================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                    FORM 10-Q

                                   ----------

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

                  For the quarterly period ended March 31, 2003

                                       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 March 31, 2003:

              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.

================================================================================


<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....................   25

         Item 3. Quantitative and Qualitative
                    Disclosures About Market Risk .........................   32

         Item 4. Control and Procedures....................................   32

PART II  OTHER INFORMATION

         Item 1. Legal Proceedings.........................................   34

         Item 5.  Other Information........................................   34

         Item 6. Exhibits and Reports on Form 8-K..........................   34

SIGNATURES ................................................................   35

CERTIFICATIONS ............................................................   36


                                       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 Consolidated Financial Statements


                                       3
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

                                 (In Thousands)

                                                          March 31,    June 30,
                                                            2003         2002
                                                         ---------    ---------
                                     ASSETS
CURRENT ASSETS:
     Cash and cash equivalents                           $  12,031    $   6,419
     Trade receivables, less allowance
        for doubtful accounts
        of $1,629 at March 31, 2003 and
        $1,802 at June 30, 2002                             59,902       61,157
     Other receivables                                       2,669        3,184
     Inventories                                            93,312       86,925
     Prepaid expenses and other current assets              15,950       15,520
     Current assets from discontinued operations             1,693       11,769
                                                         ---------    ---------
           TOTAL CURRENT ASSETS                            185,557      184,974

PROPERTY, PLANT AND EQUIPMENT, net                          73,368       76,496
INTANGIBLES                                                 11,169       11,789
OTHER ASSETS                                                12,379       12,753
OTHER ASSETS FROM DISCONTINUED OPERATIONS                     --         10,432
                                                         ---------    ---------
                                                         $ 282,473    $ 296,444
                                                         =========    =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
     Cash overdraft                                      $   4,646    $   7,767
     Loans payable to banks                                 35,215       41,535
     Current portion of long-term debt                      29,741        8,851
     Accounts payable                                       46,047       39,715
     Accrued expenses and other current
       liabilities                                          52,096       29,985
     Current liabilities from
       discontinued operations                               1,148        6,660
                                                         ---------    ---------
           TOTAL CURRENT LIABILITIES                       168,893      134,513
LONG-TERM DEBT                                             103,027      136,641
OTHER LIABILITIES                                           22,138       28,597
OTHER LIABILITIES FROM DISCONTINUED OPERATIONS                --          1,280
                                                         ---------    ---------
           TOTAL LIABILITIES                               294,058      301,031
                                                         ---------    ---------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE SECURITIES:
     Series B and C preferred stock                         63,129       56,602
                                                         ---------    ---------
STOCKHOLDERS' DEFICIT:
     Series A preferred stock                                  521          521
     Common stock                                                2            2
     Paid-in capital                                           740          740
     Accumulated deficit                                   (66,442)     (49,652)
     Accumulated other comprehensive (loss) income:
        Gain on derivative instruments                          51        1,062
        Cumulative currency translation adjustment          (9,586)     (13,862)
                                                         ---------    ---------
           TOTAL STOCKHOLDERS' DEFICIT                     (74,714)     (61,189)
                                                         ---------    ---------
                                                         $ 282,473    $ 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        Nine Months Ended
                                                           March 31,                 March 31,
                                                        2003         2002         2003         2002
                                                   ---------    ---------    ---------    ---------
<S>                                                <C>          <C>          <C>          <C>
NET SALES                                          $  93,739    $  88,164    $ 280,614    $ 265,607
COST OF GOODS SOLD                                    71,018       67,613      211,140      200,438
                                                   ---------    ---------    ---------    ---------
     GROSS PROFIT                                     22,721       20,551       69,474       65,169
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
     (includes income from litigation of
     $2,195 and $2,755 for the three months
     and nine months ended March 31, 2003,
     respectively)                                    18,453       18,469       51,559       54,265
                                                   ---------    ---------    ---------    ---------

     OPERATING INCOME                                  4,268        2,082       17,915       10,904
OTHER:
     Interest expense                                  3,978        4,609       12,138       13,926
     Interest income                                     (39)          (8)        (135)        (311)
     Other expense, net                                  112          511        1,317        2,414
                                                   ---------    ---------    ---------    ---------
     INCOME (LOSS) FROM CONTINUING
        OPERATIONS BEFORE INCOME TAXES                   217       (3,030)       4,595       (5,125)
PROVISION FOR INCOME TAXES                               599          806        2,440        1,840
                                                   ---------    ---------    ---------    ---------
     (LOSS) INCOME FROM CONTINUING
        OPERATIONS                                      (382)      (3,836)       2,155       (6,965)
DISCONTINUED OPERATIONS:
     (Loss) from discontinued operations
        (net of income taxes)                           (548)      (5,236)     (11,077)      (6,171)
     (Loss) on disposal of discontinued
        operations (net of income taxes)              (1,342)        --         (1,342)        --
                                                   ---------    ---------    ---------    ---------
     NET LOSS                                         (2,272)      (9,072)     (10,264)     (13,136)
OTHER COMPREHENSIVE INCOME (LOSS):
     Gain (loss) on derivative instruments               230          109       (1,011)         542
     Change in currency translation adjustment         7,930         (984)       4,276         (196)
                                                   ---------    ---------    ---------    ---------
      COMPREHENSIVE INCOME (LOSS)                  $   5,888    $  (9,947)      (6,999)   $ (12,790)
                                                   =========    =========    =========    =========
</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 Nine Months Ended March 31, 2003

                                 (In Thousands)

<TABLE>
<CAPTION>
                                      Preferred        Common
                                        Stock           Stock                                              Accumulated Other
                                     ----------  -------------------
                                                  Class       Class      Paid-in     Accumulated    Comprehensive
                                      Series A     "A"         "B"       Capital       Deficit      (Loss) income     Total
                                     ----------  --------    --------   --------      ---------      ------------    ---------
<S>           <C>                    <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)
                                     ========    ========    ========   ========      ========         ========     ========
     Dividends on Series B and C
        redeemable preferred stock                                                      (2,282)                       (2,282)
     Gain on derivative
        instruments                                                                                         230          230
     Foreign currency translation
        adjustment                                                                                        7,930        7,930
     Net loss                                                                           (2,272)                       (2,272)
                                     --------    --------    --------   --------      --------         --------     --------
BALANCE, MARCH 31, 2003              $    521    $      1    $      1   $    740      $(66,442)        $ (9,535)    $(74,714)
                                     ========    ========    ========   ========      ========         ========     ========
</TABLE>

      See notes to unaudited Condensed Consolidated Financial Statements.


                                       6
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                For the Nine Months Ended March 31, 2003 and 2002

                                 (In Thousands)

                                                            2003         2002
                                                         ---------    ---------
OPERATING ACTIVITIES:
  Net loss                                               $ (10,264)   $ (13,136)
  Adjustment for discontinued operations                    12,419        6,171
                                                         ---------    ---------
  Income (loss) from continuing operations                   2,155       (6,965)
  Adjustments to reconcile income (loss)
        from continuing operations to net
        cash provided by operating activities:
     Depreciation and amortization                          10,891       10,041
     Other                                                    (488)       3,813
     Changes in operating assets and liabilities:
        Accounts receivable                                  1,051       12,308
        Inventories                                         (6,069)     (16,710)
        Prepaid expenses and other current assets             (557)      (2,544)
        Other assets                                        (2,190)        (842)
        Accounts payable                                    15,078         (699)
        Accrued expenses and other liabilities               5,806        2,450
  Cash provided by (used in) discontinued operations         2,970         (438)
                                                         ---------    ---------
        NET CASH PROVIDED BY OPERATING ACTIVITIES           28,647          414
                                                         ---------    ---------
INVESTING ACTIVITIES:
  Capital expenditures                                      (7,778)      (7,881)
  Acquisition of a business                                   --         (7,182)
  Proceeds from sales of assets and other investing          3,321          469
  Discontinued operations                                    1,877         (692)
                                                         ---------    ---------
        NET CASH USED IN INVESTING ACTIVITIES
                                                            (2,580)     (15,286)
                                                         ---------    ---------
FINANCING ACTIVITIES:
  Cash overdraft                                            (3,121)       1,481
  Net (decrease) increase in short-term debt                (6,012)      15,248
  Proceeds from long-term debt                               2,125        2,316
  Payments of long-term debt                               (13,720)      (4,324)
                                                         ---------    ---------
        NET CASH (USED IN) PROVIDED BY
           FINANCING ACTIVITIES                            (20,728)      14,721
                                                         ---------    ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                        273         (110)
                                                         ---------    ---------
        NET INCREASE (DECREASE) IN CASH
           AND CASH EQUIVALENTS                              5,612         (261)
CASH AND CASH EQUIVALENTS at beginning of period             6,419       14,845
                                                         ---------    ---------
CASH AND CASH EQUIVALENTS at end of period               $  12,031    $  14,584
                                                         =========    =========

      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 March 31,
2003 and its results of operations  and cash flows for the three months and nine
months ended March 31, 2003 and 2002.

