##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K





|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the fiscal year ended June 30, 2005                                                     
|  
|or
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

Commission file number 333-123614


PAHC Holdings Corporation


(Exact name of registrant as specified in its charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 20-2297654                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

65 Challenger Road, Ridgefield Park, New Jersey 07660


(Address of principal executive offices) (Zip Code)


(201) 329-7300


(Registrants telephone number, including area code)


Securities registered pursuant to Section 12(b) of the
Act:


none


Securities registered pursuant to Section 12(g) of the
Act:


none


þ o


þ


o þ


o þ


















---










PAHC HOLDINGS CORPORATION


TABLE OF CONTENTS


|                                                                                                                               |  |                                                                                                                      |      |      |    | 
|------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------- | ---- | ---- | -- | 
|                                                                                                                               |  |                                                                                                                      |      | Page |   
|                                                                                                                               |  |                                                                                                                      |      |      |   
|PART I                                                                                                                        
|Item 1.                                                                                                                        |  | Business                                                                                                             |      |      | 1  | 
|Item 2.                                                                                                                        |  | Properties                                                                                                           |      |      | 18 | 
|Item 3.                                                                                                                        |  | Legal Proceedings                                                                                                    |      |      | 19 | 
|Item 4.                                                                                                                        |  | Submission of Matters to a Vote of Security
    Holders                                                              |      |      | 20 | 
|PART II                                                                                                                       
|Item 5.                                                                                                                        |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |      |      | 21 | 
|Item 6.                                                                                                                        |  | Selected Financial Data                                                                                              |      |      | 21 | 
|Item 7.                                                                                                                        |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |      |      | 22 | 
|Item 7A.                                                                                                                       |  | Quantitative and Qualitative Disclosures
    about Market Risk                                                       |      |      | 41 | 
|Item 8.                                                                                                                        |  | Financial Statements and Supplementary
    Data                                                                      |      |      | 41 | 
|Item 9.                                                                                                                        |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |      |      | 41 | 
|Item 9A.                                                                                                                       |  | Controls and Procedures                                                                                              |      |      | 41 | 
|Item 9B.                                                                                                                       |  | Other Information                                                                                                    |      |      | 41 | 
|PART III                                                                                                                      
|Item 10.                                                                                                                       |  | Directors and Executive Officers of the
    Registrant                                                               |      |      | 42 | 
|Item 11.                                                                                                                       |  | Executive Compensation                                                                                               |      |      | 45 | 
|Item 12.                                                                                                                       |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |      |      | 49 | 
|Item 13.                                                                                                                       |  | Certain Relationships and Related
    Transactions                                                                   |      |      | 49 | 
|Item 14.                                                                                                                       |  | Principal Accounting Fees and Services                                                                               |      |      | 52 | 
|PART IV                                                                                                                       
|Item 15.                                                                                                                       |  | Exhibits and Financial Statement
    Schedules                                                                       |      |      | 53 | 
|Index to Consolidated Financial
    Statements                                                                                 |  |                                                                                                                      | F-1  |     
|Report of Independent Registered Public
    Accounting Firm                                                                    |  |                                                                                                                      | F-2  |     
|Consolidated Financial Statements                                                                                              |  |                                                                                                                      |      |     
|Consolidated Balance Sheets as of
    June 30, 2005 and 2004                                                                   |  |                                                                                                                      | F-3  |     
|Consolidated Statements of Operations and
    Comprehensive Income (Loss) for the years ended June 30,
    2005, 2004 and 2003 |  |                                                                                                                      | F-4  |     
|Consolidated Statements of Changes in
    Stockholders Deficit for the years ended June 30,
    2005, 2004 and 2003           |  |                                                                                                                      | F-5  |     
|Consolidated Statements of Cash Flows for
    the years ended June 30, 2005, 2004 and 2003                                     |  |                                                                                                                      | F-6  |     
|Notes to Consolidated Financial
    Statements                                                                                 |  |                                                                                                                      | F-7  |     
|Financial Statements of Certain PAHC
    Holdings Corporation Affiliates                                                       |  |                                                                                                                      |      |     
|Report of Independent Registered Public
    Accounting Firm                                                                    |  |                                                                                                                      | F-49 |     
|Balance Sheets as of June 30, 2005 and
    2004                                                                                |  |                                                                                                                      | F-50 |     
|Statements of Operations and Comprehensive
    Income (Loss) for the years ended June 30, 2005, 2004 and
    2003              |  |                                                                                                                      | F-51 |     
|Statements of Changes in Stockholders
    Deficit for the years ended June 30, 2005, 2004 and 2003                            |  |                                                                                                                      | F-52 |     
|Statements of Cash Flows for the years
    ended June 30, 2005, 2004 and 2003                                                  |  |                                                                                                                      | F-53 |     
|Notes to Financial Statements                                                                                                  |  |                                                                                                                      | F-54 |     
|Signatures                                                                                                                     |  |                                                                                                                      | S-1  |     
|EX-4.1.1: FIRST SUPPLEMENTAL INDENTURE                                                                                        
|EX-21: LIST OF SUBSIDIARIES                                                                                                   
|EX-31.1: CERTIFICATION                                                                                                        
|EX-31.2: CERTIFICATION                                                                                                        
|EX-31.3: CERTIFICATION                                                                                                        
|EX-32: CERTIFICATIONS                                                                                                         





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##### Table of Contents






PART I







|        |         
|------- | --------
|Item 1. | Business

General














| |                
| | ---------------
| | Strategic Focus





1



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| |                           
| | --------------------------
| | Belgium Plant Transactions



















2



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| |                         
| | ------------------------
| | Issuance of HoldCo Notes













| |                                       
| | --------------------------------------
| | Redemption of Series C Preferred Stock



3



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Animal Health and Nutrition Business  Medicated
Feed Additives








|                                          |  |                               |  |              |      |  |         |                                                                                 
|----------------------------------------- |  | ----------------------------- |  | ------------ | ---- |  | ------- | --------------------------------------------------------------------------------
|Brand                                     |  | Active/Antigen                |  | Market Entry |      |  | Comment
|                                          |  |                               |  |              |      |  |        
|Terramycin®/ Neo-Terramycin®/
    Neo-tm® |  | oxytetracycline, neomycin/OTC |  |              | 1951 |  |         | Antibiotic with multiple applications for a wide number of
    species          
|CLTC®                                     |  | chlortetracycline             |  |              | 1954 |  |         | Antibiotic with multiple applications for a wide number of
    species          
|Nicarb®                                   |  | nicarbazin                    |  |              | 1955 |  |         | Anticoccidial for poultry                                                       
|Amprol®                                   |  | amprolium                     |  |              | 1960 |  |         | Anticoccidial for poultry and cattle                                            
|Bloatguard®                               |  | poloxalene                    |  |              | 1966 |  |         | Anti-bloat treatment for cattle                                                 
|Banminth®                                 |  | pyrantel tartrate             |  |              | 1969 |  |         | Anthelmintic for livestock                                                      
|Mecadox®                                  |  | carbadox                      |  |              | 1971 |  |         | Antibacterial used in swine feeds to control salmonellosis and
    dysentery    
|Stafac®/ Eskalin®/ V-Max®                 |  | virginiamycin                 |  |              | 1972 |  |         | Antibiotic used to prevent and control diseases in poultry,
    swine and cattle
|Coxistac®/ Posistac®                      |  | salinomycin                   |  |              | 1979 |  |         | Anticoccidial for poultry; disease preventative in swine                        
|Rumatel®                                  |  | morantel tartrate             |  |              | 1981 |  |         | Anthelmintic for livestock                                                      
|Cerditac®/ Cerdimix®                      |  | oxibendazole                  |  |              | 1982 |  |         | Anthelmintic for livestock                                                      
|Aviax®                                    |  | semduramicin                  |  |              | 1995 |  |         | Anticoccidial for poultry                                                       



| |            
| | -----------
| | Antibiotics



Virginiamycin.


streptomyces virginiae


4



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Terramycin and Neo-Terramycin.




| |   |                                                    
| | - | ---------------------------------------------------
| |  | fowl cholera in chickens,                          
|
| |  | airsacculitis in turkeys,                          
|
| |  | pneumonia and enteritis in swine, and              
|
| |  | pneumonia, enteritis and liver abscesses in cattle.





| |               
| | --------------
| | Antibacterials



Carbadox.




| |               
| | --------------
| | Anticoccidials

Eimeria spp.




Nicarbazin and Amprolium.




5



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Semduramicin and Salinomycin.










| |              
| | -------------
| | Anthelmintics



Rumatel®


Banminth®




| |                               
| | ------------------------------
| | Other Medicated Feed Additives



Manufacturing, Sales and
Regulatory






| |   |                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | Guarulhos, Brazil (salinomycin and semduramicin),                                                                                         
|
| |  | Rixensart, Belgium (virginiamycin and semduramicin), which
    facility is to be sold and production transferred to Guarulhos,
    Brazil,

6



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| |   |                                                    
| | - | ---------------------------------------------------
| |  | Ramat Hovav, Israel (nicarbazin and amprolium), and
|
| |  | Braganca Paulista, Brazil (nicarbazin).            







Animal Health and Nutrition  Nutritional Feed
Additives




Specialty Chemicals Group






| |                               
| | ------------------------------
| | Copper Wood Treatment Products



7



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| |                      
| | ---------------------
| | Other Copper Products





| |                                   
| | ----------------------------------
| | Other Specialty Chemicals Products



Sales, Marketing and Distribution










Product Registrations, Patents and Trademarks




8



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Raw Materials




Research and Development






Customers




Competition




Employees




Environmental Matters




9



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| |                   
| | ------------------
| | Federal Regulation



Resource Conservation and Recovery Act of 1976, as amended
(RCRA).




10



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The Federal Water Pollution Control Act, as amended (the
Clean Water Act).


Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (CERCLA or
Superfund).


Federal Insecticide, Fungicide and Rodenticide Act, as
amended (FIFRA).




The Clean Air Act.




| |                           
| | --------------------------
| | State and Local Regulation



11



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| |                   
| | ------------------
| | Foreign Regulation





| |                                   
| | ----------------------------------
| | Regulation of Recycling Activities











| |                 
| | ----------------
| | Waste Byproducts



12



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| |                      
| | ---------------------
| | Particular Facilities





Sumter, SC.


Santa Fe Springs, CA.


Joliet, IL.


Garland, TX.


Powder Springs, GA.


Sewaren, NJ.


13



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Union City, CA.


Union, IL.


Ramat Hovav, Israel.


Government Regulation




14



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15



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##### Table of Contents







Market Share, Ranking And Other Industry Data




CONDITIONS IN ISRAEL




Political and Military Conditions




16



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Economic Conditions






Investment Incentives




17



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|        |           
|------- | ----------
|Item 2. | Properties



|                                |  |                |           |  |      |                                                        
|------------------------------- |  | -------------- | --------- |  | ---- | -------------------------------------------------------
|                                |  | Approximate    |           |  |     
|Location                        |  | Square Footage |           |  | Uses
|                                |  |                |           |  |     
|Animal Health and Nutrition     |  |                |           |  |      |                                                        
|Bangkok, Thailand(a)            |  |                | 500       |  |      | Sales                                                  
|Braganca Paulista, Brazil       |  |                | 35,000    |  |      | Sales, Manufacturing and Administrative                
|Bremen, Indiana                 |  |                | 50,000    |  |      | Sales, Premixing and Warehouse                         
|Buenos Aires, Argentina(a)      |  |                | 900       |  |      | Sales and Administrative                               
|San Jose, Costa Rica(a)         |  |                | 800       |  |      | Sales and Administrative Sales,                        
|Guarulhos, Brazil(b)            |  |                | 1,234,000 |  |      | Premixing, Manufacturing and Administrative            
|Hong Kong, China(a)             |  |                | 750       |  |      | Sales and Administrative                               
|Kuala Lumpur, Malaysia(a)       |  |                | 7,300     |  |      | Sales, Premixing and Warehouse                         
|Ladora, Iowa                    |  |                | 9,500     |  |      | Warehouse                                              
|Lees Summit, Missouri(a)       |  |                | 1,500     |  |      | Sales                                                  
|Marion, Iowa                    |  |                | 32,500    |  |      | Premixing and Warehouse Sales, Premixing, Warehouse and
|Petach Tikva, Israel            |  |                | 60,000    |  |      | Administrative                                         
|Pretoria, South Africa(a)       |  |                | 3,200     |  |      | Sales and Administrative                               
|Quincy, Illinois(c)             |  |                | 50,000    |  |      | Sales, Warehouse, Research and Administrative          
|Rixensart, Belgium(d)           |  |                | 865,000   |  |      | Sales, Manufacturing, Research and Administrative      
|Ramat Hovav, Israel             |  |                | 140,000   |  |      | Manufacturing and Research                             
|Regina, Canada(a)               |  |                | 1,000     |  |      | Sales and Administrative                               
|Queretaro, Mexico(a)            |  |                | 3,500     |  |      | Sales and Administrative                               
|Sydney, Australia(a)            |  |                | 3,500     |  |      | Sales and Administrative                               
|Valencia, Venezuela(a)          |  |                | 1,100     |  |      | Sales and Administrative                               
|Specialty Chemicals             |  |                |           |  |      |                                                        
|Garland, Texas                  |  |                | 20,000    |  |      | Manufacturing                                          
|Joliet, Illinois                |  |                | 34,500    |  |      | Manufacturing                                          
|Reading, United Kingdom(a)      |  |                | 3,100     |  |      | Sales and Administrative                               
|Santa Fe Springs, California(e) |  |                | 90,000    |  |      | Manufacturing                                          
|Sumter, South Carolina          |  |                | 123,000   |  |      | Manufacturing and Research                             






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | This facility is leased. Our leases expire through 2027. For
    information concerning our rental obligations, see Note 17
    to our Consolidated Financial Statements included herein.                                                                                                                                                                                                                                                                                                                                                                  
|   
|(b) |  | Our Guarulhos, Brazil plant utilizes fermentation processes to
    produce the active ingredients semduramicin-mycelial and
    salinomycin. The plant also produces Aviax®,
    Terramycin®, Stafac®and Coxistac® Granular
    formulations. The plant is cGMP compliant and is FDA approved.                                                                                                                                                                                                                                                             
|   
|(c) |  | Comprises three facilities, including a warehouse, laboratory
    and office.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(d) |  | Our Rixensart, Belgium plant utilizes fermentation processes to
    produce the active ingredients semduramicin-crystalline and
    virginiamycin. The plant also produces Stafac® formulations
    and is responsible for all of our fermentation development
    activities. The plant has been approved by the FDA and is cGMP
    compliant. We have entered into an agreement to sell the
    Rixensart facility, and are in the process of transferring
    production and fermentation development activities to our
    Guarulhos, Brazil facility.

18



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|    |  |                                                                                                                                                                                        
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(e) |  | We lease the land under this facility from a partnership owned
    by Jack Bendheim, Marvin Sussman and James Herlands. See
    Certain Relationships and Related Party Transactions.












|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings









19



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|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders



20



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PART II







|        |                                                                                                                       
|------- | ----------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Repurchases of Equity
    Securities

Market Information.


Holders.


Dividends.







|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



|                                                                                                                     |  |                             |         |                        |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|-------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | ---------------------- | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                                                                                     |  | Fiscal Years Ended June 30, |        
|                                                                                                                     |  |                             |        
|                                                                                                                     |  | 2001                        |         |                        | 2002 |   |         | 2003 |  |   | 2004    |   |  | 2005 |        
|                                                                                                                     |  |                             |         |                        |      |   |         |      |  |   |         |   |  |      |        
|                                                                                                                     |  |                             |         | (Dollars in thousands) |      |   |        
|Results of Operations:                                                                                               |  |                             |         |                        |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net sales                                                                                                            |  | $                           | 299,047 |                        |      | $ | 324,142 |      |  | $ | 337,818 |   |  | $    | 354,384 |   |  | $ | 364,379 |  
|Cost of goods sold (includes Belgium Plant Transactions costs of
    $22,191 in the fiscal year ended June 30, 2005) |  |                             | 232,730 |                        |      |   | 244,617 |      |  |   | 248,577 |   |  |      | 265,217 |   |  |   | 293,086 |  
|                                                                                                                     |  |                             |         |                        |      |   |         |      |  |   |         |   |  |      |        
|Gross profit                                                                                                         |  |                             | 66,317  |                        |      |   | 79,525  |      |  |   | 89,241  |   |  |      | 89,167  |   |  |   | 71,293  |  
|Selling, general and administrative expenses                                                                         |  |                             | 60,639  |                        |      |   | 69,429  |      |  |   | 63,346  |   |  |      | 63,417  |   |  |   | 66,911  |  
|Costs of non-completed transaction                                                                                   |  |                             |        |                        |      |   |        |      |  |   |        |   |  |      | 5,261   |   |  |   |        |  
|                                                                                                                     |  |                             |         |                        |      |   |         |      |  |   |         |   |  |      |        
|Operating income                                                                                                     |  |                             | 5,678   |                        |      |   | 10,096  |      |  |   | 25,895  |   |  |      | 20,489  |   |  |   | 4,382   |  
|Interest expense                                                                                                     |  |                             | 18,358  |                        |      |   | 18,735  |      |  |   | 17,455  |   |  |      | 20,724  |   |  |   | 27,776  |  
|Interest (income)                                                                                                    |  |                             | (566    | )                      |      |   | (346    | )    |  |   | (85     | ) |  |      | (130    | ) |  |   | (149    | )
|Other expense (income), net                                                                                          |  |                             | (1,463  | )                      |      |   | 3,346   |      |  |   | 1,548   |   |  |      | (788    | ) |  |   | (1,859  | )
|Net (gain) on extinguishment of debt                                                                                 |  |                             |        |                        |      |   |        |      |  |   |        |   |  |      | (23,226 | ) |  |   |        |  
|                                                                                                                     |  |                             |         |                        |      |   |         |      |  |   |         |   |  |      |        
|Income (loss) from continuing operations before income taxes                                                         |  |                             | (10,651 | )                      |      |   | (11,639 | )    |  |   | 6,977   |   |  |      | 23,909  |   |  |   | (21,386 | )
|Provision (benefit) for income taxes                                                                                 |  |                             | (230    | )                      |      |   | 14,340  |      |  |   | 9,830   |   |  |      | 7,804   |   |  |   | 2,122   |  
|                                                                                                                     |  |                             |         |                        |      |   |         |      |  |   |         |   |  |      |        
|Income (loss) from continuing operations                                                                             |  |                             | (10,421 | )                      |      |   | (25,979 | )    |  |   | (2,853  | ) |  |      | 16,105  |   |  |   | (23,508 | )
|Income (loss) from discontinued operations, net of income taxes                                                      |  |                             | (4,474  | )                      |      |   | (25,791 | )    |  |   | (14,023 | ) |  |      | (1,166  | ) |  |   | 671     |  
|(Loss) on disposal of discontinued operations, net of income
    taxes                                               |  |                             |        |                        |      |   |        |      |  |   | (683    | ) |  |      | (2,089  | ) |  |   | 765     |  
|                                                                                                                     |  |                             |         |                        |      |   |         |      |  |   |         |   |  |      |        
|Net income (loss)                                                                                                    |  |                             | (14,895 | )                      |      |   | (51,770 | )    |  |   | (17,559 | ) |  |      | 12,850  |   |  |   | (22,072 | )
|Change in derivative instruments, net of income taxes                                                                |  |                             |        |                        |      |   | 1,062   |      |  |   | (981    | ) |  |      | (72     | ) |  |   | 114     |  
|Change in foreign currency translation adjustment, net of income
    taxes                                           |  |                             | (5,146  | )                      |      |   | (6,125  | )    |  |   | 7,377   |   |  |      | (776    | ) |  |   | 8,810   |  
|                                                                                                                     |  |                             |         |                        |      |   |         |      |  |   |         |   |  |      |        
|Comprehensive income (loss)                                                                                          |  | $                           | (20,041 | )                      |      | $ | (56,833 | )    |  | $ | (11,163 | ) |  | $    | 12,002  |   |  | $ | (13,148 | )
|                                                                                                                     |  |                             |         |                        |      |   |         |      |  |   |         |   |  |      |        

21



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|                                                      |                                                                                                                                                        |                                                                                      |         |                        |        |   |         |      |        |   |         |   |         |      |         |        |         |   |         |       |        |  
|----------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------ | ------- | ---------------------- | ------ | - | ------- | ---- | ------ | - | ------- | - | ------- | ---- | ------- | ------ | ------- | - | ------- | ----- | ------ | -
|                                                      |                                                                                                                                                        | Fiscal Years Ended June 30,                                                          |        
|                                                      |                                                                                                                                                        |                                                                                      |        
|                                                      |                                                                                                                                                        | 2001                                                                                 |         |                        | 2002   |   |         | 2003 |        |   | 2004    |   |         | 2005 |        
|                                                      |                                                                                                                                                        |                                                                                      |         |                        |        |   |         |      |        |   |         |   |         |      |        
|                                                      |                                                                                                                                                        |                                                                                      |         | (Dollars in thousands) |        |   |        
|Net income (loss)                                     |                                                                                                                                                        | $                                                                                    | (14,895 | )                      |        | $ | (51,770 | )    |        | $ | (17,559 | ) |         | $    | 12,850  |        |         | $ | (22,072 | )    
|                                                      | Excess of the reduction of redeemable preferred stock over total
    assets divested and costs and liabilities incurred on the Prince
    Transactions |                                                                                      |         |                       |        |   |         |     |        |   |         |  |         |      |         | 20,138 |         |   |         | 4,973 |       
|                                                      |                                                                                                                                                        | Dividends and equity value accreted on Series B and C
    redeemable preferred stock |         |                        | (8,172 | ) |         |      | (7,623 | ) |         |   | (12,278 | )    |         |        | (11,463 | ) |         |       | (1,723 | )
|                                                      |                                                                                                                                                        |                                                                                      |         |                        |        |   |         |      |        |   |         |   |         |      |        
|Net income (loss) attributable to common shareholders |                                                                                                                                                        | $                                                                                    | (23,067 | )                      |        | $ | (59,393 | )    |        | $ | (29,837 | ) |         | $    | 21,525  |        |         | $ | (18,822 | )    
|                                                      |                                                                                                                                                        |                                                                                      |         |                        |        |   |         |      |        |   |         |   |         |      |        
|Balance Sheet Data:                                   |                                                                                                                                                        |                                                                                      |         |                        |        |   |         |      |        |   |         |   |         |      |         |        |         |   |         |      
|Cash and cash equivalents                             |                                                                                                                                                        | $                                                                                    | 14,845  |                        |        | $ | 6,419   |      |        | $ | 11,179  |   |         | $    | 5,568   |        |         | $ | 13,597  |      
|Total assets                                          |                                                                                                                                                        |                                                                                      | 330,019 |                        |        |   | 296,444 |      |        |   | 274,347 |   |         |      | 241,369 |        |         |   | 255,486 |      
|Long-term debt and other liabilities                  |                                                                                                                                                        |                                                                                      | 148,344 |                        |        |   | 164,014 |      |        |   | 123,504 |   |         |      | 180,304 |        |         |   | 228,657 |      
|Series B and C redeemable preferred stock             |                                                                                                                                                        |                                                                                      | 48,980  |                        |        |   | 56,602  |      |        |   | 68,881  |   |         |      | 24,678  |        |         |   |        |      
|Total stockholders equity (deficit)                  |                                                                                                                                                        |                                                                                      | 3,405   |                        |        |   | (61,189 | )    |        |   | (84,510 | ) |         |      | (63,833 | )      |         |   | (73,731 | )    






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations



General






| |                         
| | ------------------------
| | Issuance of HoldCo Notes





22



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| |                                       
| | --------------------------------------
| | Redemption of Series C Preferred Stock





| |                                 
| | --------------------------------
| | Discontinued Operations  Wychem





| |                           
| | --------------------------
| | Belgium Plant Transactions



23



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24



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| |                                                    
| | ---------------------------------------------------
| | Issuance of Additional 13% Senior Secured
    Notes







| |                                                 
| | ------------------------------------------------
| | Amendment to the Domestic Senior Credit Facility





| |                    
| | -------------------
| | Prince Transactions





| |         
| | --------
| | Segments



Other Risks and Uncertainties




25



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Summary Consolidated Results of Continuing Operations


|                                             |  |                     |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------- |  | ------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                             |  | Year Ended June 30, |        
|                                             |  |                     |        
|                                             |  | 2005                |         |   | 2004 |   |         | 2003 | 
|                                             |  |                     |         |   |      |   |         |      | 
|                                             |  | (Thousands)         |        
|Net Sales                                    |  | $                   | 364,379 |   |      | $ | 354,384 |      |  | $ | 337,818 |  
|Gross profit                                 |  |                     | 71,293  |   |      |   | 89,167  |      |  |   | 89,241  |  
|Selling, general and administrative expenses |  |                     | 66,911  |   |      |   | 63,417  |      |  |   | 63,346  |  
|Costs of non-completed transaction           |  |                     |        |   |      |   | 5,261   |      |  |   |        |  
|Operating Income                             |  |                     | 4,382   |   |      |   | 20,489  |      |  |   | 25,895  |  
|Interest expense, net                        |  |                     | 27,627  |   |      |   | 20,594  |      |  |   | 17,370  |  
|Other (income) expense, net                  |  |                     | (1,859  | ) |      |   | (788    | )    |  |   | 1,548   |  
|Net (gain) on extinguishment of debt         |  |                     |        |   |      |   | (23,226 | )    |  |   |        |  
|Provision for income taxes                   |  |                     | 2,122   |   |      |   | 7,804   |      |  |   | 9,830   |  
|Income (loss) from continuing operations     |  | $                   | (23,508 | ) |      | $ | 16,105  |      |  | $ | (2,853  | )

26



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| |                        
| | -----------------------
| | 2005 Compared with 2004

Net Sales


Gross Profit




Selling, General and Administrative Expenses


Costs of Non-completed Transaction.


Net Gain on Extinguishment of Debt.


Operating Income


Interest Expense, Net


27



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Other (Income) Expense, Net


Income Taxes




| |                        
| | -----------------------
| | 2004 Compared with 2003

Net Sales


Gross Profit




Selling, General and Administrative Expenses


Costs of Non-completed Transaction.


Net Gain on Extinguishment of Debt.


Operating Income


28



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Interest Expense, Net


Other (Income) Expense, Net


Income Taxes


Operating Segments






|                 |                                    |                     |         |         |      |   |         |         |   |   |         |         |  
|---------------- | ---------------------------------- | ------------------- | ------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                 |                                    | Year Ended June 30, |        
|                 |                                    |                     |        
|                 |                                    | 2005                |         |         | 2004 |   |         | 2003    |  
|                 |                                    |                     |         |         |      |   |         |         |  
|                 |                                    | (Thousands)         |        
|Net Sales        |                                    |                     |         |         |      |   |         |         |   |   |         |        
|                 | Animal Health & Nutrition          |                     | $       | 278,837 |      |   | $       | 263,417 |   |   | $       | 248,262 |  
|                 | Industrial Chemicals  ex PMC      |                     |         | 52,305  |      |   |         | 46,984  |   |   |         | 34,708  |  
|                 | Industrial Chemicals  PMC         |                     |         |        |      |   |         | 11,118  |   |   |         | 22,332  |  
|                 | Distribution                       |                     |         | 33,237  |      |   |         | 32,865  |   |   |         | 32,516  |  
|                 |                                    |                     |         |         |      |   |         |         |  
|                 |                                    | $                   | 364,379 |         |      | $ | 354,384 |         |   | $ | 337,818 |        
|                 |                                    |                     |         |         |      |   |         |         |  
|Operating Income |                                    |                     |         |         |      |   |         |         |   |   |         |        
|                 | Animal Health & Nutrition          |                     | $       | 10,073  |      |   | $       | 32,605  |   |   | $       | 37,325  |  
|                 | Industrial Chemicals  ex PMC      |                     |         | 4,835   |      |   |         | 2,291   |   |   |         | (5,589  | )
|                 | Industrial Chemicals  PMC         |                     |         |        |      |   |         | 2,278   |   |   |         | 3,579   |  
|                 | Distribution                       |                     |         | 4,671   |      |   |         | 3,602   |   |   |         | 4,354   |  
|                 | Corporate expenses and adjustments |                     |         | (15,197 | )    |   |         | (20,287 | ) |   |         | (13,774 | )
|                 |                                    |                     |         |         |      |   |         |         |  
|                 |                                    | $                   | 4,382   |         |      | $ | 20,489  |         |   | $ | 25,895  |        
|                 |                                    |                     |         |         |      |   |         |         |  

29



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| |                                         
| | ----------------------------------------
| | Operating Segments 2005 Compared to 2004



| |                            
| | ---------------------------
| | Animal Health and Nutrition

Net Sales


Operating Income




| |                          
| | -------------------------
| | Specialty Chemicals Group

Industrial Chemicals


Distribution




| |                                         
| | ----------------------------------------
| | Operating Segments 2004 Compared to 2003



| |                            
| | ---------------------------
| | Animal Health and Nutrition

Net Sales


Operating Income




| |                          
| | -------------------------
| | Specialty Chemicals Group

Industrial Chemicals


30



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Distribution


Discontinued Operations






|                                        |  |                          |   |     |  |            |   |        |  |   |       |  |  |   |       |  |  |   |       | 
|--------------------------------------- |  | ------------------------ | - | --- |  | ---------- | - | ------ |  | - | ----- |  |  | - | ----- |  |  | - | ----- | 
|                                        |  | Year Ended June 30, 2005 |  
|                                        |  |                          |  
|                                        |  | Odda/Carbide             |   | MRT |  | LaCornubia |   | Wychem |  |   | Total | 
|                                        |  |                          |   |     |  |            |   |        |  |   |       | 
|Net Sales                               |  | $                        |  |     |  | $          |  |        |  | $ |      |  |  | $ | 4,431 |  |  | $ | 4,431 | 
|                                        |  |                          |   |     |  |            |   |        |  |   |       |  |  |   |      
|Operating Income                        |  | $                        |  |     |  | $          |  |        |  | $ |      |  |  | $ | 940   |  |  | $ | 940   | 
|Other Expense (Income), net             |  |                          |  |     |  |            |  |        |  |   |      |  |  |   | 6     |  |  |   | 6     | 
|Provision (benefit) for income tax      |  |                          |  |     |  |            |  |        |  |   |      |  |  |   | 263   |  |  |   | 263   | 
|                                        |  |                          |   |     |  |            |   |        |  |   |       |  |  |   |      
|Net Income from discontinued operations |  | $                        |  |     |  | $          |  |        |  | $ |      |  |  | $ | 671   |  |  | $ | 671   | 
|                                        |  |                          |   |     |  |            |   |        |  |   |       |  |  |   |      
|Depreciation and Amortization           |  | $                        |  |     |  | $          |  |        |  | $ |      |  |  | $ | 344   |  |  | $ | 344   | 
|                                        |  |                          |   |     |  |            |   |        |  |   |       |  |  |   |      

|                                               |  |                          |   |     |  |   |            |   |  |        |        |   |       |   |       |  |  |   |        |  
|---------------------------------------------- |  | ------------------------ | - | --- |  | - | ---------- | - |  | ------ | ------ | - | ----- | - | ----- |  |  | - | ------ | -
|                                               |  | Year Ended June 30, 2004 |  
|                                               |  |                          |  
|                                               |  | Odda/Carbide             |   | MRT |  |   | LaCornubia |   |  | Wychem |        |   | Total |  
|                                               |  |                          |   |     |  |   |            |   |  |        |        |   |       |  
|Net Sales                                      |  | $                        |  |     |  | $ | 3,327      |   |  | $      | 13,918 |   |       | $ | 3,890 |  |  | $ | 21,135 |  
|                                               |  |                          |   |     |  |   |            |   |  |        |        |   |       |   |      
|Operating Loss                                 |  | $                        |  |     |  | $ | (124       | ) |  | $      | (1,491 | ) |       | $ | 631   |  |  | $ | (984   | )
|Interest Expense, net                          |  |                          |  |     |  |   |           |   |  |        | 94     |   |       |   |      |  |  |   | 94     |  
|Other Expense (Income), net                    |  |                          |  |     |  |   |           |   |  |        | (102   | ) |       |   | 7     |  |  |   | (95    | )
|Provision (benefit) for income tax             |  |                          |  |     |  |   |           |   |  |        | 18     |   |       |   | 165   |  |  |   | 183    |  
|                                               |  |                          |   |     |  |   |            |   |  |        |        |   |       |   |      
|Net Income (loss) from discontinued operations |  | $                        |  |     |  | $ | (124       | ) |  | $      | (1,501 | ) |       | $ | 459   |  |  | $ | (1,166 | )
|                                               |  |                          |   |     |  |   |            |   |  |        |        |   |       |   |      
|Depreciation and Amortization                  |  | $                        |  |     |  | $ |           |   |  | $      | 400    |   |       | $ | 419   |  |  | $ | 819    |  
|                                               |  |                          |   |     |  |   |            |   |  |        |        |   |       |   |      

31



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|                                               |  |                          |         |   |     |   |        |            |  |   |        |   |  |       |       |   |  |   |         |  
|---------------------------------------------- |  | ------------------------ | ------- | - | --- | - | ------ | ---------- |  | - | ------ | - |  | ----- | ----- | - |  | - | ------- | -
|                                               |  | Year Ended June 30, 2003 |        
|                                               |  |                          |        
|                                               |  | Odda/Carbide             |         |   | MRT |   |        | LaCornubia |  |   | Wychem |   |  | Total |      
|                                               |  |                          |         |   |     |   |        |            |  |   |        |   |  |       |      
|Net Sales                                      |  | $                        | 11,217  |   |     | $ | 18,671 |            |  | $ | 13,479 |   |  | $     | 3,928 |   |  | $ | 47,295  |  
|                                               |  |                          |         |   |     |   |        |            |  |   |        |   |  |       |      
|Operating Loss                                 |  | $                        | (13,462 | ) |     | $ | (3,454 | )          |  | $ | (359   | ) |  | $     | 775   |   |  | $ | (16,500 | )
|Interest Expense, net                          |  |                          |        |   |     |   |       |            |  |   | 60     |   |  |       |      |   |  |   | 60      |  
|Other Expense (Income), net                    |  |                          | (2,327  | ) |     |   |       |            |  |   | (389   | ) |  |       | (9    | ) |  |   | (2,725  | )
|Provision (benefit) for income tax             |  |                          | (58     | ) |     |   |       |            |  |   | 16     |   |  |       | 230   |   |  |   | 188     |  
|                                               |  |                          |         |   |     |   |        |            |  |   |        |   |  |       |      
|Net Income (loss) from discontinued operations |  | $                        | (11,077 | ) |     | $ | (3,454 | )          |  | $ | (46    | ) |  | $     | 554   |   |  | $ | (14,023 | )
|                                               |  |                          |         |   |     |   |        |            |  |   |        |   |  |       |      
|Depreciation and Amortization                  |  | $                        | 894     |   |     | $ | 1,309  |            |  | $ | 359    |   |  | $     | 364   |   |  | $ | 2,926   |  
|                                               |  |                          |         |   |     |   |        |            |  |   |        |   |  |       |      

Mineral Resource Technologies, Inc. (MRT).


La Cornubia.


Liquidity and Capital Resources


Net Cash Provided (Used) by Operating Activities.


Net Cash Provided by Investing Activities.


Net Cash Provided (Used) by Financing Activities.


Working Capital and Capital Expenditures.


32



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Liquidity.












33



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|                                           |                               |                       |      |      |             |   |       |             |  |   |        |     |  |       |     |     |  |   |       |       | 
|------------------------------------------ | ----------------------------- | --------------------- | ---- | ---- | ----------- | - | ----- | ----------- |  | - | ------ | --- |  | ----- | --- | --- |  | - | ----- | ----- | 
|                                           |                               | Years                 |     
|                                           |                               |                       |     
|                                           |                               | Within 1              |      |      | Over 1 to 3 |   |       | Over 3 to 5 |  |   | Over 5 |     |  | Total |    
|                                           |                               |                       |      |      |             |   |       |             |  |   |        |     |  |       |    
|                                           |                               | (Dollars in millions) |     
|Loans payable to banks                     |                               | $                     | 8.0  |      |             | $ |      |             |  | $ |       |     |  | $     |    |     |  | $ | 8.0   |      
|Long-term debt (including current portion) |                               |                       | 1.6  |      |             |   | 207.2 |             |  |   |       |     |  |       |    |     |  |   | 208.8 |      
|Long-term debt (pay-in-kind notes)       |                               |                       |     |      |             |   | 10.8  |             |  |   |       |     |  |       |    |     |  |   | 10.8  |      
|Interest payments                          |                               |                       | 22.1 |      |             |   | 39.8  |             |  |   |       |     |  |       |    |     |  |   | 61.9  |      
|Lease commitments                          |                               |                       | 1.5  |      |             |   | 2.6   |             |  |   | 1.8    |     |  |       | 1.7 |     |  |   | 7.6   |      
|Acquisition of rights                      |                               |                       | 0.5  |      |             |   | 0.7   |             |  |   | 0.2    |     |  |       |    |     |  |   | 1.4   |      
|                                           |                               |                       |      |      |             |   |       |             |  |   |        |     |  |       |    
|                                           | Total contractual obligations |                       | $    | 33.7 |             |   | $     | 261.1       |  |   | $      | 2.0 |  |       | $   | 1.7 |  |   | $     | 298.5 | 
|                                           |                               |                       |      |      |             |   |       |             |  |   |        |     |  |       |    



Supplemental Information (Unaudited)




34



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|                                                          |                                                     |                                                              |        |        |         |   |        |           |        |   |          |        |        |          |        |        |        |   |         |         |         |  
|--------------------------------------------------------- | --------------------------------------------------- | ------------------------------------------------------------ | ------ | ------ | ------- | - | ------ | --------- | ------ | - | -------- | ------ | ------ | -------- | ------ | ------ | ------ | - | ------- | ------- | ------- | -
|                                                          |                                                     | Quarters Ended                                               |        |        | Year    |  
|                                                          |                                                     |                                                              |        |        | Ended   |  
|                                                          |                                                     | Sept 30,                                                     |        |        | Dec 31, |   |        | March 31, |        |   | June 30, |        |        | June 30, |       
|                                                          |                                                     | 2004                                                         |        |        | 2004    |   |        | 2005      |        |   | 2005     |        |        | 2005     |       
|                                                          |                                                     |                                                              |        |        |         |   |        |           |        |   |          |        |        |          |       
|Net sales:                                                |                                                     |                                                              |        |        |         |   |        |           |        |   |          |        |        |          |        |        |        |   |         |        
|                                                          | Animal Health & Nutrition                           |                                                              | $      | 65,342 |         |   | $      | 69,952    |        |   | $        | 68,405 |        |          | $      | 75,138 |        |   | $       | 278,837 |        
|                                                          | Industrial Chemicals                                |                                                              |        | 13,430 |         |   |        | 13,205    |        |   |          | 13,412 |        |          |        | 12,258 |        |   |         | 52,305  |        
|                                                          | Distribution                                        |                                                              |        | 8,125  |         |   |        | 8,860     |        |   |          | 8,438  |        |          |        | 7,814  |        |   |         | 33,237  |        
|                                                          |                                                     |                                                              |        |        |         |   |        |           |        |   |          |        |        |          |       
|                                                          |                                                     | Total net sales                                              |        |        | 86,897  |   |        |           | 92,017 |   |          |        | 90,255 |          |        |        | 95,210 |   |         |         | 364,379 |  
|Cost of goods sold                                        |                                                     |                                                              | 64,727 |        |         |   | 68,915 |           |        |   | 67,132   |        |        |          | 70,121 |        |        |   | 270,895 |        
|Belgium Plant Transactions costs                          |                                                     |                                                              |       |        |         |   | 9,536  |           |        |   | 4,372    |        |        |          | 8,283  |        |        |   | 22,191  |        
|                                                          |                                                     |                                                              |        |        |         |   |        |           |        |   |          |        |        |          |       
|                                                          |                                                     | Gross profit                                                 |        |        | 22,170  |   |        |           | 13,566 |   |          |        | 18,751 |          |        |        | 16,806 |   |         |         | 71,293  |  
|Selling, general and administrative expenses              |                                                     |                                                              | 15,838 |        |         |   | 16,914 |           |        |   | 17,019   |        |        |          | 17,140 |        |        |   | 66,911  |        
|                                                          |                                                     |                                                              |        |        |         |   |        |           |        |   |          |        |        |          |       
|Operating income (loss):                                  |                                                     |                                                              |        |        |         |   |        |           |        |   |          |        |        |          |        |        |        |   |         |        
|                                                          | Animal Health & Nutrition                           |                                                              |        | 7,625  |         |   |        | 7,610     |        |   |          | 7,529  |        |          |        | 9,500  |        |   |         | 32,264  |        
|                                                          | Belgium Plant Transactions costs                    |                                                              |        |       |         |   |        | (9,536    | )      |   |          | (4,372 | )      |          |        | (8,283 | )      |   |         | (22,191 | )      
|                                                          | Industrial Chemicals                                |                                                              |        | 1,191  |         |   |        | 979       |        |   |          | 1,371  |        |          |        | 1,294  |        |   |         | 4,835   |        
|                                                          | Distribution                                        |                                                              |        | 1,054  |         |   |        | 1,202     |        |   |          | 1,158  |        |          |        | 1,257  |        |   |         | 4,671   |        
|                                                          | Corporate Expenses                                  |                                                              |        | (3,575 | )       |   |        | (3,892    | )      |   |          | (3,895 | )      |          |        | (4,120 | )      |   |         | (15,482 | )      
|                                                          | Eliminations                                        |                                                              |        | 37     |         |   |        | 289       |        |   |          | (59    | )      |          |        | 18     |        |   |         | 285     |        
|                                                          |                                                     |                                                              |        |        |         |   |        |           |        |   |          |        |        |          |       
|                                                          |                                                     | Total operating income (loss)                                |        |        | 6,332   |   |        |           | (3,348 | ) |          |        | 1,732  |          |        |        | (334   | ) |         |         | 4,382   |  
|Other:                                                    |                                                     |                                                              |        |        |         |   |        |           |        |   |          |        |        |          |        |        |        |   |         |        
|                                                          | Interest expense                                    |                                                              |        | 5,837  |         |   |        | 6,062     |        |   |          | 7,658  |        |          |        | 8,219  |        |   |         | 27,776  |        
|                                                          | Interest (income)                                   |                                                              |        | (25    | )       |   |        | (33       | )      |   |          | (44    | )      |          |        | (47    | )      |   |         | (149    | )      
|                                                          | Other expense, net                                  |                                                              |        | 24     |         |   |        | (792      | )      |   |          | 77     |        |          |        | (1,168 | )      |   |         | (1,859  | )      
|                                                          |                                                     |                                                              |        |        |         |   |        |           |        |   |          |        |        |          |       
|                                                          |                                                     | Income (loss) from continuing operations before income taxes |        |        | 496     |   |        |           | (8,585 | ) |          |        | (5,959 | )        |        |        | (7,338 | ) |         |         | (21,386 | )
|Provision for income taxes                                |                                                     |                                                              | 844    |        |         |   | (918   | )         |        |   | 773      |        |        |          | 1,423  |        |        |   | 2,122   |        
|                                                          |                                                     |                                                              |        |        |         |   |        |           |        |   |          |        |        |          |       
|                                                          |                                                     | Income/(loss) from continuing operations                     |        |        | (348    | ) |        |           | (7,667 | ) |          |        | (6,732 | )        |        |        | (8,761 | ) |         |         | (23,508 | )
|Discontinued operations:                                  |                                                     |                                                              |        |        |         |   |        |           |        |   |          |        |        |          |        |        |        |   |         |        
|                                                          | Income (loss) from operations (net of income taxes) |                                                              |        | 207    |         |   |        | 96        |        |   |          | 272    |        |          |        | 96     |        |   |         | 671     |        
|                                                          | Gain (loss) on disposal (net of income taxes)       |                                                              |        |       |         |   |        |          |        |   |          |       |        |          |        | 765    |        |   |         | 765     |        
|                                                          |                                                     |                                                              |        |        |         |   |        |           |        |   |          |        |        |          |       
|                                                          |                                                     | Net income/(loss)                                            |        | $      | (141    | ) |        | $         | (7,571 | ) |          | $      | (6,460 | )        |        | $      | (7,900 | ) |         | $       | (22,072 | )
|                                                          |                                                     |                                                              |        |        |         |   |        |           |        |   |          |        |        |          |       
|Depreciation and amortization from continuing operations: |                                                     |                                                              |        |        |         |   |        |           |        |   |          |        |        |          |        |        |        |   |         |        
|                                                          | Animal Health & Nutrition                           |                                                              | $      | 2,195  |         |   | $      | 2,172     |        |   | $        | 2,208  |        |          | $      | 2,201  |        |   | $       | 8,776   |        
|                                                          | Belgium Plant Transactions costs                    |                                                              |        |       |         |   |        | 533       |        |   |          | 3,095  |        |          |        | 3,839  |        |   |         | 7,467   |        
|                                                          | Industrial Chemicals                                |                                                              |        | 403    |         |   |        | 413       |        |   |          | 374    |        |          |        | 407    |        |   |         | 1,597   |        
|                                                          | Distribution                                        |                                                              |        | 2      |         |   |        | 6         |        |   |          | 6      |        |          |        | 6      |        |   |         | 20      |        
|                                                          | Corporate Expenses                                  |                                                              |        | 64     |         |   |        | 52        |        |   |          | 63     |        |          |        | 67     |        |   |         | 246     |        
|                                                          |                                                     |                                                              |        |        |         |   |        |           |        |   |          |        |        |          |       
|                                                          |                                                     | Total depreciation and amortization                          |        | $      | 2,664   |   |        | $         | 3,176  |   |          | $      | 5,746  |          |        | $      | 6,520  |   |         | $       | 18,106  |  
|                                                          |                                                     |                                                              |        |        |         |   |        |           |        |   |          |        |        |          |       

35



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|                                                          |                                                     |                                                              |        |        |            |  |        |           |        |  |          |        |        |          |        |        |        |   |         |         |         | 
|--------------------------------------------------------- | --------------------------------------------------- | ------------------------------------------------------------ | ------ | ------ | ---------- |  | ------ | --------- | ------ |  | -------- | ------ | ------ | -------- | ------ | ------ | ------ | - | ------- | ------- | ------- | 
|                                                          |                                                     | Quarters Ended                                               |        |        |           
|                                                          |                                                     |                                                              |        |        | Year Ended | 
|                                                          |                                                     | Sept 30,                                                     |        |        | Dec 31,    |  |        | March 31, |        |  | June 30, |        |        | June 30, |       
|                                                          |                                                     | 2003                                                         |        |        | 2003       |  |        | 2004      |        |  | 2004     |        |        | 2004     |       
|                                                          |                                                     |                                                              |        |        |            |  |        |           |        |  |          |        |        |          |       
|Net sales:                                                |                                                     |                                                              |        |        |            |  |        |           |        |  |          |        |        |          |        |        |        |   |         |        
|                                                          | Animal Health & Nutrition                           |                                                              | $      | 59,290 |            |  | $      | 68,354    |        |  | $        | 64,240 |        |          | $      | 71,533 |        |   | $       | 263,417 |        
|                                                          | Industrial Chemicals  ex PMC                       |                                                              |        | 10,579 |            |  |        | 9,786     |        |  |          | 13,241 |        |          |        | 13,378 |        |   |         | 46,984  |        
|                                                          | Industrial Chemicals  PMC                          |                                                              |        | 5,683  |            |  |        | 5,435     |        |  |          |       |        |          |        |       |        |   |         | 11,118  |        
|                                                          | Distribution                                        |                                                              |        | 8,490  |            |  |        | 7,989     |        |  |          | 8,495  |        |          |        | 7,891  |        |   |         | 32,865  |        
|                                                          |                                                     |                                                              |        |        |            |  |        |           |        |  |          |        |        |          |       
|                                                          |                                                     | Total net sales                                              |        |        | 84,042     |  |        |           | 91,564 |  |          |        | 85,976 |          |        |        | 92,802 |   |         |         | 354,384 | 
|Cost of goods sold                                        |                                                     |                                                              | 63,016 |        |            |  | 69,401 |           |        |  | 63,246   |        |        |          | 69,554 |        |        |   | 265,217 |        
|                                                          |                                                     |                                                              |        |        |            |  |        |           |        |  |          |        |        |          |       
|                                                          |                                                     | Gross profit                                                 |        |        | 21,026     |  |        |           | 22,163 |  |          |        | 22,730 |          |        |        | 23,248 |   |         |         | 89,167  | 
|Selling, general and administrative expenses              |                                                     |                                                              | 15,324 |        |            |  | 16,150 |           |        |  | 15,406   |        |        |          | 16,537 |        |        |   | 63,417  |        
|Costs of non-completed transaction                        |                                                     |                                                              |       |        |            |  |       |           |        |  |         |        |        |          | 5,261  |        |        |   | 5,261   |        
|                                                          |                                                     |                                                              |        |        |            |  |        |           |        |  |          |        |        |          |       
|Operating income (loss):                                  |                                                     |                                                              |        |        |            |  |        |           |        |  |          |        |        |          |        |        |        |   |         |        
|                                                          | Animal Health & Nutrition                           |                                                              |        | 6,731  |            |  |        | 7,587     |        |  |          | 8,147  |        |          |        | 10,140 |        |   |         | 32,605  |        
|                                                          | Industrial Chemicals  ex PMC                       |                                                              |        | 304    |            |  |        | 145       |        |  |          | 1,390  |        |          |        | 452    |        |   |         | 2,291   |        
|                                                          | Industrial Chemicals  PMC                          |                                                              |        | 1,213  |            |  |        | 1,065     |        |  |          |       |        |          |        |       |        |   |         | 2,278   |        
|                                                          | Distribution                                        |                                                              |        | 1,010  |            |  |        | 760       |        |  |          | 1,012  |        |          |        | 820    |        |   |         | 3,602   |        
|                                                          | Corporate Expenses                                  |                                                              |        | (3,076 | )          |  |        | (3,619    | )      |  |          | (3,518 | )      |          |        | (3,774 | )      |   |         | (13,987 | )      
|                                                          | Eliminations                                        |                                                              |        | 82     |            |  |        | 638       |        |  |          | 293    |        |          |        | (927   | )      |   |         | 86      |        
|                                                          | Palladium management fee                            |                                                              |        | (562   | )          |  |        | (563      | )      |  |          |       |        |          |        |       |        |   |         | (1,125  | )      
|                                                          | Costs of non-completed transaction                  |                                                              |        |       |            |  |        |          |        |  |          |       |        |          |        | (5,261 | )      |   |         | (5,261  | )      
|                                                          |                                                     |                                                              |        |        |            |  |        |           |        |  |          |        |        |          |       
|                                                          |                                                     | Total operating income (loss)                                |        |        | 5,702      |  |        |           | 6,013  |  |          |        | 7,324  |          |        |        | 1,450  |   |         |         | 20,489  | 
|Other:                                                    |                                                     |                                                              |        |        |            |  |        |           |        |  |          |        |        |          |        |        |        |   |         |        
|                                                          | Interest expense                                    |                                                              |        | 4,234  |            |  |        | 5,062     |        |  |          | 5,516  |        |          |        | 5,912  |        |   |         | 20,724  |        
|                                                          | Interest (income)                                   |                                                              |        | (242   | )          |  |        | 168       |        |  |          | (43    | )      |          |        | (13    | )      |   |         | (130    | )      
|                                                          | Other expense, net                                  |                                                              |        | (586   | )          |  |        | 126       |        |  |          | (134   | )      |          |        | (194   | )      |   |         | (788    | )      
|                                                          | Net (gain) on extinguishment of debt                |                                                              |        |       |            |  |        | (23,226   | )      |  |          |       |        |          |        |       |        |   |         | (23,226 | )      
|                                                          |                                                     |                                                              |        |        |            |  |        |           |        |  |          |        |        |          |       
|                                                          |                                                     | Income (loss) from continuing operations before income taxes |        |        | 2,296      |  |        |           | 23,883 |  |          |        | 1,985  |          |        |        | (4,255 | ) |         |         | 23,909  | 
|Provision for income taxes                                |                                                     |                                                              | 800    |        |            |  | 2,819  |           |        |  | 2,126    |        |        |          | 2,059  |        |        |   | 7,804   |        
|                                                          |                                                     |                                                              |        |        |            |  |        |           |        |  |          |        |        |          |       
|                                                          |                                                     | Income/(loss) from continuing operations                     |        |        | 1,496      |  |        |           | 21,064 |  |          |        | (141   | )        |        |        | (6,314 | ) |         |         | 16,105  | 
|Discontinued operations:                                  |                                                     |                                                              |        |        |            |  |        |           |        |  |          |        |        |          |        |        |        |   |         |        
|                                                          | Income (loss) from operations (net of income taxes) |                                                              |        | (472   | )          |  |        | 222       |        |  |          | (254   | )      |          |        | (662   | )      |   |         | (1,166  | )      
|                                                          | Gain (loss) on disposal (net of income taxes)       |                                                              |        | 231    |            |  |        |          |        |  |          |       |        |          |        | (2,320 | )      |   |         | (2,089  | )      
|                                                          |                                                     |                                                              |        |        |            |  |        |           |        |  |          |        |        |          |       
|                                                          |                                                     | Net income/(loss)                                            |        | $      | 1,255      |  |        | $         | 21,286 |  |          | $      | (395   | )        |        | $      | (9,296 | ) |         | $       | 12,850  | 
|                                                          |                                                     |                                                              |        |        |            |  |        |           |        |  |          |        |        |          |       
|Depreciation and amortization from continuing operations: |                                                     |                                                              |        |        |            |  |        |           |        |  |          |        |        |          |        |        |        |   |         |        
|                                                          | Animal Health & Nutrition                           |                                                              | $      | 2,029  |            |  | $      | 2,059     |        |  | $        | 2,086  |        |          | $      | 2,089  |        |   | $       | 8,263   |        
|                                                          | Industrial Chemicals  ex PMC                       |                                                              |        | 406    |            |  |        | 395       |        |  |          | 403    |        |          |        | 432    |        |   |         | 1,636   |        
|                                                          | Industrial Chemicals  PMC                          |                                                              |        | 243    |            |  |        | 244       |        |  |          |       |        |          |        |       |        |   |         | 487     |        
|                                                          | Distribution                                        |                                                              |        | 3      |            |  |        | 4         |        |  |          | 3      |        |          |        | 1      |        |   |         | 11      |        
|                                                          | Corporate Expenses                                  |                                                              |        | 71     |            |  |        | 63        |        |  |          | 62     |        |          |        | 65     |        |   |         | 261     |        
|                                                          |                                                     |                                                              |        |        |            |  |        |           |        |  |          |        |        |          |       
|                                                          |                                                     | Total depreciation and amortization                          |        | $      | 2,752      |  |        | $         | 2,765  |  |          | $      | 2,554  |          |        | $      | 2,587  |   |         | $       | 10,658  | 
|                                                          |                                                     |                                                              |        |        |            |  |        |           |        |  |          |        |        |          |       

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|                                                          |                                                     |                                                              |        |        |            |   |        |           |        |   |          |        |        |          |        |        |        |   |         |         |         |  
|--------------------------------------------------------- | --------------------------------------------------- | ------------------------------------------------------------ | ------ | ------ | ---------- | - | ------ | --------- | ------ | - | -------- | ------ | ------ | -------- | ------ | ------ | ------ | - | ------- | ------- | ------- | -
|                                                          |                                                     | Quarters Ended                                               |        |        |           
|                                                          |                                                     |                                                              |        |        | Year Ended |  
|                                                          |                                                     | Sept 30,                                                     |        |        | Dec 31,    |   |        | March 31, |        |   | June 30, |        |        | June 30, |       
|                                                          |                                                     | 2002                                                         |        |        | 2002       |   |        | 2003      |        |   | 2003     |        |        | 2003     |       
|                                                          |                                                     |                                                              |        |        |            |   |        |           |        |   |          |        |        |          |       
|Net sales:                                                |                                                     |                                                              |        |        |            |   |        |           |        |   |          |        |        |          |        |        |        |   |         |        
|                                                          | Animal Health & Nutrition                           |                                                              | $      | 59,277 |            |   | $      | 65,943    |        |   | $        | 62,373 |        |          | $      | 60,669 |        |   | $       | 248,262 |        
|                                                          | Industrial Chemicals  ex PMC                       |                                                              |        | 9,056  |            |   |        | 7,210     |        |   |          | 9,015  |        |          |        | 9,427  |        |   |         | 34,708  |        
|                                                          | Industrial Chemicals  PMC                          |                                                              |        | 5,756  |            |   |        | 5,285     |        |   |          | 5,743  |        |          |        | 5,548  |        |   |         | 22,332  |        
|                                                          | Distribution                                        |                                                              |        | 8,795  |            |   |        | 7,904     |        |   |          | 7,914  |        |          |        | 7,903  |        |   |         | 32,516  |        
|                                                          |                                                     |                                                              |        |        |            |   |        |           |        |   |          |        |        |          |       
|                                                          |                                                     | Total net sales                                              |        |        | 82,884     |   |        |           | 86,342 |   |          |        | 85,045 |          |        |        | 83,547 |   |         |         | 337,818 |  
|Cost of goods sold                                        |                                                     |                                                              | 60,977 |        |            |   | 62,756 |           |        |   | 62,527   |        |        |          | 62,317 |        |        |   | 248,577 |        
|                                                          |                                                     |                                                              |        |        |            |   |        |           |        |   |          |        |        |          |       
|                                                          |                                                     | Gross profit                                                 |        |        | 21,907     |   |        |           | 23,586 |   |          |        | 22,518 |          |        |        | 21,230 |   |         |         | 89,241  |  
|Selling, general and administrative expenses              |                                                     |                                                              | 15,134 |        |            |   | 15,461 |           |        |   | 17,046   |        |        |          | 15,705 |        |        |   | 63,346  |        
|                                                          |                                                     |                                                              |        |        |            |   |        |           |        |   |          |        |        |          |       
|Operating income (loss):                                  |                                                     |                                                              |        |        |            |   |        |           |        |   |          |        |        |          |        |        |        |   |         |        
|                                                          | Animal Health & Nutrition                           |                                                              |        | 9,024  |            |   |        | 11,165    |        |   |          | 8,851  |        |          |        | 8,285  |        |   |         | 37,325  |        
|                                                          | Industrial Chemicals  ex PMC                       |                                                              |        | (1,022 | )          |   |        | (1,767    | )      |   |          | (1,498 | )      |          |        | (1,302 | )      |   |         | (5,589  | )      
|                                                          | Industrial Chemicals  PMC                          |                                                              |        | 1,127  |            |   |        | 901       |        |   |          | 839    |        |          |        | 712    |        |   |         | 3,579   |        
|                                                          | Distribution                                        |                                                              |        | 1,146  |            |   |        | 1,230     |        |   |          | 951    |        |          |        | 1,027  |        |   |         | 4,354   |        
|                                                          | Corporate Expenses                                  |                                                              |        | (2,773 | )          |   |        | (3,146    | )      |   |          | (3,023 | )      |          |        | (2,604 | )      |   |         | (11,546 | )      
|                                                          | Eliminations                                        |                                                              |        | (167   | )          |   |        | 305       |        |   |          | (86    | )      |          |        | (30    | )      |   |         | 22      |        
|                                                          | Palladium management fee                            |                                                              |        | (562   | )          |   |        | (563      | )      |   |          | (562   | )      |          |        | (563   | )      |   |         | (2,250  | )      
|                                                          |                                                     |                                                              |        |        |            |   |        |           |        |   |          |        |        |          |       
|                                                          |                                                     | Total operating income (loss)                                |        |        | 6,773      |   |        |           | 8,125  |   |          |        | 5,472  |          |        |        | 5,525  |   |         |         | 25,895  |  
|Other:                                                    |                                                     |                                                              |        |        |            |   |        |           |        |   |          |        |        |          |        |        |        |   |         |        
|                                                          | Interest expense                                    |                                                              |        | 4,767  |            |   |        | 3,935     |        |   |          | 4,259  |        |          |        | 4,494  |        |   |         | 17,455  |        
|                                                          | Interest (income)                                   |                                                              |        | (126   | )          |   |        | 31        |        |   |          | (39    | )      |          |        | 49     |        |   |         | (85     | )      
|                                                          | Other expense, net                                  |                                                              |        | 1,155  |            |   |        | 235       |        |   |          | 208    |        |          |        | (50    | )      |   |         | 1,548   |        
|                                                          |                                                     |                                                              |        |        |            |   |        |           |        |   |          |        |        |          |       
|                                                          |                                                     | Income (loss) from continuing operations before income taxes |        |        | 977        |   |        |           | 3,924  |   |          |        | 1,044  |          |        |        | 1,032  |   |         |         | 6,977   |  
|Provision for income taxes                                |                                                     |                                                              | 416    |        |            |   | 1,348  |           |        |   | 520      |        |        |          | 7,546  |        |        |   | 9,830   |        
|                                                          |                                                     |                                                              |        |        |            |   |        |           |        |   |          |        |        |          |       
|                                                          |                                                     | Income/(loss) from continuing operations                     |        |        | 561        |   |        |           | 2,576  |   |          |        | 524    |          |        |        | (6,514 | ) |         |         | (2,853  | )
|Discontinued operations:                                  |                                                     |                                                              |        |        |            |   |        |           |        |   |          |        |        |          |        |        |        |   |         |        
|                                                          | Income (loss) from operations (net of income taxes) |                                                              |        | (718   | )          |   |        | (10,411   | )      |   |          | (1,454 | )      |          |        | (1,440 | )      |   |         | (14,023 | )      
|                                                          | Income (loss) on disposal (net of income taxes)     |                                                              |        |       |            |   |        |          |        |   |          | (1,342 | )      |          |        | 659    |        |   |         | (683    | )      
|                                                          |                                                     |                                                              |        |        |            |   |        |           |        |   |          |        |        |          |       
|                                                          |                                                     | Net income/(loss)                                            |        | $      | (157       | ) |        | $         | (7,835 | ) |          | $      | (2,272 | )        |        | $      | (7,295 | ) |         | $       | (17,559 | )
|                                                          |                                                     |                                                              |        |        |            |   |        |           |        |   |          |        |        |          |       
|Depreciation and amortization from continuing operations: |                                                     |                                                              |        |        |            |   |        |           |        |   |          |        |        |          |        |        |        |   |         |        
|                                                          | Animal Health & Nutrition                           |                                                              | $      | 1,892  |            |   | $      | 1,920     |        |   | $        | 1,890  |        |          | $      | 1,988  |        |   | $       | 7,690   |        
|                                                          | Industrial Chemicals  ex PMC                       |                                                              |        | 587    |            |   |        | 699       |        |   |          | 498    |        |          |        | 164    |        |   |         | 1,948   |        
|                                                          | Industrial Chemicals  PMC                          |                                                              |        | 232    |            |   |        | 239       |        |   |          | 240    |        |          |        | 245    |        |   |         | 956     |        
|                                                          | Distribution                                        |                                                              |        | 3      |            |   |        | 3         |        |   |          | 2      |        |          |        | 4      |        |   |         | 12      |        
|                                                          | Corporate Expenses                                  |                                                              |        | 77     |            |   |        | 101       |        |   |          | 104    |        |          |        | 98     |        |   |         | 380     |        
|                                                          |                                                     |                                                              |        |        |            |   |        |           |        |   |          |        |        |          |       
|                                                          |                                                     | Total depreciation and amortization                          |        | $      | 2,791      |   |        | $         | 2,962  |   |          | $      | 2,734  |          |        | $      | 2,499  |   |         | $       | 10,986  |  
|                                                          |                                                     |                                                              |        |        |            |   |        |           |        |   |          |        |        |          |       

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##### Table of Contents



Critical Accounting Policies






New Accounting Pronouncements




Off-Balance Sheet Arrangements




Effect of Inflation




Quantitative and Qualitative Disclosure About Market Risk






| |                   
| | ------------------
| | Interest Rate Risk





38



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##### Table of Contents









| |                                                       
| | ------------------------------------------------------
| | Foreign Currency Exchange Rates  Translation
    Risk









| |                                                      
| | -----------------------------------------------------
| | Foreign Currency Exchange Rate  Transaction
    Risk







| |                     
| | --------------------
| | Commodity Price Risk



39



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##### Table of Contents





Certain Factors Affecting Future Operating Results




| |                           
| | --------------------------
| | Forward-Looking Statements







| |   |                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our substantial leverage and potential inability to service our
    debt                                                                                                                      
|
| |  | our dependence on distributions from our subsidiaries                                                                                                                                         
|
| |  | risks associated with our international operations and
    significant foreign assets                                                                                                         
|
| |  | our dependence on our Israeli operations                                                                                                                                                      
|
| |  | competition in each of our markets                                                                                                                                                            
|
| |  | potential environmental liability                                                                                                                                                             
|
| |  | potential legislation affecting the use of medicated feed
    additives                                                                                                                       
|
| |  | extensive regulation by numerous government authorities in the
    United States and other countries                                                                                          
|
| |  | our reliance on the continued operation and sufficiency of our
    manufacturing facilities, including the transition of
    virginiamycin production from our Belgium to our Brazil facility.
|
| |  | our reliance upon unpatented trade secrets                                                                                                                                                    
|
| |  | the risks of legal proceedings and general litigation expenses                                                                                                                                
|
| |  | potential operating hazards and uninsured risks                                                                                                                                               
|
| |  | the risk of work stoppages                                                                                                                                                                    
|
| |  | our dependence on key personnel                                                                                                                                                               



40



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##### Table of Contents












|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market
    Risk








|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures












|         |                  
|-------- | -----------------
|Item 9B. | Other Information



41



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##### Table of Contents






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant



|                   |  |     |    |  |          |                                                                                                                                     
|------------------ |  | --- | -- |  | -------- | ------------------------------------------------------------------------------------------------------------------------------------
|Name               |  | Age |    |  | Position
|                   |  |     |    |  |         
|Jack C. Bendheim   |  |     | 58 |  |          | Chairman of the Board of Directors and President of the Company
    and PAHC                                                        
|Gerald K. Carlson  |  |     | 62 |  |          | Chief Executive Officer of the Company and PAHC                                                                                     
|Marvin S. Sussman  |  |     | 58 |  |          | Vice Chairman of the Board of Directors of the Company and PAHC
    and President, Prince Agri                                      
|James O. Herlands  |  |     | 63 |  |          | Director and Executive Vice President of the Company and PAHC                                                                       
|Richard G. Johnson |  |     | 56 |  |          | Chief Financial Officer of the Company and PAHC                                                                                     
|Daniel M. Bendheim |  |     | 33 |  |          | President, Specialty Chemicals Group of PAHC(1)                                                                                     
|Steven L. Cohen    |  |     | 61 |  |          | Vice President, General Counsel and Assistant Secretary of the
    Company and Vice President, General Counsel and Secretary of PAHC
|Keith R. Collins   |  |     | 50 |  |          | President, Animal Health Division of PAHC(2)                                                                                        
|Daniel A. Welch    |  |     | 55 |  |          | Senior Vice President, Human Resources of PAHC                                                                                      
|Sam Gejdenson      |  |     | 57 |  |          | Director of PAHC, Noteholder Representative                                                                                         
|Mary Lou Malanoski |  |     | 48 |  |          | Director of PAHC                                                                                                                    






|    |                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | William A. Mathison, the former President, Specialty Chemicals
    Group of PAHC, retired in August 2004.                                              
|   
|(2) | David G. McBeath, the former President, Animal Health Group of
    PAHC, returned, as planned, to his private consulting business
    in December 2004.



Jack C. Bendheim


Gerald K. Carlson


42



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Marvin S. Sussman


James O. Herlands


Richard G. Johnson


Daniel M. Bendheim


Steven L. Cohen


Keith R. Collins


Daniel A. Welch


Sam Gejdenson


Mary Lou Malanoski


43



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##### Table of Contents





Board Composition




Compensation of Directors




Code of Ethics




Committees of the Board of Directors










44



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##### Table of Contents








|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation



|                            |                                  |      |      |                     |        |              |           |           |           |   |              |         |  |                 |        |         |     |   |        |        |    
|--------------------------- | -------------------------------- | ---- | ---- | ------------------- | ------ | ------------ | --------- | --------- | --------- | - | ------------ | ------- |  | --------------- | ------ | ------- | --- | - | ------ | ------ | ---
|                            |                                  |      |      | Annual Compensation |        |              |          
|                            |                                  |      |      |                     |        |              |          
|                            |                                  |      |      |                     |        | Other Annual |           |           | All Other |  
|Name and Principal Position |                                  | Year |      |                     | Salary |              |           | Bonus(7)  |           |   | Compensation |         |  | Compensation(1) |       
|                            |                                  |      |      |                     |        |              |           |           |           |   |              |         |  |                 |       
|Jack C. Bendheim            |                                  |      | 2005 |                     |        | $            | 1,650,000 |           |           | $ | 300,000      |         |  | $               |       |         |     | $ | 2,100  |       
|                            | Chairman of the Board; President |      |      | 2004                |        |              |           | 1,650,000 |           |   |              |        |  |                 |        |        |     |   |        | 2,050  |    
|                            |                                  |      |      | 2003                |        |              |           | 1,650,000 |           |   |              |        |  |                 |        | 150,000 | (2) |   |        | 6,500  |    
|Gerald K. Carlson(3)        |                                  |      | 2005 |                     |        |              | 500,000   |           |           |   | 544,000      |         |  |                 | 24,000 |         |     |   | 2,642  |       
|                            | Chief Executive Officer          |      |      | 2004                |        |              |           | 500,000   |           |   |              | 500,000 |  |                 |        | 24,000  |     |   |        | 1,458  |    
|                            |                                  |      |      | 2003                |        |              |           | 500,000   |           |   |              | 575,000 |  |                 |        | 24,000  |     |   |        |       |    
|Marvin S. Sussman(4)        |                                  |      | 2005 |                     |        |              | 1,000,000 |           |           |   | 152,000      |         |  |                 |       |         |     |   | 24,000 | (6)   
|                            | Vice Chairman of the Board;      |      |      | 2004                |        |              |           | 1,000,000 |           |   |              | 151,600 |  |                 |        |        |     |   |        | 24,581 | (6)
|                            | President of Prince Agri         |      |      | 2003                |        |              |           | 1,000,000 |           |   |              | 101,372 |  |                 |        |        |     |   |        | 24,500 | (6)
|James O. Herlands           |                                  |      | 2005 |                     |        |              | 400,000   |           |           |   | 139,000      |         |  |                 |       |         |     |   | 4,375  |       
|                            | Executive Vice President         |      |      | 2004                |        |              |           | 400,000   |           |   |              | 55,000  |  |                 |        |        |     |   |        | 6,581  |    
|                            |                                  |      | 2003 |                     |        |              | 400,000   |           |           |   | 95,519       |         |  |                 |       |         |     |   | 6,500  |       
|Richard G. Johnson(5)       |                                  |      | 2005 |                     |        |              | 297,917   |           |           |   | 114,000      |         |  |                 |       |         |     |   | 7,407  |       
|                            | Chief Financial Officer          |      |      | 2004                |        |              |           | 268,750   |           |   |              | 194,800 |  |                 |        | 13,500  |     |   |        | 6,703  |    
|                            |                                  |      | 2003 |                     |        |              | 192,308   |           |           |   | 100,000      |         |  |                 | 39,000 |         |     |   |       |       






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents contributions by us under our 401(k) Retirement and
    Savings Plan. See Compensation Pursuant to Plans.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(2) | In fiscal 2003, Mr. Bendheim was paid $150,000 for
    temporary deferral of fiscal 2002 compensation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(3) | In fiscal 2005, 2004 and 2003, Mr. Carlson received $24,000
    housing assistance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(4) | Pursuant to a Stockholders Agreement between us and
    Mr. Sussman, we are required to purchase, at book value,
    all shares of our Class B Common Stock owned by
    Mr. Sussman in the event of his retirement, death,
    disability or the termination of his employment by us. Should
    Mr. Sussman elect to sell his shares, we have a right of
    first offer and an option to purchase the shares. See
    Certain Relationships and Related Transactions. As a
    result, each year, we are required to record as compensation
    expense (income) in our results of operations the change in our
    book value attributable to Mr. Sussmans shares. For
    2005, 2004 and 2003, the expense (income) attributable to
    Mr. Sussmans shares was $0. No distributions have
    been made to Mr. Sussman under this agreement.
|   
|(5) | Salary is since date of employment for 2003. In fiscal 2004 and
    2003, Mr. Johnson received $13,500 and $39,000,
    respectively, for relocation and housing assistance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(6) | Of such amount, $18,000 represents the cost of the term portion
    of a life insurance policy purchased by the Company in the face
    amount of $10 million on the life of Mr. Sussman, with
    a required premium of $252,000 per year. The policy
    commenced in April 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(7) | Bonuses include annual awards under the Companys
    management incentive plan and are reported in the year in which
    the bonus was earned. Prior year information has been revised
    for consistency of presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         



Employment and Severance Agreements




45



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Compensation Pursuant to Plans


401(k) Plan. 1 2




Retirement Plan.


46



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|                     |  |                  |        |  |    |   |        |    |  |   |        |  |  |    |        |  |  |   |        | 
|-------------------- |  | ---------------- | ------ |  | -- | - | ------ | -- |  | - | ------ |  |  | -- | ------ |  |  | - | ------ | 
|                     |  | Years of Service |       
|                     |  |                  |       
|Average Compensation |  | 15               |        |  | 20 |   |        | 25 |  |   | 30     |  |  | 35 |       
|                     |  |                  |        |  |    |   |        |    |  |   |        |  |  |    |       
|$25,000              |  | $                | 3,750  |  |    | $ | 5,000  |    |  | $ | 6,250  |  |  | $  | 7,500  |  |  | $ | 8,750  | 
|$50,000              |  | $                | 7,500  |  |    | $ | 10,000 |    |  | $ | 12,500 |  |  | $  | 15,000 |  |  | $ | 17,500 | 
|$75,000              |  | $                | 11,280 |  |    | $ | 15,000 |    |  | $ | 18,750 |  |  | $  | 22,500 |  |  | $ | 26,250 | 
|$100,000             |  | $                | 16,910 |  |    | $ | 21,850 |    |  | $ | 26,800 |  |  | $  | 31,830 |  |  | $ | 37,120 | 
|$150,000             |  | $                | 28,160 |  |    | $ | 36,850 |    |  | $ | 45,550 |  |  | $  | 54,330 |  |  | $ | 63,370 | 
|$200,000             |  | $                | 39,410 |  |    | $ | 51,850 |    |  | $ | 64,300 |  |  | $  | 76,830 |  |  | $ | 89,620 | 





Deferred Compensation Plan.




|                  |  |                |        |  |                |   |           |              |  |   |         | 
|----------------- |  | -------------- | ------ |  | -------------- | - | --------- | ------------ |  | - | ------- | 
|                  |  | Annual         |        |  |                |   | Deferred  |             
|                  |  | Retirement     |        |  | Survivors     |   |           | Compensation | 
|                  |  | Income Benefit |        |  | Income Benefit |   |           | Benefit      | 
|                  |  |                |        |  |                |   |           |              | 
|Jack C. Bendheim  |  | $              | 39,786 |  |                | $ | 1,500,000 |              |  | $ | 416,265 | 
|Marvin S. Sussman |  | $              | 39,786 |  |                | $ | 1,000,000 |              |  | $ | 147,481 | 
|James O. Herlands |  | $              | 39,086 |  |                | $ | 400,000   |              |  | $ | 402,673 | 



47



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Executive Income Program.




1993 Split Dollar Agreement.


Meetings of Directors




Report of the Compensation Committee




Compensation Committee Interlocks and Insider
Participation




48



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|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters



|                                      |                           |                         |        |  |               |  |      |    |  |  |           |  |  |  |      |       | 
|------------------------------------- | ------------------------- | ----------------------- | ------ |  | ------------- |  | ---- | -- |  |  | --------- |  |  |  | ---- | ----- | 
|                                      |                           | Number of Common Shares |       
|                                      |                           | (Percentage of Class)   |       
|                                      |                           |                         |       
|                                      |                           | Class A                 |        |  | Class B       | 
|Name                                  |                           | Voting(1)               |        |  | Non-Voting(2) | 
|                                      |                           |                         |        |  |               | 
|Jack Bendheim(3)                      |                           |                         | 12,600 |  |               |  | (100 | %) |  |  | 10,699.65 |  |  |  | (90  | %)(4)
|                                      | 65 Challenger Road        |                         |        |  |               |  |      |    |  |  |           |  |  |  |      |       | 
|                                      | Ridgefield Park, NJ 07660 |                         |        |  |               |  |      |    |  |  |           |  |  |  |      |       | 
|Marvin S. Sussman                     |                           |                         |       |  |               |  |      |    |  |  | 1,188.85  |  |  |  | (10  | %)   
|                                      | 65 Challenger Road        |                         |        |  |               |  |      |    |  |  |           |  |  |  |      |       | 
|                                      | Ridgefield Park, NJ 07660 |                         |        |  |               |  |      |    |  |  |           |  |  |  |      |       | 
|All other officers and directors      |                           |                         |       |  |               |  |      |    |  |  |          |  |  |  |      |      
|All officers and directors as a group |                           |                         | 12,600 |  |               |  | (100 | %) |  |  | 11,888.50 |  |  |  | (100 | %)   






|    |                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The entire voting power is exercised by the holder of
    Class A Common Stock, except that the holder of
    Class A Common Stock currently is entitled to elect all but
    one of the directors. The holders of Class B Common Stock
    are entitled to elect one director but do not vote on any other
    matters.
|   
|(2) | Class B Common shareholders will receive the entire equity
    upon our liquidation, after payment of preferences to holders of
    all classes of preferred stock and Class A Common Stock.                                                                                                                            
|   
|(3) | Jack Bendheim also owns 5,207 (100%) shares of Series A
    Preferred Stock.                                                                                                                                                                                                                                            
|   
|(4) | Includes 6,404.53 shares owned by trusts for the benefit of
    Jack Bendheims children and their spouses and his
    grandchildren.                                                                                                                                                                                   






|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions







49



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50



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51



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|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accounting Fees and Services



|              |                          |           |           |         |         |   |           |         |         | 
|------------- | ------------------------ | --------- | --------- | ------- | ------- | - | --------- | ------- | ------- | 
|              |                          | 2005      |           |         | 2004    |  
|              |                          |           |           |         |         |  
|Audit         |                          | $         | 938,000   |         |         | $ | 1,066,000 |        
|Audit Related |                          |           | 1,314,000 |         |         |   | 1,891,000 |        
|Tax           |                          |           |           |         |         |   |           |        
|              | Tax Planning             |           |           | 175,000 |         |   |           | 180,000 |        
|              | Tax Compliance and Other |           |           | 68,000  |         |   |           |         |        
|              |                          |           |           |         |         |  
|              |                          | Total Tax |           |         | 243,000 |   |           |         | 180,000 | 
|All Other     |                          |           |          |         |         |   |          |        
|              |                          |           |           |         |         |  
|Total         |                          | $         | 2,495,000 |         |         | $ | 3,137,000 |        
|              |                          |           |           |         |         |  





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PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules





| |     |                     
| | --- | --------------------
| | (1) | Financial Statements





| |     |                              
| | --- | -----------------------------
| | (2) | Financial Statement Schedules





| |             
| | ------------
| | (3) Exhibits

|            |    |                        |  |  |  |                                                                                                                                                                                                                                                                                                                                          
|----------- | -- | ---------------------- |  |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    | Description of Exhibit
|            |    |                       
|            | 3  | .1                     |  |  |  | Certificate of Incorporation of the Registrant.(1)                                                                                                                                                                                                                                                                                       
|            | 3  | .2                     |  |  |  | By-laws of the Registrant.(1)                                                                                                                                                                                                                                                                                                            
|            | 4  | .1                     |  |  |  | Indenture, dated as of February 10, 2005, between the
    Registrant, as Issuer, and HSBC Bank USA, National Association,
    as Trustee and as Collateral Agent, relating to the
    15% Senior Secured Notes due 2010 of Registrant, and
    exhibits thereto, including Form of 15% Senior Secured Note
    due 2010 of Registrant.(1)
|            | 4  | .1.1                   |  |  |  | First Supplemental Indenture, dated as of May 17, 2005,
    between the Registrant and HSBC Bank USA, National Association,
    as Trustee.                                                                                                                                                                                              
|            | 10 | .1(a)                  |  |  |  | Stockholders Agreement, dated December 29, 1987, by and
    between Phibro Animal Health Corporation (formerly Philipp
    Brothers Chemicals, Inc.) (PAHC), Charles H.
    Bendheim, Jack C. Bendheim and Marvin S. Sussman.(1)                                                                                                       
|            | 10 | .1(b)                  |  |  |  | Subscription and Exchange Agreement, dated as of
    February 10, 2005, by and between PAHC, the Registrant,
    Jack C. Bendheim and Marvin S. Sussman, amending the
    Stockholders Agreement dated December 29, 1987.(1)                                                                                                             
|            | 10 | .2                     |  |  |  | Security Agreement, dated as of February 10, 2005, executed
    and delivered by the Registrant in favor of HSBC Bank USA,
    National Association as Collateral Agent for the Trustee and
    Holders.(1)                                                                                                                              
|            | 10 | .3                     |  |  |  | Pledge Agreement, dated as of February 10, 2005, by and
    between the Registrant and HSBC Bank USA, National Association
    as Collateral Agent for the Trustee and Noteholders.(1)                                                                                                                                                   
|            | 10 | .4                     |  |  |  | Agreement for the Sale and Purchase of the Entire Share Capital
    in Wychem Limited dated as of April 29, 2005 among Ferro
    Metal and Chemical Corporation Limited, Koffolk (1949) Limited
    and MRG Holdings Limited.(2)                                                                                                         
|            | 21 |                        |  |  |  | List of Subsidiaries.                                                                                                                                                                                                                                                                                                                    
|            | 31 | .1                     |  |  |  | Certification of Gerald K. Carlson, Chief Executive Officer
    required by Rule 15d-14(a) of the Act.                                                                                                                                                                                                                                   
|            | 31 | .2                     |  |  |  | Certification of Jack C. Bendheim, Chairman of the Board
    required by Rule 15d-14(a) of the Act.                                                                                                                                                                                                                                      
|            | 31 | .3                     |  |  |  | Certification of Richard G. Johnson, Chief Financial Officer
    required by Rule 15d-14(a) of the Act.                                                                                                                                                                                                                                  
|            | 32 |                        |  |  |  | Section 1350 Certifications of Registrant.                                                                                                                                                                                                                                                                                               






|    |                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------
|(1) | Filed as an Exhibit to the Registrants Registration
    Statement on Form S-4, No. 333-123614.                
|   
|(2) | Filed as an Exhibit to the Registrants Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2005.

53



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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


|                                                                          |                                                  |      |     |     | 
|------------------------------------------------------------------------- | ------------------------------------------------ | ---- | --- | --- | 
|                                                                          |                                                  | Page |    
|                                                                          |                                                  |      |    
|Report of Independent Registered Public Accounting Firm                   |                                                  |      | F-2 |    
|Consolidated Balance Sheets                                               |                                                  |      |     |    
|                                                                          | as of June 30, 2005 and 2004                     |      |     | F-3 | 
|Consolidated Statements of Operations and Comprehensive Income
    (Loss) |                                                  |      |     |    
|                                                                          | for the years ended June 30, 2005, 2004 and 2003 |      |     | F-4 | 
|Consolidated Statements of Changes in Stockholders Deficit               |                                                  |      |     |    
|                                                                          | for the years ended June 30, 2005, 2004 and 2003 |      |     | F-5 | 
|Consolidated Statements of Cash Flows                                     |                                                  |      |     |    
|                                                                          | for the years ended June 30, 2005, 2004 and 2003 |      |     | F-6 | 
|Notes to Consolidated Financial Statements                                |                                                  |      | F-7 |    

Financial Statements of Certain PAHC Holdings Corporation
Affiliates




|                                                                              |                                                  |  |      |      | 
|----------------------------------------------------------------------------- | ------------------------------------------------ |  | ---- | ---- | 
|Report of Independent Registered Public Accounting Firm                       |                                                  |  | F-49 |     
|Balance Sheets as of June 30, 2005 and 2004                                   |                                                  |  | F-50 |     
|Statements of Operations and Comprehensive Income (Loss)                      |                                                  |  |      |     
|                                                                              | for the years ended June 30, 2005, 2004 and 2003 |  |      | F-51 | 
|Statements of Changes in Stockholders Deficit                                |                                                  |  |      |     
|                                                                              | for the years ended June 30, 2005, 2004 and 2003 |  |      | F-52 | 
|Statements of Cash Flows for the years ended June 30, 2005,
    2004 and 2003 |                                                  |  | F-53 |     
|Notes to Financial Statements                                                 |                                                  |  | F-54 |     

F-1



---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








| |                               
| | ------------------------------
| | /s/ PricewaterhouseCoopers LLP
| |                               
| | PricewaterhouseCoopers LLP    





F-2



---



##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


|                                          |                                                                                                                                                                                                                                                             |                                                                             |                             |         |       |         |         |         |        |         |  
|----------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | --------------------------- | ------- | ----- | ------- | ------- | ------- | ------ | ------- | -
|                                          |                                                                                                                                                                                                                                                             | As of June 30,                                                              |                            
|                                          |                                                                                                                                                                                                                                                             |                                                                             |                            
|                                          |                                                                                                                                                                                                                                                             | 2005                                                                        |                             |         | 2004  |        
|                                          |                                                                                                                                                                                                                                                             |                                                                             |                             |         |       |        
|                                          |                                                                                                                                                                                                                                                             | (In thousands)                                                              |                            
|ASSETS                                   
|CURRENT ASSETS:                           |                                                                                                                                                                                                                                                             |                                                                             |                             |         |       |         |         |        
|                                          | Cash and cash equivalents                                                                                                                                                                                                                                   |                                                                             | $                           | 13,597  |       |         | $       | 5,568   |       
|                                          | Trade receivables, less allowance for doubtful accounts of
    $1,372 and $1,358 at June 30, 2005 and 2004, respectively                                                                                                                                    |                                                                             |                             | 52,806  |       |         |         | 57,217  |       
|                                          | Other receivables                                                                                                                                                                                                                                           |                                                                             |                             | 3,611   |       |         |         | 2,766   |       
|                                          | Inventories                                                                                                                                                                                                                                                 |                                                                             |                             | 96,621  |       |         |         | 78,562  |       
|                                          | Prepaid expenses and other current assets                                                                                                                                                                                                                   |                                                                             |                             | 12,787  |       |         |         | 8,591   |       
|                                          | Current assets from discontinued operations                                                                                                                                                                                                                 |                                                                             |                             |        |       |         |         | 1,886   |       
|                                          |                                                                                                                                                                                                                                                             |                                                                             |                             |         |       |        
|                                          |                                                                                                                                                                                                                                                             |                                                                             | TOTAL CURRENT ASSETS        |         |       | 179,422 |         |         |        | 154,590 |  
|PROPERTY, PLANT AND EQUIPMENT, net        |                                                                                                                                                                                                                                                             |                                                                             | 49,960                      |         |       |         | 55,381  |        
|INTANGIBLES, net                          |                                                                                                                                                                                                                                                             |                                                                             | 10,201                      |         |       |         | 11,695  |        
|OTHER ASSETS                              |                                                                                                                                                                                                                                                             |                                                                             | 15,903                      |         |       |         | 16,298  |        
|OTHER ASSETS FROM DISCONTINUED OPERATIONS |                                                                                                                                                                                                                                                             |                                                                             |                            |         |       |         | 3,405   |        
|                                          |                                                                                                                                                                                                                                                             |                                                                             |                             |         |       |        
|                                          |                                                                                                                                                                                                                                                             | $                                                                           | 255,486                     |         |       | $       | 241,369 |        
|                                          |                                                                                                                                                                                                                                                             |                                                                             |                             |         |       |        
|                                         
|LIABILITIES AND STOCKHOLDERS DEFICIT    
|CURRENT LIABILITIES:                      |                                                                                                                                                                                                                                                             |                                                                             |                             |         |       |         |         |        
|                                          | Cash overdraft                                                                                                                                                                                                                                              |                                                                             | $                           | 190     |       |         | $       | 891     |       
|                                          | Loans payable to banks                                                                                                                                                                                                                                      |                                                                             |                             | 8,038   |       |         |         | 10,996  |       
|                                          | Current portion of long-term debt                                                                                                                                                                                                                           |                                                                             |                             | 1,625   |       |         |         | 1,351   |       
|                                          | Accounts payable                                                                                                                                                                                                                                            |                                                                             |                             | 36,416  |       |         |         | 46,764  |       
|                                          | Accrued expenses and other current liabilities                                                                                                                                                                                                              |                                                                             |                             | 54,291  |       |         |         | 39,380  |       
|                                          | Current liabilities from discontinued operations                                                                                                                                                                                                            |                                                                             |                             |        |       |         |         | 838     |       
|                                          |                                                                                                                                                                                                                                                             |                                                                             |                             |         |       |        
|                                          |                                                                                                                                                                                                                                                             |                                                                             | TOTAL CURRENT LIABILITIES   |         |       | 100,560 |         |         |        | 100,220 |  
|LONG-TERM DEBT                            |                                                                                                                                                                                                                                                             |                                                                             | 207,192                     |         |       |         | 158,018 |        
|OTHER LIABILITIES                         |                                                                                                                                                                                                                                                             |                                                                             | 21,465                      |         |       |         | 22,286  |        
|                                          |                                                                                                                                                                                                                                                             |                                                                             |                             |         |       |        
|                                          |                                                                                                                                                                                                                                                             |                                                                             | TOTAL LIABILITIES           |         |       | 329,217 |         |         |        | 280,524 |  
|                                          |                                                                                                                                                                                                                                                             |                                                                             |                             |         |       |        
|COMMITMENTS AND CONTINGENCIES             |                                                                                                                                                                                                                                                             |                                                                             |                             |         |       |         |         |        
|REDEEMABLE SECURITIES:                    |                                                                                                                                                                                                                                                             |                                                                             |                             |         |       |         |         |        
|                                          | Series C preferred stock                                                                                                                                                                                                                                    |                                                                             |                             |        |       |         |         | 24,678  |       
|                                          |                                                                                                                                                                                                                                                             |                                                                             |                             |         |       |        
|STOCKHOLDERS DEFICIT:                    |                                                                                                                                                                                                                                                             |                                                                             |                             |         |       |         |         |        
|                                          | Preferred stock  $100 par value,
    150,543 shares authorized, none issued at June 30,
    2005 and 2004; Series A preferred stock 
    $100 par value, 6% non-cumulative, 5,207 shares
    authorized, issued and outstanding at June 30, 2005 and 2004 |                                                                             |                             | 521     |       |         |         | 521     |       
|                                          | Common stock  $0.10 par value, 30,300 authorized
    and 24,488 shares issued and outstanding at June 30,
    2005 and 2004                                                                                                                                |                                                                             |                             | 2       |       |         |         | 2       |       
|                                          | Paid-in capital                                                                                                                                                                                                                                             |                                                                             |                             | 860     |       |         |         | 860     |       
|                                          | Accumulated deficit                                                                                                                                                                                                                                         |                                                                             |                             | (76,786 | )     |         |         | (57,964 | )     
|                                          | Accumulated other comprehensive income (loss):                                                                                                                                                                                                              |                                                                             |                             |         |       |         |         |         |       
|                                          |                                                                                                                                                                                                                                                             | Gain on derivative instruments, net of income taxes                         |                             |         | 123   |         |         |         | 9      |        
|                                          |                                                                                                                                                                                                                                                             | Cumulative foreign currency translation adjustment, net of
    income taxes |                             |         | 1,549 |         |         |         | (7,261 | )      
|                                          |                                                                                                                                                                                                                                                             |                                                                             |                             |         |       |        
|                                          |                                                                                                                                                                                                                                                             |                                                                             | TOTAL STOCKHOLDERS DEFICIT |         |       | (73,731 | )       |         |        | (63,833 | )
|                                          |                                                                                                                                                                                                                                                             |                                                                             |                             |         |       |        
|                                          |                                                                                                                                                                                                                                                             | $                                                                           | 255,486                     |         |       | $       | 241,369 |        
|                                          |                                                                                                                                                                                                                                                             |                                                                             |                             |         |       |        



F-3



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME (LOSS)


|                                                                                                                                                       |                                                                              |                              |         |         |      |   |         |         |   |   |         |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------- | ---------------------------- | ------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                                                                                                       |                                                                              | For the Years Ended June 30, |        
|                                                                                                                                                       |                                                                              |                              |        
|                                                                                                                                                       |                                                                              | 2005                         |         |         | 2004 |   |         | 2003    |  
|                                                                                                                                                       |                                                                              |                              |         |         |      |   |         |         |  
|                                                                                                                                                       |                                                                              | (In thousands)               |        
|NET SALES                                                                                                                                              |                                                                              | $                            | 364,379 |         |      | $ | 354,384 |         |   | $ | 337,818 |        
|COST OF GOODS SOLD (includes Belgium Plant Transactions costs of
    $22,191 for the year ended June 30, 2005)                                         |                                                                              |                              | 293,086 |         |      |   | 265,217 |         |   |   | 248,577 |        
|                                                                                                                                                       |                                                                              |                              |         |         |      |   |         |         |  
|                                                                                                                                                       | GROSS PROFIT                                                                 |                              |         | 71,293  |      |   |         | 89,167  |   |   |         | 89,241  |  
|SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (includes
    litigation income of $3,040 for the year ended June 30,
    2003)                           |                                                                              |                              | 66,911  |         |      |   | 63,417  |         |   |   | 63,346  |        
|COSTS OF NON-COMPLETED TRANSACTION                                                                                                                     |                                                                              |                              |        |         |      |   | 5,261   |         |   |   |        |        
|                                                                                                                                                       |                                                                              |                              |         |         |      |   |         |         |  
|                                                                                                                                                       | OPERATING INCOME                                                             |                              |         | 4,382   |      |   |         | 20,489  |   |   |         | 25,895  |  
|OTHER:                                                                                                                                                 |                                                                              |                              |         |         |      |   |         |         |   |   |         |        
|                                                                                                                                                       | Interest expense                                                             |                              |         | 27,776  |      |   |         | 20,724  |   |   |         | 17,455  |  
|                                                                                                                                                       | Interest (income)                                                            |                              |         | (149    | )    |   |         | (130    | ) |   |         | (85     | )
|                                                                                                                                                       | Other (income) expense, net                                                  |                              |         | (1,859  | )    |   |         | (788    | ) |   |         | 1,548   |  
|                                                                                                                                                       | Net (gain) on extinguishment of debt                                         |                              |         |        |      |   |         | (23,226 | ) |   |         |        |  
|                                                                                                                                                       |                                                                              |                              |         |         |      |   |         |         |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES                                                                                           |                                                                              |                              | (21,386 | )       |      |   | 23,909  |         |   |   | 6,977   |        
|PROVISION FOR INCOME TAXES                                                                                                                             |                                                                              |                              | 2,122   |         |      |   | 7,804   |         |   |   | 9,830   |        
|                                                                                                                                                       |                                                                              |                              |         |         |      |   |         |         |  
|                                                                                                                                                       | INCOME (LOSS) FROM CONTINUING OPERATIONS                                     |                              |         | (23,508 | )    |   |         | 16,105  |   |   |         | (2,853  | )
|DISCONTINUED OPERATIONS:                                                                                                                               |                                                                              |                              |         |         |      |   |         |         |   |   |         |        
|                                                                                                                                                       | Income (loss) from discontinued operations, net of income taxes              |                              |         | 671     |      |   |         | (1,166  | ) |   |         | (14,023 | )
|                                                                                                                                                       | Income (loss)on disposal of discontinued operations, net of
    income taxes |                              |         | 765     |      |   |         | (2,089  | ) |   |         | (683    | )
|                                                                                                                                                       |                                                                              |                              |         |         |      |   |         |         |  
|                                                                                                                                                       | NET INCOME(LOSS)                                                             |                              |         | (22,072 | )    |   |         | 12,850  |   |   |         | (17,559 | )
|OTHER COMPREHENSIVE INCOME (LOSS):                                                                                                                     |                                                                              |                              |         |         |      |   |         |         |   |   |         |        
|                                                                                                                                                       | Change in derivative instruments, net of income taxes                        |                              |         | 114     |      |   |         | (72     | ) |   |         | (981    | )
|                                                                                                                                                       | Change in currency translation adjustment, net of income taxes               |                              |         | 8,810   |      |   |         | (776    | ) |   |         | 7,377   |  
|                                                                                                                                                       |                                                                              |                              |         |         |      |   |         |         |  
|                                                                                                                                                       | COMPREHENSIVE INCOME (LOSS)                                                  |                              | $       | (13,148 | )    |   | $       | 12,002  |   |   | $       | (11,163 | )
|                                                                                                                                                       |                                                                              |                              |         |         |      |   |         |         |  
|                                                                                                                                                       | NET INCOME(LOSS)                                                             |                              |         | (22,072 | )    |   |         | 12,850  |   |   |         | (17,559 | )
|Excess of the reduction of redeemable preferred stock over total
    assets divested and costs and liabilities incurred on the Prince
    Transactions |                                                                              |                              | 4,973   |         |      |   | 20,138  |         |   |   |        |        
|Dividends and equity value accreted on Series B and C
    redeemable preferred stock                                                                   |                                                                              |                              | (1,723  | )       |      |   | (11,463 | )       |   |   | (12,278 | )      
|                                                                                                                                                       |                                                                              |                              |         |         |      |   |         |         |  
|                                                                                                                                                       | NET INCOME AVAILABLE (LOSS ATTRIBUTABLE) TO COMMON SHAREHOLDERS              |                              | $       | (18,822 | )    |   | $       | 21,525  |   |   | $       | (29,837 | )
|                                                                                                                                                       |                                                                              |                              |         |         |      |   |         |         |  



F-4



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
DEFICIT


For the Years Ended June 30, 2005, 2004 and 2003


|                       |                                                                                                                                                        |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         |         |   |   |         |       |   |   |         |         |  
|---------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------- | --- |  | ------------ | - | - | ------- |  | - | ------------ | ----------------- |  | ------------- | --- | --- | ------------- | - | ------- | ------- | - | - | ------- | ----- | - | - | ------- | ------- | -
|                       |                                                                                                                                                        | Preferred      |     |  | Common Stock |   |   |         |  |   |              | Accumulated Other |  |               |    
|                       |                                                                                                                                                        | Stock          |     |  |              |   |   | Paid-in |  |   | (Accumulated |                   |  | Comprehensive |     |     |              
|                       |                                                                                                                                                        | Series A       |     |  | Class A      |   |   | Class B |  |   | Capital      |                   |  | Deficit)      |     |     | (Loss) income |   |         | Total   |  
|                       |                                                                                                                                                        |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         |         |  
|                       |                                                                                                                                                        | (In thousands) |    
|BALANCE, JUNE 30, 2002 |                                                                                                                                                        | $              | 521 |  |              | $ | 1 |         |  | $ | 1            |                   |  | $             | 740 |     |               | $ | (49,652 | )       |   | $ | (12,800 | )     |   | $ | (61,189 | )      
|                       | Dividends on Series B and C redeemable preferred stock                                                                                                 |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         | (8,808  | ) |   |         |       |   |   |         | (8,808  | )
|                       | Equity value accreted
    on Series B and C redeemable
    preferred stock                                                                             |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         | (3,470  | ) |   |         |       |   |   |         | (3,470  | )
|                       | Change in derivative instruments, net of income taxes                                                                                                  |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         |         |   |   |         | (981  | ) |   |         | (981    | )
|                       | Foreign currency translation adjustment, net of income taxes                                                                                           |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         |         |   |   |         | 7,377 |   |   |         | 7,377   |  
|                       | Payable to principal shareholder                                                                                                                       |                |     |  |              |   |   |         |  |   |              |                   |  |               |     | 120 |               |   |         |         |   |   |         |       |   |   |         | 120     |  
|                       | Net (loss)                                                                                                                                             |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         | (17,559 | ) |   |         |       |   |   |         | (17,559 | )
|                       |                                                                                                                                                        |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         |         |  
|BALANCE, JUNE 30, 2003 |                                                                                                                                                        | $              | 521 |  |              | $ | 1 |         |  | $ | 1            |                   |  | $             | 860 |     |               | $ | (79,489 | )       |   | $ | (6,404  | )     |   | $ | (84,510 | )      
|                       |                                                                                                                                                        |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         |         |  
|                       | Excess of the reduction in redeemable preferred stock over total
    assets divested and costs and liabilities incurred on the Prince
    Transactions |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         | 20,138  |   |   |         |       |   |   |         | 20,138  |  
|                       | Dividends on Series B and C redeemable preferred stock                                                                                                 |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         | (6,042  | ) |   |         |       |   |   |         | (6,042  | )
|                       | Equity value accreted on
    Series B and C redeemable
    preferred stock                                                                             |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         | (5,421  | ) |   |         |       |   |   |         | (5,421  | )
|                       | Change in derivative instruments, net of income taxes                                                                                                  |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         |         |   |   |         | (72   | ) |   |         | (72     | )
|                       | Foreign currency translation adjustment, net of income taxes                                                                                           |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         |         |   |   |         | (776  | ) |   |         | (776    | )
|                       | Net income                                                                                                                                             |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         | 12,850  |   |   |         |       |   |   |         | 12,850  |  
|                       |                                                                                                                                                        |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         |         |  
|BALANCE, JUNE 30, 2004 |                                                                                                                                                        | $              | 521 |  |              | $ | 1 |         |  | $ | 1            |                   |  | $             | 860 |     |               | $ | (57,964 | )       |   | $ | (7,252  | )     |   | $ | (63,833 | )      
|                       |                                                                                                                                                        |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         |         |  
|                       | Excess of the reduction in redeemable preferred stock over total
    assets divested and costs and liabilities incurred on the Prince
    Transactions |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         | 4,973   |   |   |         |       |   |   |         | 4,973   |  
|                       | Dividends on Series C redeemable preferred stock                                                                                                       |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         | (1,813  | ) |   |         |       |   |   |         | (1,813  | )
|                       | Equity value accreted on Series C redeemable preferred stock                                                                                           |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         | 90      |   |   |         |       |   |   |         | 90      |  
|                       | Change in derivative instruments, net of income taxes                                                                                                  |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         |         |   |   |         | 114   |   |   |         | 114     |  
|                       | Foreign currency translation adjustment,net of income taxes                                                                                            |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         |         |   |   |         | 8,810 |   |   |         | 8,810   |  
|                       | Net (loss)                                                                                                                                             |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         | (22,072 | ) |   |         |       |   |   |         | (22,072 | )
|                       |                                                                                                                                                        |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         |         |  
|BALANCE, JUNE 30, 2005 |                                                                                                                                                        | $              | 521 |  |              | $ | 1 |         |  | $ | 1            |                   |  | $             | 860 |     |               | $ | (76,786 | )       |   | $ | 1,672   |       |   | $ | (73,731 | )      
|                       |                                                                                                                                                        |                |     |  |              |   |   |         |  |   |              |                   |  |               |     |     |               |   |         |         |  



F-5



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                 |                                                                                                                                |                                                                                                                                                          |                                                      |         |        |         |        |         |         |         |        |         |        |         |  
|------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ------- | ------ | ------- | ------ | ------- | ------- | ------- | ------ | ------- | ------ | ------- | -
|                                                 |                                                                                                                                | For the Years Ended June 30,                                                                                                                             |                                                     
|                                                 |                                                                                                                                |                                                                                                                                                          |                                                     
|                                                 |                                                                                                                                | 2005                                                                                                                                                     |                                                      |         | 2004   |         |        | 2003    |        
|                                                 |                                                                                                                                |                                                                                                                                                          |                                                      |         |        |         |        |         |        
|                                                 |                                                                                                                                | (In thousands)                                                                                                                                           |                                                     
|OPERATING ACTIVITIES:                            |                                                                                                                                |                                                                                                                                                          |                                                      |         |        |         |        |         |         |         |        |        
|                                                 | Net income (loss)                                                                                                              |                                                                                                                                                          | $                                                    | (22,072 | )      |         | $      | 12,850  |         |         | $      | (17,559 | )     
|                                                 | Adjustment for discontinued operations                                                                                         |                                                                                                                                                          |                                                      | (1,436  | )      |         |        | 3,255   |         |         |        | 14,706  |       
|                                                 |                                                                                                                                |                                                                                                                                                          |                                                      |         |        |         |        |         |        
|                                                 | Income (loss) from continuing operations                                                                                       |                                                                                                                                                          |                                                      | (23,508 | )      |         |        | 16,105  |         |         |        | (2,853  | )     
|                                                 | Adjustments to reconcile income (loss) from continuing
    operations to net cash provided (used) by operating
    activities: |                                                                                                                                                          |                                                      |         |        |         |        |         |         |         |        |         |       
|                                                 |                                                                                                                                | Depreciation and amortization (includes accelerated depreciation
    from the Belgium Plant transactions of $7,467 for the year ended
    June 30, 2005) |                                                      |         | 18,106 |         |        |         | 10,658  |         |        |         | 10,986 |        
|                                                 |                                                                                                                                | Amortization of deferred financing costs                                                                                                                 |                                                      |         | 3,290  |         |        |         | 2,106   |         |        |         | 1,174  |        
|                                                 |                                                                                                                                | Deferred income taxes                                                                                                                                    |                                                      |         | (1,018 | )       |        |         | 326     |         |        |         | 6,460  |        
|                                                 |                                                                                                                                | Net gain from sales of assets                                                                                                                            |                                                      |         | (1,542 | )       |        |         | (692    | )       |        |         | (127   | )      
|                                                 |                                                                                                                                | Net gain on extinguishment of debt                                                                                                                       |                                                      |         |       |         |        |         | (23,226 | )       |        |         |       |        
|                                                 |                                                                                                                                | Effects of changes in foreign currency                                                                                                                   |                                                      |         | (699   | )       |        |         | (548    | )       |        |         | 390    |        
|                                                 |                                                                                                                                | Other                                                                                                                                                    |                                                      |         | 852    |         |        |         | 1,114   |         |        |         | 387    |        
|                                                 |                                                                                                                                | Changes in operating assets and liabilities:                                                                                                             |                                                      |         |        |         |        |         |         |         |        |         |        |        
|                                                 |                                                                                                                                |                                                                                                                                                          | Accounts receivable                                  |         |        | 4,399   |        |         |         | (7,458  | )      |         |        | 3,907   |  
|                                                 |                                                                                                                                |                                                                                                                                                          | Inventories                                          |         |        | (14,251 | )      |         |         | 3,776   |        |         |        | (1,527  | )
|                                                 |                                                                                                                                |                                                                                                                                                          | Prepaid expenses and other current assets            |         |        | (2,780  | )      |         |         | (260    | )      |         |        | (3,107  | )
|                                                 |                                                                                                                                |                                                                                                                                                          | Other assets                                         |         |        | 117     |        |         |         | (3,079  | )      |         |        | (2,632  | )
|                                                 |                                                                                                                                |                                                                                                                                                          | Accounts payable                                     |         |        | (8,785  | )      |         |         | (5,730  | )      |         |        | 20,479  |  
|                                                 |                                                                                                                                |                                                                                                                                                          | Accrued expenses and other liabilities               |         |        | 9,296   |        |         |         | 7,129   |        |         |        | (1,010  | )
|                                                 |                                                                                                                                |                                                                                                                                                          | Accrued costs of non-completed transaction           |         |        | (3,970  | )      |         |         | 3,970   |        |         |        |        |  
|                                                 |                                                                                                                                |                                                                                                                                                          | Accrued costs of the Belgium Plant Transactions      |         |        | 13,309  |        |         |         |        |        |         |        |        |  
|                                                 | Cash provided (used) by discontinued operations                                                                                |                                                                                                                                                          |                                                      | 1,022   |        |         |        | (1,329  | )       |         |        | 2,130   |       
|                                                 |                                                                                                                                |                                                                                                                                                          |                                                      |         |        |         |        |         |        
|                                                 |                                                                                                                                |                                                                                                                                                          | NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES     |         |        | (6,162  | )      |         |         | 2,862   |        |         |        | 34,657  |  
|                                                 |                                                                                                                                |                                                                                                                                                          |                                                      |         |        |         |        |         |        
|INVESTING ACTIVITIES:                            |                                                                                                                                |                                                                                                                                                          |                                                      |         |        |         |        |         |         |         |        |        
|                                                 | Capital expenditures                                                                                                           |                                                                                                                                                          |                                                      | (7,489  | )      |         |        | (6,129  | )       |         |        | (8,507  | )     
|                                                 | Proceeds from sales of assets                                                                                                  |                                                                                                                                                          |                                                      | 3,817   |        |         |        | 1,087   |         |         |        | 2,564   |       
|                                                 | Other investing                                                                                                                |                                                                                                                                                          |                                                      | (1,101  | )      |         |        | (655    | )       |         |        | 737     |       
|                                                 | Discontinued operations                                                                                                        |                                                                                                                                                          |                                                      | 4,795   |        |         |        | 14,767  |         |         |        | 1,235   |       
|                                                 |                                                                                                                                |                                                                                                                                                          |                                                      |         |        |         |        |         |        
|                                                 |                                                                                                                                |                                                                                                                                                          | NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES     |         |        | 22      |        |         |         | 9,070   |        |         |        | (3,971  | )
|                                                 |                                                                                                                                |                                                                                                                                                          |                                                      |         |        |         |        |         |        
|FINANCING ACTIVITIES:                            |                                                                                                                                |                                                                                                                                                          |                                                      |         |        |         |        |         |         |         |        |        
|                                                 | Net (decrease) in cash overdraft                                                                                               |                                                                                                                                                          |                                                      | (701    | )      |         |        | (795    | )       |         |        | (6,081  | )     
|                                                 | Net (decrease) in short-term debt                                                                                              |                                                                                                                                                          |                                                      | (2,958  | )      |         |        | (26,954 | )       |         |        | (6,660  | )     
|                                                 | Proceeds from long-term debt                                                                                                   |                                                                                                                                                          |                                                      | 53,292  |        |         |        | 109,661 |         |         |        | 2,000   |       
|                                                 | Payments of long-term debt                                                                                                     |                                                                                                                                                          |                                                      | (4,667  | )      |         |        | (35,453 | )       |         |        | (16,014 | )     
|                                                 | Redemption of Series C preferred stock                                                                                         |                                                                                                                                                          |                                                      | (26,400 | )      |         |        |        |         |         |        |        |       
|                                                 | Payment of Pfizer obligations                                                                                                  |                                                                                                                                                          |                                                      |        |        |         |        | (28,300 | )       |         |        |        |       
|                                                 | Payments relating to the Prince Transactions and related costs                                                                 |                                                                                                                                                          |                                                      |        |        |         |        | (21,393 | )       |         |        |        |       
|                                                 | Debt financing costs                                                                                                           |                                                                                                                                                          |                                                      | (4,317  | )      |         |        | (15,548 | )       |         |        |        |       
|                                                 | Discontinued operations                                                                                                        |                                                                                                                                                          |                                                      |        |        |         |        | 1,005   |         |         |        | 377     |       
|                                                 |                                                                                                                                |                                                                                                                                                          |                                                      |         |        |         |        |         |        
|                                                 |                                                                                                                                |                                                                                                                                                          | NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES     |         |        | 14,249  |        |         |         | (17,777 | )      |         |        | (26,378 | )
|                                                 |                                                                                                                                |                                                                                                                                                          |                                                      |         |        |         |        |         |        
|EFFECT OF EXCHANGE RATE CHANGES ON CASH          |                                                                                                                                |                                                                                                                                                          | (80                                                  | )       |        |         | 234    |         |         |         | 452    |        
|                                                 |                                                                                                                                |                                                                                                                                                          |                                                      |         |        |         |        |         |        
|                                                 |                                                                                                                                |                                                                                                                                                          | NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |         |        | 8,029   |        |         |         | (5,611  | )      |         |        | 4,760   |  
|CASH AND CASH EQUIVALENTS at beginning of period |                                                                                                                                |                                                                                                                                                          | 5,568                                                |         |        |         | 11,179 |         |         |         | 6,419  |        
|                                                 |                                                                                                                                |                                                                                                                                                          |                                                      |         |        |         |        |         |        
|CASH AND CASH EQUIVALENTS at end of period       |                                                                                                                                | $                                                                                                                                                        | 13,597                                               |         |        | $       | 5,568  |         |         | $       | 11,179 |        
|                                                 |                                                                                                                                |                                                                                                                                                          |                                                      |         |        |         |        |         |        
|Supplemental Cash Flow Information:              |                                                                                                                                |                                                                                                                                                          |                                                      |         |        |         |        |         |         |         |        |        
|                                                 | Interest paid                                                                                                                  |                                                                                                                                                          | $                                                    | 21,381  |        |         | $      | 17,578  |         |         | $      | 16,104  |       
|                                                 | Income taxes paid                                                                                                              |                                                                                                                                                          |                                                      | 1,653   |        |         |        | 4,531   |         |         |        | 2,674   |       



F-6



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(In thousands)




|   |                        
|-- | -----------------------
|1. | Description of Business









|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies



| |                                                           
| | ----------------------------------------------------------
| | Principles of Consolidation and Basis of
    Presentation:











| |                                    
| | -----------------------------------
| | Risks, Uncertainties and Liquidity:



F-7



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)
















| |                  
| | -----------------
| | Use of Estimates:





| |                     
| | --------------------
| | Revenue Recognition:



F-8



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |                           
| | --------------------------
| | Cash and Cash Equivalents:





| |                                                             
| | ------------------------------------------------------------
| | Accounts Receivable and Allowance for Doubtful
    Accounts:



|                     |  |                |        |  |      |   |        | 
|-------------------- |  | -------------- | ------ |  | ---- | - | ------ | 
|                     |  | As of June 30, |       
|                     |  |                |       
|                     |  | 2005           |        |  | 2004 |  
|                     |  |                |        |  |      |  
|Trade receivables    |  | $              | 52,806 |  |      | $ | 57,217 | 
|Employee receivables |  |                | 474    |  |      |   | 256    | 
|Other receivables    |  |                | 3,137  |  |      |   | 2,510  | 
|                     |  |                |        |  |      |  
|Total receivables    |  | $              | 56,417 |  |      | $ | 59,983 | 
|                     |  |                |        |  |      |  



|                               |  |                              |       |   |      |   |       |      |  |   |       |  
|------------------------------ |  | ---------------------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                               |  | For the Years Ended June 30, |      
|                               |  |                              |      
|                               |  | 2005                         |       |   | 2004 |   |       | 2003 | 
|                               |  |                              |       |   |      |   |       |      | 
|Balance at beginning of period |  | $                            | 1,358 |   |      | $ | 1,437 |      |  | $ | 1,461 |  
|Provision for bad debts        |  |                              | 258   |   |      |   | 565   |      |  |   | 347   |  
|Bad debt write-offs            |  |                              | (244  | ) |      |   | (644  | )    |  |   | (371  | )
|                               |  |                              |       |   |      |   |       |      | 
|Balance at end of period       |  | $                            | 1,372 |   |      | $ | 1,358 |      |  | $ | 1,437 |  
|                               |  |                              |       |   |      |   |       |      | 



| |             
| | ------------
| | Inventories:



|                |  |                |        |  |      |   |        | 
|--------------- |  | -------------- | ------ |  | ---- | - | ------ | 
|                |  | As of June 30, |       
|                |  |                |       
|                |  | 2005           |        |  | 2004 |  
|                |  |                |        |  |      |  
|Raw materials   |  | $              | 23,703 |  |      | $ | 16,038 | 
|Work-in-process |  |                | 434    |  |      |   | 1,468  | 
|Finished goods  |  |                | 72,484 |  |      |   | 61,056 | 
|                |  |                |        |  |      |  
|Total inventory |  | $              | 96,621 |  |      | $ | 78,562 | 
|                |  |                |        |  |      |  



| |                               
| | ------------------------------
| | Property, Plant and Equipment:



F-9



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)








| |                          
| | -------------------------
| | Deferred Financing Costs:







| |             
| | ------------
| | Intangibles:





| |                              
| | -----------------------------
| | Foreign Currency Translation:









| |                                  
| | ---------------------------------
| | Derivative Financial Instruments:



F-10



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |                                     
| | ------------------------------------
| | Recoverability of Long-Lived Assets:





| |                           
| | --------------------------
| | Environmental Liabilities:





| |              
| | -------------
| | Income Taxes:





| |                                       
| | --------------------------------------
| | Research and Development Expenditures:





| |                               
| | ------------------------------
| | New Accounting Pronouncements:





F-11



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)










F-12



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






|   |                          
|-- | -------------------------
|3. | Financing and Refinancing



| |                                      
| | -------------------------------------
| | Issuance of 15% Senior Secured Notes:







| |                                                     
| | ----------------------------------------------------
| | Issuance of Additional 13% Senior Secured
    Notes:



F-13



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |                                                  
| | -------------------------------------------------
| | Amendment to the Domestic Senior Credit Facility:





| |                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Issuance of 13% Senior Secured Notes, Repurchase of
    97/8% Senior
    Subordinated Notes, Repayment of Domestic Senior Credit
    Facility, and Payment of Pfizer Obligations

7 8


F-14



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                                            |                                         |   |        |         |  
|--------------------------------------------------------------------------- | --------------------------------------- | - | ------ | ------- | -
|Net Gain on Repurchase of
    97/8% Senior
    Subordinated Notes due 2008: |                                         |   |        |        
|                                                                            | Principal amount of repurchased notes   |   | $      | 51,971  |  
|                                                                            | Repurchased at 60% of principal amount  |   |        | (31,183 | )
|                                                                            | Transaction costs                       |   |        | (4,107  | )
|                                                                            |                                         |   |       
|Net gain on repurchase of notes                                             |                                         |   | 16,681 |        
|                                                                            |                                         |   |       
|Loss on repayment of senior credit facility                                 |                                         |   | (1,018 | )      
|                                                                            |                                         |   |       
|Net Gain on Payment of Pfizer Obligations:                                  |                                         |   |        |        
|                                                                            | Obligations paid:                       |   |        |         |  
|                                                                            |  promissory note                       |   |        | 20,075  |  
|                                                                            |  accrued interest on promissory note   |   |        | 1,015   |  
|                                                                            |  accounts payable and accrued expenses |   |        | 18,788  |  
|                                                                            |                                         |   |       
|                                                                            | Total obligations paid                  |   |        | 39,878  |  
|                                                                            | Cash payment to Pfizer                  |   |        | (29,315 | )
|                                                                            | Transaction costs                       |   |        | (3,000  | )
|                                                                            |                                         |   |       
|Net gain on payment of Pfizer obligations                                   |                                         |   | 7,563  |        
|                                                                            |                                         |   |       
|Net gain on extinguishment of debt                                          |                                         | $ | 23,226 |        
|                                                                            |                                         |   |       



|   |                           
|-- | --------------------------
|4. | Belgium Plant Transactions





F-15



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




















|   |                         
|-- | ------------------------
|5. | Series C Preferred Stock



F-16



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)










|   |                    
|-- | -------------------
|6. | Prince Transactions





|                                                                |  |   |        | 
|--------------------------------------------------------------- |  | - | ------ | 
|Series B & C Redeemable Preferred Stock:                        |  |   |        | 
|Accreted value pre-transaction                                  |  | $ | 72,184 | 
|Accreted value post-transaction                                 |  |   | 16,517 | 
|                                                                |  |   |       
|Reduction in redeemable preferred stock                         |  |   | 55,667 | 
|                                                                |  |   |       
|Assets Divested and Costs Incurred:                             |  |   |        | 
|PMC net assets divested                                         |  |   | 7,430  | 
|Cash paid to Palladium Investors for:                           |  |   |        | 
|reduction of redeemable preferred stock                        |  |   | 10,000 | 
|settlement of PMC intercompany debt                            |  |   | 3,958  | 
|working capital adjustment                                     |  |   | 1,331  | 
|closing fee                                                    |  |   | 500    | 
|Transaction costs                                               |  |   | 8,310  | 
|Contingent Backstop Indemnification Amount accrued              |  |   | 4,000  | 
|                                                                |  |   |       
|Total assets divested and costs and liabilities incurred        |  |   | 35,529 | 
|                                                                |  |   |       
|Excess amount recorded as a decrease to accumulated
    deficit |  | $ | 20,138 | 
|                                                                |  |   |       

F-17



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)








|                              |  |                              |   |      |  |   |        |  |  |   |        | 
|----------------------------- |  | ---------------------------- | - | ---- |  | - | ------ |  |  | - | ------ | 
|                              |  | For the Years Ended June 30, |  
|                              |  |                              |  
|                              |  | 2005                         |   | 2004 |  |   | 2003   | 
|                              |  |                              |   |      |  |   |        | 
|Net sales                     |  | $                            |  |      |  | $ | 11,118 |  |  | $ | 22,332 | 
|Operating income              |  |                              |  |      |  |   | 2,278  |  |  |   | 3,579  | 
|Depreciation and amortization |  |                              |  |      |  |   | 487    |  |  |   | 956    | 



|   |                        
|-- | -----------------------
|7. | Discontinued Operations



| |        
| | -------
| | Wychem:



F-18



---



##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                 |  |                              |        |   |      |   |       |      |  |   |       |  
|------------------------------------------------ |  | ---------------------------- | ------ | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                                 |  | For the Years Ended June 30, |       
|                                                 |  |                              |       
|                                                 |  | 2005                         |        |   | 2004 |   |       | 2003 | 
|OPERATING RESULTS:                               |  |                              |        |   |      |   |       |      | 
|Net sales                                        |  | $                            | 4,431  |   |      | $ | 3,890 |      |  | $ | 3,928 |  
|Cost of goods sold                               |  |                              | 2,921  |   |      |   | 2,654 |      |  |   | 2,623 |  
|Selling, general and administrative expenses     |  |                              | 570    |   |      |   | 605   |      |  |   | 530   |  
|Other (income) expense                           |  |                              | 6      |   |      |   | 7     |      |  |   | (9    | )
|                                                 |  |                              |        |   |      |   |       |      | 
|Income before income taxes                       |  |                              | 934    |   |      |   | 624   |      |  |   | 784   |  
|Provision for income taxes                       |  |                              | 263    |   |      |   | 165   |      |  |   | 230   |  
|                                                 |  |                              |        |   |      |   |       |      | 
|Income from operations                           |  | $                            | 671    |   |      | $ | 459   |      |  | $ | 554   |  
|                                                 |  |                              |        |   |      |   |       |      | 
|Depreciation and amortization                    |  | $                            | 344    |   |      | $ | 419   |      |  | $ | 364   |  
|                                                 |  |                              |        |   |      |   |       |      | 
|GAIN ON SALE:                                    |  |                              |        |   |      |   |       |      |  |   |       |  
|Current assets                                   |  | $                            | (2,328 | ) |      |   |       |      |  |   |       |  
|Property, plant & equipment-net and other assets |  |                              | (3,342 | ) |      |   |       |      |  |   |       |  
|Liabilities                                      |  |                              | 924    |   |      |   |       |      |  |   |       |  
|Currency translation adjustment                  |  |                              | 511    |   |      |   |       |      |  |   |       |  
|Net proceeds of sale                             |  |                              | 4,896  |   |      |   |       |      |  |   |       |  
|Income tax expense                               |  |                              | (213   | ) |      |   |       |      |  |   |       |  
|                                                 |  |                              |        |   |      |   |       |      | 
|Gain on sale                                     |  | $                            | 448    |   |      |   |       |      |  |   |       |  
|                                                 |  |                              |        |   |      |   |       |      | 

|                                                 |  |  |  |                |  |   |       |  |  |  |  | 
|------------------------------------------------ |  |  |  | -------------- |  | - | ----- |  |  |  |  | 
|                                                 |  |  |  | As of June 30, |  |   |      
|                                                 |  |  |  | 2004           |  |   |      
|BALANCE SHEET:                                   |  |  |  |                |  |   |      
|Trade receivables                                |  |  |  |                |  | $ | 441   |  |  |  |  | 
|Inventories                                      |  |  |  |                |  |   | 1,348 |  |  |  |  | 
|Prepaid expenses and other current assets        |  |  |  |                |  |   | 97    |  |  |  |  | 
|                                                 |  |  |  |                |  |   |       |  | 
|Current assets from discontinued operations      |  |  |  |                |  | $ | 1,886 |  |  |  |  | 
|                                                 |  |  |  |                |  |   |       |  | 
|Property, plant & equipment, net                 |  |  |  |                |  | $ | 3,405 |  |  |  |  | 
|                                                 |  |  |  |                |  |   |       |  | 
|Other assets from discontinued operations        |  |  |  |                |  | $ | 3,405 |  |  |  |  | 
|                                                 |  |  |  |                |  |   |       |  | 
|Accounts payable                                 |  |  |  |                |  | $ | 208   |  |  |  |  | 
|Accrued expenses and other current liabilities   |  |  |  |                |  |   | 630   |  |  |  |  | 
|                                                 |  |  |  |                |  |   |       |  | 
|Current liabilities from discontinued operations |  |  |  |                |  | $ | 838   |  |  |  |  | 
|                                                 |  |  |  |                |  |   |       |  | 



| |                     
| | --------------------
| | MRT and La Cornubia:



F-19



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                 |  |                     |         |   |      |   |        |  
|------------------------------------------------ |  | ------------------- | ------- | - | ---- | - | ------ | -
|                                                 |  | For the Years Ended |        
|                                                 |  | June 30,            |        
|                                                 |  |                     |        
|                                                 |  | 2004                |         |   | 2003 |  
|                                                 |  |                     |         |   |      |  
|OPERATING RESULTS:                               |  |                     |         |   |      |   |        |  
|Net sales                                        |  | $                   | 3,327   |   |      | $ | 18,671 |  
|Cost of goods sold                               |  |                     | 3,135   |   |      |   | 19,943 |  
|Selling, general and administrative expenses     |  |                     | 316     |   |      |   | 2,182  |  
|                                                 |  |                     |         |   |      |  
|(Loss) before income taxes                       |  |                     | (124    | ) |      |   | (3,454 | )
|Provision for income taxes                       |  |                     |        |   |      |   |       |  
|                                                 |  |                     |         |   |      |  
|(Loss) from operations                           |  | $                   | (124    | ) |      | $ | (3,454 | )
|                                                 |  |                     |         |   |      |  
|Depreciation and amortization                    |  | $                   |        |   |      | $ | 1,309  |  
|                                                 |  |                     |         |   |      |  
|GAIN ON SALE:                                    |  |                     |         |   |      |   |        |  
|Current assets                                   |  | $                   | (5,813  | ) |      |   |        |  
|Property, plant & equipment-net and other assets |  |                     | (10,703 | ) |      |   |        |  
|Liabilities                                      |  |                     | 2,911   |   |      |   |        |  
|Net proceeds of sale                             |  |                     | 13,836  |   |      |   |        |  
|                                                 |  |                     |         |   |      |  
|Gain on sale                                     |  | $                   | 231     |   |      |   |        |  
|                                                 |  |                     |         |   |      |  



|                                                 |  |                     |        |   |      |   |        |  
|------------------------------------------------ |  | ------------------- | ------ | - | ---- | - | ------ | -
|                                                 |  | For the Years Ended |       
|                                                 |  | June 30,            |       
|                                                 |  |                     |       
|                                                 |  | 2004                |        |   | 2003 |  
|                                                 |  |                     |        |   |      |  
|OPERATING RESULTS:                               |  |                     |        |   |      |   |        |  
|Net sales                                        |  | $                   | 13,918 |   |      | $ | 13,479 |  
|Cost of goods sold                               |  |                     | 13,723 |   |      |   | 12,528 |  
|Selling, general and administrative expenses     |  |                     | 1,686  |   |      |   | 1,310  |  
|Other (income)                                   |  |                     | (102   | ) |      |   | (389   | )
|Interest expense                                 |  |                     | 94     |   |      |   | 60     |  
|                                                 |  |                     |        |   |      |  
|(Loss) before income taxes                       |  |                     | (1,483 | ) |      |   | (30    | )
|Provision for income taxes                       |  |                     | 18     |   |      |   | 16     |  
|                                                 |  |                     |        |   |      |  
|(Loss) from operations                           |  | $                   | (1,501 | ) |      | $ | (46    | )
|                                                 |  |                     |        |   |      |  
|Depreciation and amortization                    |  | $                   | 400    |   |      | $ | 359    |  
|                                                 |  |                     |        |   |      |  
|LOSS ON DISPOSAL:                                |  |                     |        |   |      |   |        |  
|Current assets                                   |  | $                   | (5,085 | ) |      |   |        |  
|Property, plant & equipment-net and other assets |  |                     | (2,557 | ) |      |   |        |  
|Liabilities                                      |  |                     | 3,614  |   |      |   |        |  
|Unsecured debt                                   |  |                     | 2,167  |   |      |   |        |  
|Currency translation adjustment                  |  |                     | (459   | ) |      |   |        |  
|                                                 |  |                     |        |   |      |  
|(Loss) on disposal                               |  | $                   | (2,320 | ) |      |   |        |  
|                                                 |  |                     |        |   |      |  

F-20



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |                 
| | ----------------
| | Odda and Carbide





|                                             |  |              |         |  
|-------------------------------------------- |  | ------------ | ------- | -
|                                             |  | For the Year |        
|                                             |  | Ended        |        
|                                             |  | June 30,     |        
|                                             |  | 2003         |        
|                                             |  |              |        
|OPERATING RESULTS:                           |  |              |         |  
|Net sales                                    |  | $            | 11,217  |  
|Cost of goods sold                           |  |              | 13,723  |  
|Selling, general and administrative expenses |  |              | 3,175   |  
|Asset writedowns                             |  |              | 7,781   |  
|Other income                                 |  |              | 2,327   |  
|                                             |  |              |        
|(Loss) before income taxes                   |  |              | (11,135 | )
|(Benefit) for income taxes                   |  |              | (58     | )
|                                             |  |              |        
|(Loss) from operations                       |  | $            | (11,077 | )
|                                             |  |              |        
|Depreciation and amortization                |  | $            | 894     |  
|                                             |  |              |        
|LOSS ON DISPOSAL:                            |  |              |         |  
|Assets                                       |  | $            | (3,359  | )
|Liabilities                                  |  |              | 6,432   |  
|Unsecured debt                               |  |              | 2,488   |  
|Currency translation adjustment              |  |              | (6,244  | )
|                                             |  |              |        
|(Loss) on disposal                           |  | $            | (683    | )
|                                             |  |              |        



|   |                              
|-- | -----------------------------
|8. | Property, Plant and Equipment



|                               |  |                |         |  |      |   |         | 
|------------------------------ |  | -------------- | ------- |  | ---- | - | ------- | 
|                               |  | As of June 30, |        
|                               |  |                |        
|                               |  | 2005           |         |  | 2004 |  
|                               |  |                |         |  |      |  
|Land                           |  | $              | 6,250   |  |      | $ | 5,633   | 
|Buildings and improvements     |  |                | 25,967  |  |      |   | 25,743  | 
|Machinery and equipment        |  |                | 108,762 |  |      |   | 100,771 | 
|                               |  |                |         |  |      |  
|                               |  |                | 140,979 |  |      |   | 132,147 | 
|Less: accumulated depreciation |  |                | 91,019  |  |      |   | 76,766  | 
|                               |  |                |         |  |      |  
|                               |  | $              | 49,960  |  |      | $ | 55,381  | 
|                               |  |                |         |  |      |  





F-21



---



##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|   |                           
|-- | --------------------------
|9. | Related Party Transactions









|    |                                               
|--- | ----------------------------------------------
|10. | Accrued Expenses and Other Current Liabilities



|                                 |  |                |        |  |      |   |        | 
|-------------------------------- |  | -------------- | ------ |  | ---- | - | ------ | 
|                                 |  | As of June 30, |       
|                                 |  |                |       
|                                 |  | 2005           |        |  | 2004 |  
|                                 |  |                |        |  |      |  
|Belgium Plant Transactions       |  | $              | 13,309 |  |      | $ |       | 
|Employee related expenses        |  |                | 14,774 |  |      |   | 11,409 | 
|Interest and income tax accruals |  |                | 6,286  |  |      |   | 4,311  | 
|Other accrued liabilities        |  |                | 19,922 |  |      |   | 23,660 | 
|                                 |  |                |        |  |      |  
|                                 |  | $              | 54,291 |  |      | $ | 39,380 | 
|                                 |  |                |        |  |      |  



|    |     
|--- | ----
|11. | Debt



| |                       
| | ----------------------
| | Loans Payable to Banks



F-22



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)












F-23



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PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |               
| | --------------
| | Long-Term Debt

|                                           |  |                |         |  |      |   |         | 
|------------------------------------------ |  | -------------- | ------- |  | ---- | - | ------- | 
|                                           |  | As of June 30, |        
|                                           |  |                |        
|                                           |  | 2005           |         |  | 2004 |  
|                                           |  |                |         |  |      |  
|Senior secured notes due December 1, 2007  |  | $              | 127,491 |  |      | $ | 105,000 | 
|Senior subordinated notes due June 1, 2008 |  |                | 48,029  |  |      |   | 48,029  | 
|Senior secured notes due February 10, 2010 |  |                | 30,691  |  |      |   |        | 
|Foreign bank loans                         |  |                | 2,606   |  |      |   | 6,237   | 
|Capitalized lease obligations and other    |  |                |        |  |      |   | 103     | 
|                                           |  |                |         |  |      |  
|                                           |  |                | 208,817 |  |      |   | 159,369 | 
|Less: current maturities                   |  |                | 1,625   |  |      |   | 1,351   | 
|                                           |  |                |         |  |      |  
|                                           |  | $              | 207,192 |  |      | $ | 158,018 | 
|                                           |  |                |         |  |      |  



| |                              
| | -----------------------------
| | Senior Secured Notes due 2007









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PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)








| |                                   
| | ----------------------------------
| | Senior Subordinated Notes due 2008

7 8






| |                              
| | -----------------------------
| | Senior Secured Notes due 2010







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PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |                   
| | ------------------
| | Foreign Bank Loans







| |                                       
| | --------------------------------------
| | Aggregate Maturities of Long-Term Debt



|                    |       |   |         |         | 
|------------------- | ----- | - | ------- | ------- | 
|Year Ended June 30, |       |  
|                    |       |  
|2006                |       | $ | 1,625   |        
|2007                |       |   |        |        
|2008                |       |   | 207,192 |        
|2009                |       |   |        |        
|2010                |       |   |        |        
|                    |       |   |        
|                    | Total |   | $       | 208,817 | 
|                    |       |   |        



|    |                                      
|--- | -------------------------------------
|12. | Redeemable Common Stock of Subsidiary





|    |                                 
|--- | --------------------------------
|13. | Common Stock and Preferred Stock



| |              
| | -------------
| | Common Stock:



|                     |  |            |        |  |        |  |        |        |  |   |     | 
|-------------------- |  | ---------- | ------ |  | ------ |  | ------ | ------ |  | - | --- | 
|                     |  | Authorized |        |  | Issued |  |        | Amount | 
|                     |  | Shares     |        |  | Shares |  |        | at Par | 
|                     |  |            |        |  |        |  |        |        | 
|Class A common stock |  |            | 16,200 |  |        |  | 12,600 |        |  | $ | .10 | 
|Class B common stock |  |            | 14,100 |  |        |  | 11,888 |        |  | $ | .10 | 
|                     |  |            |        |  |        |  |        |        | 
|                     |  |            | 30,300 |  |        |  | 24,488 |        |  |   |     | 



F-26



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PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)








| |                         
| | ------------------------
| | Redeemable Common Stock:





|    |                       
|--- | ----------------------
|14. | Employee Benefit Plans





|                                        |  |          |        |   |               |   |        |      |  |   |        |   |  |   |       |  
|--------------------------------------- |  | -------- | ------ | - | ------------- | - | ------ | ---- |  | - | ------ | - |  | - | ----- | -
|                                        |  | Domestic |        |   | International |  
|                                        |  |          |        |   |               |  
|                                        |  | 2005     |        |   | 2004          |   |        | 2005 |  |   | 2004   |  
|                                        |  |          |        |   |               |   |        |      |  |   |        |  
|Change in benefit obligation            |  |          |        |   |               |   |        |      |  |   |        |   |  |   |       |  
|Benefit obligation at beginning of year |  | $        | 15,443 |   |               | $ | 15,846 |      |  | $ | 7,323  |   |  | $ | 6,595 |  
|Service cost                            |  |          | 1,220  |   |               |   | 1,260  |      |  |   | 477    |   |  |   | 467   |  
|Interest cost                           |  |          | 943    |   |               |   | 891    |      |  |   | 423    |   |  |   | 374   |  
|Benefits paid                           |  |          | (295   | ) |               |   | (595   | )    |  |   | (14    | ) |  |   | (3    | )
|Employee contributions                  |  |          |       |   |               |   |       |      |  |   | 39     |   |  |   | 27    |  
|Actuarial (gain) or loss                |  |          | 197    |   |               |   | (251   | )    |  |   | 670    |   |  |   | (475  | )
|Curtailment                             |  |          |       |   |               |   | (922   | )    |  |   |       |   |  |   |      |  
|Special termination benefits            |  |          |       |   |               |   |       |      |  |   | 888    |   |  |   |      |  
|Change in discount rate                 |  |          | 3,732  |   |               |   | (786   | )    |  |   | 1,690  |   |  |   |      |  
|Exchange rate impact                    |  |          |       |   |               |   |       |      |  |   | (232   | ) |  |   | 338   |  
|                                        |  |          |        |   |               |   |        |      |  |   |        |  
|Benefit obligation at end of year       |  | $        | 21,240 |   |               | $ | 15,443 |      |  | $ | 11,264 |   |  | $ | 7,323 |  
|                                        |  |          |        |   |               |   |        |      |  |   |        |  





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PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                               |  |   |        |   |  |   |        |   |  |   |        |   |  |   |        |  
|---------------------------------------------- |  | - | ------ | - |  | - | ------ | - |  | - | ------ | - |  | - | ------ | -
|Change in Plan Assets                          |  |   |        |   |  |   |        |   |  |   |        |   |  |   |        |  
|Fair value of plan assets at beginning of year |  | $ | 11,795 |   |  | $ | 10,387 |   |  | $ | 5,828  |   |  | $ | 4,566  |  
|Actual return on plan assets                   |  |   | 365    |   |  |   | 1,068  |   |  |   | 623    |   |  |   | 435    |  
|Employer contributions                         |  |   | 720    |   |  |   | 935    |   |  |   | 658    |   |  |   | 558    |  
|Employee contributions                         |  |   |       |   |  |   |       |   |  |   | 38     |   |  |   | 27     |  
|Other                                          |  |   |       |   |  |   |       |   |  |   | 353    |   |  |   |       |  
|Benefits paid                                  |  |   | (295   | ) |  |   | (595   | ) |  |   | (14    | ) |  |   | (3     | )
|Exchange rate impact                           |  |   |       |   |  |   |       |   |  |   | (78    | ) |  |   | 245    |  
|                                               |  |   |        |   |  |   |        |   |  |   |        |  
|Fair value of plan assets at end of year       |  | $ | 12,585 |   |  | $ | 11,795 |   |  | $ | 7,408  |   |  | $ | 5,828  |  
|                                               |  |   |        |   |  |   |        |   |  |   |        |  
|Funded status                                  |  |   |        |   |  |   |        |   |  |   |        |   |  |   |        |  
|Funded status of the plan                      |  | $ | (8,655 | ) |  | $ | (3,648 | ) |  | $ | (3,856 | ) |  | $ | (1,495 | )
|Unrecognized net actuarial (gain) or loss      |  |   | 4,618  |   |  |   | 152    |   |  |   | 2,002  |   |  |   | 368    |  
|Unrecognized prior service cost                |  |   | (195   | ) |  |   | (338   | ) |  |   |       |   |  |   |       |  
|Unrecognized transition obligation/(asset)     |  |   | (5     | ) |  |   | (8     | ) |  |   |       |   |  |   |       |  
|                                               |  |   |        |   |  |   |        |   |  |   |        |  
|(Accrued) pension cost                         |  | $ | (4,237 | ) |  | $ | (3,842 | ) |  | $ | (1,854 | ) |  | $ | (1,127 | )
|                                               |  |   |        |   |  |   |        |   |  |   |        |  







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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                            |  |      |       |   |      |   |       |      |  |   |       |  
|----------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                                            |  | 2005 |       |   | 2004 |   |       | 2003 | 
|                                                            |  |      |       |   |      |   |       |      | 
|Domestic Pension Expense                                    |  |      |       |   |      |   |       |      |  |   |       |  
|Service cost  benefits earned during the year              |  | $    | 1,220 |   |      | $ | 1,260 |      |  | $ | 1,056 |  
|Interest cost on benefit obligation                         |  |      | 943   |   |      |   | 891   |      |  |   | 784   |  
|Expected return on plan assets                              |  |      | (902  | ) |      |   | (846  | )    |  |   | (756  | )
|Amortization of initial unrecognized net transition (asset) |  |      | (3    | ) |      |   | (3    | )    |  |   | (3    | )
|Amortization of prior service costs                         |  |      | (143  | ) |      |   | (153  | )    |  |   | (162  | )
|Amortization of net actuarial loss (gain)                   |  |      |      |   |      |   | 25    |      |  |   | (57   | )
|Curtailment benefit                                         |  |      |      |   |      |   | (64   | )    |  |   |      |  
|                                                            |  |      |       |   |      |   |       |      | 
|Net periodic pension expense  domestic                     |  | $    | 1,115 |   |      | $ | 1,110 |      |  | $ | 862   |  
|                                                            |  |      |       |   |      |   |       |      | 
|International Pension Expense                               |  |      |       |   |      |   |       |      |  |   |       |  
|Service cost  benefits earned during the year              |  | $    | 477   |   |      | $ | 467   |      |  | $ | 310   |  
|Interest cost on benefit obligation                         |  |      | 424   |   |      |   | 374   |      |  |   | 259   |  
|Expected return on plan assets                              |  |      | (362  | ) |      |   | (300  | )    |  |   | (203  | )
|Special Termination Benefits                                |  |      | 888   |   |      |   |      |      |  |   |      |  
|Amortization of net actuarial loss                          |  |      |      |   |      |   | 22    |      |  |   |      |  
|                                                            |  |      |       |   |      |   |       |      | 
|Net periodic pension expense  international                |  | $    | 1,427 |   |      | $ | 563   |      |  | $ | 366   |  
|                                                            |  |      |       |   |      |   |       |      | 



|                                              |  |      |           |  |      |  |           |      |  |  |           | 
|--------------------------------------------- |  | ---- | --------- |  | ---- |  | --------- | ---- |  |  | --------- | 
|                                              |  | 2005 |           |  | 2004 |  |           | 2003 | 
|                                              |  |      |           |  |      |  |           |      | 
|Domestic Actuarial Assumptions                |  |      |           |  |      |  |           |      |  |  |           | 
|Discount rate for service and interest        |  |      | 6.1%      |  |      |  | 5.8%      |      |  |  | 7.1%      | 
|Expected rate of return on plan assets        |  |      | 7.5%      |  |      |  | 7.5%      |      |  |  | 7.5%      | 
|Rate of compensation increase                 |  |      | 3.0%-4.5% |  |      |  | 3.0%-4.5% |      |  |  | 3.0%-4.5% | 
|Discount rate for year-end benefit obligation |  |      | 5.0%      |  |      |  | 6.1%      |      |  |  | 5.8%      | 
|International Actuarial Assumptions           |  |      |           |  |      |  |           |      |  |  |           | 
|Discount rate for service and interest        |  |      | 5.5%      |  |      |  | 5.5%      |      |  |  | 5.8%      | 
|Expected rate of return on plan assets        |  |      | 6.0%      |  |      |  | 6.0%      |      |  |  | 6.0%      | 
|Rate of compensation increase                 |  |      | 3.0%      |  |      |  | 3.0%      |      |  |  | 3.0%      | 
|Discount rate for year-end benefit obligation |  |      | 4.5%      |  |      |  | 5.5%      |      |  |  | 5.5%      | 



F-29



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|          |  |          |       |  |               |   |    | 
|--------- |  | -------- | ----- |  | ------------- | - | -- | 
|          |  | Domestic |       |  | International |  
|          |  |          |       |  |               |  
|2006      |  | $        | 333   |  |               | $ | 48 | 
|2007      |  |          | 334   |  |               |   | 10 | 
|2008      |  |          | 447   |  |               |   | 6  | 
|2009      |  |          | 512   |  |               |   | 5  | 
|2010      |  |          | 616   |  |               |   | 4  | 
|2011-2015 |  |          | 5,267 |  |               |   | 13 | 





|                                |  |      |           |  |      |  |    |      |  |  |    |  
|------------------------------- |  | ---- | --------- |  | ---- |  | -- | ---- |  |  | -- | -
|Domestic Plan Asset Allocations |  | 2006 |           |  | 2005 |  |    | 2004 | 
|                                |  |      |           |  |      |  |    |      | 
|Debt Securities                 |  |      | 35% - 45% |  |      |  | 39 | %    |  |  | 50 | %
|Equity Securities               |  |      | 25% - 35% |  |      |  | 30 | %    |  |  | 19 | %
|Other                           |  |      | 25% - 35% |  |      |  | 31 | %    |  |  | 31 | %







|                                     |  |      |    |   |      |  |    |      |  |  |    |  
|------------------------------------ |  | ---- | -- | - | ---- |  | -- | ---- |  |  | -- | -
|International Plan Asset Allocations |  | 2006 |    |   | 2005 |  |    | 2004 | 
|                                     |  |      |    |   |      |  |    |      | 
|Debt Securities                      |  |      | 57 | % |      |  | 57 | %    |  |  | 62 | %
|Equity Securities                    |  |      | 24 | % |      |  | 23 | %    |  |  | 21 | %
|Other                                |  |      | 19 | % |      |  | 20 | %    |  |  | 17 | %







F-30



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)










|    |             
|--- | ------------
|15. | Income Taxes



|                                                             |  |      |         |   |      |   |        |      |  |   |       | 
|------------------------------------------------------------ |  | ---- | ------- | - | ---- | - | ------ | ---- |  | - | ----- | 
|                                                             |  | 2005 |         |   | 2004 |   |        | 2003 | 
|                                                             |  |      |         |   |      |   |        |      | 
|Domestic                                                     |  | $    | 381     |   |      | $ | 27,587 |      |  | $ | 3,855 | 
|Foreign                                                      |  |      | (21,767 | ) |      |   | (3,678 | )    |  |   | 3,122 | 
|                                                             |  |      |         |   |      |   |        |      | 
|Income (loss) from continuing operations before income taxes |  | $    | (21,386 | ) |      | $ | 23,909 |      |  | $ | 6,977 | 
|                                                             |  |      |         |   |      |   |        |      | 



|                                  |                                          |      |       |        |      |   |       |        |   |   |       |        |  
|--------------------------------- | ---------------------------------------- | ---- | ----- | ------ | ---- | - | ----- | ------ | - | - | ----- | ------ | -
|                                  |                                          | 2005 |       |        | 2004 |   |       | 2003   |  
|                                  |                                          |      |       |        |      |   |       |        |  
|Current tax provision (benefit):  |                                          |      |       |        |      |   |       |        |   |   |       |       
|                                  | Federal                                  |      | $     | 175    |      |   | $     | 563    |   |   | $     |       |  
|                                  | State and local                          |      |       | 520    |      |   |       | 1,333  |   |   |       | 516    |  
|                                  | Foreign                                  |      |       | 2,445  |      |   |       | 5,582  |   |   |       | 2,854  |  
|                                  |                                          |      |       |        |      |   |       |        |  
|                                  | Total current tax provision              |      |       | 3,140  |      |   |       | 7,478  |   |   |       | 3,370  |  
|                                  |                                          |      |       |        |      |   |       |        |  
|Deferred tax provision (benefit): |                                          |      |       |        |      |   |       |        |   |   |       |       
|                                  | Federal                                  |      |       | 358    |      |   |       | 10,150 |   |   |       | 1,705  |  
|                                  | State and local                          |      |       | (170   | )    |   |       | (1,396 | ) |   |       | (345   | )
|                                  | Foreign                                  |      |       | (5,527 | )    |   |       | (1,671 | ) |   |       | 850    |  
|                                  | Change in valuation allowance  domestic |      |       | (188   | )    |   |       | (8,754 | ) |   |       | (1,360 | )
|                                  |  foreign                                |      |       | 4,509  |      |   |       | 1,997  |   |   |       | 5,610  |  
|                                  |                                          |      |       |        |      |   |       |        |  
|                                  | Total deferred tax provision             |      |       | (1,018 | )    |   |       | 326    |   |   |       | 6,460  |  
|                                  |                                          |      |       |        |      |   |       |        |  
|Provision for income taxes        |                                          | $    | 2,122 |        |      | $ | 7,804 |        |   | $ | 9,830 |       
|                                  |                                          |      |       |        |      |   |       |        |  

F-31



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                                                       |  |      |       |    |      |  |       |      |  |  |       |  
|-------------------------------------------------------------------------------------- |  | ---- | ----- | -- | ---- |  | ----- | ---- |  |  | ----- | -
|                                                                                       |  | 2005 |       |    | 2004 |  |       | 2003 | 
|                                                                                       |  |      |       |    |      |  |       |      | 
|Federal income tax rate                                                                |  |      | (35.0 | )% |      |  | 35.0  | %    |  |  | 35.0  | %
|State and local taxes, net of federal income tax effect                                |  |      | 1.6   |    |      |  | 3.6   |      |  |  | 1.6   |  
|Foreign tax rate differences and taxes in certain profitable
    foreign jurisdictions |  |      | 36.4  |    |      |  | 23.9  |      |  |  | 38.8  |  
|Change in valuation allowance                                                          |  |      | (2.0  | )  |      |  | (42.5 | )    |  |  | 60.9  |  
|Taxable income not recorded on books                                                   |  |      | 8.1   |    |      |  | 10.6  |      |  |  |      |  
|Nondeductible expenses                                                                 |  |      | 1.8   |    |      |  | 1.7   |      |  |  | 4.9   |  
|Other                                                                                  |  |      | (1.0  | )  |      |  | 0.3   |      |  |  | (0.3  | )
|                                                                                       |  |      |       |    |      |  |       |      | 
|Effective tax rate                                                                     |  |      | 9.9   | %  |      |  | 32.6  | %    |  |  | 140.9 | %
|                                                                                       |  |      |       |    |      |  |       |      | 





F-32



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                           |                                              |                |        |         |      |   |        |         |  
|-------------------------- | -------------------------------------------- | -------------- | ------ | ------- | ---- | - | ------ | ------- | -
|                           |                                              | As of June 30, |       
|                           |                                              |                |       
|                           |                                              | 2005           |        |         | 2004 |  
|                           |                                              |                |        |         |      |  
|Deferred tax assets:       |                                              |                |        |         |      |   |        |        
|                           | Employee benefits                            |                | $      | 3,149   |      |   | $      | 3,274   |  
|                           | Property, plant and equipment                |                |        | 406     |      |   |        | 475     |  
|                           | Insurance                                    |                |        | 334     |      |   |        | 350     |  
|                           | Receivables allowances                       |                |        | 729     |      |   |        | 724     |  
|                           | Inventory                                    |                |        | 1,434   |      |   |        | 3,441   |  
|                           | Environmental remediation                    |                |        | 1,156   |      |   |        | 1,322   |  
|                           | Alternative minimum tax                      |                |        | 563     |      |   |        | 701     |  
|                           | Net operating loss carry forwards  domestic |                |        | 10,817  |      |   |        | 11,645  |  
|                           |  foreign                                    |                |        | 18,982  |      |   |        | 10,432  |  
|                           | Other                                        |                |        | 1,822   |      |   |        | 1,333   |  
|                           |                                              |                |        |         |      |  
|                           |                                              |                | 39,392 |         |      |   | 33,697 |        
|                           | Valuation allowance                          |                |        | (34,310 | )    |   |        | (30,045 | )
|                           |                                              |                |        |         |      |  
|                           |                                              |                | 5,082  |         |      |   | 3,652  |        
|                           |                                              |                |        |         |      |  
|Deferred tax liabilities   |                                              |                |        |         |      |   |        |        
|                           | Property, plant and equipment                |                |        | (3,141  | )    |   |        | (2,727  | )
|                           | Other                                        |                |        | (2,647  | )    |   |        | (2,649  | )
|                           |                                              |                |        |         |      |  
|                           |                                              |                | (5,788 | )       |      |   | (5,376 | )      
|                           |                                              |                |        |         |      |  
|Net deferred tax liability |                                              | $              | (706   | )       |      | $ | (1,724 | )      
|                           |                                              |                |        |         |      |  



|                                               |  |      |        |   |      |   |        |  
|---------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                               |  | 2005 |        |   | 2004 |  
|                                               |  |      |        |   |      |  
|Prepaid expenses and other current assets      |  | $    | 541    |   |      | $ | 502    |  
|Accrued expenses and other current liabilities |  |      | (141   | ) |      |   | (138   | )
|Other assets                                   |  |      | 255    |   |      |   | 669    |  
|Other liabilities                              |  |      | (1,361 | ) |      |   | (2,757 | )
|                                               |  |      |        |   |      |  
|                                               |  | $    | (706   | ) |      | $ | (1,724 | )
|                                               |  |      |        |   |      |  



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PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                               |  |      |        |   |      |   |        |      |  |   |        | 
|------------------------------ |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | 
|                               |  | 2005 |        |   | 2004 |   |        | 2003 | 
|                               |  |      |        |   |      |   |        |      | 
|Balance at beginning of period |  | $    | 30,045 |   |      | $ | 32,954 |      |  | $ | 18,495 | 
|Change in valuation allowance  |  |      | 4,321  |   |      |   | (6,757 | )    |  |   | 4,250  | 
|Other adjustments              |  |      | (56    | ) |      |   | 3,848  |      |  |   | 10,209 | 
|                               |  |      |        |   |      |   |        |      | 
|Balance at end of period       |  | $    | 34,310 |   |      | $ | 30,045 |      |  | $ | 32,954 | 
|                               |  |      |        |   |      |   |        |      | 









|    |                              
|--- | -----------------------------
|16. | Commitments and Contingencies



| |        
| | -------
| | Leases:



|                             |  |                |       | 
|---------------------------- |  | -------------- | ----- | 
|                             |  | Non-Cancelable |      
|                             |  | Operating      |      
|Year Ended June 30           |  | Leases         |      
|                             |  |                |      
|2006                         |  | $              | 1,474 | 
|2007                         |  |                | 1,388 | 
|2008                         |  |                | 1,244 | 
|2009                         |  |                | 972   | 
|2010                         |  |                | 853   | 
|Thereafter                   |  |                | 1,695 | 
|                             |  |                |      
|Total minimum lease payments |  | $              | 7,626 | 
|                             |  |                |      







| |            
| | -----------
| | Litigation:



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




















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PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |                           
| | --------------------------
| | Environmental Remediation:













|    |           
|--- | ----------
|17. | Guarantees





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PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|    |                      
|--- | ---------------------
|18. | Financial Instruments











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PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)








|    |                  
|--- | -----------------
|19. | Business Segments







|                              |  |           |         |  |            |   |        |              |  |   |           |  |  |       |         |   |  |   |         | 
|----------------------------- |  | --------- | ------- |  | ---------- | - | ------ | ------------ |  | - | --------- |  |  | ----- | ------- | - |  | - | ------- | 
|                              |  | Animal    |         |  |            |   |        |              |  |   |          
|                              |  | Health &  |         |  | Industrial |   |        |              |  |   |           | 
|2005 Segment Detail           |  | Nutrition |         |  | Chemicals  |   |        | Distribution |  |   | Corporate |  |  | Total |        
|                              |  |           |         |  |            |   |        |              |  |   |           |  |  |       |        
|Net Sales                     |  | $         | 278,837 |  |            | $ | 52,305 |              |  | $ | 33,237    |  |  | $     |        |   |  | $ | 364,379 | 
|Operating income/(loss)       |  |           | 10,073  |  |            |   | 4,835  |              |  |   | 4,671     |  |  |       | (15,197 | ) |  |   | 4,382   | 
|Depreciation and amortization |  |           | 16,243  |  |            |   | 1,597  |              |  |   | 20        |  |  |       | 246     |   |  |   | 18,106  | 
|Identifiable assets           |  |           | 204,799 |  |            |   | 21,473 |              |  |   | 8,092     |  |  |       | 21,122  |   |  |   | 255,486 | 
|Capital expenditures          |  |           | 4,823   |  |            |   | 1,384  |              |  |   | 50        |  |  |       | 1,232   |   |  |   | 7,489   | 



|                              |  |           |         |  |            |   |        |              |  |   |           |  |  |       |         |   |  |   |         | 
|----------------------------- |  | --------- | ------- |  | ---------- | - | ------ | ------------ |  | - | --------- |  |  | ----- | ------- | - |  | - | ------- | 
|                              |  | Animal    |         |  |            |   |        |              |  |   |          
|                              |  | Health &  |         |  | Industrial |   |        |              |  |   |           | 
|2004 Segment Detail           |  | Nutrition |         |  | Chemicals  |   |        | Distribution |  |   | Corporate |  |  | Total |        
|                              |  |           |         |  |            |   |        |              |  |   |           |  |  |       |        
|Net Sales                     |  | $         | 263,417 |  |            | $ | 58,102 |              |  | $ | 32,865    |  |  | $     |        |   |  | $ | 354,384 | 
|Operating income/(loss)       |  |           | 32,605  |  |            |   | 4,569  |              |  |   | 3,602     |  |  |       | (20,287 | ) |  |   | 20,489  | 
|Depreciation and amortization |  |           | 8,263   |  |            |   | 2,123  |              |  |   | 11        |  |  |       | 261     |   |  |   | 10,658  | 
|Identifiable assets           |  |           | 185,601 |  |            |   | 26,146 |              |  |   | 7,715     |  |  |       | 16,616  |   |  |   | 236,078 | 
|Capital expenditures          |  |           | 3,850   |  |            |   | 2,216  |              |  |   | 6         |  |  |       | 57      |   |  |   | 6,129   | 

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PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


|                              |  |           |         |  |            |   |        |              |  |   |           |  |  |       |         |   |  |   |         | 
|----------------------------- |  | --------- | ------- |  | ---------- | - | ------ | ------------ |  | - | --------- |  |  | ----- | ------- | - |  | - | ------- | 
|                              |  | Animal    |         |  |            |   |        |              |  |   |          
|                              |  | Health &  |         |  | Industrial |   |        |              |  |   |           | 
|2003 Segment Detail           |  | Nutrition |         |  | Chemicals  |   |        | Distribution |  |   | Corporate |  |  | Total |        
|                              |  |           |         |  |            |   |        |              |  |   |           |  |  |       |        
|Net Sales                     |  | $         | 248,262 |  |            | $ | 57,040 |              |  | $ | 32,516    |  |  | $     |        |   |  | $ | 337,818 | 
|Operating income/(loss)       |  |           | 37,325  |  |            |   | (2,010 | )            |  |   | 4,354     |  |  |       | (13,774 | ) |  |   | 25,895  | 
|Depreciation and amortization |  |           | 7,690   |  |            |   | 2,904  |              |  |   | 12        |  |  |       | 380     |   |  |   | 10,986  | 
|Identifiable assets           |  |           | 190,864 |  |            |   | 33,191 |              |  |   | 9,154     |  |  |       | 13,353  |   |  |   | 246,562 | 
|Capital expenditures          |  |           | 5,669   |  |            |   | 2,836  |              |  |   |          |  |  |       | 2       |   |  |   | 8,507   | 



|    |                       
|--- | ----------------------
|20. | Geographic Information



|              |  |                              |         |  |      |   |         |      |  |   |         | 
|------------- |  | ---------------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|              |  | For the Years Ended June 30, |        
|              |  |                              |        
|Net Sales:    |  | 2005                         |         |  | 2004 |   |         | 2003 | 
|              |  |                              |         |  |      |   |         |      | 
|United States |  | $                            | 251,520 |  |      | $ | 248,577 |      |  | $ | 233,942 | 
|Europe        |  |                              | 17,091  |  |      |   | 14,715  |      |  |   | 12,715  | 
|Israel        |  |                              | 40,150  |  |      |   | 43,170  |      |  |   | 44,383  | 
|Latin America |  |                              | 31,397  |  |      |   | 26,800  |      |  |   | 25,235  | 
|Asia/ Pacific |  |                              | 24,221  |  |      |   | 21,122  |      |  |   | 21,543  | 
|              |  |                              |         |  |      |   |         |      | 
|Total         |  | $                            | 364,379 |  |      | $ | 354,384 |      |  | $ | 337,818 | 
|              |  |                              |         |  |      |   |         |      | 

|                                    |  |                              |        |  |      |   |        |      |  |   |        | 
|----------------------------------- |  | ---------------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                    |  | For the Years Ended June 30, |       
|                                    |  |                              |       
|Property, Plant and Equipment, net: |  | 2005                         |        |  | 2004 |   |        | 2003 | 
|                                    |  |                              |        |  |      |   |        |      | 
|United States                       |  | $                            | 14,742 |  |      | $ | 13,836 |      |  | $ | 16,719 | 
|Europe                              |  |                              | 8,167  |  |      |   | 17,327 |      |  |   | 17,062 | 
|Israel                              |  |                              | 7,816  |  |      |   | 9,157  |      |  |   | 10,990 | 
|Latin America                       |  |                              | 18,997 |  |      |   | 14,783 |      |  |   | 15,396 | 
|Asia/ Pacific                       |  |                              | 238    |  |      |   | 278    |      |  |   | 337    | 
|                                    |  |                              |        |  |      |   |        |      | 
|Total                               |  | $                            | 49,960 |  |      | $ | 55,381 |      |  | $ | 60,504 | 
|                                    |  |                              |        |  |      |   |        |      | 



|    |                                   
|--- | ----------------------------------
|21. | Consolidating Financial Statements





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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)










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PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




CONSOLIDATING BALANCE SHEET


As of June 30, 2005


|                                               |                                                |                                                                 |                                      |         |              |         |              |   |   |        |         |         |           |         |         |              |        |         |               |         |        |              |         |        |          |       |          |               |          |         |              |         |         |         |         |         |        |         |        |         |        |        |         |         |         |         |  
|---------------------------------------------- | ---------------------------------------------- | --------------------------------------------------------------- | ------------------------------------ | ------- | ------------ | ------- | ------------ | - | - | ------ | ------- | ------- | --------- | ------- | ------- | ------------ | ------ | ------- | ------------- | ------- | ------ | ------------ | ------- | ------ | -------- | ----- | -------- | ------------- | -------- | ------- | ------------ | ------- | ------- | ------- | ------- | ------- | ------ | ------- | ------ | ------- | ------ | ------ | ------- | ------- | ------- | ------- | -
|                                               |                                                |                                                                 |                                      |         |              | U.S.    |              |   |   |        |         |         | Non-      |         |         |              |        |         |               |         |        |              |         |       
|                                               |                                                | Parent                                                          |                                      |         | Unrestricted |         | Guarantor    |   |   | Dutch  |         |         | Belgium   |         |         | Guarantor    |        |         | Consolidation |         |        | PAHC         |         |        | Holdings |       |          | Consolidation |          |         | Holdings     |        
|                                               |                                                | Issuer                                                          |                                      |         | Subsidiaries |         | Subsidiaries |   |   | Issuer |         |         | Guarantor |         |         | Subsidiaries |        |         | Adjustments   |         |        | Consolidated |         |        | Issuer   |       |          | Adjustments   |          |         | Consolidated |        
|                                               |                                                |                                                                 |                                      |         |              |         |              |   |   |        |         |         |           |         |         |              |        |         |               |         |        |              |         |        |          |       |          |               |          |         |              |        
|ASSETS                                        
|CURRENT ASSETS:                                |                                                |                                                                 |                                      |         |              |         |              |   |   |        |         |         |           |         |         |              |        |         |               |         |        |              |         |        |          |       |          |               |          |         |              |         |         |         |         |         |        |         |        |         |        |        |         |        
|                                               | Cash and cash equivalents                      |                                                                 | $                                    | 2,490   |              |         | $            |  |   |        | $       | 1,787   |           |         | $       | 17           |        |         | $             | 255     |        |              | $       | 8,452  |          |       | $        |              |          |         | $            | 13,001  |         |         | $       | 596     |        |         | $      |        |        |        | $       | 13,597  |        
|                                               | Trade receivables                              |                                                                 |                                      | 2,828   |              |         |              |  |   |        |         | 24,791  |           |         |         |             |        |         |               | 3,980   |        |              |         | 21,207 |          |       |          |              |          |         |              | 52,806  |         |         |         |        |        |         |        |        |        |        |         | 52,806  |        
|                                               | Other receivables                              |                                                                 |                                      | 549     |              |         |              |  |   |        |         | 971     |           |         |         |             |        |         |               | 804     |        |              |         | 1,287  |          |       |          |              |          |         |              | 3,611   |         |         |         |        |        |         |        |        |        |        |         | 3,611   |        
|                                               | Inventory                                      |                                                                 |                                      | 2,669   |              |         |              |  |   |        |         | 36,289  |           |         |         |             |        |         |               | 29,691  |        |              |         | 27,972 |          |       |          |               |          |         |              | 96,621  |         |         |         |        |        |         |        |         |        |        |         | 96,621  |        
|                                               | Prepaid expenses and other                     |                                                                 |                                      | 4,118   |              |         |              |  |   |        |         | 921     |           |         |         |             |        |         |               | 1,203   |        |              |         | 6,545  |          |       |          |              |          |         |              | 12,787  |         |         |         |        |        |         |        |        |        |        |         | 12,787  |        
|                                               |                                                |                                                                 |                                      |         |              |         |              |   |   |        |         |         |           |         |         |              |        |         |               |         |        |              |         |        |          |       |          |               |          |         |              |         |        
|                                               |                                                | TOTAL CURRENT ASSETS                                            |                                      |         | 12,654       |         |              |   |  |        |         |         | 64,759    |         |         |              | 17     |         |               |         | 35,933 |              |         |        | 65,463   |       |          |               |         |         |              |         | 178,826 |         |         |         | 596    |         |        |         |       |        |         |         | 179,422 |        
|                                               |                                                |                                                                 |                                      |         |              |         |              |   |   |        |         |         |           |         |         |              |        |         |               |         |        |              |         |        |          |       |          |               |          |         |              |         |        
|Property, plant & equipment, net               |                                                |                                                                 | 1,178                                |         |              |         |             |   |   |        | 13,564  |         |           |         |        |              |        |         | 8,122         |         |        |              | 27,096  |        |          |       |         |               |          |         | 49,960       |         |         |         |        |         |        |         |       |         |        |        | 49,960  |        
|Intangibles, net                               |                                                |                                                                 |                                     |         |              |         |             |   |   |        | 3,827   |         |           |         |        |              |        |         | 1,339         |         |        |              | 5,035   |        |          |       |         |               |          |         | 10,201       |         |         |         |        |         |        |         |       |         |        |        | 10,201  |        
|Other assets                                   |                                                |                                                                 | 12,303                               |         |              |         |             |   |   |        | 796     |         |           |         |        |              |        |         |              |         |        |              | 971     |        |          |       |         |               |          |         | 14,070       |         |         |         | 1,833   |         |        |         |       |         |        |        | 15,903  |        
|Investment in subsidiaries                     |                                                |                                                                 | 101,464                              |         |              |         |             |   |   |        |        |         |           |         | (17,469 | )            |        |         |              |         |        |              |        |        |          |       | (83,995  | )             |          |         |             |         |         |         | (44,924 | )       |        |         | 44,924 |         |        |        |        |        
|Intercompany                                   |                                                |                                                                 | 9,384                                |         |              |         |             |   |   |        | 93,463  |         |           |         | 31,103  |              |        |         | (1,427        | )       |        |              | (14,325 | )      |          |       | (118,198 | )             |          |         |             |         |         |         |        |         |        |         |       |         |        |        |        |        
|                                               |                                                |                                                                 |                                      |         |              |         |              |   |   |        |         |         |           |         |         |              |        |         |               |         |        |              |         |        |          |       |          |               |          |         |              |         |        
|                                               |                                                | $                                                               | 136,983                              |         |              | $       |             |   |   | $      | 176,409 |         |           | $       | 13,651  |              |        | $       | 43,967        |         |        | $            | 84,240  |        |          | $     | (202,193 | )             |          | $       | 253,057      |         |         | $       | (42,495 | )       |        | $       | 44,924 |         |        | $      | 255,486 |        
|                                               |                                                |                                                                 |                                      |         |              |         |              |   |   |        |         |         |           |         |         |              |        |         |               |         |        |              |         |        |          |       |          |               |          |         |              |         |        
|                                              
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
|CURRENT LIABILITIES:                           |                                                |                                                                 |                                      |         |              |         |              |   |   |        |         |         |           |         |         |              |        |         |               |         |        |              |         |        |          |       |          |               |          |         |              |         |         |         |         |         |        |         |        |         |        |        |         |        
|                                               | Cash overdraft                                 |                                                                 | $                                    |        |              |         | $            |  |   |        | $       | 190     |           |         | $       |             |        |         | $             |        |        |              | $       |       |          |       | $        |              |          |         | $            | 190     |         |         | $       |        |        |         | $      |        |        |        | $       | 190     |        
|                                               | Loan payable to banks                          |                                                                 |                                      | 8,000   |              |         |              |  |   |        |         |        |           |         |         |             |        |         |               |        |        |              |         | 38     |          |       |          |              |          |         |              | 8,038   |         |         |         |        |        |         |        |        |        |        |         | 8,038   |        
|                                               | Current portion of long-term debt              |                                                                 |                                      |        |              |         |              |  |   |        |         |        |           |         |         |             |        |         |               |        |        |              |         | 1,625  |          |       |          |              |          |         |              | 1,625   |         |         |         |        |        |         |        |        |        |        |         | 1,625   |        
|                                               | Accounts payable                               |                                                                 |                                      | 1,683   |              |         |              |  |   |        |         | 20,137  |           |         |         |             |        |         |               | 3,320   |        |              |         | 11,207 |          |       |          |              |          |         |              | 36,347  |         |         |         | 69      |        |         |        |        |        |        |         | 36,416  |        
|                                               | Accrued expenses and other                     |                                                                 |                                      | 10,910  |              |         |              |  |   |        |         | 9,222   |           |         |         | 248          |        |         |               | 21,195  |        |              |         | 12,240 |          |       |          |               |          |         |              | 53,815  |         |         |         | 476     |        |         |        |         |        |        |         | 54,291  |        
|                                               |                                                |                                                                 |                                      |         |              |         |              |   |   |        |         |         |           |         |         |              |        |         |               |         |        |              |         |        |          |       |          |               |          |         |              |         |        
|                                               |                                                | TOTAL CURRENT LIABILITIES                                       |                                      |         | 20,593       |         |              |   |  |        |         |         | 29,549    |         |         |              | 248    |         |               |         | 24,515 |              |         |        | 25,110   |       |          |               |         |         |              |         | 100,015 |         |         |         | 545    |         |        |         |       |        |         |         | 100,560 |        
|                                               |                                                |                                                                 |                                      |         |              |         |              |   |   |        |         |         |           |         |         |              |        |         |               |         |        |              |         |        |          |       |          |               |          |         |              |         |        
|Long-term debt                                 |                                                |                                                                 | 151,236                              |         |              |         |             |   |   |        |        |         |           |         | 24,284  |              |        |         |              |         |        |              | 981     |        |          |       |         |               |          |         | 176,501      |         |         |         | 30,691  |         |        |         |       |         |        |        | 207,192 |        
|Other liabilities                              |                                                |                                                                 | 10,078                               |         |              |         |             |   |   |        | 5,364   |         |           |         |        |              |        |         | 1,856         |         |        |              | 4,167   |        |          |       |         |               |          |         | 21,465       |         |         |         |        |         |        |         |       |         |        |        | 21,465  |        
|Intercompany debt                              |                                                |                                                                 |                                     |         |              |         |             |   |   |        | 28,047  |         |           |         | 6,591   |              |        |         | 35,065        |         |        |              | 48,495  |        |          |       | (118,198 | )             |          |         |             |         |         |         |        |         |        |         |       |         |        |        |        |        
|                                               |                                                |                                                                 |                                      |         |              |         |              |   |   |        |         |         |           |         |         |              |        |         |               |         |        |              |         |        |          |       |          |               |          |         |              |         |        
|                                               |                                                | TOTAL LIABILITIES                                               |                                      |         | 181,907      |         |              |   |  |        |         |         | 62,960    |         |         |              | 31,123 |         |               |         | 61,436 |              |         |        | 78,753   |       |          |               | (118,198 | )       |              |         | 297,981 |         |         |         | 31,236 |         |        |         |       |        |         |         | 329,217 |        
|                                               |                                                |                                                                 |                                      |         |              |         |              |   |   |        |         |         |           |         |         |              |        |         |               |         |        |              |         |        |          |       |          |               |          |         |              |         |        
|STOCKHOLDERS EQUITY (DEFICIT):                |                                                |                                                                 |                                      |         |              |         |              |   |   |        |         |         |           |         |         |              |        |         |               |         |        |              |         |        |          |       |          |               |          |         |              |         |         |         |         |         |        |         |        |         |        |        |         |        
|                                               | Series A preferred stock                       |                                                                 |                                      | 521     |              |         |              |  |   |        |         |        |           |         |         |             |        |         |               |        |        |              |         |       |          |       |          |              |          |         |              | 521     |         |         |         | 521     |        |         |        | (521    | )      |        |         | 521     |        
|                                               | Common stock                                   |                                                                 |                                      | 2       |              |         |              |  |   |        |         | 33      |           |         |         |             |        |         |               |        |        |              |         |       |          |       |          | (33           | )        |         |              | 2       |         |         |         | 2       |        |         |        | (2      | )      |        |         | 2       |        
|                                               | Paid-in capital                                |                                                                 |                                      | 27,260  |              |         |              |  |   |        |         | 108,383 |           |         |         | 21           |        |         |               | 52      |        |              |         | 1,537  |          |       |          | (109,993      | )        |         |              | 27,260  |         |         |         | 860     |        |         |        | (27,260 | )      |        |         | 860     |        
|                                               | Retained earnings (accumulated deficit)        |                                                                 |                                      | (74,379 | )            |         |              |  |   |        |         | 5,188   |           |         |         | (21,445      | )      |         |               | (21,473 | )      |              |         | 6,074  |          |       |          | 31,656        |          |         |              | (74,379 | )       |         |         | (76,786 | )      |         |        | 74,379  |        |        |         | (76,786 | )      
|                                               | Accumulated other comprehensive income (loss): |                                                                 |                                      |         |              |         |              |   |   |        |         |         |           |         |         |              |        |         |               |         |        |              |         |        |          |       |          |               |          |         |              |         |         |         |         |         |        |         |        |         |        |        |         |         |        
|                                               |                                                | Gain on derivative instruments, net of income taxes             |                                      |         | 123          |         |              |   |  |        |         |         | 123       |         |         |              |       |         |               |         |       |              |         |        |         |       |          |               | (123     | )       |              |         | 123     |         |         |         | 123    |         |        |         | (123   | )      |         |         | 123     |        
|                                               |                                                | Cumulative currency translation adjustment, net of income taxes |                                      |         | 1,549        |         |              |   |  |        |         |         | (278      | )       |         |              | 3,952  |         |               |         | 3,952  |              |         |        | (2,124   | )     |          |               | (5,502   | )       |              |         | 1,549   |         |         |         | 1,549  |         |        |         | (1,549 | )      |         |         | 1,549   |        
|                                               |                                                |                                                                 |                                      |         |              |         |              |   |   |        |         |         |           |         |         |              |        |         |               |         |        |              |         |        |          |       |          |               |          |         |              |         |        
|                                               |                                                |                                                                 | TOTAL STOCKHOLDERS EQUITY (DEFICIT) |         |              | (44,924 | )            |   |   |       |         |         |           | 113,449 |         |              |        | (17,472 | )             |         |        | (17,469      | )       |        |          | 5,487 |          |               |          | (83,995 | )            |         |         | (44,924 | )       |         |        | (73,731 | )      |         |        | 44,924 |         |         |         | (73,731 | )
|                                               |                                                |                                                                 |                                      |         |              |         |              |   |   |        |         |         |           |         |         |              |        |         |               |         |        |              |         |        |          |       |          |               |          |         |              |         |        
|                                               |                                                | $                                                               | 136,983                              |         |              | $       |             |   |   | $      | 176,409 |         |           | $       | 13,651  |              |        | $       | 43,967        |         |        | $            | 84,240  |        |          | $     | (202,193 | )             |          | $       | 253,057      |         |         | $       | (42,495 | )       |        | $       | 44,924 |         |        | $      | 255,486 |        
|                                               |                                                |                                                                 |                                      |         |              |         |              |   |   |        |         |         |           |         |         |              |        |         |               |         |        |              |         |        |          |       |          |               |          |         |              |         |        



F-41



---



##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




CONSOLIDATING STATEMENT OF OPERATIONS


For the Year Ended June 30, 2005


|                                                                              |                                                                        |                   |        |         |              |   |                |   |   |        |         |        |           |   |    |               |         |   |               |         |         |              |         |        |          |   |         |               |        |   |              |         |         |   |   |         |         |   |   |         |        |   |         |         |         |  
|----------------------------------------------------------------------------- | ---------------------------------------------------------------------- | ----------------- | ------ | ------- | ------------ | - | -------------- | - | - | ------ | ------- | ------ | --------- | - | -- | ------------- | ------- | - | ------------- | ------- | ------- | ------------ | ------- | ------ | -------- | - | ------- | ------------- | ------ | - | ------------ | ------- | ------- | - | - | ------- | ------- | - | - | ------- | ------ | - | ------- | ------- | ------- | -
|                                                                              |                                                                        | Parent            |        |         | Unrestricted |   | U.S. Guarantor |   |   | Dutch  |         |        | Belgium   |   |    | Non-Guarantor |         |   | Consolidation |         |         | PAHC         |         |        | Holdings |   |         | Consolidation |        |   | Holdings     |        
|                                                                              |                                                                        | Issuer            |        |         | Subsidiaries |   | Subsidiaries   |   |   | Issuer |         |        | Guarantor |   |    | Subsidiaries  |         |   | Adjustments   |         |         | Consolidated |         |        | Issuer   |   |         | Adjustments   |        |   | Consolidated |        
|                                                                              |                                                                        |                   |        |         |              |   |                |   |   |        |         |        |           |   |    |               |         |   |               |         |         |              |         |        |          |   |         |               |        |   |              |        
|NET SALES                                                                     |                                                                        | $                 | 23,877 |         |              | $ |               |   |   | $      | 227,643 |        |           | $ |   |               |         | $ | 10,276        |         |         | $            | 102,583 |        |          | $ |        |               |        | $ | 364,379      |         |         | $ |  |         |         | $ |  |         |        | $ | 364,379 |        
|NET SALES  INTERCOMPANY                                                      |                                                                        |                   | 173    |         |              |   |               |   |   |        | 265     |        |           |   |   |               |         |   | 30,298        |         |         |              | 7,417   |        |          |   | (38,153 | )             |        |   |             |         |         |   |  |         |         |   |  |         |        |   |        |        
|COST OF GOODS SOLD (includes Belgium Plant Transactions costs of
    $22,191) |                                                                        |                   | 18,503 |         |              |   |               |   |   |        | 167,734 |        |           |   |   |               |         |   | 55,688        |         |         |              | 89,314  |        |          |   | (38,153 | )             |        |   | 293,086      |         |         |   |  |         |         |   |  |         |        |   | 293,086 |        
|                                                                              |                                                                        |                   |        |         |              |   |                |   |   |        |         |        |           |   |    |               |         |   |               |         |         |              |         |        |          |   |         |               |        |   |              |         |        
|                                                                              | GROSS PROFIT                                                           |                   |        | 5,547   |              |   |                |  |   |        |         | 60,174 |           |   |    |              |         |   |               | (15,114 | )       |              |         | 20,686 |          |   |         |              |        |   |              | 71,293  |         |   |   |        |         |   |   |        |        |   |         | 71,293  |        
|SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                  |                                                                        |                   | 18,694 |         |              |   |               |   |   |        | 29,424  |        |           |   | 17 |               |         |   | 2,345         |         |         |              | 16,431  |        |          |   |        |               |        |   | 66,911       |         |         |   |  |         |         |   |  |         |        |   | 66,911  |        
|                                                                              |                                                                        |                   |        |         |              |   |                |   |   |        |         |        |           |   |    |               |         |   |               |         |         |              |         |        |          |   |         |               |        |   |              |         |        
|                                                                              | OPERATING INCOME (LOSS)                                                |                   |        | (13,147 | )            |   |                |  |   |        |         | 30,750 |           |   |    | (17           | )       |   |               | (17,459 | )       |              |         | 4,255  |          |   |         |              |        |   |              | 4,382   |         |   |   |        |         |   |   |        |        |   |         | 4,382   |        
|OTHER:                                                                        |                                                                        |                   |        |         |              |   |                |   |   |        |         |        |           |   |    |               |         |   |               |         |         |              |         |        |          |   |         |               |        |   |              |         |         |   |   |         |         |   |   |         |        |   |         |        
|                                                                              | Interest expense                                                       |                   |        | 21,662  |              |   |                |  |   |        |         |       |           |   |    | 2,877         |         |   |               | 61      |         |              |         | 742    |          |   |         |              |        |   |              | 25,342  |         |   |   | 2,434   |         |   |   |        |        |   |         | 27,776  |        
|                                                                              | Interest (income)                                                      |                   |        | (12     | )            |   |                |  |   |        |         | (8     | )         |   |    |              |         |   |               |        |         |              |         | (100   | )        |   |         |              |        |   |              | (120    | )       |   |   | (29     | )       |   |   |        |        |   |         | (149    | )      
|                                                                              | Other (income) expense, net                                            |                   |        | (707    | )            |   |                |  |   |        |         | (10    | )         |   |    |              |         |   |               | 62      |         |              |         | (1,204 | )        |   |         |              |        |   |              | (1,859  | )       |   |   |        |         |   |   |        |        |   |         | (1,859  | )      
|                                                                              | Intercompany interest and other                                        |                   |        | (26,862 | )            |   |                |  |   |        |         | 20,754 |           |   |    | (2,909        | )       |   |               | 4,073   |         |              |         | 4,944  |          |   |         |              |        |   |              |        |         |   |   |        |         |   |   |        |        |   |         |        |        
|                                                                              | Loss relating to subsidiaries                                          |                   |        | 12,657  |              |   |                |  |   |        |         |       |           |   |    | 18,716        |         |   |               |        |         |              |         |       |          |   |         | (31,373       | )      |   |              |        |         |   |   | 21,101  |         |   |   | (21,101 | )      |   |         |        |        
|                                                                              |                                                                        |                   |        |         |              |   |                |   |   |        |         |        |           |   |    |               |         |   |               |         |         |              |         |        |          |   |         |               |        |   |              |         |        
|                                                                              | INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES           |                   |        | (19,885 | )            |   |                |  |   |        |         | 10,014 |           |   |    | (18,701       | )       |   |               | (21,655 | )       |              |         | (127   | )        |   |         | 31,373        |        |   |              | (18,981 | )       |   |   | (23,506 | )       |   |   | 21,101  |        |   |         | (21,386 | )      
|PROVISION (BENEFIT) FOR INCOME TAXES                                          |                                                                        |                   | 1,216  |         |              |   |               |   |   |        | 487     |        |           |   |   |               |         |   | (2,939        | )       |         |              | 3,356   |        |          |   |        |               |        |   | 2,120        |         |         |   | 2 |         |         |   |  |         |        |   | 2,122   |        
|                                                                              |                                                                        |                   |        |         |              |   |                |   |   |        |         |        |           |   |    |               |         |   |               |         |         |              |         |        |          |   |         |               |        |   |              |         |        
|                                                                              | INCOME (LOSS) FROM CONTINUING OPERATIONS                               |                   |        | (21,101 | )            |   |                |  |   |        |         | 9,527  |           |   |    | (18,701       | )       |   |               | (18,716 | )       |              |         | (3,483 | )        |   |         | 31,373        |        |   |              | (21,101 | )       |   |   | (23,508 | )       |   |   | 21,101  |        |   |         | (23,508 | )      
|DISCONTINUED OPERATIONS:                                                      |                                                                        |                   |        |         |              |   |                |   |   |        |         |        |           |   |    |               |         |   |               |         |         |              |         |        |          |   |         |               |        |   |              |         |         |   |   |         |         |   |   |         |        |   |         |        
|                                                                              | Income from discontinued operations, net of income taxes               |                   |        |        |              |   |                |  |   |        |         |       |           |   |    |              |         |   |               |        |         |              |         | 671    |          |   |         |              |        |   |              | 671     |         |   |   |        |         |   |   |        |        |   |         | 671     |        
|                                                                              | Gain from disposal of discontinued operations, net of income
    taxes |                   |        | 253     |              |   |                |  |   |        |         |       |           |   |    |              |         |   |               |        |         |              |         | 512    |          |   |         |              |        |   |              | 765     |         |   |   |        |         |   |   |        |        |   |         | 765     |        
|                                                                              | Income relating to discontinued operations                             |                   |        | 1,183   |              |   |                |  |   |        |         |       |           |   |    |              |         |   |               |        |         |              |         |       |          |   |         | (1,183        | )      |   |              |        |         |   |   | 1,436   |         |   |   | (1,436  | )      |   |         |        |        
|                                                                              |                                                                        |                   |        |         |              |   |                |   |   |        |         |        |           |   |    |               |         |   |               |         |         |              |         |        |          |   |         |               |        |   |              |         |        
|                                                                              |                                                                        | NET INCOME (LOSS) |        | $       | (19,665      | ) |                | $ |  |        |         | $      | 9,527     |   |    | $             | (18,701 | ) |               | $       | (18,716 | )            |         | $      | (2,300   | ) |         | $             | 30,190 |   |              | $       | (19,665 | ) |   | $       | (22,072 | ) |   | $       | 19,665 |   |         | $       | (22,072 | )
|                                                                              |                                                                        |                   |        |         |              |   |                |   |   |        |         |        |           |   |    |               |         |   |               |         |         |              |         |        |          |   |         |               |        |   |              |         |        



F-42



---



##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




CONSOLIDATING STATEMENT OF CASH FLOWS


For the Year Ended June 30, 2005


|                                                 |                                                                                                                            |                                                                                                                     |                                                 |         |              |        |   |                |     |    |        |        |        |           |    |         |               |        |     |               |        |        |              |        |        |          |   |        |               |         |        |              |        |         |     |         |         |        |   |         |         |         |        |         |        |         |  
|------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | ------- | ------------ | ------ | - | -------------- | --- | -- | ------ | ------ | ------ | --------- | -- | ------- | ------------- | ------ | --- | ------------- | ------ | ------ | ------------ | ------ | ------ | -------- | - | ------ | ------------- | ------- | ------ | ------------ | ------ | ------- | --- | ------- | ------- | ------ | - | ------- | ------- | ------- | ------ | ------- | ------ | ------- | -
|                                                 |                                                                                                                            | Parent                                                                                                              |                                                 |         | Unrestricted |        |   | U.S. Guarantor |     |    | Dutch  |        |        | Belgium   |    |         | Non-Guarantor |        |     | Consolidation |        |        | PAHC         |        |        | Holdings |   |        | Consolidation |         |        | Holdings     |       
|                                                 |                                                                                                                            | Issuer                                                                                                              |                                                 |         | Subsidiaries |        |   | Subsidiaries   |     |    | Issuer |        |        | Guarantor |    |         | Subsidiaries  |        |     | Adjustments   |        |        | Consolidated |        |        | Issuer   |   |        | Adjustments   |         |        | Consolidated |       
|                                                 |                                                                                                                            |                                                                                                                     |                                                 |         |              |        |   |                |     |    |        |        |        |           |    |         |               |        |     |               |        |        |              |        |        |          |   |        |               |         |        |              |       
|OPERATING ACTIVITIES:                            |                                                                                                                            |                                                                                                                     |                                                 |         |              |        |   |                |     |    |        |        |        |           |    |         |               |        |     |               |        |        |              |        |        |          |   |        |               |         |        |              |        |         |     |         |         |        |   |         |         |         |        |        
|                                                 | Net income (loss)                                                                                                          |                                                                                                                     | $                                               | (19,665 | )            |        | $ |               |     |    | $      | 9,527  |        |           | $  | (18,701 | )             |        | $   | (18,716       | )      |        | $            | (2,300 | )      |          | $ | 30,190 |               |         | $      | (19,665      | )      |         | $   | (22,072 | )       |        | $ | 19,665  |         |         | $      | (22,072 | )     
|                                                 | Adjustment for discontinued operations                                                                                     |                                                                                                                     |                                                 | (1,436  | )            |        |   |               |     |    |        |       |        |           |    |        |               |        |     |              |        |        |              | (1,183 | )      |          |   | 1,183  |               |         |        | (1,436       | )      |         |     | (1,436  | )       |        |   | 1,436   |         |         |        | (1,436  | )     
|                                                 |                                                                                                                            |                                                                                                                     |                                                 |         |              |        |   |                |     |    |        |        |        |           |    |         |               |        |     |               |        |        |              |        |        |          |   |        |               |         |        |              |       
|                                                 | Income (loss) from continuing operations                                                                                   |                                                                                                                     |                                                 | (21,101 | )            |        |   |               |     |    |        | 9,527  |        |           |    | (18,701 | )             |        |     | (18,716       | )      |        |              | (3,483 | )      |          |   | 31,373 |               |         |        | (21,101      | )      |         |     | (23,508 | )       |        |   | 21,101  |         |         |        | (23,508 | )     
|                                                 | Adjustments to reconcile income (loss) from continuing
    operations to net cash provided (used) by operating activities: |                                                                                                                     |                                                 |         |              |        |   |                |     |    |        |        |        |           |    |         |               |        |     |               |        |        |              |        |        |          |   |        |               |         |        |              |        |         |     |         |         |        |   |         |         |         |        |         |       
|                                                 |                                                                                                                            | Depreciation and amortization (includes accelerated depreciation
    from the Belgium Plant Transactions of $7,467) |                                                 |         | 246          |        |   |                |    |    |        |        | 2,829  |           |    |         |              |        |     |               | 10,489 |        |              |        | 4,542  |          |   |        |              |         |        |              | 18,106 |         |     |         |        |        |   |         |        |         |        |         | 18,106 |        
|                                                 |                                                                                                                            | Amortization of deferred financing costs                                                                            |                                                 |         | 2,974        |        |   |                |    |    |        |        |       |           |    |         |              |        |     |               |       |        |              |        |       |          |   |        |              |         |        |              | 2,974  |         |     |         | 316     |        |   |         |        |         |        |         | 3,290  |        
|                                                 |                                                                                                                            | Deferred income taxes                                                                                               |                                                 |         |             |        |   |                |    |    |        |        |       |           |    |         |              |        |     |               | (2,124 | )      |              |        | 1,106  |          |   |        |              |         |        |              | (1,018 | )       |     |         |        |        |   |         |        |         |        |         | (1,018 | )      
|                                                 |                                                                                                                            | Net gain from sales of assets                                                                                       |                                                 |         | (643         | )      |   |                |    |    |        |        | (823   | )         |    |         |              |        |     |               |       |        |              |        | (76    | )        |   |        |              |         |        |              | (1,542 | )       |     |         |        |        |   |         |        |         |        |         | (1,542 | )      
|                                                 |                                                                                                                            | Effects of changes in foreign currency                                                                              |                                                 |         |             |        |   |                |    |    |        |        | (731   | )         |    |         |              |        |     |               | 62     |        |              |        | (30    | )        |   |        |              |         |        |              | (699   | )       |     |         |        |        |   |         |        |         |        |         | (699   | )      
|                                                 |                                                                                                                            | Other                                                                                                               |                                                 |         | 291          |        |   |                |    |    |        |        | 294    |           |    |         |              |        |     |               |       |        |              |        | 267    |          |   |        |              |         |        |              | 852    |         |     |         |        |        |   |         |        |         |        |         | 852    |        
|                                                 |                                                                                                                            | Changes in operating assets and liabilities:                                                                        |                                                 |         |              |        |   |                |     |    |        |        |        |           |    |         |               |        |     |               |        |        |              |        |        |          |   |        |               |         |        |              |        |         |     |         |         |        |   |         |         |         |        |         |        |        
|                                                 |                                                                                                                            |                                                                                                                     | Accounts receivable                             |         |              | (168   | ) |                |     |   |        |        |        | 2,460     |    |         |               |       |     |               |        | (1,482 | )            |        |        | 3,589    |   |        |               |        |        |              |        | 4,399   |     |         |         |       |   |         |         |        |        |         |        | 4,399   |  
|                                                 |                                                                                                                            |                                                                                                                     | Inventory                                       |         |              | (675   | ) |                |     |   |        |        |        | 2,906     |    |         |               |       |     |               |        | (7,084 | )            |        |        | (9,398   | ) |        |               |        |        |              |        | (14,251 | )   |         |         |       |   |         |         |        |        |         |        | (14,251 | )
|                                                 |                                                                                                                            |                                                                                                                     | Prepaid expenses and other                      |         |              | (1,102 | ) |                |     |   |        |        |        | 338       |    |         |               |       |     |               |        | (786   | )            |        |        | (1,230   | ) |        |               |        |        |              |        | (2,780  | )   |         |         |       |   |         |         |        |        |         |        | (2,780  | )
|                                                 |                                                                                                                            |                                                                                                                     | Other assets                                    |         |              | 804    |   |                |     |   |        |        |        | (23       | )  |         |               |       |     |               |        |       |              |        |        | (664     | ) |        |               |        |        |              |        | 117     |     |         |         |       |   |         |         |        |        |         |        | 117     |  
|                                                 |                                                                                                                            |                                                                                                                     | Intercompany                                    |         |              | 7,809  |   |                |     | 5  |        |        |        | (7,023    | )  |         |               | 14,386 |     |               |        | 7,871  |              |        |        | 8,325    |   |        |               | (31,373 | )      |              |        |        |     |         |         | 21,101 |   |         |         | (21,101 | )      |         |        |        |  
|                                                 |                                                                                                                            |                                                                                                                     | Accounts payable                                |         |              | (1,251 | ) |                |     | 6  |        |        |        | (8,325    | )  |         |               |       |     |               |        | 1,137  |              |        |        | (421     | ) |        |               |        |        |              |        | (8,854  | )   |         |         | 69     |   |         |         |        |        |         |        | (8,785  | )
|                                                 |                                                                                                                            |                                                                                                                     | Accrued expenses and other                      |         |              | 3,455  |   |                |     | (1 | )      |        |        | 1,512     |    |         |               | 31     |     |               |        | (1,628 | )            |        |        | 3,808    |   |        |               |        |        |              |        | 7,177   |     |         |         | 2,119  |   |         |         |        |        |         |        | 9,296   |  
|                                                 |                                                                                                                            |                                                                                                                     | Accrued costs of non-completed transaction      |         |              | (3,970 | ) |                |     |   |        |        |        |          |    |         |               |       |     |               |        |       |              |        |        |         |   |        |               |        |        |              |        | (3,970  | )   |         |         |       |   |         |         |        |        |         |        | (3,970  | )
|                                                 |                                                                                                                            |                                                                                                                     | Accrued costs of the Belgium Plant Transactions |         |              |       |   |                |     |   |        |        |        |          |    |         |               |       |     |               |        | 13,309 |              |        |        |         |   |        |               |        |        |              |        | 13,309  |     |         |         |       |   |         |         |        |        |         |        | 13,309  |  
|                                                 | Cash provided by discontinued operations                                                                                   |                                                                                                                     |                                                 | 765     |              |        |   |               |     |    |        |       |        |           |    |        |               |        |     |              |        |        |              | 257    |        |          |   |       |               |         |        | 1,022        |        |         |     |        |         |        |   |        |         |         |        | 1,022   |       
|                                                 |                                                                                                                            |                                                                                                                     |                                                 |         |              |        |   |                |     |    |        |        |        |           |    |         |               |        |     |               |        |        |              |        |        |          |   |        |               |         |        |              |       
|                                                 |                                                                                                                            | NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES                                                                    |                                                 |         | (12,566      | )      |   |                | 10  |    |        |        | 2,941  |           |    |         | (4,284        | )      |     |               | 1,048  |        |              |        | 6,592  |          |   |        |              |         |        |              | (6,259 | )       |     |         | 97      |        |   |         |        |         |        |         | (6,162 | )      
|                                                 |                                                                                                                            |                                                                                                                     |                                                 |         |              |        |   |                |     |    |        |        |        |           |    |         |               |        |     |               |        |        |              |        |        |          |   |        |               |         |        |              |       
|INVESTING ACTIVITIES:                            |                                                                                                                            |                                                                                                                     |                                                 |         |              |        |   |                |     |    |        |        |        |           |    |         |               |        |     |               |        |        |              |        |        |          |   |        |               |         |        |              |        |         |     |         |         |        |   |         |         |         |        |        
|                                                 | Capital expenditures                                                                                                       |                                                                                                                     |                                                 | (1,232  | )            |        |   |               |     |    |        | (2,527 | )      |           |    |        |               |        |     | (1,001        | )      |        |              | (2,729 | )      |          |   |       |               |         |        | (7,489       | )      |         |     |        |         |        |   |        |         |         |        | (7,489  | )     
|                                                 | Proceeds from sale of assets                                                                                               |                                                                                                                     |                                                 | 2,418   |              |        |   |               |     |    |        | 1,366  |        |           |    |        |               |        |     |              |        |        |              | 33     |        |          |   |       |               |         |        | 3,817        |        |         |     |        |         |        |   |        |         |         |        | 3,817   |       
|                                                 | Other investing                                                                                                            |                                                                                                                     |                                                 | (1,101  | )            |        |   |               |     |    |        |       |        |           |    |        |               |        |     |              |        |        |              |       |        |          |   |       |               |         |        | (1,101       | )      |         |     | (26,400 | )       |        |   | 26,400  |         |         |        | (1,101  | )     
|                                                 | Discontinued operations                                                                                                    |                                                                                                                     |                                                 | 940     |              |        |   |               |     |    |        |       |        |           |    |        |               |        |     |              |        |        |              | 3,855  |        |          |   |       |               |         |        | 4,795        |        |         |     |        |         |        |   |        |         |         |        | 4,795   |       
|                                                 |                                                                                                                            |                                                                                                                     |                                                 |         |              |        |   |                |     |    |        |        |        |           |    |         |               |        |     |               |        |        |              |        |        |          |   |        |               |         |        |              |       
|                                                 |                                                                                                                            | NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES                                                                    |                                                 |         | 1,025        |        |   |                |    |    |        |        | (1,161 | )         |    |         |              |        |     |               | (1,001 | )      |              |        | 1,159  |          |   |        |              |         |        |              | 22     |         |     |         | (26,400 | )      |   |         | 26,400  |         |        |         | 22     |        
|                                                 |                                                                                                                            |                                                                                                                     |                                                 |         |              |        |   |                |     |    |        |        |        |           |    |         |               |        |     |               |        |        |              |        |        |          |   |        |               |         |        |              |       
|FINANCING ACTIVITIES:                            |                                                                                                                            |                                                                                                                     |                                                 |         |              |        |   |                |     |    |        |        |        |           |    |         |               |        |     |               |        |        |              |        |        |          |   |        |               |         |        |              |        |         |     |         |         |        |   |         |         |         |        |        
|                                                 | Net (decrease) in cash overdraft                                                                                           |                                                                                                                     |                                                 |        |              |        |   | (10            | )   |    |        | (691   | )      |           |    |        |               |        |     |              |        |        |              |       |        |          |   |       |               |         |        | (701         | )      |         |     |        |         |        |   |        |         |         |        | (701    | )     
|                                                 | Net increase (decrease) in short-term debt                                                                                 |                                                                                                                     |                                                 | (2,996  | )            |        |   |               |     |    |        |       |        |           |    |        |               |        |     |              |        |        |              | 38     |        |          |   |       |               |         |        | (2,958       | )      |         |     |        |         |        |   |        |         |         |        | (2,958  | )     
|                                                 | Proceeds from long-term debt                                                                                               |                                                                                                                     |                                                 | 19,107  |              |        |   |               |     |    |        |       |        |           |    | 4,284   |               |        |     |              |        |        |              | 901    |        |          |   |       |               |         |        | 24,292       |        |         |     | 29,000  |         |        |   |        |         |         |        | 53,292  |       
|                                                 | Payments of long-term debt                                                                                                 |                                                                                                                     |                                                 |        |              |        |   |               |     |    |        | (103   | )      |           |    |        |               |        |     |              |        |        |              | (4,564 | )      |          |   |       |               |         |        | (4,667       | )      |         |     |        |         |        |   |        |         |         |        | (4,667  | )     
|                                                 | Proceeds from capital contribution from PAHC Holdings Corporation                                                          |                                                                                                                     |                                                 | 26,400  |              |        |   |               |     |    |        |       |        |           |    |        |               |        |     |              |        |        |              |       |        |          |   |       |               |         |        | 26,400       |        |         |     |        |         |        |   | (26,400 | )       |         |        |        |       
|                                                 | Redemption of Series C preferred stock                                                                                     |                                                                                                                     |                                                 | (26,400 | )            |        |   |               |     |    |        |       |        |           |    |        |               |        |     |              |        |        |              |       |        |          |   |       |               |         |        | (26,400      | )      |         |     |        |         |        |   |        |         |         |        | (26,400 | )     
|                                                 | Debt financing costs                                                                                                       |                                                                                                                     |                                                 | (2,216  | )            |        |   |               |     |    |        |       |        |           |    |        |               |        |     |              |        |        |              |       |        |          |   |       |               |         |        | (2,216       | )      |         |     | (2,101  | )       |        |   |        |         |         |        | (4,317  | )     
|                                                 |                                                                                                                            |                                                                                                                     |                                                 |         |              |        |   |                |     |    |        |        |        |           |    |         |               |        |     |               |        |        |              |        |        |          |   |        |               |         |        |              |       
|                                                 |                                                                                                                            | NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES                                                                    |                                                 |         | 13,895       |        |   |                | (10 | )  |        |        | (794   | )         |    |         | 4,284         |        |     |               |       |        |              |        | (3,625 | )        |   |        |              |         |        |              | 13,750 |         |     |         | 26,899  |        |   |         | (26,400 | )       |        |         | 14,249 |        
|                                                 |                                                                                                                            |                                                                                                                     |                                                 |         |              |        |   |                |     |    |        |        |        |           |    |         |               |        |     |               |        |        |              |        |        |          |   |        |               |         |        |              |       
|EFFECT OF EXCHANGE RATE CHANGES ON CASH          |                                                                                                                            |                                                                                                                     |                                                |         |              |        |  |                |     |    |       |        |        |           |   |         |               |        | (4  | )             |        |        | (76          | )      |        |          |   |        |               |         | (80    | )            |        |         |    |         |         |        |   |         |         |         | (80    | )      
|                                                 |                                                                                                                            |                                                                                                                     |                                                 |         |              |        |   |                |     |    |        |        |        |           |    |         |               |        |     |               |        |        |              |        |        |          |   |        |               |         |        |              |       
|NET INCREASE IN CASH AND CASH EQUIVALENTS        |                                                                                                                            |                                                                                                                     | 2,354                                           |         |              |        |  |                |     |    | 986    |        |        |           |   |         |               |        | 43  |               |        |        | 4,050        |        |        |          |  |        |               |         | 7,433  |              |        |         | 596 |         |         |        |  |         |         |         | 8,029  |        
|CASH AND CASH EQUIVALENTS at beginning of period |                                                                                                                            |                                                                                                                     | 136                                             |         |              |        |  |                |     |    | 801    |        |        |           | 17 |         |               |        | 212 |               |        |        | 4,402        |        |        |          |   |        |               |         | 5,568  |              |        |         |    |         |         |        |   |         |         |         | 5,568  |        
|                                                 |                                                                                                                            |                                                                                                                     |                                                 |         |              |        |   |                |     |    |        |        |        |           |    |         |               |        |     |               |        |        |              |        |        |          |   |        |               |         |        |              |       
|CASH AND CASH EQUIVALENTS at end of period       |                                                                                                                            | $                                                                                                                   | 2,490                                           |         |              | $      |  |                |     | $  | 1,787  |        |        | $         | 17 |         |               | $      | 255 |               |        | $      | 8,452        |        |        | $        |  |        |               | $       | 13,001 |              |        | $       | 596 |         |         | $      |  |         |         | $       | 13,597 |        
|                                                 |                                                                                                                            |                                                                                                                     |                                                 |         |              |        |   |                |     |    |        |        |        |           |    |         |               |        |     |               |        |        |              |        |        |          |   |        |               |         |        |              |       

F-43



---



##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


CONSOLIDATING BALANCE SHEET


As of June 30, 2004


|                                               |                                                  |                                                                 |                                      |         |              |         |        |                |   |        |         |         |      |           |        |        |               |        |        |               |       |        |              |        |         |        |          |          |       |          |         |         |        |         |  
|---------------------------------------------- | ------------------------------------------------ | --------------------------------------------------------------- | ------------------------------------ | ------- | ------------ | ------- | ------ | -------------- | - | ------ | ------- | ------- | ---- | --------- | ------ | ------ | ------------- | ------ | ------ | ------------- | ----- | ------ | ------------ | ------ | ------- | ------ | -------- | -------- | ----- | -------- | ------- | ------- | ------ | ------- | -
|                                               |                                                  | Parent                                                          |                                      |         | Unrestricted |         |        | U.S. Guarantor |   |        | Dutch   |         |      | Belgium   |        |        | Non-Guarantor |        |        | Consolidation |       |        | Consolidated |       
|                                               |                                                  | Issuer                                                          |                                      |         | Subsidiaries |         |        | Subsidiaries   |   |        | Issuer  |         |      | Guarantor |        |        | Subsidiaries  |        |        | Adjustments   |       |        | Balance      |       
|                                               |                                                  |                                                                 |                                      |         |              |         |        |                |   |        |         |         |      |           |        |        |               |        |        |               |       |        |              |       
|ASSETS                                        
|CURRENT ASSETS:                                |                                                  |                                                                 |                                      |         |              |         |        |                |   |        |         |         |      |           |        |        |               |        |        |               |       |        |              |        |         |        |          |          |       |          |         |        
|                                               | Cash and cash equivalents                        |                                                                 | $                                    | 136     |              |         | $      |               |   |        | $       | 801     |      |           | $      | 17     |               |        | $      | 212           |       |        | $            | 4,402  |         |        | $        |         |       |          | $       | 5,568   |       
|                                               | Trade receivables                                |                                                                 |                                      | 2,670   |              |         |        |               |   |        |         | 26,996  |      |           |        |       |               |        |        | 2,592         |       |        |              | 24,959 |         |        |          |         |       |          |         | 57,217  |       
|                                               | Other receivables                                |                                                                 |                                      | 317     |              |         |        | 414            |   |        |         | 1,195   |      |           |        |       |               |        |        | 72            |       |        |              | 768    |         |        |          |         |       |          |         | 2,766   |       
|                                               | Inventory                                        |                                                                 |                                      | 1,994   |              |         |        |               |   |        |         | 37,890  |      |           |        |       |               |        |        | 23,159        |       |        |              | 15,519 |         |        |          |          |       |          |         | 78,562  |       
|                                               | Prepaid expenses and other                       |                                                                 |                                      | 3,195   |              |         |        | 110            |   |        |         | 565     |      |           |        |       |               |        |        | 1,018         |       |        |              | 3,703  |         |        |          |         |       |          |         | 8,591   |       
|                                               | Current assets from discontinued operations      |                                                                 |                                      |        |              |         |        |               |   |        |         |        |      |           |        |       |               |        |        |              |       |        |              | 1,886  |         |        |          |         |       |          |         | 1,886   |       
|                                               |                                                  |                                                                 |                                      |         |              |         |        |                |   |        |         |         |      |           |        |        |               |        |        |               |       |        |              |       
|                                               |                                                  |                                                                 | TOTAL CURRENT ASSETS                 |         |              | 8,312   |        |                |   | 524    |         |         |      | 67,447    |        |        |               | 17     |        |               |       | 27,053 |              |        |         | 51,237 |          |          |       |         |         |         |        | 154,590 |  
|                                               |                                                  |                                                                 |                                      |         |              |         |        |                |   |        |         |         |      |           |        |        |               |        |        |               |       |        |              |       
|Property, plant & equipment, net               |                                                  |                                                                 | 105                                  |         |              |         |       |                |   |        | 13,730  |         |      |           |       |        |               |        | 17,321 |               |       |        | 24,225       |        |         |        |         |          |       |          | 55,381  |        
|Intangibles, net                               |                                                  |                                                                 |                                     |         |              |         |       |                |   |        | 4,252   |         |      |           |       |        |               |        | 1,569  |               |       |        | 5,874        |        |         |        |         |          |       |          | 11,695  |        
|Other assets                                   |                                                  |                                                                 | 14,506                               |         |              |         |       |                |   |        | 1,056   |         |      |           |       |        |               |        |       |               |       |        | 736          |        |         |        |         |          |       |          | 16,298  |        
|Other assets from discontinued operations      |                                                  |                                                                 |                                     |         |              |         |       |                |   |        |        |         |      |           |       |        |               |        |       |               |       |        | 3,405        |        |         |        |         |          |       |          | 3,405   |        
|Investment in subsidiaries                     |                                                  |                                                                 | 125,355                              |         |              |         |       |                |   |        |        |         |      |           | 1,604  |        |               |        |       |               |       |        |             |        |         |        | (126,959 | )        |       |          |        |        
|Intercompany                                   |                                                  |                                                                 | (14,995                              | )       |              |         | 20,995 |                |   |        | 60,030  |         |      |           | 20,181 |        |               |        | 1,630  |               |       |        | (12,497      | )      |         |        | (75,344  | )        |       |          |        |        
|                                               |                                                  |                                                                 |                                      |         |              |         |        |                |   |        |         |         |      |           |        |        |               |        |        |               |       |        |              |       
|                                               |                                                  | $                                                               | 133,283                              |         |              | $       | 21,519 |                |   | $      | 146,515 |         |      | $         | 21,802 |        |               | $      | 47,573 |               |       | $      | 72,980       |        |         | $      | (202,303 | )        |       | $        | 241,369 |        
|                                               |                                                  |                                                                 |                                      |         |              |         |        |                |   |        |         |         |      |           |        |        |               |        |        |               |       |        |              |       
|                                              
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
|CURRENT LIABILITIES:                           |                                                  |                                                                 |                                      |         |              |         |        |                |   |        |         |         |      |           |        |        |               |        |        |               |       |        |              |        |         |        |          |          |       |          |         |        
|                                               | Cash overdraft                                   |                                                                 | $                                    |        |              |         | $      | 10             |   |        | $       | 881     |      |           | $      |       |               |        | $      |              |       |        | $            |       |         |        | $        |         |       |          | $       | 891     |       
|                                               | Loan payable to banks                            |                                                                 |                                      | 10,996  |              |         |        |               |   |        |         |        |      |           |        |       |               |        |        |              |       |        |              |       |         |        |          |         |       |          |         | 10,996  |       
|                                               | Current portion of long-term debt                |                                                                 |                                      |        |              |         |        |               |   |        |         | 101     |      |           |        |       |               |        |        |              |       |        |              | 1,250  |         |        |          |         |       |          |         | 1,351   |       
|                                               | Accounts payable                                 |                                                                 |                                      | 4,734   |              |         |        | 9              |   |        |         | 28,434  |      |           |        |       |               |        |        | 2,258         |       |        |              | 11,329 |         |        |          |         |       |          |         | 46,764  |       
|                                               | Accrued expenses and other                       |                                                                 |                                      | 11,857  |              |         |        | 159            |   |        |         | 8,306   |      |           |        | 216    |               |        |        | 12,022        |       |        |              | 6,820  |         |        |          |          |       |          |         | 39,380  |       
|                                               | Current liabilities from discontinued operations |                                                                 |                                      |        |              |         |        |               |   |        |         |        |      |           |        |       |               |        |        |              |       |        |              | 838    |         |        |          |         |       |          |         | 838     |       
|                                               |                                                  |                                                                 |                                      |         |              |         |        |                |   |        |         |         |      |           |        |        |               |        |        |               |       |        |              |       
|                                               |                                                  |                                                                 | TOTAL CURRENT LIABILITIES            |         |              | 27,587  |        |                |   | 178    |         |         |      | 37,722    |        |        |               | 216    |        |               |       | 14,280 |              |        |         | 20,237 |          |          |       |         |         |         |        | 100,220 |  
|                                               |                                                  |                                                                 |                                      |         |              |         |        |                |   |        |         |         |      |           |        |        |               |        |        |               |       |        |              |       
|Long-term debt                                 |                                                  |                                                                 | 133,029                              |         |              |         |       |                |   |        | 2       |         |      |           | 20,000 |        |               |        |       |               |       |        | 4,987        |        |         |        |         |          |       |          | 158,018 |        
|Other liabilities                              |                                                  |                                                                 | 11,822                               |         |              |         |       |                |   |        | 4,897   |         |      |           |       |        |               |        | 1,136  |               |       |        | 4,431        |        |         |        |         |          |       |          | 22,286  |        
|Intercompany debt                              |                                                  |                                                                 |                                     |         |              |         |       |                |   |        |        |         |      |           |       |        |               |        | 30,553 |               |       |        | 44,791       |        |         |        | (75,344  | )        |       |          |        |        
|                                               |                                                  |                                                                 |                                      |         |              |         |        |                |   |        |         |         |      |           |        |        |               |        |        |               |       |        |              |       
|                                               |                                                  |                                                                 | TOTAL LIABILITIES                    |         |              | 172,438 |        |                |   | 178    |         |         |      | 42,621    |        |        |               | 20,216 |        |               |       | 45,969 |              |        |         | 74,446 |          |          |       | (75,344  | )       |         |        | 280,524 |  
|                                               |                                                  |                                                                 |                                      |         |              |         |        |                |   |        |         |         |      |           |        |        |               |        |        |               |       |        |              |       
|REDEEMABLE SECURITIES:                         |                                                  |                                                                 |                                      |         |              |         |        |                |   |        |         |         |      |           |        |        |               |        |        |               |       |        |              |        |         |        |          |          |       |          |         |        
|                                               | Series C preferred stock                         |                                                                 |                                      | 24,678  |              |         |        |               |   |        |         |        |      |           |        |       |               |        |        |              |       |        |              |       |         |        |          |         |       |          |         | 24,678  |       
|                                               |                                                  |                                                                 |                                      |         |              |         |        |                |   |        |         |         |      |           |        |        |               |        |        |               |       |        |              |       
|STOCKHOLDERS EQUITY (DEFICIT):                |                                                  |                                                                 |                                      |         |              |         |        |                |   |        |         |         |      |           |        |        |               |        |        |               |       |        |              |        |         |        |          |          |       |          |         |        
|                                               | Series A preferred stock                         |                                                                 |                                      | 521     |              |         |        |               |   |        |         |        |      |           |        |       |               |        |        |              |       |        |              |       |         |        |          |         |       |          |         | 521     |       
|                                               | Common stock                                     |                                                                 |                                      | 2       |              |         |        | 1              |   |        |         | 33      |      |           |        |       |               |        |        |              |       |        |              |       |         |        |          | (34      | )     |          |         | 2       |       
|                                               | Paid-in capital                                  |                                                                 |                                      | 860     |              |         |        |               |   |        |         | 108,383 |      |           |        | 21     |               |        |        | 52            |       |        |              | 1,537  |         |        |          | (109,993 | )     |          |         | 860     |       
|                                               | Retained earnings (accumulated deficit)          |                                                                 |                                      | (57,964 | )            |         |        | 21,340         |   |        |         | (4,339  | )    |           |        | (2,744 | )             |        |        | (2,757        | )     |        |              | 8,374  |         |        |          | (19,874  | )     |          |         | (57,964 | )     
|                                               | Accumulated other comprehensive income (loss):   |                                                                 |                                      |         |              |         |        |                |   |        |         |         |      |           |        |        |               |        |        |               |       |        |              |        |         |        |          |          |       |          |         |         |       
|                                               |                                                  | Gain on derivative instruments, net of income taxes             |                                      |         | 9            |         |        |                |  |        |         |         | 9    |           |        |        |              |        |        |               |      |        |              |        |        |        |          |          | (9    | )        |         |         | 9      |        
|                                               |                                                  | Cumulative currency translation adjustment, net of income taxes |                                      |         | (7,261       | )       |        |                |  |        |         |         | (192 | )         |        |        | 4,309         |        |        |               | 4,309 |        |              |        | (11,377 | )      |          |          | 2,951 |          |         |         | (7,261 | )      
|                                               |                                                  |                                                                 |                                      |         |              |         |        |                |   |        |         |         |      |           |        |        |               |        |        |               |       |        |              |       
|                                               |                                                  |                                                                 | TOTAL STOCKHOLDERS EQUITY (DEFICIT) |         |              | (63,833 | )      |                |   | 21,341 |         |         |      | 103,894   |        |        |               | 1,586  |        |               |       | 1,604  |              |        |         | (1,466 | )        |          |       | (126,959 | )       |         |        | (63,833 | )
|                                               |                                                  |                                                                 |                                      |         |              |         |        |                |   |        |         |         |      |           |        |        |               |        |        |               |       |        |              |       
|                                               |                                                  | $                                                               | 133,283                              |         |              | $       | 21,519 |                |   | $      | 146,515 |         |      | $         | 21,802 |        |               | $      | 47,573 |               |       | $      | 72,980       |        |         | $      | (202,303 | )        |       | $        | 241,369 |        
|                                               |                                                  |                                                                 |                                      |         |              |         |        |                |   |        |         |         |      |           |        |        |               |        |        |               |       |        |              |       



F-44



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


CONSOLIDATING STATEMENT OF OPERATIONS


For The Year Ended June 30, 2004


|                                             |                                                                             |                   |        |         |              |   |        |                |    |   |         |        |        |           |   |        |                |   |        |               |       |   |              |         |        |   |         |        |        |   |         |         |        | 
|-------------------------------------------- | --------------------------------------------------------------------------- | ----------------- | ------ | ------- | ------------ | - | ------ | -------------- | -- | - | ------- | ------ | ------ | --------- | - | ------ | -------------- | - | ------ | ------------- | ----- | - | ------------ | ------- | ------ | - | ------- | ------ | ------ | - | ------- | ------- | ------ | 
|                                             |                                                                             | Parent            |        |         | Unrestricted |   |        | U.S. Guarantor |    |   | Dutch   |        |        | Belgium   |   |        | Non-Guarantors |   |        | Consolidation |       |   | Consolidated |        
|                                             |                                                                             | Issuer            |        |         | Subsidiaries |   |        | Subsidiaries   |    |   | Issuer  |        |        | Guarantor |   |        | Subsidiaries   |   |        | Adjustments   |       |   | Balance      |        
|                                             |                                                                             |                   |        |         |              |   |        |                |    |   |         |        |        |           |   |        |                |   |        |               |       |   |              |        
|NET SALES                                    |                                                                             | $                 | 21,868 |         |              | $ | 11,118 |                |    | $ | 215,591 |        |        | $         |  |        |                | $ | 5,742  |               |       | $ | 100,065      |         |        | $ |        |        |        | $ | 354,384 |        
|NET SALES  INTERCOMPANY                     |                                                                             |                   | 150    |         |              |   | 2,598  |                |    |   | 468     |        |        |           |  |        |                |   | 28,970 |               |       |   | 4,375        |         |        |   | (36,561 | )      |        |   |        |        
|COST OF GOODS SOLD                           |                                                                             |                   | 17,318 |         |              |   | 10,139 |                |    |   | 160,136 |        |        |           |  |        |                |   | 25,293 |               |       |   | 88,892       |         |        |   | (36,561 | )      |        |   | 265,217 |        
|                                             |                                                                             |                   |        |         |              |   |        |                |    |   |         |        |        |           |   |        |                |   |        |               |       |   |              |        
|                                             | GROSS PROFIT                                                                |                   |        | 4,700   |              |   |        | 3,577          |    |   |         | 55,923 |        |           |   |       |                |   |        | 9,419         |       |   |              | 15,548  |        |   |         |       |        |   |         | 89,167  |       
|SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |                                                                             |                   | 23,393 |         |              |   | 1,299  |                |    |   | 25,317  |        |        |           | 4 |        |                |   | 2,676  |               |       |   | 15,989       |         |        |   |         |        |        |   | 68,678  |        
|                                             |                                                                             |                   |        |         |              |   |        |                |    |   |         |        |        |           |   |        |                |   |        |               |       |   |              |        
|                                             | OPERATING INCOME (LOSS)                                                     |                   |        | (18,693 | )            |   |        | 2,278          |    |   |         | 30,606 |        |           |   | (4     | )              |   |        | 6,743         |       |   |              | (441    | )      |   |         |       |        |   |         | 20,489  |       
|OTHER:                                       |                                                                             |                   |        |         |              |   |        |                |    |   |         |        |        |           |   |        |                |   |        |               |       |   |              |         |        |   |         |        |        |   |         |        
|                                             | Interest expense                                                            |                   |        | 18,314  |              |   |        | 18             |    |   |         |       |        |           |   | 1,806  |                |   |        | 95            |       |   |              | 491     |        |   |         |        |        |   |         | 20,724  |       
|                                             | Interest (income)                                                           |                   |        | (4      | )            |   |        |               |    |   |         |       |        |           |   |       |                |   |        |              |       |   |              | (126    | )      |   |         |        |        |   |         | (130    | )     
|                                             | Other (income) expense, net                                                 |                   |        | 578     |              |   |        |               |    |   |         | (605   | )      |           |   |       |                |   |        | (265          | )     |   |              | (496    | )      |   |         |        |        |   |         | (788    | )     
|                                             | Net (gain) on extinguishment of debt                                        |                   |        | (23,226 | )            |   |        |               |    |   |         |       |        |           |   |       |                |   |        |              |       |   |              |        |        |   |         |        |        |   |         | (23,226 | )     
|                                             | Intercompany interest and other                                             |                   |        | (26,755 | )            |   |        | 1,892          |    |   |         | 16,392 |        |           |   | (1,823 | )              |   |        | 3,335         |       |   |              | 6,959   |        |   |         |        |        |   |         |        |       
|                                             | Loss relating to subsidiaries                                               |                   |        | (4,890  | )            |   |        |               |    |   |         |       |        |           |   | (2,124 | )              |   |        |              |       |   |              |        |        |   |         | 7,014  |        |   |         |        |       
|                                             |                                                                             |                   |        |         |              |   |        |                |    |   |         |        |        |           |   |        |                |   |        |               |       |   |              |        
|                                             | INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES                |                   |        | 17,290  |              |   |        | 368            |    |   |         | 14,819 |        |           |   | 2,137  |                |   |        | 3,578         |       |   |              | (7,269  | )      |   |         | (7,014 | )      |   |         | 23,909  |       
|PROVISION FOR INCOME TAXES                   |                                                                             |                   | 1,185  |         |              |   | 221    |                |    |   | 1,294   |        |        |           |  |        |                |   | 1,454  |               |       |   | 3,650        |         |        |   |         |        |        |   | 7,804   |        
|                                             |                                                                             |                   |        |         |              |   |        |                |    |   |         |        |        |           |   |        |                |   |        |               |       |   |              |        
|                                             | INCOME (LOSS) FROM CONTINUING OPERATIONS                                    |                   |        | 16,105  |              |   |        | 147            |    |   |         | 13,525 |        |           |   | 2,137  |                |   |        | 2,124         |       |   |              | (10,919 | )      |   |         | (7,014 | )      |   |         | 16,105  |       
|DISCONTINUED OPERATIONS:                     |                                                                             |                   |        |         |              |   |        |                |    |   |         |        |        |           |   |        |                |   |        |               |       |   |              |         |        |   |         |        |        |   |         |        
|                                             | (Loss) from discontinued operations, net of income taxes                    |                   |        |        |              |   |        | (124           | )  |   |         |       |        |           |   |       |                |   |        |              |       |   |              | (1,042  | )      |   |         |        |        |   |         | (1,166  | )     
|                                             | Gain (loss) on disposal of discontinued operations, net of
    income taxes |                   |        | (3,197  | )            |   |        |               |    |   |         | (2,735 | )      |           |   |       |                |   |        |              |       |   |              | 3,843   |        |   |         |        |        |   |         | (2,089  | )     
|                                             | (Loss) relating to discontinued operations                                  |                   |        | (58     | )            |   |        |               |    |   |         |       |        |           |   |       |                |   |        |              |       |   |              |        |        |   |         | 58     |        |   |         |        |       
|                                             |                                                                             |                   |        |         |              |   |        |                |    |   |         |        |        |           |   |        |                |   |        |               |       |   |              |        
|                                             |                                                                             | NET INCOME (LOSS) |        | $       | 12,850       |   |        | $              | 23 |   |         | $      | 10,790 |           |   | $      | 2,137          |   |        | $             | 2,124 |   |              | $       | (8,118 | ) |         | $      | (6,956 | ) |         | $       | 12,850 | 
|                                             |                                                                             |                   |        |         |              |   |        |                |    |   |         |        |        |           |   |        |                |   |        |               |       |   |              |        



F-45



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##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




CONSOLIDATING STATEMENT OF CASH FLOWS


For the Year Ended June 30, 2004


|                                                     |                                                                                                                                |                                                  |                                            |         |              |       |      |                |         |        |        |        |        |           |    |        |               |         |     |               |        |        |              |         |        |        |   |        |   |       |        |         |         |        |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------ | ------------------------------------------ | ------- | ------------ | ----- | ---- | -------------- | ------- | ------ | ------ | ------ | ------ | --------- | -- | ------ | ------------- | ------- | --- | ------------- | ------ | ------ | ------------ | ------- | ------ | ------ | - | ------ | - | ----- | ------ | ------- | ------- | ------ | -
|                                                     |                                                                                                                                | Parent                                           |                                            |         | Unrestricted |       |      | U.S. Guarantor |         |        | Dutch  |        |        | Belgium   |    |        | Non-Guarantor |         |     | Consolidation |        |        | Consolidated |        
|                                                     |                                                                                                                                | Issuer                                           |                                            |         | Subsidiaries |       |      | Subsidiaries   |         |        | Issuer |        |        | Guarantor |    |        | Subsidiaries  |         |     | Adjustments   |        |        | Balance      |        
|                                                     |                                                                                                                                |                                                  |                                            |         |              |       |      |                |         |        |        |        |        |           |    |        |               |         |     |               |        |        |              |        
|OPERATING ACTIVITIES:                                |                                                                                                                                |                                                  |                                            |         |              |       |      |                |         |        |        |        |        |           |    |        |               |         |     |               |        |        |              |         |        |        |   |        |   |       |        |        
|                                                     | Net income (loss)                                                                                                              |                                                  | $                                          | 12,850  |              |       | $    | 23             |         |        | $      | 10,790 |        |           | $  | 2,137  |               |         | $   | 2,124         |        |        | $            | (8,118  | )      |        | $ | (6,956 | ) |       | $      | 12,850  |        
|                                                     | Adjustment for discontinued operations                                                                                         |                                                  |                                            | 3,255   |              |       |      | 124            |         |        |        | 2,735  |        |           |    |       |               |         |     |              |        |        |              | (2,801  | )      |        |   | (58    | ) |       |        | 3,255   |        
|                                                     |                                                                                                                                |                                                  |                                            |         |              |       |      |                |         |        |        |        |        |           |    |        |               |         |     |               |        |        |              |        
|                                                     | Income (loss) from continuing operations                                                                                       |                                                  |                                            | 16,105  |              |       |      | 147            |         |        |        | 13,525 |        |           |    | 2,137  |               |         |     | 2,124         |        |        |              | (10,919 | )      |        |   | (7,014 | ) |       |        | 16,105  |        
|                                                     | Adjustments to reconcile income (loss) from continuing
    operations to net cash provided (used) by operating
    activities: |                                                  |                                            |         |              |       |      |                |         |        |        |        |        |           |    |        |               |         |     |               |        |        |              |         |        |        |   |        |   |       |        |         |        
|                                                     |                                                                                                                                | Depreciation and amortization                    |                                            |         | 261          |       |      |                | 487     |        |        |        | 2,542  |           |    |        |              |         |     |               | 2,669  |        |              |         | 4,699  |        |   |        |   |       |        |         | 10,658  |       
|                                                     |                                                                                                                                | Amortization of deferred financing costs         |                                            |         | 2,106        |       |      |                |        |        |        |        |       |           |    |        |              |         |     |               |       |        |              |         |       |        |   |        |   |       |        |         | 2,106   |       
|                                                     |                                                                                                                                | Deferred income taxes                            |                                            |         | 733          |       |      |                |        |        |        |        |       |           |    |        |              |         |     |               |       |        |              |         | (407   | )      |   |        |   |       |        |         | 326     |       
|                                                     |                                                                                                                                | Net gain from sales of assets                    |                                            |         |             |       |      |                |        |        |        |        | (689   | )         |    |        |              |         |     |               |       |        |              |         | (3     | )      |   |        |   |       |        |         | (692    | )     
|                                                     |                                                                                                                                | Net gain on extinguishment of debt               |                                            |         | (23,226      | )     |      |                |        |        |        |        |       |           |    |        |              |         |     |               |       |        |              |         |       |        |   |        |   |       |        |         | (23,226 | )     
|                                                     |                                                                                                                                | Effects of changes in foreign currency           |                                            |         |             |       |      |                |        |        |        |        | 84     |           |    |        |              |         |     |               | (264   | )      |              |         | (368   | )      |   |        |   |       |        |         | (548    | )     
|                                                     |                                                                                                                                | Other                                            |                                            |         | 525          |       |      |                |        |        |        |        | 395    |           |    |        |              |         |     |               |       |        |              |         | 194    |        |   |        |   |       |        |         | 1,114   |       
|                                                     |                                                                                                                                | Changes in operating assets and liabilities:     |                                            |         |              |       |      |                |         |        |        |        |        |           |    |        |               |         |     |               |        |        |              |         |        |        |   |        |   |       |        |         |         |       
|                                                     |                                                                                                                                |                                                  | Accounts receivable                        |         |              | 79    |      |                |         | 336    |        |        |        | (4,826    | )  |        |               |        |     |               |        | (945   | )            |         |        | (2,102 | ) |        |   |       |        |         |         | (7,458 | )
|                                                     |                                                                                                                                |                                                  | Inventory                                  |         |              | 618   |      |                |         | (543   | )      |        |        | 4,143     |    |        |               |        |     |               |        | (8,762 | )            |         |        | 8,320  |   |        |   |       |        |         |         | 3,776  |  
|                                                     |                                                                                                                                |                                                  | Prepaid expenses and other                 |         |              | (268  | )    |                |         | 188    |        |        |        | (479      | )  |        |               |        |     |               |        | 1,369  |              |         |        | (1,070 | ) |        |   |       |        |         |         | (260   | )
|                                                     |                                                                                                                                |                                                  | Other assets                               |         |              | 1,997 |      |                |         |       |        |        |        | (4,548    | )  |        |               |        |     |               |        |       |              |         |        | (528   | ) |        |   |       |        |         |         | (3,079 | )
|                                                     |                                                                                                                                |                                                  | Intercompany                               |         |              | (522  | )    |                |         | 17,331 |        |        |        | (8,706    | )  |        |               | (22,336 | )   |               |        | 13,316 |              |         |        | (6,097 | ) |        |   | 7,014 |        |         |         |       |  
|                                                     |                                                                                                                                |                                                  | Accounts payable                           |         |              | (370  | )    |                |         | (328   | )      |        |        | (2,368    | )  |        |               |        |     |               |        | (2,395 | )            |         |        | (269   | ) |        |   |       |        |         |         | (5,730 | )
|                                                     |                                                                                                                                |                                                  | Accrued expenses and other                 |         |              | 2,803 |      |                |         | (89    | )      |        |        | 5,089     |    |        |               | 216     |     |               |        | 2,742  |              |         |        | (3,632 | ) |        |   |       |        |         |         | 7,129  |  
|                                                     |                                                                                                                                |                                                  | Accrued costs of non-completed transaction |         |              | 3,970 |      |                |         |       |        |        |        |          |    |        |               |        |     |               |        |       |              |         |        |       |   |        |   |       |        |         |         | 3,970  |  
|                                                     | Cash provided (used) by discontinued operations                                                                                |                                                  |                                            | (3,197  | )            |       |      | (652           | )       |        |        | (2,735 | )      |           |    |       |               |         |     |              |        |        |              | 5,255   |        |        |   |        |   |       |        | (1,329  | )      
|                                                     |                                                                                                                                |                                                  |                                            |         |              |       |      |                |         |        |        |        |        |           |    |        |               |         |     |               |        |        |              |        
|                                                     |                                                                                                                                | NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES |                                            |         | 1,614        |       |      |                | 16,877  |        |        |        | 1,427  |           |    |        | (19,983       | )       |     |               | 9,854  |        |              |         | (6,927 | )      |   |        |  |       |        |         | 2,862   |       
|                                                     |                                                                                                                                |                                                  |                                            |         |              |       |      |                |         |        |        |        |        |           |    |        |               |         |     |               |        |        |              |        
|INVESTING ACTIVITIES:                                |                                                                                                                                |                                                  |                                            |         |              |       |      |                |         |        |        |        |        |           |    |        |               |         |     |               |        |        |              |         |        |        |   |        |   |       |        |        
|                                                     | Capital expenditures                                                                                                           |                                                  |                                            | (57     | )            |       |      | (62            | )       |        |        | (2,506 | )      |           |    |       |               |         |     | (1,613        | )      |        |              | (1,891  | )      |        |   |        |   |       |        | (6,129  | )      
|                                                     | Proceeds from sale of assets                                                                                                   |                                                  |                                            |        |              |       |      |               |         |        |        | 1,057  |        |           |    |       |               |         |     |              |        |        |              | 30      |        |        |   |        |   |       |        | 1,087   |        
|                                                     | Other investing                                                                                                                |                                                  |                                            | (654    | )            |       |      |               |         |        |        |       |        |           |    |       |               |         |     |              |        |        |              | (1      | )      |        |   |        |   |       |        | (655    | )      
|                                                     | Discontinued operations                                                                                                        |                                                  |                                            | 14,343  |              |       |      |               |         |        |        |       |        |           |    |       |               |         |     |              |        |        |              | 424     |        |        |   |        |   |       |        | 14,767  |        
|                                                     |                                                                                                                                |                                                  |                                            |         |              |       |      |                |         |        |        |        |        |           |    |        |               |         |     |               |        |        |              |        
|                                                     |                                                                                                                                | NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES |                                            |         | 13,632       |       |      |                | (62     | )      |        |        | (1,449 | )         |    |        |              |         |     |               | (1,613 | )      |              |         | (1,438 | )      |   |        |  |       |        |         | 9,070   |       
|                                                     |                                                                                                                                |                                                  |                                            |         |              |       |      |                |         |        |        |        |        |           |    |        |               |         |     |               |        |        |              |        
|FINANCING ACTIVITIES:                                |                                                                                                                                |                                                  |                                            |         |              |       |      |                |         |        |        |        |        |           |    |        |               |         |     |               |        |        |              |         |        |        |   |        |   |       |        |        
|                                                     | Net (decrease) in cash overdraft                                                                                               |                                                  |                                            | (350    | )            |       |      | (276           | )       |        |        | (160   | )      |           |    |       |               |         |     |              |        |        |              | (9      | )      |        |   |        |   |       |        | (795    | )      
|                                                     | Net (decrease) in short-term debt                                                                                              |                                                  |                                            | (26,882 | )            |       |      |               |         |        |        |       |        |           |    |       |               |         |     |              |        |        |              | (72     | )      |        |   |        |   |       |        | (26,954 | )      
|                                                     | Proceeds from long-term debt                                                                                                   |                                                  |                                            | 85,000  |              |       |      |               |         |        |        |       |        |           |    | 20,000 |               |         |     |              |        |        |              | 4,661   |        |        |   |        |   |       |        | 109,661 |        
|                                                     | Payments of long-term debt                                                                                                     |                                                  |                                            | (32,679 | )            |       |      | (13            | )       |        |        | (1,055 | )      |           |    |       |               |         |     |              |        |        |              | (1,706  | )      |        |   |        |   |       |        | (35,453 | )      
|                                                     | Payment of Pfizer obligations                                                                                                  |                                                  |                                            | (20,075 | )            |       |      |               |         |        |        |       |        |           |    |       |               |         |     | (8,225        | )      |        |              |        |        |        |   |        |   |       |        | (28,300 | )      
|                                                     | Payments relating to the Prince Transactions and transaction
    costs                                                         |                                                  |                                            | (4,619  | )            |       |      | (16,645        | )       |        |        | (129   | )      |           |    |       |               |         |     |              |        |        |              |        |        |        |   |        |   |       |        | (21,393 | )      
|                                                     | Debt financing costs                                                                                                           |                                                  |                                            | (15,548 | )            |       |      |               |         |        |        |       |        |           |    |       |               |         |     |              |        |        |              |        |        |        |   |        |   |       |        | (15,548 | )      
|                                                     | Discontinued operations                                                                                                        |                                                  |                                            |        |              |       |      |               |         |        |        |       |        |           |    |       |               |         |     |              |        |        |              | 1,005   |        |        |   |        |   |       |        | 1,005   |        
|                                                     |                                                                                                                                |                                                  |                                            |         |              |       |      |                |         |        |        |        |        |           |    |        |               |         |     |               |        |        |              |        
|                                                     |                                                                                                                                | NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES |                                            |         | (15,153      | )     |      |                | (16,934 | )      |        |        | (1,344 | )         |    |        | 20,000        |         |     |               | (8,225 | )      |              |         | 3,879  |        |   |        |  |       |        |         | (17,777 | )     
|                                                     |                                                                                                                                |                                                  |                                            |         |              |       |      |                |         |        |        |        |        |           |    |        |               |         |     |               |        |        |              |        
|EFFECT OF EXCHANGE RATE CHANGES ON CASH              |                                                                                                                                |                                                  |                                           |         |              |       |     |                |         |        |       |        |        |           |   |        |               |         | 11  |               |        |        | 223          |         |        |        |   |        |   |       | 234    |        
|                                                     |                                                                                                                                |                                                  |                                            |         |              |       |      |                |         |        |        |        |        |           |    |        |               |         |     |               |        |        |              |        
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                                                                                |                                                  | 93                                         |         |              |       | (119 | )              |         |        | (1,366 | )      |        |           | 17 |        |               |         | 27  |               |        |        | (4,263       | )       |        |        |  |        |   |       | (5,611 | )      
|CASH AND CASH EQUIVALENTS at beginning of period     |                                                                                                                                |                                                  | 43                                         |         |              |       | 119  |                |         |        | 2,167  |        |        |           |   |        |               |         | 185 |               |        |        | 8,665        |         |        |        |   |        |   |       | 11,179 |        
|                                                     |                                                                                                                                |                                                  |                                            |         |              |       |      |                |         |        |        |        |        |           |    |        |               |         |     |               |        |        |              |        
|CASH AND CASH EQUIVALENTS at end of period           |                                                                                                                                | $                                                | 136                                        |         |              | $     |     |                |         | $      | 801    |        |        | $         | 17 |        |               | $       | 212 |               |        | $      | 4,402        |         |        | $      |  |        |   | $     | 5,568  |        
|                                                     |                                                                                                                                |                                                  |                                            |         |              |       |      |                |         |        |        |        |        |           |    |        |               |         |     |               |        |        |              |        



F-46



---



##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


CONSOLIDATING STATEMENT OF OPERATIONS


For The Year Ended June 30, 2003


|                                             |                                                                               |                   |        |         |              |   |        |                |        |   |         |        |       |           |   |   |               |   |        |               |        |   |              |         |        |   |         |         |         |   |         |         |         |  
|-------------------------------------------- | ----------------------------------------------------------------------------- | ----------------- | ------ | ------- | ------------ | - | ------ | -------------- | ------ | - | ------- | ------ | ----- | --------- | - | - | ------------- | - | ------ | ------------- | ------ | - | ------------ | ------- | ------ | - | ------- | ------- | ------- | - | ------- | ------- | ------- | -
|                                             |                                                                               | Parent            |        |         | Unrestricted |   |        | U.S. Guarantor |        |   | Dutch   |        |       | Belgium   |   |   | Non-Guarantor |   |        | Consolidation |        |   | Consolidated |        
|                                             |                                                                               | Issuer            |        |         | Subsidiaries |   |        | Subsidiaries   |        |   | Issuer  |        |       | Guarantor |   |   | Subsidiaries  |   |        | Adjustments   |        |   | Balance      |        
|                                             |                                                                               |                   |        |         |              |   |        |                |        |   |         |        |       |           |   |   |               |   |        |               |        |   |              |        
|NET SALES                                    |                                                                               | $                 | 23,982 |         |              | $ | 22,332 |                |        | $ | 187,628 |        |       | $         |  |   |               | $ | 6,625  |               |        | $ | 97,251       |         |        | $ |        |         |         | $ | 337,818 |        
|NET SALES  INTERCOMPANY                     |                                                                               |                   | 1,338  |         |              |   | 4,244  |                |        |   | 775     |        |       |           |  |   |               |   | 26,994 |               |        |   | 6,812        |         |        |   | (40,163 | )       |         |   |        |        
|COST OF GOODS SOLD                           |                                                                               |                   | 20,083 |         |              |   | 20,422 |                |        |   | 144,543 |        |       |           |  |   |               |   | 31,435 |               |        |   | 72,257       |         |        |   | (40,163 | )       |         |   | 248,577 |        
|                                             |                                                                               |                   |        |         |              |   |        |                |        |   |         |        |       |           |   |   |               |   |        |               |        |   |              |        
|                                             | GROSS PROFIT                                                                  |                   |        | 5,237   |              |   |        | 6,154          |        |   |         | 43,860 |       |           |   |  |               |   |        | 2,184         |        |   |              | 31,806  |        |   |         |        |         |   |         | 89,241  |        
|SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |                                                                               |                   | 16,890 |         |              |   | 2,575  |                |        |   | 26,632  |        |       |           |  |   |               |   | 1,868  |               |        |   | 15,381       |         |        |   |        |         |         |   | 63,346  |        
|                                             |                                                                               |                   |        |         |              |   |        |                |        |   |         |        |       |           |   |   |               |   |        |               |        |   |              |        
|                                             | OPERATING INCOME (LOSS)                                                       |                   |        | (11,653 | )            |   |        | 3,579          |        |   |         | 17,228 |       |           |   |  |               |   |        | 316           |        |   |              | 16,425  |        |   |         |        |         |   |         | 25,895  |        
|OTHER:                                       |                                                                               |                   |        |         |              |   |        |                |        |   |         |        |       |           |   |   |               |   |        |               |        |   |              |         |        |   |         |         |         |   |         |        
|                                             | Interest expense                                                              |                   |        | 16,224  |              |   |        | 86             |        |   |         | 1      |       |           |   |  |               |   |        | 62            |        |   |              | 1,082   |        |   |         |        |         |   |         | 17,455  |        
|                                             | Interest (income)                                                             |                   |        | (2      | )            |   |        |               |        |   |         |       |       |           |   |  |               |   |        |              |        |   |              | (83     | )      |   |         |        |         |   |         | (85     | )      
|                                             | Other (income) expense, net                                                   |                   |        | 3,283   |              |   |        |               |        |   |         | (3,481 | )     |           |   |  |               |   |        | 1,283         |        |   |              | 463     |        |   |         |        |         |   |         | 1,548   |        
|                                             | Intercompany interest and other                                               |                   |        | (33,819 | )            |   |        | 4,952          |        |   |         | 18,997 |       |           |   |  |               |   |        | 2,849         |        |   |              | 7,021   |        |   |         |        |         |   |         |        |        
|                                             | Loss relating to subsidiaries                                                 |                   |        | 4,590   |              |   |        |               |        |   |         |       |       |           |   |  |               |   |        |              |        |   |              |        |        |   |         | (4,590  | )       |   |         |        |        
|                                             |                                                                               |                   |        |         |              |   |        |                |        |   |         |        |       |           |   |   |               |   |        |               |        |   |              |        
|                                             | INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES                  |                   |        | (1,929  | )            |   |        | (1,459         | )      |   |         | 1,711  |       |           |   |  |               |   |        | (3,878        | )      |   |              | 7,942   |        |   |         | 4,590   |         |   |         | 6,977   |        
|PROVISION FOR INCOME TAXES                   |                                                                               |                   | 924    |         |              |   | 52     |                |        |   | 570     |        |       |           |  |   |               |   | 572    |               |        |   | 7,712        |         |        |   |        |         |         |   | 9,830   |        
|                                             |                                                                               |                   |        |         |              |   |        |                |        |   |         |        |       |           |   |   |               |   |        |               |        |   |              |        
|                                             | INCOME (LOSS) FROM CONTINUING OPERATIONS                                      |                   |        | (2,853  | )            |   |        | (1,511         | )      |   |         | 1,141  |       |           |   |  |               |   |        | (4,450        | )      |   |              | 230     |        |   |         | 4,590   |         |   |         | (2,853  | )      
|DISCONTINUED OPERATIONS:                     |                                                                               |                   |        |         |              |   |        |                |        |   |         |        |       |           |   |   |               |   |        |               |        |   |              |         |        |   |         |         |         |   |         |        
|                                             | (Loss) from discontinued operations, net of income taxes                      |                   |        |        |              |   |        | (3,454         | )      |   |         |       |       |           |   |  |               |   |        |              |        |   |              | (10,569 | )      |   |         |        |         |   |         | (14,023 | )      
|                                             | Gain (loss) from disposal of discontinued operations, net of
    income taxes |                   |        | (30,019 | )            |   |        |               |        |   |         |       |       |           |   |  |               |   |        |              |        |   |              | 29,336  |        |   |         |        |         |   |         | (683    | )      
|                                             | Income relating to discontinued operations                                    |                   |        | 15,313  |              |   |        |               |        |   |         |       |       |           |   |  |               |   |        |              |        |   |              |        |        |   |         | (15,313 | )       |   |         |        |        
|                                             |                                                                               |                   |        |         |              |   |        |                |        |   |         |        |       |           |   |   |               |   |        |               |        |   |              |        
|                                             |                                                                               | NET INCOME (LOSS) |        | $       | (17,559      | ) |        | $              | (4,965 | ) |         | $      | 1,141 |           |   | $ |              |   |        | $             | (4,450 | ) |              | $       | 18,997 |   |         | $       | (10,723 | ) |         | $       | (17,559 | )
|                                             |                                                                               |                   |        |         |              |   |        |                |        |   |         |        |       |           |   |   |               |   |        |               |        |   |              |        

F-47



---



##### Table of Contents



PAHC HOLDINGS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


CONSOLIDATING STATEMENT OF CASH FLOWS


For the Year Ended June 30, 2003


|                                                                                                                    |                                              |        |         |         |              |   |        |                |   |   |        |         |           |   |   |               |  |   |               |        |   |              |         |        |   |   |         |        |   |   |         |         |  
|------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ------ | ------- | ------- | ------------ | - | ------ | -------------- | - | - | ------ | ------- | --------- | - | - | ------------- |  | - | ------------- | ------ | - | ------------ | ------- | ------ | - | - | ------- | ------ | - | - | ------- | ------- | -
|                                                                                                                    |                                              | Parent |         |         | Unrestricted |   |        | U.S. Guarantor |   |   | Dutch  |         | Belgium   |   |   | Non-Guarantor |  |   | Consolidation |        |   | Consolidated |        
|                                                                                                                    |                                              | Issuer |         |         | Subsidiaries |   |        | Subsidiaries   |   |   | Issuer |         | Guarantor |   |   | Subsidiaries  |  |   | Adjustments   |        |   | Balance      |        
|                                                                                                                    |                                              |        |         |         |              |   |        |                |   |   |        |         |           |   |   |               |  |   |               |        |   |              |        
|OPERATING ACTIVITIES:                                                                                               |                                              |        |         |         |              |   |        |                |   |   |        |         |           |   |   |               |  |   |               |        |   |              |         |        |   |   |         |        |   |   |         |        
|Net income (loss)                                                                                                   |                                              | $      | (17,559 | )       |              | $ | (4,965 | )              |   | $ | 1,141  |         |           | $ |  |               |  | $ | (4,450        | )      |   | $            | 18,997  |        |   | $ | (10,723 | )      |   | $ | (17,559 | )      
|Adjustment for discontinued operations                                                                              |                                              |        | 14,706  |         |              |   | 3,454  |                |   |   |       |         |           |   |  |               |  |   |              |        |   |              | (18,767 | )      |   |   | 15,313  |        |   |   | 14,706  |        
|                                                                                                                    |                                              |        |         |         |              |   |        |                |   |   |        |         |           |   |   |               |  |   |               |        |   |              |         |       
|Income (loss) from continuing operations                                                                            |                                              |        | (2,853  | )       |              |   | (1,511 | )              |   |   | 1,141  |         |           |   |  |               |  |   | (4,450        | )      |   |              | 230     |        |   |   | 4,590   |        |   |   | (2,853  | )      
|Adjustments to reconcile income (loss) from continuing
    operations to net cash provided by operating activities: |                                              |        |         |         |              |   |        |                |   |   |        |         |           |   |   |               |  |   |               |        |   |              |         |        |   |   |         |        |   |   |         |        
|                                                                                                                    | Depreciation and amortization                |        |         | 380     |              |   |        | 956            |   |   |        | 2,900   |           |   |   |              |  |   |               | 2,019  |   |              |         | 4,731  |   |   |         |       |   |   |         | 10,986  |  
|                                                                                                                    | Amortization of deferred financing costs     |        |         | 1,174   |              |   |        |               |   |   |        |        |           |   |   |              |  |   |               |       |   |              |         |       |   |   |         |       |   |   |         | 1,174   |  
|                                                                                                                    | Deferred income taxes                        |        |         |        |              |   |        |               |   |   |        |        |           |   |   |              |  |   |               |       |   |              |         | 6,460  |   |   |         |       |   |   |         | 6,460   |  
|                                                                                                                    | Net gain from sales of assets                |        |         |        |              |   |        |               |   |   |        | (118    | )         |   |   |              |  |   |               |       |   |              |         | (9     | ) |   |         |       |   |   |         | (127    | )
|                                                                                                                    | Effects of changes in foreign currency       |        |         |        |              |   |        |               |   |   |        | (399    | )         |   |   |              |  |   |               | 1,268  |   |              |         | (479   | ) |   |         |       |   |   |         | 390     |  
|                                                                                                                    | Other                                        |        |         | 218     |              |   |        | 13             |   |   |        | 540     |           |   |   |              |  |   |               |       |   |              |         | (384   | ) |   |         |       |   |   |         | 387     |  
|                                                                                                                    |                                              |        |         |         |              |   |        |                |   |   |        |         |           |   |   |               |  |   |               |        |   |              |         |        |   |   |         |        |   |   |        |        
|                                                                                                                    | Changes in operating assets and liabilities: |        |         |         |              |   |        |                |   |   |        |         |           |   |   |               |  |   |               |        |   |              |         |        |   |   |         |        |   |   |         |        |  
|                                                                                                                    | Accounts receivable                          |        |         | 301     |              |   |        | 245            |   |   |        | 1,489   |           |   |   |              |  |   |               | (322   | ) |              |         | 2,194  |   |   |         |       |   |   |         | 3,907   |  
|                                                                                                                    | Inventory                                    |        |         | 95      |              |   |        | (61            | ) |   |        | (3,658  | )         |   |   |              |  |   |               | 2,270  |   |              |         | (173   | ) |   |         |       |   |   |         | (1,527  | )
|                                                                                                                    | Prepaid expenses and other                   |        |         | (702    | )            |   |        | (195           | ) |   |        | 558     |           |   |   |              |  |   |               | (1,191 | ) |              |         | (1,577 | ) |   |         |       |   |   |         | (3,107  | )
|                                                                                                                    | Other assets                                 |        |         | (3,171  | )            |   |        |               |   |   |        | 1,131   |           |   |   |              |  |   |               |       |   |              |         | (592   | ) |   |         |       |   |   |         | (2,632  | )
|                                                                                                                    | Intercompany                                 |        |         | 13,334  |              |   |        | 2,717          |   |   |        | (12,285 | )         |   |   |              |  |   |               | 4,989  |   |              |         | (4,165 | ) |   |         | (4,590 | ) |   |         |        |  
|                                                                                                                    | Accounts payable                             |        |         | 2,280   |              |   |        | 714            |   |   |        | 12,542  |           |   |   |              |  |   |               | 3,523  |   |              |         | 1,420  |   |   |         |       |   |   |         | 20,479  |  
|                                                                                                                    | Accrued expenses and other                   |        |         | 1,415   |              |   |        | 95             |   |   |        | 2,326   |           |   |   |              |  |   |               | (6,444 | ) |              |         | 1,598  |   |   |         |       |   |   |         | (1,010  | )
|Cash provided (used) by discontinued operations                                                                     |                                              |        |        |         |              |   | (1,928 | )              |   |   |       |         |           |   |  |               |  |   |              |        |   |              | 4,058   |        |   |   |        |        |   |   | 2,130   |        
|                                                                                                                    |                                              |        |         |         |              |   |        |                |   |   |        |         |           |   |   |               |  |   |               |        |   |              |         |       
|                                                                                                                    | NET CASH PROVIDED BY OPERATING ACTIVITIES    |        |         | 12,471  |              |   |        | 1,045          |   |   |        | 6,167   |           |   |   |              |  |   |               | 1,662  |   |              |         | 13,312 |   |   |         |       |   |   |         | 34,657  |  
|                                                                                                                    |                                              |        |         |         |              |   |        |                |   |   |        |         |           |   |   |               |  |   |               |        |   |              |         |       
|INVESTING ACTIVITIES:                                                                                               |                                              |        |         |         |              |   |        |                |   |   |        |         |           |   |   |               |  |   |               |        |   |              |         |        |   |   |         |        |   |   |         |        
|Capital expenditures                                                                                                |                                              |        | (2      | )       |              |   | (350   | )              |   |   | (2,573 | )       |           |   |  |               |  |   | (2,149        | )      |   |              | (3,433  | )      |   |   |        |        |   |   | (8,507  | )      
|Proceeds from sale of assets                                                                                        |                                              |        |        |         |              |   |       |                |   |   | 2,530  |         |           |   |  |               |  |   |              |        |   |              | 34      |        |   |   |        |        |   |   | 2,564   |        
|Other investing                                                                                                     |                                              |        |        |         |              |   |       |                |   |   |       |         |           |   |  |               |  |   |              |        |   |              | 737     |        |   |   |        |        |   |   | 737     |        
|Discontinued operations                                                                                             |                                              |        |        |         |              |   | (493   | )              |   |   |       |         |           |   |  |               |  |   |              |        |   |              | 1,728   |        |   |   |        |        |   |   | 1,235   |        
|                                                                                                                    |                                              |        |         |         |              |   |        |                |   |   |        |         |           |   |   |               |  |   |               |        |   |              |         |       
|                                                                                                                    | NET CASH (USED) BY INVESTING ACTIVITIES      |        |         | (2      | )            |   |        | (843           | ) |   |        | (43     | )         |   |   |              |  |   |               | (2,149 | ) |              |         | (934   | ) |   |         |       |   |   |         | (3,971  | )
|                                                                                                                    |                                              |        |         |         |              |   |        |                |   |   |        |         |           |   |   |               |  |   |               |        |   |              |         |       
|FINANCING ACTIVITIES:                                                                                               |                                              |        |         |         |              |   |        |                |   |   |        |         |           |   |   |               |  |   |               |        |   |              |         |        |   |   |         |        |   |   |         |        
|Net (decrease) in cash overdraft                                                                                    |                                              |        | (226    | )       |              |   | (24    | )              |   |   | (4,151 | )       |           |   |  |               |  |   |              |        |   |              | (1,680  | )      |   |   |        |        |   |   | (6,081  | )      
|Net (decrease) in short-term debt                                                                                   |                                              |        | (5,844  | )       |              |   |       |                |   |   |       |         |           |   |  |               |  |   |              |        |   |              | (816    | )      |   |   |        |        |   |   | (6,660  | )      
|Proceeds from long-term debt                                                                                        |                                              |        |        |         |              |   |       |                |   |   |       |         |           |   |  |               |  |   |              |        |   |              | 2,000   |        |   |   |        |        |   |   | 2,000   |        
|Payments of long-term debt                                                                                          |                                              |        | (6,813  | )       |              |   | (111   | )              |   |   | (415   | )       |           |   |  |               |  |   |              |        |   |              | (8,675  | )      |   |   |        |        |   |   | (16,014 | )      
|Discontinued operations                                                                                             |                                              |        |        |         |              |   |       |                |   |   |       |         |           |   |  |               |  |   |              |        |   |              | 377     |        |   |   |        |        |   |   | 377     |        
|                                                                                                                    |                                              |        |         |         |              |   |        |                |   |   |        |         |           |   |   |               |  |   |               |        |   |              |         |       
|                                                                                                                    | NET CASH (USED) BY FINANCING ACTIVITIES      |        |         | (12,883 | )            |   |        | (135           | ) |   |        | (4,566  | )         |   |   |              |  |   |               |       |   |              |         | (8,794 | ) |   |         |       |   |   |         | (26,378 | )
|                                                                                                                    |                                              |        |         |         |              |   |        |                |   |   |        |         |           |   |   |               |  |   |               |        |   |              |         |       
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                                             |                                              |        |        |         |              |   |       |                |   |   | 9      |         |           |   |  |               |  |   | 54            |        |   |              | 389     |        |   |   |         |        |   |   | 452     |        
|                                                                                                                    |                                              |        |         |         |              |   |        |                |   |   |        |         |           |   |   |               |  |   |               |        |   |              |         |       
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                                |                                              |        | (414    | )       |              |   | 67     |                |   |   | 1,567  |         |           |   |  |               |  |   | (433          | )      |   |              | 3,973   |        |   |   |        |        |   |   | 4,760   |        
|CASH AND CASH EQUIVALENTS at beginning of period                                                                    |                                              |        | 457     |         |              |   | 52     |                |   |   | 600    |         |           |   |  |               |  |   | 618           |        |   |              | 4,692   |        |   |   |         |        |   |   | 6,419   |        
|                                                                                                                    |                                              |        |         |         |              |   |        |                |   |   |        |         |           |   |   |               |  |   |               |        |   |              |         |       
|CASH AND CASH EQUIVALENTS at end of period                                                                          |                                              | $      | 43      |         |              | $ | 119    |                |   | $ | 2,167  |         |           | $ |  |               |  | $ | 185           |        |   | $            | 8,665   |        |   | $ |        |        |   | $ | 11,179  |        
|                                                                                                                    |                                              |        |         |         |              |   |        |                |   |   |        |         |           |   |   |               |  |   |               |        |   |              |         |       

F-48



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##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM










| |                               
| | ------------------------------
| | /s/ PricewaterhouseCoopers LLP
| |                               
| | PricewaterhouseCoopers LLP    





F-49



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##### Table of Contents



PHIBRO ANIMAL HEALTH SA (Belgium)





BALANCE SHEETS


|                                               |                                                                                                                   |                                      |        |         |         |   |        |        |        | 
|---------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ------------------------------------ | ------ | ------- | ------- | - | ------ | ------ | ------ | 
|                                               |                                                                                                                   | As of June 30,                       |       
|                                               |                                                                                                                   |                                      |       
|                                               |                                                                                                                   | 2005                                 |        |         | 2004    |  
|                                               |                                                                                                                   |                                      |        |         |         |  
|                                               |                                                                                                                   | (In thousands)                       |       
|ASSETS                                        
|CURRENT ASSETS:                                |                                                                                                                   |                                      |        |         |         |   |        |       
|                                               | Cash, including restricted balance of $175 at June 30, 2004                                                       |                                      | $      | 255     |         |   | $      | 212    |       
|                                               | Trade receivables, less allowance for doubtful accounts of $0
    and $13 at June 30, 2005 and 2004, respectively |                                      |        | 3,980   |         |   |        | 2,592  |       
|                                               | Other receivables                                                                                                 |                                      |        | 804     |         |   |        | 72     |       
|                                               | Inventories                                                                                                       |                                      |        | 29,691  |         |   |        | 23,159 |       
|                                               | Prepaid expenses and other current assets                                                                         |                                      |        | 1,203   |         |   |        | 1,018  |       
|                                               | Trade receivables  related parties                                                                               |                                      |        | 5,560   |         |   |        | 4,527  |       
|                                               |                                                                                                                   |                                      |        |         |         |  
|                                               |                                                                                                                   | TOTAL CURRENT ASSETS                 |        |         | 41,493  |   |        |        | 31,580 | 
|PROPERTY, PLANT AND EQUIPMENT, net             |                                                                                                                   |                                      | 8,122  |         |         |   | 17,321 |       
|INTANGIBLES, net                               |                                                                                                                   |                                      | 1,339  |         |         |   | 1,569  |       
|                                               |                                                                                                                   |                                      |        |         |         |  
|                                               |                                                                                                                   | $                                    | 50,954 |         |         | $ | 50,470 |       
|                                               |                                                                                                                   |                                      |        |         |         |  
|                                              
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
|CURRENT LIABILITIES:                           |                                                                                                                   |                                      |        |         |         |   |        |       
|                                               | Accounts payable                                                                                                  |                                      | $      | 3,320   |         |   | $      | 2,258  |       
|                                               | Accrued expenses and other current liabilities                                                                    |                                      |        | 19,909  |         |   |        | 8,291  |       
|                                               | Trade payables  related parties                                                                                  |                                      |        | 6,390   |         |   |        | 2,879  |       
|                                               |                                                                                                                   |                                      |        |         |         |  
|                                               |                                                                                                                   | TOTAL CURRENT LIABILITIES            |        |         | 29,619  |   |        |        | 13,428 | 
|OTHER LIABILITIES                              |                                                                                                                   |                                      | 1,855  |         |         |   | 2,897  |       
|NOTES PAYABLE  RELATED PARTIES                |                                                                                                                   |                                      | 35,662 |         |         |   | 30,571 |       
|                                               |                                                                                                                   |                                      |        |         |         |  
|                                               |                                                                                                                   | TOTAL LIABILITIES                    |        |         | 67,136  |   |        |        | 46,896 | 
|                                               |                                                                                                                   |                                      |        |         |         |  
|STOCKHOLDERS EQUITY (DEFICIT):                |                                                                                                                   |                                      |        |         |         |   |        |       
|                                               | Paid-in capital                                                                                                   |                                      |        | 3,114   |         |   |        | 1,896  |       
|                                               | