ---------     ---------   ------------     --------      -----------     --------
<S>                                               <C>           <C>            <C>           <C>            <C>            <C>
Nine Months Ended March 31, 2002

Revenues -external customers                      $180,477      $ 53,988       $ 26,144      $ 28,347       $     --       $288,956
         -intersegment                               3,141        11,730          1,654           117        (16,642)            --
                                                  --------      --------       --------      --------       --------       --------
Total revenues                                    $183,618      $ 65,718       $ 27,798      $ 28,464       $(16,642)      $288,956
                                                  ========      ========       ========      ========       ========       ========
Operating income/(loss)                           $ 23,870      $(12,809)      $  2,224      $   (860)      $(10,131)      $  2,294
                                                  ========      ========       ========      ========       ========       ========
</TABLE>


                                       11
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                   Animal                                                  Corporate
                                                  Health &     Industrial                      All         Expenses &
                                                  Nutrition     Chemicals   Distribution      Other        Adjustments      Total
                                                  ---------     ---------   ------------     --------      -----------     --------
<S>                                               <C>           <C>            <C>           <C>            <C>            <C>
Nine Months Ended March 31, 2001

Revenues -external customers                      $135,755      $ 56,638       $ 32,513      $ 35,035       $     --       $259,941
         -intersegment                               3,896        15,643          1,415            --        (20,954)            --
                                                  --------      --------       --------      --------       --------       --------
Total revenues                                    $139,651      $ 72,281       $ 33,928      $ 35,035       $(20,954)      $259,941
                                                  ========      ========       ========      ========       ========       ========
Operating income/(loss)                           $ 11,107      $   (797)      $  2,964      $ (5,383)      $ (7,557)      $    334
                                                  ========      ========       ========      ========       ========       ========
</TABLE>

7. Divestitures

      On May 4, 2001, the Company sold its Agtrol U.S.  business,  a division of
the Company's Phibro-Tech, Inc. subsidiary, to Nufarm, Inc. ("Nufarm"), the U.S.
subsidiary of Nufarm Limited,  a publicly listed  Australian  based company.  On
June 14, 2001, the Company sold its Agtrol international business to Nufarm. The
sales  included  inventory and  intangible  assets to Nufarm and did not include
plant, equipment,  or other manufacturing assets.  Phibro-Tech also entered into
agreements to supply copper fungicide products to Nufarm from its Sumter,  South
Carolina  plant for five years,  and from its  Bordeaux,  France plant for three
years.  On December 24, 2001, the Company  transferred  certain  receivables and
rebate  liabilities,  at net carrying value, from Agtrol U.S. sales prior to May
1, 2001, to Nufarm, with no recourse.

      Revenues and operating losses relating to the Agtrol business  amounted to
$10,673 and $1,501, respectively, for the three months ended March 31, 2001, and
$23,947 and $5,473, respectively, for the nine months ended March 31, 2001.

8. Condensed Consolidating Financial Statements

      In  June  1998,   the  Company  issued  $100  million  of  9 7/8%   Senior
Subordinated  Notes due 2008 (the "Notes").  In connection  with the issuance of
these  Notes,  the  Company's  U.S.   Subsidiaries  fully  and   unconditionally
guaranteed such Notes on a joint and several basis.  Foreign subsidiaries do not
presently guarantee the Notes.

      The  following  condensed  consolidating  financial  data  summarizes  the
assets,  liabilities  and  results of  operations  and cash flows of the Parent,
Guarantor  Subsidiaries and  Non-Guarantor  Subsidiaries.  The Parent is Philipp
Brothers Chemicals,  Inc. ("PBC").  The U.S. Guarantor  Subsidiaries include all
domestic  subsidiaries  of PBC including the following:  C.P.  Chemicals,  Inc.,
Phibro-Tech,  Inc., Mineral Resource  Technologies,  Inc., Prince  Agriproducts,
Inc., The Prince Manufacturing  Company (PA), The Prince  Manufacturing  Company
(IL), PhibroChem,  Inc., Phibro Chemicals, Inc., Western Magnesium Corp., Phibro
Animal  Health  Holdings,  Inc. and Phibro  Animal  Health  U.S.,  Inc. The U.S.
Guarantor  and Foreign  Non-Guarantor  Subsidiaries  are directly or  indirectly
wholly owned as to voting stock by PBC.

      Investments  in  subsidiaries  are  accounted  for by the Parent using the
equity method. Income tax expense (benefit) is allocated among the consolidating
entities based upon taxable income (loss) by jurisdiction within each group.

      The principal  consolidation  adjustments are to eliminate  investments in
subsidiaries  and intercompany  balances and  transactions.  Separate  financial
statements of the U.S. Guarantor Subsidiaries and the Non-Guarantor Subsidiaries
are not presented  because such  financial  statements  would not be material to
investors.


                                       12
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
                CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
                              As of March 31, 2002
                                 (In Thousands)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                        Foreign
                                                                    U.S. Guarantor    Subsidiaries     Consolidation    Consolidated
                                                       Parent        Subsidiaries    Non-Guarantors     Adjustments       Balance
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>              <C>              <C>              <C>
                      Assets
Current Assets:
Cash and cash equivalents                             $   1,942        $     538        $  12,104                         $  14,584
Trade receivables                                         3,301           25,070           35,304                            63,675
Other receivables                                         1,056            1,502            2,347                             4,905
Inventory                                                 2,935           45,790           49,544                            98,269
Prepaid expenses and other                                4,089            3,771            9,844                            17,704
                                                   --------------------------------------------------------------------------------
    Total current assets                                 13,323           76,671          109,143               --          199,137
                                                   --------------------------------------------------------------------------------

Property, plant & equipment, net                            438           30,109           66,183                            96,730

Intangibles                                                  32            1,771           10,610                            12,413
Investment in subsidiaries                               48,766            2,258           (6,854)         (44,170)              --
Intercompany                                             74,168          (31,414)          (8,460)         (34,294)              --
Other assets                                             92,971          (71,283)           1,662                            23,350
                                                   --------------------------------------------------------------------------------
    Total assets                                      $ 229,698        $   8,112        $ 172,284        $ (78,464)       $ 331,630
                                                   ================================================================================
    Liabilities and Stockholders' Equity
Current Liabilities:
Cash overdraft                                        $      --        $   5,808        $      --                         $   5,808
Loan payable to banks                                    40,564               --            3,358                            43,922
Current portion of long term debt                         2,540              461            2,466                             5,467
Accounts payable                                            648           24,637           24,841                            50,126
Accrued expenses and other                                8,704            7,446           16,452                            32,602
                                                   --------------------------------------------------------------------------------
    Total current liabilities                            52,456           38,352           47,117               --          137,925
                                                   --------------------------------------------------------------------------------

Long term debt                                          127,732          (69,452)         119,674          (34,294)         143,660

Other liabilities                                         2,187            4,804            3,364                            10,355

Redeemable securities:
Series B and C preferred stock                           54,673               --               --                            54,673
Common stock                                                481               --             (481)                               --
Common stock of subsidiary                                   --               95               --                                95
                                                   --------------------------------------------------------------------------------
                                                         55,154               95             (481)              --           54,768
                                                   --------------------------------------------------------------------------------
             Stockholders' Equity
Series A preferred stock                                    521               --               --                               521
Common stock                                                  2               32               --              (32)               2
Paid in capital                                             878           34,041               --          (34,041)             878
Retained earnings                                        (9,088)             210            9,887          (10,097)          (9,088)
Accumulated other comprehensive
  income (loss)- gain on derivative
  instruments                                                --               --              542                               542
  currency translation adjustment                          (144)              30           (7,819)                           (7,933)
                                                   --------------------------------------------------------------------------------
    Total stockholders' equity                           (7,831)          34,313            2,610          (44,170)         (15,078)
                                                   --------------------------------------------------------------------------------
    Total liabilities and equity                      $ 229,698        $   8,112        $ 172,284        $ (78,464)       $ 331,630
                                                   ================================================================================
</TABLE>


                                       13
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
           CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
                    For The Three Months Ended March 31, 2002
                                 (In Thousands)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                        Foreign
                                                                    U.S. Guarantor    Subsidiaries     Consolidation    Consolidated
                                                       Parent        Subsidiaries    Non-Guarantors     Adjustments       Balance
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>              <C>              <C>              <C>
Net sales                                             $  6,337         $ 53,002         $ 44,308         $ (7,337)        $ 96,310

Cost of goods sold                                       5,034           36,663           38,983           (7,337)          73,343
                                                    -------------------------------------------------------------------------------
    Gross profit                                         1,303           16,339            5,325               --           22,967

Selling, general, and
 administrative expenses                                 4,402           14,036            8,258               --           26,696
                                                    -------------------------------------------------------------------------------
    Operating (loss) income                             (3,099)           2,303           (2,933)              --           (3,729)

Interest expense                                           574              427            3,608                             4,609
Interest income                                             (5)              --               (3)                               (8)
Other (income) expense                                       6              (79)             166                                93

Intercompany allocation                                 (4,843)           4,843               --                                --

Loss relating to subsidiaries                            8,578               --               --           (8,578)              --
                                                    -------------------------------------------------------------------------------
    (Loss) income before income taxes                   (7,409)          (2,888)          (6,704)           8,578           (8,423)

Provision (benefit) for income taxes                     1,663           (1,049)              35                               649
                                                    -------------------------------------------------------------------------------
    Net (loss) income                                 $ (9,072)        $ (1,839)        $ (6,739)        $  8,578         $ (9,072)
                                                    ===============================================================================
</TABLE>


                                       14
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
           CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
                    For The Nine Months Ended March 31, 2002
                                 (In Thousands)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                        Foreign
                                                                    U.S. Guarantor    Subsidiaries     Consolidation    Consolidated
                                                       Parent        Subsidiaries    Non-Guarantors     Adjustments       Balance
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>              <C>              <C>              <C>
Net sales                                             $  19,516        $ 160,863        $ 129,706        $ (21,129)       $ 288,956

Cost of goods sold                                       15,431          110,578          102,757          (21,129)         207,637
                                                   --------------------------------------------------------------------------------
    Gross profit                                          4,085           50,285           26,949               --           81,319

Selling, general, and
  administrative expenses                                12,259           41,255           25,511                            79,025
                                                   --------------------------------------------------------------------------------
    Operating (loss) income                              (8,174)           9,030            1,438               --            2,294

Interest expense                                          1,769            1,995           10,162                            13,926
Interest income                                             (15)              --             (296)                             (311)
Other (income) expense                                     (298)             (72)           1,488                             1,118

Intercompany allocation                                  (9,778)           9,778               --                                --

Loss relating to subsidiaries                            11,901               --               --          (11,901)              --
                                                   --------------------------------------------------------------------------------
    (Loss) income before income taxes                   (11,753)          (2,671)          (9,916)          11,901          (12,439)

Provision (benefit) for income taxes                      1,383             (185)            (501)                              697
                                                   --------------------------------------------------------------------------------
    Net (loss) income                                 $ (13,136)       $  (2,486)       $  (9,415)       $  11,901        $ (13,136)
                                                   ================================================================================
</TABLE>


                                       15
<PAGE>

                         PHILIPP BROTHERS CHEMICALS INC.
           CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
                    For the Nine Months Ended March 31, 2002
                                 (In Thousands)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                        Foreign
                                                                    U.S. Guarantor    Subsidiaries     Consolidation    Consolidated
                                                       Parent        Subsidiaries    Non-Guarantors     Adjustments       Balance
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>              <C>              <C>              <C>
Operating activities:
  Net (loss) income                                   $(13,136)        $ (2,486)        $ (9,415)        $ 11,901         $ (13,136)
  Adjustments to reconcile net (loss)
   income to cash (used in) provided by
   operating activities:
   Depreciation and amortization                           795            3,986           12,378                             17,159
   Other                                                  (594)             136            2,612                              2,154

  Changes in operating assets and
   liabilities net of effect of
   business acquired:
   Accounts receivable                                   1,278            6,163            5,758                             13,199
   Inventory                                               318           (3,521)         (12,949)                           (16,152)
   Prepaid expenses and other                              892             (909)          (2,021)                            (2,038)
   Other assets                                            260             (838)            (264)                              (842)
   Intercompany                                         (4,443)           3,675           12,669          (11,901)               --
   Accounts payable                                     (1,095)             343             (698)                            (1,450)
   Accrued expenses and other                              902           (5,130)           5,748                              1,520
                                                      -----------------------------------------------------------------------------
   Net cash (used in) provided by
    operating activities                               (14,823)           1,419           13,818               --              414
                                                      -----------------------------------------------------------------------------
Investing activities:
  Capital expenditures                                     (74)          (3,918)          (4,673)                            (8,665)
  Acquisition of a business                                 --               --           (7,182)                            (7,182)
  Other investing                                           --              412              149                                561
                                                      -----------------------------------------------------------------------------
   Net cash used in
    investing activities                                   (74)          (3,506)         (11,706)              --           (15,286)
                                                      -----------------------------------------------------------------------------
Financing activities:
  Cash overdraft                                           (13)           1,494               --                              1,481
  Net increase (decrease) in
   short term debt                                      16,093               --             (845)                            15,248
  Proceeds from long term debt                           2,000              316               --                              2,316
  Payments of long term debt                            (2,533)            (395)          (1,396)                            (4,324)
                                                      -----------------------------------------------------------------------------
   Net cash provided by (used in)
    financing activities                                15,547            1,415           (2,241)              --            14,721
                                                      -----------------------------------------------------------------------------
Effect of exchange rate changes on cash                     --               --             (110)                              (110)
                                                      -----------------------------------------------------------------------------
   Net increase (decrease) in
    cash and cash equivalents                              650             (672)            (239)              --              (261)

