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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 December 31, 2001

                                       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 December 31,
2001:

                 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........  26

PART II OTHER INFORMATION

  Item 5. Other Information.................................................  27
  Item 6. Exhibits and Reports on Form 8-K..................................  27

SIGNATURES..................................................................  28


                                       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)

                                                        December 31,  June 30,
                                                            2001        2001
                                                        ------------  ---------

                                     ASSETS
CURRENT ASSETS:
    Cash and cash equivalents                           $  17,316     $  14,845
    Trade receivables, less allowance
       for doubtful accounts of $2,670 at
       December 31, 2001 and $2,369 at
       June 30, 2001                                       65,694        77,910
    Other receivables                                       2,610         4,800
    Inventories                                            97,607        83,796
    Prepaid expenses and other
       current assets                                      18,838        17,448
                                                        ---------     ---------
          TOTAL CURRENT ASSETS                            202,065       198,799

PROPERTY, PLANT AND EQUIPMENT, net                        102,977       102,323

INTANGIBLES                                                10,366         5,832

OTHER ASSETS                                               23,635        23,065
                                                        ---------     ---------
                                                        $ 339,043     $ 330,019
                                                        =========     =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
    Cash overdraft                                      $   5,079     $   4,222
    Loans payable to banks                                 40,304        28,463
    Current portion of long-term debt                       5,390         5,404
    Accounts payable                                       49,769        51,304
    Accrued expenses and other
       current liabilities                                 37,426        35,378
                                                        ---------     ---------
          TOTAL CURRENT LIABILITIES                       137,968       124,771

LONG-TERM DEBT                                            140,917       139,464

OTHER LIABILITIES                                          10,521        12,926
                                                        ---------     ---------
          TOTAL LIABILITIES                               289,406       277,161
                                                        ---------     ---------
COMMITMENTS AND CONTINGENCIES

REDEEMABLE SECURITIES:
    Series B and C preferred stock                         55,374        48,980
    Common stock                                               --           378
    Common stock of subsidiary                                 95            95
                                                        ---------     ---------
          TOTAL REDEEMABLE SECURITIES                      55,469        49,453
                                                        ---------     ---------
STOCKHOLDERS' EQUITY:
    Series A preferred stock                                  521           521
    Common stock                                                2             2
    Paid-in capital                                           878           878
    Retained earnings                                        (717)        9,741
    Accumulated other comprehensive income
       (loss) - gain on derivative instruments                433            --
       cumulative currency translation
       adjustment                                          (6,949)       (7,737)
                                                        ---------     ---------
          TOTAL STOCKHOLDERS' EQUITY                       (5,832)        3,405
                                                        ---------     ---------
                                                        $ 339,043     $ 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       Six Months Ended
                                             December 31,            December 31,
                                          2001         2000        2001         2000
                                       ---------    ---------    ---------    ---------
<S>                                    <C>          <C>          <C>          <C>
NET SALES                              $  97,987    $  83,344    $ 192,646    $ 156,139

COST OF GOODS SOLD                        66,698       61,310      134,294      113,600
                                       ---------    ---------    ---------    ---------
    GROSS PROFIT                          31,289       22,034       58,352       42,539

SELLING, GENERAL AND
    ADMINISTRATIVE EXPENSES               26,675       24,426       52,329       43,521
                                       ---------    ---------    ---------    ---------
    OPERATING INCOME                       4,614       (2,392)       6,023         (982)

OTHER:

    Interest expense                       4,674        4,080        9,317        8,019

    Interest income                         (233)        (186)        (303)        (403)

    Other expense (income), net            1,220       (1,231)       1,025           97
                                       ---------    ---------    ---------    ---------
    LOSS BEFORE INCOME TAXES              (1,047)      (5,055)      (4,016)      (8,695)

PROVISION (BENEFIT) FOR INCOME TAXES         652       (2,437)          48       (2,958)
                                       ---------    ---------    ---------    ---------
    NET LOSS                              (1,699)      (2,618)      (4,064)      (5,737)

OTHER COMPREHENSIVE INCOME (LOSS)-
    Gain on derivative instruments           288          168          433          168
    Change in currency translation
      adjustment                           2,354          389          788         (772)
                                       ---------    ---------    ---------    ---------
    COMPREHENSIVE INCOME (LOSS)        $     943    $  (2,061)   $  (2,843)   $  (6,341)
                                       =========    =========    =========    =========
</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 Six Months Ended December 31, 2001
                                 (In Thousands)

<TABLE>
<CAPTION>
                                 Preferred Stock    Common Stock                                  Accumulated
                                 ---------------   --------------                                    Other
                                                   Class    Class     Paid-in      Retained      Comprehensive
                                    Series 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)
                                      =====        ===        ===      =====        ======          =======       =======
</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 Six Months Ended December 31, 2001 and 2000
                                 (In Thousands)

                                                          2001           2000
                                                        --------       --------
OPERATING ACTIVITIES:
    Net loss                                            $ (4,064)      $ (5,737)
    Adjustments to reconcile net loss
      to net cash provided by
      operating activities:
       Depreciation and amortization                       8,044          6,640
       Other                                               1,666         (1,584)

       Changes in operating assets
        and liabilities:
          Accounts receivable                             11,968          7,776
          Inventories                                    (13,927)        (4,017)
          Prepaid expenses and other
            current assets                                  (372)          (813)
          Other assets                                      (507)        (2,914)
          Accounts payable                                (2,218)         3,801
          Accrued expenses and other
            current liabilities                            3,714          2,253
                                                        --------       --------
          NET CASH PROVIDED BY
            OPERATING ACTIVITIES                           4,304          5,405
                                                        --------       --------
INVESTING ACTIVITIES:
    Capital expenditures                                  (6,634)        (6,509)
    Acquisition of a business                             (4,422)       (51,700)
    Other investing                                          (38)          (339)
                                                        --------       --------
          NET CASH USED IN
           INVESTING ACTIVITIES                          (11,094)       (58,548)
                                                        --------       --------
FINANCING ACTIVITIES:
    Cash overdraft                                           751          1,432
    Net increase in short-term debt                       10,402         12,403
    Proceeds from long-term debt                           2,042          1,590
    Proceeds from issuance of
      redeemable preferred stock                              --         45,000
    Payments of long-term debt                            (3,963)        (1,018)
    Other financing                                           --           (942)
                                                        --------       --------
          NET CASH PROVIDED BY
           FINANCING ACTIVITIES                            9,232         58,465
                                                        --------       --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                       29           (164)
                                                        --------       --------
          NET INCREASE IN CASH
           AND CASH EQUIVALENTS                            2,471          5,158

CASH AND CASH EQUIVALENTS at
  beginning of period                                     14,845          2,403
                                                        --------       --------
          CASH AND CASH EQUIVALENTS
           at end of period                             $ 17,316       $  7,561
                                                        ========       ========

       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) necessary to present fairly its financial position
as of December  31, 2001 and its  results of  operations  and cash flows for the
three months and six months ended December 31, 2001 and 2000.

      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 $1,570 and $3,013 for the three  months and six months  ended
December  31,  2000,  respectively,  from  selling,  general and  administrative
expenses  to  net  sales  on  the  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 six  months  ended
December 31, 2001 and 2000 may not be indicative of results for the full year.

2. Acquisition

      On November 30, 2000,  the Company  purchased the Medicated Feed Additives
(MFA) 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 $4,787,  related to product intangibles,  under this
arrangement  as of  December  31,  2001,  of which  $5,363  has been  paid as of
December 31, 2001. Under the terms of the agreement,  the Company has elected to
defer $3,000 of the payment  until June 30, 2006.  The  deferred  payment  bears
interest at an annual rate of 13%. In  addition,  the Company is


                                       8
<PAGE>

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

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 MFA
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 six-month period ended
December 31, 2000 are as follows:

      Net sales ....................................            $ 203,732
      Net (loss) income ............................               (6,480)

      The impact of purchase price  adjustments  to the inventory  acquired from
Pfizer  increased  the loss  before  income  taxes for the three  months and six
months  ended  December 31, 2001 by $941 and $2,914,  respectively,  and for the
three  months and six months  ended  December  31, 2000 by $1,081.  Exclusive of
these  charges the loss before  income taxes for the three months and six months
ended December 31, 2001 would have been $106 and $1,102,  respectively,  and for
the three months and six months  ended  December 31, 2000 would have been $3,974
and $7,614, respectively.

3. 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  December  31,  2001  and  June 30,  2001  consist  of the
following:

                                                 December 31,     June 30,
                                                     2001           2001
                                                   -------        -------
      Raw materials                                $24,040        $22,614
      Work-in-process                                3,718          4,257
      Finished goods                                69,849         56,925
                                                   -------        -------
      Total inventory                              $97,607        $83,796
                                                   =======        =======

4. 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.  Tentative 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.


                                       9
<PAGE>

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

      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.

      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.

      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  $2,182 as of December 31, 2001,  which is included in current and
long-term liabilities.

5. Risks and Uncertainties

      The Company's Odda, Norway operation has suffered  operating losses during
fiscal 2001 and for the six months  ended  December  31,  2001.  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 is evaluating the future
operation  of Odda  under a  number  of  scenarios,  which  range  from  ceasing
production of certain  products to a complete  shutdown of the operation.  Among
other  uncertainties,  the  ultimate  decision may be affected by the outcome of
negotiations  with the  government of Norway for certain  financial  assistance.
This  outcome is not  expected to be known until the third or fourth  quarter of
fiscal 2002.

      The Company has evaluated the likelihood of the possible scenarios and the
related  probability  weighted  estimated  future cash flows 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  $26,912)
exists  at  December  31,  2001;  however,  certain  of the  possible  operating
scenarios  could  result in a  write-down  of assets  that could be  material to
operating results and financial position.  A material write-down may also result
in violation of certain of the  financial  covenants  included in the  Company's
revolving credit facility and certain debt of Odda,  making amounts  outstanding
under these  facilities  callable at the discretion of the lenders.  The Company
believes it will be able to successfully negotiate waivers of such violations or
amendments  to  financial  covenants,  if  required;  however  the  outcome  and
resolution of the above matters is uncertain at this time.

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.


                                       10
<PAGE>

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

Segment data for the three and six months  ended  December 31, 2001 and 2000 are
as follows:

<TABLE>
<CAPTION>
                                                  Animal                                                  Corporate
                                                 Health &     Industrial                      All        Expenses &
Three Months Ended December 31, 2001             Nutrition     Chemicals    Distribution     Other       Adjustments        Total
                                                 ---------     ---------    ------------    --------     -----------      ---------
<S>                                               <C>           <C>            <C>          <C>            <C>            <C>
Revenues -external customers                      $ 63,156      $ 17,394       $ 8,383      $  9,054       $     --       $  97,987
         -intersegment                                 857         4,474           442            19         (5,792)             --
                                                  --------      --------       -------      --------       --------       ---------
Total revenues                                    $ 64,013      $ 21,868       $ 8,825      $  9,073       $ (5,792)      $  97,987
                                                  ========      ========       =======      ========       ========       =========
Operating income/(loss)                           $ 10,259      $ (2,542)      $   751      $   (229)      $ (3,625)      $   4,614
                                                  ========      ========       =======      ========       ========       =========

<CAPTION>
                                                  Animal                                                  Corporate
                                                 Health &     Industrial                      All        Expenses &
Three Months Ended December 31, 2000             Nutrition     Chemicals    Distribution     Other       Adjustments        Total
                                                 ---------     ---------    ------------    --------     -----------      ---------
<S>                                               <C>           <C>            <C>          <C>            <C>            <C>
Revenues -external customers                      $ 43,548      $ 18,870       $10,454      $ 10,472       $     --       $  83,344
         -intersegment                               1,306         5,562           434            --         (7,302)             --
                                                  --------      --------       -------      --------       --------       ---------
Total revenues                                    $ 44,854      $ 24,432       $10,888      $ 10,472       $ (7,302)      $  83,344
                                                  ========      ========       =======      ========       ========       =========
Operating income/(loss)                           $  3,446      $   (845)      $   927      $ (1,965)      $ (3,955)      $  (2,392)
                                                  ========      ========       =======      ========       ========       =========

<CAPTION>
                                                  Animal                                                  Corporate
                                                 Health &     Industrial                      All        Expenses &
Six Months Ended December 31, 2001               Nutrition     Chemicals    Distribution     Other       Adjustments        Total
                                                 ---------     ---------    ------------    --------     -----------      ---------
<S>                                               <C>           <C>            <C>          <C>            <C>            <C>
Revenues -external customers                      $121,099      $ 34,739       $17,818      $ 18,990       $     --       $ 192,646
         -intersegment                               2,267         8,140           996            30        (11,433)             --
                                                  --------      --------       -------      --------       --------       ---------
Total revenues                                    $123,366      $ 42,879       $18,814      $ 19,020       $(11,433)      $ 192,646
                                                  ========      ========       =======      ========       ========       =========
Operating income/(loss)                           $ 17,624      $ (6,742)      $ 1,589      $   (110)      $ (6,338)      $   6,023
                                                  ========      ========       =======      ========       ========       =========

<CAPTION>
                                                  Animal                                                  Corporate
                                                 Health &     Industrial                      All        Expenses &
Six Months Ended December 31, 2000               Nutrition     Chemicals    Distribution     Other       Adjustments        Total
                                                 ---------     ---------    ------------    --------     -----------      ---------
<S>                                               <C>           <C>            <C>          <C>            <C>            <C>
Revenues -external customers                      $ 77,210      $ 36,637       $21,372      $ 20,920       $     --       $ 156,139
         -intersegment                               2,274         9,868           915            --        (13,057)             --
                                                  --------      --------       -------      --------       --------       ---------
Total revenues                                    $ 79,484      $ 46,505       $22,287      $ 20,920       $(13,057)      $ 156,139
                                                  ========      ========       =======      ========       ========       =========
Operating income/(loss)                           $  6,493      $   (400)      $ 1,845      $ (3,639)      $ (5,281)      $    (982)
                                                  ========      ========       =======      ========       ========       =========
</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
$6,907 and $1,969,  respectively,  for the three months ended December 31, 2000,
and $13,274 and $3,972,  respectively,  for the six months  ended  December  31,
2000.


                                       11
<PAGE>

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  the  Company  has  determined  that such  financial
statements would not be material to investors.


                                       12
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
                CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
                             As of December 31, 2001
                                 (In Thousands)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                U.S. Guarantor  Foreign Subsidiaries  Consolidation    Consolidated
                                                   Parent        Subsidiaries      Non-Guarantors      Adjustments        Balance
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>               <C>                  <C>              <C>              <C>
                  Assets

Current Assets:

Cash and cash equivalents                        $   1,838         $  1,110             $ 14,368                          $ 17,316
Trade receivables                                    3,302           27,605               34,787                            65,694
Other receivables                                      611              547                1,452                             2,610
Inventory                                            3,840           45,397               48,370                            97,607
Prepaid expenses and other                           4,699            3,077               11,062                            18,838
                                          -----------------------------------------------------------------------------------------
           Total current assets                     14,290           77,736              110,039               --          202,065
                                          -----------------------------------------------------------------------------------------

Property, plant & equipment, net                       516           29,748               72,713                           102,977

