#### SECURITIES
AND EXCHANGE COMMISSION

Washington,
D.C. 20549

#### FORM 10-Q

For the quarterly period ended September 30, 2001

For the transition period fromto
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.

#### 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.

`Farrel Corporation
                               ------------------

                                      Index
                                      -----

                                                                       Page
                                                                       ----


Part I.   Financial Information
          ---------------------

           Consolidated Balance Sheets -
           September 30, 2001 and December 31, 2000                      3

           Consolidated Statements of Operations -
           Three and nine months ended September 30, 2001
           and October 1, 2000                                           4

           Consolidated Statements of Cash Flows -
           Nine months ended September 30, 2001
           and October 1, 2000                                           5

           Notes to Consolidated Financial Statements                    6

           Management's Discussion and Analysis of Financial
           Condition and Results of Operations                           8



Part II.   Other Information                                            12

           Exhibit 11 - Computation of Earnings Per Share               13`

Page 2 of 14

`Part I - Financial Information
                               FARREL CORPORATION
                               ------------------
                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------
                        (In thousands, except share data)
                        ---------------------------------

                                                                      September 30,  December 31,
                                                                      -------------  ------------
                                                                          2001           2000
                                                                          ----           ----
ASSETS                                                                 (Unaudited)
        Current Assets:
              Cash and cash equivalents ...........................     $  6,138      $  2,486
              Accounts receivable, net of allowance for
                 doubtful accounts of  $194 and $139, respectively         6,124        13,607
              Inventory ...........................................       14,443        12,411
              Deferred income taxes ...............................          793           793
              Other current assets ................................        1,219         1,284
                                                                        --------      --------
                            Total current assets ..................       28,717        30,581
              Property, plant and equipment - net of accumulated
                 depreciation of  $14,775 and $14,037, respectively        8,355         9,538
              Prepaid pension costs ...............................        3,855         3,514
              Other assets ........................................          184           299
                                                                        --------      --------
              Total Assets ........................................     $ 41,111      $ 43,932
                                                                        ========      ========
LIABILITIES & STOCKHOLDERS' EQUITY
        Current Liabilities:
              Accounts payable ....................................     $  6,563      $  6,400
              Accrued expenses & taxes payable ....................        1,362         1,660
              Advances from customers .............................        4,449         5,948
              Accrued warranty costs ..............................          767         1,075
              Short - term debt ...................................          688         1,194
                                                                        --------      --------
                             Total current liabilities ............       13,829        16,277
        Long - term debt ..........................................        1,204         1,194
        Postretirement benefit obligation .........................        1,087         1,118
        Deferred income taxes .....................................        1,404         1,380
        Commitments and contingencies .............................         --            --
                                                                        --------      --------
                             Total Liabilities ....................       17,524        19,969
                                                                        --------      --------
        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
                 September 30, 2001 and 912,045 shares at December
                 31, 2000 .........................................       (2,534)       (2,529)
              Retained earnings ...................................        8,073         8,330
              Accumulated other comprehensive expense .............       (1,308)       (1,194)
                                                                        --------      --------
                             Total Stockholders' Equity ...........       23,587        23,963
                                                                        --------      --------
        Total Liabilities and Stockholders' Equity ................     $ 41,111      $ 43,932
                                                                        ========      ========
           See Accompanying Notes to Consolidated Financial Statements`

Page 3 of 14

`FARREL CORPORATION
                               ------------------
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------
                 (In thousands, except per share and share data)
                 -----------------------------------------------

                                               Three Months Ended             Nine Months Ended
                                               ------------------             -----------------
                                           September 30,    October 1,   September 30,   October 1,
                                               2001           2000            2001          2000
                                               ----           ----            ----          ----
                                                   (Unaudited)                   (Unaudited)
Net sales ...............................  $    15,847    $    17,488    $    39,282    $    44,313

Cost of sales ...........................       11,422         13,422         29,967         34,173
                                           -----------    -----------    -----------    -----------

Gross margin ............................        4,425          4,066          9,315         10,140

Operating expenses:

    Selling .............................        1,030          1,670          3,592          5,169

    General & administrative ............        1,634          1,993          4,956          6,064

    Research & development ..............          265            389          1,085          1,238
                                           -----------    -----------    -----------    -----------

Total operating expenses ................        2,929          4,052          9,633         12,471
                                           -----------    -----------    -----------    -----------

Operating  income (loss) ................        1,496             14           (318)        (2,331)

Interest income .........................           36             37            124            185

Interest expense ........................          (39)           (64)          (117)          (208)

Other income (expense), net .............          (63)           (65)          (112)          (121)
                                            -----------    -----------    -----------    -----------

Income (loss)  before income taxes ......        1,430            (78)          (423)        (2,475)

Provision (benefit)  for income taxes ...          507             55           (166)          (730)
                                            -----------    -----------    -----------    -----------

Net income (loss) .......................   $      923     $     (133)    $     (257)    $   (1,745)
                                            ===========    ===========    ===========    ===========

Per share data:

Basic and Diluted income (loss) per
  common share ..........................   $      0.18    $     (0.03)   $     (0.05)   $     (0.33)
                                            ===========    ===========    ===========    ===========
Average shares outstanding:
  Basic .................................     5,228,461      5,250,061      5,228,999      5,250,061
                                            ===========    ===========    ===========    ===========
  Diluted ...............................     5,228,461      5,250,061      5,228,999      5,250,061
                                            ===========    ===========    ===========    ===========
  Dividends per share ...................   $      0.00    $      0.04    $      0.00    $      0.12
                                            ===========    ===========    ===========    ===========
           See Accompanying Notes to Consolidated Financial Statements`

Page 4 of 14

`FARREL CORPORATION
                               ------------------
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
                                 (In thousands)
                                                                                   Nine Months Ended
                                                                                   -----------------
                                                                               September 30,  October 1,
                                                                               -------------  ----------
                                                                                   2001          2000
                                                                                   ----          ----
                                                                               (Unaudited)   (Unaudited)
Cash flows from operating activities:
  Net loss ..................................................................   ($  257)      ($1,745)
  Adjustments to reconcile net loss to
  net cash provided by (used in) operating activities:
    Loss (gain) on disposal of fixed assets .................................      (182)            8
    Depreciation and amortization ...........................................     1,272         1,515
    Decrease in accounts receivable .........................................     7,352         3,630
    (Increase) in inventory .................................................    (2,042)       (3,398)
    (Increase) in prepaid pension costs .....................................      (367)         (753)
    Increase (decrease) in accounts payable .................................       160        (2,436)
    Increase (decrease) increase in customer advances .......................    (1,406)        1,410
    (Decrease) in accrued expenses & taxes ..................................      (452)       (1,087)
    (Decrease)  in accrued warranty costs ...................................      (305)         (290)
    Increase (decrease) in deferred income taxes ............................        39            (7)
    Other ...................................................................       210           420
                                                                                -------       -------
    Total adjustments .......................................................     4,279          (988)
                                                                                -------       -------
    Net cash (used in) provided by operating activities .....................     4,022        (2,733)
                                                                                -------       -------
Cash flows from investing activities:
    Proceeds from disposal of fixed assets ..................................       484             6
    Purchases of property, plant and equipment ..............................      (358)         (605)
                                                                                -------       -------
    Net cash (used in) provided by investing activities .....................       126          (599)
Cash flows from financing activities:
    Repayment of long-term borrowings .......................................    (2,264)         (930)
    Proceeds from borrowings, net of repayments of short-term borrowings ....     1,817          --
    Purchase of treasury stock ..............................................        (5)         --
    Dividends paid ..........................................................      --            (630)
                                                                                -------       -------
    Net cash (used in) financing activities .................................      (452)       (1,560)
                                                                                -------       -------
Effect of foreign currency exchange rate changes on cash ....................       (44)         (219)
                                                                                -------       -------
Net increase (decrease) in cash and cash equivalents ........................     3,652        (5,111)
    Cash and cash equivalents - Beginning of period .........................     2,486         6,069
                                                                                -------       -------
    Cash and cash equivalents - End of period ...............................   $ 6,138       $   958
                                                                                =======       =======
Income taxes paid ...........................................................   $    33       $   210
                                                                                =======       =======
Interest paid ...............................................................   $   118       $   203
                                                                                =======       =======
           See Accompanying Notes to Consolidated Financial Statements`

Page 5 of 14

#### 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 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
September 30, 2001,  and the  consolidated  results of its  operations and its cash flows for the three and/or nine month periods ended
September  30, 2001 and October 1, 2000.  These  results are not  necessarily  indicative of results to be expected for the full fiscal
year. The statements  should be read in conjunction with the financial  statements and notes thereto,  included in the Company's Annual
Report and Form 10-K for the year ended December 31, 2000.

#### Note 2 -
Inventory

`Inventory is comprised of the following:
                                               September 30,      December 31,
                                               -------------      ------------
                                                    2001               2000
                                                    ----               ----
                                                        (In thousands)
     Stock and raw materials.............         $ 7,465           $ 7,997
     Work-in process.....................           6,978             4,414
                                                  -------           -------
     Total...............................         $14,443           $12,411
                                                  =======           =======`

#### Note 3 - Comprehensive
Income (Expense)

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

`Three Months Ended                  Nine Months Ended
                                       September 30,   October 1,       September 30,     October 1,
                                           2001           2000              2001             2000
                                           ----           ----              ----             ----
                                                              (In thousands)

     Net income (loss)                   $  923          $(133)            $(257)         $(1,745)
     Foreign currency translation
        adjustments                         374           (279)             (114)            (988)
                                         ------          ------            ------         --------
     Other comprehensive (income)
        expense                          $1,297          $(412)            $(371)         $(2,733)
                                         ======          ======            ======         ========`

Accumulated  other  comprehensive  expense  consists of foreign  currency  translation  adjustments  at September 30, 2001 and
December 31, 2000.

#### 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.

Page 6 of 14

#### Note 5 - Impact
of Recently Issued Accounting Standards

In June 1998, the FASB issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities,  which the
Company was required to adopt 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  which are denominated in currencies other than the Company's  operating
currencies.

As of September 30, 2001, 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  during the three or nine months ended  September 30, 2001,  related to
these contracts.  At September 30, 2001, the difference  between the spot rate and the contract rate for the foreign exchange  forwards
was a net unrealized gain of $13,000.

#### Note 6 -
Restatement of Prior Year Balances

Prior year  balances  have been  restated  to  reflect  the  adoption  of SEC Staff  Accounting  Bulletin  101  ("Revenue
Recognition")  and  EITF00-10  ("Accounting  for  Shipping  and Handling  Costs").  The Company was required to adopt these  accounting
guidelines in the fourth quarter of 2000. The adoption  required  restatement  of prior periods.  The net effect of the  restatement on
the net loss for the nine months ended October 1, 2000, was not material.

#### Note 7 - Bank Credit
Arrangements

In June 2001, the Company  entered into a new worldwide  multi-currency  credit facility with a major US 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  expires on
June 15,  2003.  The  facility  contains  limits on direct  borrowings  and  issuance's  of  letters of credit  based  upon  stipulated
percentages of accounts  receivable and inventory.  The facility also contains  covenants  specifying minimum and/or maximum thresholds
for operating results,  selected financial ratios and backlog. There can be no assurance that the Company will achieve the required thresholds in the future.  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's old credit  facility was terminated  except in relation to  approximately  $0.8
million of letters of credit which had  previously  been posted under that  facility and continue to be  outstanding  on September  30,
2001.  The Company has approximately $2.0 million of letters of credit posted under its new facility on September 30, 2001.

The  Company  also  entered  into a term loan for £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 £38,888 through June 2004.  The term loan has an interest rate of LIBOR plus 2.7%.

Page 7 of 14

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,  in  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;  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

#### Nine Months Ended September 30, 2001 Compared To The Nine Months Ended October 1, 2000

Net sales for the nine month period  ended  September  30, 2001,  were $39.3  million  compared to $44.3  million for the nine
month period ended October 1, 2000, a decrease of $5.0  million.  The decrease is primarily a result of lower sales in North America of
$12.9 million  partially  offset by an increase in new machine sales in Europe.  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  remain  particularly  competitive  and are subject to
local economic events.

Orders  received for the nine month period ended  September  30, 2001,  were $34.0  million  compared to $44.8 million for the
nine month period ended October 1, 2000.  The decline in incoming orders is due to weak market conditions faced by the Company.

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.
In  addition,  since its  inception,  the  decline in the value of the Euro  versus the U.S.  dollar and  British  pound  sterling  has
increased  pricing  pressures.  Over the longer term,  these  conditions  are resulting in customer  orders with lower margins and lost
business.  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 September  30, 2001,  was $22.5 million  compared to $27.7 million at
December 31, 2000, and $29.9 million at October 1, 2000.  Of the $22.5 million in backlog as of September 30, 2001, approximately $16 million is scheduled to be shipped by December 31, 2001.  Such shipments are subject to various factors, such as customer requests for changes or manufacturing delays, which could result in shipments being delayed beyond December 31, 2001.

Page 8 of 14

Gross margin for the nine month period ended  September  30,  2001,  was $9.3 million  compared to $10.1  million for the nine
month period  ended  October 1, 2000, 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 nine month  period  ended  September  30,  2001,  was 23.7%  compared  to 22.9% for the nine month
period ended October 1, 2000.  The increase in gross margin as a percent of sales is primarily due to a change in sales mix.

Operating  expenses for the nine month period ended  September 30, 2001,  were $9.6 million  compared to $12.5 million for the
nine month period ended October 1, 2000, a decrease of $2.8 million  primarily due to lower employee  compensation and related expenses
of approximately $1.9 million, travel expenses of $0.4 million and professional fees of $0.5 million.

Interest  income for the nine month period ended  September  30,  2001,  was $124,000  compared to $185,000 for the nine month
period  ended  October 1, 2000, a decrease of $61,000.  The decrease is primarily  due to lower  average cash  balances  available  for
investing and lower interest rates.

Interest  expense for the nine month period ended  September  30, 2001,  was $117,000  compared to $208,000 for the nine month
period ended October 1, 2000, a decrease of $91,000.  The decrease is primarily due to lower borrowings.

The Company  provides for income taxes at the statutory  rates in effect in each tax  jurisdiction  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 benefit was 39% for the nine month period  ended  September  30, 2001,  compared to 30% for the nine month period
ended  October 1, 2000.  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 September 30, 2001 Compared to The Three Months Ended October 1, 2000

Net sales for the three months ended  September  30, 2001,  were $15.8  million  compared to $17.5 million for the three month
period ended  October 1, 2000, a decrease of $1.6  million.  The decrease is primarily a result of lower sales in North America of $6.1
million partially offset by an increase in new machine sales in Europe.

Orders  received for the three month period ended  September 30, 2001,  were $10.9  million  compared to $11.7 million for the
three month period ended October 1, 2000.

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 nine month period
on page 8.

Gross margin for the three month  period ended  September  30, 2001,  was $4.4 million  compared to $4.1 million for the three
month  period ended  October 1, 2000,  an increase of $0.4  million.  The increase in gross margin is a result of a change in sales mix
and lower  manufacturing  related  overhead  costs.  The gross margin as a percent of sales for the three month period ended  September
30, 2001,  was 27.9%  compared to 23.3% for the three month period ended October 1, 2000. The increase in the gross margin as a percent
of sales is primarily due to a change in sales mix and lower manufacturing related overhead costs.

Operating  expenses  for the three month  period ended  October 1, 2001,  were $2.9  million  compared to $4.1 million for the
three month period ended October 1, 2000, a decrease of $1.1 million  primarily due to lower  employee  compensation  and benefit costs
of approximately $0.8 million, and lower travel expenses and professional fees.

Interest  income for the three month period ended  September  30,  2001,  was $36,000  compared to $37,000 for the three month
period ended October 1, 2000.

Page 9 of 14

Interest  expense for the three month period ended  September 30, 2001,  was $39,000  compared to $64,000 for the three months
ended October 1, 2000.  The decrease is primarily due to lower borrowings.

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 35% for the three month period ended  September 30, 2001,  compared to (71%) for the three month period
ended  October 1, 2000.  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

In February  1995,  the Company and Black & Decker  Corporation  ("Black &  Decker")  entered  into a  Settlement  Agreement
pursuant to which 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 Derby,  Connecticut facilities,  as required by the Connecticut Department of
Environmental  Protection  ("DEP").  A  preliminary  environmental  assessment  of the  Company's  properties  in  Ansonia  and  Derby,
Connecticut  has been  conducted by Black & Decker.  Although the  assessment is still being  evaluated by the DEP, on the basis of the
preliminary  data now available  there is no reason to believe that any remediation  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 September 30, 2001 were $14.9 million and 2.1 to 1,  respectively,  compared
to $14.3 million and 1.9 to 1 at December 31, 2000,  respectively.  During the nine months ended  September 30, 2001,  the Company paid
no dividends.

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 has also  generally  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 $358,000 and $605,000  during the nine
month periods ended September 30, 2001 and October 1, 2000, respectively.

In June 2001,  the Company  entered into a new worldwide  multi-currency  credit  facility with a major US 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  expires on June 15, 2003.
The facility  contains limits on direct  borrowings and issuance's of letters of credit based upon  stipulated  percentages of accounts
receivable and inventory.  The facility also contains  covenants  specifying  minimum and/or maximum  thresholds for operating results,
selected  financial  ratios and backlog.  There can be no assurance that the Company will achieve the required thresholds in the future. 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's  old credit  facility was  terminated  except in relation to  approximately  $0.8 million of
letters of credit which had  previously  been posted under that  facility and continue to be  outstanding  on September  30, 2001.  The
Company has approximately $2.0 million of letters of credit posted under its new facility on September 30, 2001.

Page 10 of 14

The  Company  also  entered  into a term loan for £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 £38,888  through  October 2004.  The term loan has an interest rate of LIBOR plus 2.7%. At September 30, 2001
and December 31, 2000, there were $1.9 million and $2.4 million, respectively, outstanding under a term loan.

#### Impact of
Recently Issued Accounting Standards

In June 1998, the FASB issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities,  which the
Company was required to adopt 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.

#### Item 2 -
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 to 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 11 of 14

|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 | N/A     
|ITEM 5 - OTHER INFORMATION                                                   | N/A     
|ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K                                    |         
|Exhibit 11 (Regulation S-K) Computation of Earnings Per Share.               | Attached
|Reports on Form 8-K                                                          |         

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

Page 12 of 14

Exhibit 11

`FARREL CORPORATION
                               ------------------
                 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
                 ----------------------------------------------
                 (In thousands, except per share and share data)
                 ----------------------------------------------

                                                    Three Months Ended          Nine Months Ended
                                                    ------------------          -----------------
                                                 September 30, October 1,   September 30,  October 1,
                                                     2001         2000          2001          2000
                                                     ----         ----          ----          ----

Net income (loss) applicable to common stock ..  $       923  $      (133)  $      (257)  $    (1,745)
                                                 ===========  ===========   ===========   ===========
Weighted average number of common
shares outstanding -  Basic earnings per share     5,228,461    5,250,061     5,228,999     5,250,061

Effect of dilutive stock and purchase options          --           --            --            --
                                                 -----------  -----------   -----------   -----------

Weighted average number of common
shares outstanding - Diluted earnings per share    5,228,461    5,250,061     5,228,999     5,250,061
                                                 ===========  ===========   ===========   ===========

Net income (loss) per common share-
  Basic .......................................  $      0.18  $     (0.03)  $     (0.05)  $     (0.33)
                                                 ===========  ===========   ===========   ===========
  Fully diluted ...............................  $      0.18  $     (0.03)  $     (0.05)  $     (0.33)
                                                 ===========  ===========   ===========   ===========`

Page 13 of 14

#### 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.

|DATE:11/13/01 | /s/ Rolf K. Liebergesell                  
|------------- | ------------------------------------------
|              | ROLF K. LIEBERGESELL                      
|              | CHIEF EXECUTIVE OFFICER,                  
|              | PRESIDENT AND CHAIRMAN OF THE BOARD       
|DATE:11/13/01 | /s/ Walter C. Lazarcheck                  
|              | WALTER C. LAZARCHECK                      
|              | VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
|              | (CHIEF ACCOUNTING OFFICER)                

Page 14 of 14