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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, 2002

                                       OR

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

             For the transition period from _________ to __________.

                        Commission File Number 333-64641
                    ----------------------------------------

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

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

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

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

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                Yes |X| *                           No |_|

Indicate  by check mark  whether  the  Registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act).

                Yes |   |                           No |X|

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


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

*     By virtue of Section 15(d) of the  Securities  Act of 1934, the Registrant
      is not subject to such filing  requirements  and not required to file this
      Quarterly  Report,  but has  provided  all such  reports as if so required
      during the preceding 12 months.

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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' Deficit..............................     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.....................    23
          Item 3. Quantitative and Qualitative Disclosures
                    About Market Risk.....................................    29

          Item 4. Control and Procedures..................................    29

PART II   OTHER INFORMATION


          Item 1. Legal Proceedings.......................................    30
          Item 5.  Other Information......................................    30
          Item 6. Exhibits and Reports on Form 8-K........................    30

SIGNATURES ...............................................................    31

CERTIFICATIONS ...........................................................    32


                                       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,  2002
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,
                                                            2002        2002
                                                        ------------  --------
                                     ASSETS

CURRENT ASSETS:
    Cash and cash equivalents                            $  13,788    $   6,419
    Trade receivables, less allowance for
      doubtful accounts of $1,812 at December 31,
      2002 and $1,893 at June 30, 2002                      59,483       65,161
    Other receivables                                        2,599        3,912
    Inventories                                             97,995       93,517
    Prepaid expenses and other current assets               14,190       15,965
                                                         ---------    ---------
        TOTAL CURRENT ASSETS                               188,055      184,974

PROPERTY, PLANT AND EQUIPMENT, net                          73,415       84,730
INTANGIBLES                                                 12,654       13,200
OTHER ASSETS                                                11,927       13,540
                                                         ---------    ---------
                                                         $ 286,051    $ 296,444
                                                         =========    =========

                     LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
    Cash overdraft                                       $   2,416    $   7,767
    Loans payable to banks                                  38,219       41,535
    Current portion of long-term debt                        8,449        8,851
    Accounts payable                                        48,993       42,280
    Accrued expenses and other current liabilities          37,156       34,080
                                                         ---------    ---------
        TOTAL CURRENT LIABILITIES                          135,233      134,513

LONG-TERM DEBT                                             128,418      136,641
OTHER LIABILITIES                                           39,873       29,877
                                                         ---------    ---------
        TOTAL LIABILITIES                                  303,524      301,031
                                                         ---------    ---------

COMMITMENTS AND CONTINGENCIES

REDEEMABLE SECURITIES:
    Series B and C preferred stock                          60,847       56,602
                                                         ---------    ---------

STOCKHOLDERS' DEFICIT:
    Series A preferred stock                                   521          521
    Common stock                                                 2            2
    Paid-in capital                                            740          740
    Retained earnings                                      (61,888)     (49,652)
    Accumulated other comprehensive (loss) income:
      (Loss) gain on derivative instruments                   (179)       1,062
      Cumulative currency translation adjustment           (17,516)     (13,862)
                                                         ---------    ---------
        TOTAL STOCKHOLDERS' DEFICIT                        (78,320)     (61,189)
                                                         ---------    ---------
                                                         $ 286,051    $ 296,444
                                                         =========    =========

       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,
                                                  2002          2001         2002        2001
                                                ---------    ---------    ---------    ---------
<S>                                             <C>          <C>          <C>          <C>
NET SALES                                       $  99,118    $  97,987    $ 196,159    $ 192,646

COST OF GOODS SOLD                                 76,985       73,692      152,222      147,886
                                                ---------    ---------    ---------    ---------

    GROSS PROFIT                                   22,133       24,295       43,937       44,760

SELLING, GENERAL AND ADMINISTRATIVE
    EXPENSES                                       18,523       19,681       35,969       38,737

ASSET WRITEDOWNS                                    7,781         --          7,781         --
                                                ---------    ---------    ---------    ---------

    OPERATING (LOSS) INCOME                        (4,171)       4,614          187        6,023

OTHER:

    Interest expense                                3,656        4,674        8,160        9,317

    Interest income                                    30         (233)         (96)        (303)

    Other (income) expense, net                    (1,442)       1,220       (1,752)       1,025
                                                ---------    ---------    ---------    ---------

    LOSS BEFORE INCOME TAXES                       (6,415)      (1,047)      (6,125)      (4,016)

PROVISION FOR INCOME TAXES                          1,420          652        1,867           48
                                                ---------    ---------    ---------    ---------

    NET LOSS                                       (7,835)      (1,699)      (7,992)      (4,064)

OTHER COMPREHENSIVE (LOSS) INCOME:
    (Loss) gain on derivative instruments            (158)         288       (1,241)         433
    Change in currency translation adjustment        (827)       2,354       (3,654)         788
                                                ---------    ---------    ---------    ---------

    COMPREHENSIVE INCOME (LOSS)                 $  (8,820)   $     943    $ (12,887)   $  (2,843)
                                                =========    =========    =========    =========
</TABLE>

       See notes to unaudited Condensed Consolidated Financial Statements.


                                       5
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES

     CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
                                  (Unaudited)
          For the Three Months and Six Months Ended December 31, 2002
                                 (In Thousands)
<TABLE>
<CAPTION>

                                   Preferred      Common
                                     Stock        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, 2002              $  521      $ 1     $ 1      $ 740   $(49,652)       $(12,800)    $(61,189)

 Dividends on Series B and C
    redeemable preferred stock                                             (2,123)                      (2,123)

 Loss on derivative
    instruments                                                                            (1,083)      (1,083)

 Foreign currency translation
    adjustment                                                                             (2,827)      (2,827)

 Net loss                                                                    (157)                        (157)
                                    ------      ---     ---      -----   --------        --------     --------
BALANCE, SEPTEMBER 30, 2002         $  521      $ 1     $ 1      $ 740   $(51,932)       $(16,710)    $(67,379)
                                    ======      ===     ===      =====   ========        ========     ========

 Dividends on Series B and C
    redeemable preferred stock                                             (2,121)                      (2,121)

 Loss on derivative
    instruments                                                                              (158)        (158)

 Foreign currency translation
    adjustment                                                                               (827)        (827)

 Net loss                                                                  (7,835)                      (7,835)
                                    ------      ---     ---      -----   --------        --------     --------
BALANCE, DECEMBER 31, 2002          $  521      $ 1     $ 1      $ 740   $(61,888)       $(17,695)    $(78,320)
                                    ======      ===     ===      =====   ========        ========     ========
</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, 2002 and 2001
                                 (In Thousands)

                                                              2002       2001
                                                           ---------    -------

OPERATING ACTIVITIES:
    Net loss                                               $ (7,992)   $ (4,064)
    Adjustments to reconcile net loss to
      net cash provided
        by operating activities:
      Depreciation and amortization                           8,025       8,044
      Asset writedowns                                        7,781        --
      Other                                                     308       1,666

      Changes in operating assets and liabilities:
        Accounts receivable                                   4,110      11,968
        Inventories                                          (4,861)    (13,927)
        Prepaid expenses and other current assets             1,554        (372)
        Other assets                                         (1,107)       (507)
        Accounts payable                                     17,988      (2,218)
        Accrued expenses and other current liabilities        1,636       3,714
                                                           --------    --------
        NET CASH PROVIDED BY OPERATING ACTIVITIES            27,442       4,304
                                                           --------    --------

INVESTING ACTIVITIES:
    Capital expenditures                                     (7,351)     (6,634)
    Acquisition of a business                                  --        (4,422)
    Proceeds from sales of assets                             5,956        --
    Other investing                                            --           (38)
                                                           --------    --------
        NET CASH USED IN INVESTING ACTIVITIES                (1,395)    (11,094)
                                                           --------    --------

FINANCING ACTIVITIES:
    Cash overdraft                                           (5,351)        751
    Net increase (decrease) in short-term debt               (3,426)     10,402
    Proceeds from long-term debt                              1,660       2,042
    Payments of long-term debt                              (11,752)     (3,963)
                                                           --------    --------
        NET CASH (USED IN) PROVIDED BY FINANCING
          ACTIVITIES                                        (18,869)      9,232
                                                           --------    --------

EFFECT OF EXCHANGE RATE CHANGES ON CASH                         191          29
                                                           --------    --------

        NET INCREASE IN CASH AND CASH EQUIVALENTS             7,369       2,471

CASH AND CASH EQUIVALENTS at beginning of period              6,419      14,845
                                                           --------    --------
        CASH AND CASH EQUIVALENTS at end of period         $ 13,788    $ 17,316
                                                           ========    ========

       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 Philipp Brothers  Chemicals,  Inc. (the "Company"),  the
accompanying unaudited condensed consolidated  financials statements contain all
adjustments  (consisting only of normal recurring adjustments,  except for asset
writedowns)  necessary to present  fairly its financial  position as of December
31, 2002 and its results of  operations  and cash flows for the three months and
six months ended December 31, 2002 and 2001.

      The condensed  consolidated  balance sheet as of June 30, 2002 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, 2002.

      Certain  prior year  amounts in the  accompanying  condensed  consolidated
financial  statements and related notes have been reclassified to conform to the
fiscal 2003 presentation.

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

      Effective  July 1,  2002  the  Company  adopted  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 requires
that the purchase  method of  accounting  be used for all business  combinations
initiated after June 30, 2001. SFAS No. 142  establishes  specific  criteria for
recognition  of  intangible  assets  separately  from  goodwill.  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 has no  goodwill,  but has  assessed the useful lives of its
intangible assets. The adoption of SFAS No. 141 and No. 142 did not result in an
impact on the Company's financial statements.

      Effective  July  1,  2002  the  Company  adopted  Statement  of  Financial
Accounting  Standards  No. 143  "Accounting  for Asset  Retirement  Obligations"
("SFAS  No.  143").  SFAS  No.  143  established  accounting  standards  for the
recognition and measurement of an asset retirement obligation and its associated
asset retirement cost. The Company has reviewed its tangible  long-lived  assets
for associated asset retirement obligations ("AROs") in accordance with SFAS No.
143. The Company has not recognized  liabilities  associated with AROs since the
associated assets have indeterminate useful lives.

      Effective  July  1,  2002  the  Company  adopted  Statement  of  Financial
Accounting Standard No. 144 "Accounting for Impairment or Disposal of Long-Lived
Assets" ("SFAS No. 144"). SFAS No. 144 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" ("SFAS No. 121"),
and the  development  of a  single  accounting  model,  based  on the  framework
established  in SFAS No. 121, for  long-lived  assets to be disposed of by sale,
whether previously held and used or newly acquired. The adoption of SFAS No. 144
did not result in an impact on the Company's financial statements.

      Effective  July  1,  2002  the  Company  adopted  Statement  of  Financial
Accounting  Standards No. 145,  "Rescission of SFAS Nos. 4, 44 and 64, Amendment
of SFAS 13, and  Technical  Corrections"  ("SFAS No.  145").  Under the  current
rules,  SFAS No. 4, "Reporting  Gains and Losses from  Extinguishment  of Debt,"
requires that all gains and losses from the extinguishment of debt be classified
as extraordinary on the Company's consolidated  statement of operations,  net of
applicable  taxes.  SFAS  No.  145  rescinds  the  automatic  classification  as
extraordinary and requires that the Company evaluate whether the gains or losses
qualify as  extraordinary  under  Accounting  Principles  Board  Opinion No. 30,
"Reporting  the Results of  Operations-  Reporting  the Effects of Disposal of a
Segment of a Business,  and  Extraordinary,  Unusual and Infrequently  Occurring
Events  and  Transactions."  The  adoption  of SFAS No. 145 did not result in an
impact on the Company's financial statements.


                                       8
<PAGE>

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

      In June 2002, the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standards No. 146,  "Accounting for Costs Associated with
Exit or Disposal  Activities"  ("SFAS No.  146").  SFAS No. 146 requires  that a
liability for a cost associated with an exit or disposal  activity be recognized
and measured  initially at fair value when the liability is incurred rather than
at the date of a commitment to an exit or disposal  plan.  Costs covered by SFAS
No. 146 include lease  termination  costs and certain  employee  severance costs
that are associated with a restructuring,  discontinued operation, plant closing
or other  exit or  disposal  activity.  SFAS No.  146 is  effective  for exit or
disposal activities that are initiated after December 31, 2002. The Company does
not  expect  the  adoption  of SFAS No.  146 to have a  material  impact  on the
financial statements.

      In November 2002,  the Financial  Accounting  Standards  Board issued FASB
Interpretation No. 45, "Guarantor's  Accounting and Disclosure  Requirements for
Guarantees,  Including Indirect  Guarantees of Indebtedness of Others" ("FIN No.
45"). FIN No. 45 elaborates on the  disclosures to be made by a guarantor in its
interim and annual  financial  statements  about its  obligations  under certain
guarantees that it has issued. It also clarifies that a guarantor is required to
recognize,  at the  inception of a guarantee,  a liability for the fair value of
the obligation undertaken in issuing the guarantee.  The disclosure requirements
of FIN No. 45 are  required for  financial  statements  of periods  ending after
December  15,  2002.  The  initial  measurement  provisions  of FIN  No.  45 are
applicable  on a  prospective  basis for  guarantees  issued or  modified  after
December  31,  2002.  The Company  does not expect the adoption of FIN No. 45 to
have a significant impact on the financial statements.

      In January 2003,  the  Financial  Accounting  Standards  Board issued FASB
Interpretation  No. 46,  "Consolidation of Variable Interest Entities" ("FIN No.
46").  FIN No. 46 requires  consolidation  by business  enterprises  of variable
interest entities (commonly referred to as special purpose entities), which meet
certain  characteristics.  FIN No. 46  applies  to  variable  interest  entities
created  after  January 31, 2003 and to variable  interest  entities in which an
enterprise  obtains an interest  after  January 31,  2003.  The Company does not
expect the adoption of FIN No. 46 to have an impact on the financial statements.

2. Reclassifications

      Freight and warehousing expenses of $6,598,  $6,994, $6,428 and $9,245 for
the three months ended September 30, 2001, December 31, 2001, March 31, 2002 and
June 30, 2002,  respectively,  are being reclassified from selling,  general and
administrative  expenses  to  cost of  goods  sold  on the  Company's  condensed
consolidated   statements   of  operations   and   comprehensive   income.   The
reclassification had no impact on net sales, operating income (loss) or net loss
for each of the periods  presented below.  Results for the prior fiscal year are
as follows:

<TABLE>
<CAPTION>
                           3 Months      3 Months      3 Months    3 Months     12 Months
                            Ended         Ended          Ended       Ended        Ended
                        September 30,  December 31,    March 31,    June 30,    June 30,
                            2001           2001          2002         2002        2002
                        -------------  ------------    ---------    --------    --------
<S>                       <C>            <C>           <C>         <C>          <C>
Net Sales                 $94,659        $97,987       $96,310     $ 99,857     $388,813
Gross Profit               20,465         24,295        16,539        5,167       66,466
Operating Income (Loss)     1,409          4,614        (3,729)     (23,958)     (21,664)
Net (Loss)                 (2,365)        (1,699)       (9,072)     (38,634)     (51,770)
</TABLE>


                                       9
<PAGE>

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

3. Risks and Uncertainties

      As of December 31, 2002, the Company was in compliance  with the financial
covenants  included in its amended senior credit  facility  ("credit  facility")
with its lending banks,  for which PNC Bank serves as agent. The credit facility
was amended in October 2002 to: waive  noncompliance with financial covenants as
of June 30, 2002; amend financial covenants prospectively until maturity;  amend
the  borrowing  base  formula and also  reduce  maximum  availability  under the
revolving credit portion of the credit facility from $70 million to $55 million;
limit  borrowings  under the capital  expenditure line of the credit facility to
the outstanding balance as of the amendment date; and increase the interest rate
to 1.5% to 1.75% per annum  over the base rate (as  defined  in the  agreement).
Management  believes  that the  reduced  maximum  availability  and the  revised
borrowing base formula under the revolving credit portion of the credit facility
will not adversely  affect the Company's  ability to meet its cash  requirements
through the remaining term of the credit facility (see below).

      The  Company's  ability to fund its operating  plan relies upon  continued
availability  of the credit  facility  which,  in turn,  requires the Company to
maintain compliance with the amended financial  covenants.  The Company believes
that it will be able to comply with the terms of the amended  covenants based on
its forecasted  operating  plan. In the event of adverse  operating  results and
resultant  violation of the covenants  through the remaining  term of the credit
facility  (see below),  the Company  cannot be certain it will be able to obtain
waivers or amendments on favorable terms, if at all.

      The Company's credit facility and its note payable to Pfizer,  Inc. mature
in  November  2003  and  March  2004,  respectively.  The  Company  may not have
sufficient  cash  resources  to repay this debt and  management  has  undertaken
actions to improve the Company's operating  performance and overall liquidity in
order to reduce  debt  levels and allow for  ultimate  refinancing  of this debt
prior to their  maturities.  These actions  include cost  reduction  activities,
working  capital  improvement  programs,  shutdown of  unprofitable  operations,
deferral and forbearance of certain  obligations to Pfizer, and possible sale of
certain business operations and other assets.

      The Company  intends to  refinance  its current  credit  facility  and the
Pfizer note payable.  The ability to refinance such debt on terms  acceptable to
the Company is, among other things, dependent upon the success of the management
actions  referred to above.  There can be no assurance  that the Company will be
able to refinance such debt on terms acceptable to the Company. The inability to
refinance  the debt on terms  acceptable  to the  Company  would have a material
adverse impact on the Company's financial position,  results of operations,  and
cash flow.

      In October 2002, the Company entered into an agreement with Pfizer whereby
Pfizer agreed to defer until March 1, 2004, without interest,  unpaid contingent
purchase price amounts existing at May 31, 2002 and to waive contingent purchase
price payments on future net revenues from June 1, 2002 through March 1, 2004.

      In October 2002,  Odda entered into an agreement with its Norwegian  banks
to restructure its loans and to obtain waivers for its  non-compliance  with the
financial  covenants.  The  agreement  establishes a periodic  payment  schedule
through  November 30, 2003. The Company is the guarantor of certain  portions of
this debt.

      The Company has  completed  the sale of certain  fixed  assets of Odda and
certain assets of its Phibro-tech  etchant business during the second quarter of
fiscal  year 2003 for  aggregate  proceeds  of $5,956.  The  Company is actively
pursuing  the sale of certain  business  operations  to  generate  cash for debt
repayment.  However, there can be no assurance that such sales will be completed
on terms acceptable to the Company, and there are no disposal transactions which
the Company considers probable at December 31, 2002. Disposal transactions could
result in recording losses for financial statement purposes.

      The issue of the potential for increased  bacterial  resistance to certain
antibiotics used in certain food-producing animals is the subject of discussions
on  a  worldwide  basis  and,  in  certain  instances,  has  led  to  government
restrictions on the use of antibiotics in these food-producing animals. The sale
of feed additives containing  antibiotics is a material portion of the Company's
business. Should regulatory or other developments result in further restrictions
on the sale of such  products,  it could have a material  adverse  impact on the
Company's financial position, results of operations and cash flows.

     On  February  14,  2003,  the Company  was  advised  that the Joint  Expert
Committee on Food  Additives of the Food and  Agricultural  Organization  of the
United Nations and the World Health Organization  ("JECFA"), at its meeting held
February  6-12,  2003,  had  determined to withdraw the maximum  residue  limits
("MRL's")  for  Carbadox.  It is not known at this  time  whether  any  national
regulatory  authorities  will adopt this  determination,  which could  result in
reduced overall sales of the product.  Carbadox is a significant product for the
Company's Phibro Animal Health business.  The Company is presently assessing the
impact of this determination on the Company.


                                       10
<PAGE>

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

4. Inventories

      Inventories are valued at the lower of cost or market. Cost is determined
principally under the first-in, first-out (FIFO) and average cost methods;
however, certain subsidiaries of the Company use the last-in, first-out (LIFO)
method for valuing inventories. Obsolete or unsaleable inventory is reflected at
its estimated net realizable value. Inventory costs include materials, direct
labor and manufacturing overhead.

