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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                    FORM 10-Q

                                   ----------

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

                For the quarterly period ended September 30, 2000

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

                                 Yes |X| No |_|

Number of shares of each class of common stock outstanding as of October 31,
2000:

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

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<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.

                                Table of Contents

                                                                            Page
                                                                            ----

PART I  FINANCIAL INFORMATION (UNAUDITED)

        Item 1.  Condensed Financial Statements ...........................    3
                 Condensed Consolidated Balance Sheets ....................    4
                 Condensed Consolidated Statements of Operations and
                 Comprehensive Income .....................................    5
                 Condensed Consolidated Statements of Changes in
                 Stockholders' Equity .....................................    6
                 Condensed Consolidated Statements of Cash Flows ..........    7
                 Notes to Condensed Consolidated Financial Statements .....    8
        Item 2.  Management's Discussion and Analysis of Financial
                 Condition and Results of Operations ......................   18
        Item 3.  Quantitative and Qualitative Disclosures About Market
                 Risk .....................................................   22

PART II OTHER INFORMATION

        Item 6.  Exhibits and Reports on Form 8-K .........................   22

SIGNATURES ................................................................   23


                                       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 throughout this
Form 10-Q and are discussed in Item 2 of Part I of this Form 10-Q under the
caption "Certain Factors Affecting Future Operating Results." Unless the context
otherwise requires, references in this report to the "Company" refers to the
Company and/or one or more of its subsidiaries, as applicable.

PART I -- FINANCIAL INFORMATION

Item 1. Condensed Financial Statements


                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                     September 30,     June 30,
                                                                         2000           2000
                                                                     -------------    ---------
<S>                                                                    <C>            <C>
                                     ASSETS
CURRENT ASSETS:
   Cash and cash equivalents .....................................     $   5,864      $   2,403
   Trade receivables, less allowance for doubtful accounts of $805
      at September 30, 2000 and $756 at June 30, 2000 ............        67,870         79,376
   Other receivables .............................................         4,314          8,479
   Inventories ...................................................        53,644         50,405
   Prepaid expenses and other current assets .....................         9,675          9,098
                                                                       ---------      ---------
   TOTAL CURRENT ASSETS ..........................................       141,367        149,761
PROPERTY, PLANT AND EQUIPMENT, net ...............................        75,103         76,180
INTANGIBLES ......................................................         6,476          6,297
OTHER ASSETS .....................................................        27,538         26,213
                                                                       ---------      ---------
                                                                       $ 250,484      $ 258,451
                                                                       =========      =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Cash overdraft ................................................     $   3,675      $   2,120
   Loans payable to banks ........................................         7,078          8,650
   Current portions of long-term debt ............................         1,296          2,296
   Accounts payable ..............................................        32,181         32,642
   Accrued expenses and other current liabilities ................        25,222         24,157
                                                                       ---------      ---------

      TOTAL CURRENT LIABILITIES ..................................        69,452         69,865

LONG-TERM DEBT ...................................................       137,731        139,722
OTHER LIABILITIES ................................................        12,579         13,282
                                                                       ---------      ---------
      TOTAL LIABILITIES ..........................................       219,762        222,869
                                                                       ---------      ---------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE SECURITIES:
   Common stock ..................................................         3,038          3,513
   Common stock of subsidiary ....................................           346            451
                                                                       ---------      ---------
      TOTAL REDEEMABLE SECURITIES ................................         3,384          3,964
                                                                       ---------      ---------
STOCKHOLDERS' EQUITY:
   Series A preferred stock ......................................           521            521
   Common stock ..................................................             2              2
   Paid-in capital ...............................................           878            878
   Retained earnings .............................................        29,689         32,808
   Accumulated other comprehensive (loss)--
      cumulative currency translation adjustment .................        (3,752)        (2,591)
                                                                       ---------      ---------
      TOTAL STOCKHOLDERS' EQUITY .................................        27,338         31,618
                                                                       ---------      ---------
                                                                       $ 250,484      $ 258,451
                                                                       =========      =========
</TABLE>

       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)
             For the Three Months Ended September 30, 2000 and 1999
                                 (In Thousands)

                                                            2000        1999
                                                          --------    --------

NET SALES .............................................   $ 70,895    $ 70,087

COST OF GOODS SOLD ....................................     51,833      50,228
                                                          --------    --------

   GROSS PROFIT .......................................     19,062      19,859

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ..........     17,652      19,074
                                                          --------    --------

   OPERATING INCOME ...................................      1,410         785

OTHER:

   Interest expense ...................................      3,939       3,390

   Interest income ....................................       (217)        (92)

   Other expense, net .................................      1,328         901
                                                          --------    --------

   LOSS BEFORE INCOME TAXES ...........................     (3,640)     (3,414)

BENEFIT FOR INCOME TAXES ..............................       (521)     (1,429)
                                                          --------    --------

   NET LOSS ...........................................     (3,119)     (1,985)

OTHER COMPREHENSIVE (LOSS) INCOME
   Change in foreign currency translation adjustment ..     (1,161)      1,384
                                                          --------    --------

   COMPREHENSIVE LOSS .................................   $ (4,280)   $   (601)
                                                          ========    ========

       See notes to unaudited Condensed Consolidated Financial Statements


                                       5
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
                        STOCKHOLDERS' EQUITY (Unaudited)
                  For the Three Months Ended September 30, 2000
                                 (In Thousands)

<TABLE>
<CAPTION>
                                 Preferred Stock    Common Stock                                  Accumulated
                                 ---------------  ---------------                                    Other
                                                  Class     Class    Paid-in       Retained      Comprehensive
                                     Series A      "A"       "B"     Capital       Earnings      Income (loss)        Total
                                 ---------------  -----     -----    -------       --------      -------------        -----
<S>                                    <C>         <C>       <C>       <C>         <C>              <C>             <C>
BALANCE, JULY 1, 2000                  $521        $1        $1        $878        $ 32,808         $(2,591)        $ 31,618

   Foreign currency translation
     adjustment                          --         -         -          --              --          (1,161)          (1,161)

   Net loss                              --         -         -          --          (3,119)             --           (3,119)
                                       ----        --        --        ----        --------         -------         --------

BALANCE, SEPTEMBER 30, 2000            $521         1         1        $878        $ 29,689         $(3,752)        $ 27,338
                                       ====        ==        ==        ====        ========         =======         ========
</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 Three Months Ended September 30, 2000 and 1999
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                  2000          1999
                                                               --------      --------
<S>                                                            <C>           <C>
OPERATING ACTIVITIES:
   Net loss ..............................................     $ (3,119)     $ (1,985)
   Adjustments to reconcile net loss to net
      cash provided by operating activities:
      Depreciation and amortization ......................        3,129         2,988
      Other ..............................................          (53)          695
      Changes in operating assets and liabilities:
         Accounts receivable .............................       12,018        11,508
         Inventories .....................................       (4,402)       (3,917)
         Prepaid expenses and other current assets .......        3,195         1,073
         Other assets ....................................       (1,958)         (261)
         Accounts payable ................................         (761)       (1,748)
         Accrued expenses and other current liabilities ..        2,369          (240)
                                                               --------      --------
         NET CASH PROVIDED BY OPERATING ACTIVITIES .......       10,418         8,113
                                                               --------      --------
INVESTING ACTIVITIES:
   Capital expenditures ..................................       (3,248)       (4,045)
   Proceeds from property damage claim ...................           --           872
   Other .................................................          (85)         (500)
                                                               --------      --------
         NET CASH USED IN INVESTING ACTIVITIES ...........       (3,333)       (3,673)
                                                               --------      --------
FINANCING ACTIVITIES:
   Cash overdraft ........................................        1,264          (619)
   Net decrease in short-term debt .......................       (1,040)         (822)
   Proceeds from long-term debt ..........................          732         1,019
   Payments of long-term debt ............................       (4,350)       (2,278)
                                                               --------      --------
         NET CASH USED IN FINANCING ACTIVITIES ...........       (3,394)       (2,700)
                                                               --------      --------

EFFECT OF EXCHANGE RATE CHANGES ON CASH ..................         (230)           --
                                                               --------      --------

         NET INCREASE IN CASH AND CASH EQUIVALENTS .......        3,461         1,740

CASH AND CASH EQUIVALENTS at beginning of period .........        2,403         2,308
                                                               --------      --------

         CASH AND CASH EQUIVALENTS at end of period ......     $  5,864      $  4,048
                                                               ========      ========
</TABLE>

       See notes to unaudited Condensed Consolidated Financial Statements


                                       7
<PAGE>

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

1. General

      In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial position
as of September 30, 2000 and the results of operations and cash flows for the
three months ended September 30, 2000 and 1999.

      The condensed consolidated balance sheet as of June 30, 2000 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, 2000.

      Certain prior year amounts in the accompanying consolidated financial
statements and related notes have been reclassified to conform to the 2000
presentation. Such reclassifications include a reclassification of customer
rebates of $232 for the three months ended September 30, 1999, from selling,
general and administrative expenses to net sales on the consolidated statements
of operations and comprehensive income, as a result of the adoption of the
Emerging Issues Task Force Issue No. 00-14 "Accounting for Certain Sales
Incentives."

      The Company adopted Statement of Financial Accounting Standards No. 133
"Accounting for Derivative Instruments and Hedging Activities" (SFAS 133) on
July 1, 2000. SFAS 133 requires that all derivative instruments be recorded on
the balance sheet at their fair value. Gains or losses resulted from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. The Company uses
derivative financial instruments, primarily foreign currency forward contracts
as a means of hedging exposure to foreign currency risks. The Company also
utilizes, on a limited basis, certain commodity derivatives, primarily on copper
used in its manufacturing process, to hedge the cost of its anticipated
production requirements. During the quarter ended September 30, 2000, the
Company's derivative instruments did not meet the criteria of SFAS 133 to
qualify for hedge accounting. SFAS 133 requires that unrealized gains and losses
on derivatives not qualifying for hedge accounting be recognized currently in
earnings. The cumulative effect of a change in accounting principle due to the
adoption of SFAS 133 as of July 1, 2000 was not material. The Company recorded a
net gain of $395 in cost of good sold for commodity contracts and a net gain of
$62 in other expense for forward currency contracts for changes in the
derivatives fair value for the three month period ended September 30, 2000.

      In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101 "Revenue Recognition", which provides
guidelines in applying generally accepted accounting principles to selected
revenue recognition issues. The SAB is effective in the fourth fiscal quarter of
fiscal years beginning after December 15, 1999, or as of April 1, 2001 in the
Company's case. The Company continues to evaluate the impact of SAB 101, but
believes it is in compliance with the provisions of the SAB and accordingly,
does not expect this statement to have a material impact on its financial
statements.

      In October 2000, the Emerging Issues Task Force ("EITF") issued guidance
on how to classify certain revenues and costs in a company's financial
statements. EITF No. 00-10 "Accounting for Shipping and Handling Revenues and
Costs" requires that companies classify all amounts billed to customers related
to shipping and handling cost as revenue. This statement will be effective in
the fourth fiscal quarter of fiscal years beginning after December 15, 1999 and
is not expected to have any effect on the financial statements.

      The results of operations for the three months ended September 30, 2000
and 1999 are not indicative of results for the full year.

2. Inventories

      Inventories are valued at the lower of cost or market. Cost is principally
determined using the first-in, first-out


                                       8
<PAGE>

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

(FIFO) and average methods, however, certain subsidiaries of the Company use the
last-in, first-out (LIFO) method for valuing inventories.

      Inventories at September 30, 2000 and June 30, 2000 are based on perpetual
records and consist of the following:

                                                 September 30,          June 30,
                                                     2000                 2000
                                                 -------------          --------
Raw materials ......................               $23,192               $21,457
Work-in-process ....................                 2,579                 5,340
Finished goods .....................                27,873                23,608
                                                   -------               -------
                                                   $53,644               $50,405
                                                   =======               =======

3. Contingencies

      a. Litigation

      The Company's subsidiary, Phibro-Tech, Inc. has been named as a
potentially responsible party ("PRP") in connection with an action commenced by
the EPA, involving a third party fertilizer manufacturing site in South
Carolina. While the outcome of ongoing negotiation is uncertain, the Company has
accrued its best estimate of the amount for which this matter can be settled.
Phibro-Tech, Inc. has also been named as a PRP involving a third party site in
California. The Company is not, at this time, in a position to assess the extent
of liability associated with this site.

      The Company and its subsidiary, C.P. Chemicals, Inc., are involved in
litigation alleging that operations at the Sewaren, New Jersey site have
affected the adjoining owner's property. The Company is not, at this time, in a
position to assess the extent of any liability.

