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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                    FORM 10-Q

                                   ----------
               (Mark One)

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

                For the quarterly period ended September 30, 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
                    ---------------------------------------

                        Phibro Animal Health Corporation
             (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 September 30,
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.

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<PAGE>

                        PHIBRO ANIMAL HEALTH CORPORATION


                                TABLE OF CONTENTS

                                                                            Page
PART I    FINANCIAL INFORMATION (UNAUDITED)


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

          Item 2. Management's Discussion and Analysis of Financial

                  Condition and Results of Operations.......................  23

          Item 3. Quantitative and Qualitative Disclosures About
                    Market Risk.............................................  31

          Item 4. Controls and Procedures...................................  31


PART II   OTHER INFORMATION

          Item 6. Exhibits and Reports on Form 8-K..........................  32

SIGNATURES .................................................................  33


                                       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,  2003
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" or to "we" or "our" refers to Phibro  Animal  Health  Corporation
and/or one or more of its subsidiaries, as applicable.

PART I -- FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements


                                       3
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
                CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
                                 (In Thousands)

                                                        September 30    June 30,
                                                            2003         2003
                                                         ---------    ---------
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                              $  26,917    $  11,179
  Trade receivables, less allowance for doubtful
     accounts of $1,466 at September 30, 2003 and
     $1,445 at June 30, 2003                                54,324       55,671
  Other receivables                                          4,541        3,642
  Inventories                                               94,389       88,767
  Prepaid expenses and other current assets                  9,117       10,188
  Current assets from discontinued operations                   --        4,942
                                                         ---------    ---------
        TOTAL CURRENT ASSETS                               189,288      174,389

PROPERTY, PLANT AND EQUIPMENT, net                          65,317       66,440
INTANGIBLES                                                  8,080        8,669
OTHER ASSETS                                                13,531       14,199
OTHER ASSETS FROM DISCONTINUED OPERATIONS                       --       10,650
                                                         ---------    ---------
                                                         $ 276,216    $ 274,347
                                                         =========    =========

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Cash overdraft                                         $   2,417    $   1,686
  Loans payable to banks                                    38,750       38,914
  Current portion of long-term debt                         23,828       24,124
  Accounts payable                                          59,235       56,915
  Accrued expenses and other current liabilities            48,965       41,609
  Current liabilities from discontinued operations              --        2,051
                                                         ---------    ---------
        TOTAL CURRENT LIABILITIES                          173,195      165,299

LONG-TERM DEBT                                             102,880      102,391
OTHER LIABILITIES                                           15,057       22,088
OTHER LIABILITIES FROM DISCONTINUED OPERATIONS                  --          198
                                                         ---------    ---------
        TOTAL LIABILITIES                                  291,132      289,976
                                                         ---------    ---------
COMMITMENTS AND CONTINGENCIES

REDEEMABLE SECURITIES:
  Series B and C preferred stock                            69,868       68,881
                                                         ---------    ---------
STOCKHOLDERS' DEFICIT:
  Series A preferred stock                                     521          521
  Common stock                                                   2            2
  Paid-in capital                                              860          860
  Accumulated deficit                                      (79,221)     (79,489)
  Accumulated other comprehensive income (loss):
     Gain on derivative instruments                            398           81
     Cumulative currency translation adjustment             (7,344)      (6,485)
                                                         ---------    ---------
        TOTAL STOCKHOLDERS' DEFICIT                        (84,784)     (84,510)
                                                         ---------    ---------
                                                         $ 276,216    $ 274,347
                                                         =========    =========

  See notes to unaudited Condensed Consolidated Financial Statements


                                       4
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                                  (Unaudited)
             For the Three Months Ended September 30, 2003 and 2002
                                 (In Thousands)



                                                              2003        2002
                                                           --------    --------
NET SALES                                                  $ 87,170    $ 86,282

COST OF GOODS SOLD                                           66,006      64,134
                                                           --------    --------
  GROSS PROFIT                                               21,164      22,148

SELLING, GENERAL AND ADMINISTRATIVE
  EXPENSES                                                   16,161      15,850
                                                           --------    --------
  OPERATING INCOME                                            5,003       6,298

OTHER:
  Interest expense                                            3,949       4,504
  Interest (income)                                            (242)       (126)
  Other (income) expense, net                                  (635)      1,186
                                                           --------    --------
  INCOME FROM CONTINUING OPERATIONS
     BEFORE INCOME TAXES                                      1,931         734

PROVISION FOR INCOME TAXES                                      783         432
                                                           --------    --------
  INCOME FROM CONTINUING OPERATIONS                           1,148         302

DISCONTINUED OPERATIONS:
  (Loss) from discontinued operations
    (net of income taxes)                                      (124)       (459)
  Gain on disposal of discontinued operations
     (net of income taxes)                                      231          --
                                                           --------    --------
  NET INCOME (LOSS)                                           1,255        (157)

OTHER COMPREHENSIVE INCOME (LOSS):
  Derivative instruments                                        317      (1,083)
  Currency translation adjustment                              (859)     (2,827)
                                                           --------    --------
  COMPREHENSIVE INCOME (LOSS)                              $    713    $ (4,067)
                                                           ========    ========

       See notes to unaudited Condensed Consolidated Financial Statements


                                       5
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
                                  (Unaudited)
             For the Three Months Ended September 30, 2003 and 2002
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                      Common                                    Accumulated
                                  Preferred            Stock                                        Other
                                    Stock      --------------------    Paid-in   Accumulated   Comprehensive
                                   Series A     Class A     Class B    Capital     Deficit      Income (Loss)    Total
                                   --------     -------     -------    -------     -------      -------------    -----
<S>                                <C>         <C>         <C>        <C>          <C>            <C>           <C>
Balance, June 30, 2003             $    521    $      1    $      1   $    860     $(79,489)      $ (6,404)     $(84,510)

   Dividends on Series B and C
      redeemable preferred stock                                                     (2,453)                      (2,453)

   Equity value accreted on
   Series B and C redeemable
      preferred stock                                                                 1,466                        1,466

   Derivative instruments                                                                              317           317

   Foreign currency translation
      adjustment                                                                                      (859)         (859)

   Net income                                                                         1,255                        1,255
                                   --------    --------    --------   --------     --------       --------      --------
 Balance, September 30, 2003       $    521    $      1    $      1   $    860     $(79,221)      $ (6,946)     $(84,784)
                                   ========    ========    ========   ========     ========       ========      ========
</TABLE>
       See notes to unaudited Condensed Consolidated Financial Statements


                                       6
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
             For the Three Months Ended September 30, 2003 and 2002
                                 (In Thousands)


                                                             2003         2002
                                                           --------     --------

OPERATING ACTIVITIES:
  Net income (loss)                                        $  1,255     $  (157)
                                                           --------     -------
  Adjustment for discontinued operations                       (107)        459
                                                           --------     -------
  Income from continuing operations                           1,148         302

  Adjustments to reconcile income from continuing
      operations to net cash provided by operating
      activities:
    Depreciation and amortization                             3,268       3,256
    Deferred income taxes                                        53         373
    Unrealized foreign currency (gains) losses and other     (1,262)      1,225

    Changes in operating assets and liabilities:
      Accounts receivable                                     2,136       3,380
      Inventories                                            (4,932)     (2,890)
      Prepaid expenses and other current assets                 (41)        550
      Other assets                                             (375)        (63)
      Accounts payable                                       (5,775)      9,899
      Accrued expenses and other liabilities                  7,469       5,100
  Cash provided (used) by discontinued operations              (421)      2,442
                                                           --------     -------
      NET CASH PROVIDED BY OPERATING ACTIVITIES               1,268      23,574
                                                           --------     -------
INVESTING ACTIVITIES:
  Capital expenditures                                         (891)     (2,681)
  Proceeds from sale of assets                                   12           6
  Discontinued operations                                    14,088      (1,022)
                                                           --------     -------
      NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES       13,209      (3,697)
                                                           --------     -------
FINANCING ACTIVITIES:
  Cash overdraft                                                731      (5,800)
  Net (decrease) in short-term debt                            (188)    (10,387)
  Proceeds from long-term debt                                1,500           -
  Payments of long-term debt                                   (950)     (1,468)
                                                           --------     -------
      NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES        1,093     (17,655)
                                                           --------     -------

EFFECT OF EXCHANGE RATE CHANGES ON CASH                         168          12
                                                           --------     -------
      NET INCREASE IN CASH AND CASH EQUIVALENTS              15,738       2,234

CASH AND CASH EQUIVALENTS at beginning of period             11,179       6,419
                                                           --------     -------

CASH AND CASH EQUIVALENTS at end of period                 $ 26,917     $ 8,653
                                                           ========     =======

       See notes to unaudited Condensed Consolidated Financial Statements


                                       7
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

1.  General

   Principles of Consolidation and Basis of Presentation

     In  the  opinion  of  Phibro  Animal  Health  Corporation   ("PAHC"),   the
accompanying  unaudited condensed  consolidated financial statements contain all
adjustments  (consisting  only of normal  recurring  adjustments)  necessary  to
present  fairly its financial  position as of September 30, 2003 and its results
of operations  and cash flows for the three months ended  September 30, 2003 and
2002. PAHC and/or its subsidiaries are referred to as the "Company".

     The  condensed  consolidated  balance sheet as of June 30, 2003 was derived
from audited financial statements, but does not include all disclosures required
by generally accepted accounting principles in the United States.  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  audited  consolidated  financial
statements for the year ended June 30, 2003.

     The Company's  Odda,  Carbide,  and MRT businesses  have been classified as
discontinued  operations,  as  discussed  in Note  5.  These  footnotes  present
information only for continuing operations, unless otherwise indicated.

     The results of operations for the three months ended September 30, 2003 may
not be indicative of results for the full year.

   New Accounting Pronouncements

     The Company adopted the following new accounting  pronouncements  in fiscal
2004:

     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.  The  adoption of SFAS No. 149 did not
result in a material impact on the Company's financial statements.

     Statement  of  Financial  Accounting  Standards  No. 150,  "Accounting  for
Certain  Financial  Instruments  with  Characteristics  of both  Liabilities and
Equity"  ("SFAS No.  150").  SFAS No.  150  requires  that an issuer  classify a
financial  instrument,  that is within its scope, as a liability (or an asset in
some circumstances).  SFAS No. 150 also revises the definition of liabilities to
encompass  certain  obligations  that can, or must, be settled by issuing equity
shares,  depending  on the nature of the  relationship  established  between the
holder and the issuer.  The adoption of SFAS No. 150 did not result in an impact
on the Company's financial statements.


2.  Risks and Uncertainties

     The  use of  antibiotics  in  medicated  feed  additives  is a  subject  of
legislative  and  regulatory  interest.  The issue of  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
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.

     The testing,  manufacturing,  and marketing of certain products are subject
to extensive regulation by numerous government  authorities in the United States
and other countries.

     The Company has  significant  assets located  outside of the United States,
and a significant  portion of the Company's sales and earnings are  attributable
to operations conducted abroad.


                                       8
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

     The  Company  has  assets  located in Israel and a portion of its sales and
earnings are  attributable  to  operations  conducted in Israel.  The Company is
affected by social,  political and economic conditions affecting Israel, and any
major hostilities  involving Israel as well as the Middle East or curtailment of
trade between  Israel and its current  trading  partners,  either as a result of
hostilities or otherwise, could have a material adverse effect on the Company.

     The Company's operations, properties and subsidiaries are subject to a wide
variety of complex and stringent federal, state, local and foreign environmental
laws and  regulations,  including  those governing the use,  storage,  handling,
generation,  treatment,  emission,  release,  discharge  and disposal of certain
materials and wastes, the remediation of contaminated soil and groundwater,  the
manufacture,  sale and use of pesticides and the health and safety of employees.
As such, the nature of the Company's  current and former operations and those of
its subsidiaries  exposes the Company and its subsidiaries to the risk of claims
with respect to such matters.

3.  Refinancing

     On October 21, 2003 the Company issued 105,000 units  consisting of $85,000
of 13% Senior Secured Notes due 2007 of PAHC (the "US Senior Notes") and $20,000
13% Senior Secured Notes due 2007 of Philipp Brothers  Netherlands III B.V. (the
"Dutch Senior Notes" and, together with the US Senior Notes, the "Senior Secured
Notes"), an indirect wholly-owned  subsidiary of PAHC (the "Dutch issuer").  The
Company used the proceeds from the issuance to: (i) repurchase  $51,971 of its 9
7/8% Senior Subordinated Notes due 2008 at a price equal to 60% of the principal
amount thereof,  plus accrued and unpaid interest;  (ii) repay its senior credit
facility of $34,888  outstanding at the repayment  date;  (iii)  satisfy,  for a
payment of  approximately  $29,315,  certain of its  outstanding  obligations to
Pfizer Inc., including: (a) $20,075 aggregate principal amount of its promissory
note plus  accrued  and unpaid  interest;  (b) $9,681 of accounts  payable,  (c)
$9,257 of accrued expenses; and (d) future contingent purchase price obligations
under  its  agreements  with  Pfizer  by which  the  Company  acquired  Pfizer's
medicated feed additive  business,  and; (iv) pay fees and expenses  relating to
the above transactions.

     The US  Senior  Notes  and  the  Dutch  Senior  Notes  are  senior  secured
obligations  of each of PAHC and the Dutch issuer,  respectively.  The US Senior
Notes and the Dutch Senior Notes are guaranteed on a senior secured basis by all
PAHC's  domestic  restricted  subsidiaries,  and  the  Dutch  Senior  Notes  are
guaranteed on a senior secured basis by PAHC and by the restricted  subsidiaries
of the Dutch  issuer,  including  Phibro Animal Health  (Belgium)  SPRL.  The US
Senior Notes and related  guarantees are secured by substantially  all of PAHC's
assets and the assets of its domestic restricted  subsidiaries,  other than real
property and interests  therein.  The Dutch Senior Notes and related  guarantees
are secured by a pledge of all the accounts  receivable,  a security interest or
floating  charge on the inventory to the extent  permitted by applicable  law, a
mortgage on substantially all of the real property, of the Dutch issuer and each
of its  restricted  subsidiaries,  a pledge of 100% of the capital stock of each
subsidiary of the Dutch issuer, a pledge of the  intercompany  loans made by the
Dutch issuer to its restricted  subsidiaries and substantially all of the assets
of the U.S.  guarantors,  other than real  property and interests  therein.  The
indenture  governing the Senior Secured Notes  provides for optional  make-whole
redemptions at any time prior to June 1, 2005,  optional  redemption on or after
June 1, 2005, and requires the Company to make certain offers to purchase Senior
Secured Notes upon a change of control,  upon certain asset sales and from fifty
percent (50%) of excess cash flow (as such terms are defined in the indenture).

     Also,  on October 21,  2003,  the Company  entered  into a new  replacement
domestic senior working capital credit facility with Wells Fargo Foothill, Inc.,
providing  for a working  capital  line plus a letter  of credit  facility.  The
aggregate  amount of borrowings  under such working capital and letter of credit
facilities may not exceed $25,000,  and the aggregate amount of borrowings under
the working capital facility may not exceed $15,000.

     Borrowings  under the  replacement  domestic  senior  credit  facility  are
subject to a borrowing base formula based on  percentages  of eligible  domestic
receivables and domestic inventory.  Under the replacement credit facility,  the
Company may choose between two interest rate options:  (i) the  applicable  base
rate as  defined  plus  0.50% and (ii) the LIBOR  rate as  defined  plus  2.75%.
Indebtedness  under  the  replacement  credit  facility  is  secured  by a first
priority  lien on  substantially  all of the  Company's  assets  and  assets  of
substantially  all  of the  Company's  domestic  subsidiaries.  The  Company  is
required  to pay an  unused  line fee of  0.375% on the  unused  portion  of the
replacement  credit  facility,  a


                                       9
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

monthly  servicing  fee and  standard  letter of credit  fees to issuing  banks.
Borrowings  under the replacement  credit facility are available  until, and are
repayable no later than, October 31, 2007, although borrowings must be repaid by
June 30, 2007 if the maturity of the Senior Secured Notes has not been extended,
as required by the credit facility, by that date.

     Pursuant to the terms of an intercreditor  agreement, the security interest
securing  the Senior  Secured  Notes and the  guarantees  made by the  Company's
domestic  restricted  subsidiaries  are  subordinated  to a  lien  securing  the
replacement domestic senior credit facility.

     The Company believes that, through the refinancings  referred to above, the
liquidity issues mentioned in the Company's June 30, 2003 consolidated financial
statements  have been  resolved.  The  Company's  replaced  senior  bank  credit
facility  and its note  payable to Pfizer  were to mature in  November  2003 and
March 2004, respectively.  The effect of the above refinancing transactions will
be included in the December 31, 2003 financial statements.

     The Company's ability to fund its operating plan relies upon its ability to
continue to successfully implement its efforts to improve its overall liquidity
(through cost reduction activities, working capital improvement plans, shutdown
of unprofitable operations and sale of certain business operations and other
assets) and the continued availability of borrowings under its replacement
senior working capital facility. The Company believes that it will be able to
comply with the terms of its covenants under the replacement senior credit
facility based on its forecasted operating plan. In the event of adverse
operating results and/or violation of covenants under this facility, there can
be no assurance that the Company would be able to obtain waivers or consents on
favorable terms, if at all.

     The Company intends to sell the assets and business of its subsidiary,  The
Prince  Manufacturing  Company ("PMC"),  to Palladium Equity Partners II, LP and
certain of its affiliates (the "Palladium Investors").  The material elements of
the transactions relating to this sale include: (i) the transfer of ownership to
the  Palladium  Investors of PMC's  assets;  (ii) the reduction of the preferred
stock of the  Palladium  Investors  from $69,868 (as of  September  30, 2003) to
$15,200 (as of September 30, 2003);  (iii) the  termination of any obligation of
the Company or any  subsidiaries  of the Company in respect of the $2,250 annual
management advisory fee; (iv) a separate cash payment to the Palladium Investors
of $10,000  (derived from the recent sale of the Company's  subsidiary,  Mineral
Resource  Technologies,  Inc.  ("MRT");  (v)  payments by PMC to the Company for
central  support  services  for the next three  years of $1,000,  $500 and $200,
respectively;  and (vi)  supply  arrangements  between  the Company and PMC with
respect to manganous oxide and red iron oxide.  The PMC transactions are subject
to   definitive   documentation   that  is   expected   to   include   customary
representations,  warranties  and  indemnities  of the Company,  provisions  for
working capital adjustments and settlement of intercompany  accounts,  a closing
fee payable to  Palladium  and the  agreement of the Company to pay or reimburse
the Palladium Investors for their reasonable out-of-pocket transaction expenses.
The  economic  terms  set forth  above  are  subject  to the  terms  upon  which
intercompany accounts would be settled, the amount of minimum working capital of
PMC to be agreed upon and the amount of the  closing  fee payable to  Palladium.
The Company also expects that it will  establish a $1,000 escrow or other credit
support  for two years to secure its net  working  capital  and  indemnification
obligations,  and indemnify the Palladium Investors,  payable after the maturity
of the Company's Senior  Subordinated Notes due 2008, for a portion, at the rate
of $0.65  for every  dollar,  of the  amount  they  receive  in  respect  of the
disposition  of the PMC business less than $21,000,  up to a maximum  payment by
the Company of $4,000.  Under the indenture for the Senior  Secured  Notes,  the
transaction must be completed on or before December 31, 2003.


                                       10
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

4.  Inventories

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


                                         September 30, 2003        June 30, 2003
                                         ------------------        -------------
Raw materials                                 $ 24,415               $ 22,277
Work-in-process                                  2,198                  1,765
Finished goods                                  68,408                 65,357
Excess of FIFO cost over LIFO cost                (632)                  (632)
                                              --------               --------
 Total inventory                              $ 94,389               $ 88,767
                                              ========               ========

5.  Intangibles

     Product  intangibles  cost arising from the MFA  acquisition was $10,449 at
September 30, 2003 and June 30, 2003 and accumulated amortization was $2,369 and
$1,780 at  September  30,  2003 and June 30,  2003,  respectively.  Amortization
expense was $304 and $320 for the three month periods  ended  September 30, 2003
and 2002,  respectively.  Amortization expense from the MFA acquisition for each
of the next five years from 2004 to 2008 will be $1,045 per year.

