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

                       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, 2002

                                       OR

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

             For the transition period from _________ to __________.

                        Commission File Number 333-64641

                                   ----------

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

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

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

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

                                   ----------

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

                  Yes |X| *                           No |_|

Number of shares of each class of common stock  outstanding  as of September 30,
2002:

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

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

================================================================================
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
PART I FINANCIAL INFORMATION (UNAUDITED)

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

  Item 2. Management's Discussion and Analysis of Financial
          Condition and Results of Operations .............................   20

  Item 3. Quantitative and Qualitative Disclosures About Market Risk ......   25

  Item 4. Control and Procedures ..........................................   25

PART II OTHER INFORMATION

  Item 1. Legal Proceedings ...............................................   26

  Item 5. Other Information ...............................................   26

  Item 6. Exhibits and Reports on Form 8-K ................................   26

SIGNATURES ................................................................   27


                                       2
<PAGE>

This Form 10-Q contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company's actual results could
differ materially from those set forth in the forward-looking statements.
Certain factors that might cause such a difference are discussed in the
Company's Annual Report on Form 10-K for its fiscal year ended June 30, 2002
and/or throughout this Form 10-Q and in particular in Item 2 of Part I of this
Form 10-Q under the caption "Certain Factors Affecting Future Operating
Results." Unless the context otherwise requires, references in this report to
the "Company" refers to the Company and/or one or more of its subsidiaries, as
applicable.

PART I -- FINANCIAL INFORMATION

Item 1. Condensed Financial Statements


                                       3
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

                                 (In Thousands)

                                                     September 30,    June 30,
                                                         2002           2002
                                                     -------------   -----------

                                     ASSETS
CURRENT ASSETS:
    Cash and cash equivalents                          $   8,653      $   6,419
    Trade receivables, less allowance for
      doubtful accounts of $2,858 at
      September 30, 2002 and $2,927 at
      June 30, 2002                                       60,495         65,161
    Other receivables                                      3,041          3,912
    Inventories                                           89,962         93,517
    Prepaid expenses and other current assets             14,235         15,965
                                                       ---------      ---------
        TOTAL CURRENT ASSETS                             176,386        184,974

PROPERTY, PLANT AND EQUIPMENT, net                        83,456         84,730

INTANGIBLES                                               12,840         13,200

OTHER ASSETS                                              12,601         13,540
                                                       ---------      ---------
                                                       $ 285,283      $ 296,444
                                                       =========      =========

                     LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
    Cash overdraft                                     $   1,967      $   7,767
    Loans payable to banks                                31,086         41,535
    Current portion of long-term debt                     10,038          8,851
    Accounts payable                                      50,780         42,280
    Accrued expenses and other current
      liabilities                                         37,864         34,080
                                                       ---------      ---------
        TOTAL CURRENT LIABILITIES                        131,735        134,513

LONG-TERM DEBT                                           134,036        136,641

OTHER LIABILITIES                                         28,166         29,877
                                                       ---------      ---------
        TOTAL LIABILITIES                                293,937        301,031
                                                       ---------      ---------

COMMITMENTS AND CONTINGENCIES

REDEEMABLE SECURITIES:
    Series B and C preferred stock                        58,725         56,602
                                                       ---------      ---------
STOCKHOLDERS' DEFICIT:
    Series A preferred stock                                 521            521
    Common stock                                               2              2
    Paid-in capital                                          740            740
    Retained earnings                                    (51,932)       (49,652)
    Accumulated other comprehensive (loss)
      income -
      (loss) gain on derivative instruments                  (21)         1,062
      cumulative currency translation
        adjustment                                       (16,689)       (13,862)
                                                       ---------      ---------
        TOTAL STOCKHOLDERS' DEFICIT                      (67,379)       (61,189)
                                                       ---------      ---------
                                                       $ 285,283      $ 296,444
                                                       =========      =========

       See notes to unaudited Condensed Consolidated Financial Statements.


                                       4
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES

    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                                  (Unaudited)

             For the Three Months Ended September 30, 2002 and 2001

                                 (In Thousands)

                                                           2002          2001
                                                         --------      --------
NET SALES                                                $ 97,041      $ 94,659

COST OF GOODS SOLD                                         75,237        74,194
                                                         --------      --------
    GROSS PROFIT                                           21,804        20,465

SELLING, GENERAL AND ADMINISTRATIVE
    EXPENSES                                               17,446        19,056
                                                         --------      --------
    OPERATING INCOME                                        4,358         1,409

OTHER:
    Interest expense                                        4,504         4,643

    Interest income                                          (126)          (70)

    Other (income)/expense, net                              (310)         (195)
                                                         --------      --------
    INCOME (LOSS) BEFORE INCOME TAXES                         290        (2,969)

PROVISION (BENEFIT) FOR INCOME TAXES                          447          (604)
                                                         --------      --------
    NET LOSS                                                 (157)       (2,365)

OTHER COMPREHENSIVE (LOSS) INCOME-
    (Loss) gain on derivative instruments                  (1,083)          145
    Change in currency translation adjustment              (2,827)       (1,566)
                                                         --------      --------
    COMPREHENSIVE LOSS                                   $ (4,067)     $ (3,786)
                                                         ========      ========

       See notes to unaudited Condensed Consolidated Financial Statements.


                                       5
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES

     CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
                                  (Unaudited)

                  For the Three Months Ended September 30, 2002

                                 (In Thousands)

<TABLE>
<CAPTION>
                                              Preferred            Common
                                                Stock               Stock                                   Accumulated
                                              ---------     ---------------------                              Other
                                                             Class        Class      Paid-in    Retained   Comprehensive
                                               Series A       "A"          "B"       Capital    Earnings   (Loss) income-   Total
                                              ---------     --------     --------    --------   ---------  --------------  --------
<S>                                            <C>          <C>          <C>         <C>         <C>          <C>          <C>
BALANCE, JULY 1, 2002                          $    521     $      1     $      1    $    740    $(49,652)    $(12,800)    $(61,189)

   Accretion of redeemable
    preferred securities to fair
    market value                                                                                       --                        --

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

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

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

   Net loss                                                                                          (157)                     (157)
                                               --------     --------     --------    --------    --------     --------     --------

BALANCE, SEPTEMBER 30, 2002                    $    521     $      1     $      1    $    740    $(51,932)    $(16,710)    $(67,379)
                                               ========     ========     ========    ========    ========     ========     ========
</TABLE>

       See notes to unaudited Condensed Consolidated Financial Statements.


                                       6
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

             For the Three Months Ended September 30, 2002 and 2001

                                 (In Thousands)

                                                            2002         2001
                                                          --------     --------
OPERATING ACTIVITIES:
    Net loss                                              $   (157)    $ (2,365)
    Adjustments to reconcile net loss
      to net cash provided by operating
      activities:
      Depreciation and amortization                          3,937        4,158
      Other                                                  1,259          789

      Changes in operating assets and
        liabilities:
        Accounts receivable                                  3,955        5,525
        Inventories                                          1,441       (4,383)
        Prepaid expenses and other current assets            1,469        2,606
        Other assets                                          (187)        (815)
        Accounts payable                                     8,870       (1,334)
        Accrued expenses and other current
          liabilities                                        2,987          872
                                                          --------     --------
        NET CASH PROVIDED BY OPERATING ACTIVITIES           23,574        5,053
                                                          --------     --------

INVESTING ACTIVITIES:
    Capital expenditures                                    (4,017)      (3,626)
    Other investing                                            320           79
                                                          --------     --------
        NET CASH USED IN INVESTING ACTIVITIES               (3,697)      (3,547)
                                                          --------     --------

FINANCING ACTIVITIES:
    Cash overdraft                                          (5,800)          99
    Net increase (decrease) in short-term debt             (10,387)       1,917
    Proceeds from long-term debt                                --           11
    Payments of long-term debt                              (1,468)      (1,073)
                                                          --------     --------
        NET CASH (USED IN) PROVIDED BY
          FINANCING ACTIVITIES                             (17,655)         954
                                                          --------     --------

EFFECT OF EXCHANGE RATE CHANGES ON CASH                         12           52
                                                          --------     --------
        NET INCREASE IN CASH AND CASH EQUIVALENTS            2,234        2,512

CASH AND CASH EQUIVALENTS at beginning of period             6,419       14,845
                                                          --------     --------
        CASH AND CASH EQUIVALENTS at end of period        $  8,653     $ 17,357
                                                          ========     ========

       See notes to unaudited Condensed Consolidated Financial Statements.


                                       7
<PAGE>

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

1. General

      In the opinion of Philipp Brothers  Chemicals,  Inc. (the "Company"),  the
accompanying unaudited condensed consolidated  financials statements contain all
adjustments  (consisting  only of normal  recurring  adjustments)  necessary  to
present  fairly its financial  position as of September 30, 2002 and its results
of operations  and cash flows for the three months ended  September 30, 2002 and
2001.

      The condensed  consolidated  balance sheet as of June 30, 2002 was derived
from audited financial statements, but does not include all disclosures required
by generally accepted accounting  principles.  Additionally,  it should be noted
that the  accompanying  condensed  consolidated  financial  statements and notes
thereto have been prepared in accordance with accounting  standards  appropriate
for  interim  financial   statements.   While  the  Company  believes  that  the
disclosures  presented are adequate to make the information contained herein not
misleading,  it  is  suggested  that  these  financial  statements  be  read  in
conjunction with the Company's  consolidated  financial  statements for the year
ended June 30, 2002.

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

      The results of  operations  for the three months ended  September 30, 2002
may not be indicative of results for the full year.

      Effective  July 1,  2002  the  Company  adopted  Statements  of  Financial
Accounting  Standards No. 141 "Business  Combinations"  ("SFAS No. 141") and No.
142 "Goodwill  and Other  Intangibles"  ("SFAS No. 142").  SFAS No. 141 requires
that the purchase  method of  accounting  be used for all business  combinations
initiated after June 30, 2001. The statement also establishes  specific criteria
for recognition of intangible  assets  separately  from goodwill.  The statement
requires  that  goodwill and  indefinite  lived  intangible  assets no longer be
amortized  and be tested for  impairment  at least  annually.  The  amortization
period of intangible assets with finite lives will no longer be limited to forty
years.  The Company has no  goodwill,  but has  assessed the useful lives of its
intangible assets. The adoption of SFAS No. 141 and No. 142 did not result in an
impact on the Company's financial statements.

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

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

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


                                       8
<PAGE>

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

      In June 2002, the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standards No. 146,  "Accounting for Costs Associated with
Exit or Disposal  Activities"  ("SFAS No.  146").  SFAS No. 146 requires  that a
liability for a cost associated with an exit or disposal  activity be recognized
and measured  initially at fair value when the liability is incurred rather than
at the date of a commitment to an exit or disposal  plan.  Costs covered by SFAS
No. 146 include lease  termination  costs and certain  employee  severance costs
that are associated with a restructuring,  discontinued operation, plant closing
or other  exit or  disposal  activity.  SFAS No.  146 is  effective  for exit or
disposal  activities  that are initiated after December 31, 2002. The Company is
currently assessing the impact of this statement.

2. Reclassifications

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

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

3. Risks and Uncertainties

      As of September 30, 2002 (after giving effect to the amendment referred to
below),  the Company was in compliance with the financial  covenants included in
its amended senior credit facility  ("credit  agreement" or "facility") with its
lending  banks,  for which PNC Bank serves as agent.  The credit  agreement  was
amended in October 2002 to: waive  noncompliance with financial  covenants as of
June 30, 2002; amend financial covenants prospectively until maturity; amend the
borrowing base formula and also reduce maximum  availability under the revolving
credit portion of the facility from $70 million to $55 million; limit borrowings
under the capital  expenditure  line of the facility to the current  outstanding
balance of $5.8  million;  and increase  the interest  rate to 1.5% to 1.75% per
annum over the base rate (as defined in the agreement). Management believes that
the reduced maximum  availability  and the revised  borrowing base formula under
the  revolving  credit  portion of the facility  will not  adversely  affect the
Company's ability to meet its cash requirements during fiscal 2003.

      The Company's  ability to fund its fiscal 2003  operating plan relies upon
continued  availability of the credit  agreement  which,  in turn,  requires the
Company to maintain compliance with the amended financial covenants. The Company
believes that it will be able to comply with the terms of the amended  covenants
based  on its  forecasted  operating  plan for  2003.  In the  event of  adverse
operating  results and resultant  violation of the covenants during fiscal 2003,
the Company cannot be certain it will be able to obtain waivers or amendments on
favorable terms, if at all.


                                       9
<PAGE>

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

      In  addition,  the  Company's  credit  agreement  and its note  payable to
Pfizer, Inc. mature in November 2003 and March 2004, respectively. The Company's
management has undertaken actions to improve the Company's operating performance
and overall  liquidity  in order to reduce  debt  levels and allow for  ultimate
refinancing  of this debt in fiscal 2004.  These actions  include cost reduction
activities,  working  capital  improvement  programs,  shutdown of  unprofitable
operations,  deferral and  forbearance  of certain  obligations  to Pfizer,  and
possible sale of certain business operations and other assets. These actions are
ongoing and will continue to be re-evaluated during fiscal 2003.

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

4. Inventories

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

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

                                                September 30,      June 30,
                                                   2002             2002
                                               --------------      --------
      Raw materials                               $22,277          $23,524
      Work-in-process                               1,879            2,098
      Finished goods                               65,806           67,895
                                                  -------          -------
      Total inventory                             $89,962          $93,517
                                                  =======          =======

5. Restructuring and Asset Writedowns

      The Company's Odda, Norway operation has suffered  operating losses during
fiscal  years 2002 and 2001.  During the third  quarter of fiscal  year 2002 the
Company decided to cease  production of two of Odda's three primary  products as
of June 30, 2002, and focus its resources on the remaining  product line. During
the fourth quarter of fiscal year 2002, due to further deterioration of the Odda
business,  the  Company's  review  of  certain  long-lived  assets  of Odda  for
impairment,  under the  scenarios of continuing  production of Odda's  remaining
primary  product or  complete  shutdown of the Odda  operation,  resulted in the
Company recording an impairment charge.