      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 nine months ended March
31, 2003 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.  Identifiable  intangible  assets  with  determinable  useful  lives will
continue to be  amortized.  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.  As a result of the adoption
of SFAS No.  144,  the Company  was  required  to classify  the Odda and Carbide
Industries businesses as discontinued operations.

      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 adoption of
SFAS No. 146 did not result in an impact on the Company's 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  adoption  of FIN No. 45 did not  result in a material
impact on the Company's 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  (including  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
adoption  of FIN No. 46 did not result in an impact on the  Company's  financial
statements.

      In April 2003, the Financial  Accounting  Standards Board issued Statement
of  Financial  Accounting  Standards  No.  149,  "Amendment  of SFAS No.  133 on
Derivative  Instruments and Hedging  Activities"  ("SFAS No. 149"). SFAS No. 149
amends and  clarifies  accounting  and  reporting  for  derivative  instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging  activities  under SFAS No. 133. SFAS No. 149 is effective for contracts
entered  into or modified  after June 30,  2003,  and for hedging  relationships
designated after June 30, 2003. The Company is currently assessing the impact of
this statement.

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,  have been 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,
after reclassifications, are as follows:

                                                                      12 Months
                                        3 Months Ended                  Ended
                   September 30,  December 31,   March 31,  June 30,   June 30,
                        2001         2001          2002       2002       2002
                     --------       ------        ------     ------    -------
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        1,409        4,614        (3,729)   (23,958)   (21,664)
  (Loss)
Net (Loss)             (2,365)      (1,699)       (9,072)   (38,634)   (51,770)


                                       9
<PAGE>

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

                                 (In Thousands)

3. Risks and Uncertainties

      As of March 31, 2003,  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
from 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), there can be no assurance that the Company 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 is presently  seeking 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,
if at all.  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.

      During the second quarter of fiscal year 2003,  the Company  completed the
sale of certain  fixed assets of Odda for proceeds of $3,458 and certain  assets
of its Phibro-Tech etchant business for proceeds of $2,530.  Subsequent to March
31, 2003 the Company completed the sale of its Carbide Industries business;  the
proceeds  were not  material.  The Odda and Carbide  Industries  businesses  are
classified as discontinued operations. The Company is actively pursuing the sale
of certain  other  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,  if at all. There are no other disposal  transactions
which the Company considered probable at March 31, 2003.  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.


                                       10
<PAGE>

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

                                 (In Thousands)

      The Joint Expert  Committee on Food Additives of the Food and Agricultural
Organization  of the United  Nations and the World Health  Organization,  at its
meeting held February 6-12, 2003, had determined to withdraw the maximum residue
limits for Carbadox.  A final report has not yet been issued. 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  continues to assess the impact of this  determination on
the Company.

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 of continuing operations consist of the following:

                                            March 31, 2003     June 30, 2002
                                            --------------     -------------
               Raw materials                  $20,651             $22,387
               Work-in-process                  1,517               2,098
               Finished goods                  71,144              62,440
                                              -------             -------
               Total inventory                $93,312             $86,925
                                              =======             =======

5. Discontinued Operations

      In February 2003 the Company determined that it would permanently shutdown
and no longer fund the operations of its Norwegian  subsidiary,  Odda Smelteverk
("Odda").  On February 28,  2003,  Odda filed for  bankruptcy  in Norway and the
bankruptcy is proceeding in accordance  with Norwegian law. The Company has been
advised that, as a result of the bankruptcy, the creditors of Odda have recourse
only to the assets of Odda, except in the case of certain debt guaranteed by the
Company.  The  Company has  removed  all  assets,  liabilities  (except as noted
below),  and  cumulative  translation  adjustments  related  to  Odda  from  the
Company's consolidated balance sheets as of March 31, 2003, and has recorded the
net result as a Loss on disposal of discontinued operations.  The Company is the
guarantor of certain debt of Odda under two  separate  multi-currency  revolving
credit  facilities.  As of March 31, 2003, NOK 41,100  ($5,731) was  outstanding
under these  facilities  and  continues  to be included in the Loans  payable to
banks  and  Current   portion  of  long-term  debt  captions  on  the  Company's
consolidated  balance  sheets at March 31,  2003.  The Company has entered  into
forebearance  agreements with the two banks holding  guarantees from the Company
for the debt of Odda under which the banks have  agreed not to demand  immediate
payment on those  guarantees,  and the Company  has agreed to pay the  principal
amount plus interest in installments.  The Company has been advised by Norwegian
counsel  that it will  obtain the  benefit of the banks'  position  as a secured
creditor upon payment  pursuant to the guarantees.  The Company has obtained the
consent of a majority  of the  holders of its  outstanding  Senior  Subordinated
Notes due 2008 to amend the  Indenture  governing  these  notes in such a manner
that the bankruptcy of Odda does not create an event of default thereunder.

      In  February  2003 the  Company  decided  to sell its  Carbide  Industries
business  in the U.K.  which  had  been a sales  distributor  for one of  Odda's
product lines.  Subsequent to March 31, 2003, the Company  completed the sale of
the Carbide Industries  business.  Odda was included in the Company's Industrial
Chemicals  segment  and  Carbide   Industries  was  included  in  the  Company's
Distribution segment.

      The Company's  consolidated financial statements have been reclassified to
report separately the operating results,  financial position,  and cash flows of
the discontinued operations.  Prior year financial statements have been restated
to conform with the fiscal year 2003 presentation of discontinued operations.


                                       11
<PAGE>

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

                                 (In Thousands)

      Operating results and loss on disposal of the discontinued  operations are
as follows:

<TABLE>
<CAPTION>

                                        3 Months Ended               9 Months Ended
                                   March 31,      March 31,     March 31,    March 31,
                                     2003           2002          2003         2002
                                   ---------      ---------     ---------    ---------
OPERATING RESULTS:
<S>                                <C>             <C>          <C>           <C>
Net sales                          $ 1,933         $10,736      $ 12,890      $30,453
Cost of goods sold                   1,623          14,748        15,396       34,323
Selling, general and
  administrative expenses              883           1,799         3,175        4,740
Asset writedowns                       --               --         7,781           --
Other (expense) income                 (59)            418         2,327        1,296
                                   -------         -------       -------      -------
(Loss) before income taxes            (632)         (5,393)      (11,135)      (7,314)
(Benefit) for income taxes             (84)           (157)          (58)      (1,143)
                                   -------         -------      --------      -------
(Loss) from operations             $  (548)        $(5,236)     $(11,077)     $(6,171)
                                   =======         =======      ========      =======

Depreciation and amortization      $   192         $ 5,562      $    894      $ 7,118
                                   =======         =======      ========      =======

LOSS ON DISPOSAL:
Assets                             $(4,018)        $    --      $ (4,018)     $    --
Liabilities                          6,432              --         6,432           --
Unsecured debt                       2,488              --         2,488           --
Currency translation adjustment     (6,244)             --        (6,244)          --
                                   ------          -------      --------      -------
(Loss) on disposal                 $(1,342)        $    --      $ (1,342)          --
                                   =======         =======      ========      =======
</TABLE>

The balance sheet data for the discontinued operations is as follows:

                                                   March 31,       June 30,
                                                     2003           2002
                                                   ---------      ---------
Trade receivables                                   $1,380         $ 4,004
Other receivables                                       --             728
Inventories                                            305           6,592
Prepaid expenses and other current assets                8             445
                                                    ------         -------
Current assets from discontinued operations         $1,693         $11,769
                                                    ======         =======

Property, plant and equipment, net                  $   --         $ 8,234
Intangibles                                             --           1,411
Other assets                                            --             787
                                                    ------         -------
Other assets from discontinued operations           $   --         $10,432
                                                    ======         =======

Accounts payable                                    $  773           2,565
Accrued expenses and other current liabilities         375           4,095
                                                    ------         -------
Current liabilities from discontinued operations    $1,148         $ 6,660
                                                    ======         =======


                                       12
<PAGE>

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

                                 (In Thousands)

Other liabilities                                   $   --         $ 1,280
                                                    ------         -------
Other liabilities from discontinued operations      $   --         $ 1,280
                                                    ======         =======

      In December  2002,  the Company  reevaluated  the carrying value of Odda's
long-lived assets (consisting of property, plant and equipment and certain other
assets),  based upon its  estimate of future net cash flows  under the  possible
scenarios then being considered by management. As a result, an impairment charge
of $7,781 was recorded  during the second fiscal  quarter to reduce the carrying
value of Odda's long-lived assets to their estimated salvage values.