Intangibles                                             32            1,856                8,478                            10,366
Investment in subsidiaries                          58,844            2,254               (6,850)         (54,248)              --
Intercompany                                        67,244          (28,811)              (3,909)         (34,524)              --
Other assets                                        93,235          (71,296)               1,696                            23,635
                                          -----------------------------------------------------------------------------------------
               Total assets                      $ 234,161         $ 11,487             $182,167         $(88,772)        $339,043
                                          =========================================================================================

   Liabilities and Stockholders' Equity

Current Liabilities:
Cash overdraft                                   $      28         $  4,987             $     64                          $  5,079
Loan payable to banks                               38,137                -                2,167                            40,304
Current portion of long term debt                    2,540              478                2,372                             5,390
Accounts payable                                     1,135           22,204               26,430                            49,769
Accrued expenses and other                           7,288            9,173               20,965                            37,426
                                          -----------------------------------------------------------------------------------------
Total current liabilities                           49,128           36,842               51,998               --          137,968
                                          -----------------------------------------------------------------------------------------
Long term debt                                     126,738          (66,480)             115,183          (34,524)         140,917

Other liabilities                                    2,016            4,877                3,628                            10,521

Redeemable securities:
Series B and C preferred stock                      55,374               --                   --                            55,374
Common stock                                           365               --                 (365)                               --
Common stock of subsidiary                              --               95                   --                                95
                                          -----------------------------------------------------------------------------------------
                                                    55,739               95                 (365)              --           55,469
                                          -----------------------------------------------------------------------------------------
           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                                     (717)           2,049               18,126          (20,175)            (717)
Accumulated other comprehensive
 income (loss)-
  gain on derivative instruments                        --               --                  433                               433
  cumulative currency translation
   adjustment                                         (144)              31               (6,836)                           (6,949)
                                          -----------------------------------------------------------------------------------------
        Total stockholders' equity                     540           36,153               11,723          (54,248)          (5,832)
                                          -----------------------------------------------------------------------------------------
       Total liabilities and equity              $ 234,161         $ 11,487             $182,167         $(88,772)        $339,043
                                          =========================================================================================
</TABLE>


                                       13
<PAGE>

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

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                   U.S. Guarantor  Foreign Subsidiaries  Consolidation  Consolidated
                                                      Parent        Subsidiaries      Non-Guarantors      Adjustments      Balance
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>              <C>                  <C>              <C>              <C>
Net sales                                           $ 6,071          $56,267              $42,994          $(7,345)         $97,987

Cost of goods sold                                    4,765           37,743               31,535           (7,345)          66,698
                                           -----------------------------------------------------------------------------------------
       Gross profit                                   1,306           18,524               11,459               --           31,289

Selling, general, and administrative
  expenses                                            4,120           13,688                8,867                            26,675
                                           -----------------------------------------------------------------------------------------
       Operating (loss) income                       (2,814)           4,836                2,592               --            4,614

Interest expense                                        521              635                3,518                             4,674
Interest income                                         (13)              --                 (220)                             (233)
Other (income) expense                                 (421)             (12)               1,653                             1,220

Intercompany allocation                              (3,942)           3,942                   --                                --

Loss (profit) relating to subsidiaries                2,225               --                   --           (2,225)              --
                                           -----------------------------------------------------------------------------------------
       (Loss) income before income taxes             (1,184)             271               (2,359)           2,225           (1,047)

Provision (benefit) for income taxes                    515              544                 (407)                              652
                                           -----------------------------------------------------------------------------------------
       Net (loss) income                            $(1,699)         $  (273)             $(1,952)         $ 2,225          $(1,699)
                                           =========================================================================================
</TABLE>


                                       14
<PAGE>

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

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                U.S. Guarantor  Foreign Subsidiaries    Consolidation   Consolidated
                                                   Parent        Subsidiaries      Non-Guarantors        Adjustments      Balance
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>             <C>                   <C>             <C>              <C>
Net sales                                           $13,179         $107,861              $85,398         $(13,792)        $192,646

Cost of goods sold                                   10,397           73,915               63,774          (13,792)         134,294
                                           -----------------------------------------------------------------------------------------
       Gross profit                                   2,782           33,946               21,624               --           58,352

Selling, general, and administrative
  expenses                                            7,857           27,219               17,253                            52,329
                                           -----------------------------------------------------------------------------------------
       Operating (loss) income                       (5,075)           6,727                4,371               --            6,023

Interest expense                                      1,195            1,568                6,554                             9,317
Interest income                                         (10)              --                 (293)                             (303)
Other (income) expense                                 (304)               7                1,322                             1,025

Intercompany allocation                              (4,935)           4,935                   --                                --

Loss (profit) relating to subsidiaries                3,323               --                   --           (3,323)              --
                                           -----------------------------------------------------------------------------------------
       (Loss) income before income taxes             (4,344)             217               (3,212)           3,323           (4,016)

(Benefit) provision for income taxes                   (280)             864                 (536)                               48
                                           -----------------------------------------------------------------------------------------
       Net (loss) income                            $(4,064)        $   (647)             $(2,676)        $  3,323         $ (4,064)
                                           =========================================================================================
</TABLE>


                                       15
<PAGE>

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

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                U.S. Guarantor  Foreign Subsidiaries  Consolidation     Consolidated
                                                   Parent        Subsidiaries      Non-Guarantors      Adjustments        Balance
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>                <C>                <C>                <C>            <C>
Operating activities:
Net (loss) income                                  $ (4,064)          $ (647)            $ (2,676)          $3,323         $ (4,064)
Adjustments to reconcile net (loss)
 income to cash (used in) provided by
 operating activities:
  Depreciation and amortization                         532            2,643                4,869                             8,044
  Other                                                (190)             286                1,570                             1,666

Changes in operating assets and liabilities:
  Accounts receivable                                 1,292            3,692                6,984                            11,968
  Inventory                                            (587)          (2,931)             (10,409)                          (13,927)
  Prepaid expenses and other                            727              863               (1,962)                             (372)
  Other assets                                          185             (587)                (105)                             (507)
  Intercompany                                       (8,599)           3,535                8,387           (3,323)              --
  Accounts payable                                     (608)          (1,726)                 116                            (2,218)
  Accrued expenses and other                            410           (3,337)               6,641                             3,714
                                           -----------------------------------------------------------------------------------------
Net cash (used in) provided by
 operating activities                               (10,902)           1,791               13,415               --            4,304
                                           -----------------------------------------------------------------------------------------
Investing activities:
  Capital expenditures                                  (72)          (2,368)              (4,194)                           (6,634)
  Acquisition of a business                              --               --               (4,422)                           (4,422)
  Other investing                                      (541)             412                   91                               (38)
                                           -----------------------------------------------------------------------------------------
Net cash used in
 investing activities                                  (613)          (1,956)              (8,525)              --          (11,094)
                                           -----------------------------------------------------------------------------------------
Financing activities:
  Cash overdraft                                         15              817                  (81)                              751
  Net increase (decrease)
   in short term debt                                12,570               --               (2,168)                           10,402
  Proceeds from long term debt                        2,000               --                   42                             2,042
  Payments of long term debt                         (2,524)            (242)              (1,197)                           (3,963)
                                           -----------------------------------------------------------------------------------------
Net cash provided by (used in)
 financing activities                                12,061              575               (3,404)              --            9,232
                                           -----------------------------------------------------------------------------------------
Effect of exchange rate changes
 on cash                                                 --               --                   29                                29
                                           -----------------------------------------------------------------------------------------
Net increase in cash and
 cash equivalents                                       546              410                1,515               --            2,471

Cash and cash equivalents
 at beginning of year                                 1,292              700               12,853                            14,845
                                           -----------------------------------------------------------------------------------------
Cash and cash equivalents
 at end of year                                    $  1,838          $ 1,110             $ 14,368           $   --         $ 17,316
                                           =========================================================================================
</TABLE>


                                       16
<PAGE>

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

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                U.S. Guarantor  Foreign 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-
  cumulative 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 December 31, 2000
                                 (In Thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                 U.S. Guarantor  Foreign Subsidiaries  Consolidation    Consolidated
                                                    Parent        Subsidiaries      Non-Guarantors      Adjustments       Balance
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>              <C>                  <C>              <C>              <C>
Net sales                                           $ 8,148          $48,993              $35,391          $(9,188)         $83,344

Cost of goods sold                                    6,656           34,690               29,152           (9,188)          61,310
                                           -----------------------------------------------------------------------------------------
       Gross profit                                   1,492           14,303                6,239               --           22,034

Selling, general, and administrative
  expenses                                            3,557           14,523                6,346                            24,426
                                           -----------------------------------------------------------------------------------------
       Operating (loss) income                       (2,065)            (220)                (107)              --           (2,392)

Interest expense                                      2,773               (5)               1,312                             4,080
Interest income                                          (8)              (1)                (177)                             (186)
Other expense                                            32               (4)              (1,259)                           (1,231)

Intercompany allocation                              (3,571)           3,442                  129                                --

Loss (profit) relating to subsidiaries                2,112               --                   --           (2,112)              --
                                           -----------------------------------------------------------------------------------------
       (Loss) income before income taxes             (3,403)          (3,652)                (112)           2,112           (5,055)

Benefit for income taxes                               (785)          (1,307)                (345)                           (2,437)
                                           -----------------------------------------------------------------------------------------
       Net (loss) income                            $(2,618)         $(2,345)             $   233          $ 2,112          $(2,618)
                                           =========================================================================================
</TABLE>


                                       18
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
           CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
                   For The Six Months Ended December 31, 2000
                                 (In Thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                U.S. Guarantor  Foreign Subsidiaries  Consolidation     Consolidated
                                                   Parent        Subsidiaries      Non-Guarantors      Adjustments        Balance
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>              <C>                  <C>             <C>              <C>
Net sales                                           $16,669          $91,807              $63,488         $(15,825)        $156,139

Cost of goods sold                                   13,447           64,607               51,371          (15,825)         113,600
                                           -----------------------------------------------------------------------------------------
       Gross profit                                   3,222           27,200               12,117               --           42,539

Selling, general, and administrative
  expenses                                            7,029           25,991               10,501                            43,521
                                           -----------------------------------------------------------------------------------------
       Operating (loss) income                       (3,807)           1,209                1,616               --             (982)