6.  Discontinued Operations

     The Company shutdown Odda Smelteverk (Norway) ("Odda") and divested Carbide
Industries  (U.K.)  ("Carbide"),  during the 2003 fiscal year,  and sold Mineral
Resource  Technologies,  Inc. ("MRT") in August 2003. These businesses have been
classified as  discontinued  operations.  The Company's  consolidated  financial
statements have been  reclassified to report  separately the operating  results,
financial position, and cash flows of the discontinued operations.

   Odda and Carbide:

     Operating results of Odda and Carbide were:

                                                              Three Months Ended
                                                              September 30, 2002
                                                              ------------------
OPERATING RESULTS:
Net sales                                                          $ 4,905
 Cost of goods sold                                                  6,037
 Selling, general and administrative expenses                        1,077
 Other income                                                        1,496
                                                                   -------
 Loss before income taxes                                             (713)
 Provision for income taxes                                             15
                                                                   -------
Loss from discontinued operations                                  $  (728)
                                                                   =======
 Depreciation and amortization                                     $   372
                                                                   =======


                                       11
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

Mineral Resource Technologies, Inc. ("MRT"):

     The Company sold MRT on August 28, 2003 for net proceeds, after transaction
costs, of approximately $13,836, subject to certain post-closing adjustments and
escrow requirements.  Based upon its assessment of likely outcomes,  the Company
does not anticipate a material effect from post-closing  adjustments.  Operating
results and gain on sale of MRT were:


                                                Three Months Ended September 30,
                                                --------------------------------
                                                     2003             2002
                                                   -------           -------
OPERATING RESULTS:
 Net sales                                         $ 3,327           $ 5,854
 Cost of goods sold                                  3,135             5,066
 Selling, general and administrative expenses          316               519
                                                   -------           -------
 Income (loss) before income taxes                    (124)              269
 Provision for income taxes                             --                --
                                                   -------           -------
 Income (loss) from discontinued operations        $  (124)          $   269
                                                   =======           =======
 Depreciation and amortization                     $    --           $   309
                                                   =======           =======

                                                             Three Months Ended
GAIN ON SALE:                                                September 30, 2003
                                                             ------------------
Current assets                                                   $  5,813
Net property, plant & equipment and other assets                   10,703
Current liabilities                                                (2,511)
 Other liabilities                                                   (400)
 Net proceeds of sale                                             (13,836)
                                                                 --------
(Gain) on sale                                                   $   (231)
                                                                 ========


                                       12
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

7.  Contingencies

(a) Litigation:

     On or about April 17, 1997, CP Chemicals, Inc. (a subsidiary, "CP") and the
Company were served with a complaint filed by Chevron U.S.A. Inc. ("Chevron") in
the United States  District Court for the District of New Jersey,  alleging that
the operations of CP at its Sewaren plant affected  adjoining  property owned by
Chevron and alleging that the Company,  as the parent of CP, is also responsible
to  Chevron.  In July 2002,  a phased  settlement  agreement  was  reached and a
Consent Order entered by the Court.  That  settlement is in the process of being
implemented. The Company's and CP's portion of the settlement for past costs and
expenses  through  the entry of the Consent  Order was $495 and was  included in
selling,  general  and  administrative  expenses  in fiscal 2002 and was paid in
fiscal  2003.  The Consent  Order then  provides  for a period of due  diligence
investigation  of the  property  owned by Chevron.  The  investigation  has been
conducted and the results are under review.  The  investigation  costs are being
split with one other defendant, Vulcan Materials Company. Upon completion of the
review of the results of the  investigation,  a decision will be made whether to
opt out of the  settlement or proceed.  If no party opts out of the  settlement,
the Company and CP will take title to the adjoining Chevron  property,  probably
through the use of a three-member  New Jersey  limited  liability  company.  The
third member of the limited liability company will be Vulcan Materials  Company.
The  Company  also  has  commenced   negotiations  with  Chevron  regarding  its
allocation of responsibility and associated costs under the Consent Order. While
the costs  cannot be estimated  with any degree of  certainty at this time,  the
Company  believes that insurance  recoveries will be available to offset some 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 such  subsidiary  agreed to
contribute  up to $900 of which  $635 has been  paid as of June 30,  2003.  Some
recovery  from  insurance  and other  sources is expected.  The Company also has
accrued its best estimate of any future costs.

     Phibro-Tech,  Inc. has resolved certain alleged technical permit violations
with the California  Department of Toxic  Substances  Control and has reached an
oral agreement to pay $425 over six years

     In February 2000, the EPA notified numerous parties of potential  liability
for waste disposal at a licensed Casmalia, California disposal site, including a
business,  assets of which were  originally  acquired by a subsidiary in 1984. A
settlement  has been reached in this matter and the Company has paid $171 of the
settlement amount.

     On or about  April 5,  2002,  the  Company  was  served,  as a  potentially
responsible  party,  with an  information  request  from 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  and its  subsidiaries  are party to a number  of  claims  and
lawsuits  arising  out  of the  normal  course  of  business  including  product
liabilities and governmental  regulation.  Certain of these actions seek damages
in various  amounts.  In most cases,  such claims are covered by insurance.  The
Company  believes  that  none  of  the  claims  or  pending   lawsuits,   either
individually  or in the  aggregate,  will have a material  adverse effect on its
financial position.

(b) Environmental Remediation:

     The Company's operations, properties and subsidiaries are subject to a wide
variety of complex and stringent federal, state, local and foreign environmental
laws and  regulations,  including  those governing the use,  storage,  handling,
generation,  treatment,  emission,  release,  discharge  and disposal of certain
materials and wastes, the remediation of contaminated soil and groundwater,  the
manufacture,  sale and use of pesticides and the health and safety of employees.
As such, the nature of the Company's  current and former operations and those of
its subsidiaries  exposes the Company and its subsidiaries to the risk of claims
with respect to such matters. Under certain circumstances, the Company or any of
its  subsidiaries  might be required to curtail  operations  until a  particular
problem  is  remedied.   Known  costs  and  expenses  under  environmental  laws
incidental  to  ongoing  operations  are  generally  included  within  operating
results.


                                       13
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

Potential  costs and expenses may also be incurred in connection with the repair
or  upgrade  of  facilities  to  meet   existing  or  new   requirements   under
environmental   laws  or  to  investigate  or  remediate   potential  or  actual
contamination  and from time to time the Company  establishes  reserves for such
contemplated  investigation  and  remediation  costs.  In  many  instances,  the
ultimate  costs under  environmental  laws and the time period during which such
costs are likely to be incurred are difficult to predict.

     The Company's  subsidiaries have, from time to time, implemented procedures
at  their  facilities   designed  to  respond  to  obligations  to  comply  with
environmental  laws.  The Company  believes that its operations are currently in
material  compliance with such environmental laws, although at various sites its
subsidiaries  are  engaged  in  continuing  investigation,   remediation  and/or
monitoring  efforts  to address  contamination  associated  with their  historic
operations.

     The  nature of the  Company's  and its  subsidiaries'  current  and  former
operations  exposes the Company and its  subsidiaries to the risk of claims with
respect to environmental matters and the Company cannot assure it will not incur
material costs and  liabilities in connection  with such claims.  Based upon its
experience to date, the Company believes that the future cost of compliance with
existing  environmental  laws,  and  liability  for known  environmental  claims
pursuant to such environmental  laws, will not have a material adverse effect on
the Company's financial position.

     Based  upon  information  available,  the  Company  estimates  the  cost of
litigation proceedings described above and the cost of further investigation and
remediation  of identified  soil and  groundwater  problems at operating  sites,
closed sites and  third-party  sites,  and closure  costs for closed sites to be
approximately  $2,518, which is included in current and long-term liabilities in
the  September 30, 2003  condensed  consolidated  balance  sheet  (approximately
$2,791 at June 30, 2003).


                                       14
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

8.  Business Segments

     The  Company's   reportable  segments  are  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 more than 500 formulations
and  concentrations  of medicated feed additives and nutritional  feed additives
including  antibiotics,  antibacterials,  anticoccidials,  anthelmintics,  trace
minerals,  vitamins,  vitamin  premixes  and other animal  health and  nutrition
products.  The Industrial Chemicals segment manufactures and markets a number of
chemicals   for   use  in  the   pressure-treated   wood,   chemical   catalyst,
semiconductor,  automotive,  and aerospace industries.  The Distribution segment
markets and  distributes  a variety of  industrial,  specialty  and fine organic
chemicals and intermediates  produced primarily by third parties.  The All Other
segment  manufactures  and markets a variety of specialty  custom  chemicals and
copper-based fungicides.  Intersegment sales and transfers were not significant.
The following segment data includes information only for continuing operations.

<TABLE>
<CAPTION>

                                          Animal
                                          Health &     Industrial                   All       Corporate &
                                         Nutrition     Chemicals   Distribution    Other         Other        Total
                                         ---------     ---------   ------------    -----      -----------     -----
<S>                                        <C>          <C>          <C>          <C>          <C>           <C>
Three Months Ended September 30, 2003
Net sales                                  $59,841      $11,982      $ 7,939      $ 7,408      $    --       $87,170
Operating income (loss)                      6,900          822          841          297       (3,857)        5,003
Depreciation and amortization                2,029          649            3          215          372         3,268

                                           Animal
                                          Health &    Industrial                    All       Corporate &
                                          Nutrition    Chemicals   Distribution    Other         Other         Total
                                         ---------     ---------   ------------    -----      -----------     -----
Three Months Ended September 30, 2002
Net sales                                  $59,976      $13,894      $ 8,096      $ 4,316       $    --       $86,282
Operating income (loss)                      9,420           92          750         (184)       (3,780)        6,298
Depreciation and amortization                1,892          819            3          187           355         3,256

                                          Animal
Identifiable Assets of                    Health &     Industrial                   All       Corporate &
Continuing Operations                    Nutrition     Chemicals   Distribution    Other         Other         Total
                                         ---------     ---------   ------------    -----      -----------      -----
At September 30, 2003                     $206,024     $ 36,867     $  9,366     $ 11,355      $ 12,604      $276,216
At June 30, 2003                           190,864       33,191        9,154       12,735        12,811       258,755
</TABLE>

9.  Consolidating Financial Statements

     The Senior  Subordinated  Notes due 2008 (the  "Notes") are  guaranteed  by
certain subsidiaries.  The Company's U.S. subsidiaries fully and unconditionally
guaranteed such Notes on a joint and several basis.  Foreign subsidiaries do not
presently guarantee the Notes.

     The  following   consolidating   financial  data   summarizes  the  assets,
liabilities  and results of operations and cash flows of the Parent,  Guarantors
and  Non-Guarantor  Subsidiaries.  The  Company  is the  Parent.  The  Guarantor
Subsidiaries  include all domestic  subsidiaries  of the Company  including:  CP
Chemicals,  Inc.;  Phibro-Tech,  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.  The  Guarantor  Subsidiaries  and  Non-Guarantor  Subsidiaries  are
directly or indirectly wholly owned as to voting stock by the Company.

     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.


                                       15
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

     The principal  consolidation  adjustments  are to eliminate  investments in
subsidiaries  and intercompany  balances and  transactions.  Separate  financial
statements of the 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>

                        PHIBRO ANIMAL HEALTH CORPORATION
                CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
                            As of September 30, 2003
                                 (In Thousands)

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------------
                                                                    Guarantor   Non-Guarantor   Consolidation  Consolidated
                                                       Parent     Subsidiaries  Subsidiaries     Adjustments      Balance
---------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>          <C>          <C>               <C>             <C>
                                     ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                          $      43      $     949      $  25,925                     $  26,917
  Trade receivables                                      2,637         25,747         25,940                        54,324
  Other receivables                                      1,370          1,380          1,791                         4,541
  Inventory                                              3,390         58,172         32,827                        94,389
  Prepaid expenses and other                             2,441          1,348          5,328                         9,117
                                                     ---------      ---------      ---------      ---------      ---------
    TOTAL CURRENT ASSETS                                 9,881         87,596         91,811             --        189,288
                                                     ---------      ---------      ---------      ---------      ---------
Property, plant & equipment, net                           122         16,158         49,037                        65,317

Intangibles                                                 --             --          8,080                         8,080
Investment in subsidiaries                             125,741          3,619             --       (129,360)            --
Intercompany                                             9,879         66,047           (124)       (75,802)            --
Other assets                                            11,057          1,687            787                        13,531
                                                     ---------      ---------      ---------      ---------      ---------
                                                     $ 156,680      $ 175,107      $ 149,591      $(205,162)     $ 276,216
                                                     =========      =========      =========      =========      =========

                     LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Cash overdraft                                     $     368      $   1,969      $      80                     $   2,417
  Loan payable to banks                                 31,598             --          7,152                        38,750
  Current portion of long-term debt                     21,368            382          2,078                        23,828
  Accounts payable                                       2,128         34,886         22,221                        59,235
  Accrued expenses and other                            11,886         10,588         26,491                        48,965
                                                     ---------      ---------      ---------      ---------      ---------
    TOTAL CURRENT LIABILITIES                           67,348         47,825         58,022             --        173,195
                                                     ---------      ---------      ---------      ---------      ---------
Long-term debt                                         100,000              6          2,874                       102,880
Intercompany debt                                           --             --         75,802        (75,802)            --
Other liabilities                                        4,248          6,167          4,642                        15,057
                                                     ---------      ---------      ---------      ---------      ---------
    TOTAL LIABILITIES                                  171,596         53,998        141,340        (75,802)       291,132
                                                     ---------      ---------      ---------      ---------      ---------
REDEEMABLE SECURITIES:
  Series B and C preferred stock                        69,868             --             --                        69,868
                                                     ---------      ---------      ---------      ---------      ---------
STOCKHOLDERS' DEFICIT:
  Series A preferred stock                                 521             --             --                           521
  Common stock                                               2             32             --            (32)             2
  Paid-in capital                                          860        110,863          5,199       (116,062)           860
  Accumulated deficit                                  (79,221)        10,001         10,210        (20,211)       (79,221)
  Accumulated other comprehensive income (loss):
    gain on derivative instruments                         398            398             --           (398)           398
    cumulative currency translation adjustment          (7,344)          (185)        (7,158)         7,343         (7,344)
                                                     ---------      ---------      ---------      ---------      ---------
    TOTAL STOCKHOLDERS' DEFICIT                        (84,784)       121,109          8,251       (129,360)       (84,784)
                                                     ---------      ---------      ---------      ---------      ---------
                                                     $ 156,680      $ 175,107      $ 149,591      $(205,162)     $ 276,216
                                                     =========      =========      =========      =========      =========
</TABLE>


                                       17
<PAGE>

                        PHIBRO ANIMAL HEALTH CORPORATION
           CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
                  For The Three Months Ended September 30, 2003
                                 (In Thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                                     Guarantor   Non-Guarantor  Consolidation Consolidated
                                                         Parent     Subsidiaries  Subsidiaries   Adjustments     Balance
------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>           <C>           <C>           <C>           <C>
NET SALES                                               $  5,742      $ 53,811      $ 28,465      $   (848)     $ 87,170

COST OF GOODS SOLD                                         4,508        39,512        22,834          (848)       66,006
                                                        --------      --------      --------      --------      --------
  GROSS PROFIT                                             1,234        14,299         5,631            --        21,164

SELLING, GENERAL AND ADMINISTRATIVE
  EXPENSES                                                 4,673         6,896         4,592                      16,161
                                                        --------      --------      --------      --------      --------
  OPERATING INCOME (LOSS)                                 (3,439)        7,403         1,039            --         5,003

OTHER:
  Interest expense                                         3,713            11           225                       3,949
  Interest (income)                                           --            --          (242)                       (242)
  Other (income) expense, net                                228          (242)         (621)                       (635)

  Intercompany interest and other                         (5,993)        3,621         2,372            --

  Loss (profit) relating to subsidiaries                  (2,536)           --            --         2,536            --
                                                        --------      --------      --------      --------      --------
  INCOME (LOSS) FROM CONTINUING
    OPERATIONS BEFORE INCOME TAXES                         1,149         4,013          (695)       (2,536)        1,931

PROVISION FOR INCOME TAXES                                     1           234           548                         783
                                                        --------      --------      --------      --------      --------
  INCOME (LOSS) FROM CONTINUING OPERATIONS                 1,148         3,779        (1,243)       (2,536)        1,148

DISCONTINUED OPERATIONS:
  Profit (loss) relating to discontinued operations         (124)           --            --           124            --
  (Loss) from discontinued operations (net of
    income taxes)                                             --          (124)           --                        (124)
  Gain from disposal of discontinued operations
    (net of income taxes)                                    231            --            --                         231
                                                        --------      --------      --------      --------      --------
    NET INCOME (LOSS)                                   $  1,255      $  3,655      $ (1,243)     $ (2,412)     $  1,255
                                                        ========      ========      ========      ========      ========
</TABLE>


                                       18
<PAGE>


                        PHIBRO ANIMAL HEALTH CORPORATION
           CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
                  For the Three Months Ended September 30, 2003
                                 (In Thousands)

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------
                                                                 Guarantor    Non-Guarantor Consolidation  Consolidated
                                                     Parent     Subsidiaries  Subsidiaries   Adjustments     Balance
-----------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>           <C>           <C>           <C>           <C>
OPERATING ACTIVITIES:
  Net income (loss)                                 $  1,255      $  3,655      $ (1,243)     $ (2,412)     $  1,255
  Adjustment for discontinued operation                 (107)          124            --          (124)         (107)
                                                    --------      --------      --------      --------      --------
  Income (loss) from continuing operations             1,148         3,779        (1,243)       (2,536)        1,148

  Adjustments to reconcile income (loss) from
    continuing operations to net cash
    provided (used) by operating activities:
  Depreciation and amortization                          372           873         2,023                       3,268
  Deferred income taxes                                   --            --            53                          53
  Unrealized foreign currency (gains) losses
    and other                                            126           155        (1,543)                     (1,262)
  Changes in operating assets and liabilities:
    Accounts receivable                                  119        (1,268)        3,285                       2,136
    Inventory                                           (778)      (11,300)        7,146                      (4,932)
    Prepaid expenses and other                           433          (551)           77                         (41)
    Other assets                                        (530)           79            76                        (375)
    Intercompany                                     (11,283)        8,267           480         2,536            --
    Accounts payable                                  (1,176)         (707)       (3,892)                     (5,775)
    Accrued expenses and other                         4,015          (183)        3,637                       7,469
  Cash provided (used) by discontinued operations        231          (652)           --            --          (421)
                                                    --------      --------      --------      --------      --------
    NET CASH PROVIDED (USED) BY
      OPERATING ACTIVITIES                            (7,323)       (1,508)       10,099            --         1,268
                                                    --------      --------      --------      --------      --------
INVESTING ACTIVITIES:
  Capital expenditures                                    --          (318)         (573)                       (891)
  Proceeds from sale of assets                            --            --            12                          12
  Discontinued operations                             13,788            --           300                      14,088
                                                    --------      --------      --------      --------      --------
    NET CASH PROVIDED (USED) BY
      INVESTING ACTIVITIES                            13,788          (318)         (261)           --        13,209
                                                    --------      --------      --------      --------      --------
FINANCING ACTIVITIES:
  Cash overdraft                                          18           642            71                         731
  Net increase (decrease) in short-term debt          (6,280)           --         6,092                        (188)
  Proceeds from long-term debt                            --            --         1,500                       1,500
  Payments of long-term debt                            (203)         (155)         (592)                       (950)
                                                    --------      --------      --------      --------      --------
    NET CASH PROVIDED (USED) BY
    FINANCING ACTIVITIES                              (6,465)          487         7,071            --         1,093
                                                    --------      --------      --------      --------      --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                   --             2           166                         168
                                                    --------      --------      --------      --------      --------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                                        --        (1,337)       17,075            --        15,738

CASH AND CASH EQUIVALENTS
  at beginning of period                                  43         2,286         8,850                      11,179
                                                    --------      --------      --------      --------      --------
CASH AND CASH EQUIVALENTS
  at end of period                                  $     43      $    949      $ 25,925      $     --      $ 26,917
                                                    ========      ========      ========      ========      ========
</TABLE>