      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.

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.


                                       13
<PAGE>

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

                                 (In Thousands)

      The South  Carolina  Department of Health and  Environmental  Conservation
("DHEC") has informed the Company that its  Phibro-Tech,  Inc.  subsidiary  must
begin  certain  remediation  activities  and conduct  additional  RCRA  Facility
Investigations  ("RFI's") leading to a Corrective  Measures Study and Corrective
Measures  Implementation.  Phibro-Tech,  Inc. has proposed  several  alternative
plans to the South Carolina DHEC and will enter into negotiations with the state
regarding measures to be taken at its Sumter, South Carolina facility.

      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 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 costs of
further investigation and remediation of identified soil and groundwater
problems at operating sites, closed sites and third-party sites; closure costs
for closed sites; and any penalties that may be assessed for environmental
violations to be approximately $2,071, which is included in current and
long-term liabilities in the Company's condensed consolidated balance sheets at
March 31, 2003.

8. Income from Litigation

      The  Company  has  recognized  income of $2,195  and  $2,766 for the three
months and nine months ended March 31, 2003,  respectively,  resulting  from the
settlement of class action  litigation  against European vitamin  manufacturers.
This income is included in selling,  general and administrative  expenses on the
Company's  condensed  consolidated  statements of operations  and  comprehensive
income.

9. 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.

      The Industrial  Chemicals and Distribution  segments have been restated to
give effect to the discontinued operations.


                                       14
<PAGE>

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

                                 (In Thousands)

      Segment data for the three months and nine months ended March 31, 2003 and
2002 is as follows:

<TABLE>
<CAPTION>
                                                       Animal                                           Corporate
                                                      Health &    Industrial                All        Expenses &
Three Months Ended March 31, 2003                    Nutrition    Chemicals  Distribution  Other       Adjustments    Total
                                                     -----------   --------    --------   --------    ------------   --------
<S>                                                  <C>           <C>         <C>        <C>         <C>            <C>
Revenues -- external customers                       $    62,675   $ 12,192    $  7,612   $ 11,260    $         --   $ 93,739
         -- intersegment                                     579      1,985         547          1          (3,112)        --
                                                     -----------   --------    --------   --------    ------------   --------
Total revenues                                       $    63,254   $ 14,177    $  8,159   $ 11,261    $     (3,112)  $ 93,739
                                                     ===========   ========    ========   ========    ============   ========
Operating income/(loss)                              $     8,122   $   (716)   $    900   $   (846)   $     (3,192)  $  4,268
                                                     ===========   ========    ========   ========    ============   ========
Depreciation and amortization                        $     1,890   $    738    $      2   $    533    $        405   $  3,568
                                                     ===========   ========    ========   ========    ============   ========


                                                       Animal                                           Corporate
                                                      Health &    Industrial                All        Expenses &
Three Months Ended March 31, 2002                    Nutrition    Chemicals  Distribution  Other       Adjustments    Total
                                                     -----------   --------    --------   --------    ------------  --------
Revenues -- external customers                          $ 59,378   $ 12,676    $  6,753   $  9,357      $   --      $ 88,164
         -- intersegment                                     874      1,286         372         87        (2,619)       --
                                                        --------   --------    --------   --------      --------    --------
Total revenues                                          $ 60,252   $ 13,962    $  7,125   $  9,444      $ (2,619)   $ 88,164
                                                        ========   ========    ========   ========      ========    ========
Operating income/(loss)                                 $  6,246   $   (117)   $    496   $   (750)     $ (3,793)   $  2,082
                                                        ========   ========    ========   ========      ========    ========
Depreciation and amortization                           $  1,996   $    851    $      3   $    440      $    263    $  3,553
                                                        ========   ========    ========   ========      ========    ========


                                                         Animal                                          Corporate
                                                        Health &   Industrial                All        Expenses &
Nine Months Ended March 31, 2003                       Nutrition   Chemicals  Distribution  Other       Adjustments    Total
                                                      -----------   --------    --------   --------    ------------  --------
Revenues -- external customers                          $189,301   $ 37,317    $ 22,905   $ 31,091      $   --      $280,614
         -- intersegment                                   2,224      5,745       1,395          8        (9,372)         --
                                                        --------   --------    --------   --------      --------    --------
Total revenues                                          $191,525   $ 43,062    $ 24,300   $ 31,099      $ (9,372)   $280,614
                                                        ========   ========    ========   ========      ========    ========
Operating income/(loss)                                 $ 29,852   $ (1,538)   $  2,452   $ (1,464)     $(11,387)   $ 17,915
                                                        ========   ========    ========   ========      ========    ========
Depreciation and amortization                           $  5,702   $  2,495    $      8   $  1,531      $  1,155    $ 10,891
                                                        ========   ========    ========   ========      ========    ========


                                                         Animal                                        Corporate
                                                        Health &   Industrial                All       Expenses &
Nine Months Ended March 31, 2002                       Nutrition   Chemicals  Distribution  Other     Adjustments      Total
                                                      -----------  --------    ---------  --------    ------------   --------
Revenues -- external customers                          $180,477   $ 35,800    $ 20,983   $ 28,347    $     --       $265,607
         -- intersegment                                   3,141      5,077       1,203        117      (9,538)           --
                                                        --------   --------    --------   --------    --------       --------
Total revenues                                          $183,618   $ 40,877    $ 22,186   $ 28,464    $ (9,538)      $265,607
                                                        ========   ========    ========   ========    ========       ========
Operating income/(loss)                                 $ 23,870   $ (3,627)   $  1,652   $   (860)   $(10,131)      $ 10,904
                                                        ========   ========    ========   ========    ========       ========
Depreciation and amortization                           $  5,395   $  2,545    $      9   $  1,297    $    795       $ 10,041
                                                        ========   ========    ========   ========    ========       ========
</TABLE>


                                       15
<PAGE>

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

                                 (In Thousands)

<TABLE>
<CAPTION>
                                                         Animal                                          Corporate
Identifiable Assets of                                  Health &    Industrial                All        Expenses &
Continuing Operations                                  Nutrition    Chemicals  Distribution  Other       Adjustments    Total
                                                       -----------   --------    --------   --------    ------------  --------
<S>                                                     <C>        <C>         <C>          <C>           <C>         <C>
At June 30, 2002                                        $186,118   $ 38,985    $  8,059     $ 30,688      $ 10,393    $274,243
                                                        ========   ========    ========     ========      ========    ========
At March 31, 2003                                       $199,763   $ 33,747    $ 10,082     $ 28,967      $  8,221    $280,780
                                                        ========   ========    ========     ========      ========    ========
</TABLE>

10. 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 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.


                                       16
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
                CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
                              As of March 31, 2003
                                 (In Thousands)

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                                                          Foreign
                                                                      U.S. Guarantor    Subsidiaries   Consolidation  Consolidated
                                                             Parent     Subsidiaries    Non-Guarantors  Adjustments      Balance
----------------------------------------------------------------------------------------------------------------------------------
                    Assets
Current Assets:
<S>                                                         <C>            <C>            <C>           <C>             <C>
Cash and cash equivalents                                   $      43      $   1,884      $  10,104                     $  12,031
Trade receivables                                               3,220         28,792         27,890                        59,902
Other receivables                                                 184            698          1,787                         2,669
Inventory                                                       2,874         54,115         36,323                        93,312
Prepaid expenses and other                                      2,106          2,283         11,561                        15,950
Current assets from discontinued operations                        --             --          1,693                         1,693
                                                            ---------      ---------      ---------      ---------      ---------
    Total current assets                                        8,427         87,772         89,358             --        185,557
                                                            ---------      ---------      ---------      ---------      ---------
Property, plant & equipment, net                                  206         27,086         46,076                        73,368
Intangibles                                                       210          1,303          9,656                        11,169
Investment in subsidiaries                                    101,810          3,621             --       (105,431)            --
Intercompany                                                   40,033        (36,683)         4,127         (7,477)            --
Other assets                                                   10,490          1,369            520                        12,379
Other assets from discontinued operations                          --             --             --                            --
                                                            ---------      ---------      ---------      ---------      ---------
    Total assets                                            $ 161,176      $  84,468      $ 149,737      $(112,908)     $ 282,473
                                                            =========      =========      =========      =========      =========
     Liabilities and Stockholders' Equity
Current Liabilities:
Cash overdraft                                              $     578      $   4,068      $      --                     $   4,646
Loan payable to banks                                          32,382             --          2,833                        35,215
Current portion of long term debt                              23,283            458          6,000                        29,741
Accounts payable                                                2,265         28,360         15,422                        46,047
Accrued expenses and other                                     11,145          8,031         32,920                        52,096
Current liabilities from discontinued
operations                                                         --             --          1,148                         1,148
                                                            ---------      ---------      ---------      ---------      ---------
    Total current liabilities                                  69,653         40,917         58,323             --        168,893
                                                            ---------      ---------      ---------      ---------      ---------
Long term debt                                                100,081        (69,891)        80,314         (7,477)       103,027
Other liabilities                                               3,027         14,594          4,517                        22,138
Other liabilities from discontinued operations                     --             --             --                            --
Redeemable securities:
Series B and C preferred stock                                 63,129             --             --                        63,129
             Stockholders' Equity
Series A preferred stock                                          521             --             --                           521
Common stock                                                        2             32             --            (32)             2
Paid in capital                                                   740        110,885          5,179       (116,064)           740
(Accumulated deficit) retained earnings                       (66,442)       (12,040)        10,909          1,131        (66,442)
Accumulated other comprehensive income (loss)-
  gain (loss) on derivative instruments                            51             51             --            (51)            51
  currency translation adjustment                              (9,586)           (80)        (9,505)         9,585         (9,586)
                                                            ---------      ---------      ---------      ---------      ---------
    Total stockholders' equity                                (74,714)        98,848          6,583       (105,431)       (74,714)
                                                            ---------      ---------      ---------      ---------      ---------

    Total liabilities and equity                            $ 161,176      $  84,468      $ 149,737      $(112,908)     $ 282,473
                                                            =========      =========      =========      =========      =========
</TABLE>


                                       17
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
          CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
                   For The Three Months Ended March 31, 2003
                                 (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                                                   $  6,500        $ 57,536      $ 31,975        $ (2,272)     $ 93,739
Cost of goods sold                                             5,065          45,289        22,936          (2,272)       71,018
                                                            --------        --------      --------        --------      --------
    Gross profit                                               1,435          12,247         9,039              --        22,721
Selling, general, and administrative
  expenses                                                     4,109           9,531         4,813                        18,453
                                                            --------        --------      --------        --------      --------
    Operating (loss) income                                   (2,674)          2,716         4,226              --         4,268
Interest expense                                                 543             667         2,768                         3,978
Interest income                                                   (1)             --           (38)                          (39)
Other expense (income)                                           129            (308)          291                           112
Intercompany allocation                                       (3,754)          3,592           162                            --
(Profit) loss relating to subsidiaries                           791              --            --            (791)           --
                                                            --------        --------      --------        --------      --------
    (Loss) income before income taxes                           (382)         (1,235)        1,043             791           217
Provision for income taxes                                        --             281           318                           599
                                                            --------        --------      --------        --------      --------
    (Loss) income from continuing operations                    (382)         (1,516)          725             791          (382)
DISCONTINUED OPERATIONS:
  Profit (loss) relating to discontinued operations           28,129              --            --         (28,129)           --
  (Loss) from discontinued operations (net of
    income taxes)                                                 --              --          (548)                         (548)
  (Loss) on disposal of discontinued operations
    (net of income taxes)                                    (30,019)             --        28,677                        (1,342)
                                                            --------        --------      --------        --------      --------
    Net (loss) income                                       $ (2,272)       $ (1,516)     $ 28,854        $(27,338)     $ (2,272)
                                                            ========        ========      ========        ========      ========
</TABLE>


                                       18
<PAGE>


                        PHILIPP BROTHERS CHEMICALS, INC.
          CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
                    For The Nine Months Ended March 31, 2003
                                 (In Thousands)

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                                                          Foreign
                                                                      U.S. Guarantor    Subsidiaries   Consolidation  Consolidated
                                                             Parent     Subsidiaries    Non-Guarantors  Adjustments      Balance
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>           <C>             <C>           <C>               <C>
Net sales                                                   $ 19,643      $172,552        $ 95,966      $ (7,547)         $280,614
Cost of goods sold                                            15,605       134,776          68,306        (7,547)          211,140
                                                            --------      --------        --------      --------          --------
    Gross profit                                               4,038        37,776          27,660            --            69,474
Selling, general, and administrative
  expenses                                                    13,863        23,881          13,815                          51,559
                                                            --------      --------        --------      --------          --------
    Operating (loss) income                                   (9,825)       13,895          13,845            --            17,915
Interest expense                                               1,215         2,154           8,769                          12,138
Interest income                                                   (2)           --            (133)                           (135)
Other expense (income)                                           438          (308)          1,187                           1,317
Intercompany allocation                                      (12,395)       11,927             468                              --
(Profit) loss relating to subsidiaries                        (1,392)           --              --         1,392                --
                                                            --------      --------        --------      --------          --------
    Income (loss) before income taxes                          2,311           122           3,554        (1,392)            4,595
Provision for income taxes                                       156           507           1,777                           2,440
                                                            --------      --------        --------      --------          --------
    Income (loss) from continuing operations                   2,155          (385)          1,777        (1,392)            2,155
DISCONTINUED OPERATIONS:
  Profit (loss) relating to discontinued operations           17,600            --              --       (17,600)               --
  (Loss) from discontinued operations (net of
    income taxes)                                                 --            --         (11,077)                        (11,077)
  (Loss) on disposal of discontinued operations
    (net of income taxes)                                    (30,019)           --          28,677                          (1,342)
                                                            --------      --------        --------      --------          --------
    Net (loss) income                                       $(10,264)     $   (385)       $ 19,377      $(18,992)         $(10,264)
                                                            ========      ========        ========      ========          ========
</TABLE>


                                       19
<PAGE>

                         PHILIPP BROTHERS CHEMICALS INC.
           CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
                    For the Nine Months Ended March 31, 2003
                                 (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                                         $(10,264)     $   (385)     $ 19,377        $(18,992)        $(10,264)
  Adjustment for discontinued operations                      12,419            --       (17,600)         17,600           12,419
                                                            --------      --------      --------        --------         --------
  Income (loss) from continuing operations                     2,155          (385)        1,777          (1,392)           2,155
  Adjustments to reconcile income
   (loss) from continuing operations to cash
    provided by operating activities:
    Depreciation and amortization                              1,155         4,170         5,566                           10,891
    Other                                                        319          (557)         (250)                            (488)
    Changes in operating assets and liabilities:
      Accounts receivable                                       (137)          797           391                            1,051
      Inventory                                                 (167)      (10,024)        4,122                           (6,069)
      Prepaid expenses and other                               1,112          (139)       (1,530)                            (557)
      Other assets                                            (2,135)          894          (949)                          (2,190)
      Intercompany                                             2,505        (3,114)         (783)          1,392               --
      Accounts payable                                         1,241        13,147           690                           15,078
      Accrued expenses and other                               4,274        (1,119)        2,651                            5,806
  Operating cash flows from discontinued
    operations                                                    --            --         2,970                            2,970
                                                            --------      --------      --------        --------         --------
      Net cash provided by operating activities               10,322         3,670        14,655              --           28,647
                                                            --------      --------      --------        --------         --------
Investing activities:
  Capital expenditures                                            --        (3,126)       (4,652)                          (7,778)
  Proceeds from asset sales and other investing                   --         2,530           791                            3,321
  Discontinued operations                                         --            --         1,877                            1,877
                                                            --------      --------      --------        --------         --------
      Net cash used in investing activities                       --          (596)       (1,984)             --           (2,580)
                                                            --------      --------      --------        --------         --------
Financing activities:
  Cash overdraft                                                   2        (1,434)       (1,689)                          (3,121)
  Net increase (decrease) in short term debt                  (5,609)           --          (403)                          (6,012)
  Proceeds from long term debt                                    --            --         2,125                            2,125
  Payments of long term debt                                  (5,129)         (410)       (8,181)                         (13,720)
                                                            --------      --------      --------        --------         --------


      Net cash used in financing activities                  (10,736)       (1,844)       (8,148)             --          (20,728)
                                                            --------      --------      --------        --------         --------
Effect of exchange rate changes on cash                           --             2           271                              273
                                                            --------      --------      --------        --------         --------
  Net (decrease) increase in cash and
  cash equivalents                                              (414)        1,232         4,794              --            5,612
Cash and cash equivalents at
beginning of period                                              457           652         5,310                            6,419
                                                            --------      --------      --------        --------         --------
Cash and cash equivalents at end of period                  $     43      $  1,884      $ 10,104        $     --         $ 12,031
                                                            ========      ========      ========        ========         ========
</TABLE>


                                       20
<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>               <C>
                                     Assets

Current Assets:
Cash and cash equivalents                                   $    457      $    130       $  5,832                       $  6,419
Trade receivables                                              3,150        28,671         29,336                         61,157
Other receivables                                                392           855          1,937                          3,184
Inventory                                                      2,707        44,929         39,289                         86,925
Prepaid expenses and other                                     3,010         2,460         10,050                         15,520
Current assets from discontinued operations                       --            --         11,769                         11,769
                                                            --------      --------       --------       ---------       --------
             Total current assets                              9,716        77,045         98,213              --        184,974
                                                            --------      --------       --------       ---------       --------
Property, plant & equipment, net                                 409        29,781         46,306                         76,496
Intangibles                                                       32         1,495         10,262                         11,789
Investment in subsidiaries                                    82,540         3,621             --         (86,161)            --
Intercompany                                                  73,359       (36,074)        (5,240)        (32,045)            --
Other assets                                                   9,738         1,918          1,097                         12,753
Other assets from discontinued operations                         --            --         10,432                         10,432
                                                            --------      --------       --------       ---------       --------
             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         13,975                         39,715
Accrued expenses and other                                     7,579         8,092         14,314                         29,985
Current liabilities from discontinued
operations                                                        --            --          6,660                          6,660
                                                            --------      --------       --------       ---------       --------
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         20,089                         28,597
Other liabilities from discontinued operations                    --            --          1,280                          1,280
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
(Accumulated deficit) 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>


                                       21
<PAGE>

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

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                                                          Foreign
                                                                      U.S. Guarantor    Subsidiaries   Consolidation  Consolidated
                                                             Parent     Subsidiaries    Non-Guarantors  Adjustments      Balance
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>           <C>             <C>           <C>               <C>
Net sales                                                   $  6,337      $ 53,002        $ 36,162      $ (7,337)       $ 88,164
Cost of goods sold                                             5,189        41,629          28,132        (7,337)         67,613
                                                            --------      --------        --------      --------        --------
    Gross profit                                               1,148        11,373           8,030            --          20,551
Selling, general, and administrative
  expenses                                                     4,247         9,070           5,152            --          18,469
                                                            --------      --------        --------      --------        --------
    Operating (loss) income                                   (3,099)        2,303           2,878            --           2,082
Interest expense                                                 574           427           3,608                         4,609
Interest income                                                   (5)           --              (3)                           (8)
Other expense (income)                                             6           (79)            584                           511
Intercompany allocation                                       (4,843)        4,843              --                            --
Loss (profit) relating to subsidiaries                         3,342            --              --        (3,342)             --
                                                            --------      --------        --------      --------        --------
    (Loss) income before income taxes                         (2,173)       (2,888)         (1,311)        3,342          (3,030)
Provision (benefit) for income taxes                           1,663        (1,049)            192                           806
                                                            --------      --------        --------      --------        --------
    (Loss) income from continuing operations                  (3,836)       (1,839)         (1,503)        3,342          (3,836)
DISCONTINUED OPERATIONS:
  (Loss) profit relating to discontinued operations           (5,236)           --              --         5,236              --
  (Loss) from discontinued operations (net of
    income taxes)                                                 --            --          (5,236)                       (5,236)
                                                            --------      --------        --------      --------        --------
    Net (loss) income                                       $ (9,072)     $ (1,839)       $ (6,739)     $  8,578        $ (9,072)
                                                            ========      ========        ========      ========        ========
</TABLE>


                                       22
<PAGE>

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

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                                                          Foreign
                                                                      U.S. Guarantor    Subsidiaries   Consolidation  Consolidated
                                                             Parent     Subsidiaries    Non-Guarantors  Adjustments      Balance
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>           <C>             <C>           <C>               <C>
Net sales                                                   $ 19,516      $160,863        $106,357      $(21,129)       $265,607
Cost of goods sold                                            15,849       125,650          80,068       (21,129)        200,438
                                                            --------      --------        --------      --------        --------
    Gross profit                                               3,667        35,213          26,289            --          65,169
Selling, general, and administrative
  expenses                                                    11,841        26,183          16,241                        54,265
                                                            --------      --------        --------      --------        --------
    Operating (loss) income                                   (8,174)        9,030          10,048            --          10,904
Interest expense                                               1,769         1,995          10,162                         13,926
Interest income                                                  (15)           --            (296)                          (311)
Other (income) expense                                          (298)          (72)          2,784                          2,414
Intercompany allocation                                       (9,778)        9,778              --                             --
Loss (income) relating to subsidiaries                         5,730            --              --        (5,730)             --
                                                            --------      --------        --------      --------        --------
    (Loss) income before income taxes                         (5,582)       (2,671)         (2,602)        5,730          (5,125)
Provision (benefit) for income taxes                           1,383          (185)            642                         1,840
                                                            --------      --------        --------      --------        --------
    (Loss) income from continuing operations                  (6,965)       (2,486)         (3,244)        5,730          (6,965)
DISCONTINUED OPERATIONS:
  (Loss) profit relating to discontinued operations           (6,171)           --              --         6,171              --
  (Loss) from discontinued operations (net of
    income taxes)                                                 --            --          (6,171)                        (6,171)
                                                            --------      --------        --------      --------        --------
    Net (loss) income                                       $(13,136)     $ (2,486)       $ (9,415)     $ 11,901        $(13,136)
                                                            ========      ========        ========      ========        ========
</TABLE>


                                       23
<PAGE>


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

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                                                          Foreign
                                                                      U.S. Guarantor    Subsidiaries   Consolidation  Consolidated
                                                             Parent     Subsidiaries    Non-Guarantors  Adjustments      Balance
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>           <C>             <C>           <C>               <C>
Operating activities:
  Net (loss) income                                         $(13,136)     $ (2,486)     $ (9,415)       $ 11,901        $(13,136)
  Adjustment for discontinued operations                       6,171            --         6,171          (6,171)          6,171
                                                            --------      --------      --------        --------        --------
  (Loss) income from continuing operations                  $ (6,965)     $ (2,486)     $ (3,244)       $  5,730        $ (6,965)
  Adjustments to reconcile (loss) income
    from continuing operations to cash
    (used in) provided by operating activities:
    Depreciation and amortization                                795         3,986         5,260                          10,041
    Other                                                       (594)          136         4,271                           3,813
    Changes in operating assets and liabilities:
      Accounts receivable                                      1,278         6,163         4,867                          12,308
      Inventory                                                  318        (3,521)      (13,507)                        (16,710)
      Prepaid expenses and other                                 892          (909)       (2,527)                         (2,544)
      Other assets                                               260          (838)         (264)                           (842)
      Intercompany                                           (10,614)        3,675        12,669          (5,730)             --
      Accounts payable                                        (1,095)          343            53                            (699)
      Accrued expenses and other                                 902        (5,130)        6,678                           2,450
  Operating cash flows from discontinued
    operations                                                    --            --          (438)                           (438)
                                                            --------      --------      --------        --------        --------
      Net cash (used in) provided by
      operating activities                                   (14,823)        1,419        13,818              --             414
                                                            --------      --------      --------        --------        --------
Investing activities:
  Capital expenditures                                           (74)       (3,918)       (3,889)                         (7,881)
  Acquisition of a business                                       --            --        (7,182)                         (7,182)
  Other investing                                                 --           412            57                             469
  Discontinued operations                                         --            --          (692)                           (692)
                                                            --------      --------      --------        --------        --------
      Net cash used in investing activities                      (74)       (3,506)      (11,706)             --         (15,286)
                                                            --------      --------      --------        --------        --------
Financing activities:
  Cash overdraft                                                 (13)        1,494            --                           1,481
  Net increase (decrease) in short term debt                  16,093            --          (845)                         15,248
  Proceeds from long term debt                                 2,000           316            --                           2,316
  Payments of long term debt                                  (2,533)         (395)       (1,396)                         (4,324)
                                                            --------      --------      --------        --------        --------
      Net cash provided by (used in)
      financing activities                                    15,547         1,415        (2,241)             --          14,721
                                                            --------      --------      --------        --------        --------
Effect of exchange rate changes on cash                           --            --          (110)                           (110)
                                                            --------      --------      --------        --------        --------
  Net increase (decrease) in cash and
  cash equivalents                                               650          (672)         (239)             --            (261)
Cash and cash equivalents at
beginning of period                                            1,292         1,210        12,343                          14,845
                                                            --------      --------      --------        --------        --------
Cash and cash equivalents at end of period                  $  1,942      $    538      $ 12,104        $     --        $ 14,584
                                                            ========      ========      ========        ========        ========
</TABLE>


                                       24
<PAGE>

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

General

      The Company is a 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.

      In February 2003 the Company determined that it would permanently shutdown
and no longer fund the operations of its Norwegian  subsidiary,  Odda Smelteverk
("Odda").  On February 28, 2003,  the management of Odda filed for bankruptcy in
Norway and the  bankruptcy is proceeding in accordance  with Norwegian law. As a
result of the bankruptcy, the creditors of Odda have recourse only to the assets
of Odda,  except in the case of certain  debt  guaranteed  by the  Company.  The
Company  has  removed  all  assets,  liabilities  (except  as noted  below)  and
cumulative   translation   adjustments   related  to  Odda  from  the  Company's
consolidated balance sheet as of March 31, 2003, and has recorded the net result
as a Loss on disposal of discontinued  operations.  Philipp Brothers  Chemicals,
Inc is the guarantor of certain debt of Odda under two separate  multi- currency
revolving  credit  facilities of Odda. As of March 31, 2003, NOK 41,100 ($5,731)
was  outstanding  under these  facilities  and continues to be included in Loans
payable to banks and Current portion of long-term debt captions on the Company's
Consolidated  Balance  Sheet at March 31,  2003.  The Company  has entered  into
forebearance  agreements with the two banks holding  guarantees from the Company
for the debt of Odda under which the banks have  agreed not to demand  immediate
payment on those  guarantees,  and the Company  has agreed to pay the  principal
amount plus interest in installments.  The Company has been advised by Norwegian
counsel  that it will  obtain the  benefit of the banks'  position  as a secured
creditor upon payment  pursuant to the guarantees.  The Company has obtained the
consent of a majority  of the  holders of its  outstanding  Senior  Subordinated
Notes to amend the  Indenture  governing  these  notes in such a manner that the
bankruptcy of Odda does not create an event of default  thereunder.  The results
of Odda's operations are reflected as a discontinued operation and the operating
results have been  excluded  from the  Industrial  Chemical  segment.  All prior
periods have been restated for consistency of presentation.

      In November 2002,  the Company had announced a temporary  shutdown of Odda
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.  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 to their estimated salvage values.

      In April 2003,  the  Company  completed  the sale of its Carbide  business
which  distributed  calcium  carbide  previously  produced by Odda.  The Company
recorded  a loss  on sale of  approximately  $1.0  million.  Proceeds  were  not
material.  The results of Carbide's  operations  are reflected as a discontinued
operation  and the operating  results have been  excluded from the  Distribution
segment. All prior periods have been restated for consistency of presentation.

      The Company recorded  operating  income,  after the  classification of its
Odda and Carbide businesses as discontinued operations, of $17.9 million for the
nine months ended March 31, 2003  compared to operating  income of $10.9 million
in the prior year nine-month  period. The  period-to-period  comparison was also
affected by purchase  accounting  adjustments  relating to inventory acquired in
the acquisition of the Phibro Animal Health ("PAH") business, that resulted in a
$3.3 million  increase to cost of goods sold for the nine months ended March 31,
2002.

      At March 31,  2003,  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.  The Company is
presently seeking to refinance its credit facility and the Pfizer note payable.

      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.

                                       25
<PAGE>

      Certain prior year amounts have been reclassified to conform to the fiscal
2003  presentation.  Freight and warehousing  expenses of $6.4 million and $20.0
million for the three and nine months ended March 31, 2002,  respectively,  were
reclassified from general and administrative expenses to cost of goods sold.

Results of Operations

<TABLE>
<CAPTION>
                                                                                 Sales
                                                                               ($000's)
                                                            Three Months Ended            Nine Months Ended
                                                                 March 31,                    March 31,
                                                          ----------------------      -----------------------
Operating Segments                                          2003           2002         2003           2002
                                                          -------        -------      --------       --------
      <S>                                                 <C>            <C>          <C>            <C>
      Animal Health and Nutrition......................   $63,254        $60,252      $191,525       $183,618
      Industrial Chemicals.............................    14,177         13,962        43,062         40,877
      Distribution.....................................     8,159          7,125        24,300         22,186
      All Other........................................    11,261          9,444        31,099         28,464
      Elimination of inter-segment sales...............    (3,112)        (2,619)       (9,372)        (9,538)
                                                          -------        -------      --------       --------
                                                          $93,739        $88,164      $280,614       $265,607
                                                          =======        =======      ========       ========

<CAPTION>
                                                                         Operating Income (Loss)
                                                                                ($000's)
                                                            Three Months Ended               Nine Months Ended
                                                                 March 31,                       March 31,
Operating Segments                                          2003           2002         2003           2002
                                                          -------        -------      --------       --------
      <S>                                                 <C>            <C>          <C>            <C>
      Animal Health and Nutrition ......................  $ 8,122        $ 6,246      $ 29,852       $ 23,870
      Industrial Chemicals..............................     (716)          (117)       (1,538)        (3,627)
      Distribution......................................      900            496         2,452          1,652
      All Other.........................................     (846)          (750)       (1,464)          (860)
      Corporate expenses and eliminations...............   (3,192)        (3,793)      (11,387)       (10,131)
                                                          -------        -------      --------       --------
                                                          $ 4,268        $ 2,082      $ 17,915       $ 10,904
                                                          =======        =======      ========       ========
</TABLE>

Comparison of Three Months Ended March 31, 2003 and 2002

      Net Sales. Net sales increased by $5.6 million, or 6%, to $93.7 million in
the three  months  ended March 31,  2003,  as compared to the same period of the
prior year. Each of the Company's  segments reported higher sales over the prior
period.

      Animal Health and Nutrition net sales increased by $3.0 million, or 5%, to
$63.3  million for the three  months  ended March 31, 2003.  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 declined
due to lower unit volume sales of its core organic materials.

      Industrial  Chemicals net sales increased by $.2 million,  or 2%, to $14.2
million  in the three  months  ended  March 31,  2003 as  compared  to the prior
period. The Company's Prince operations improved due to higher unit volumes over
the prior year comparable period. Sales by the Company's Phibro-Tech  subsidiary
decreased  from the prior year due to lower  recycling  fees and sales  volumes.
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  continues its existing  etchant  business at its other
facilities.

      Net sales for the Distribution  segment increased by $1.0 million, or 15%,
to $8.2  million in 2003,  as  compared to the prior  period.  Higher unit sales
volumes at the Company's  Ferro  operations and improved  product mix changes in
the Company's PhibroChem operations accounted for the increase.

      Net sales for the All Other segment increased by $1.8 million,  or 19%, to
$11.2  million in 2003,  as compared to the prior  period.  Higher sales of crop
protection  chemicals  increased  revenues by  approximately  $1.2 million.  The
Company's fly ash


                                       26
<PAGE>

business  increased  revenues  by  approximately  $.5 million due to higher unit
volumes  offset in part by declines in average  selling  prices.  An increase in
specialized  lab projects and  formulations  at the  segment's  U.K.  operations
accounted for the balance of the increase.

      Gross Profit.  Gross profit  increased by $2.2  million,  or 11%, to $22.7
million in the three  months  ended  March 31,  2003,  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 $.3
million  for the  three  months  ended  March 31,  2003 and 2002,  respectively.
Excluding  the  purchase  accounting  adjustments,  gross  profit  increased  by
approximately  $1.7 million in the Animal Health segment primarily due to higher
unit volume sales. The Industrial  Chemicals  segment decreased by approximately
$.9 million primarily due to lower revenues and production levels at Phibro-Tech
facilities  and  also  higher   manufacturing  costs  at  the  Company's  Prince
Manufacturing  operations.   The  Distribution  segment  increased  $.4  million
primarily as a result of higher unit volume sales and product mix. The All Other
segment  approximated  the  prior  year due to higher  sales of crop  protection
chemicals   offset  by  the  Company's  fly  ash   operations.   Elimination  of
inter-company profit in inventory accounted for the remainder.

      Selling,  General  and  Administrative  Expenses.  Costs  for the  current
quarter were $18.5 million,  approximately the same as the comparable prior year
period.  During the  current  quarter,  the  Company  recognized  a gain of $2.2
million  resulting  from a settlement  of a class  action suit against  European
vitamin manufacturers. Costs declined primarily at the Company's Phibro-Tech and
Koffolk operations due to cost reduction programs and lower levels of production
activity. Costs increased due to environmental accruals of $.7 million primarily
related to the Company's Sumter, S.C. facility,  severance costs of $.4 million,
resolution of a disputed  claim  related to a divested  business of $.2 million,
actuarial revisions in pension expense of $.3 million and higher insurance costs
of $.4 million.  Further,  Corporate  expenses increased due to costs related to
debt restructuring activities and higher staff levels.

      Operating  (Loss) Income.  Operating  income  increased by $2.2 million to
$4.3 million in 2003,  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  higher  environmental  expense
accruals at Phibro-Tech and higher manufacturing costs at Prince  Manufacturing,
offset in part by lower general and administrative expenses at Phibro-Tech.  The
Company's Distribution segment increased as a result of higher unit volume sales
and product mix. The All Other segment declined  slightly from the prior period.
In addition,  the Company  recognized a gain of $2.2 million  during the current
quarter  resulting  from a settlement  of a class  action suit against  European
vitamin manufacturers.

      Interest  Expense,  Net.  Costs  decreased  by $.7  million or 14% to $3.9
million  for the three  months  ended  March 31,  2003 as  compared to the prior
period primarily due to lower weighted-average  interest rates and lower average
borrowing levels.

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

      Income  Taxes.  An income tax  provision  of $.6 million was reported on a
consolidated  pre-tax  income of $.2  million in fiscal  2003  primarily  due to
income tax  provisions in profitable  foreign  jurisdictions  and also for state
income taxes. The Company continues to carry a full valuation  allowance related
to its domestic and Brazilian  operating losses.  These deferred tax assets will
continue to be  evaluated  each  reporting  period  based on actual and expected
operating performance.

      Loss from  Discontinued  Operations.  Net sales, loss and depreciation and
amortization  from the discontinued  operations for the three months ended March
31 were as follows, amounts in $000s:

<TABLE>
<CAPTION>
                                                                  Odda                           Carbide
                                                                  ----                           -------
                                                           2003          2002              2003          2002
                                                        ---------      ---------       -----------    ----------
<S>                                                     <C>            <C>             <C>            <C>
Gross sales, including intercompany...................  $      --      $   8,877       $     1,933    $    1,859
                                                        =========      =========       ===========    ==========

Pre-tax income (loss) from discontinued operations....  $    (500)     $  (5,502)      $     (132)           109
Provision (benefit) for income tax ...................         --            166              (84)             9
                                                        ---------      ---------       -----------    ----------
Net income (loss) from discontinued operations........  $    (500)     $  (5,336)      $      (48)    $      100
                                                        =========      =========       ===========    ==========

Depreciation and amortization.........................  $      --      $   5,513       $      192     $       49
                                                        =========      =========       ===========    ==========
</TABLE>

      Loss on Disposal of Discontinued Operations. The Company recorded charges
of $.3 million and $1.0 million related to the disposal of Odda and Carbide,
respectively. Such costs were related to the write-off of foreign currency
cumulative


                                       27
<PAGE>

translation adjustments,  fixed assets,  intangibles and other net assets of the
divested operations and also costs associated with their disposition.

Comparison of Nine Months Ended March 31, 2003 and 2002

      Net Sales. Net sales increased by $15.0 million,  or 6%, to $280.6 million
in the nine months ended March 31,  2003,  as compared to the same period of the
prior year. Each of the Company's  segments reported higher sales over the prior
period.

      Animal Health and Nutrition net sales increased by $7.9 million, or 4%, to
$191.5  million for the nine months  ended March 31,  2003.  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.

      Industrial  Chemicals net sales increased by $2.2 million, or 5%, to $43.1
million in the nine months ended March 31, 2003 as compared to the prior period.
Sales by the  Company's  Phibro-Tech  subsidiary  decreased  due to  lower  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  continued  its
existing  etchant  business  at  its  other  facilities.  The  Company's  Prince
operations  also reported higher sales due to higher unit volumes over the prior
year comparable period.

      Net sales for the Distribution  segment increased by $2.1 million, or 10%,
to $24.3  million in 2003,  as compared to the prior  period.  Higher unit sales
volumes at the Company's  Ferro  operations and improved  product mix changes in
the Company's PhibroChem operations accounted for the increase.

      Net sales for the All Other segment  increased by $2.6 million,  or 9%, to
$31.1 million in 2003,  as compared to the prior  period.  The Company's fly ash
business  increased  revenues by  approximately  $2.1 million due to higher unit
volumes offset in part by declines in average  selling  prices.  Higher sales of
crop protection  chemicals increased revenues by approximately $1.1 million over
the prior year  comparable  period.  A decrease in specialized  lab projects and
formulations at the segment's U.K. operations lowered revenues by $.6 million.

      Gross  Profit.  Gross profit  increased by $4.3  million,  or 7%, to $69.5
million in the nine  months  ended  March 31,  2003,  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 $3.3
million  for the nine  months  ended  March  31,  2003 and  2002,  respectively.
Excluding  the  purchase  accounting  adjustments,  gross  profit  increased  by
approximately  $1.4 million in the Animal Health segment primarily due to higher
unit volume  sales,  lower  manufacturing  costs offset in part by lower average
selling prices. The Industrial Chemicals segment decreased by approximately $1.7
million  primarily  due  to  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  $.7  million
primarily as a result of higher unit volume sales and product mix. The All Other
segment  declined by approximately  $.6 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  offset  in part  by  higher  margins  on the  sale of crop  protection
chemicals.  Elimination of inter-company  profit in inventory  accounted for the
remainder.

      Selling,  General and  Administrative  Expenses.  Costs  decreased by $2.7
million, or 5% to $51.6 million in 2003, as compared to the prior period. During
the current period, the Company recognized a gain of $2.8 million resulting from
a  settlement  of a class action suit against  European  vitamin  manufacturers.
Costs declined primarily at the Company's Phibro-Tech and Koffolk 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.  Costs  increased  due to  environmental
accruals  of $.7  million  primarily  related  to  the  Company's  Sumter,  S.C.
facility, severance costs of $.4 million, resolution of a disputed claim related
to a divested business of $.2 million, actuarial revisions in pension expense of
$.3  million  and higher  insurance  costs of $.4  million.  Further,  Corporate
expenses  increased due to costs related to debt  restructuring  activities  and
higher staff levels.

      Operating  (Loss) Income.  Operating  income  increased by $7.0 million to
$17.9 million in 2003,  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 volume sales and lower  manufacturing
costs, offset in part by lower average selling prices. The


                                       28
<PAGE>

Industrial  Chemicals  segment  improved  primarily  due to  lower  general  and
administrative  costs at the  Company's  Phibro-Tech  facilities.  The Company's
Distribution  segment  increased  as a result of higher  unit  volume  sales and
product mix. 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 offset in part
by higher margins on the sale of crop  protection  chemicals.  In addition,  the
Company  recognized a gain of $2.8 million during the current  period  resulting
from a settlement of a class action suit against European vitamin manufacturers.

      Interest  Expense,  Net.  Costs  decreased by $1.6 million or 12% to $12.0
million for the nine months ended March 31, 2003 as compared to the prior period
primarily  due to lower  weighted-average  interest  rates  and  slightly  lower
average borrowing levels.

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

      Income  Taxes.  An income tax  provision of $2.4 million was reported on a
consolidated  pre-tax  income of $4.6  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 related to
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.

      Loss from  Discontinued  Operations.  Net sales, loss and depreciation and
amortization from the discontinued operations for the nine months ended March 31
were as follows, amounts in $000s:

<TABLE>
<CAPTION>
                                                                  Odda                      Carbide
                                                                  ----                      -------
                                                           2003           2002          2003        2002
                                                        ---------      ---------     ---------    --------
<S>                                                     <C>            <C>           <C>          <C>
Gross Sales, including intercompany...................  $   7,781      $  24,841     $   1,933    $  5,612
                                                        =========      =========     =========    ========

Pre-tax income (loss) from discontinued operations....  $ (11,193)     $  (7,932)    $      58         618
Provision (benefit) for income tax ...................         --         (1,254)          (58)        111
                                                        ---------      ---------     ---------    --------
Net income (loss) from discontinued operations........  $ (11,193)     $  (6,678)    $     116    $    507
                                                        =========      =========     =========    ========

Depreciation and amortization.........................  $     643      $   6,967     $     251    $    151
                                                        =========      =========     =========    ========
</TABLE>

      Loss on Disposal of Discontinued Operations.  The Company recorded charges
of $.3 million and $1.0 million  related to the  operations of Odda and Carbide,
respectively.  Such costs  were  related to the  write-off  of foreign  currency
cumulative  translation  adjustments,  fixed assets,  intangibles  and other net
assets  of  the  divested  operations  and  also  costs  associated  with  their
disposition.

Liquidity and Capital Resources

      Net Cash Provided by Operating Activities. Cash provided by operations for
the nine months ended March 31, 2003 and 2002 was $28.6 million and $.4 million,
respectively. Cash provided by operating activities increased in the nine months
ended  March 31,  2003,  compared  with the nine months  ended  March 31,  2002,
primarily due to improvements in working capital management and higher operating
income.

      Net  Cash  Used in  Investing  Activities.  Net  cash  used  in  investing
activities  for the nine months  ended March 31, 2003 and 2002 was $2.6  million
and $15.3 million,  respectively.  The prior year included  contingent  purchase
price payments of $7.2 million.  Capital  expenditures  of $7.8 million and $7.9
million in the respective 2003 and 2002 periods,  were for new product capacity,
maintaining the Company's existing asset base and for environmental,  health and
safety projects. Proceeds from sales of fixed assets and discontinued operations
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 nine months ended March 31, 2003 and
2002 was ($20.7) million and $14.7 million,  respectively.  Borrowings under the
domestic  credit  facility and other  long-term debt were reduced in fiscal 2003
from cash generated by operating activities.


                                       29
<PAGE>

      Liquidity.  At March 31,  2003,  the  Company was in  compliance  with the
financial  covenants  included in its amended  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 credit
facility,  there can be no  assurance  that the  Company  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 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,  if at all, and
there are no disposal transactions which the Company considers probable at March
31, 2003.  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,  if at all. 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 February 2003 the Company determined that it would permanently shutdown
and no longer fund the operations of its Norwegian  subsidiary,  Odda Smelteverk
("Odda").  On February 28,  2003,  Odda filed for  bankruptcy  in Norway and the
bankruptcy is proceeding in accordance  with Norwegian law. The Company has been
advised that, as a result of the bankruptcy, the creditors of Odda have recourse
only to the assets of Odda, except in the case of certain debt guaranteed by the
Company.  The  Company  has removed  all  assets,  liabilities,  and  cumulative
translation  adjustments related to Odda from the Company's consolidated balance
sheets  as of March  31,  2003,  and has  recorded  the net  result as a Loss on
disposal of  discontinued  operations.  The Company is the  guarantor of certain
debt of Odda under two separate multi-currency  revolving credit facilities.  As
of March 31, 2003, NOK 41,100  ($5,731) was outstanding  under these  facilities
and continues to be included in the Loans  payable to banks and Current  portion
of long-term debt captions on the Company's consolidated balance sheets at March
31, 2003.  The Company has entered  into  forebearance  agreements  with the two
banks holding  guarantees  from the Company for the debt of Odda under which the
banks have agreed not to demand immediate payment on those  guarantees,  and the
Company has agreed to pay the principal  amount plus  interest in  installments.
The  Company  has been  advised by  Norwegian  counsel  that it will  obtain the
benefit of the banks'  position as a secured  creditor upon payment  pursuant to
the  guarantees.  The  Company  has  obtained  the  consent of a majority of the
holders  of its  outstanding  Senior  Subordinated  Notes  due 2008 to amend the
Indenture  governing  these notes in such a manner that the  bankruptcy  of Odda
does not create an event of default thereunder.

      Working  capital as of March 31, 2003 was $16.7 million  compared to $50.5
million at fiscal year end June 30, 2002.  The  decrease in working  capital was
primarily  due  to  the  reclassification  to  Current  Liabilities  of  certain
obligations, now due within one year, previously classified as non-current Other
Liabilities.  These  reclassified  items include:  the Note Payable to Pfizer of
approximately  $20.1  million,  due March 2004,  included in Current  portion of
long-term  debt;  accrued  royalties  payable of $9.0  million,  due March 2004,
included in Other current liabilities;  and, other payables and accruals of $6.5
million included in Accounts payable and other current liabilities.


                                       30
<PAGE>

      At March 31,  2003,  the  amount of credit  extended  under the  Company's
credit  facility  totaled  $32.4  million  and the  Company  had  $12.0  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 $8.7 million under their respective loan agreements.

      The Company  anticipates  spending  approximately $9.0 million for capital
expenditures related to continuing operations 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 adoption of
SFAS No. 146 did not result in an impact on the Company's 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  adoption  of FIN No. 45 did not  result in a material
impact on the Company's 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  (including  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
adoption  of FIN No. 46 did not result in an impact on the  Company's  financial
statements.

      In April 2003, the Financial  Accounting  Standards Board issued Statement
of  Financial  Accounting  Standards  No.  149,  "Amendment  of SFAS No.  133 on
Derivative  Instruments and Hedging  Activities"  ("SFAS No. 149"). SFAS No. 149
amends and  clarifies  accounting  and  reporting  for  derivative  instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging  activities  under SFAS No. 133. SFAS No. 149 is effective for contracts
entered  into or


                                       31
<PAGE>

modified after June 30, 2003,  and for hedging  relationships  designated  after
June 30, 2003. The Company is currently assessing the impact of this statement.

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,  at its meeting held February
6-12,  2003, had determined to withdraw the maximum residue limits for Carbadox.
A final report has not yet been issued. 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  continues
to assess 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


                                       32
<PAGE>

            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.


                                       33
<PAGE>

                          PART II -- OTHER INFORMATION

Item 1. Legal Proceedings.

            None.

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.


                                       34
<PAGE>

                                   SIGNATURES

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

                                                PHILIPP BROTHERS CHEMICALS, INC.

Date: May 14, 2003                              By: /s/ JACK C. BENDHEIM
                                                --------------------------------
                                                        Jack C. Bendheim
                                                      Chairman of the Board

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

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

                                       35
<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: May 14, 2003

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


                                       36
<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:    May 14, 2003

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


                                       37
<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: May 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.

                                       38