      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 which govern the management of
chemical wastes. The most significant regulation governing the Company's
recycling activities is the Resource Conservation and Recovery Act of 1976
("RCRA"). The Company has been issued final RCRA "Part B" permits to operate as
hazardous waste treatment and storage facilities at its facilities in Santa Fe
Springs, California; Garland, Texas; Joliet, Illinois; Sumter, South Carolina
and Sewaren, New Jersey. The Company has also obtained an interim status RCRA
permit for its Union City, California facility.

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

      Based upon information available, management estimates the cost of further
investigation and remediation of identified soil and groundwater problems at
operating sites, closed sites and third party sites to be approximately $1,536
as of September 30, 2000, which is included in current and long-term
liabilities.

4. Business Segments

      The Company operates in two business segments: AgChem and Industrial
Chemicals. The AgChem segment manufactures and markets a variety of animal
nutrition and health products, copper based fungicides and growth


                                       9
<PAGE>

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

regulators. The Industrial Chemicals segment manufactures and markets a number
of specialty organic and inorganic intermediate chemicals for use in a broad
variety of industrial chemical applications. The Company aggregates certain
operating segments into its reportable segments. Management evaluates the
performance of its operating segments and allocates resources based on operating
income. Transfers between segments are priced at amounts that include a
manufacturing profit except that transfers of $3,402 and $2,113 for the three
months ended September 30, 2000 and 1999, respectively, from the Industrial
Chemicals group to the AgChem group are recorded at the cost of product
transferred. Other includes corporate expenses and elimination of intersegment
revenues.

<TABLE>
<CAPTION>
                                                     Industrial
                                          AgChem     Chemicals
                                           Group       Group       Other           Total
                                          ------     ----------   -------         -------
<S>                                       <C>         <C>         <C>             <C>
Three Months Ended September 30, 2000
Revenues - external customers .......     $39,090     $31,805     $    --         $70,895
         - intersegment .............       1,425       6,251      (7,676)              0
                                          -------     -------     -------         -------
Total revenues ......................     $40,515     $38,056     $(7,676)        $70,895
                                          =======     =======     =======         =======
Operating income (loss) .............     $ 1,425     $ 1,311     $(1,326)(1)     $ 1,410
                                          =======     =======     =======         =======
</TABLE>

----------
1. Represents corporate expenses and intercompany profit eliminations.


<TABLE>
<CAPTION>
                                                     Industrial
                                          AgChem     Chemicals
                                           Group       Group       Other           Total
                                          ------     ----------   -------         -------
<S>                                       <C>         <C>         <C>             <C>
Three Months Ended September 30, 1999
Revenues - external customers .......     $35,583     $34,504     $    --         $70,087
         - intersegment .............       1,672       5,007      (6,679)              0
                                          -------     -------     -------         -------
Total revenues ......................     $37,255     $39,511     $(6,679)        $70,087
                                          =======     =======     =======         =======
Operating income (loss) .............     $   783     $ 2,147     $(2,145)(2)     $   785
                                          =======     =======     =======         =======
</TABLE>

----------
2. Represents corporate expenses and intercompany profit eliminations.

5. Acquisition

On September 28, 2000, Philipp Brothers Chemicals, Inc. signed an agreement to
purchase assets of the Medicated Feed Additives (MFA) business of Pfizer, Inc.
and various of its subsidiaries ("Pfizer"). The Company expects to close on this
transaction during the second quarter of fiscal year 2001. The MFA business
constitutes a group of products within Pfizer's Animal Health Group. The
business produces and sells to the global livestock industry a broad range of
Medicated Feed Additive Products (MFAs). Sales are made either directly to large
integrated livestock producers or through a network of independent distributors.
Total consideration for the transaction is expected to be $155 million. This is
expected to consist of a $50 million cash payment and issuance of a $40 million
note (payable over a three (3) year period based on ten (10) years amortization
with interest fixed at 13%) at closing and contingent payments aggregating a
maximum of $65 million over a maximum of five (5) years. The contingent payments
are based on specified levels of sales of certain acquired products and on
certain gross profit levels for the other acquired products. The final amount of
the sellers' note may be reduced if closing inventory values are below agreed
upon amounts. In addition to the sellers' note, the Company expects that
financing for the acquisition will be provided by $45 million in gross proceeds
from the proposed issuance by the Company of two new series of Redeemable
Participating Preferred Shares ("Preferred Shares"). The Preferred Shares would
be entitled to cumulative dividends at an annual rate of 15% payable in kind,
with mandatory redemption rights exercisable by the Preferred Shareholders at
any time after the redemption of the $100 million outstanding principal amount
of the Company's 9-7/8% Senior Subordinated Notes. The


                                       10
<PAGE>

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

Company, at its option, would be entitled to redeem certain of the Preferred
Shares starting on the first anniversary of the closing and all of the Preferred
Shares starting on the third anniversary of the closing. At redemption, the
Company would also be required to pay the holders a formula-based equity value
amount, as defined in the Company's amended certificate of incorporation.

      The acquisition will be accounted for in accordance with the purchase
method. The purchase price is expected to be allocated principally to inventory,
property, plant, equipment and identifiable intangibles. Property, plant and
equipment include two facilities, Rixensart, Belgium and Guarulhols, Brazil. The
final allocation and useful lives of the assets will be based on an independent
valuation to be completed subsequent to the purchase.

6. Condensed Consolidating Financial Statements

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

      The following condensed consolidating financial data summarizes the
assets, liabilities and results of operations and cash flows of the Parent,
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., Koffolk,
Inc., Phibro-Tech, Inc., MRT Management Corp., Mineral Resource Technologies,
L.L.C., Prince Agriproducts, Inc., The Prince Manufacturing Company (PA), The
Prince Manufacturing Company (IL), Phibrochem, Inc., Phibro Chemicals, Inc. and
Western Magnesium Corp. The Non-Guarantor Subsidiaries include the following:
Koffolk (1949) Ltd., Agtrol International, Ferro Metal and Chemical Corporation
Limited, Odda Smelteverk, AS, Agtrol Mexico S.A. de C.V., and Agtrol
Internacionale, S.A. The U.S. and foreign Guarantor and Non-Guarantor
Subsidiaries are wholly-owned as to voting common stock by the Parent.

      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.