                                       19
<PAGE>

                        PHIBRO ANIMAL HEALTH CORPORATION
                CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
                               As of June 30, 2003
                                 (In Thousands)
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------
                                                                     Guarantor      Non-Guarantor Consolidation   Consolidated
                                                          Parent    Subsidiaries    Subsidiaries   Adjustments       Balance
------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>            <C>            <C>            <C>
                                                            ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                            $      43      $   2,286      $   8,850                     $  11,179
  Trade receivables                                        2,759         24,523         28,389                        55,671
  Other receivables                                          957            736          1,949                         3,642
  Inventory                                                2,612         45,544         40,611                        88,767
  Prepaid expenses and other                               3,267          1,439          5,482                        10,188
  Current assets from discontinued operations                 --          4,942             --                         4,942
                                                       ---------      ---------      ---------      ---------      ---------
      TOTAL CURRENT ASSETS                                 9,638         79,470         85,281             --        174,389
                                                       ---------      ---------      ---------      ---------      ---------
Property, plant & equipment, net                             153         16,566         49,721                        66,440


Intangibles                                                   --             --          8,669                         8,669
Investment in subsidiaries                                96,672          3,621             --       (100,293)            --
Intercompany                                              35,186         40,334         (2,537)       (72,983)            --
Other assets                                              11,516          1,832            851                        14,199
Other assets from discontinued operations                     --         10,650             --                        10,650
                                                       ---------      ---------      ---------      ---------      ---------
                                                       $ 153,165      $ 152,473      $ 141,985      $(173,276)     $ 274,347
                                                       =========      =========      =========      =========      =========

                                               LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Cash overdraft                                       $     350      $   1,327      $       9                     $   1,686
  Loan payable to banks                                   32,147             --          6,767                        38,914
  Current portion of long-term debt                       21,599            447          2,078                        24,124
  Accounts payable                                         3,304         28,276         25,335                        56,915
  Accrued expenses and other                               6,924         11,082         23,603                        41,609
  Current liabilities from discontinued operations            --          2,051             --                         2,051
                                                       ---------      ---------      ---------      ---------      ---------
      TOTAL CURRENT LIABILITIES                           64,324         43,183         57,792             --        165,299
                                                       ---------      ---------      ---------      ---------      ---------
Long-term debt                                           100,073            362          1,956                       102,391
Intercompany debt                                             --             --         72,983        (72,983)            --
Other liabilities                                          4,397         13,403          4,288                        22,088
Other liabilities from discontinued operations                --            198             --                           198
                                                       ---------      ---------      ---------      ---------      ---------
      TOTAL LIABILITIES                                  168,794         57,146        137,019        (72,983)       289,976
                                                       ---------      ---------      ---------      ---------      ---------
REDEEMABLE SECURITIES:
  Series B and C preferred stock                          68,881             --             --                        68,881
                                                       ---------      ---------      ---------      ---------      ---------
STOCKHOLDERS' DEFICIT:
  Series A preferred stock                                   521             --             --                           521
  Common stock                                                 2             32             --            (32)             2
  Paid-in capital                                            860        110,885          5,179       (116,064)           860
  Accumulated deficit                                    (79,489)       (15,479)         6,079          9,400        (79,489)
  Accumulated other comprehensive income (loss):
    gain on derivative instruments                            81             81             --            (81)            81
    cumulative currency translation adjustment            (6,485)          (192)        (6,292)         6,484         (6,485)
                                                       ---------      ---------      ---------      ---------      ---------
      TOTAL STOCKHOLDERS' DEFICIT                        (84,510)        95,327          4,966       (100,293)       (84,510)
                                                       ---------      ---------      ---------      ---------      ---------
                                                       $ 153,165      $ 152,473      $ 141,985      $(173,276)     $ 274,347
                                                       =========      =========      =========      =========      =========
</TABLE>


                                       20
<PAGE>


                        PHIBRO ANIMAL HEALTH CORPORATION
           CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
                  For The Three Months Ended September 30, 2002
                                 (In Thousands)

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------
                                                                       Guarantor   Non-Guarantors  Consolidation  Consolidated
                                                           Parent     Subsidiaries  Subsidiaries    Adjustments      Balance
------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>            <C>           <C>            <C>            <C>
NET SALES                                                $  7,108       $ 50,363      $ 30,665       $ (1,854)      $ 86,282


COST OF GOODS SOLD                                          5,787         37,747        22,454         (1,854)        64,134
                                                         --------       --------      --------       --------       --------
  GROSS PROFIT                                              1,321         12,616         8,211             --         22,148


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                4,358          6,955         4,537                        15,850
                                                         --------       --------      --------       --------       --------
  OPERATING INCOME (LOSS)                                  (3,037)         5,661         3,674             --          6,298

OTHER:
  Interest expense                                          3,764             30           710                         4,504
  Interest (income)                                            (1)            --          (125)                         (126)
  Other expense, net                                           97            139           950                         1,186

  Intercompany interest and other                          (7,546)         4,950         2,596                            --

  Loss (profit) relating to subsidiaries                      347             --            --           (347)            --
                                                         --------       --------      --------       --------       --------
  INCOME (LOSS) FROM CONTINUING
    OPERATIONS BEFORE INCOME TAXES                            302            542          (457)           347            734

PROVISION FOR INCOME TAXES                                     --             77           355                           432
                                                         --------       --------      --------       --------       --------
  INCOME (LOSS) FROM CONTINUING
    OPERATIONS                                                302            465          (812)           347            302


DISCONTINUED OPERATIONS:
  Profit (loss) relating to discontinued operations          (459)            --            --            459             --
  Profit (loss) from discontinued operations (net
    of income taxes)                                           --            269          (728)                         (459)
                                                         --------       --------      --------       --------       --------
NET INCOME (LOSS)                                        $   (157)      $    734      $ (1,540)      $    806       $   (157)
                                                         ========       ========      ========       ========       ========
</TABLE>


                                       21
<PAGE>


                        PHIBRO ANIMAL HEALTH CORPORATION
           CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
                  For the Three Months Ended September 30, 2002
                                 (In Thousands)

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------
                                                                     Guarantor    Non-Guarantor  Consolidation   Consolidated
                                                       Parent      Subsidiaries    Subsidiaries   Adjustments      Balance
------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>            <C>            <C>            <C>            <C>
OPERATING ACTIVITIES:
  Net income (loss)                                   $   (157)      $    734       $ (1,540)      $    806       $   (157)
  Adjustment for discontinued operation                    459           (269)           728           (459)           459
                                                      --------       --------       --------       --------       --------
  Income (loss) from continuing operations                 302            465           (812)           347            302

  Adjustments to reconcile income (loss) from
    continuing operations to net cash
    provided by operating activities:
    Depreciation and amortization                          355          1,052          1,849                         3,256
    Deferred income taxes                                   --             --            373                           373
    Unrealized foreign currency (gains) losses
      and other                                             95           (523)         1,653                         1,225

    Changes in operating assets and liabilities:
      Accounts receivable                                 (306)         2,243          1,443                         3,380
      Inventory                                            (65)        (3,832)         1,007                        (2,890)
      Prepaid expenses and other                         1,285          1,705         (2,440)                          550
      Other assets                                        (154)           566           (475)                          (63)
      Intercompany                                       5,541           (273)        (4,921)          (347)            --
      Accounts payable                                     536          7,524          1,839                         9,899
      Accrued expenses and other                         2,322         (1,614)         4,392                         5,100
   Cash provided by discontinued operations                 --            (85)         2,527                         2,442
                                                      --------       --------       --------       --------       --------
    NET CASH PROVIDED BY OPERATING ACTIVITIES            9,911          7,228          6,435             --         23,574
                                                      --------       --------       --------       --------       --------
INVESTING ACTIVITIES:
  Capital expenditures                                    (172)        (1,395)        (1,114)                       (2,681)
  Proceeds from sale of assets                              --             --              6                             6
  Discontinued operations                                   --           (177)          (845)                       (1,022)
                                                      --------       --------       --------       --------       --------
NET CASH (USED) BY INVESTING ACTIVITIES                   (172)        (1,572)        (1,953)            --         (3,697)
                                                      --------       --------       --------       --------       --------
FINANCING ACTIVITIES:
  Cash overdraft                                          (226)        (3,885)        (1,689)                       (5,800)
  Net (decrease) in short-term debt                     (9,927)            --           (460)                      (10,387)
  Payments of long-term debt                                --           (136)        (1,332)                       (1,468)
                                                      --------       --------       --------       --------       --------
  NET CASH (USED) BY FINANCING ACTIVITIES              (10,153)        (4,021)        (3,481)            --        (17,655)
                                                      --------       --------       --------       --------       --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                     --             (7)            19                            12
                                                      --------       --------       --------       --------       --------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                                        (414)         1,628          1,020             --          2,234

CASH AND CASH EQUIVALENTS
  at beginning of period                                   457            130          5,832                         6,419
                                                      --------       --------       --------       --------       --------
CASH AND CASH EQUIVALENTS
  at end of period                                    $     43       $  1,758       $  6,852       $     --       $  8,653
                                                      ========       ========       ========       ========       ========
</TABLE>


                                       22
<PAGE>

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

     This  information   should  be  read  in  conjunction  with  the  condensed
consolidated  financial statements and related notes,  contained in this Report.
The  Company's  Odda,  Carbide,  and MRT  businesses  have  been  classified  as
discontinued   operations.   This  discussion  presents   information  only  for
continuing operations, unless otherwise indicated.

General

     The Company is a leading  diversified global manufacturer and marketer of a
broad range of animal health and nutrition products, specifically medicated feed
additives  (MFAs)  and  nutritional  feed  additives  (NFAs),   which  are  sold
throughout the world  predominantly  to the poultry,  swine and cattle  markets.
MFAs are used  preventatively  and  therapeutically  in animal  feeds to produce
healthy livestock. The Company believes it is the third largest manufacturer and
marketer of MFAs in the world, and that certain of its MFA products have leading
positions  in  the  marketplace.  The  Company  is  also a  specialty  chemicals
manufacturer and marketer,  serving primarily the United States pressure-treated
wood and chemical industries.  The Company has several proprietary products, and
many of the  Company's  products  provide  critical  performance  attributes  to
customers'  products,  while representing a relatively small percentage of total
end-product cost.