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

                                       December 31,         June 30,
                                           2002               2002
                                       ------------         --------
      Raw Materials                      $21,011            $23,524
      Work-in-process                      1,785              2,098
      Finished goods                      75,199             67,895
                                         -------            -------
      Total inventory                    $97,995            $93,517
                                         =======            =======

5. Asset Writedowns and Restructuring

      The Company's Odda, Norway operation has suffered  operating losses during
fiscal  years  2002 and  2001.  Odda is  included  in the  Company's  Industrial
Chemicals segment.

      In November 2002, the Company  announced a temporary  shutdown of the Odda
operation  due to continuing  operating  losses,  higher than planned  operating
costs, and delays in the market acceptance of calcium oxide, a by-product of the
manufacturing  process  of  its  primary  product,  dicyandiamide.  The  Company
continues  to assess  various  alternatives  for its Odda  operation,  including
complete shutdown.

      The Company has reevaluated the carrying value of Odda's long-lived assets
(consisting  of  property,  plant and  equipment  and certain  other  assets) at
December  31,  2002,  based upon its estimate of future net cash flows under the
possible  scenarios being considered by management.  As a result,  an impairment
charge of $7,781  has been  recorded  in the  Company's  condensed  consolidated
statements of operations and  comprehensive  income for the three months and six
months ended December 31, 2002 to reduce the carrying value of Odda's long-lived
assets to their estimated salvage values.

      The Company  continues to carry a  cumulative  translation  adjustment  of
$6,314 related to Odda's operations.  Pending management's  ultimate decision on
the future of Odda, such amount may be charged to operating results.

      Operating results for Odda are as follows:

     Three Months Ended December 31,         2002              2001
                                           --------          ---------
     Total revenues                        $  3,069          $ 8,517
     Operating loss                        $(10,702)         $  (970)
     Other income (expense)                $    814          $  (420)
     Depreciation                          $    325          $   728

     Six Months Ended December 31,           2002              2001
                                           --------          ---------
     Total revenues                        $  7,781          $ 15,964
     Operating loss                        $(12,904)         $ (3,232)
     Other income (expense)                $  2,211          $    802
     Depreciation                          $    643          $  1,454


                                       11
<PAGE>

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

      During the third quarter of fiscal year 2002 the Company  decided to cease
production  of two of Odda's three  primary  products as of June 30,  2002,  and
focus its resources on the remaining  product line. During the fourth quarter of
fiscal  year  2002,  due to  further  deterioration  of the Odda  business,  the
Company's review of certain long-lived assets of Odda for impairment,  under the
scenarios  of  continuing  production  of Odda's  remaining  primary  product or
complete  shutdown of the Odda operation,  resulted in the Company  recording an
impairment charge of $5,133.

      During  fiscal 2002 Odda  incurred  restructuring  charges and  terminated
approximately  120  employees as of June 30,  2002.  During the six months ended
December 31, 2002 Odda paid $32 of these  restructuring  charges.  An accrual of
$847 for  restructuring  costs still to be paid at December  31, 2002 remains on
the Company's condensed consolidated balance sheets at December 31, 2002.

6. Contingencies

(a) Litigation:

      On or about April 17, 1997, the Company and CP Chemicals, Inc. ("CP") were
served with a complaint  filed by Chevron USA,  Inc.  ("Chevron")  in the United
States  District Court for the District of New Jersey,  alleging that operations
of CP at its Sewaren plant affected adjoining property owned by Chevron and that
the Company,  as the parent of CP, is also responsible to Chevron. In July 2002,
a phased  settlement  agreement  was reached under which the Company and another
defendant  will,  subject to  certain  conditions,  take title to the  property,
subject  to a  period  of  due  diligence  investigation  of the  property.  The
Company's  portion of the settlement for past costs and expenses is $495 and was
included in selling,  general and  administrative  expenses in the June 30, 2002
statement of operations and comprehensive income, and was paid in July 2002. The
Company and the other defendant  will, if the sale becomes final,  share equally
in the costs of  remediation.  While the costs cannot be estimated at this time,
the Company  believes  the costs will not be material and  insurance  recoveries
will be available to offset a portion of those costs.

      The Company's  Phibro-Tech  subsidiary  was named in 1993 as a potentially
responsible  party  ("PRP") in  connection  with an action  commenced  under the
federal Comprehensive  Environmental Response,  Compensation,  and Liability Act
("CERCLA") by the United  States  Environmental  Protection  Agency (the "EPA"),
involving a former third-party  fertilizer  manufacturing site in Jericho, South
Carolina.  An agreement  has been reached  under which the Company has agreed to
contribute  up to $900 of which  $500 was paid  during  fiscal  year  2002.  The
Company has accrued its best  estimate of any future costs under the  agreement.
Partial recovery from insurance and other sources is expected.

      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  liabilities  and  governmental   regulation  concerning
environmental  and other  matters.  Certain  of these  actions  seek  damages in
various amounts.  All such claims are being contested,  and management  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  that 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  accrued for closure  were $109 as of December  31,
2002.


                                       12
<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.

      On or about  April 5, 2002,  the  Company  was  served,  as a  potentially
responsible   party,  with  an  information   request  from  the  United  States
Environmental  Protection Agency (the "EPA") relating to a third-party superfund
site in Rhode Island. The Company is investigating the matter,  which relates to
events in the 1950's and 1960's.  The Company does not believe there will be any
material costs or liabilities.

      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, management estimates the cost of further
investigation  and remediation of identified  soil and  groundwater  problems at
operating sites, closed sites and third-party sites to be approximately  $1,532,
which is included in current and long-term  liabilities in the December 31, 2002
condensed consolidated balance sheets.

7. Business Segments

      The Company has four  reportable  segments--Animal  Health and  Nutrition,
Industrial Chemicals, Distribution, and All Other. 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.  Certain of these products 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  primarily by
third  parties.  The  Company's  All Other  segment  manufactures  and markets a
variety of specialty custom chemicals, and copper-based  fungicides,  as well as
providing management and recycling of coal combustion residues.

      Segment data for the three  months and six months ended  December 31, 2002
and 2001 is as follows:

<TABLE>
<CAPTION>


                                           Animal                                              Corporate
                                          Health &    Industrial                      All      Expenses &
Three Months Ended December 31, 2002      Nutrition    Chemicals     Distribution    Other     Adjustments    Total
                                          ---------    ---------     ------------    -----     -----------    -----
<S>                                       <C>           <C>             <C>          <C>          <C>         <C>
Revenues    -external customers           $66,650       $ 13,913        $8,894       $9,661      $    --      $99,118
            -intersegment                     718          2,538           499            3       (3,758)          --
                                          -------       --------        ------       ------      -------      -------
Total revenues                            $67,368       $ 16,451        $9,393       $9,664      $(3,758)     $99,118
                                          =======       ========        ======       ======      =======      =======
Operating income/(loss)                   $11,457       $(11,616)       $  824       $ (703)     $(4,133)     $(4,171)
                                          =======       ========        ======       ======      =======      =======

                                           Animal                                              Corporate
                                          Health &    Industrial                       All     Expenses &
Three Months Ended December 31, 2001      Nutrition    Chemicals     Distribution     Other    Adjustments     Total
                                          ---------    ---------     ------------    -----     -----------    -----
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
                                          =======       ========        ======       ======      =======      =======
</TABLE>


                                       13
<PAGE>

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

                                           Animal                                              Corporate
                                          Health &    Industrial                       All     Expenses &
Six Months Ended December 31, 2002        Nutrition    Chemicals     Distribution     Other    Adjustments     Total
                                          ---------    ---------     ------------     -----    -----------     -----
<S>                                       <C>          <C>             <C>           <C>         <C>         <C>
Revenues    -external customers           $126,626     $ 31,235        $18,467       $19,831     $    --     $196,159
            -intersegment                    1,645        5,431            850             7      (7,933)          --
                                          --------     --------        -------       -------     -------     --------
Total revenues                            $128,271     $ 36,666        $19,317       $19,838     $(7,933)    $196,159
                                          ========     ========        =======       =======     =======     ========
Operating income/(loss)                   $ 21,159     $(13,726)       $ 1,567       $  (618)    $(8,195)    $    187
                                          ========     ========        =======       =======     =======     ========

                                           Animal                                              Corporate
                                          Health &    Industrial                       All     Expenses &
Six Months Ended December 31, 2001        Nutrition    Chemicals     Distribution     Other    Adjustments     Total
                                          ---------    ---------     ------------     -----    -----------     -----
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
                                          ========       =======       =======       =======    ========     ========

                                           Animal
                                          Health &    Industrial                       All    Corporate &
Identifiable Assets                       Nutrition    Chemicals   Distribution       Other    Adjustments     Total
                                          ---------    ---------   ------------       -----    -----------     -----
At June 30, 2002                          $186,118       $57,419       $11,826       $30,688     $10,393     $296,444
At December 31, 2002                      $195,819       $35,347       $12,345       $28,030     $14,510     $286,051
</TABLE>

8. Consolidating Financial Statements

      In June 1998, the Company issued $100 million in 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   consolidating   financial  data  summarizes  the  assets,
liabilities  and results of operations and cash flows of the Parent,  Guarantors
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,  Phibrochem,  Inc.,  Phibro Chemicals,  Inc.,  Western Magnesium Corp.,
Phibro Animal  Health  Holdings,  Inc. and Phibro  Animal Health U.S.,  Inc. All
Guarantor and 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  management  has  determined  that  such  financial
statements would not be material to investors.