                                       11
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
                CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
                            As of September 30, 2000
                                 (In Thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                 U.S. Guarantor Foreign Subsidiaries  Consolidation     Consolidated
                                                    Parent        Subsidiaries     Non-Guarantors      Adjustments        Balance
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>               <C>              <C>               <C>               <C>
                         Assets
Current Assets:
Cash and cash equivalents ...................     $       3         $    765         $   5,096                           $   5,864
Trade receivables ...........................         5,713           36,966            25,191                              67,870
Other receivables ...........................           467              807             3,040                               4,314
Inventory ...................................         3,174           30,059            20,411                              53,644
Prepaid expenses and other ..................         4,012            2,321             3,342                               9,675
                                                  ----------------------------------------------------------------------------------
         Total current assets ...............        13,369           70,918            57,080                --           141,367
                                                  ----------------------------------------------------------------------------------

Property, plant & equipment, net ............           646           26,735            47,722                              75,103
Intangibles .................................            86            2,197             4,193                               6,476
Investment in subsidiaries ..................        70,523            1,542            (6,138)          (65,927)               --
Intercompany ................................        68,310          (31,572)           (2,061)          (34,677)               --
Other assets ................................        15,901            9,555             2,082                              27,538
                                                  ----------------------------------------------------------------------------------
         Total assets .......................     $ 168,835         $ 79,375         $ 102,878         $(100,604)        $ 250,484
                                                  ==================================================================================

      Liabilities and Stockholders' Equity
Current Liabilities:
Cash overdraft ..............................     $     272         $  3,112         $     291                           $   3,675
Loan payable to banks .......................            --               --             7,078                               7,078
Current portion of long term debt ...........            31            1,178                87                               1,296
Accounts payable ............................         1,690           15,402            15,089                              32,181
Other loans payable .........................            --               --                --                                  --
Accrued expenses and other ..................         7,781           11,907             5,534                              25,222
                                                  ----------------------------------------------------------------------------------
         Total current liabilities ..........         9,774           31,599            28,079                --            69,452
                                                  ----------------------------------------------------------------------------------
Long term debt ..............................       126,608            2,142            43,658           (34,677)          137,731
Other liabilities ...........................         2,076            4,431             6,072                              12,579

Redeemable Securities:
Common stock ................................         2,431               --               607                               3,038
Common stock of subsidiary ..................            --              346                --                                 346
                                                  ----------------------------------------------------------------------------------
                                                      2,431              346               607                --             3,384
                                                  ----------------------------------------------------------------------------------
             Stockholders' Equity
Series "A" preferred stock ..................           521               --                --                                 521
Common stock ................................             2               32                --               (32)                2
Paid in capital .............................           878           34,040                --           (34,040)              878
Retained earnings ...........................        26,689            6,755            28,100           (31,855)           29,689
Accumulated other comprehensive
   income (loss) - cumulative currency
   translation adjustment ...................          (144)              30            (3,638)                             (3,752)
                                                  ----------------------------------------------------------------------------------
         Total stockholders' equity .........        27,946           40,857            24,462           (65,927)           27,338
                                                  ----------------------------------------------------------------------------------
         Total liabilities and equity .......     $ 168,835         $ 79,375         $ 102,878         $(100,604)        $ 250,484
                                                  ==================================================================================
</TABLE>


                                       12
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
           CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
                                 (In Thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                 U.S. Guarantor Foreign Subsidiaries   Consolidation    Consolidated
                                                  Parent          Subsidiaries    Non-Guarantors        Adjustments       Balance
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>               <C>              <C>               <C>               <C>
Net sales ...............................         $ 8,511           $ 41,381         $ 28,097          $   (7,094)       $ 70,895

Cost of goods sold ......................           6,791             29,917           22,219              (7,094)         51,833
                                                  ----------------------------------------------------------------------------------

         Gross profit ...................           1,720             11,464            5,878                  --          19,062

Selling, general, and administrative
   expenses .............................           3,462             10,035            4,155                              17,652
                                                  ----------------------------------------------------------------------------------

Operating (loss) income .................          (1,742)             1,429            1,723                  --           1,410

Interest expense ........................           2,470                 66            1,403                               3,939

Interest income .........................             (36)                --             (181)                               (217)

Other expense ...........................              89                 --            1,239                               1,328

Intercompany allocation .................          (3,324)             3,067              257                                  --

(Profit) loss relating to subsidiaries ..           1,505                 --               --              (1,505)             --
                                                  ----------------------------------------------------------------------------------

(Loss) income before income taxes .......          (2,446)            (1,704)            (995)              1,505          (3,640)

Provision (benefit) for income taxes ....             673               (712)            (482)                               (521)
                                                  ----------------------------------------------------------------------------------

Net (loss) income .......................         $(3,119)          $   (992)        $   (513)         $    1,505        $ (3,119)
                                                  ==================================================================================
</TABLE>


                                       13
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
           CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
                                 (In Thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                   U.S. Guarantor Foreign Subsidiaries Consolidation   Consolidated
                                                       Parent       Subsidiaries      Non-Guarantors     Adjustment       Balance
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>                <C>             <C>             <C>
Operating activities:
Net (loss) income .................................   $(3,119)        $  (992)           $  (513)        $  1,505        $ (3,119)
Adjustments to reconcile net (loss) income to
      net cash provided by operating activities:
   Depreciation and amortization ..................       116           1,213              1,800                            3,129
   Other ..........................................       186             (60)              (179)                             (53)

Changes in operating assets and liabilities:
Accounts receivable ...............................       459           8,367              3,192                           12,018
Inventory .........................................        93          (4,987)               492                           (4,402)
Prepaid expenses and other ........................     3,441            (135)              (111)                           3,195
Other assets ......................................      (788)         (1,216)                46                           (1,958)
Intercompany ......................................        84            (900)             2,321           (1,505)             --
Accounts payable ..................................      (450)            403               (714)                            (761)
Accrued expenses and other ........................     3,991             (25)            (1,597)                           2,369
                                                      ------------------------------------------------------------------------------

Net cash provided by operating activities .........     4,013           1,668              4,737               --          10,418
                                                      ------------------------------------------------------------------------------

Investing activities:
Capital expenditures ..............................       (23)         (2,617)              (608)                          (3,248)
Other .............................................        --              --                (85)                             (85)
                                                      ------------------------------------------------------------------------------

Net cash used in investing activities .............       (23)         (2,617)              (693)              --          (3,333)
                                                      ------------------------------------------------------------------------------