Interest expense                                      5,243               61                2,715                             8,019
Interest income                                         (44)              (1)                (358)                             (403)
Other expense                                           121               (4)                 (20)                               97

Intercompany allocation                              (6,895)           6,509                  386                                --

Loss (profit) relating to subsidiaries                3,617               --                   --           (3,617)              --
                                           -----------------------------------------------------------------------------------------
       (Loss) income before income taxes             (5,849)          (5,356)              (1,107)           3,617           (8,695)

Benefit for income taxes                               (112)          (2,019)                (827)                           (2,958)
                                           -----------------------------------------------------------------------------------------
       Net (loss) income                            $(5,737)         $(3,337)             $  (280)        $  3,617         $ (5,737)
                                           =========================================================================================
</TABLE>


                                       19
<PAGE>

                         PHILIPP BROTHERS CHEMICALS INC.
           CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
                   For the Six Months Ended December 31, 2000
                                 (In Thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                U.S. Guarantor  Foreign Subsidiaries  Consolidation     Consolidated
                                                   Parent        Subsidiaries      Non-Guarantors      Adjustments        Balance
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>               <C>                  <C>              <C>             <C>
Operating activities:
Net (loss) income                                  $ (5,737)         $(3,337)             $  (280)         $ 3,617         $ (5,737)
Adjustments to reconcile net (loss)
 income to cash provided by
 operating activities:
  Depreciation and amortization                         273            2,551                3,816                             6,640
  Other                                                (565)             (22)                (997)                           (1,584)

Changes in operating assets and liabilities:
  Accounts receivable                                 1,048            9,128               (2,400)                            7,776
  Inventory                                            (306)          (5,619)               1,908                            (4,017)
  Prepaid expenses and other                          1,904           (2,248)                (469)                             (813)
  Other assets                                         (957)          (1,948)                  (9)                           (2,914)
  Intercompany                                         (891)           2,620                1,888           (3,617)              --
  Accounts payable                                      184              552                3,065                             3,801
  Accrued expenses and other                            438            2,082                 (267)                            2,253
                                           -----------------------------------------------------------------------------------------

Net cash (used in) provided by
 operating activities                                (4,609)           3,759                6,255               --            5,405
                                           -----------------------------------------------------------------------------------------

Investing activities:
  Capital expenditures                                  (47)          (4,099)              (2,363)                           (6,509)
  Acquisition of a business                         (51,700)              --                   --                           (51,700)
  Other investing                                        --               --                 (339)                             (339)
                                           -----------------------------------------------------------------------------------------

Net cash used in
 investing activities                               (51,747)          (4,099)              (2,702)              --          (58,548)
                                           -----------------------------------------------------------------------------------------

Financing activities:
  Cash overdraft                                       (158)           1,590                   --                             1,432
  Net decrease in short term debt                    12,586               --                 (183)                           12,403
  Proceeds from long term debt                           --               --                1,590                             1,590
  Proceeds from issuance of
   redeemable preferred stock                        45,000               --                   --                            45,000
  Payments of long term debt                            (15)            (340)                (663)                           (1,018)
  Other financing                                      (942)              --                   --                              (942)
                                           -----------------------------------------------------------------------------------------

Net cash provided by
 financing activities                                56,471            1,250                  744               --           58,465
                                           -----------------------------------------------------------------------------------------

Effect of exchange rate changes
 on cash                                                 --               --                 (164)                             (164)
                                           -----------------------------------------------------------------------------------------

Net increase in cash and
 cash equivalents                                       115              910                4,133               --            5,158

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

Cash and cash equivalents
 at end of year                                    $    126          $ 1,009              $ 6,426          $    --         $  7,561
                                           =========================================================================================
</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 six months  ended  December  31,  2001.  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 is evaluating the future
operation  of Odda  under a  number  of  scenarios,  which  range  from  ceasing
production of certain  products to a complete  shutdown of the operation.  Among
other  uncertainties,  the  ultimate  decision may be affected by the outcome of
negotiations  with the  government of Norway for certain  financial  assistance.
This  outcome is not  expected to be known until the third or fourth  quarter of
fiscal 2002.

      The Company has evaluated the likelihood of the possible scenarios and the
related  probability-weighted  estimated  future cash flows 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 $26.9 million)
exists  at  December  31,  2001;  however,  certain  of the  possible  operating
scenarios,  could  result in a  write-down  of assets  that could be material to
operating results and financial position.  A material write-down may also result
in violation of certain of the  financial  covenants  included in the  Company's
revolving credit facility and certain debt of Odda,  making amounts  outstanding
under these  facilities  callable at the discretion of the lenders.  The Company
believes it will be able to successfully negotiate waivers of such violations or
amendments  to  financial  covenants,  if  required;  however  the  outcome  and
resolution of the above matters is uncertain at this time.


                                       21
<PAGE>

Results of Operations

<TABLE>
<CAPTION>
                                                                                Sales
                                                                               ($000's)
                                                        Three Months Ended                   Six Months Ended
                                                           December 31,                         December 31,
                                                   ---------------------------          ----------------------------
Operating Segments                                   2001               2000               2001               2000
                                                   --------          ---------          ---------          ---------
<S>                                                <C>               <C>                <C>                <C>
   Animal Health and Nutrition ............        $ 64,013          $  44,854          $ 123,366          $  79,484
   Industrial Chemicals ...................          21,868             24,432             42,879             46,505
   Distribution ...........................           8,825             10,888             18,814             22,287
   All Other ..............................           9,073             10,472             19,020             20,920
   Elimination of intersegment sales ......          (5,792)            (7,302)           (11,433)           (13,057)
                                                   --------          ---------          ---------          ---------
                                                   $ 97,987          $  83,344          $ 192,646          $ 156,139
                                                   ========          =========          =========          =========

<CAPTION>
                                                                       Operating Income (Loss)
                                                                             ($000's)
                                                        Three Months Ended                    Six Months Ended
                                                           December 31,                         December 31,
                                                   ---------------------------          ----------------------------
Operating Segments                                   2001               2000               2001               2000
                                                   --------          ---------          ---------          ---------
<S>                                                <C>               <C>                <C>                <C>
   Animal Health and Nutrition ............        $ 10,259          $   3,446          $  17,624          $   6,493
   Industrial Chemicals ...................          (2,542)              (845)            (6,742)              (400)
   Distribution ...........................             751                927              1,589              1,845
   All Other ..............................            (229)            (1,965)              (110)            (3,639)
   Corporate expenses and eliminations ....          (3,625)            (3,955)            (6,338)            (5,281)
                                                   --------          ---------          ---------          ---------
                                                   $  4,614          $  (2,392)         $   6,023          $    (982)
                                                   ========          =========          =========          =========
</TABLE>

Comparison of Three Months Ended December 31, 2001 and 2000

      Net Sales. Net sales increased by $14.6 million,  or 18%, to $98.0 million
in the three months ended  December 31, 2001,  as compared to the 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 $19.2
million,  or 43%, to $64.0 million in the three months ended  December 31, 2001,
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 $.4  million  below the prior year  primarily  due to
discontinuing  sales of vitamin  exports and lower average selling prices by the
Company's Koffolk Israel facility due to the adverse business climate in Israel.
Higher  unit  volumes in the U.S.  were  offset in part by lower  average  sales
prices.

      The Industrial Chemicals segment's net sales decreased by $2.6 million, or
10%, to $21.9  million in the three months ended  December 31, 2001, as compared
to the prior period. Sales by the Company's Phibro-Tech  subsidiary were down by
$2.0  million  due to volume  declines  related  to the  printed  circuit  board
industry.  Higher unit volume sales at the Company's Odda  subsidiary  increased
revenues by $.3 million and  partially  offset the decrease.  Other  declines in
intersegment sales aggregated $.9 million.

      Net sales for the Distribution  segment decreased by $2.1 million, or 19%,
to $8.8 million in 2001, as compared to the prior period. The net sales decrease
was due to lower unit volumes.  Significant  declines in the segment's  cyanide,
carbide and dicyandiamide products occurred during the first and second quarters
of this fiscal year as compared to the prior year periods.

      Net sales for the All Other segment decreased by $1.4 million,  or 13%, to
$9.1  million in 2001,  as  compared  to the prior  period.  Approximately  $2.1
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 $.7 million  above the prior year.  The  Company's  fly ash
business  increased by $.3 million primarily due to increased volume as a result
of  additional  contracts  with  utilities in Missouri and Michigan and improved
average selling prices. Revenues at the Company's Wychem, U.K. facility improved
by $.4 million due to an increase in specialized lab projects and formulations.


                                       22
<PAGE>

      Gross Profit.  Gross profit  increased by $9.3  million,  or 42%, to $31.3
million in the three  months ended  December 31, 2001,  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.  Purchase accounting
adjustments relating to inventory acquired in the PAH acquisition resulted in an
increase  to cost of goods  sold of $.9 and $1.1  million  for the three  months
ended December 31, 2001 and 2000,  respectively.  The remainder of the inventory
purchase adjustment, approximately $.3 million, will be charged to cost of goods
sold during the  balance of the fiscal  year.  Margin  declines in the All Other
segment  were 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.

      Selling,  General and  Administrative  Expenses.  Costs  increased by $2.2
million to $26.7 million in 2001, as compared to the prior period. Excluding PAH
and  Agtrol,  costs  were  up  approximately  $.9  million  principally  due  to
management advisory fees to Palladium Equity Partners, LLC ($.4 million), higher
warehousing and  distribution  costs  primarily  relating to sales growth in the
Company's  fly  ash  business  ($.8  million),  environmental  remediation  ($.3
million),  and other general spending increases ($.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.

      Operating  Income.  Operating  income  increased  by $7.0  million to $4.6
million  in 2001,  as  compared  to the prior  period.  The  Animal  Health  and
Nutrition  segment  increased  due  to the  inclusion  of PAH  for  the  period.
Operating income 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  PhibroTech'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 slightly  below the prior year  primarily due to sales
volume declines.

      Interest  Expense,  Net.  Costs  increased  by $.5  million or 14% to $4.4
million for the three  months  ended  December 31, 2001 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  losses  of the  Company's  foreign  subsidiaries  and the
quarter over quarter change reflects the strengthening of currencies against the
U.S. dollar in 2001  (principally  Norwegian  Kroner) versus  weakening of these
currencies in the December 2000 quarter.

