<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

For the quarterly period ended June 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    0 -19703
                       ------------------

                               FARREL CORPORATION
            --------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           DELAWARE                                               22-2689245
--------------------------------                            --------------------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                   25 MAIN STREET, ANSONIA, CONNECTICUT, 06401
                   -------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (203) 736-5500
                              ----- --------------
              (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  V     No
    ---       ---
                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

       CLASS                               OUTSTANDING AT AUGUST 9, 2002
------------------------------------------------------------------------

  Common Stock (Voting), $.01 par value              5,228,461

<PAGE>

                               FARREL CORPORATION


                                      INDEX

<TABLE>
<CAPTION>

                                                                                                               PAGE

Part I.   Item 1 - Financial Information
<S>                                                                                                              <C>
                  Consolidated Balance Sheets -
                  June 30, 2002 and December 31, 2001                                                             3

                  Consolidated Statements of Operations -
                  Three and six months ended June 30, 2002
                  and July 1, 2001                                                                                4

                  Consolidated Statements of Cash Flows -
                  Six months ended June 30, 2002
                  and July 1, 2001                                                                                5

                  Notes to Consolidated Financial Statements                                                      6

         Item 2 - Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                                            10

         Item 3 - Quantitative and Qualitative Disclosures About Market Risk                                     14

Part II.   Other Information                                                                                     15

              Signatures                                                                                         16

              Exhibits -

                      Exhibit 4 - Modification of Revolving Promissory Note and Loan Agreement
                                  Dated August 2, 2002                                                           18

                      Exhibit 11 - Computation of Earnings Per Share                                             21

                      Exhibit 99.1 - Certification pursuant to 18 U.S.C. Section 1350, as adopted
                                     pursuant to section 906 of the Sarbanes-Oxley Act of 2002                   22

                      Exhibit 99.2 - Certification pursuant to 18 U.S.C. Section 1350, as adopted
                                     pursuant to section 906 of the Sarbanes-Oxley Act of 2002                   23
</TABLE>





                                  Page 2 of 23

<PAGE>

                     Part I - Item 1 - Financial Information
                               FARREL CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>

                                                                                    June 30,             December 31,
                                                                                    --------             ------------
                                                                                      2002                   2001
                                                                                      ----                   ----
                                                                                  (Unaudited)
<S>                                                                                     <C>                    <C>
ASSETS
           Current Assets:
                 Cash and cash equivalents                                              $ 7,741                $ 5,579
                 Accounts receivable, net of allowance for
                    doubtful accounts of  $92 and $179, respectively                      6,158                  9,416
                 Inventory                                                               12,752                 10,554
                 Deferred income taxes                                                      423                    423
                 Other current assets                                                       872                    873
                                                                                 ---------------        ---------------
                               Total current assets                                      27,946                 26,845
                 Property, plant and equipment - net of accumulated
                    depreciation of  $16,087 and $14,995, respectively                    7,608                  8,101
                 Deferred income taxes                                                      814                    764
                 Other assets                                                               219                    256
                                                                                 ---------------        ---------------
                 Total Assets                                                           $36,587                $35,966
                                                                                 ===============        ===============
LIABILITIES & STOCKHOLDERS' EQUITY
           Current Liabilities:
                 Accounts payable                                                       $ 3,915                $ 4,393
                 Accrued expenses & taxes payable                                           790                  1,482
                 Advances from customers                                                  6,479                  3,452
                 Accrued warranty costs                                                     943                  1,004
                 Current portion of long - term debt                                        716                    680
                                                                                 ---------------        ---------------
                                Total current liabilities                                12,843                 11,011
           Long - term debt                                                                 775                  1,019
           Postretirement benefit obligation                                              1,064                  1,076
           Minimum pension liability                                                      3,425                  3,155
           Commitments and contingencies                                                    ---                    ---
                                                                                 ---------------        ---------------
                                Total Liabilities                                        18,107                 16,261
                                                                                 ---------------        ---------------
           Stockholders' Equity:
                 Preferred stock, par value $100, 1,000,000
                      shares authorized, no shares issued                                   ---                    ---
                 Common stock, par value $.01,
                      10,000,000 shares authorized,
                      6,142,106 shares issued                                                61                     61
                 Paid in capital                                                         19,295                 19,295
                 Treasury stock, 913,645 shares at
                    June 30, 2002 and December 31, 2001                                 (2,530)                (2,530)
                 Retained earnings                                                        7,684                  9,120
                 Accumulated other comprehensive loss                                   (6,030)                (6,241)
                                                                                 ---------------        ---------------
                                Total Stockholders' Equity                               18,480                 19,705
                                                                                 ---------------        ---------------
           Total Liabilities and Stockholders' Equity                                   $36,587                $35,966
                                                                                 ===============        ===============
</TABLE>

           See Accompanying Notes to Consolidated Financial Statements

                                  Page 3 of 23

<PAGE>

                               FARREL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)

<TABLE>
<CAPTION>

                                                Three Months Ended                          Six Months Ended
                                                ------------------                          ----------------
                                            June 30,           July 1,                June 30,             July 1,
                                              2002               2001                   2002                2001
                                              ----               ----                   ----                ----
                                                      (Unaudited)                                (Unaudited)
<S>                                          <C>                <C>                   <C>                  <C>
Net sales                                       $9,175            $12,355               $17,020              $23,435

Cost of sales                                    6,957              9,937                12,950               18,545
                                          -------------     --------------       ---------------     ----------------

Gross margin                                     2,218              2,418                 4,070                4,890

Operating expenses:

    Selling                                      1,000              1,260                 1,968                2,562

    General & administrative                     1,669              1,611                 3,561                3,322

    Research & development                         281                376                   530                  820
                                          -------------     --------------       ---------------     ----------------

Total operating expenses                         2,950              3,247                 6,059                6,704
                                          -------------     --------------       ---------------     ----------------

Operating  loss                                  (732)              (829)               (1,989)              (1,814)

Interest income                                     30                 36                    56                   88

Interest expense                                  (26)               (36)                  (53)                 (78)

Other income (expense), net                         13               (68)                   185                 (49)
                                          -------------     --------------       ---------------     ----------------

Loss before income taxes                         (715)              (897)               (1,801)              (1,853)

Benefit  for income taxes                        (248)              (324)                 (574)                (673)
                                          -------------     --------------       ---------------     ----------------

Net loss                                        $(467)             $(573)              $(1,227)             $(1,180)
                                          =============     ==============       ===============     ================

Per share data:

Basic and Diluted loss per
  common share                                 $(0.09)            $(0.11)               $(0.23)              $(0.23)
                                          =============     ==============       ===============     ================
Average shares outstanding:
  Basic                                      5,228,461          5,228,563             5,228,461            5,229,251
                                          =============     ==============       ===============     ================
  Diluted                                    5,228,461          5,228,563             5,228,461            5,229,251
                                          =============     ==============       ===============     ================
  Dividends per share                            $0.04              $0.00                 $0.04                $0.00
                                          =============     ==============       ===============     ================
</TABLE>

           See Accompanying Notes to Consolidated Financial Statements

                                  Page 4 of 23

<PAGE>

                               FARREL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>

                                                                                   Six Months Ended
                                                                                   ----------------
                                                                             June 30,              July 1,
                                                                             --------              -------
                                                                               2002                  2001
                                                                               ----                  ----
                                                                           (Unaudited)           (Unaudited)
<S>                                                                              <C>                  <C>
         Cash flows from operating activities:
           Net loss                                                              $(1,227)             $(1,180)
           Adjustments to reconcile net loss to net
           cash provided by operating activities:
             Gain on disposal of fixed assets                                           -                (152)
             Depreciation and amortization                                            795                  859
             Decrease  in accounts receivable                                       3,420                7,099
             (Increase) in inventory                                              (2,499)              (2,088)
             Decrease (increase) in prepaid pension costs                             104                (227)
             (Decrease) in accounts payable                                         (592)                (625)
             Increase (decrease)  in customer advances                              3,511                  (2)
             (Decrease) in accrued expenses & taxes                                 (694)                (913)
             (Decrease) in accrued warranty costs                                    (78)                (221)
             Increase in deferred income taxes                                          -                   71
             Increase(decrease) in other                                                8                (264)
                                                                         -----------------      ---------------
             Total adjustments                                                      3,975                3,537
                                                                         -----------------      ---------------
             Net cash provided by operating activities                              2,748                2,357
                                                                         -----------------      ---------------
         Cash flows from investing activities:
             Proceeds from disposal of fixed assets                                     -                  374
             Purchases of property, plant and equipment                              (61)                (290)
                                                                         -----------------      ---------------
             Net cash (used in) provided by investing activities                     (61)                   84
         Cash flows from financing activities:
             Repayment of long-term borrowings                                      (280)              (2,264)
             Bank borrowings                                                            -                1,981
             Purchase of treasury stock                                                 -                  (5)
             Dividends paid                                                         (209)                    -
                                                                         -----------------      ---------------
             Net cash (used in) financing activities                                (489)                (288)
         Effect of foreign currency exchange rate changes on cash                    (36)                 (80)
                                                                         -----------------      ---------------
         Net increase in cash and cash equivalents                                  2,162                2,073
             Cash and cash equivalents - Beginning of period                        5,579                2,486
                                                                         -----------------      ---------------
             Cash and cash equivalents - End of period                             $7,741               $4,559
                                                                         =================      ===============
         Income taxes paid                                                            $40                  $32
                                                                         =================      ===============
         Interest paid                                                                $53                  $77
                                                                         =================      ===============
</TABLE>

           See Accompanying Notes to Consolidated Financial Statements

                                  Page 5 of 23

<PAGE>

                               FARREL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

      In the opinion of management, the accompanying unaudited consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by U.S. generally
accepted accounting principles for complete financial statements. In the opinion
of management, the accompanying unaudited consolidated financial statements
contain all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly in accordance with generally accepted accounting
principles, the consolidated financial position of Farrel Corporation ("Farrel"
or "the Company") as of June 30, 2002, and the consolidated results of its
operations and its cash flows for the three and/or six month periods ended June
30, 2002 and July 1, 2001. These results are not necessarily indicative of
results to be expected for the full fiscal year. For further information, the
statements should be read in conjunction with the financial statements and notes
thereto, included in the Company's Form 10-K for the year ended December 31,
2001.