Financing activities:
Cash overdraft ....................................       114           1,810               (660)                           1,264
Net (decrease) increase in short term debt ........      (104)             --               (936)                          (1,040)
Proceeds from long term debt ......................        --              --                732                              732
Payments of long term debt ........................    (4,008)           (195)              (147)                          (4,350)
                                                      ------------------------------------------------------------------------------

Net cash (used in) provided by
   financing activities ...........................    (3,998)          1,615             (1,011)              --          (3,394)
                                                      ------------------------------------------------------------------------------

Effect of exchange rate changes on cash ...........        --              --               (230)                            (230)
                                                      ------------------------------------------------------------------------------

Net (decrease) increase in cash and
   cash equivalents ...............................        (8)            666              2,803               --           3,461

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

Cash and cash equivalents
   at end of year .................................   $     3         $   765            $ 5,096         $     --        $  5,864
                                                      ==============================================================================
</TABLE>


                                       14
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
                CONDENSED CONSOLIDATING BALANCE SHEET (UNAUDITED)
                               AS OF JUNE 30, 2000
                                 (In Thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                U.S. Guarantor  Foreign Subsidiaries  Consolidation     Consolidated
                                                    Parent       Subsidiaries      Non-Guarantors      Adjustment         Balance
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>               <C>             <C>               <C>               <C>
                   Assets
Current Assets:
Cash and cash equivalents ................        $      11         $     99         $   2,293                           $   2,403
Trade receivables ........................            6,172           45,378            27,826                              79,376
Other receivables ........................            4,855              550             3,074                               8,479
Inventory ................................            3,267           25,072            22,066                              50,405
Prepaid expenses and other ...............            3,065            2,443             3,590                               9,098
                                                  ----------------------------------------------------------------------------------
         Total current assets ............           17,370           73,542            58,849                --           149,761
                                                  ----------------------------------------------------------------------------------

Property, plant & equipment, net .........              702           25,032            50,446                              76,180
Intangibles ..............................               87            2,292             3,918                               6,297
Investment in subsidiaries ...............           78,028            1,533            (6,129)          (73,432)               --
Intercompany .............................           63,874          (32,463)            3,197           (34,608)               --
Other assets .............................           15,236            8,542             2,435                              26,213
                                                  ----------------------------------------------------------------------------------
         Total assets ....................        $ 175,297         $ 78,478         $ 112,716         $(108,040)        $ 258,451
                                                  ==================================================================================

      Liabilities and Stockholders' Equity
Current Liabilities:
Cash overdraft ...........................        $     158         $  1,302         $     660                           $   2,120
Loan payable to banks ....................               --               --             8,650                               8,650
Current portion of long term debt ........               31              893             1,372                               2,296
Accounts payable .........................            2,140           14,999            15,503                              32,642
Accrued expenses and other ...............            3,892           13,118             7,147                              24,157
                                                  ----------------------------------------------------------------------------------
         Total current liabilities .......            6,221           30,312            33,332                --            69,865
                                                  ----------------------------------------------------------------------------------
Long term debt ...........................          130,600            1,435            42,295           (34,608)          139,722
Other liabilities ........................            2,022            4,431             6,829                              13,282

Redeemable Securities:
Common stock .............................            2,389               --             1,124                               3,513
Common stock of subsidiary ...............               --              451                --                                 451
                                                  ----------------------------------------------------------------------------------
                                                      2,389              451             1,124                --             3,964
                                                  ----------------------------------------------------------------------------------
             Stockholders' Equity
Series "A" preferred stock ...............              521               --                --                                 521
Common stock .............................                2               32                --               (32)                2
Paid in capital ..........................              878           34,040                --           (34,040)              878
Retained earnings ........................           32,808            7,747            31,613           (39,360)           32,808
Accumulated other comprehensive
   income (loss) - cumulative currency
   translation adjustment ................             (144)              30            (2,477)                             (2,591)
                                                  ----------------------------------------------------------------------------------
         Total stockholders' equity ......           34,065           41,849            29,136           (73,432)           31,618
                                                  ----------------------------------------------------------------------------------
         Total liabilities and equity ....        $ 175,297         $ 78,478         $ 112,716         $(108,040)        $ 258,451
                                                  ==================================================================================
</TABLE>


                                       15
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
           CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
                                 (In Thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                              U.S. Guarantor Foreign Subsidiaries  Consolidation      Consolidated
                                                  Parent       Subsidiaries     Non-Guarantors      Adjustment          Balance
------------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>             <C>               <C>                <C>               <C>
Net sales ...............................        $ 8,709         $ 37,529          $ 33,001           $(9,152)          $ 70,087

Cost of goods sold ......................          7,056           28,000            24,324            (9,152)            50,228
                                                 -----------------------------------------------------------------------------------

         Gross profit ...................          1,653            9,529             8,677                --             19,859

Selling, general, and
   administrative expenses ..............          3,176            9,618             6,280                               19,074
                                                 -----------------------------------------------------------------------------------

Operating (loss) income .................         (1,523)             (89)            2,397                --                785

Interest expense ........................          1,932               43             1,415                                3,390

Interest income .........................             (7)              --               (85)                                 (92)

Other expense ...........................             87               --               814                                  901

Intercompany allocation .................         (2,588)           2,588                --                                   --

(Profit) loss relating to subsidiaries ..          1,427               --                --            (1,427)                --
                                                 -----------------------------------------------------------------------------------

(Loss) income before income taxes .......         (2,374)          (2,720)              253             1,427             (3,414)

Benefit for income taxes ................           (389)            (983)              (57)               --             (1,429)
                                                 -----------------------------------------------------------------------------------

Net (loss) income .......................        $(1,985)        $ (1,737)         $    310           $ 1,427           $ (1,985)
                                                 ===================================================================================
</TABLE>


                                       16
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
           CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
                                 (In Thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                     U.S. Guarantor Foreign Subsidiaries  Consolidation Consolidated
                                                         Parent       Subsidiaries     Non-Guarantors      Adjustment      Balance
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>             <C>               <C>               <C>          <C>
Operating activities:
Net (loss) income ..............................        $(1,985)        $(1,737)          $   310           $  1,427     $ (1,985)
Adjustments to reconcile net (loss) income to
      net cash provided by operating activities:
   Depreciation and amortization ...............            129           1,110             1,749                           2,988
   Other .......................................          1,253               4              (562)                            695