Cash and cash equivalents at
 beginning of period                                     1,292            1,210           12,343                             14,845
                                                      -----------------------------------------------------------------------------
   Cash and cash equivalents at
    end of period                                     $  1,942         $    538         $ 12,104         $     --         $  14,584
                                                      =============================================================================
</TABLE>


                                       16
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
                CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
                               As of June 30, 2001
                                 (In Thousands)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                        Foreign
                                                                    U.S. Guarantor    Subsidiaries     Consolidation    Consolidated
                                                       Parent        Subsidiaries    Non-Guarantors     Adjustments       Balance
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>              <C>              <C>              <C>
                      Assets
Current Assets:
Cash and cash equivalents                             $   1,292        $   1,210        $  12,343                         $  14,845
Trade receivables                                         4,624           32,291           40,995                            77,910
Other receivables                                           791            1,913            2,096                             4,800
Inventory                                                 2,715           44,050           37,031                            83,796
Prepaid expenses and other                                5,461            2,745            9,242                            17,448
                                                    -------------------------------------------------------------------------------
    Total current assets                                 14,883           82,209          101,707               --          198,799
                                                    -------------------------------------------------------------------------------
Property, plant & equipment, net                            626           30,143           71,554                           102,323

Intangibles                                                  87            1,915            3,830                             5,832
Investment in subsidiaries                               63,490            1,542           (6,138)         (58,894)              --
Intercompany                                             54,322          (22,808)           3,852          (35,366)              --
Other assets                                             93,466          (71,571)           1,170                            23,065
                                                    -------------------------------------------------------------------------------
    Total assets                                      $ 226,874        $  21,430        $ 175,975        $ (94,260)       $ 330,019
                                                    ===============================================================================
      Liabilities and Stockholders' Equity
Current Liabilities:
Cash overdraft                                        $      13        $   4,209        $      --                         $   4,222
Loan payable to banks                                    24,471               --            3,992                            28,463
Current portion of long term debt                         2,541              493            2,370                             5,404
Accounts payable                                          1,743           23,359           26,202                            51,304
Accrued expenses and other                                7,859           11,780           15,739                            35,378
                                                    -------------------------------------------------------------------------------
    Total current liabilities                            36,627           39,841           48,303               --          124,771
                                                    -------------------------------------------------------------------------------
Long term debt                                          127,263          (60,654)         108,221          (35,366)         139,464

Other liabilities                                         2,129            5,731            5,066                            12,926

Redeemable securities:
Series B and C preferred stock                           48,980               --               --                            48,980
Common stock                                                877               --             (499)                              378
Common stock of subsidiary                                   --               95               --                                95
                                                    -------------------------------------------------------------------------------
                                                         49,857               95             (499)              --           49,453
                                                    -------------------------------------------------------------------------------
           Stockholders' Equity
Series A preferred stock                                    521               --               --                               521
Common stock                                                  2               32               --              (32)               2
Paid in capital                                             878           34,041               --          (34,041)             878
Retained earnings                                         9,741            2,325           22,496          (24,821)           9,741
Accumulated other comprehensive
  (loss) income-currency
  translation adjustment                                   (144)              19           (7,612)                           (7,737)
                                                    -------------------------------------------------------------------------------
    Total stockholders' equity                           10,998           36,417           14,884          (58,894)           3,405
                                                    -------------------------------------------------------------------------------
    Total liabilities and equity                      $ 226,874        $  21,430        $ 175,975        $ (94,260)       $ 330,019
                                                    ===============================================================================
</TABLE>


                                       17
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
           CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
                    For The Three Months Ended March 31, 2001
                                 (In Thousands)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                        Foreign
                                                                    U.S. Guarantor    Subsidiaries     Consolidation    Consolidated
                                                       Parent        Subsidiaries    Non-Guarantors     Adjustments       Balance
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>              <C>              <C>              <C>
Net sales                                             $   8,814        $  60,537        $  50,888        $ (16,437)       $ 103,802

Cost of goods sold                                        7,156           43,864           40,729          (16,437)          75,312
                                                   --------------------------------------------------------------------------------
    Gross profit                                          1,658           16,673           10,159               --           28,490

Selling, general, and
 administrative expenses                                  4,180           15,392            7,602                            27,174
                                                   --------------------------------------------------------------------------------
    Operating (loss) income                              (2,522)           1,281            2,557               --            1,316

Interest expense                                          3,639              (71)           1,615                             5,183
Interest (income)                                            (5)              (9)              30                                16
Other expense                                                29              340              768                             1,137

Intercompany allocation                                  (4,699)           2,991            1,708                                --

Loss relating to subsidiaries                             2,445               --               --           (2,445)              --
                                                   --------------------------------------------------------------------------------

    (Loss) income before income taxes                    (3,931)          (1,970)          (1,564)           2,445           (5,020)

Benefit for income taxes                                    (82)            (471)            (618)                           (1,171)
                                                   --------------------------------------------------------------------------------

    Net (loss) income                                 $  (3,849)       $  (1,499)       $    (946)       $   2,445        $  (3,849)
                                                   ================================================================================
</TABLE>


                                       18
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
           CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
                    For The Nine Months Ended March 31, 2001
                                 (In Thousands)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                        Foreign
                                                                    U.S. Guarantor    Subsidiaries     Consolidation    Consolidated
                                                       Parent        Subsidiaries    Non-Guarantors     Adjustments       Balance
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>              <C>              <C>              <C>
Net sales                                             $  25,483        $ 152,344        $ 114,376        $ (32,262)       $ 259,941

Cost of goods sold                                       20,603          108,471           92,100          (32,262)         188,912
                                                   --------------------------------------------------------------------------------
    Gross profit                                          4,880           43,873           22,276               --           71,029

Selling, general, and
 administrative expenses                                 11,209           41,383           18,103                            70,695
                                                   --------------------------------------------------------------------------------
    Operating (loss) income                              (6,329)           2,490            4,173               --              334

Interest expense                                          8,882              (10)           4,330                            13,202
Interest income                                             (49)             (10)            (328)                             (387)
Other expense                                               150              336              748                             1,234

Intercompany allocation                                 (11,594)           9,500            2,094                                --

Loss relating to subsidiaries                             6,062               --               --           (6,062)              --
                                                   --------------------------------------------------------------------------------
    (Loss) income before income taxes                    (9,780)          (7,326)          (2,671)           6,062          (13,715)

Benefit for income taxes                                   (194)          (2,490)          (1,445)                           (4,129)
                                                   --------------------------------------------------------------------------------
    Net (loss) income                                 $  (9,586)       $  (4,836)       $  (1,226)       $   6,062        $  (9,586)
                                                   ================================================================================
</TABLE>


                                       19
<PAGE>

                         PHILIPP BROTHERS CHEMICALS INC.
           CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
                    For the Nine Months Ended March 31, 2001
                                 (In Thousands)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                        Foreign
                                                                    U.S. Guarantor    Subsidiaries     Consolidation    Consolidated
                                                       Parent        Subsidiaries    Non-Guarantors     Adjustments       Balance
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>              <C>              <C>              <C>
Operating activities:
  Net (loss) income                                   $ (9,586)        $ (4,836)        $ (1,226)        $  6,062         $ (9,586)
  Adjustments to reconcile net (loss)
   income to cash (used in) provided by
   operating activities:
   Depreciation and amortization                           528            3,805            5,923                            10,256
   Other                                                  (878)             320           (1,480)                           (2,038)

  Changes in operating assets and liabilities
   net of effect of business acquired:
    Accounts receivable                                    920            8,255           (8,037)                            1,138
    Inventory                                              280           (9,834)           8,352                            (1,202)
    Prepaid expenses and other                            (434)           2,910           (1,622)                              854
    Other assets                                          (918)          (2,286)              39                            (3,165)
    Intercompany                                        (3,517)           4,116            5,463           (6,062)              --
    Accounts payable                                     1,532              573            3,578                             5,683
    Accrued expenses and other                          (2,476)           1,491              625                              (360)
                                                   -------------------------------------------------------------------------------
    Net cash (used in) provided by
     operating activities                              (14,549)           4,514           11,615               --            1,580
                                                   -------------------------------------------------------------------------------
Investing activities:
  Capital expenditures                                    (236)          (6,845)          (3,245)                          (10,326)
  Acquisition of a business                            (51,700)              --               --                           (51,700)
  Other investing                                           --               --             (457)                             (457)
                                                   -------------------------------------------------------------------------------

    Net cash used in
     investing activities                              (51,936)          (6,845)          (3,702)              --          (62,483)
                                                   -------------------------------------------------------------------------------

Financing activities:
  Cash overdraft                                          (145)           3,489               --                             3,344
  Net decrease in short term debt                       24,592               --              893                            25,485
  Proceeds from long term debt                              --               26            1,552                             1,578
  Proceeds from issuance of
   redeemable preferred stock                           45,000               --               --                            45,000
  Payments of long term debt                               (24)            (806)              (6)                             (836)
  Other financing                                         (942)              --               --                              (942)
                                                   -------------------------------------------------------------------------------

    Net cash provided by
     financing activities                               68,481            2,709            2,439               --           73,629
                                                   -------------------------------------------------------------------------------

Effect of exchange rate changes on cash                     --               (4)             (41)                              (45)
                                                   -------------------------------------------------------------------------------

    Net increase in cash and
     cash equivalents                                    1,996              374           10,311               --           12,681

Cash and cash equivalents
 at beginning of period                                     11               99            2,293                             2,403
                                                   -------------------------------------------------------------------------------

    Cash and cash equivalents
     at end of period                                 $  2,007         $    473         $ 12,604         $     --         $ 15,084
                                                   ===============================================================================
</TABLE>


                                       20
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

General

      The Company is a leading diversified global manufacturer and marketer of a
broad range of specialty  agricultural and industrial chemicals,  which are sold
world-wide for use in numerous  markets,  including animal health and nutrition,
agriculture,  pharmaceutical,  electronics,  wood treatment, glass, construction
and concrete.  The Company also provides  recycling and hazardous waste services
primarily to the electronics and metal treatment industries.

      The  Company has four  operating  segments--Animal  Health and  Nutrition,
Industrial  Chemicals,  Distribution  and  All  Other.  The  Company  previously
reported  two  operating  segments--Agchem  and  Industrial  Chemicals.  Due  to
organizational  changes during fiscal 2001,  including those associated with the
acquisition of the animal health business from Pfizer and the sale of the Agtrol
crop  protection  business,  segment  reporting was revised as of June 30, 2001.
Prior period segment  information has been revised to conform to the fiscal 2002
segment presentation.

      On November 30, 2000, the Company  purchased the animal health business of
Pfizer,  Inc.  ("Pfizer").  The operating  results of this business,  now called
Phibro  Animal  Health,  ("PAH"),  are  included in the  Company's  consolidated
statements of operations  from the date of  acquisition  and are included in the
Animal Health and Nutrition segment.

      On May 4, 2001, the Company sold its Agtrol U.S.  business,  a division of
the Company's Phibro-Tech,  Inc. subsidiary,  to Nufarm, Inc. ("Nufarm"), a U.S.
subsidiary of Nufarm Limited,  a publicly listed  Australian  based company.  On
June 14,  2001,  the Company sold its Agtrol  international  business to Nufarm.
Agtrol developed,  manufactured and marketed crop protection products, including
copper  fungicides.  The sale included inventory and intangible assets to Nufarm
but did not include plant, equipment, or other manufacturing assets. Phibro-Tech
also entered into agreements to supply copper fungicide  products to Nufarm from
its Sumter,  South Carolina plant for five years, and from its Bordeaux,  France
plant for three years.  On December 24, 2001,  the Company  transferred  certain
receivables  and rebate  liabilities,  at net carrying  value,  from Agtrol U.S.
sales prior to May 1, 2001, to Nufarm,  with no recourse.  The operating results
of Agtrol are included in the Company's consolidated statements of operations up
to the date of disposition and are included in the All Other segment.