      During  fiscal 2002 Odda  incurred  restructuring  charges and  terminated
approximately 120 employees.  An accrual of $824 for restructuring charges still
to be paid at June 30, 2002 remained on the Company's  balance sheet at June 30,
2002. An accrual of $770 for  restructuring  costs still to be paid at September
30, 2002  remains on the  Company's  balance  sheet at September  30, 2002.  The
Company  anticipates  that by the end of January 2003  substantially  all of the
remaining restructuring costs will be paid.

      During the first  quarter of fiscal 2003 Odda  reduced  production  of its
primary product, dicyandiamide,  pending market acceptance of its calcium oxide,
a  by-product  of the  manufacturing  process.  In  November  2002,  the Company
announced a temporary shutdown of the Odda operation due to continuing operating
losses, higher than planned operating costs, and delays in the market acceptance
of calcium oxide.  Various  alternatives are under consideration by the Company.


                                       10
<PAGE>

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

6. Contingencies

(a) Litigation:

      On or about April 17, 1997, the Company and CP Chemicals, Inc. ("CP") were
served with a complaint  filed by Chevron USA,  Inc.  ("Chevron")  in the United
States  District Court for the District of New Jersey,  alleging that operations
of CP at its Sewaren plant affected adjoining property owned by Chevron and that
Philipp Brothers,  as the parent of CP, is also responsible to Chevron.  In July
2002,  a phased  settlement  agreement  was reached  under which the Company and
another  defendant  will,  subject  to  certain  conditions,  take  title to the
property,  subject to a period of due diligence  investigation  of the property.
The Company's  portion of the settlement for past costs and expenses is $495 and
was  included in selling,  general and  administrative  expenses in the June 30,
2002  statement of operations  and  comprehensive  income,  and was paid in July
2002. The Company and the other defendant will, if the sale becomes final, share
equally in the costs of remediation. While the costs cannot be estimated at this
time,  the  Company  believes  the  costs  will not be  material  and  insurance
recoveries will be available to offset 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 the Company has agreed to
contribute up to $900 of which $500 has been paid as of September 30, 2002. Some
recovery  from  insurance  and other  sources is expected.  The Company has also
accrued its best estimate of any future costs.

      The  Company  and its  subsidiaries  are a party to a number of claims and
lawsuits   arising  in  the  normal   course  of  business,   including   patent
infringement,   product  liabilities  and  governmental   regulation  concerning
environmental  and other  matters.  Certain  of these  actions  seek  damages in
various amounts.

      All  such  claims  are  being  contested,   and  management  believes  the
resolution  of  these  matters  will  not  materially  affect  the  consolidated
financial position, results of operations or cash flows of the Company.

(b) Environmental Remediation:

      The Company's domestic subsidiaries are subject to various federal,  state
and local  environmental  laws and  regulations  that govern the  management  of
chemical  wastes.  The  most  significant  regulation  governing  the  Company's
recycling  activities  is the  Resource  Conservation  and  Recovery Act of 1976
("RCRA").  The Company has been issued final RCRA "Part B" permits to operate as
hazardous waste  treatment and storage  facilities at its facilities in Santa Fe
Springs,  California;  Garland, Texas; Joliet, Illinois; Sumter, South Carolina;
and Sewaren,  New Jersey.  The Company has ceased  operations at its Union City,
California  facility.  Costs  accrued for closure were $350 as of September  30,
2002.

      On or about  November  15,  2001,  the Company was advised by the State of
California that the State intended to file a civil complaint against the Company
for  alleged  violations  arising  out of  operations  at the Santa Fe  Springs,
California  facility.  The Company is engaged in negotiations  with the State of
California at this time.  The amount of any penalty that may be assessed  cannot
be determined at this time, but is not expected to be material.

      On or about  April 5, 2002,  the  Company  was  served,  as a  potentially
responsible   party,  with  an  information   request  from  the  United  States
Environmental  Protection  Agency  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.

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


                                       11
<PAGE>

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

      Based upon information available, management estimates the cost of further
investigation  and remediation of identified  soil and  groundwater  problems at
operating  sites,   closed  sites  and  third-party  sites  (including   Jericho
litigation)  to be  approximately  $2,025,  which is  included  in  current  and
long-term  liabilities in the September 30, 2002 condensed  consolidated balance
sheet.

7. Business Segments

      The Company has four  reportable  segments--Animal  Health and  Nutrition,
Industrial Chemicals,  Distribution and All Other. Reportable segments have been
determined  primarily  on the basis of the nature of products  and  services and
certain  similar  operating  units have been  aggregated.  The Company's  Animal
Health and  Nutrition  segment  manufactures  and  markets a broad range of feed
additive  products  including  trace  minerals,   anticoccidials,   antibiotics,
vitamins,  vitamin  premixes and other animal  health  products.  The  Company's
Industrial Chemicals segment manufactures and markets pigments and other mineral
products.  Certain of these products include copper oxide,  which is produced by
the Company's recycling  operation,  mineral oxides, and alkaline etchants.  The
Company's  Distribution segment markets and distributes a variety of industrial,
specialty and fine organic  chemicals and  intermediates  produced  primarily by
third  parties.  The  Company's  All Other  segment  manufactures  and markets a
variety of specialty custom chemicals, and copper-based  fungicides,  as well as
providing management and recycling of coal combustion residues.

      Segment data for the three months ended  September 30, 2002 and 2001 is as
follows:

<TABLE>
<CAPTION>
                                                Animal                                                    Corporate
                                               Health &     Industrial                        All         Expenses &
Three Months Ended September 30, 2002         Nutrition     Chemicals      Distribution      Other        Adjustments        Total
                                              ---------     ----------     ------------     --------      -----------       --------
<S>                                           <C>            <C>             <C>            <C>             <C>             <C>
Revenues -external customers                  $ 59,976       $ 17,322        $  9,573       $ 10,170        $     --        $ 97,041
         -intersegment                             927          2,893             351              4          (4,175)             --
                                              --------       --------        --------       --------        --------        --------
Total revenues                                $ 60,903       $ 20,215        $  9,924       $ 10,174        $ (4,175)       $ 97,041
                                              ========       ========        ========       ========        ========        ========
Operating income/(loss)                       $  9,702       $ (2,110)       $    743       $     85        $ (4,062)       $  4,358
                                              ========       ========        ========       ========        ========        ========

<CAPTION>
                                                Animal                                                    Corporate
                                               Health &     Industrial                        All         Expenses &
Three Months Ended September 30, 2001         Nutrition     Chemicals      Distribution      Other        Adjustments        Total
                                              ---------     ----------     ------------     --------      -----------       --------
<S>                                           <C>            <C>             <C>            <C>             <C>             <C>
Revenues -external customers                  $ 57,943       $ 17,345        $  9,435       $  9,936        $     --        $ 94,659
         -intersegment
                                                 1,410          3,666             554             11          (5,641)             --
                                              --------       --------        --------       --------        --------        --------
Total revenues                                $ 59,353       $ 21,011        $  9,989       $  9,947        $ (5,641)       $ 94,659
                                              ========       ========        ========       ========        ========        ========
Operating income/(loss)                       $  7,365       $ (4,200)       $    838       $    119        $ (2,713)       $  1,409
                                              ========       ========        ========       ========        ========        ========
</TABLE>

8. Consolidating Financial Statements

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


                                       12
<PAGE>

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

      The  following   consolidating   financial  data  summarizes  the  assets,
liabilities  and results of operations and cash flows of the Parent,  Guarantors
and Non-Guarantor  Subsidiaries.  The Parent is Philipp Brothers Chemicals, Inc.
("PBC"). The U.S. Guarantor  Subsidiaries  include all domestic  subsidiaries of
PBC including the following:  C.P. Chemicals,  Inc., Phibro-Tech,  Inc., Mineral
Resource Technologies, Inc., Prince Agriproducts, Inc., The Prince Manufacturing
Company,  Phibrochem,  Inc.,  Phibro Chemicals,  Inc.,  Western Magnesium Corp.,
Phibro Animal Health Holdings, Inc. and Phibro Animal Health U.S., Inc. The U.S.
and foreign Guarantor and Non-Guarantor  Subsidiaries are directly or indirectly
wholly owned as to voting stock by PBC.

      Investments  in  subsidiaries  are  accounted  for by the Parent using the
equity method. Income tax expense (benefit) is allocated among the consolidating
entities based upon taxable income (loss) by jurisdiction within each group.

      The principal  consolidation  adjustments are to eliminate  investments in
subsidiaries  and intercompany  balances and  transactions.  Separate  financial
statements of the U.S. Guarantor Subsidiaries and the Non-Guarantor Subsidiaries
are  not  presented  because  management  has  determined  that  such  financial
statements would not be material to investors.


                                       13
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
                CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
                            As of September 30, 2002
                                 (In Thousands)

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

Current Assets:

Cash and cash equivalents                         $      43         $   1,758         $   6,852                           $   8,653
Trade receivables                                     3,433            27,557            29,505                              60,495
Other receivables                                       393               880             1,768                               3,041
Inventory                                             2,772            48,467            38,723                              89,962
Prepaid expenses and other                            1,724               767            11,744                              14,235
                                                  ---------------------------------------------------------------------------------
        Total current assets                          8,365            79,429            88,592                --           176,386
                                                  ---------------------------------------------------------------------------------

Property, plant & equipment, net                        508            30,015            52,933                              83,456

Intangibles                                              32             1,438            11,370                              12,840
Investment in subsidiaries                           77,824             3,621                --           (81,445)               --
Intercompany                                         68,146           (37,483)            1,938           (32,601)               --
Other assets                                          9,538             1,788             1,275                              12,601
                                                  ---------------------------------------------------------------------------------
        Total assets                              $ 164,413         $  78,808         $ 156,108         $(114,046)        $ 285,283
                                                  =================================================================================

 Liabilities and Stockholders' Deficit

Current Liabilities:
Cash overdraft                                    $     350         $   1,617         $      --                           $   1,967
Loan payable to banks                                28,064                --             3,022                              31,086
Current portion of long term debt                     3,507               493             6,038                              10,038
Accounts payable                                      1,560            31,933            17,287                              50,780
Accrued expenses and other                            9,728             7,514            20,622                              37,864
                                                  ---------------------------------------------------------------------------------
Total current liabilities                            43,209            41,557            46,969                --           131,735

Long term debt                                      127,380           (67,658)          106,915           (32,601)          134,036

Other liabilities                                     2,478             5,199            20,489                              28,166
                                                  ---------------------------------------------------------------------------------
Total liabilities                                   173,067           (20,902)          174,373           (32,601)          293,937
                                                  ---------------------------------------------------------------------------------

Redeemable securities:
Series B and C preferred stock                       58,725                --                --                              58,725
                                                  ---------------------------------------------------------------------------------

          Stockholders' Deficit
Series A preferred stock                                521                --                --                                 521
Common stock                                              2                32                --               (32)                2
Paid in capital                                         740           110,885             8,166          (119,051)              740
Retained earnings                                   (51,932)          (10,921)          (10,008)           20,929           (51,932)
Accumulated other comprehensive
 (loss) income-
  loss on derivative instruments                        (21)             (311)              290                21               (21)
  cumulative currency translation
  adjustment                                        (16,689)               25           (16,713)           16,688           (16,689)
                                                  ---------------------------------------------------------------------------------
        Total stockholders' deficit                 (67,379)           99,710           (18,265)          (81,445)          (67,379)
                                                  ---------------------------------------------------------------------------------
        Total liabilities and deficit             $ 164,413         $  78,808         $ 156,108         $(114,046)        $ 285,283
                                                  =================================================================================
</TABLE>


                                       14
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
           CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
                  For The Three Months Ended September 30, 2002
                                 (In Thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Foreign
                                                                  U.S. Guarantor    Subsidiaries       Consolidation    Consolidated
                                                    Parent         Subsidiaries    Non-Guarantors       Adjustments        Balance
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>               <C>               <C>               <C>               <C>
Net sales                                          $ 7,108          $56,217           $ 36,480          $ (2,764)         $ 97,041

Cost of goods sold                                   5,787           42,813             29,401            (2,764)           75,237
                                                  ---------------------------------------------------------------------------------
       Gross profit                                  1,321           13,404              7,079                --            21,804

Selling, general, and administrative
  expenses                                           4,358            7,474              5,614                              17,446
                                                  ---------------------------------------------------------------------------------
       Operating (loss) income                      (3,037)           5,930              1,465                --             4,358

Interest expense                                       386              812              3,306                               4,504
Interest income                                         (1)              --               (125)                               (126)
Other expense                                           97              139               (546)                               (310)

Intercompany allocation                             (4,168)           4,168                 --                                  --

Loss (profit) relating to subsidiaries                 806               --                 --              (806)               --
                                                  ---------------------------------------------------------------------------------
       (Loss) income before income taxes              (157)             811             (1,170)              806               290

Provision (benefit) for income taxes                    --               77                370                                 447
                                                  ---------------------------------------------------------------------------------
       Net (loss) income                           $  (157)         $   734           $ (1,540)         $    806          $   (157)
                                                  =================================================================================
</TABLE>


                                       15
<PAGE>

                         PHILIPP BROTHERS CHEMICALS INC.
           CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
                  For the Three Months Ended September 30, 2002
                                 (In Thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Foreign
                                                                  U.S. Guarantor    Subsidiaries       Consolidation    Consolidated
                                                    Parent         Subsidiaries    Non-Guarantors       Adjustments        Balance
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>               <C>               <C>               <C>               <C>
Operating activities:
Net (loss) income                                 $   (157)         $   734           $(1,540)          $    806          $   (157)
Adjustments to reconcile net (loss)
 income to cash provided by
 operating activities:
  Depreciation and amortization                        355            1,361             2,221                                3,937
  Other                                                 95             (548)            1,712                                1,259