Changes in operating assets and liabilities:
Accounts receivable ............................            473           8,861             2,174                          11,508
Inventory ......................................           (981)         (1,787)           (1,149)                         (3,917)
Prepaid expenses and other .....................         (1,385)          1,240             1,218                           1,073
Other assets ...................................             40            (109)             (192)                           (261)
Intercompany ...................................          2,780          (1,633)              280             (1,427)          --
Accounts payable ...............................           (222)         (1,754)              228                          (1,748)
Accrued expenses and other .....................          2,414          (3,931)            1,277                            (240)
                                                        ----------------------------------------------------------------------------

Net cash provided by operating activities ......          2,516             264             5,333                 --        8,113
                                                        ----------------------------------------------------------------------------

Investing activities:
Capital expenditures ...........................            (44)         (1,232)           (2,769)                         (4,045)
Proceeds from property damage claim ............             --             872                --                             872
Other investing ................................           (500)             --                --                            (500)
                                                        ----------------------------------------------------------------------------

Net cash used in investing activities ..........           (544)           (360)           (2,769)                --       (3,673)
                                                        ----------------------------------------------------------------------------

Financing activities:
Cash overdraft .................................            (96)            365              (888)                           (619)
Net (decrease) increase in short term debt .....            (32)             --              (790)                           (822)
Proceeds from long term debt ...................              7              39               973                           1,019
Payments of long term debt .....................         (2,238)            (39)               (1)                         (2,278)
                                                        ----------------------------------------------------------------------------

Net cash (used in) provided by
   financing activities ........................         (2,359)            365              (706)                --       (2,700)
                                                        ----------------------------------------------------------------------------

Net (decrease) increase in cash and
   cash equivalents ............................           (387)            269             1,858                           1,740

Cash and cash equivalents
   at beginning of year ........................            393             166             1,749                           2,308
                                                        ----------------------------------------------------------------------------

Cash and cash equivalents
   at end of year ..............................        $     6         $   435           $ 3,607           $     --     $  4,048
                                                        ============================================================================
</TABLE>


                                       17
<PAGE>

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

      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 throughout this
Form 10-Q and are discussed under the caption of this Item 2 entitled "Certain
Factors Affecting Future Operating Results".

General

      Philipp Brothers Chemicals, Inc. (together with its subsidiaries, the
"Company"), is a leading diversified global manufacturer and marketer of a broad
range of specialty agricultural and industrial chemicals, which are sold
world-wide for use in numerous markets, including animal nutrition and health,
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. Unless the context
otherwise requires, references herein to the Company are intended to refer to
Philipp Brothers Chemicals, Inc. and/or one or more of its subsidiaries, as
applicable.

      The Company operates in two industry segments: AgChem and Industrial
Chemicals.

Results of Operations

                                                              Sales
                                                            ($000's)
                                                Three Months Ended September 30,
Operating Segments                                  2000              1999
                                                  --------          --------
      AgChem ...............................      $ 40,515          $ 37,255
      Industrial Chemicals .................        38,056            39,511
      Elimination of intersegment sales ....        (7,676)           (6,679)
                                                  --------          --------
                                                  $ 70,895          $ 70,087
                                                  ========          ========

                                                        Operating Income
                                                            ($000's)
                                                Three Months Ended September 30,
Operating Segments                                  2000              1999
                                                   -------          -------
      AgChem .................................     $ 1,425          $   783
      Industrial Chemicals ...................       1,311            2,147
      Corporate expenses and eliminations ....      (1,326)          (2,145)
                                                   -------          -------
                                                   $ 1,410          $   785
                                                   =======          =======

Comparison of Three Months Ended September 30, 2000 and 1999

      Net Sales. Net sales increased by $.8 million, or 1.2% to $70.9 million in
the three months ended September 30, 2000, as compared to the same period of the
prior year. Industrial Chemicals sales were lower by $1.5 million primarily due
to lower volume sales of dicyandiamide and calcium carbide ($3.8 million)
primarily as a result of lower production levels due to manufacturing
disruptions at the Company's Norwegian facility which were mostly offset by
higher volume sales of coal fly ash ($.7 million) and higher sales of the
Company's products to the electronic industry ($.7 million) and higher recycling
fees ($.6 million) due to increased demand. AgChem sales were higher by $3.3
million primarily as a result of higher volume sales of the Company's animal
feed pre-mixes ($1.0 million), coccidiostats ($1.0 million) and crop protection
chemicals ($1.0 million).

      Gross Profit. Gross profit decreased by $.8 million or 4% to $19 million
as compared to the same period of the prior year. This decrease was primarily
attributable to lower profits in the Industrial Chemicals segment due to lower
sales and higher costs for dicyandiamide and calcium carbide ($2.5 million)
which were somewhat offset by higher sales of coal fly ash ($.7 million) and
higher recycling fees ($.6 million). Gross profit of the Company's AgChem
segment was higher ($.8 million) primarily due to higher sales of animal feed
premixes and coccidiostats. Gross profit as a


                                       18
<PAGE>

percentage of net sales also decreased to 26.9% in the quarter ended September
30, 2000 as compared to 28.3% in the same period of the prior year principally
due to lower profits on dicyandiamide and calcium carbide sales.

      Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $1.4 million or 7.5% to $17.7 million for the
three months ended September 30, 2000, as compared to the same period of the
prior year. This decrease, primarily in the Industrial Chemicals segment, is a
result of reduced manpower and lower distribution expenses at the Company's
Norwegian subsidiary.

      Operating Income. Operating income increased by $.6 million or 79.6% to
$1.4 million in the three months ended September 30, 2000, as compared to the
same period of the prior year. Operating income of the AgChem segment increased
by $.6 million primarily due to increased profitability of animal health and
nutrition products. Operating income of the Industrial Chemicals segment was
lower by $.8 million primarily due to lower profitability of dicyandiamide and
calcium carbide sales. In addition, non-segment expenses and eliminations were
lower, by $.8 million, than the comparable period of the prior year.

      Interest Expense. Interest expense increased by $.6 million or 16.2% to
$3.9 million in the three months ended September 30, 2000, as compared to the
same period of the prior year, primarily due to increased average borrowings and
higher interest rates under the Company's credit facility with PNC Bank.

      Other Expense, Net. Other expenses, net, principally reflects foreign
currency transactions gains and losses of the Company's foreign subsidiaries due
to the strengthening of the U.S. dollar.