NOTE 2 - INVENTORY

      Inventory is comprised of the following:

<TABLE>
<CAPTION>
                                                                       June 30,         December 31,
                                                                       --------         ------------
                                                                        2002                 2001
                                                                        ----                 ----
                                                                               (In thousands)
<S>                                                                    <C>                  <C>
         Stock and raw materials.....................                  $6,820               $6,444
         Work-in process.............................                   5,932                4,110
                                                                      -------              -------
         Total.......................................                 $12,752              $10,554
                                                                      =======              =======
</TABLE>

NOTE 3 - COMPREHENSIVE INCOME (LOSS)

      The components of other comprehensive income (loss) are as follows:

<TABLE>
<CAPTION>
                                                         Three Months Ended            Six Months Ended
                                                       June 30,       July 1,        June 30,     July 1,
                                                        2002           2001           2002         2001
                                                        ----           ----           ----         ----
                                                                         (In thousands)

<S>                                                      <C>          <C>            <C>          <C>
         Net loss                                        $(467)       $(573)         $(1,227)     $(1,180)
         Foreign currency translation adjustments          633           (1)             430         (488)
                                                         -----        -----          -------      -------
         Other comprehensive income (loss)               $ 166        $(574)         $  (797)     $(1,668)
                                                         =====        =====          =======      =======
</TABLE>

 Accumulated other comprehensive loss consists of the following:

<TABLE>
<CAPTION>
                                                            June 30,               December 31,
                                                              2002                     2001
                                                              ----                     ----
                                                                      (In thousands)
<S>                                                        <C>                       <C>
         Foreign currency translation
               adjustments                                 $  (990)                  $(1,420)
         Minimum pension liability                          (5,040)                   (4,821)
                                                           --------                  --------
         Accumulated other comprehensive
                Loss                                       $(6,030)                  $(6,241)
                                                           ========                   =======
</TABLE>

                                  Page 6 of 23

<PAGE>

NOTE 4 - SEGMENT INFORMATION

      The Company's operations are considered one operating segment. The
Company's products consist of new machines, aftermarket and spare parts and
repair related services. The Company's products and services are sold to
commercial manufacturers in the plastic and rubber industries. The
manufacturing, assembly and distribution of the Company's products are
essentially the same.

NOTE 5 - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

      In June 2001, the Financial Accounting Standards Board (the "FASB") issued
statements No. 142 (Goodwill and Other Intangible Assets) and No. 143
(Accounting for Asset Retirement Obligations). Statement No. 142 was adopted by
the Company on January 1, 2002. The Company must adopt Statement No. 143 no
later than January 2003. Statement No. 142 changed the accounting for Goodwill
and other intangible assets, such that those assets whose life is determined to
be indefinite are not subject to amortization. These assets shall be tested for
impairment at least annually, and the value will need to be written down if the
fair value is less than the carrying value. The adoption of Statement No. 142
did not have a significant effect on the Company's financial position or results
of operations. Statement No. 143 requires that a liability must be recognized
for an asset retirement obligation related to long lived tangible assets. The
liability shall be recorded at fair value. The Company anticipates the adoption
of Statement No. 143 will not have a significant effect on its financial
position or results of operations.

      In August 2001, the FASB issued Statement No. 144 (Accounting for the
Impairment or Disposals of Long-lived Assets). The Company adopted Statement No.
144 on January 1, 2002. This statement requires an impairment loss to be
recognized if the carrying value of a long-lived asset (asset group) is not
recoverable and exceeds its fair value. Long-lived assets (asset group) shall be
tested for impairment whenever events or changes in circumstances indicate that
its carrying amount may not be recoverable. The adoption of this statement did
not have an effect on the Company's financial position or results of operations.

NOTE 6 - FOREIGN CURRENCY CONTRACTS

      In June 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, which the Company adopted on January 1,
2001. The Statement provides a new method of accounting for derivatives and
hedges. The adoption of this Statement did not have a significant effect on the
Company's results of operations or financial position.

      The Company has entered into foreign exchange forward contracts which are
designated as fair value hedges of accounts receivable and future receivables
related to customer orders in backlog. The Company, from time to time, enters
into foreign exchange forward contracts to hedge certain firm commitments that
are denominated in currencies other than the Company's operating currencies.

      At June 30, 2002, all of the Company's foreign exchange forward contracts
were designated as fair value hedges. As such, there were no charges to the
statement of operations related to these contracts. At June 30, 2002, the
difference between the spot rate and the contract rate for the foreign exchange
forwards was a net unrealized loss of $97,000.

NOTE 7 - BANK CREDIT ARRANGEMENTS

      In June 2001, the Company entered into a new worldwide multi-currency
credit facility with a major U.S. bank. This facility includes a $10 million
revolving credit facility for direct borrowings and letters of credit. The
facility contains a sub-limit that caps the amount of direct borrowings the
Company can make at $5 million. The revolving credit facility, as amended in
August 2002, expires on June 15, 2004. The facility contains limits on direct
borrowings and issuance of letters of credit based upon stipulated percentages
of accounts receivable and inventory. The facility, as amended, also contains
covenants specifying minimum and/or maximum thresholds for operating results,
selected financial ratios and backlog. The backlog covenant requires that end of
month backlog will not be less than $20 million for

                                  Page 7 of 23

<PAGE>

more than two consecutive months. The Company did not achieve the backlog
covenant as of the end of January and February 2002; however, the bank waived
the non-compliance. The agreement contains certain restrictions on investments,
borrowings and the sale of assets. Dividend declarations or payments are allowed
under this credit facility as long as there exists under the credit facility no
Event of Default (as defined in the credit facility) or no condition which upon
giving notice or lapse of time or both, would become an Event of Default. The
Company has approximately $2.8 million of letters of credit issued under its
credit facility on June 30, 2002.

      In June 2001, the Company also entered into a term loan for (British
pound)1.4 million (approximately $2 million) as part of this credit facility.
The proceeds of this loan were used to repay an existing term loan of the same
amount. The new term loan is repayable in monthly installments of (British
pound)38,888 (approximately $60,000) through June 2004. The term loan has an
interest rate of LIBOR plus 2.7%.

NOTE 8 - PENSION

      At December 31, 2001, the Company was required to record a minimum pension
liability related to the pension plan of its U.K. subsidiary since under
Financial Accounting Standards Board Statement No. 87 ("FAS 87"), which
prescribes the U.S. accounting for pension plans, the plan was underfunded. At
December 31, 2001, under FAS 87 this plan was underfunded by approximately $2.6
million, as a result of which the Company was required to take a charge against
stockholders' equity of $4.2 million. At December 31, 2002, the Company will be
required to reflect the results of a FAS 87 computation as of that date in its
financial statements. Based upon the decline in the plan's assets in 2002
described below, a charge to reduce stockholders' equity may be required at
December 31, 2002.

      For the year ended December 31, 2000, the assets in the plan declined in
value by $649,000 and in the first five months of 2001 the assets in the plan
declined in value by approximately $1,089,000. As a result of the poor
investment performance, the trustees of the plan changed to a new investment
manager in May 2001. Under this new investment manager the assets in the plan
declined in value by approximately $1,309,000 in the remainder of 2001 and for
the period January 1, 2002 to June 30, 2002, the assets in the plan declined in
value by approximately $1,900,000. For the period December 31, 1999 to June 30,
2002, the total decline in value of the assets was approximately $4,947,000. The
majority of 2002 loss was incurred in June 2002 as a result of the decline in
the stock market. The trustees of the plan moved the plan assets out of equities
in July and are reviewing the long-term investment strategy of the plan.

      Benefits paid by the pension plan were $808,000, $1,017,000 and $966,000
in 1999, 2000 and 2001, respectively. At June 30, 2002, total assets in the plan
were approximately $20.7 million. The value of the plan assets currently
significantly exceeds the historical benefits paid for the past few years.

      In response to the funding situation, in January 2002, the U.K. subsidiary
officially informed the plan trustees that effective the end of the first
quarter of 2002, the U.K. employees would no longer accrue additional benefits
under this pension plan for future service. Beginning in 2002, the U.K.
subsidiary, as required under U.K. law, offered a defined contribution plan to
its employees.

      Under laws governing the funding of U.K. defined benefit pension plans,
the pension plan of the Company's U.K. subsidiary must be 90% funded on a
non-wind up basis as computed under such funding rules by 2005 and 100% funded
on a non-wind up basis as computed under such funding rules by 2012. The plan's
actuary estimated that the plan was 87% funded as of January 31, 2002, on a
non-wind up basis under the U.K. funding rules. The Company currently is
contributing (British pound)36,000 (approximately $56,000) a month to the
pension plan. This contribution amount was based upon the estimated funded
status as of January 2002. A new formal funding computation is required by
November 2002 and at such time a new rate of contributions from the Company will
be determined. This new rate of contributions could be materially greater than
the current contribution requirement.

      In July 2002, the Company, the plan trustees and the plan's actuary began
discussing the appropriate means of ensuring the long term funding of the plan
under currently existing U.K. funding rules, including among other things an
assessment of the U.K. subsidiary's business prospects and cash position, the
securitization of the U.K.

                                  Page 8 of 23

<PAGE>

subsidiary's assets, a parent company guarantee, or other assurances, in order
to avoid a determination by the actuary that the trustees should wind up the
plan. The Company's U.K. legal counsel has provided a written opinion that, so
long as the U.K. subsidiary is complying with its non-wind up statutory funding
obligations, the trustees and the actuary have no legal basis to implement a
wind up. The Company's U.K. subsidiary has confirmed its intention to meet these
funding obligations.

      Under the U.K. funding rules, on a wind up basis the amount of
underfunding of the plan is computed differently than, and would be
substantially greater than, the amount computed on a non-wind up basis.
Additionally, on a wind up basis, the underfunding must be paid down within a
substantially shorter time period. If a wind up were to occur, it could have a
material adverse effect on the financial position and results of operations of
the Company.











                                  Page 9 of 23

<PAGE>

PART I - ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION & RESULTS OF OPERATIONS

SAFE HARBOR STATEMENTS UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

      Certain statements contained in the Company's public documents, including
this report and in particular, this "Management's Discussion and Analysis of
Financial Condition and Results of Operations", may be forward looking and may
be subject to a variety of risks and uncertainties. Various factors could cause
actual results to differ materially from these statements. These factors
include, but are not limited to, pricing pressures from competitors and/or
customers; continued economic and political uncertainty in certain of the
Company's markets; the Company's ability to maintain and increase gross margin
levels; the Company's ability to generate positive cash flow; changes in
business conditions, in general, and, in particular, in the businesses of the
Company's customers and competitors; the Company's access to adequate financing
at competitive rates and other factors which might be described from time to
time in the Company's filings with the Securities and Exchange Commission.


RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO THE SIX MONTHS ENDED JULY 1, 2001

      Net sales for the six month period ended June 30, 2002, were $17.0 million
compared to $23.4 million for the six month period ended July 1, 2001, a
decrease of $6.4 million. The decrease is primarily a result of lower sales of
new machines of approximately $5.0 million and after-market parts and field
service of approximately $1.4 million. The timing of the Company's sales,
particularly new machines sales, is highly dependent on when an order is
received, the amount of lead time from receipt of order to delivery and specific
customer requirements. The Company operates in markets which are extremely
competitive with cyclical demand. Many of the Company's customers and markets
operate at less than full capacity and certain markets remain particularly
competitive and are subject to local economic events.

      Orders received for the six month period ended June 30, 2002, were $29.4
million compared to $23.0 million for the six month period ended July 1, 2001.

      The Company's products are primarily supplied to manufacturers and
represent capital commitments for new plants, expansion or modernization. In the
case of major equipment orders, up to 12 months are required to complete the
manufacturing process. Accordingly, revenues reported in the statement of
operations may represent orders received in the current or previous periods
during which time economic conditions in various geographic markets of the world
impact the Company's level of order intake. Many of the Company's traditional
customers and markets are operating with excess capacity thereby reducing the
number of projects for plant expansion and modernization. The Company is
experiencing increased pricing pressures from competitors in an overall smaller
market. Until recently, the value of the Euro versus the U.S. dollar and British
pound sterling had decreased significantly since it was introduced which
resulted in increased pricing pressures. Although it would be expected that a
stronger Euro would benefit the Company from a competitive standpoint, the
Company cannot be certain that it will alleviate any of the current pricing
pressures in the market place. Demand for capital expenditures remains weak.
Further, the cyclical nature of industry demand and, therefore, the timing of
order intake may effect the Company's quarterly results of operations. The
Company's ability to maintain and increase net sales depends upon a
strengthening and stability in the Company's traditional markets and its ability
to control costs to effectively compete in its current markets. There can be no
assurance that the current level of orders will continue, that market conditions
will not worsen, or that improvements in the Company's traditional markets will
lead to increased orders for the Company's products.

      The level of backlog considered firm by management at June 30, 2002, was
$31.3 million compared to $18.1 million at December 31, 2001, and $27.4 million
at July 1, 2001. Substantially all of the backlog as of June 30, 2002, is
scheduled for shipment in the next 12 months.

                                 Page 10 of 23

<PAGE>

      Gross margin for the six month period ended June 30, 2002, was $4.1
million compared to $4.9 million for the six month period ended July 1, 2001, a
decrease of $0.8 million. The decrease in gross margin is a result of lower
sales. The gross margin as a percent of sales for the six month period ended
June 30, 2002, was 23.9% compared to 20.9% for the six month period ended July
1, 2001. The increase in gross margin as a percent of sales is primarily due to
(i) sales of after-market related items representing a larger percent of total
sales in 2002 versus 2001 and (ii) higher gross profit margins on new machine
sales. After-market items such a spare parts typically have higher gross profit
percents than new machine sales. The increase in gross margin as a percent of
sales for new machines in 2002 versus 2001 is due to changes in sales mix of new
machines.

      Operating expenses for the six month period ended June 30, 2002, were $6.1
million compared to $6.7 million for the six month period ended July 1, 2001, a
decrease of $0.6 million. The selling and research and development components of
operating expenses decreased primarily due to lower employee compensation and
related expenses. The general and administrative component of operating expenses
increased primarily due to higher pension related costs.

      Interest income for the six month period ended June 30, 2002, was $56,000
compared to $88,000 for the six month period ended July 1, 2001, a decrease of
$32,000. The decrease is primarily due to lower interest rates.

      Interest expense for the six month period ended June 30, 2002, was $53,000
compared to $78,000 for the six month period ended July 1, 2001, a decrease of
$25,000. The decrease is due to lower borrowings and lower interest rates.

      Other income, net for the six month period ended June 30, 2002, was
$185,000 compared to other expense, net of $49,000 for the six month period
ended July 1, 2001. Other income for the period ended June 30, 2002 includes
approximately $167,000 received by the Company as a result of the
demutualization of an insurance provider used by the Company.

      The Company provides for income taxes at the statutory rates in effect in
each tax jurisdictions in which income is earned or losses generated, adjusted
for permanent differences in determining income for financial reporting and
income tax purposes. The effective income tax rate was 31.9% for the six month
period ended June 30, 2002, compared to 36.3% for the six month period ended
July 1, 2001. The effective tax rate varies among periods due to the change in
the proportion and amount of income and losses generated in different taxing
jurisdictions.

      THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THE THREE MONTHS ENDED JULY
1, 2001

      Net sales for the three months ended June 30, 2002, were $9.2 million
compared to $12.4 million for the three month period ended July 1, 2001, a
decrease of $3.2 million. The decrease is primarily a result of lower sales of
new machines of $2.7 million and after-market parts and field service of $0.8
million, offset to some extent by increased sales of in-house repair services.

      Orders received for the three month period ended June 30, 2002, were $15.2
million compared to $13.4 million for the three month period ended July 1, 2001.

      The Company's sales, orders and backlog levels varied when comparing the
two quarters due to market conditions and the nature of the industry in which
the Company operates as more fully discussed in the results of operations for
the six month period on page 10.

      Gross margin for the three month period ended June 30, 2002, was $2.2
million compared to $2.4 million for the three month period ended July 1, 2001,
a decrease of $0.2 million. The decrease in gross margin is a result of lower
sales. The gross margin as a percent of sales for the three month period ended
June 30, 2002, was 24.2% compared to 19.6% for the three month period ended July
1, 2001. The increase in the gross margin as a percent of sales is primarily due
to (i) sales of after-market related items representing a larger percent of
total sales in 2002 versus 2001 and (ii) higher gross profit margins on new
machine sales. After-market items such a spare parts typically have higher gross
profit percents than

                                 Page 11 of 23

<PAGE>

new machine sales. The increase in gross margin as a percent of sales for new
machines in 2002 versus 2001 is due to changes in sales mix of new machines.

      Operating expenses for the three month period ended June 30, 2002, were
$2.9 million compared to $3.2 million for the three month period ended July 1,
2001, a decrease of $0.3 primarily due to lower employee compensation and
related expenses.

      Interest income for the three month period ended June 30, 2002, was
$30,000 compared to $36,000 for the three month period ended July 1, 2001, a
decrease of $6,000. The decrease is primarily due to lower interest rates.

      Interest expense for the three month periods ended June 30, 2002, was
$26,000 compared to $36,000 for the three month period ended July 1, 2001, a
decrease of $10,000. The decrease is primarily due to lower borrowings and lower
interest rates.

      Other income, net for the three month period ended June 30, 2002, was
$13,000 compared to other expense, net of $68,000 for the three month period
ended July 1, 2002.

      The Company provides for income taxes at the statutory rates in effect in
each tax jurisdiction in which income is earned or losses are generated,
adjusted for permanent differences in determining income for financial reporting
and income tax purposes. The effective income tax rate was 34.7% for the three
month periods ended June 30, 2002, compared to 36.1% for the three months ended
July 1, 2001. The effective tax rate varies among periods due to the change in
the proportion and amount of income and losses generated in different tax
jurisdictions.

MATERIAL CONTINGENCIES

      Pursuant to a settlement agreement entered into in 1995 between the
Company and Black & Decker Corporation ("Black & Decker"), Black & Decker agreed
to assume full responsibility for the investigation and remediation of any
pre-May 12, 1986 environmental contamination at the Company's Ansonia and former
Derby, Connecticut facilities, as required by the Connecticut Department of
Environmental Protection ("DEP"). Black & Decker has conducted a preliminary
environmental assessment of the facilities. On the basis of the preliminary data
now available there is no reason to believe that any activities which might be
required as a result of the findings of the assessment will have a material
effect upon the capital expenditures, results of operations or the competitive
position of the Company.

LIQUIDITY AND CAPITAL RESOURCES; CAPITAL EXPENDITURES

      Working capital and the working capital ratio at June 30, 2002 were $15.1
million and 2.2 to 1, respectively, compared to $15.8 million and 2.4 to 1 at
December 31, 2001, respectively. During the six months ended June 30, 2002, the
Company paid a dividend of $0.04 per share.

      Due to the nature of the Company's business, many sales are of a large
dollar amount. Consequently, the timing of recording such sales may cause the
balances in accounts receivable and/or inventory to fluctuate dramatically
between quarters and may result in significant fluctuations in cash provided by
operations. Historically, the Company has not experienced significant problems
regarding the collection of accounts receivable. The Company also generally has
financed its operations with cash generated by operations, progress payments
from customers and borrowings under its bank credit facilities. Management
anticipates that its cash balances, operating cash flows and available credit
line will be adequate to fund anticipated capital commitments and working
capital requirements for at least the next twelve months. The Company made
capital expenditures of $61,000 and $290,000 during the six month periods ended
June 30, 2002 and July 1, 2001, respectively.

      In June 2001, the Company entered into a new worldwide multi-currency
credit facility with a major U.S. bank. This facility includes a $10 million
revolving credit facility for direct borrowings and letters of credit. The
facility contains a sub-limit that caps the amount of direct borrowings the
Company

                                 Page 12 of 23

<PAGE>

can make at $5 million. The revolving credit facility, as amended in August
2002, expires on June 15, 2004. The facility contains limits on direct
borrowings and issuances of letters of credit based upon stipulated percentages
of accounts receivable and inventory. The facility, as amended, also contains
covenants specifying minimum and/or maximum thresholds for operating results,
selected financial ratios and backlog. The backlog covenant requires that end of
month backlog will not be less than $20 million for more than two consecutive
months. The Company did not achieve the backlog covenant as of the end of
January and February 2002; however, the bank waived the non-compliance. The
agreement contains certain restrictions on investments, borrowings and the sale
of assets. Dividend declarations or payments are allowed under this credit
facility as long as there exists under the credit facility no Event of Default
(as defined in the credit facility) or no condition which, upon giving of notice
or lapse of time or both, would become an Event of Default. The Company has
approximately $2.8 million of letters of credit issued under its credit facility
on June 30, 2002.

      In June 2001, the Company also entered into a term loan for (British
pound)1.4 million (approximately $2 million) as part of this credit facility.
The proceeds of this loan were used to repay an existing term loan of the same
amount. The new term loan is repayable in monthly installments of (British
pound)38,888 (approximately $60,000) through October 2004. The term loan has an
interest rate of LIBOR plus 2.7%. At June 30, 2002 and December 31, 2001, there
were $1.5 million and $1.7 million, respectively, outstanding under the term
loan.

      At December 31, 2001, the Company was required to record a minimum pension
liability related to the pension plan of its U.K. subsidiary since under
Financial Accounting Standards Board Statement No. 87 ("FAS 87"), which
prescribes the U.S. accounting for pension plans, the plan was underfunded. At
December 31, 2001, under FAS 87 this plan was underfunded by approximately $2.6
million, as a result of which the Company was required to take a charge against
stockholders' equity of $4.2 million. At December 31, 2002, the Company will be
required to reflect the results of a FAS 87 computation as of that date in its
financial statements. Based upon the decline in the plan's assets in 2002
described below, a charge to reduce stockholders' equity may be required at
December 31, 2002.

      For the year ended December 31, 2000, the assets in the plan declined in
value by $649,000 and in the first five months of 2001 the assets in the plan
declined in value by approximately $1,089,000. As a result of the poor
investment performance, the trustees of the plan changed to a new investment
manager in May 2001. Under this new investment manager the assets in the plan
declined in value by approximately $1,309,000 in the remainder of 2001 and for
the period January 1, 2002 to June 30, 2002, the assets in the plan declined in
value by approximately $1,900,000. For the period December 31, 1999 to June 30,
2002, the total decline in value of the assets was approximately $4,947,000. The
majority of 2002 loss was incurred in June 2002 as a result of the decline in
the stock market. The trustees of the plan moved the plan assets out of equities
in July and are reviewing the long-term investment strategy of the plan.

      Benefits paid by the pension plan were $808,000, $1,017,000 and $966,000
in 1999, 2000 and 2001, respectively. At June 30, 2002, total assets in the plan
were approximately $20.7 million. The value of the plan assets currently
significantly exceeds the historical benefits paid for the past few years.

      In response to the funding situation, in January 2002, the U.K. subsidiary
officially informed the plan trustees that effective the end of the first
quarter of 2002, the U.K. employees would no longer accrue additional benefits
under this pension plan for future service. Beginning in 2002, the U.K.
subsidiary, as required under U.K. law, offered a defined contribution plan to
its employees.

      Under laws governing the funding of U.K. defined benefit pension plans,
the pension plan of the Company's U.K. subsidiary must be 90% funded on a
non-wind up basis as computed under such funding rules by 2005 and 100% funded
on a non-wind up basis as computed under such funding rules by 2012. The plan's
actuary estimated that the plan was 87% funded as of January 31, 2002, on a
non-wind up basis under the U.K. funding rules. The Company currently is
contributing (British pound)36,000 (approximately $56,000) a month to the
pension plan. This contribution amount was based upon the estimated funded
status as of January 2002. A new formal funding computation is required by
November 2002 and at such

                                 Page 13 of 23

<PAGE>

time a new rate of contributions from the Company will be determined. This new
rate of contributions could be materially greater than the current contribution
requirement.

      In July 2002, the Company, the plan trustees and the plan's actuary began
discussing the appropriate means of ensuring the long term funding of the plan
under currently existing U.K. funding rules, including among other things an
assessment of the U.K. subsidiary's business prospects and cash position, the
securitization of the U.K. subsidiary's assets, a parent company guarantee, or
other assurances, in order to avoid a determination by the actuary that the
trustees should wind up the plan. The Company's U.K. legal counsel has provided
a written opinion that, so long as the U.K. subsidiary is complying with its
non-wind up statutory funding obligations, the trustees and the actuary have no
legal basis to implement a wind up. The Company's U.K. subsidiary has confirmed
its intention to meet these funding obligations.

      Under the U.K. funding rules, on a wind up basis the amount of
underfunding of the plan is computed differently than, and would be
substantially greater than, the amount computed on a non-wind up basis.
Additionally, on a wind up basis, the underfunding must be paid down within a
substantially shorter time period. If a wind up were to occur, it could have a
material adverse effect on the financial position and results of operations of
the Company.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

      In June 2001, the Financial Accounting Standards Board (the "FASB") issued
statements No. 142 (Goodwill and Other Intangible Assets) and No. 143
(Accounting for Asset Retirement Obligations). Statement No. 142 was adopted by
the Company on January 1, 2002. The Company must adopt statement No. 143 no
later than January 2003. Statement No. 142 changed the accounting for Goodwill
and other intangible assets, such that those assets whose life is determined to
be indefinite are not subject to amortization. These assets shall be tested for
impairment at least annually, and the value will need to be written down if the
fair value is less than the carrying value. The adoption of Statement No. 142
did not have a significant effect on the Company's financial position or results
of operations. Statement No. 143 requires that a liability must be recognized
for an asset retirement obligation related to long lived tangible assets. The
liability shall be recorded at fair value. The Company anticipates the adoption
of Statement No. 143 will not have a significant effect on its financial
position or results of operations.

      In August 2001, the FASB issued statement No. 144 (Accounting for the
Impairment or Disposals of Long-lived Assets). The Company adopted statement No.
144 on January 1, 2002. This statement requires an impairment loss to be
recognized if the carrying value of a long-lived asset (asset group) is not
recoverable and exceeds its fair value. Long-lived assets (asset group) shall be
tested for impairment whenever events or changes in circumstances indicate that
its carrying amount may not be recoverable. The adoption of this statement did
not have an effect on the Company's financial position or results of operations.







                                 Page 14 of 23

<PAGE>

PART 1 - ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The Company is exposed to market risk from changes in foreign currency and
interest rates. The Company manufactures many of its products and components in
the United Kingdom and purchases many components in foreign markets.
Approximately 50% of the Company's revenue is generated from foreign markets.
The Company manages its risk of foreign currency rate changes by maintaining
foreign currency bank accounts in currencies in which it regularly transacts
business and the use of foreign exchange forward contracts. The Company does not
enter into derivative contracts for trading or speculative purposes.

      The Company's cash equivalents and short-term investments and its
outstanding debt bear variable interest rates. The rates are adjusted to market
conditions. Changes in the market rate effects interest earned and paid by the
Company. The Company does not use derivative instruments to offset the exposure
to changes in interest rates. Changes in the interest rates related to these
items are not expected to have a material impact on the Company's results of
operations.













                                 Page 15 of 23

<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                            <C>

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS                                                                     None

ITEM 2 - CHANGES IN SECURITIES                                                                 N/A

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES                                                       N/A

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     a)    Election of Directors:

           Howard J. Aibel:                 votes for 4,969,710, votes withheld 188,421
           Rolf K. Liebergesell:            votes for 4,953,314, votes withheld 204,817
           James A. Purdy:                  votes for 4,967,210, votes withheld 190,921

     b)    Ratification of the selection of Ernst & Young LLP as independent
           accountants for the Company for the fiscal year ending December 31,
           2002:

           votes for 5,123,984, votes against 8,800, votes abstained 25,347

ITEM 5 - OTHER INFORMATION                                                                     N/A

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

     a)  Exhibits:

         Exhibit 4   Modification to Revolving Promissory Note and Loan Agreement
                     Dated August 2, 2002                                                      Attached

         Exhibit 11 (Regulation S-K) Computation of Earnings Per Share.                        Attached

         Exhibit 99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
                      pursuant to section 906 of the Sarbanes-Oxley Act of 2002                Attached

         Exhibit 99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
                      pursuant to section 906 of the Sarbanes-Oxley Act of 2002                Attached

     b)  Reports on Form 8-K:

         No Reports on Form 8-K were filed by the registrant during the periods
covered by this report.
</TABLE>

                                 Page 16 of 23

<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.


                               FARREL CORPORATION
                               ------------------
                               REGISTRANT



DATE:   8/13/02                           /s/ Rolf K. Liebergesell
      ------------------------------      --------------------------------------
                                          ROLF K. LIEBERGESELL
                                          CHIEF EXECUTIVE OFFICER,
                                          PRESIDENT AND CHAIRMAN OF THE BOARD




DATE    8/13/02                           /s/ Walter C. Lazarcheck
      ------------------------------      --------------------------------------
                                          WALTER C. LAZARCHECK
                                          VICE PRESIDENT AND CHIEF FINANCIAL
                                          OFFICER (CHIEF ACCOUNTING OFFICER)






                                 Page 17 of 23