     The Company recently changed its name to Phibro Animal Health  Corporation.
The Company was formerly known as Philipp Brothers Chemicals,  Inc. The new name
reflects the core focus and strategic direction of the Company.

     In August  2003,  the Company  completed  the sale of MRT for net  proceeds
after  transaction  costs of  approximately  $13.8  million,  subject to certain
post-closing adjustments and escrow requirements.

Refinancing

     On  October  21,  2003 the  Company  issued  105,000  units  consisting  of
$85,000,000  of 13%  Senior  Secured  Notes  due 2007 of  Phibro  Animal  Health
Corporation  ("PAHC") (the "US Senior Notes") and $20,000,000 13% Senior Secured
Notes due 2007 of Philipp  Brothers  Netherlands  III B.V.  (the  "Dutch  Senior
Notes" and,  together with the US Senior Notes, the "Senior Secured Notes"),  an
indirect wholly-owned  subsidiary of PAHC (the "Dutch issuer"). The Company used
the  proceeds  from the issuance to: (i)  repurchase  $51,971,000  of its 9 7/8%
Senior  Subordinated  Notes  due 2008 at a price  equal to 60% of the  principal
amount thereof,  plus accrued and unpaid interest;  (ii) repay its senior credit
facility of $34,888,000  outstanding at the repayment date; (iii) satisfy, for a
payment of approximately $29,315,000,  certain of its outstanding obligations to
Pfizer  Inc.,  including:  (a)  $20,075,000  aggregate  principal  amount of its
promissory  note plus accrued and unpaid  interest;  (b)  $9,681,000 of accounts
payable, (c) $9,257,000 of accrued expenses;  and (d) future contingent purchase
price obligations under its agreements with Pfizer by which the Company acquired
Pfizer's  medicated  feed  additive  business,  and;  (iv) pay fees and expenses
relating to the above transactions.

     The US  Senior  Notes  and  the  Dutch  Senior  Notes  are  senior  secured
obligations  of each of PAHC and the Dutch issuer,  respectively.  The US Senior
Notes and the Dutch Senior Notes are guaranteed on a senior secured basis by all
PAHC's  domestic  restricted  subsidiaries,  and  the  Dutch  Senior  Notes  are
guaranteed on a senior secured basis by PAHC and by the restricted  subsidiaries
of the Dutch  issuer,  including  Phibro Animal Health  (Belgium)  SPRL.  The US
Senior Notes and related  guarantees are secured by substantially  all of PAHC's
assets and the assets of its domestic restricted  subsidiaries,  other than real
property and interests  therein.  The Dutch Senior Notes and related  guarantees
are secured by a pledge of all the accounts  receivable,  a security interest or
floating  charge on the inventory to the extent  permitted by applicable  law, a
mortgage on substantially all of the real property, of the Dutch issuer and each
of its  restricted  subsidiaries,  a pledge of 100% of the capital stock of each
subsidiary of the Dutch issuer, a pledge of the  intercompany  loans made by the
Dutch issuer to its restricted  subsidiaries and substantially all of the assets
of the U.S.  guarantors,  other than real  property and interests  therein.  The
indenture  governing the Senior Secured Notes  provides for optional  make-whole
redemptions at any time prior to June 1, 2005,  optional  redemption on or after
June 1, 2005, and requires the Company to make certain offers to purchase Senior
Secured Notes upon a change of control,  upon certain asset sales and from fifty
percent (50%) of excess cash flow (as such terms are defined in the indenture).

     Also,  on October 21,  2003,  the Company  entered  into a new  replacement
domestic senior working capital credit facility with Wells Fargo Foothill, Inc.,
providing  for a working  capital  line plus a letter  of credit  facility.  The
aggregate  amount of borrowings  under such working capital and letter of credit
facilities may not exceed  $25,000,000,  and the aggregate  amount of borrowings
under the working capital facility may not exceed $15,000,000.


                                       23
<PAGE>

Borrowings under the replacement  domestic senior credit facility are subject to
a borrowing base formula based on percentages of eligible  domestic  receivables
and domestic inventory.  Under the replacement credit facility,  the Company may
choose  between two  interest  rate  options:  (i) the  applicable  base rate as
defined plus 0.50% and (ii) the LIBOR rate as defined  plus 2.75%.  Indebtedness
under the  replacement  credit  facility is secured by a first  priority lien on
substantially all of the Company's assets and assets of substantially all of the
Company's domestic  subsidiaries.  The Company is required to pay an unused line
fee of 0.375% on the  unused  portion  of the  replacement  credit  facility,  a
monthly  servicing  fee and  standard  letter of credit  fees to issuing  banks.
Borrowings  under the replacement  credit facility are available  until, and are
repayable no later than, October 31, 2007, although borrowings must be repaid by
June 30, 2007 if the maturity of the Senior Secured Notes has not been extended,
as required by the credit facility, by that date.

     Pursuant to the terms of an intercreditor  agreement, the security interest
securing  the Senior  Secured  Notes and the  guarantees  made by the  Company's
domestic  restricted  subsidiaries  is  subordinated  to  a  lien  securing  the
replacement domestic senior credit facility.

     The Company believes that, through the refinancings  referred to above, the
liquidity issues mentioned in the Company's June 30, 2003 consolidated financial
statements  have been  resolved.  The  Company's  replaced  senior  bank  credit
facility  and its note  payable to Pfizer  were to mature in  November  2003 and
March 2004, respectively.  The effect of the above refinancing transactions will
be included in the December 31, 2003 financial statements.

     The Company intends to sell the assets and business of its subsidiary,  The
Prince  Manufacturing  Company ("PMC"),  to Palladium Equity Partners II, LP and
certain of its affiliates (the "Palladium Investors").  The material elements of
the transactions relating to this sale include: (i) the transfer of ownership to
the  Palladium  Investors of PMC's  assets;  (ii) the reduction of the preferred
stock of the Palladium  Investors from $69,868,000 (as of September 30, 2003) to
$15,200,000 (as of September 30, 2003);  (iii) the termination of any obligation
of the Company or any  subsidiaries  of the Company in respect of the $2,250,000
annual  management  advisory  fee; (iv) a separate cash payment to the Palladium
Investors  of  $10,000,000  (derived  from  the  recent  sale  of the  Company's
subsidiary, Mineral Resource Technologies,  Inc. ("MRT"); (v) payments by PMC to
the Company for central support services for the next three years of $1,000,000,
$500,000 and $200,000,  respectively;  and (vi) supply arrangements  between the
Company and PMC with  respect to  manganous  oxide and red iron  oxide.  The PMC
transactions are subject to definitive documentation that is expected to include
customary representations, warranties and indemnities of the Company, provisions
for working  capital  adjustments  and settlement of  intercompany  accounts,  a
closing  fee payable to  Palladium  and the  agreement  of the Company to pay or
reimburse the Palladium Investors for their reasonable out-of-pocket transaction
expenses. The economic terms set forth above are subject to the terms upon which
intercompany accounts would be settled, the amount of minimum working capital of
PMC to be agreed upon and the amount of the  closing  fee payable to  Palladium.
The Company  also expects  that it will  establish a $1,000,000  escrow or other
credit   support  for  two  years  to  secure  its  net   working   capital  and
indemnification  obligations,  and indemnify the  Palladium  Investors,  payable
after the maturity of the Company's  Senior  Subordinated  Notes due 2008, for a
portion,  at the rate of $0.65 for every  dollar,  of the amount they receive in
respect of the  disposition of the PMC business less than  $21,000,000,  up to a
maximum payment by the Company of $4,000,000. Under the indenture for the Senior
Secured Notes, the transaction must be completed on or before December 31, 2003.


                                       24
<PAGE>

Summary Consolidated Results of Continuing Operations

                                                Three Months Ended September 30,
                                                --------------------------------
                                                     2003               2002
                                                     ----               ----
                                                          (Thousands)

Net sales                                          $ 87,170          $ 86,282
 Gross profit                                        21,164            22,148
 Selling, general and administrative                 16,161            15,850
 Operating income                                     5,003             6,298
 Interest expense, net                                3,707             4,378
 Other (income) expense, net                           (635)            1,186
 Provision for income taxes                             783               432
 Income from continuing operations                 $  1,148          $    302

Comparison of Three Months Ended September 30, 2003 and 2002

     Net Sales of $87.2 million increased $0.9 million, or 1%. Animal Health and
Nutrition  sales  of $59.8  million  declined  slightly  from  the  prior  year.
Specialty  Chemicals  sales of $27.4  million  increased  $1.0  million,  or 4%,
primarily due to volume increases in the All Other segment.

     Gross Profit of $21.2 million decreased $1.0 million to 24.3% of net sales,
compared  with  25.7%  in 2002.  Unfavorable  sales  mix in  Animal  Health  and
Nutrition was responsible for the overall decrease.

     Selling,  General and  Administrative  Expenses of $16.2 million  increased
$0.3 million,  or 2%. Operating  segment  expenses  approximated the prior year.
Corporate  expenses  increased $0.3 million due to higher  staffing  levels that
began in mid-fiscal 2003.

     Operating  Income of $5.0 million  decreased $1.3 million to 5.7% of sales.
The decrease was primarily due to gross profit declines in the Animal Health and
Nutrition  segment  offset  in part by  improved  operating  performance  of the
Specialty Chemicals group.

     Interest Expense, Net of $3.7 million decreased $0.7 million, compared with
$4.4 million in 2002, primarily due to lower average borrowing levels.

     Other  (Income)  Expense,  Net of ($0.6)  million  improved  compared  with
expense of $1.2 million last year.  The (income)  expense  principally  reflects
foreign   currency   transaction   net  (gains)  losses  related  to  short-term
inter-company balances and foreign currency translation (gains) losses.

     Income  Taxes of $0.8  million  on a  consolidated  pre-tax  income of $1.9
million  were  primarily  due to income tax  provisions  in  profitable  foreign
jurisdictions and also for state income taxes.


                                       25
<PAGE>

Operating Segments

                                                Three Months Ended September 30,
                                                --------------------------------
                                                      2003              2002
                                                      ----              ----
                                                          (Thousands)
Net Sales
    Animal Health & Nutrition                       $59,841           $59,976
    Specialty Chemicals:
       Industrial Chemicals                          11,982            13,894
       Distribution                                   7,939             8,096
       All Other                                      7,408             4,316
                                                    -------           -------
                                                    $87,170           $86,282
                                                    =======           =======

                                                Three Months Ended September 30,
                                                --------------------------------
                                                     2003              2002
                                                     ----              ----
                                                           (Thousands)
Operating Income
    Animal Health & Nutrition                      $ 6,900           $ 9,420
    Specialty Chemicals:
       Industrial Chemicals                            822                92
       Distribution                                    841               750
       All Other                                       297              (184)
    Corporate                                       (3,857)           (3,780)
                                                   -------           -------
                                                   $ 5,003           $ 6,298
                                                   =======           =======

     The Animal Health and Nutrition  segment  manufactures and markets MFAs and
NFAs to the poultry,  swine and cattle  markets,  and includes the operations of
the Phibro Animal Health business unit, Prince AgriProducts, Koffolk Israel, and
Koffolk  Brazil.  The  Industrial  Chemicals  segment  manufactures  and markets
specialty  chemicals for use in the pressure  treated wood,  brick,  glass,  and
chemical industries,  and includes Phibro-Tech and PMC. The Distribution segment
markets a variety of  specialty  chemicals,  and includes  PhibroChem  and Ferro
operations.  The All  Other  segment  includes  contract  manufacturing  of crop
protection chemicals, Wychem and all other operations.

Operating Segments Comparison of Three Months Ended September 30, 2003 and 2002

     Animal Health and Nutrition

     Net Sales of $59.8 million decreased $0.1 million. Medicated Feed Additives
net sales  decreased by $2.8 million.  Revenues  were lower for  antibacterials,
antibiotics  and  anticoccidials  but were  offset  in part by  higher  sales of
anthelmintics  and  other  medicated  feed  additives.  The  decreased  revenues
primarily  were due to unit volume  decreases.  Nutritional  Feed  Additives net
sales  increased by $2.7 million,  principally  due to volume  increases in core
inorganic minerals, trace mineral premixes and other ingredients.

     Operating Income of $6.9 million decreased $2.5 million,  or 27%. Operating
income  declined  due to higher cost of goods  reflecting  the  stronger  Euro's
effect on Belgium manufacturing costs, lower unit volumes and changes in product
mix to lower margin  items.  This was offset in part by higher  average  selling
prices, including favorable currency effect on international sales.


                                       26
<PAGE>

    Specialty Chemicals

     Industrial  Chemicals net sales of $12.0 million decreased $1.9 million, or
14%. Sales of etchants and related  products to the printed circuit board market
decreased  $1.8 million due to the  divesture of the  Company's  eastern  United
States etchant business in mid-fiscal  2003. The Company  continues its existing
etchant  business  at one  remaining  facility.  Sales  of  iron  and  manganese
compounds to the brick, masonry,  glass, and other chemical industries decreased
$0.1 million primarily due to lower unit volumes. Industrial Chemicals operating
income of $0.8 million  improved $0.7 million.  The improvement  principally was
due to savings from headcount reductions and facility restructurings.

     Distribution net sales of $7.9 million decreased $0.2 million, or 2%. Lower
unit sales volumes in the U.S. were partially  offset by higher sales volumes in
Europe. Distribution operating income of $0.8 million increased $0.1 million, or
12%. As a percentage of sales, operating income increased to 11% in 2003 from 9%
in 2002. The improvement in operating income margins  resulted  principally from
increased sales of higher margin products.

     All  Other  net  sales of $7.4  million  increased  $3.1  million,  or 72%.
Revenues for contract  manufacturing  increased $3.0 million and specialized lab
projects and formulations  increased $0.1 million. All Other operating income of
$0.3 million  improved from the prior year loss of $0.2 million due to increased
unit volumes and higher average selling prices.


                                       27
<PAGE>

Discontinued Operations

     The Company  shutdown  Odda  Smelteverk  (Norway)  ("Odda"),  and  divested
Carbide  Industries (U.K.) ("Carbide") and Mineral Resource  Technologies,  Inc.
("MRT"). These businesses have been classified as discontinued  operations.  The
Company's  consolidated  financial  statements have been  reclassified to report
separately  the operating  results,  financial  position,  and cash flows of the
discontinued operations.



                                                              Three Months Ended
                                                              September 30, 2003
                                                              ------------------
                                                                 (Thousands)

                                                                    MRT
                                                                    ---
 Net sales                                                        $ 3,327
                                                                  =======

Pre-tax income (loss) from discontinued operations                $  (124)
Provision (benefit) for income tax                                $    --
                                                                  -------
Income  (loss) from discontinued operations                       $  (124)
                                                                  =======
Depreciation and Amortization                                     $    --
                                                                  =======

<TABLE>
<CAPTION>

                                            Three Months Ended September 30, 2002
                                          ------------------------------------------
                                                          (Thousands)
                                            Odda       Carbide      MRT       Total
                                          --------    --------   --------   --------
<S>                                       <C>         <C>        <C>        <C>
Net sales                                 $  3,428    $  1,477   $  5,854   $ 10,759
                                          ========    ========   ========   ========
Pre-tax income (loss) from discontinued
  operations                              $   (805)   $     92   $    269   $   (444)
Provision (benefit) for income tax        $     --    $     15   $     --   $     15
                                          --------    --------   --------   --------
Income  (loss) from discontinued
  operations                              $   (805)   $     77   $    269   $   (459)
                                          ========    ========   ========   ========
Depreciation and Amortization             $    318    $     54   $    309   $    681
                                          ========    ========   ========   ========
</TABLE>

     Odda  and  Carbide.  During  2003,  the  Company  determined  that it would
permanently  shutdown and no longer fund the operations of Odda. On February 28,
2003,  Odda filed for  bankruptcy  in Norway.  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 is the
guarantor of certain debt of Odda. As of September  30, 2003,  debt of Norwegian
Krone (NOK) 23.8  million  ($3.4  million) was  outstanding  and was included in
loans  payable  to  banks  on the  Company's  consolidated  balance  sheet.  The
outstanding  balance is payable  November 30, 2003. 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.  During 2003,  the
Company sold Carbide,  previously a distributor for one of Odda's product lines.
Proceeds from the divestiture were not material.

     Mineral Resource Technologies, Inc. ("MRT"). The Company sold MRT on August
28, 2003 for net proceeds,  after  transaction  costs,  of  approximately  $13.8
million,  subject  to  post-closing  adjustments  and escrow  requirements.  The
Company  recorded a gain of approximately  $0.2 million on disposal.  Based upon
its  assessment of likely  outcomes,  the Company does not anticipate a material
effect from post-closing adjustments.


                                       28
<PAGE>

Liquidity and Capital Resources

     Net Cash Provided by Operating Activities.  Cash provided by operations for
the three  months ended  September  30, 2003 and 2002 was $0.7 million and $23.6
million,  respectively.  Cash provided in 2003 was  attributable  to income from
operations  offset by unrealized  foreign currency losses and increased  working
capital  requirements.  Cash  provided  in 2002  was due to  aggressive  working
capital management.

     Net Cash Provided (Used) by Investing Activities.  Net cash provided (used)
by investing  activities for the three months ended  September 30, 2003 and 2002
was $13.2  million and ($3.7)  million,  respectively.  Discontinued  operations
provided (used) $14.1 million and ($1.0) million in 2003 and 2002, respectively.
Capital  expenditures of $.9 million and $2.7 million in the respective 2003 and
2002  periods  were for new product  capacity,  for  maintaining  the  Company's
existing asset base and for environmental, health and safety projects.

     Net Cash Provided (Used) by Financing Activities.  Net cash provided (used)
by financing  activities for the three months ended  September 30, 2003 and 2002
was $1.1 million and ($17.7)  million,  respectively.  Short-term debt decreased
due to a $4.0  million  reduction in the  domestic  credit  facility and related
capital  expenditure  line and a $2.3 million  payment related to Norwegian bank
debt,  offset by a $6.0  million  increase  in foreign  borrowings.  Payments of
long-term debt and changes in cash overdraft  accounted for the remainder of net
cash provided by financing activities.

     Working  Capital  and Capital  Expenditures.  Working  capital,  defined as
accounts receivables, inventories and prepaid expenses and other current assets,
less accounts  payable and accrued expenses and other current  liabilities,  was
$54.2  million and $59.7  million as of  September  30, 2003 and June 30,  2003,
respectively.  The decrease was primarily due to improved management of accounts
receivable and increases in accrued expenses.

     The Company  anticipates  spending  approximately $10.0 million for capital
expenditures related to continuing operations in fiscal 2004, primarily to cover
the  Company's  asset  replacement   needs,  to  improve   processes,   and  for
environmental and regulatory compliance, subject to the availability of funds.

     Liquidity.  At September 30, 2003,  the Company was holding  excess cash of
approximately  $18.0  million,  due to the  pending  status  of its  refinancing
transactions at that date. The cash was  substantially  from the sale of MRT and
additional borrowings under foreign credit facilities.

     At September  30, 2003,  the Company was in  compliance  with the financial
covenants  included in its since replaced  domestic  senior credit facility with
its lending banks.  At September 30, 2003,  the amount of credit  extended under
the Company's  replaced  domestic senior credit  facility  totaled $28.2 million
under  the  revolving  credit  facility  and  $1.3  million  under  the  capital
expenditure  facility.  At November 14, 2003, the amount of borrowings under the
Company's new  replacement  working capital  facility was $7.6 million,  and the
Company had $4.9 million  available  under that facility,  after reduction for a
$2.5 million  reserve for interest  payments due December 1, 2003.  In addition,
certain of the Company's  foreign  subsidiaries  also had availability  totaling
$0.6 million under their respective loan agreements.

     The Company's ability to fund its operating plan relies upon its ability to
continue to successfully implement its efforts to improve its overall liquidity
(through cost reduction activities, working capital improvement plans, shutdown
of unprofitable operations and sale of certain business operations and other
assets) and the continued availability of borrowings under its replacement
senior working capital facility. The Company believes that it will be able to
comply with the terms of its covenants under the replacement senior credit
facility based on its forecasted operating plan. In the event of adverse
operating results and/or violation of covenants under this facility, there can
be no assurance that the Company would be able to obtain waivers or consents on
favorable terms, if at all.

     The Company  anticipates  taxable gains on extinguishment of debt and other
aspects  of the  refinancing  will  be  substantially  offset  by  existing  net
operating loss carry forwards,  and that the Company will not incur  significant
cash income tax payments related to these gains.


                                       29
<PAGE>

Certain Factors Affecting Future Operating Results

Forward-Looking Statements

     This Report on 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.  Statements that are not
historical facts,  including statements about our beliefs and expectations,  are
forward-looking   statements.   Forward-looking  statements  include  statements
preceded  by,  followed by or that include the words  "may,"  "could,"  "would,"
"should,"  "believe,"  "expect,"  "anticipate,"  "plan,"  "estimate,"  "target,"
"project,"  "intend," or similar  expressions.  These statements include,  among
others,   statements  regarding  our  expected  business  outlook,   anticipated
financial and operating  results,  our business  strategy and means to implement
the strategy, our objectives, the amount and timing of capital expenditures, the
likelihood of our success in expanding our business,  financing plans,  budgets,
working capital needs and sources of liquidity.

     Forward-looking  statements are only  predictions and are not guarantees of
performance.  These  statements  are  based  on  our  management's  beliefs  and
assumptions,  which  in turn  are  based  on  currently  available  information.
Important assumptions relating to the forward-looking  statements include, among
others,  assumptions regarding demand for our products, the expansion of product
offerings  geographically  or through new  applications,  the timing and cost of
planned  capital  expenditures,  competitive  conditions  and  general  economic
conditions. These assumptions could prove inaccurate. Forward-looking statements
also involve  risks and  uncertainties,  which could cause  actual  results that
differ materially from those contained in any forward-looking statement. Many of
these  factors  are beyond our  ability to  control  or  predict.  Such  factors
include, but are not limited to, the following:

     o    our substantial leverage and potential inability to service our debt

     o    our dependence on distributions from our subsidiaries

     o    risks  associated  with our  international  operations and significant
          foreign assets

     o    our dependence on our Israeli operations

     o    competition in each of our markets

     o    potential environmental liability

     o    potential legislation affecting the use of medicated feed additives

     o    extensive regulation by numerous government  authorities in the United
          States and other countries

     o    our  reliance  on  the  continued  operation  and  sufficiency  of our
          manufacturing facilities

     o    our reliance upon unpatented trade secrets

     o    the risks of legal proceedings and general litigation expenses

     o    potential operating hazards and uninsured risks

     o    the risk of work stoppages

     o    our dependence on key personnel

     See also the discussion  under "Risks and  Uncertainties"  in Note 2 of our
Consolidated Financial Statements included in our Annual Report on Form 10-K for
the fiscal year ended June 30, 2003 and in Note 2 of our Condensed  Consolidated
Financial Statements included in this Report.

     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


                                       30
<PAGE>

our  business.  Should  regulatory  or  other  developments  result  in  further
restrictions  on the sale of such  products,  it could have a  material  adverse
impact on our financial position, results of operations and cash flows.

     We believe the  forward-looking  statements in this Report are  reasonable;
however, no undue reliance should be placed on any  forward-looking  statements,
as they are based on current expectations.  Further,  forward-looking statements
speak  only as of the date they are made,  and we  undertake  no  obligation  to
update publicly any of them in light of new information or future events.

Item 3. Quantitative and Qualitative Disclosures 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 our Annual
Report on Form 10-K for the fiscal  year  ended June 30,  2003 and to Note 15 to
our Consolidated Financial Statements included therein.

Item 4. Controls and Procedures

(a)  Our  management  has  evaluated,   under  the   supervision  and  with  the
     participation  of our Chief  Executive  Officer,  Chairman of the Board and
     Chief Financial  Officer,  the  effectiveness  and design of our disclosure
     controls and  procedures,  and have  concluded  that,  as of the end of the
     period covered by this Report, our disclosure  controls and procedures,  as
     defined  in Rule  15d-15(e)  of the  Securities  Exchange  Act of 1934,  as
     amended, are effective for gathering,  analyzing and disclosing information
     we are  required to disclose in reports  that we furnish to the  Securities
     and  Exchange  Commission.  In  designing  and  evaluating  the  disclosure
     controls  and  procedures,  management  recognized  that any  controls  and
     procedures,  no matter how well  designed  and  operated,  can provide only
     reasonable  assurance  of achieving  the desired  control  objectives,  and
     management  necessarily is required to apply its judgment in evaluating the
     cost-benefit relationship of possible controls and procedures.

(b)  There have been no changes in our internal control over financial reporting
     that occurred  during the period covered by this Report that has materially
     affected,  or is  reasonably  likely to  materially  affect,  our  internal
     control over financial reporting.


                                       31
<PAGE>

                           PART II --OTHER INFORMATION

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

(a)      Exhibits

Exhibit No.       Description

4.1.4          Fourth Supplemental Indenture, dated as of October 1, 2003, among
               Phibro Animal Health  Corporation,  the Guarantors  named therein
               and  JPMorgan  Chase  Bank,  as  trustee,  relating to the 9 7/8%
               Senior Subordinated Notes due 2008 of Registrant. (1)

4.1.5          Fifth Supplemental Indenture, dated as of October 21, 2003, among
               Phibro Animal Health  Corporation,  the Guarantors  named therein
               and  JPMorgan  Chase  Bank,  as  trustee,  relating to the 9 7/8%
               Senior Subordinated Notes due 2008 of Registrant.

4.2            Indenture,  dated as of October  21,  2003,  by and among  Phibro
               Animal Health  Corporation and Philipp  Brothers  Netherlands III
               B.V., as Issuers,  the Guarantors  named  therein,  and HSBC Bank
               USA, as Trustee and Collateral Agent. (2)

10.31          Loan and Security Agreement, dated October 21, 2003, by and
               among, the lenders identified on the signature pages thereto,
               Wells Fargo Foothill, Inc., and Phibro Animal Health Corporation
               ("Parent"), and each of Parent's Subsidiaries identified on the
               signature pages thereto.

10.31.1        Amendment Number One to Loan and Security Agreement dated
               November 14, 2003.

10.32          Intercreditor  and  Lien  Subordination  Agreement,  dated  as of
               October 21, 2003, made by and among Wells Fargo  Foothill,  Inc.,
               HSBC Bank USA,  Phibro Animal Health  Corporation  ("Parent") and
               those certain subsidiaries of the Parent party thereto.

31.1           Certification  of  Gerald K.  Carlson,  Chief  Executive  Officer
               required by Rule 15d-14(a) of the Act.

31.2           Certification of Jack C. Bendheim, Chairman of the Board required
               by Rule 15d-14(a) of the Act.

31.3           Certification  of Richard G.  Johnson,  Chief  Financial  Officer
               required by Rule 15d-14(a) of the Act.

(1)  Filed as an  exhibit  to the  Company's  Current  Report  on Form 8-K dated
     October 2, 2003.
(2)  Filed as an  exhibit  to the  Company's  Current  Report  on Form 8-K dated
     October 21, 2003.

     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 9 7/8% Senior Subordinated Notes due 2008.

(b) Reports on Form 8-K

     On September 12, 2003 the Company  furnished a report on Form 8-K reporting
     items 2 and 7.

     On September 24, 2003, the Company furnished a report on Form 8-K reporting
     items 7 and 9.

     Subsequent  to the period  covered by this  Report,  on October 7, 2003 the
Company  furnished a report on Form 8-K reporting  items 5 and 7, and on October
31, 2003 the Company furnished a report on Form 8-K reporting items 5 and 7.


                                       32
<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.


                                        PHIBRO ANIMAL HEALTH CORPORATION


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


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


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


                                       33
<PAGE>

                                 Exhibit Index

Exhibit No.       Description

4.1.4          Fourth Supplemental Indenture, dated as of October 1, 2003, among
               Phibro Animal Health  Corporation,  the Guarantors  named therein
               and  JPMorgan  Chase  Bank,  as  trustee,  relating to the 9 7/8%
               Senior Subordinated Notes due 2008 of Registrant. (1)

4.1.5          Fifth Supplemental Indenture, dated as of October 21, 2003, among
               Phibro Animal Health  Corporation,  the Guarantors  named therein
               and  JPMorgan  Chase  Bank,  as  trustee,  relating to the 9 7/8%
               Senior Subordinated Notes due 2008 of Registrant.

4.2            Indenture,  dated as of October  21,  2003,  by and among  Phibro
               Animal Health  Corporation and Philipp  Brothers  Netherlands III
               B.V., as Issuers,  the Guarantors  named  therein,  and HSBC Bank
               USA, as Trustee and Collateral Agent. (2)

10.31          Loan and Security Agreement, dated October 21, 2003, by and
               among, the lenders identified on the signature pages thereto,
               Wells Fargo Foothill, Inc., and Phibro Animal Health Corporation
               ("Parent"), and each of Parent's Subsidiaries identified on the
               signature pages thereto.

10.31.1        Amendment Number One to Loan and Security Agreement dated
               November 14, 2003.

10.32          Intercreditor  and  Lien  Subordination  Agreement,  dated  as of
               October 21, 2003, made by and among Wells Fargo  Foothill,  Inc.,
               HSBC Bank USA,  Phibro Animal Health  Corporation  ("Parent") and
               those certain subsidiaries of the Parent party thereto.

31.1           Certification  of  Gerald K.  Carlson,  Chief  Executive  Officer
               required by Rule 15d-14(a) of the Act.

31.2           Certification of Jack C. Bendheim, Chairman of the Board required
               by Rule 15d-14(a) of the Act.

31.3           Certification  of Richard G.  Johnson,  Chief  Financial  Officer
               required by Rule 15d-14(a) of the Act.

(1)  Filed as an  exhibit  to the  Company's  Current  Report  on Form 8-K dated
     October 2, 2003.
(2)  Filed as an  exhibit  to the  Company's  Current  Report  on Form 8-K dated
     October 21, 2003.

     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 9 7/8% Senior Subordinated Notes due 2008.