      Income Taxes. The Company provides a benefit on interim period losses to
the extent income is projected for the full fiscal year. The effective tax rate
for the quarter is less than the statuatory rates due to lower tax rates for the
Company's foreign subsidiaries.

Liquidity and Capital Resources

      Net Cash Provided by Operating Activities. Net cash provided by operations
for the three months ended September 30, 2000 was $10.4 million, an increase of
$2.3 million from the same period of the prior year. This increase was primarily
due to receipt by the Company, during the quarter ending September 30, 2000, of
$4.1 million as a final settlement from its insurance carrier for business
interruption and other reimbursable losses and expenses in connection with a
fire, in April 1999, at the Company's Bowmanstown, Pennsylvania facility, which
was somewhat offset by higher net losses and higher depreciation and
amortization charges. Reimbursements from the insurance carrier in the quarter
ended September 30, 1999 were primarily for property and equipment and were
reported in investing activities.

      Net Cash Used in Investing Activities. Net cash used in investing
activities for the three months ended September 30, 2000 was $3.3 million, a
decrease of $.3 million. Increased capital expenditures by Mineral Resource
Technologies, L.L.C. associated with its coal fly ash products was more than
offset by lower expenditures by ODDA, the Company's Norwegian subsidiary. In
September 30, 1999 quarter, the Company made a $.5 million minority interest
investment.

      Net Cash Used in Financing Activities. Net cash used in financing
activities for the three months ended September 30, 2000 was $3.4 million, an
increase of $.7 million from the same period of the prior year, primarily due to
higher repayments under the Company's various revolving credit facilities.

      Liquidity. As of September 30, 2000, the Company had $71.9 million of
working capital compared to $79.9 million as of June 30, 2000 due principally to
lower receivable balances due to the seasonal nature of the business. Cash on
hand as of September 30, 2000 amounted to $5.9 million, as compared to $2.4
million at June 30, 2000.

      On September 28, 2000, Philipp Brothers Chemicals, Inc. signed an
agreement to purchase assets of the Medicated Feed Additives (MFA) business of
Pfizer, Inc. and various of its subsidiaries ("Pfizer"). The Company expects to
close on this transaction during the second quarter of fiscal year 2001. The MFA
business constitutes a group of products within Pfizer's Animal Health Group.
The business produces and sells to the global livestock industry a broad range
of Medicated Feed Additive Products (MFAs). Sales are made either directly to
large integrated livestock producers or through a network of independent
distributors. Total consideration for the transaction is expected to be $155
million. This is expected to consist of a $50 million cash payment and issuance
of a $40 million note (payable over a three (3) year period based on ten (10)
years amortization with interest fixed at 13%) at closing and contingent
payments aggregating a maximum of $65 million over a maximum of five (5) years.
The contingent payments are based on specified levels of sales of certain
acquired products and on certain gross profit levels for the other acquired
products. The final amount of the sellers' note may be reduced if closing
inventory values are below agreed upon amounts. In


                                       19
<PAGE>

addition to the sellers' note, the Company expects that financing for the
acquisition will be provided by $45 million in gross proceeds from the proposed
issuance by the Company of two new series of Redeemable Participating Preferred
Shares ("Preferred Shares"). The Preferred Shares would be entitled to
cumulative dividends at an annual rate of 15% payable in kind, with mandatory
redemption rights exercisable by the Preferred Shareholders at any time after
the redemption of the $100 million outstanding principal amount of the Company's
9-7/8% Senior Subordinated Notes. The Company, at its option, would be entitled
to redeem certain of the Preferred Shares starting on the first anniversary of
the closing and all of the Preferred Shares starting on the third anniversary of
the closing. At redemption, the Company would also be required to pay the
holders a formula-based equity value amount, as defined in the Company's amended
certificate of incorporation.

      In addition, the Company is engaged in negotiations for the increase and
amendment of its existing $35 million revolving credit facility with PNC Bank in
order to increase the facility to $75 million and to provide for an additional
$15 million facility for capital expenditure spending. It is anticipated that
the interest rate, under terms of this proposed amended credit agreement, will
be the Euro Rate, as defined, plus 21/4%-3% per annum, depending on the
Company's operating performance and whether drawdowns are under the revolving
credit facility or the capital expenditure facility. The proposed facilities
would have a maturity date on the third anniversary of the closing of the
acquisition and would require the grant of security interests in substantially
all the Company's domestic assets as well as certain of the capital stock of
certain of the Company's foreign subsidiaries. The Company expects that the
proposed issuance of Redeemable Participating Preferred Shares and the proposed
increased credit facilities with PNC would provide sufficient funds to
consummate the MFA acquisition.

      At September 30, 2000, the Company had $25.7 million outstanding
borrowings under its existing credit agreement with PNC Bank. In addition to
amounts outstanding, the Company had $8.9 million available under the borrowing
base formula under this agreement.

      Commencing with the fourth quarter of fiscal 2000, due to competitive
market conditions, the Company extended payment terms on selected AgChem sales
representing $6.7 million of revenues. These terms defer cash inflows into the
third and fourth quarters of fiscal 2001.

      The Company anticipates spending approximately $16 million for capital
expenditures in the 2001 fiscal year for its existing business (before giving
effect to the MFA acquisition), principally for improvements and expansion for
its ODDA (Norway) and Mineral Resource Technologies, L.L.C. (coal fly ash)
operations. Depending on actual future operating results, the Company may, if
necessary, postpone certain expenditures that are considered discretionary.

      Assuming the Company consummates the MFA acquisition and the proposed
preferred share issuance and proposed increase in its bank credit facilities
described above, the Company believes that cash flows from operations and these
and other borrowing arrangements should provide sufficient working capital to
operate the Company's business, to make budgeted capital expenditures and to
service interest and current principal coming due on outstanding debt for the
next twelve months.

Seasonality of Business

      The Company's sales are typically highest in the fourth fiscal quarter.
The Company's sales of copper-based fungicides and other agricultural products
are typically highest in the first and fourth fiscal quarters, and its sales of
gibberellic acid are highest in the fourth quarter, due to the seasonal nature
of the agricultural industry. The Company's sales of finished chemicals to the
wood treatment industry are typically highest in the first and fourth fiscal
quarters due to the increased level of home construction during these periods.
Additionally, sales of these products may be more concentrated in one of these
quarters due to weather conditions.