                                       14
<PAGE>

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

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

Cash and cash equivalents                      $     131    $   2,005      $  11,652                   $  13,788
Trade receivables                                  2,722       26,070         30,691                      59,483
Other receivables                                    583          615          1,401                       2,599
Inventory                                          3,430       53,087         41,478                      97,995
Prepaid expenses and other                         1,319        1,075         11,796                      14,190
                                               ---------    ---------      ---------      ---------    ---------
               Total current assets                8,185       82,852         97,018             --      188,055
                                               ---------    ---------      ---------      ---------    ---------

Property, plant & equipment, net                     266       27,924         45,225                      73,415

Intangibles                                           32        1,375         11,247                      12,654
Investment in subsidiaries                        69,299        3,621             --        (72,920)          --
Intercompany                                      63,395      (33,967)         1,273        (30,701)          --
Other assets                                       9,835        1,417            675                      11,927
                                               ---------    ---------      ---------      ---------    ---------
                   Total assets                $ 151,012    $  83,222      $ 155,438      $(103,621)   $ 286,051
                                               =========    =========      =========      =========    =========

      Liabilities and Stockholders' Deficit

Current Liabilities:
Cash overdraft                                 $   1,055    $   1,361      $      --                   $   2,416
Loan payable to banks                             33,375           --          4,844                      38,219
Current portion of long term debt                  4,011          469          3,969                       8,449
Accounts payable                                   1,746       29,043         18,204                      48,993
Accrued expenses and other                         5,641        6,691         24,824                      37,156
                                               ---------    ---------      ---------      ---------    ---------
Total current liabilities                         45,828       37,564         51,841             --      135,233

Long term debt                                   120,110      (71,563)       110,572        (30,701)     128,418

Other liabilities                                  2,547       16,989         20,337                      39,873
                                               ---------    ---------      ---------      ---------    ---------
Total liabilities                                168,485      (17,010)       182,750        (30,701)     303,524
                                               ---------    ---------      ---------      ---------    ---------
Redeemable securities:
Series B and C preferred stock                    60,847           --             --                      60,847
                                               ---------    ---------      ---------      ---------    ---------
              Stockholders' Deficit
Series A preferred stock                             521           --             --                         521
Common stock                                           2           32             --            (32)           2
Paid in capital                                      740      110,885          8,166       (119,051)         740
Retained earnings                                (61,888)     (10,524)       (17,945)        28,469      (61,888)
Accumulated other comprehensive
 (loss) income-
  loss on derivative instruments                    (179)        (179)            --            179         (179)
  cumulative currency translation adjustment     (17,516)          18        (17,533)        17,515      (17,516)
                                               ---------    ---------      ---------      ---------    ---------
           Total stockholders' deficit           (78,320)     100,232        (27,312)       (72,920)     (78,320)
                                               ---------    ---------      ---------      ---------    ---------
          Total liabilities and deficit        $ 151,012    $  83,222      $ 155,438      $(103,621)   $ 286,051
                                               =========    =========      =========      =========    =========
</TABLE>


                                       15
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
           CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
                  For The Three Months Ended December 31, 2002
                                 (In Thousands)
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------
                                                                             Foreign
                                                          U.S. Guarantor  Subsidiaries  Consolidation Consolidated
                                                 Parent    Subsidiaries  Non-Guarantors  Adjustments    Balance
------------------------------------------------------------------------------------------------------------------
<S>                                            <C>           <C>           <C>           <C>           <C>
Net sales                                      $  6,035      $ 58,799      $ 36,795      $ (2,511)     $ 99,118

Cost of goods sold                                4,753        46,674        28,069        (2,511)       76,985
                                               --------      --------      --------      --------      --------
       Gross profit                               1,282        12,125         8,726            --        22,133

Selling, general, and administrative
  expenses                                        5,396         7,447         5,680                      18,523

Asset writedowns                                     --            --         7,781                       7,781
                                               --------      --------      --------      --------      --------
       Operating (loss) income                   (4,114)        4,678        (4,735)           --        (4,171)

Interest expense                                    286           675         2,695                       3,656
Interest (income)                                    --            --            30                          30
Other expense (income)                              212          (710)         (944)                     (1,442)

Intercompany allocation                          (4,473)        4,167           306                          --

Loss (profit) relating to subsidiaries            7,540            --            --        (7,540)           --
                                               --------      --------      --------      --------      --------
       (Loss) income before income taxes         (7,679)          546        (6,822)        7,540        (6,415)

Provision for income taxes                          156           149         1,115                       1,420
                                               --------      --------      --------      --------      --------
       Net (loss) income                       $ (7,835)     $    397      $ (7,937)     $  7,540      $ (7,835)
                                               ========      ========      ========      ========      ========
</TABLE>


                                       16
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
           CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
                   For The Six Months Ended December 31, 2002
                                 (In Thousands)
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------
                                                                             Foreign
                                                          U.S. Guarantor  Subsidiaries  Consolidation Consolidated
                                                 Parent    Subsidiaries  Non-Guarantors  Adjustments    Balance
------------------------------------------------------------------------------------------------------------------
<S>                                             <C>          <C>             <C>          <C>          <C>
Net sales                                       $13,143      $115,016        $73,275      $(5,275)     $196,159

Cost of goods sold                               10,540        89,487         57,470       (5,275)      152,222
                                                -------      --------        -------      -------      --------
       Gross profit                               2,603        25,529         15,805           --        43,937

Selling, general, and administrative
  expenses                                        9,754        14,921         11,294                     35,969

Asset writedowns
                                                                   --          7,781                      7,781
                                                -------      --------        -------      -------      --------
       Operating (loss) income                   (7,151)       10,608         (3,270)          --           187

Interest expense                                    672         1,487          6,001                      8,160
Interest income                                      (1)           --            (95)                       (96)
Other expense (income)                              309          (571)        (1,490)                    (1,752)

Intercompany allocation                          (8,641)        8,335            306                         --

Loss (profit) relating to subsidiaries            8,346            --             --       (8,346)           --
                                                -------      --------        -------      -------      --------
       (Loss) income before income taxes         (7,836)        1,357         (7,992)       8,346        (6,125)

Provision for income taxes                          156           226          1,485                      1,867
                                                -------      --------        -------      -------      --------

       Net (loss) income                        $(7,992)     $  1,131        $(9,477)     $ 8,346      $ (7,992)
                                                =======      ========        =======      =======      ========
</TABLE>


                                       17
<PAGE>

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

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------
                                                                             Foreign
                                                          U.S. Guarantor  Subsidiaries  Consolidation Consolidated
                                                 Parent    Subsidiaries  Non-Guarantors  Adjustments    Balance
------------------------------------------------------------------------------------------------------------------
<S>                                            <C>           <C>           <C>            <C>          <C>
Operating activities:
Net (loss) income                              $ (7,992)     $  1,131      $ (9,477)      $  8,346     $ (7,992)
Adjustments to reconcile net (loss)
 income to cash provided by
 operating activities:
  Depreciation and amortization                     750         2,859         4,416                       8,025
  Asset writedowns                                   --            --         7,781                       7,781
  Other                                             189           (75)          194                         308

Changes in operating assets and liabilities:
  Accounts receivable                               383         3,301           426                       4,110
  Inventory                                        (723)       (8,617)        4,479                      (4,861)
  Prepaid expenses and other                      1,500         1,152        (1,098)                      1,554
  Other assets                                     (849)         (145)         (113)                     (1,107)
  Intercompany                                   15,913        (7,489)          (78)        (8,346)          --
  Accounts payable                                  722        16,004         1,262                      17,988
  Accrued expenses and other                     (1,740)       (2,212)        5,588                       1,636
                                               --------      --------      --------       --------     --------
Net cash provided by
 operating activities                             8,153         5,909        13,380             --       27,442
                                               --------      --------      --------       --------     --------
Investing activities:
  Capital expenditures                               --        (2,606)       (4,745)                     (7,351)
  Proceeds from sales of assets                      --         2,472         3,484                       5,956
  Other investing                                    --            --            --                          --
                                               --------      --------      --------       --------     --------
Net cash used in
 investing activities                                --          (134)       (1,261)            --       (1,395)
                                               --------      --------      --------       --------     --------
Financing activities:
  Cash overdraft                                    479        (4,141)       (1,689)                     (5,351)
  Net decrease in short term debt                (4,616)           --         1,190                      (3,426)
  Proceeds from long term debt                       --            --         1,660                       1,660
  Payments of long term debt                     (4,342)         (262)       (7,148)                    (11,752)
                                               --------      --------      --------       --------     --------
Net cash used in
 financing activities                            (8,479)       (4,403)       (5,987)            --      (18,869)
                                               --------      --------      --------       --------     --------
Effect of exchange rate changes
 on cash                                             --           (19)          210                         191
                                               --------      --------      --------       --------     --------
Net (decrease) increase in cash and
 cash equivalents                                  (326)        1,353         6,342             --        7,369

Cash and cash equivalents
 at beginning of year                               457           652         5,310                       6,419
                                               --------      --------      --------       --------     --------
Cash and cash equivalents
 at end of year                                $    131      $  2,005      $ 11,652       $     --     $ 13,788
                                               ========      ========      ========       ========     ========
</TABLE>


                                       18
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
                CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
                               As of June 30, 2002
                                 (In Thousands)
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------
                                                                             Foreign
                                                          U.S. Guarantor  Subsidiaries  Consolidation Consolidated
                                                 Parent    Subsidiaries  Non-Guarantors  Adjustments    Balance
------------------------------------------------------------------------------------------------------------------
<S>                                            <C>           <C>           <C>                         <C>
                      Assets
Current Assets:
Cash and cash equivalents                      $    457      $    130      $  5,832                    $   6,419
Trade receivables                                 3,150        28,671        33,340                       65,161
Other receivables                                   392           855         2,665                        3,912
Inventory                                         2,707        44,929        45,881                       93,517
Prepaid expenses and other                        3,010         2,460        10,495                       15,965
                                               --------      --------      --------     ---------      ---------
               Total current assets               9,716        77,045        98,213            --        184,974
                                               --------      --------      --------     ---------      ---------

Property, plant & equipment, net                    409        29,781        54,540                       84,730

Intangibles                                          32         1,495        11,673                       13,200
Investment in subsidiaries                       82,540         3,621            --       (86,161)            --
Intercompany                                     73,359       (36,074)       (5,240)      (32,045)            --
Other assets                                      9,738         1,918         1,884                       13,540
                                               --------      --------      --------     ---------      ---------
                   Total assets                $175,794      $ 77,786      $161,070     $(118,206)     $ 296,444
                                               ========      ========      ========     =========      =========
      Liabilities and Stockholders' Deficit

Current Liabilities:
Cash overdraft                                 $    576      $  5,502      $  1,689                    $   7,767
Loan payable to banks                            37,991            --         3,544                       41,535
Current portion of long term debt                 3,216           530         5,105                        8,851
Accounts payable                                  1,024        24,716        16,540                       42,280
Accrued expenses and other                        7,579         8,092        18,409                       34,080
                                               --------      --------      --------     ---------      ---------
Total current liabilities                        50,386        38,840        45,287            --        134,513
                                               --------      --------      --------     ---------      ---------
Long term debt                                  127,643       (68,271)      109,314       (32,045)       136,641

Other liabilities                                 2,352         6,156        21,369                       29,877

Redeemable securities:
Series B and C preferred stock                   56,602            --            --                       56,602

              Stockholders' Deficit

Series A preferred stock                            521            --            --                          521
Common stock                                          2            32            --           (32)             2
Paid in capital                                     740       110,885         8,166      (119,051)           740
Retained earnings                               (49,652)      (10,271)       (9,852)       20,123        (49,652)
Accumulated other comprehensive income (loss)-
  gain (loss) on derivative instruments           1,062           384           678        (1,062)         1,062
  cumulative currency translation adjustment    (13,862)           31       (13,892)       13,861        (13,862)
                                               --------      --------      --------     ---------      ---------
           Total stockholders' deficit          (61,189)      101,061       (14,900)      (86,161)       (61,189)
                                               --------      --------      --------     ---------      ---------
          Total liabilities and deficit        $175,794      $ 77,786      $161,070     $(118,206)     $ 296,444
                                               ========      ========      ========     =========      =========
</TABLE>


                                       19
<PAGE>

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

<TABLE>
<CAPTION>

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

Cost of goods sold                                4,765        43,123        33,149        (7,345)       73,692
                                                -------       -------       -------       -------       -------
       Gross profit                               1,306        13,144         9,845            --        24,295

Selling, general, and administrative
  expenses                                        4,120         8,308         7,253                      19,681
                                                -------       -------       -------       -------       -------
       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>

                                       20
<PAGE>

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

<TABLE>
<CAPTION>

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

Cost of goods sold                               10,397        84,284         66,997       (13,792)     147,886
                                                -------      --------        -------      --------     --------
       Gross profit                               2,782        23,577         18,401            --       44,760

Selling, general, and administrative
  expenses                                        7,857        16,850         14,030                     38,737
                                                -------      --------        -------      --------     --------
       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>


                                       21
<PAGE>

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

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------
                                                                             Foreign
                                                          U.S. Guarantor  Subsidiaries  Consolidation Consolidated
                                                 Parent    Subsidiaries  Non-Guarantors  Adjustments    Balance
------------------------------------------------------------------------------------------------------------------
<S>                                            <C>          <C>             <C>           <C>          <C>
Operating activities:
Net (loss) income                              $ (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>


                                       22
<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.  These  operations
are  classified  into four  segments:  Animal Health and  Nutrition;  Industrial
Chemicals; Distribution; and, All Other.

      The Company  recorded  operating  income of $.2 million for the six months
ended December 31, 2002. Excluding an asset writedown of $7.8 million related to
the Company's  Odda  operations,  operating  income was $8.0 million for the six
months ended December 31, 2002,  compared to an operating income of $6.0 million
in the  prior  year  six-month  period.  The  year-to-year  comparison  was also
affected by purchase  accounting  adjustments  relating to inventory acquired in
the  acquisition of the Phibro Animal Health ("PAH")  business in November 2000,
that  resulted  in a $2.9  million  increase  to cost of goods  sold for the six
months ended December 31, 2001.

      At December 31, 2002,  the Company was in  compliance  with the  financial
covenants  included in its amended  domestic  senior  credit  facility  ("credit
facility")  with its lending banks.  During fiscal 2003, the Company amended the
credit  facility and obtained a waiver for  noncompliance  at June 30, 2002.  In
addition,  the Company  entered into an agreement  with its  Norwegian  banks to
restructure  loans and to obtain a waiver for  noncompliance  at June 30,  2002.
Further, the Company entered into an agreement with Pfizer whereby Pfizer agreed
to defer until March 1, 2004, without interest, unpaid contingent purchase price
amounts existing at May 31, 2002 and to waive contingent purchase price payments
on future net revenues from June 1, 2002 through March 1, 2004.

      In November 2002, the Company  announced a temporary  shutdown of the Odda
facility due to continuing operating losses, higher than planned operating costs
and delays in the  market  acceptance  of calcium  oxide,  a  by-product  of the
manufacturing process to produce  dicyandiamide.  Various alternatives are under
consideration by the Company including complete  shutdown.  The Company recorded
an asset  write-down  charge of $7.8  million at  December  31,  2002 to reflect
impairment of long-lived assets at the Odda facility.  Long-lived assets at Odda
have now been reduced to their estimated salvage values.

      The Company  continues to carry a  cumulative  translation  adjustment  of
$6,314 related to Odda's operations.  Pending management's  ultimate decision on
the future of Odda, such amount may be charged to operating results.

      In light of continued  declines in the printed  circuit board  business in
the  United  States,  during  the second  quarter  of fiscal  2003,  Phibro-Tech
disposed of that portion of its ammoniacal etchant business  associated with its
Joliet, Illinois and Sumter, South Carolina facilities. The transaction included
the  migration  of the  customers  of such  business  to the  purchaser  and the
exclusive license to the purchaser of know-how for the fresh ammoniacal  etchant
sold in certain states. No manufacturing facilities,  equipment or inventory was
included in the  transaction.  The purchaser has agreed to pay future  royalties
based on sales levels  exceeding  certain  specified  minimums.  The gain on the
transaction was not material.

      Certain prior year amounts have been reclassified to conform to the fiscal
2003  presentation.  Freight and warehousing  expenses of $7.0 million and $13.6
million for the three and six months ended December 31, 2001, respectively, were
reclassified from general and administrative expenses to cost of goods sold.

Results of Operations

                                                     Sales
                                                   ($000's)
                                   Three Months Ended      Six Months Ended
                                       December 31,           December 31,
                                   ------------------      -----------------
Operating Segments                  2002        2001       2002        2001
                                    ----        ----       ----        ----
    Animal Health and Nutrition .. $67,368    $64,013    $128,271    $123,366
    Industrial Chemicals .........  16,451     21,868      36,666      42,879
    Distribution .................   9,393      8,825      19,317      18,814
    All Other ....................   9,664      9,073      19,838      19,020
    Elimination of inter-segment
      sales ......................  (3,758)    (5,792)     (7,933)    (11,433)
                                   -------    -------    --------    --------
                                   $99,118    $97,987    $196,159    $192,646
                                   =======    =======    ========    ========


                                       23
<PAGE>

                                            Operating Income (Loss)
                                                     ($000's)
                                     Three Months Ended      Six Months Ended
                                         December 31,          December 31,
                                     ------------------      ----------------
Operating Segments                     2002       2001        2002      2001
                                       ----       ----        ----      ----
    Animal Health and Nutrition ..  $ 11,457    $10,259    $ 21,159    $17,624
    Industrial Chemicals .........   (11,616)    (2,542)    (13,726)    (6,742)
    Distribution .................       824        751       1,567      1,589
    All Other ....................      (703)      (229)       (618)      (110)
    Corporate expenses and
      eliminations ...............    (4,133)    (3,625)     (8,195)    (6,338)
                                    --------    -------    --------    -------
                                    $ (4,171)   $ 4,614    $    187    $ 6,023
                                    ========    =======    ========    =======

Comparison of Three Months Ended December 31, 2002 and 2001

      Net Sales. Net sales increased by $1.1 million, or 1%, to $99.1 million in
the three months ended  December 31, 2002, as compared to the same period of the
prior year.  The increase was primarily due to higher sales in the Animal Health
segment offset in part by declines in the Industrial Chemicals segment.

      The Animal  Health and  Nutrition  segment's  net sales  increased by $3.4
million,  or 5%, to $67.4 million for the three months ended  December 31, 2002.
The  Company's  PAH  operations  improved due to higher unit volume sales of its
antibacterial and anticoccidial products offset in part by lower average selling
prices.  Higher  revenues  were  also  recorded  at the  Company's  Prince  Agri
operations  due to  higher  unit  volumes  associated  with its  core  inorganic
materials, trace mineral premixes and other specialty ingredients. The Company's
Koffolk sales also improved due to sales of its core organic materials.

      The Industrial Chemicals segment's net sales decreased by $5.4 million, or
25%, to $16.5 million in the three months ended December 31, 2002 as compared to
the prior period.  The Company's  Odda revenues  declined by $5.4 million due to
discontinued  production and sale of the CY-50 and calcium carbide product lines
in the fourth  quarter of fiscal year 2002.  In addition,  in the quarter  ended
December 31, 2002 Odda began a temporary  shutdown of  production  which reduced
sales of its  remaining  dicyandiamide  product  line.  Sales  by the  Company's
Phibro-Tech  subsidiary  decreased  slightly  from the prior  year.  During  the
quarter ended December 31, 2002,  Phibro-Tech  disposed of its etchant  business
operated out of the Joliet,  Illinois  and Sumter,  South  Carolina  facilities.
Phibro-Tech will maintain its existing etchant business at its other facilities.
The  Company's  Prince   operations   reported  slightly  higher  sales  due  to
improvements in average selling prices during the current fiscal quarter.

      Net sales for the Distribution segment increased by $.6 million, or 6%, to
$9.4 million in 2002, as compared to the prior period.  Improved  performance in
the Company's Ferro  operations  were offset by lower carbide sales,  related to
the discontinuance of carbide production at Odda.

      Net sales for the All Other  segment  increased by $.6 million,  or 7%, to
$9.7 million in 2002,  as compared to the prior  period.  The  Company's fly ash
business  increased  revenues  by  approximately  $.8 million due to higher unit
volumes  offset in part by declines  in average  selling  prices.  A decrease in
specialized  lab projects and  formulations  at the  segment's  U.K.  operations
lowered revenues by $.2 million.

      Gross  Profit.  Gross profit  decreased by $2.2  million,  or 9%, to $22.1
million in the three  months ended  December 31, 2002,  as compared to the prior
period.  Purchase accounting  adjustments  relating to inventory acquired in the
PAH  acquisition  resulted  in an  increase  to cost of goods sold of $0 and $.9
million for the three  months ended  December  31, 2002 and 2001,  respectively.
Excluding  the  purchase  accounting  adjustments,  gross  profit  decreased  by
approximately  $.4 million in the Animal Health  segment  primarily due to lower
average  selling  prices.   The  Industrial   Chemicals   segment  decreased  by
approximately $3.4 million primarily due to lower revenues and higher production
costs at the Company's Odda facility, lower revenues and higher production costs
at  Phibro-Tech  facilities,  offset in part by higher  margins at the Company's
Prince Manufacturing operations.  The Distribution segment increased $.1 million
primarily  as a result of lower  material  costs and product  mix. The All Other
segment  declined by approximately  $.2 million  primarily due to higher freight
and  warehousing  costs  associated  with the Company's fly ash  operations  and
decreases in  specialized  lab projects and  formulations  at the Company's U.K.
operations.  Elimination of inter-company  profit in inventory accounted for the
remainder.


                                       24
<PAGE>

      Selling,  General and  Administrative  Expenses.  Costs  decreased by $1.2
million, or 6% to $18.5 million in 2002, as compared to the prior period.  Costs
declined primarily at the Company's Phibro-Tech, Koffolk and Odda operations due
to cost reduction  programs and lower levels of production  activity.  Corporate
expenses  increased  due to  increased  staff  levels and costs  related to debt
restructuring activities.

      Asset Write-down.  During the quarter ended December 31, 2002, the Company
recorded a charge of $7.8 million related to the impairment of long-lived assets
at  the  Company's  Odda,  Norway  operations.  (See  Note  5 to  the  Condensed
Consolidated Financial Statements).

      Operating  (Loss) Income.  Operating income decreased by $8.8 million to a
loss of $4.2 million in 2002, as compared to the prior period. The Animal Health
and Nutrition segment, after the exclusion of purchase accounting adjustments in
fiscal  2002,  increased  due to higher unit  volumes and cost  reductions.  The
Industrial  Chemicals  segment worsened due to asset  impairment  charges at the
Company's  Odda  facilities  offset in part by lower general and  administrative
expenses at Phibro-Tech  and also higher sales and production  volumes at Prince
Manufacturing.  The Company's  Distribution segment approximated the prior year.
The All Other segment  declined from the prior period due to higher costs at MRT
and sales decreases at the Company's U.K. operations.

      Interest  Expense,  Net.  Costs  decreased  by $.8  million or 17% to $3.7
million for the three  months  ended  December 31, 2002 as compared to the prior
period  primarily due to lower interest rates offset in part by slightly  higher
average borrowing levels.

      Other  (Income)  Expense,  Net. Other (income)  expense,  net  principally
reflects  foreign  currency  transaction/translation  gains  and  losses  of the
Company's  foreign  subsidiaries  (principally  Norwegian Kroner and the Israeli
Shekel).  In addition,  the Company  recognized a gain of $.6 million  resulting
from a class action  litigation  against  European  vitamin  manufacturers.  The
Company  also  recorded  a gain of $.4  million on a power  purchase  derivative
instrument at its Odda facility.


      Income  Taxes.  An income tax  provision of $1.4 million was reported on a
consolidated pre-tax loss of $6.4 million in fiscal 2003 primarily due to income
tax  provisions in profitable  foreign  jurisdictions  and also for state income
taxes. In addition, domestic pre-tax income was recorded without a tax provision
due to the utilization of net operating loss carryforwards with a full valuation
allowance. The Company's Odda losses were not given any tax benefit. The Company
continues to carry a full  valuation  allowance on its  domestic,  Brazilian and
Norwegian  operating  losses.  These  deferred  tax assets  will  continue to be
evaluated  each  reporting  period  based  on  actual  and  expected   operating
performance.

Comparison of Six Months Ended December 31, 2002 and 2001

      Net Sales.  Net sales increased by $3.5 million,  or 2%, to $196.2 million
in the six months ended December 31, 2002, as compared to the same period of the
prior year.  The increase was primarily due to higher sales in the Animal Health
and  Nutrition  segment  offset in part by declines in the  Industrial  Chemical
segment.

      The Animal  Health and  Nutrition  segment's  net sales  increased by $4.9
million, or 4% to $128.3 million for the six months ended December 31, 2002. The
Company's  PAH  operations  improved  due to  higher  unit  volume  sales of its
antibacterial  products offset in part by lower average  selling prices.  Higher
revenues  were also  recorded at the  Company's  Prince Agri  operations  due to
higher unit volumes associated with its core inorganic materials,  trace mineral
premixes and other specialty  ingredients.  The Company's Koffolk sales declined
due to unfavorable  currency impacts at its Brazilian  subsidiary offset in part
by improved sales of its core organic materials.

      The Industrial Chemicals segment's net sales decreased by $6.2 million, or
14%, to $36.7  million in the six months ended  December 31, 2002 as compared to
the prior  period.  The  Company's  Odda  subsidiary  revenues  declined by $8.2
million due to discontinued production and sale of the CY-50 and calcium carbide
product lines in the fourth quarter of fiscal 2002. In addition,  in the quarter
ended  December  31, 2002 Odda began a temporary  shutdown  of  operations  that
reduced  sales  of  its  remaining  dicyandiamide  product  line.  Sales  by the
Company's Phibro-Tech subsidiary increased by $1.3 million due to increased unit
volumes over the prior year comparable period. During the quarter ended December
31, 2002,  Phibro-Tech divested its etchant business operated out of the Joliet,
Illinois and Sumter,  South Carolina  facilities.  Phibro-Tech will maintain its
existing  etchant  business  at  its  other  facilities.  The  Company's  Prince
operations  reported  higher sales due to improvements in average selling prices
during the current period.


                                       25
<PAGE>

      Net sales for the Distribution segment increased by $.5 million, or 3%, to
$19.3 million in 2002, as compared to the prior period.  Improved performance in
the Company's Ferro  operations  were offset by lower carbide sales,  related to
the discontinuance of carbide production at Odda.

      Net sales for the All Other  segment  increased by $.8 million,  or 4%, to
$19.8 million in 2002,  as compared to the prior  period.  The Company's fly ash
business  increased  revenues by  approximately  $1.6 million due to higher unit
volumes  offset in part by declines  in average  selling  prices.  A decrease in
specialized  lab projects and  formulations  at the  segment's  U.K.  operations
lowered  revenues  by $.6  million.  Lower  sales of crop  protection  chemicals
accounted for the balance of the decrease.

      Gross  Profit.  Gross profit  decreased  by $.8  million,  or 2%, to $43.9
million in the six months  ended  December  31,  2002,  as compared to the prior
period.  Purchase accounting  adjustments  relating to inventory acquired in the
PAH  acquisition  resulted  in an  increase to cost of goods sold of $0 and $2.9
million  for the six months  ended  December  31,  2002 and 2001,  respectively.
Excluding  the  purchase  accounting  adjustments,  gross  profit  decreased  by
approximately  $.2 million in the Animal Health  segment  primarily due to lower
average  selling  prices.   The  Industrial   Chemicals   segment  decreased  by
approximately $3.2 million primarily due to lower revenues and higher production
costs at the Company's Odda facility; lower revenues and higher production costs
at  Phibro-Tech  facilities,  offset in part by higher  margins at the Company's
Prince Manufacturing operations. The Distribution segment approximated the prior
year. The All Other segment declined by approximately  $.5 million primarily due
to higher  freight and  warehouse  costs  associated  with the Company's fly ash
operations and decreases in  specialized  lab projects and  formulations  at the
segment's  U.K.  facility.  Elimination  of  inter-company  profit in  inventory
accounted for the remainder.

      Selling,  General and  Administrative  Expenses.  Costs  decreased by $2.8
million, or 7% to $36.0 million in 2002, as compared to the prior period.  Costs
declined primarily at the Company's Phibro-Tech, Koffolk and Odda operations due
to cost reduction  programs and lower levels of production  activity.  The prior
period  included  a $.4  million  non-cash  gain  to  reflect  the  decrease  in
repurchase value of redeemable common stock of a minority shareholder; no amount
was  recorded  in  the  current  period.  Corporate  expenses  increased  due to
increased staff levels and costs related to debt restructuring activities.

      Asset Write-down.  During the quarter ended December 31, 2002, the Company
recorded a charge of $7.8 million related to the impairment of long-lived assets
at  the  Company's  Odda,  Norway  operations.  (See  Note  5 to  the  Condensed
Consolidated Financial Statements).

      Operating (Loss) Income. Operating income decreased by $5.8 million to $.2
million  in 2002,  as  compared  to the prior  period.  The  Animal  Health  and
Nutrition  segment,  after the exclusion of purchase  accounting  adjustments in
fiscal 2002,  increased due to higher unit  volumes.  The  Industrial  Chemicals
segment  worsened  due  to  asset  impairment  charges  at  the  Company's  Odda
facilities  offset  in part by lower  general  and  administrative  costs at the
Company's   Phibro-Tech   facilities.   The   Company's   Distribution   segment
approximated  the prior  year.  The All Other  segment  declined  from the prior
period due to higher  costs at MRT and sales  decreases  at the  Company's  U.K.
facility.

      Interest  Expense,  Net.  Costs  decreased  by $.9  million or 11% to $8.1
million  for the six months  ended  December  31,  2002 as compared to the prior
period  primarily due to lower interest rates offset in part by slightly  higher
average borrowing levels.

      Other  (Income)  Expense,  Net. Other (income)  expense,  net  principally
reflects  foreign  currency  transaction/translation  gains  and  losses  of the
Company's  foreign  subsidiaries  (principally  Norwegian Kroner and the Israeli
Shekel).  In addition,  the Company  recognized a gain of $.6 million  resulting
from a settlement of a class action against European vitamin manufacturers.  The
Company  also  recorded a gain of $1.1  million on a power  purchase  derivative
instrument at its Odda facility.

      Income  Taxes.  An income tax  provision of $1.9 million was reported on a
consolidated pre-tax loss of $9.6 million in fiscal 2003 primarily due to income
tax  provisions in profitable  foreign  jurisdictions  and also for state income
taxes. In addition, domestic pre-tax income was recorded without a tax provision
due to the utilization of net operating loss carryforwards with a full valuation
allowance.  The Company's  Odda facility  losses were not given any tax benefit.
The Company  continues  to carry a full  valuation  allowance  on its  domestic,
Brazilian  and  Norwegian  operating  losses.  These  deferred  tax assets  will
continue to be  evaluated  each  reporting  period  based on actual and expected
operating performance.


                                       26
<PAGE>

Liquidity and Capital Resources

      Net Cash Provided by Operating Activities. Cash provided by operations for
the six months  ended  December  31,  2002 and 2001 was $27.4  million  and $4.3
million,  respectively.  Cash provided by operating  activities increased in the
six months ended December 31, 2002,  compared with the six months ended December
31, 2001, primarily due to improvements in working capital management.


      Net  Cash  Used in  Investing  Activities.  Net  cash  used  in  investing
activities  for the six months ended December 31, 2002 and 2001 was $1.4 million
and $11.1 million,  respectively.  Capital expenditures of $7.4 million and $6.6
million  in  the  respective  2002  and  2001  periods,  were  for  new  product
development,   maintaining   the   Company's   existing   asset   base  and  for
environmental,  health and safety projects.  Proceeds of $6.0 million from sales
of certain fixed assets of Odda and certain  assets of its  Phibro-tech  etchant
business accounted for the remainder of cash provided by investing activities.

      Net Cash (Used In)  Provided by Financing  Activities.  Net cash (used in)
provided by financing  activities for the six months ended December 31, 2002 and
2001 was ($18.9) million and $9.2 million,  respectively.  Borrowings  under the
domestic  revolving  credit  facility and other  long-term  debt were reduced in
fiscal 2003 from cash generated by operating activities.

      Liquidity.  At December 31, 2002,  the Company was in compliance  with the
financial  covenants  included in its amended  domestic  senior credit  facility
("credit  facility") with its lending banks.  The credit facility was amended in
October 2002 to: waive  noncompliance  with  financial  covenants as of June 30,
2002;  amend  financial  covenants  prospectively  until  maturity;   amend  the
borrowing base formula and also reduce maximum  availability under the revolving
credit portion of the facility from $70 million to $55 million; limit borrowings
under the capital expenditure line of the facility outstanding balance as of the
amendment date; and revise the interest rate to 1.5% to 1.75% per annum over the
base rate (as defined in the  agreement).  Management  believes that the reduced
maximum  availability and the revised borrowing base formula under the revolving
credit portion of the credit  facility will not affect the Company's  ability to
meet its cash requirements during fiscal 2003.

      The  Company's  ability to fund its operating  plan relies upon  continued
availability  of the credit  facility  which,  in turn,  requires the Company to
maintain compliance with the amended financial  covenants.  The Company believes
that it will be able to comply with the terms of the amended  covenants based on
its forecasted  operating  plan. In the event of adverse  operating  results and
resultant  violation  of  the  covenants,  through  the  remaining  term  of the
financing  agreement (see below),  the Company cannot be certain it will be able
to obtain waivers or amendments on favorable terms, if at all.

      The  Company's  credit  facility and its note payable to Pfizer  mature in
November 2003 and March 2004, respectively.  The Company may not have sufficient
cash  resources  to repay this debt and  management  has  undertaken  actions to
improve the Company's  operating  performance and overall  liquidity in order to
reduce debt  levels and allow for  ultimate  refinancing  of this debt in fiscal
2004.  These  actions  include  cost  reduction   activities,   working  capital
improvement programs,  shutdown of unprofitable operations, and possible sale of
certain business operations and other assets. The Company has completed the sale
of certain fixed assets of Odda and certain  assets of its  Phibro-tech  etchant
business during the second quarter of fiscal year 2003 for aggregate proceeds of
$5,956. The Company is actively pursuing the sale of certain business operations
to generate cash for debt  repayment.  However,  there can be no assurance  that
such sales will be completed on terms  acceptable to the Company,  and there are
no disposal  transactions  which the Company considers  probable at December 31,
2002.  Disposal  transactions  could  result in recording  losses for  financial
statement purposes.

      The Company  intends to  refinance  its current  credit  facility  and the
Pfizer note payable.  The ability to refinance such debt on terms  acceptable to
the Company is, among other things, dependent upon the success of the management
actions  referred to above.  There can be no assurance  that the Company will be
able to refinance such debt on terms acceptable to the Company. The inability to
refinance  the debt on terms  acceptable  to the  Company  would have a material
adverse impact on the Company's financial position,  results of operations,  and
cash flow.

      In October 2002, the Company entered into an agreement with Pfizer whereby
Pfizer agreed to defer until March 1, 2004, without interest,  unpaid contingent
purchase price amounts existing at May 31, 2002 and to waive contingent purchase
price payments on future net revenues from June 1, 2002 through March 1, 2004.

      In October 2002,  Odda entered into an agreement with its Norwegian  banks
to  restructure  these  loans and to obtain a waiver for  non-compliance  of its
financial  covenants.  The  agreement  establishes a periodic  payment  schedule
through November 30, 2003. Philipp Brothers Chemicals,  Inc. is the guarantor of
certain portions of this debt.


                                       27
<PAGE>

      Working  capital as of  December  31, 2002 was $52.8  million  compared to
$50.5 million at fiscal year end June 30, 2002. At December 31, 2002, the amount
of credit extended under the Company's credit facility totaled $33.4 million and
the Company had $7.9  million  available  under the  borrowing  base  formula in
effect under the credit facility. In addition,  certain of the Company's foreign
subsidiaries also had availability  totaling $7.3 million under their respective
loan agreements.

      The Company anticipates  spending  approximately $10.4 million for capital
expenditures in fiscal 2003,  primarily to cover the Company's asset replacement
needs,  improve  processes,  and for  environmental  and regulatory  compliance,
subject to the availability of funds.

Critical Accounting Policies

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

      The Company's  significant  accounting policies are described in Note 1 to
the  Consolidated  Financial  Statements for the fiscal year ended June 30, 2002
and critical  accounting  policies are discussed in Management's  Discussion and
Analysis of  Financial  Condition  and Results of  Operations.  Not all of these
significant accounting policies require management to make difficult, subjective
or  complex  judgments  or  estimates.  However,  management  of the  Company is
required to make certain  estimates and  assumptions  during the  preparation of
consolidated  financial  statements in  accordance  with  accounting  principles
generally  accepted  in the  United  States  of  America.  These  estimates  and
assumptions impact the reported amount of assets and liabilities and disclosures
of  contingent  assets  and  liabilities  as of the  date  of  the  consolidated
financial  statements.  Estimates and assumptions are reviewed  periodically and
the effects of revisions are  reflected in the period they are  determined to be
necessary. Actual results could differ from those estimates.


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

New Accounting Pronouncements

      In June 2002, the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standards No. 146,  "Accounting for Costs Associated with
Exit or Disposal  Activities"  ("SFAS No.  146").  SFAS No. 146 requires  that a
liability for a cost associated with an exit or disposal  activity be recognized
and measured  initially at fair value when the liability is incurred rather than
at the date of a commitment to an exit or disposal  plan.  Costs covered by SFAS
No. 146 include lease  termination  costs and certain  employee  severance costs
that are associated with a restructuring,  discontinued operation, plant closing
or other  exit or  disposal  activity.  SFAS No.  146 is  effective  for exit or
disposal activities that are initiated after December 31, 2002. The Company does
not  expect  the  adoption  of SFAS No.  146 to have a  material  impact  on the
financial statements.

      In November 2002,  the Financial  Accounting  Standards  Board issued FASB
Interpretation No. 45, "Guarantor's  Accounting and Disclosure  Requirements for
Guarantees,  Including Indirect  Guarantees of Indebtedness of Others" ("FIN No.
45"). FIN No. 45 elaborates on the  disclosures to be made by a guarantor in its
interim and annual  financial  statements  about its  obligations  under certain
guarantees that it has issued. It also clarifies that a guarantor is required to
recognize,  at the  inception of a guarantee,  a liability for the fair value of
the obligation undertaken in issuing the guarantee.  The disclosure requirements
of FIN No. 45 are  required for  financial  statements  of periods  ending after
December  15,  2002.  The  initial  measurement  provisions  of FIN  No.  45 are
applicable  on a  prospective  basis for  guarantees  issued or  modified  after
December  31,  2002.  The Company  does not expect the adoption of FIN No. 45 to
have a significant impact on the financial statements.

      In January 2003,  the  Financial  Accounting  Standards  Board issued FASB
Interpretation  No. 46,  "Consolidation of Variable Interest Entities" ("FIN No.
46").  FIN No. 46 requires  consolidation  by business  enterprises  of variable
interest entities (commonly referred to as special purpose entities), which meet
certain  characteristics.  FIN No. 46  applies  to  variable  interest  entities
created  after  January 31, 2003 and to variable  interest  entities in which an
enterprise  obtains an interest  after  January 31,  2003.  The Company does not
expect the adoption of FIN No. 46 to have an impact on the financial statements.


                                       28
<PAGE>

Seasonality of Business

      There is some  seasonality  in the  Company's  results 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 fiscal  year ended June 30, 2002 and to Note
14 to the Consolidated Financial Statements of the Company included therein.

Certain Factors Affecting Future Operating Results

      This Form 10-Q contains "forward-looking statements" within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities Exchange Act of 1934, as amended.  The Company's actual results could
differ  materially  from  those  set  forth in the  forward-looking  statements.
Certain factors that might cause such a difference include,  among other factors
noted herein, the following:  the Company's  substantial  leverage and potential
inability to service its debt; the Company's  dependence on  distributions  from
its subsidiaries;  risks associated with the Company's international operations;
the Company's  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; and the uncertain impact of the Company's divestiture plans. See also
the  discussion  under  "Risks  and  Uncertainties"  in Note 3 of the  Notes  to
Condensed  Consolidated Financial Statements included in this Report and matters
referred to throughout Item 1of the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2002.

      In addition, the issue of the potential for increased bacterial resistance
to certain antibiotics used in certain  food-producing animals is the subject of
discussions  on a  worldwide  basis  and,  in  certain  instances,  has  led  to
government  restrictions  on the  use of  antibiotics  in  these  food-producing
animals. The sale of feed additives containing antibiotics is a material portion
of the Company's  business.  Should regulatory or other  developments  result in
further  restrictions  on the sale of such  products,  it could  have a material
adverse impact on the Company's  financial  position,  results of operations and
cash flows.

     On  February  14,  2003,  the Company  was  advised  that the Joint  Expert
Committee on Food  Additives of the Food and  Agricultural  Organization  of the
United Nations and the World Health Organization  ("JECFA"), at its meeting held
February  6-12,  2003,  had  determined to withdraw the maximum  residue  limits
("MRL's")  for  Carbadox.  It is not known at this  time  whether  any  national
regulatory  authorities  will adopt this  determination,  which could  result in
reduced overall sales of the product.  Carbadox is a significant product for the
Company's Phibro Animal Health business.  The Company is presently assessing the
impact of this determination on the Company.

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."

Item 4. Control and Procedures

(a)   Based  upon  an  evaluation  by the  Company's  Chief  Executive  Officer,
      Chairman of the Board and Chief Financial  Officer within 90 days prior to
      the filing date of this Quarterly  Report on Form 10-Q they have concluded
      that the Company's  disclosure  controls and procedures as defined in Rule
      15d-14(c)  under the  Securities  Exchange  Act of 1934,  as amended,  are
      effective for gathering, analyzing and disclosing information contained in
      the Company's  periodic  reports  provided to the  Securities and Exchange
      Commission.

(b)   Since the date of the most recent  evaluation  of the  Company's  internal
      controls, there have been no significant changes in such internal controls
      or in other  factors that could  significantly  affect these  controls nor
      were there any corrective actions with regard to significant  deficiencies
      and material weaknesses.


                                       29
<PAGE>

                          PART II -- OTHER INFORMATION

Item 1. Legal Proceedings.

      On or about April 17, 1997,  Philipp Brothers  Chemicals,  Inc.  ("Philipp
Brothers") and CP Chemicals,  Inc.  ("CP") were served with a complaint filed by
Chevron  USA,  Inc.  ("Chevron")  in the United  States  District  Court for the
District of New Jersey,  alleging  that  operations  of CP at its Sewaren  plant
affected adjoining  property owned by Chevron and that Philipp Brothers,  as the
parent of CP, is also responsible to Chevron.  In July 2002, a phased settlement
agreement  was reached  under which the  Company  and  another  defendant  will,
subject to certain conditions,  take title to the property,  subject to a period
of due diligence  investigation  of the property.  The Company's  portion of the
settlement  for past costs and  expenses  is $495 and is  included  in  selling,
general and administrative expenses in the June 30, 2002 statement of operations
and  comprehensive  income.  The payable of $495 is included in accrued expenses
and other current  liabilities as of June 30, 2002 and was subsequently  paid in
July 2002. The Company and the other  defendant will, if the sale becomes final,
share equally in the costs of  remediation.  While the costs cannot be estimated
at this time, the Company  believes the costs will not be material and insurance
recoveries will be available to offset some of those costs.

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.


                                       30
<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 14, 2003                       By: /s/ JACK C. BENDHEIM

                                            -----------------------------------
                                                        Jack C. Bendheim
                                                      Chairman of the Board


Date: February 14, 2003                       By: /S/ GERALD K. CARLSON
                                            -----------------------------------
                                                        Gerald K. Carlson
                                                     Chief Executive Officer

Date: February 14, 2003                       By: /s/ RICHARD G. JOHNSON
                                            -----------------------------------
                                                       Richard G. Johnson
                                                    Chief Financial Officer
                                                (Principal Financial Officer and
                                                  Principal Accounting Officer)


                                       31
<PAGE>

                                 CERTIFICATIONS

I, Gerald K. Carlson, certify that:

(1)   I have reviewed  this  quarterly  report on Form 10-Q of Philipp  Brothers
      Chemicals, Inc.;

(2)   Based on my knowledge,  this quarterly  report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the  circumstances  under which such
      statements were made, not misleading with respect to the period covered by
      this quarterly report;

(3)   Based on my  knowledge,  the  financial  statements,  and other  financial
      information  included  in this  quarterly  report,  fairly  present in all
      material respects the financial condition,  results of operations and cash
      flows of the  registrant  as of, and for,  the periods  presented  in this
      quarterly report;

(4)   The  registrant's  other  certifying  officers and I are  responsible  for
      establishing  and  maintaining  disclosure  controls  and  procedures  (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      a)    designed  such  disclosure  controls and  procedures  to ensure that
            material  information  relating  to the  registrant,  including  its
            consolidated  subsidiaries,  is made  known to us by  others  within
            those  entities,  particularly  during  the  period  in  which  this
            quarterly report is being prepared;

      b)    evaluated the effectiveness of the registrant's  disclosure controls
            and  procedures as of a date within 90 days prior to the filing date
            of this quarterly report (the "Evaluation Date"); and

      c)    presented  in  this  quarterly  report  our  conclusions  about  the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

(5)   The registrant's other certifying officers and I have disclosed,  based on
      our most recent  evaluation,  to the  registrant's  auditors and the audit
      committee of  registrant's  board of directors (or persons  performing the
      equivalent function):

      a)    all significant  deficiencies in the design or operation of internal
            controls which could adversely  affect the  registrant's  ability to
            record,  process,  summarize  and  report  financial  data  and have
            identified for the registrant's  auditors any material weaknesses in
            internal controls; and

      b)    any fraud,  whether or not  material,  that  involves  management or
            other  employees  who have a  significant  role in the  registrant's
            internal controls; and

(6)   The registrant's  other  certifying  officers and I have indicated in this
      quarterly report whether or not there were significant changes in internal
      controls or in other  factors  that could  significantly  affect  internal
      controls  subsequent to the date of our most recent evaluation,  including
      any  corrective  actions  with  regard  to  significant  deficiencies  and
      material weaknesses.

Date:    February 14, 2003

/s/Gerald K. Carlson
----------------------------
Gerald K. Carlson,
Chief Executive Officer


                                       32
<PAGE>

I, Jack C. Bendheim, certify that:

(1)   I have reviewed  this  quarterly  report on Form 10-Q of Philipp  Brothers
      Chemicals, Inc.;

(2)   Based on my knowledge,  this quarterly  report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the  circumstances  under which such
      statements were made, not misleading with respect to the period covered by
      this quarterly report;

(3)   Based on my  knowledge,  the  financial  statements,  and other  financial
      information  included  in this  quarterly  report,  fairly  present in all
      material respects the financial condition,  results of operations and cash
      flows of the  registrant  as of, and for,  the periods  presented  in this
      quarterly report;

(4)   The  registrant's  other  certifying  officers and I are  responsible  for
      establishing  and  maintaining  disclosure  controls  and  procedures  (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      a)    designed  such  disclosure  controls and  procedures  to ensure that
            material  information  relating  to the  registrant,  including  its
            consolidated  subsidiaries,  is made  known to us by  others  within
            those  entities,  particularly  during  the  period  in  which  this
            quarterly report is being prepared;

      b)    evaluated the effectiveness of the registrant's  disclosure controls
            and  procedures as of a date within 90 days prior to the filing date
            of this quarterly report (the "Evaluation Date"); and

      c)    presented  in  this  quarterly  report  our  conclusions  about  the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

(5)   The registrant's other certifying officers and I have disclosed,  based on
      our most recent  evaluation,  to the  registrant's  auditors and the audit
      committee of  registrant's  board of directors (or persons  performing the
      equivalent function):

      a)    all significant  deficiencies in the design or operation of internal
            controls which could adversely  affect the  registrant's  ability to
            record,  process,  summarize  and  report  financial  data  and have
            identified for the registrant's  auditors any material weaknesses in
            internal controls; and

      b)    any fraud,  whether or not  material,  that  involves  management or
            other  employees  who have a  significant  role in the  registrant's
            internal controls; and

(6)   The registrant's  other  certifying  officers and I have indicated in this
      quarterly report whether or not there were significant changes in internal
      controls or in other  factors  that could  significantly  affect  internal
      controls  subsequent to the date of our most recent evaluation,  including
      any  corrective  actions  with  regard  to  significant  deficiencies  and
      material weaknesses.

Date:    February 14, 2003

/s/Jack C. Bendheim
------------------------------------
Jack C. Bendheim,
Chairman of the Board


                                       33
<PAGE>

I, Richard G. Johnson, certify that:

(1)   I have reviewed  this  quarterly  report on Form 10-Q of Philipp  Brothers
      Chemicals, Inc.;

(2)   Based on my knowledge,  this quarterly  report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the  circumstances  under which such
      statements were made, not misleading with respect to the period covered by
      this quarterly report;

(3)   Based on my  knowledge,  the  financial  statements,  and other  financial
      information  included  in this  quarterly  report,  fairly  present in all
      material respects the financial condition,  results of operations and cash
      flows of the  registrant  as of, and for,  the periods  presented  in this
      quarterly report;

(4)   The  registrant's  other  certifying  officers and I are  responsible  for
      establishing  and  maintaining  disclosure  controls  and  procedures  (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      a)    designed  such  disclosure  controls and  procedures  to ensure that
            material  information  relating  to the  registrant,  including  its
            consolidated  subsidiaries,  is made  known to us by  others  within
            those  entities,  particularly  during  the  period  in  which  this
            quarterly report is being prepared;

      b)    evaluated the effectiveness of the registrant's  disclosure controls
            and  procedures as of a date within 90 days prior to the filing date
            of this quarterly report (the "Evaluation Date"); and

      c)    presented  in  this  quarterly  report  our  conclusions  about  the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

(5)   The registrant's other certifying officers and I have disclosed,  based on
      our most recent  evaluation,  to the  registrant's  auditors and the audit
      committee of  registrant's  board of directors (or persons  performing the
      equivalent function):

      a)    all significant  deficiencies in the design or operation of internal
            controls which could adversely  affect the  registrant's  ability to
            record,  process,  summarize  and  report  financial  data  and have
            identified for the registrant's  auditors any material weaknesses in
            internal controls; and

      b)    any fraud,  whether or not  material,  that  involves  management or
            other  employees  who have a  significant  role in the  registrant's
            internal controls; and

(6)   The registrant's  other  certifying  officers and I have indicated in this
      quarterly report whether or not there were significant changes in internal
      controls or in other  factors  that could  significantly  affect  internal
      controls  subsequent to the date of our most recent evaluation,  including
      any  corrective  actions  with  regard  to  significant  deficiencies  and
      material weaknesses.

Date:    February 14, 2003


/s/Richard G. Johnson
--------------------------------
Richard G. Johnson,
Chief Financial Officer


      Since the Company does not have securities registered under Section 12 of
the Securities Exchange Act of 1934 and is not required to file periodic reports
pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934, the
Company is not an "issuer" as defined in the Sarbanes-Oxley Act of 2002, and
therefore the Company is not filing the written certification statement pursuant
to Section 906 of such Act. The Company submits periodic reports with the
Securities and Exchange Commission because it is required to do so by the terms
of the indenture governing its senior subordinated notes.


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