      The Company's Odda, Norway operation has suffered  operating losses during
fiscal 2001 and for the nine months  ended March 31,  2002.  Odda is included in
the Industrial Chemicals segment and had third party revenues of $18.2 and $15.9
million, and operating losses (before the effect of the $4.8 million incremental
depreciation  discussed  below)  of $4.4 and  $3.2  million  for the nine  month
periods ended March 31, 2002 and 2001,  respectively.  The Company has initiated
and  completed a number of cost  cutting and  efficiency  initiatives.  However,
continued   competitive   pricing  pressures  on  Odda's  primary  products  and
increasing raw material and production costs have more than offset the favorable
impact of  initiatives  undertaken to date. The Company has evaluated the future
operation of Odda under a number of scenarios,  ranging from ceasing  production
of certain  products to a complete  shutdown of the operation.  During the third
quarter of fiscal 2002 the Company decided to cease  production of two of Odda's
three  primary  products as of June 30,  2002,  and focus its  resources  on the
remaining  product line. Third party revenues of the remaining product line were
$9.6  million for the nine months  ended March 31,  2002.  The decision to cease
production  of these  two  products  requires  the  Company  to  accelerate  the
depreciation of the directly  related  property,  plant,  and equipment so these
assets  will be fully  depreciated  by June 30,  2002.  This  change in expected
remaining  useful  life has  increased  depreciation  and  amortization  by $4.8
million for the three  months and nine  months  ended  March 31,  2002,  with an
additional  charge to depreciation  and amortization of $9.3 million planned for
the fourth quarter.  The Company is also in negotiations  with the government of
Norway for certain financial assistance.

      The  Company  has  evaluated  this  decision  to cease  production  of two
products  and the  related  estimated  undiscounted  future  cash flows from the
remaining product line under Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-lived Assets and For Long-lived Assets To
Be Disposed Of" and believes no impairment of long-lived  assets of Odda (with a
carrying value of $18,946) exists at March 31, 2002.


                                       21
<PAGE>

Results of Operations

<TABLE>
<CAPTION>
                                                                                                Sales
                                                                                               ($000's)
                                                                       Three Months Ended                   Nine Months Ended
                                                                            March 31,                            March 31,
                                                                   --------------------------           ---------------------------
                                                                    2002               2001               2002              2001
                                                                   -------            -------           --------           --------
<S>                                                              <C>                <C>                <C>                <C>
Operating Segments
  Animal Health and Nutrition ..........................         $  60,252          $  60,167          $ 183,618          $ 139,651
  Industrial Chemicals .................................            22,839             25,776             65,718             72,281
  Distribution .........................................             8,984             11,641             27,798             33,928
  All Other ............................................             9,444             14,115             28,464             35,035
  Elimination of intersegment sales ....................            (5,209)            (7,897)           (16,642)           (20,954)
                                                                 ---------          ---------          ---------          ---------
                                                                 $  96,310          $ 103,802          $ 288,956          $ 259,941
                                                                 =========          =========          =========          =========

<CAPTION>
                                                                                      Operating Income (Loss)
                                                                                               ($000's)
                                                                       Three Months Ended                   Nine Months Ended
                                                                            March 31,                            March 31,
                                                                   --------------------------           ---------------------------
                                                                    2002               2001               2002              2001
                                                                   -------            -------           --------           --------
<S>                                                              <C>                <C>                <C>                <C>
Operating Segments
  Animal Health and Nutrition ..........................         $   6,246          $   4,614          $  23,870          $  11,107
  Industrial Chemicals .................................            (6,067)              (397)           (12,809)              (797)
  Distribution .........................................               635              1,119              2,224              2,964
  All Other ............................................              (750)            (1,744)              (860)            (5,383)
  Corporate expenses and eliminations ..................            (3,793)            (2,276)           (10,131)            (7,557)
                                                                 ---------          ---------          ---------          ---------
                                                                 $  (3,729)         $   1,316          $   2,294          $     334
                                                                 =========          =========          =========          =========
</TABLE>

Comparison of Three Months Ended March 31, 2002 and 2001

      Net Sales. Net sales decreased by $7.5 million, or 7%, to $96.3 million in
the three months ended March,  2002, as compared to the same period of the prior
year.  The  decrease  was  primarily  due to the  sale of the  Company's  Agtrol
operations and lower average selling prices.

      The Animal Health and Nutrition segment's net sales were $60.3 million for
the three  months  ended  March 31,  2002,  approximately  the same as the prior
period.  Higher  unit  volumes  and  product  mix  changes  increased  sales
approximately  7% during  the period and were  offset by lower  average  selling
prices and inter segment sales of approximately the same percent.

      The Industrial Chemicals segment's net sales decreased by $2.9 million, or
11%, to $22.8  million in the three  months  ended March 31, 2002 as compared to
the prior period.  Sales by the Company's  Phibro-Tech  subsidiary were down by
$2.1  million  due to volume  declines  related  to the  printed  circuit  board
industry.  The Company's Odda subsidiary reduced revenues by $1.1 million due to
lower shipments of Carbide and  Dicyandiamide  offset by increased  shipments of
CY-50 product.  Higher shipments of mineral oxide products  partially offset the
decrease.  Included in the sales  decreases  were lower inter  segment  sales of
approximately $2.2 million.

      Net sales for the Distribution  segment decreased by $2.7 million, or 23%,
to $9.0 million in 2002, as compared to the prior period. The net sales decrease
was due to lower unit  volumes and product mix changes of $2.5  million and also
lower average selling prices of $.2 million.  Declines in the segment's cyanide,
carbide,  dicyandiamide and DL panthenol products occurred during the quarter of
this fiscal year as compared to the prior year period.

      Net sales for the All Other segment decreased by $4.7 million,  or 33%, to
$9.4  million in 2002,  as  compared  to the prior  period.  Approximately  $4.9
million of this decrease  related to lower sales of crop  protection  chemicals.
The Company's Agtrol crop protection business was sold during the fourth quarter
of fiscal 2001 and sales of certain  crop  protection  chemicals  are  currently
being made under supply agreements to Nufarm.  Excluding  Agtrol,  sales for the
segment in 2002 were $.2 million above the prior year, primarily due to improved
average selling prices in the Company's fly ash business.


                                       22
<PAGE>

      Gross Profit.  Gross profit  decreased by $5.5  million,  or 19%, to $23.0
million in the three  months  ended  March 31,  2002,  as  compared to the prior
period.  A charge of $4.8  million  was  recorded  in the third  quarter for the
acceleration  of  depreciation  related  to  the  Company's  decision  to  cease
production of two products at the Company's Odda facility.  Purchase  accounting
adjustments relating to inventory acquired in the PAH acquisition resulted in an
increase  to cost of goods sold of $.4  million  and $4.6  million for the three
months  ended  March  31,  2002  and,  respectively.  Excluding  the  purchase
accounting  adjustments,  gross profit declined by approximately  $.8 million in
the Animal Health segment  primarily due to lower average  selling  prices.  The
Industrial  Chemicals segment declined primarily due to lower production volumes
and ERS revenues at the Company's Phibro-Tech facilities ($.9 million) and lower
profits at the Company's  Odda  facility ($.8 million)  offset in part by higher
sales of mineral products ($.3 million).  The Distribution  segment declined $.6
million primarily as a result of lower unit volume. Gross profit declined in the
All Other segment due to sales of crop protection  products sold to Nufarm under
a supply  agreement in the current  period as opposed to higher  margin sales to
third parties in the prior period of $1.9 million offset by improved performance
at the Company's fly ash operations ($.5 million).  Elimination of inter-company
profit in inventory accounted for the balance of the decrease.