Quantitative and Qualitative Disclosure About Market Risk

      In the normal course of operations, the Company is exposed to market risks
arising from adverse changes in interest rates, foreign currency exchange rates,
and commodity prices. As a result, future earnings, cash flows and fair values
of assets and liabilities are subject to uncertainty. The Company uses foreign
currency forward contracts as a means of hedging exposure to foreign currency
risks. The Company also utilizes, on a limited basis, certain commodity
derivatives, primarily on copper used in its manufacturing processes, to hedge
the cost of its anticipated purchase requirements. The Company does not utilize
derivative instruments for trading purposes. The Company does not hedge its
exposure to market risks in a manner that completely eliminates the effects of
changing market conditions on


                                       20
<PAGE>

earnings, cash flows and fair values. The Company monitors the financial
stability and credit standing of its major counterparties.

Interest Rate Risk

      The Company uses sensitivity analysis to assess the market risk of its
debt-related financial instruments and derivatives. Market risk is defined for
these purposes as the potential change in the fair value resulting from an
adverse movement in interest rates. The carrying amounts of cash and cash
equivalents, trade receivables, trade payables and short term debt is considered
to be representative of their fair value because of their short maturities. As
of September 30, 2000, the fair value of the Company's senior subordinated debt
was estimated based on quoted market rates to be $73.8 million and the related
carrying amount is $100 million. A 100 basis point increase in interest rates
could result in an approximately $6.0 million reduction in the fair value of
total debt.

Foreign Currency Exchange Rate Risk

      A significant portion of the financial results of the Company is derived
from activities conducted outside the U.S. and denominated in currencies other
than the U.S. dollar. Because the financial results of the Company are reported
in U.S. dollars, they are affected by changes in the value of the various
foreign currencies in relation to the U.S. Dollar. Exchange rate risks are
reduced, however, by the diversity of the Company's foreign operations and the
fact that international activities are not concentrated in any single non-U.S.
currency. Short-term exposures to changing foreign currency exchange rates are
primarily due to operating cash flows denominated in foreign currencies. The
Company covers known and anticipated operating exposures by using purchased
foreign currency exchange option and forward contracts. The primary currencies
for which the Company has foreign currency exchange rate exposure are the Euro
and Japanese yen.

      The Company uses sensitivity analysis to assess the market risk associated
with its foreign currency transactions. Market risk is defined for these
purposes as the potential change in fair value resulting from an adverse
movement in foreign currency exchange rates. The fair value associated with the
foreign currency contracts has been estimated by valuing the net position of the
contracts using the applicable spot rates and forward rates as of the reporting
date. At September 30, 2000, the fair market value was equal to their carrying
amount due to the Company's adoption of SFAS 133 at July 1, 2000 which requires
that all derivatives be recorded on the balance sheet at fair value.

Other

      The Company obtains third party letters of credit and surety bonds in
connection with certain inventory purchases and insurance obligations. At
September 30, 2000, the contract values of these letters of credit and surety
bonds were $.4 million and their fair values did not differ materially from
their carrying amount.

Commodity Price Risk

      The Company purchases certain raw materials, such as copper, under
short-term supply contracts. The purchase prices thereunder are generally
determined based on prevailing market conditions. The Company uses commodity
derivative instruments to modify some of the commodity price risks. At September
30, 2000, the fair market value was equal to their carrying due to the Company's
adoption of SFAS 133 at July 1, 2000 which requires that all derivatives be
recorded on the balance sheet at fair value.

      The foregoing market risk discussion and the estimated amounts presented
are Forward-Looking Statements that assume certain market conditions. Actual
results in the future may differ materially from these projected results due to
developments in relevant financial markets and commodity markets. The methods
used above to assess risk should not be considered projections of expected
future events or results.

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


                                       21
<PAGE>

Company's international operations; the Company's ability to absorb and
integrate into its existing operations the MFA acquisition referred to above;
the Company's dependence on its Israeli operations; competition in each of the
Company's markets; potential environmental liability; extensive regulation by
numerous government authorities in the United States and other countries;
significant cyclical price fluctuation for the principal raw materials used by
the Company in the manufacture of its products; the Company's reliance on the
continued operation and sufficiency of its manufacturing facilities; the
Company's dependence upon unpatented trade secrets; the risks of legal
proceedings and general litigation expenses; potential operating hazards and
uninsured risks; the risk of work stoppages; the Company's dependence on key
personnel; the uncertain impact of the Company's acquisition plans; and the
seasonality of the Company's business.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

                          PART II -- OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

      (a) Exhibits

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

      10.33        Asset Purchase Agreement, dated as of September 28, 2000,
                   among Pfizer, Inc., the Asset Selling Corporations (named
                   therein) and Philipp Brothers Chemicals, Inc., and various
                   Exhibits and certain Schedules thereto [A request for
                   confidential treatment has been made with respect to portions
                   of this document. Confidential portions have been omitted and
                   filed separately with the SEC.]

      10.34        Stock Purchase Agreement, dated as of October 4, 2000,
                   between Nathan Bistricer and Phibro-Tech, Inc. and Separation
                   Agreement, dated October 4, 2000, among Philipp Brothers
                   Chemicals, Inc., Phibro-Tech, Inc. and Nathan Bistricer.

      27           Financial Data Schedule

      (b) Reports on Form 8-K

      No report on Form 8-K has been filed during the quarter ended September
30, 2000.


                                       22
<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 : November 13, 2000                By: /s/ NATHAN Z. BISTRICER
                                            ------------------------------------
                                            Nathan Z. Bistricer, Vice President
                                            and Chief Financial Officer


Date: November 13, 2000                 By: /s/ JOSEPH KATZENSTEIN
                                            ------------------------------------
                                            Joseph Katzenstein, Treasurer
                                            and Secretary


                                       23
<PAGE>

                                  EXHIBIT INDEX

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

 10.33        Asset Purchase Agreement, dated as of September 28, 2000,
              among Pfizer, Inc., the Asset Selling Corporations (named
              therein) and Philipp Brothers Chemicals, Inc., and various
              Exhibits and certain Schedules thereto [A request for
              confidential treatment has been made with respect to portions
              of this document. Confidential portions have been omitted and
              filed separately with the SEC.]

 10.34        Stock Purchase Agreement, dated as of October 4, 2000,
              between Nathan Bistricer and Phibro-Tech, Inc. and Separation
              Agreement, dated October 4, 2000, among Philipp Brothers
              Chemicals, Inc., Phibro-Tech, Inc. and Nathan Bistricer.

 27           Financial Data Schedule


                                       24