      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
subsidiaries'  individual  income or loss position to the statutory tax rates in
each country.

Comparison of Six Months Ended December 31, 2001 and 2000

      Net Sales. Net sales increased by $36.5 million, or 23%, to $192.6 million
in the six months ended  December  31,  2001,  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 $43.9
million, or 55%, to $123.4 million in the six months ended December 31, 2001, 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 $.6 million  above the prior year  primarily  due to higher
unit volume sales of vitamin, mineral and other pre-mix products at our 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 facility.

      The Industrial Chemicals segment's net sales decreased by $3.6 million, or
8%, to $42.9  million in the six months ended  December 31, 2001, as compared to
the prior period.  Sales by the Company's  Phibro-Tech  subsidiary  were down by
$3.7  million  due to volume  declines  related  to the  printed  circuit  board
industry.  Higher unit volume sales at the Company's Odda  subsidiary  increased
revenues  by $2.0  million  and  partially  offset  the  decrease.  Declines  in
intersegment  sales  aggregated  $1.4  million.  Lower  unit  sales  of iron and
manganese oxides accounted for the balance of the change.

      Net sales for the Distribution  segment decreased by $3.5 million, or 16%,
to $18.8  million  in 2001,  as  compared  to the  prior  period.  The net sales
decrease was due to lower unit  volumes.  Significant  declines in the segment's
cyanide, carbide


                                       23
<PAGE>

and dicyandiamide products occurred during the first and second quarters of this
fiscal year as compared to the prior year periods.

      Net sales for the All Other segment  decreased by $1.9 million,  or 9%, to
$19.0  million in 2001,  as compared  to the prior  period.  Approximately  $4.5
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 $2.6 million  above the prior year.  The  Company's fly ash
business increased by $1.6 million primarily due to increased volume as a result
of  additional  contracts  with  utilities in Missouri and Michigan and improved
average selling prices. Revenues at the Company's Wychem, U.K. facility improved
by $1.0 million due to an increase in specialized lab projects and formulations.

      Gross Profit.  Gross profit  increased by $15.8 million,  or 37%, to $58.4
million in the six months  ended  December  31,  2001,  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.  Purchase accounting
adjustments relating to inventory acquired in the PAH acquisition resulted in an
increase to cost of goods sold of $2.9 and $1.1 million for the six months ended
December  31,  2001 and  2000,  respectively.  The  remainder  of the  inventory
purchase adjustment, approximately $.3 million, will be charged to cost of goods
sold during the  balance of the fiscal  year.  Margin  declines in the All Other
segment  were 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.

      Selling,  General and  Administrative  Expenses.  Costs  increased by $8.8
million to $52.3 million in 2001, as compared to the prior period. Excluding PAH
and  Agtrol,  costs  were  up  approximately  $3.5  million  principally  due to
management advisory fees to Palladium Equity Partners, LLC ($.9 million), higher
warehousing and distribution primarily relating to sales growth in the Company's
fly ash business ($1.3 million),  environmental  remediation ($.7 million),  and
other general  spending  increases ($1.9 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.

      Operating  Income.  Operating  income  increased  by $7.0  million to $6.0
million  in 2001,  as  compared  to the prior  period.  The  Animal  Health  and
Nutrition  segment  increased  due  to the  inclusion  of PAH  for  the  period.
Operating income 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  PhibroTech'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 slightly  below the prior year  primarily due to sales
volume declines.

      Interest  Expense,  Net.  Costs  increased  by $1.4 million or 18% to $9.0
million  for the six months  ended  December  31,  2001 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 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
subsidiaries'  individual  income or loss position to the statutory tax rates in
each country.

Liquidity and Capital Resources

      Net Cash Provided by Operating Activities. Cash provided by operations for
the six months ended  December 31, 2001 was $4.3  million.  The increase in cash
from the collection of receivables from our crop protection  business was offset
by 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 six months ended December 31, 2001 was $11.1 million. Capital
expenditures of $6.6 million were mostly for maintaining the Company's  existing
asset base and for  environmental,  health and safety  projects.  The  remainder
primarily   relates  to  contingent   purchase   price  payments  from  the  PAH
acquisition.


                                       24
<PAGE>

      Net Cash Provided by Financing Activities.  Net cash provided by financing
activities totaled $9.2 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 December 31, 2001,  working  capital  totaled $64.1 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 December 31,
2001, the amount of credit  extended under this agreement  totaled $38.1 million
and the Company had $8.3 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 $9.6 million.

      The Company  anticipates  spending  approximately  $13 million for capital
expenditures in fiscal 2002,  primarily to cover the Company's asset replacement
needs, improve processes,  and for environmental and regulatory compliance.  The
Company  believes  that cash  flows  from  operations  and  available  borrowing
arrangements  should 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.

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,


                                       25
<PAGE>

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.

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."


                                       26
<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.


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<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: February 12, 2002                    By: /s/ DAVID C. STORBECK
                                               ---------------------------------
                                               David C. Storbeck
                                               Chief Financial Officer


Date: February 12, 2002                    By: /S/ JOSEPH KATZENSTEIN
                                               ---------------------------------
                                               Joseph Katzenstein, Treasurer
                                               and Secretary


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