      Selling,  General and  Administrative  Expenses.  Costs  decreased  by $.5
million to $26.7  million in 2002,  as compared to the prior  period.  Excluding
Agtrol, costs were up approximately $2.7 million. Costs increased by $.9 million
over the prior period at PAH due to increased  staffing levels,  advertising and
research and development costs associated with the transition of operations from
Pfizer. In addition, costs increased due to higher warehousing, and distribution
costs primarily  relating to sales growth in the Company's fly ash business ($.7
million).  The prior period included a $1.1 million non-cash gain to reflect the
decrease  in  repurchase  value  of  redeemable   common  stock  of  a  minority
shareholder; no amount was recorded in the current period.

      Operating  Income (Loss).  Operating income decreased by $5.0 million to a
loss of $3.7 million in 2002, as compared to the prior period. The Animal Health
and Nutrition segment,  after the exclusion of purchase accounting  adjustments,
decreased  due to lower  margins  and  increased  overhead  spending.  Operating
income,  excluding  the  accelerated  depreciation  at  Odda,  declined  in  the
Industrial  Chemicals  segment  primarily  due to  lower  sales  and  production
volumes.   The  Company  is  implementing  cost  reduction  programs  and  other
initiatives with respect to Phibro-Tech's  copper related businesses in reaction
to  current  market  conditions  in the  printed  circuit  board  industry.  The
improvement in operating income of the All Other segment is primarily the result
of the sale of Agtrol as the  Company is no longer  materially  impacted  by the
seasonal  nature  of the crop  protection  business.  The  Distribution  segment
decreased compared to the prior year primarily due to sales volume declines.

      Interest  Expense,  Net.  Costs  decreased  by $.6  million or 12% to $4.6
million  for the three  months  ended  March 31,  2002 as  compared to the prior
period primarily due to lower interest rates and lower average  borrowing levels
associated with the Company's revolving credit agreement.

      Other Expense,  Net.  Other  expense,  net  principally  reflects  foreign
currency  transaction/translation  gains  and  losses of the  Company's  foreign
subsidiaries (principally Norwegian Kroner and the Israeli Shekel).

      Income Taxes.  The Company  provides a benefit on interim period losses as
it is anticipated that future earnings can be utilized to offset the tax benefit
recorded in the current  year.  The  effective  tax rate  differs  from the U.S.
statutory  rate  due to the  relationship  of each  domestic  and  international
subsidiary's  individual  income or loss  position to the statutory tax rates in
each country.

Comparison of Nine Months Ended March 31, 2002 and 2001

      Net Sales. Net sales increased by $29.0 million, or 11%, to $289.0 million
in the nine months ended March 31, 2002, as compared to same period of the prior
year. The increase was primarily due to the purchase of the PAH business  offset
in part by the sale of the Company's Agtrol operations.

      The Animal  Health and Nutrition  segment's  net sales  increased by $44.0
million,  or 31%, to $183.6  million in the nine months ended March 31, 2002, as
compared to the prior period.  The net sales  increase was due to increased unit
volume  primarily as a result of the PAH purchase.  Excluding PAH, sales for the
segment in 2001 were $2.2 million  above the prior year  primarily due to higher
unit  volume  sales of  vitamin,  mineral  and  other  pre-mix  products  at the
Company's domestic  facilities.  This was offset in part by the adverse business
climate in Israel  and the  discontinuation  of sales of vitamin  exports by the
Company's Koffolk Israel operations.


                                       23
<PAGE>

      The Industrial Chemicals segment's net sales decreased by $6.6 million, or
9%, to $65.7 million in the nine months ended March 31, 2002, as compared to the
prior period.  Sales by the Company's  Phibro-Tech  subsidiary were down by $7.1
million due to volume  declines  related to the printed  circuit board industry.
Higher unit volume sales, offset in part by lower average selling prices, at the
Company's  Odda  subsidiary  increased  revenues by $1.1  million and  partially
offset the decrease.  Lower sales of iron and manganese oxides accounted for the
balance of the change.

      Net sales for the Distribution  segment decreased by $6.1 million, or 18%,
to $27.8  million  in 2002,  as  compared  to the  prior  period.  The net sales
decrease  was  primarily  due to lower unit  volumes  and product mix changes of
approximately  $3.3 million and lower average selling prices,  primarily carbide
products,  of  $2.8  million.   Declines  in  the  segment's  cyanide,  carbide,
dicyandiamide  and DL panthenol  products also occurred during nine month period
of this fiscal year as compared to the prior year period.

      Net sales for the All Other segment decreased by $6.6 million,  or 19%, to
$28.5  million in 2002,  as compared  to the prior  period.  Approximately  $9.4
million of this decrease  related to lower sales of crop  protection  chemicals.
The Company's Agtrol crop protection business was sold during the fourth quarter
of fiscal 2001 and sales of certain  crop  protection  chemicals  are  currently
being made under supply agreements to Nufarm.  Excluding  Agtrol,  sales for the
segment in 2001 were $2.8 million  above the prior year.  The  Company's fly ash
business increased by $1.8 million primarily due to increased volume as a result
of  additional  contracts  with  utilities in Missouri and Michigan and improved
average  selling  prices.  Revenues of the  Company's  Wychem,  U.K.  operations
improved by $1.0  million due to an increase in  specialized  lab  projects  and
formulations.

      Gross Profit.  Gross profit  increased by $10.3 million,  or 14%, to $81.3
million in the nine  months  ended  March 31,  2002,  as  compared  to the prior
period.  The  increase  was  primarily  due to the  purchase of the PAH business
offset  in  part  by  lower  production  volumes  at the  Company's  Phibro-Tech
facilities  and the sale of the Company's  Agtrol  operations.  A charge of $4.8
million was recorded in the third quarter for the  acceleration  of depreciation
related to the  Company's  decision to cease  production  of two products at the
Company's Odda facility.  Purchase accounting  adjustments relating to inventory
acquired in the PAH acquisition resulted in an increase to cost of goods sold of
$3.3 and $5.7  million  for the nine  months  ended  March  31,  2002 and  2001,
respectively.  Gross  profit  declined in the All Other  segment due to sales of
crop protection  products sold to Nufarm under a supply agreement in the current
period as opposed to higher margin sales to third parties in the prior period of
$4.1 million offset by improved  performance at the Company's fly ash operations
of $1.6 million.  Elimination of inter-company profit in inventory accounted for
the balance of the decrease.

      Selling,  General and  Administrative  Expenses.  Costs  increased by $8.3
million to $79.0 million in 2002, as compared to the prior period. Excluding PAH
and  Agtrol,  costs  were  up  approximately  $5.3  million  principally  due to
management advisory fees to Palladium Equity Partners, LLC ($.9 million), higher
warehousing and distribution primarily relating to sales growth in the Company's
fly ash business ($1.5  million),  higher  depreciation  and  amortization  ($.6
million) and environmental  remediation ($.7 million). The prior period included
an accrual for severance costs ($1.3 million) associated with the termination of
employment  of an  executive  of the  Company.  In  addition,  the prior  period
included a $2.3  million  non-cash  gain to reflect the  decrease in  repurchase
value of redeemable common stock of a minority  shareholder,  as compared to the
gain in the current period of $.4 million.  Other general spending accounted for
the balance of the increase.

      Operating  Income.  Operating  income  increased  by $2.0  million to $2.3
million  in 2002,  as  compared  to the prior  period.  The  Animal  Health  and
Nutrition  segment  increased  due  to the  inclusion  of PAH  for  the  period.
Operating income,  excluding the accelerated  depreciation at Odda,  declined in
the  Industrial  Chemicals  segment  primarily due to lower sales and production
volumes.   The  Company  is  implementing  cost  reduction  programs  and  other
initiatives with respect to Phibro-Tech's  copper related businesses in reaction
to  current  market  conditions  in the  printed  circuit  board  industry.  The
improvement in operating income of the All Other segment is primarily the result
of the sale of Agtrol as the  Company is no longer  materially  impacted  by the
seasonal nature of the crop protection  business.  The Distribution  segment was
below the prior year primarily due to sales volume declines.

      Interest  Expense,  Net.  Costs  increased  by $.8  million or 6% to $13.6
million for the nine months ended March 31, 2002 as compared to the prior period
primarily due to debt incurred in connection with the PAH acquisition and higher
levels of average bank borrowings.

      Other Expense,  Net.  Other  expense,  net  principally  reflects  foreign
currency  transaction/translation  gains  and  losses of the  Company's  foreign
subsidiaries.

      Income Taxes.  The Company  provides a benefit on interim period losses as
it is anticipated that future earnings can be utilized to offset the tax benefit
recorded in the current  year.  The  effective  tax rate  differs  from the U.S.
statutory  rate  due to the  relationship  of each  domestic  and  international
subsidiary's  individual  income or loss  position to the statutory tax rates in
each country.


                                       24
<PAGE>

Liquidity and Capital Resources

      Net Cash Provided by Operating Activities. Cash provided by operations for
the nine months ended March 31, 2002 was $.4 million.  The increase in cash from
the collection of receivables  from the Company's crop  protection  business was
offset by a planned  increase in higher  inventories  at the PAH business  unit.
This build up of  inventories  is  considered  necessary  to ensure an  adequate
availability of product as the Company  continues to refine its supply chain and
expand into new markets.

      Net  Cash  Used by  Investing  Activities.  Net  cash  used  in  investing
activities for the nine months ended March 31, 2002 was $15.3  million.  Capital
expenditures of $8.7 million were mostly for maintaining the Company's  existing
asset base and for environmental,  health and safety projects.  The remainder of
the net cash  used by  investing  activities  primarily  relates  to  contingent
purchase price payments from the PAH acquisition.

      Net Cash Provided by Financing Activities.  Net cash provided by financing
activities totaled $14.7 million. Borrowings under the domestic revolving credit
agreement were partially  offset by paydowns of debt at several of the Company's
international  subsidiaries and a $2.5 million payment on long-term debt related
to the PAH acquisition.

      Liquidity.  At March 31,  2002,  working  capital  totaled  $61.2  million
compared to $74.0 million at the fiscal year end. Due to the nature and terms of
the revolving credit  agreement,  which includes both a subjective  acceleration
clause and a  requirement  to  maintain a lockbox  arrangement,  all  borrowings
against this facility are classified as a current liability.  At March 31, 2002,
the amount of credit extended under this agreement totaled $40.6 million and the
Company had $4.4  million  available  under the  borrowing  base formula in this
agreement.  In addition,  certain of the Company's foreign subsidiaries also had
availability under their respective credit facilities totaling $8.1 million.

      The Company  anticipates  spending  approximately  $12 million for capital
expenditures in fiscal 2002,  primarily to cover the Company's asset replacement
needs,  improve  processes,  and for  environmental  and regulatory  compliance,
subject to the availability of funds.

      The  Company's  Odda  subsidiary,  with the  concurrence  of the Norwegian
banks,  has  deferred  a  scheduled  principal  payment of $.6  million  pending
resolution of discussions with Odda's banks regarding the restructuring of these
loans as a result of the  partial  shutdown  of Odda's  operations,  and is also
negotiating  with the  government  of Norway for financial  assistance.  Philipp
Brothers Chemicals, Inc. is the guarantor of this debt.

      Due to lower levels of economic activity and increased global competition,
the Company  believes that cash flows from  operations  and available  borrowing
arrangements may not provide sufficient working capital to operate the Company's
existing  business,  to  make  budgeted  capital  expenditures,  and to  service
interest and current  principal  coming due on outstanding debt over the ensuing
12 month period.  Accordingly,  the Company is  considering  the  divestiture of
certain business operations and cost reduction programs to provide funds to meet
future obligations on a timely basis.

Critical Accounting Policies

      The Securities and Exchange  Commission ("SEC") recently issued disclosure
guidance  for  "critical  accounting   policies".   The  SEC  defines  "critical
accounting  policies" as those that require  application  of  management's  most
difficult,  subjective  or complex  judgments,  often as a result of the need to
make estimates about the effect of matters that are inherently uncertain and may
change in subsequent periods.

      The Company's  significant  accounting policies are described in Note 1 of
the June 30,  2001  Annual  Report on Form  10-K.  Not all of these  significant
accounting policies require management to make difficult,  subjective or complex
judgments or estimates.  However,  management of the Company is required to make
certain  estimates  and  assumptions  during  the  preparation  of  consolidated
financial statements in accordance with accounting principles generally accepted
in the United  States of America.  These  estimates and  assumptions  impact the
reported amount of assets and  liabilities and disclosures of contingent  assets
and  liabilities  as of the  date  of  the  consolidated  financial  statements.
Estimates and assumptions are reviewed periodically and the effects of revisions
are reflected in the period they are determined to be necessary.  Actual results
could differ from those estimates.

      Significant estimates underlying the accompanying  consolidated  financial
statements include inventory valuation,  allowance for doubtful accounts, useful
lives of tangible and intangible  assets and various other operating  allowances
and accruals.


                                       25
<PAGE>

New Accounting Pronouncements

      In June 2001, the Financial  Accounting  Standards Board issued Statements
of Financial  Accounting  Standards No. 141 "Business  Combinations"  ("SFAS No.
141") and No. 142 "Goodwill and Other  Intangibles"  ("SFAS No. 142").  SFAS No.
141 and No. 142 are  effective  for the  Company  on July 1, 2002.  SFAS No. 141
requires  that the  purchase  method  of  accounting  be used  for all  business
combinations  initiated  after June 30, 2001.  The  statement  also  establishes
specific criteria for recognition of intangible assets separately from goodwill.
SFAS No. 142 primarily  addresses  the  accounting  for goodwill and  intangible
assets subsequent to their acquisition. The statement requires that goodwill and
indefinite  lived  intangible  assets no longer be  amortized  and be tested for
impairment at least annually.  The amortization period of intangible assets with
finite lives will no longer be limited to forty years.  The Company is currently
assessing the impact of these statements.

      In June 2001, the Financial Accounting Standards Board issued Statement of
Financial   Accounting  Standards  No.  143  "Accounting  for  Asset  Retirement
Obligations" ("SFAS No. 143"). SFAS No. 143 is effective for the Company on July
1, 2002. The statement establishes  accounting standards for the recognition and
measurement  of  an  asset  retirement   obligation  and  its  associated  asset
retirement  cost.  The  Company  is  currently  assessing  the  impact  of  this
statement.

      In August 2001, the Financial  Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144 "Accounting for Impairment or Disposal
of  Long-Lived  Assets"  ("SFAS No.  144").  SFAS No. 144 is  effective  for the
Company on July 1, 2002. The statement addresses  significant issues relating to
the  implementation  of FASB Statement No. 121 "Accounting for the Impairment of
Long-Lived  Assets and for Long-Lived Assets to Be Disposed Of" ("FAS No. 121"),
and the  development  of a  single  accounting  model,  based  on the  framework
established  in FAS No. 121,  for  long-lived  assets to be disposed of by sale,
whether  previously  held and used or newly  acquired.  The Company is currently
assessing the impact of this statement.

Seasonality of Business

      Prior to the  divestiture of the crop protection  business,  the Company's
sales were  typically  highest in the fourth fiscal  quarter due to the seasonal
nature of the agricultural industry.  With the sale of this business, as well as
the  acquisition  of the  non-seasonal  PAH business,  the  Company's  sales are
expected to be less seasonal. However, some seasonality in the Company's results
will  remain as sales of  certain  industrial  chemicals  to the wood  treatment
industry as well as sales of coal fly ash are typically  highest during the peak
construction periods of the first and fourth fiscal quarters.

Quantitative and Qualitative Disclosure About Market Risk

      For financial  market risks related to changes in interest rates,  foreign
currency exchange rates and commodity prices, reference is made to Part II, Item
7,  Quantitative and Qualitative  Disclosure About Market Risk, in the Company's
Annual  Report on Form 10-K for the year ended  June 30,  2001 and to Note 13 to
the Consolidated Financial Statements of the Company included therein.

Certain Factors Affecting Future Operating Results

      This Form 10-Q contains "forward-looking statements" within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities Exchange Act of 1934, as amended.  The Company's actual results could
differ  materially  from  those  set  forth in the  forward-looking  statements.
Certain factors that might cause such a difference include,  among other factors
noted herein, the following:  the Company's  substantial  leverage and potential
inability to service its debt; the Company's  dependence on  distributions  from
its subsidiaries;  risks associated with the Company's international operations;
the Company's  ability to absorb and integrate into its existing  operations the
PAH  acquisition  referred to above;  the  Company's  dependence  on its Israeli
operations;   competition   in  each  of  the   Company's   markets;   potential
environmental liability; extensive regulation by numerous government authorities
in the United States and other countries; significant cyclical price fluctuation
for the principal raw materials  used by the Company in the  manufacture  of its
products;  the Company's reliance on the continued  operation and sufficiency of
its  manufacturing  facilities;  the Company's  dependence upon unpatented trade
secrets;  the  risks of  legal  proceedings  and  general  litigation  expenses;
potential operating hazards and uninsured risks; the risk of work stoppages; the
Company's  dependence on key  personnel;  the uncertain  impact of the Company's
acquisition plans; and the seasonality of the Company's business.

      Additional  factors that might cause such a difference  include the effect
of  current  hostilities  in Israel on the  Company's  Israeli  operations,  the
potential  need to make cost  reduction  programs  and  divestiture  of  certain
business operations and the effect of such actions on consolidated  results, and
uncertainties   with  respect  to  the   restructuring  of  the  Company's  Odda
operations.


                                       26
<PAGE>

      The Company has a domestic net deferred tax asset of  approximately  $12.2
million at March 31, 2002.  The Company has incurred  domestic  losses in recent
fiscal years; however, with the acquisition of the Pfizer Animal Health business
and the sale of the Agtrol crop  protection  business  in 2001,  the Company had
anticipated  a return to  profitability  in fiscal  2002 and,  accordingly,  the
Company  had  considered  the  deferred  tax  assets  more  likely  than  not of
realization.  As indicated previously,  the Company has experienced lower levels
of economic activity than anticipated  across its global  operations,  including
the United  States.  As a result,  the  Company  currently  anticipates  a small
domestic loss for fiscal 2002. As indicated  above,  significant  cost reduction
activities have already been undertaken in several domestic businesses to adjust
the  cost  base  to  current  levels  of  economic  activity,  and  the  Company
anticipates domestic profitability for fiscal 2003 and beyond. Consequently, the
Company  continues  to consider  the deferred tax assets more likely than not of
recovery and no valuation  allowance has been provided.  The Company's  position
will  continue  to be  reassessed  each  reporting  period in light of  domestic
operating performance.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

      See Part I -- Item 2 -- "Management's Discussion and Analysis of Financial
Condition  and Results of Operations  Quantitative  and  Qualitative  Disclosure
About Market Risk."


                                       27
<PAGE>

                          PART II -- OTHER INFORMATION

Item 5. Other Information.

      None.

Item 6. Exhibits and Reports on Form 8-K.

      (a) Exhibits

          Exhibit No.    Description
          -----------    -----------

          None.

      (b) Reports on Form 8-K.

          None.


                                       28
<PAGE>

                                   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.

                                        PHILIPP BROTHERS CHEMICALS, INC.

Date: May 14, 2002                      By: /s/ DAVID C. STORBECK
                                            -----------------------------------
                                            David C. Storbeck
                                            Chief Financial Officer


Date: May 14, 2002                      By: /s/ JOSEPH KATZENSTEIN
                                            -----------------------------------
                                            Joseph Katzenstein, Treasurer
                                            and Secretary


                                       29