Changes in operating assets and
  liabilities:
  Accounts receivable                                 (306)           1,702             2,559                                3,955
  Inventory                                            (65)          (3,553)            5,059                                1,441
  Prepaid expenses and other                         1,285            1,669            (1,485)                               1,469
  Other assets                                        (154)             567              (600)                                (187)
  Intercompany                                       6,000             (795)           (4,399)              (806)               --
  Accounts payable                                     536            7,137             1,197                                8,870
  Accrued expenses and other                         2,322           (1,568)            2,233                                2,987
                                                  ---------------------------------------------------------------------------------
Net cash provided by
 operating activities                                9,911            6,706             6,957                 --            23,574
                                                  ---------------------------------------------------------------------------------
Investing activities:
  Capital expenditures                                (172)          (1,572)           (2,273)                              (4,017)
  Other investing                                       --               --               320                                  320
                                                  ---------------------------------------------------------------------------------
Net cash used in
 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 in) provided by
 financing activities                              (10,153)          (4,021)           (3,481)                --           (17,655)
                                                  ---------------------------------------------------------------------------------
Effect of exchange rate changes
 on cash                                                --               (7)               19                                   12
                                                  ---------------------------------------------------------------------------------
Net (decrease) increase in cash and
 cash equivalents                                     (414)           1,106             1,542                 --             2,234

Cash and cash equivalents
 at beginning of year                                  457              652             5,310                                6,419
                                                  ---------------------------------------------------------------------------------
Cash and cash equivalents
 at end of year                                   $     43          $ 1,758           $ 6,852           $     --          $  8,653
                                                  =================================================================================
</TABLE>


                                       16
<PAGE>

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

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

Current Assets:
Cash and cash equivalents                         $     457         $     130         $   5,832                           $   6,419
Trade receivables                                     3,150            28,671            33,340                              65,161
Other receivables                                       392               855             2,665                               3,912
Inventory                                             2,707            44,929            45,881                              93,517
Prepaid expenses and other                            3,010             2,460            10,495                              15,965
                                                  ---------------------------------------------------------------------------------
        Total current assets                          9,716            77,045            98,213                --           184,974
                                                  ---------------------------------------------------------------------------------

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

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

    Liabilities and Stockholders' Deficit

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

Long term debt                                      127,643           (68,271)          109,314           (32,045)          136,641

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

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

         Stockholders' Deficit

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


                                       17
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
           CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
                  For The Three Months Ended September 30, 2001
                                 (In Thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Foreign
                                                                  U.S. Guarantor    Subsidiaries       Consolidation    Consolidated
                                                    Parent         Subsidiaries    Non-Guarantors       Adjustments        Balance
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>               <C>               <C>               <C>               <C>
Net sales                                         $ 7,108           $ 51,594          $ 42,404          $ (6,447)         $ 94,659

Cost of goods sold                                  5,632             41,161            33,848            (6,447)           74,194
                                                  ---------------------------------------------------------------------------------
       Gross profit                                 1,476             10,433             8,556                --            20,465

Selling, general, and administrative
  expenses                                          3,737              8,542             6,777                              19,056
                                                  ---------------------------------------------------------------------------------
       Operating (loss) income                     (2,261)             1,891             1,779                --             1,409

Interest expense                                      674                933             3,036                               4,643
Interest income                                         3                 --               (73)                                (70)
Other expense (income)                                117                 19              (331)                               (195)

Intercompany allocation                              (993)               993                --                                  --

Loss (profit) relating to subsidiaries              1,098                 --                --            (1,098)               --
                                                  ---------------------------------------------------------------------------------
       (Loss) income before income taxes           (3,160)               (54)             (853)            1,098            (2,969)

(Benefit) provision for income taxes                 (795)               320              (129)                               (604)
                                                  ---------------------------------------------------------------------------------
       Net (loss) income                          $(2,365)          $   (374)         $   (724)         $  1,098          $ (2,365)
                                                  =================================================================================
</TABLE>


                                       18
<PAGE>

                         PHILIPP BROTHERS CHEMICALS INC.
           CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
                  For the Three Months Ended September 30, 2001
                                 (In Thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Foreign
                                                                  U.S. Guarantor    Subsidiaries       Consolidation    Consolidated
                                                    Parent         Subsidiaries    Non-Guarantors       Adjustments        Balance
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>               <C>               <C>              <C>                <C>
Operating activities:
Net (loss) income                                 $(2,365)          $  (374)          $   (724)        $  1,098           $ (2,365)
Adjustments to reconcile net (loss)
 income to cash (used in) provided by
 operating activities:
  Depreciation and amortization                       264             1,344              2,550                               4,158
  Other                                              (211)               65                935                                 789

Changes in operating assets and liabilities:
  Accounts receivable                                 210             2,369              2,946                               5,525
  Inventory                                           220            (1,401)            (3,202)                             (4,383)
  Prepaid expenses and other                          362             1,843                401                               2,606
  Other assets                                        264              (996)               (83)                               (815)
  Intercompany                                     (3,000)             (718)             4,816           (1,098)                --
  Accounts payable                                   (502)           (1,861)             1,029                              (1,334)
  Accrued expenses and other                        1,462             1,093             (1,683)                                872
                                                  ---------------------------------------------------------------------------------
Net cash (used in) provided by
 operating activities                              (3,296)            1,364              6,985               --              5,053
                                                  ---------------------------------------------------------------------------------
Investing activities:
  Capital expenditures                                (70)           (1,426)            (2,130)                             (3,626)
  Other investing                                      --                --                 79                                  79
                                                  ---------------------------------------------------------------------------------
Net cash used in
 investing activities                                 (70)           (1,426)            (2,051)              --             (3,547)
                                                  ---------------------------------------------------------------------------------
Financing activities:
  Cash overdraft                                       --               246               (147)                                 99
  Net increase (decrease)
   in short term debt                               3,498                --             (1,581)                              1,917
  Proceeds from long term debt                         --                11                 --                                  11
  Payments of long term debt                           (8)             (126)              (939)                             (1,073)
                                                  ---------------------------------------------------------------------------------
Net cash provided by (used in)
 financing activities                               3,490               131             (2,667)              --                954
                                                  ---------------------------------------------------------------------------------
Effect of exchange rate changes
 on cash                                               --                --                 52                                  52
                                                  ---------------------------------------------------------------------------------
Net increase in cash and
 cash equivalents                                     124                69              2,319               --              2,512

Cash and cash equivalents
 at beginning of year                               1,292               700             12,853                              14,845
                                                  ---------------------------------------------------------------------------------
Cash and cash equivalents
 at end of year                                   $ 1,416           $   769           $ 15,172         $     --           $ 17,357
                                                  =================================================================================
</TABLE>


                                       19
<PAGE>

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

General

      The Company is a leading diversified global manufacturer and marketer of a
broad range of specialty  agricultural and industrial chemicals,  which are sold
world-wide for use in numerous  markets,  including animal health and nutrition,
agriculture,  pharmaceutical,  electronics,  wood treatment, glass, construction
and concrete.  The Company also provides  recycling and hazardous waste services
primarily to the electronics and metal treatment  industries.  These  operations
are  classified  into four  segments--Animal  Health and  Nutrition,  Industrial
Chemicals, Distribution and All Other.

      The Company recorded operating income of $4.4 million and $1.4 million for
the three  months  ended  September  30, 2002 and 2001,  respectively.  Purchase
accounting  adjustments relating to inventory acquired in the acquisition of the
Phibro Animal Health ("PAH") business in November 2002,  resulted in an increase
to cost of goods sold of $2.0 million for the quarter ended  September 30, 2001.
Excluding  the purchase  accounting  adjustment,  the Company's  performance  in
fiscal 2003 improved over the prior fiscal period.

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

      In  the  first  quarter  of  fiscal  2003,  Odda  reduced   production  of
dicyandiamide  pending  market  acceptance of its calcium oxide, a by-product of
the manufacturing  process.  In November 2002, the Company announced a temporary
shutdown of the Odda facility due to continuing  operating  losses,  higher than
planned  operating  costs and delays in the market  acceptance of calcium oxide.
Various  alternatives  are  under  consideration  by  the  Company.   Additional
impairment  charges may be  recorded in the future,  the extent of which will be
dependent upon the outcome of the alternatives selected.

      Certain prior year amounts have been reclassified to conform to the fiscal
2003  presentation.  Freight  and  warehousing  expenses of $6,598 for the three
months   ended   September   30,  2001  were   reclassified   from  general  and
administrative expenses to cost of goods sold.

Results of Operations

                                                              Sales
                                                            ($000's)
                                                        Three Months Ended
                                                           September 30,
                                                    --------------------------
Operating Segments:                                   2002              2001
                                                    --------          --------
Animal Health and Nutrition ..............          $ 60,903           $ 59,353
Industrial Chemicals .....................            20,215             21,011
Distribution .............................             9,924              9,989
All Other ................................            10,174              9,947
Elimination of intersegment sales ........            (4,175)            (5,641)
                                                    --------           --------
                                                    $ 97,041           $ 94,659
                                                    ========           ========

                                                      Operating Income (Loss)
                                                            ($000's)
                                                        Three Months Ended
                                                           September 30,
                                                    --------------------------
Operating Segments:                                   2002              2001
                                                    --------          --------
Animal Health and Nutrition ..............          $  9,702           $  7,365
Industrial Chemicals .....................            (2,110)            (4,200)
Distribution .............................               743                838
All Other ................................                85                119
Corporate expenses and intercompany
  profit elimination .....................            (4,062)            (2,713)
                                                    --------           --------
                                                    $  4,358           $  1,409
                                                    ========           ========


                                       20
<PAGE>

Comparison of Three Months Ended September 30, 2002 and 2001

      Net Sales. Net sales increased by $2.4 million, or 3%, to $97.0 million in
the three months ended September 30, 2002, as compared to the same period of the
prior year.  The increase was primarily due to higher sales in the Animal Health
segment offset in part by declines in the Industrial Chemical segment.

      The Animal  Health and  Nutrition  segment's  net sales  increased by $1.5
million, or 2.6% to $60.9 million for the three months ended September 30, 2002.
The  Company's  PAH  operations  improved due to higher unit volume sales of its
antibacterial and anticoccidial products.  Higher revenues were also recorded at
the Company's Prince Agri operations due to higher unit volumes  associated with
its  vitamin  and other  specialty  ingredients.  The  Company's  Koffolk  sales
declined due to the adverse business climate in Israel and unfavorable  currency
impacts at its Brazilian subsidiary.

      The Industrial  Chemicals segment's net sales decreased by $.8 million, or
4%, to $20.2 million in the three months ended September 30, 2002 as compared to
the prior  period.  The  Company's  Odda  subsidiary  revenues  declined by $2.7
million due to discontinued production and sale of the CY-50 and calcium carbide
product lines in the fourth  quarter of 2002. In addition,  in the quarter ended
September 30, 2002,  Odda reduced  production of  dicyandiamide  pending  market
acceptance  of its calcium  oxide,  a by-product of the  manufacturing  process.
Sales by the Company's  Phibro-Tech  subsidiary increased by $1.4 million due to
increased  unit  volumes  over the prior year  comparable  quarter.  Higher unit
shipments of pigments and blends and manganese dioxide products by the Company's
Prince operations,  partially offset by sales price declines, increased revenues
by $.5 million during the current fiscal period.

      Net sales for the Distribution segment decreased by $.1 million, or 1%, to
$9.9 million in 2002, as compared to the prior period. Declines in the segment's
carbide  sales,  related to the  discontinuance  of carbide  production at Odda,
account for the decrease and were partially  offset by  improvements  in product
mix.

      Net sales for the All Other  segment  increased by $.2 million,  or 2%, to
$10.2 million in 2002,  as compared to the prior  period.  The Company's fly ash
business  increased  revenues  by  approximately  $.8 million due to higher unit
volumes  offset in part by declines  in average  selling  prices.  A decrease in
specialized  lab projects and  formulations  at the  segment's  U.K.  operations
lowered  revenues  by $.4  million.  Lower  sales of crop  protection  chemicals
accounted for the balance of the decrease.

      Gross  Profit.  Gross profit  increased by $1.3  million,  or 7%, to $21.8
million in the three months ended  September  30, 2002, as compared to the prior
period.  Purchase accounting  adjustments  relating to inventory acquired in the
PAH  acquisition  resulted  in an  increase to cost of goods sold of $0 and $2.0
million for the three months ended  September  30, 2002 and 2001,  respectively.
Excluding  the  purchase  accounting  adjustments,  gross  profit  increased  by
approximately  $.1 million in the Animal Health segment  primarily due to higher
unit volumes.  The Industrial  Chemicals  segment increased by approximately $.2
million  primarily due to higher margins at the Company's  Prince  Manufacturing
and  Phibro-Tech  facilities  offset in part by higher  production  costs at the
Company's Odda facility. The Distribution segment declined $.1 million primarily
as a result of lower unit  volume of  carbide  products.  The All Other  segment
declined by  approximately  $.3 million  primarily  due to higher  freight costs
associated  with the Company's fly ash  operations  and decreases in specialized
lab projects and  formulations  at the segment's U.K.  facility.  Elimination of
inter-company profit in inventory accounted for the balance of the decrease.

      Selling,  General and  Administrative  Expenses.  Costs  decreased by $1.6
million, or 8% to $17.4 million in 2002, as compared to the prior period.  Costs
declined primarily at the Company's Phibro-Tech, Koffolk and Odda operations due
to cost reduction  programs and lower levels of production  activity.  The prior
period  included  a $.4  million  non-cash  gain  to  reflect  the  decrease  in
repurchase value of redeemable common stock of a minority shareholder; no amount
was recorded in the current period.

      Operating  Income (Loss).  Operating  income  increased by $2.9 million to
$4.4 million in 2002,  as compared to the prior  period.  The Animal  Health and
Nutrition  segment,  after the exclusion of purchase  accounting  adjustments in
fiscal  2002,  increased  due to higher unit  volumes and cost  reductions.  The
Industrial  Chemicals segment improved  primarily due to cost reduction programs
and also  higher  sales and  production  volumes  at the  Company's  Phibro-Tech
facilities.  The Company's  Distribution and All Other segment declined slightly
from the prior period.

      Interest  Expense,  Net.  Costs  decreased  by $.2  million  or 4% to $4.4
million for the three months ended  September  30, 2002 as compared to the prior
period  primarily due to lower interest rates offset in part by slightly  higher
average borrowing levels.


                                       21
<PAGE>

      Other Expense,  Net.  Other  expense,  net  principally  reflects  foreign
currency  transaction/translation  gains  and  losses of the  Company's  foreign
subsidiaries  (principally Norwegian Kroner and the Israeli Shekel). The Company
also recorded a gain of $.7 million on a power purchase derivative instrument at
its Odda facility.

      Income  Taxes.  An income tax  provision  of $.4 million was reported on a
consolidated  pre-tax  income of $.3  million in fiscal  2003  primarily  due to
income tax  provisions in profitable  foreign  jurisdictions  and also for state
income taxes. In addition,  domestic  pre-tax income was recorded  without a tax
provision due to the utilization of net operating loss carryforwards with a full
valuation  allowance.  The Company's Odda facility losses were not given any tax
benefit.  The  Company's  position with respect to the  recoverability  of these
deferred tax assets will continue to be evaluated each reporting period based on
actual and expected operating performance.

Liquidity and Capital Resources

      Net Cash Provided by Operating Activities. Cash provided by operations for
the three months ended  September  30, 2002 and 2001 was $24.8  million and $5.1
million,  respectively.  Cash provided by operating  activities increased in the
three months ended  September  30,  2002,  compared  with the three months ended
September  30, 2001,  primarily  due to improved  earnings and  improvements  in
working capital management.

      Net  Cash  Used in  Investing  Activities.  Net  cash  used  in  investing
activities  for the three  months  ended  September  30,  2002 and 2001 was $3.7
million and $3.5 million, respectively. Capital expenditures of $4.0 million and
$3.6  million  in the  respective  2002 and 2001  periods,  were  mostly for new
product  development,  maintaining  the  Company's  existing  asset base and for
environmental,  health and  safety  projects.  Proceeds  from the sale of assets
accounted for the remainder of cash used in investing activities.

      Net Cash (Used In)  Provided by Financing  Activities.  Net cash (used in)
provided by financing  activities for the three months ended  September 30, 2002
and 2001 was ($17.9) million and $1.0 million,  respectively.  Borrowings  under
the domestic revolving credit agreement and other long-term debt were reduced in
fiscal 2003 from cash generated by operating activities.

      Liquidity.  At September  30, 2002,  after giving  effect to the amendment
referred to below,  the Company was in compliance  with the financial  covenants
included in its amended domestic senior credit facility  ("credit  agreement" or
"credit  facility") with its lending banks.  The credit agreement was amended in
October 2002 to: waive  noncompliance  with  financial  covenants as of June 30,
2002;  amend  financial  covenants  prospectively  until  maturity;   amend  the
borrowing base formula and also reduce maximum  availability under the revolving
credit portion of the facility from $70 million to $55 million; limit borrowings
under the capital  expenditure  line of the facility to the current  outstanding
balance of $5.8 million; and revise the interest rate to 1.5% to 1.75% per annum
over the base rate (as defined in the agreement).  Management  believes that the
reduced maximum  availability  and the revised  borrowing base formula under the
revolving  credit portion of the facility will not affect the Company's  ability
to meet its cash requirements during fiscal 2003.

      The Company's  ability to fund its fiscal 2003  operating plan relies upon
continued  availability  of the credit  agreement,  which in turn,  requires the
Company  to  maintain  compliance  with the  amended  financial  covenants.  The
financial covenants require certain ratios of consolidated interest coverage and
a  minimum  level of  domestic  cash  flows  (each,  as  defined  in the  credit
agreement). The Company believes it will be able to comply with the terms of the
amended covenants based on its forecasted operating plan for fiscal 2003. In the
event of adverse  operating  results and  resultant  violation of the  covenants
during 2003,  the Company cannot be certain it will be able to obtain waivers or
amendments on favorable terms, if at all.

      In addition, the Company's credit agreement and its note payable to Pfizer
mature in November 2003 and March 2004,  respectively.  The Company's management
has  undertaken  actions to improve  the  Company's  operating  performance  and
overall  liquidity  in order to  reduce  debt  levels  and  allow  for  ultimate
refinancing  of this debt in fiscal 2004.  These actions  include cost reduction
activities,  working  capital  improvement  programs,  shutdown of  unprofitable
operations,  and possible sale of certain business  operations and other assets.
The  Company  has  announced  its  intention  to sell its  Prince  Manufacturing
operations,  part of the Prince  Manufacturing  Group, and also a U.K. operation
which  manufactures  and  sells  chemical  intermediates  to the  pharmaceutical
industry.  These actions are ongoing and will continue to be re-evaluated during
fiscal 2003.  In  addition,  the Company  entered into an agreement  with Pfizer
whereby  Pfizer agreed to defer until March 1, 2004,  without  interest,  unpaid
contingent  purchase  price  amounts  existing  at May  31,  2002  and to  waive
contingent  purchase  price  payments on future net  revenues  from June 1, 2002
through March 1, 2004.

      As  a  result  of  the   partial   shutdown  of  Odda's   operations   and
non-compliance with the financial  covenants of its credit facilities,  Odda has
entered into an agreement with its Norwegian  banks to  restructure  these loans
and to obtain a waiver  for the  non-compliance.  The  agreement  establishes  a
periodic payment schedule through November 30, 2003. Philipp Brothers Chemicals,
Inc. is the guarantor of this debt.


                                       22
<PAGE>

      Working  capital as of September  30, 2002 was $44.7  million  compared to
$50.4  million at fiscal year end June 30, 2002.  Due to the nature and terms of
the credit agreement, which includes both a subjective acceleration clause and a
requirement  to maintain a lockbox  arrangement,  all  borrowings  against  this
facility are  classified  as a current  liability.  At September  30, 2002,  the
amount of credit  extended  under this  agreement  totaled $28.8 million and the
Company had $8.7 million  available  under the borrowing  base formula in effect
under this agreement. In addition, certain of the Company's foreign subsidiaries
also had availability  under their respective  credit  facilities  totaling $9.4
million. Management's efforts to improve liquidity has resulted in a decrease in
borrowings under the revolving  credit agreement to approximately  $24.7 million
as of October 31, 2002.

      The Company anticipates  spending  approximately $10.7 million for capital
expenditures in fiscal 2003,  primarily to cover the Company's asset replacement
needs,  improve  processes,  and for  environmental  and regulatory  compliance,
subject to the availability of funds.

Critical Accounting Policies

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

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

      Revenue Recognition

      Revenues  are  recognized  when  title  to  products  and risk of loss are
transferred to customers.  Additional  conditions for recognition of revenue are
that  collection of sales proceeds is reasonably  assured and the Company has no
further performance obligations.  Net sales are comprised of total sales billed,
net of goods returned, trade discounts and customer allowances.

      Litigation

      The Company is subject to legal  proceedings and claims arising out of the
normal course of business.  The Company routinely assesses the likelihood of any
adverse  judgments  or outcomes  to these  matters as well as ranges of probable
losses.  A  determination  of the  amount  of the  reserves  required  for these
contingencies  is  based  on an  analysis  of  the  various  issues,  historical
experience, other third party judgments and outside specialists, where required.
The required  reserves may change in the future due to new  developments in each
matter.  For  further  discussion,  see  Note 13 to the  Consolidated  Financial
Statements for the fiscal year ended June 30, 2002.

      Environmental Matters

      The  Company  determines  the costs of  environmental  remediation  of its
facilities  and  formerly  owned  properties  on the  basis of  current  law and
existing technologies. Uncertainties exist in these evaluations primarily due to
unknown  conditions,  changing  governmental  regulations  and  legal  standards
regarding  liability,  and evolving  technologies.  The liabilities are adjusted
periodically  as  remediation  efforts  progress  or as  additional  information
becomes  available.  The Company has  recorded  liabilities  of $2.0  million at
September 30, 2002 for such activities.

      Long Lived Assets

      Long-lived  assets,  including plant and equipment,  and other  intangible
assets are reviewed for impairment when events or circumstances  indicate that a
diminution in value may have  occurred,  based on a comparison  of  undiscounted
future  cash  flows to the  carrying  amount  of the  long-lived  asset.  If the
carrying amount exceeds  undiscounted future cash flows, an impairment charge is
recorded  based on the difference  between the carrying  amount of the asset and
its fair value.


                                       23
<PAGE>

      The assessment of potential  impairment  for a particular  asset or set of
assets requires  certain  judgments and estimates by the Company,  including the
determination  of an event  indicating  impairment;  the future cash flows to be
generated by the asset, including the estimated life of the asset and likelihood
of alternative courses of action; the risk associated with those cash flows; and
the Company's cost of capital or discount rate to be utilized.

      Useful Lives of Long-Lived Assets

      Useful lives of long-lived assets, including plant and equipment and other
intangible  assets are based on  management's  estimates of the periods that the
assets will be productively utilized in the revenue-generation  process. Factors
that affect the  determination  of lives include prior  experience  with similar
assets and product life  expectations  and  management's  estimate of the period
that the assets will generate revenue.

      Inventories

      Inventories are valued at the lower of cost or market.  Cost is determined
on a  first-in,  first-out  (FIFO) and  average  methods  for most  inventories;
however certain  subsidiaries of the Company use the last-in,  first-out  (LIFO)
method for valuing inventories.  The determination of market value to compare to
cost involves  assessment  of numerous  factors,  including  costs to dispose of
inventory  and  estimated  selling  prices.  Reserves are recorded for inventory
determined to be damaged, obsolete, or otherwise unsalable.

      Income Taxes

      Deferred tax assets and liabilities are determined using enacted tax rates
for the effects of net operating  losses and temporary  differences  between the
book and tax bases of assets and  liabilities.  The Company  records a valuation
allowance on deferred tax assets when appropriate to reflect the expected future
tax benefits to be realized. In determining the appropriate valuation allowance,
certain  judgments are made relating to  recoverability  of deferred tax assets,
use of tax loss  carryforwards,  level of  expected  future  taxable  income and
available tax planning  strategies.  These  judgments are routinely  reviewed by
management.

New Accounting Pronouncements

      In June 2002, the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standards No. 146,  "Accounting for Costs Associated with
Exit or Disposal  Activities"  ("SFAS No.  146").  SFAS No. 146 requires  that a
liability for a cost associated with an exit or disposal  activity be recognized
and measured  initially at fair value when the liability is incurred rather than
at the date of a commitment to an exit or disposal  plan.  Costs covered by SFAS
No. 146 include lease  termination  costs and certain  employee  severance costs
that are associated with a restructuring,  discontinued operation, plant closing
or other  exit or  disposal  activity.  SFAS No.  146 is  effective  for exit or
disposal  activities  that are initiated after December 31, 2002. The Company is
currently assessing the impact of this statement.

Seasonality of Business

      There is some  seasonality  in the  Company's  results as sales of certain
industrial chemicals to the wood treatment industry as well as sales of coal fly
ash are typically highest during the peak construction  periods of the first and
fourth fiscal quarters.

Quantitative and Qualitative Disclosure About Market Risk

      For financial  market risks related to changes in interest rates,  foreign
currency exchange rates and commodity prices, reference is made to Part II, Item
7,  Quantitative and Qualitative  Disclosure About Market Risk, in the Company's
Annual  Report on Form 10-K for the fiscal  year ended June 30, 2002 and to Note
14 to the Consolidated Financial Statements of the Company included therein.

Certain Factors Affecting Future Operating Results

      This Form 10-Q contains "forward-looking statements" within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities Exchange Act of 1934, as amended.  The Company's actual results could
differ  materially  from  those  set  forth in the  forward-looking  statements.
Certain factors that might cause such a difference include,  among other factors
noted herein, the following:  the Company's  substantial  leverage and potential
inability to service its debt; the Company's  dependence on  distributions  from
its subsidiaries;  risks associated with the Company's international


                                       24
<PAGE>

operations;  the Company's dependence on its Israeli operations;  competition in
each of the Company's  markets;  potential  environmental  liability;  extensive
regulation  by numerous  government  authorities  in the United States and other
countries;   significant  cyclical  price  fluctuation  for  the  principal  raw
materials used by the Company in the manufacture of its products;  the Company's
reliance  on the  continued  operation  and  sufficiency  of  its  manufacturing
facilities; the Company's dependence upon unpatented trade secrets; the risks of
legal proceedings and general litigation  expenses;  potential operating hazards
and uninsured risks; the risk of work stoppages; the Company's dependence on key
personnel; and the uncertain impact of the Company's divestiture plans. See also
the  discussion  under  "Risks  and  Uncertainties"  in Note 3 of the  Notes  to
Condensed  Consolidated Financial Statements included in this Report and matters
referred to throughout Item 1of the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2002.

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Control and Procedures

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

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


                                       25
<PAGE>

                          PART II -- OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 5. Other Information.

      None.

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

      (a) Exhibits

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

          None.

      (b) Reports on Form 8-K.

          None.


                                       26
<PAGE>

                                   SIGNATURES

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

                                        PHILIPP BROTHERS CHEMICALS, INC.

Date: November 14, 2002                    By: /s/ JACK C. BENDHEIM
                                           --------------------------------
                                                  Jack C. Bendheim
                                                Chairman of the Board

Date: November 14, 2002                    By: /S/ GERALD K. CARLSON
                                           --------------------------------
                                                  Gerald K. Carlson
                                               Chief Executive Officer

Date: November 14, 2002                    By: /s/ RICHARD G. JOHNSON
                                           --------------------------------
                                                  Richard G. Johnson
                                               Chief Financial Officer
                                           (Principal Financial Officer and
                                             Principal Accounting Officer)


                                       27
<PAGE>

                                 CERTIFICATIONS

I, Gerald K. Carlson, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: November 14, 2002

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


                                       28
<PAGE>

I, Jack C. Bendheim, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: November 14, 2002

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


                                       29
<PAGE>

I, Richard G. Johnson, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: November 14, 2002

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

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


                                       30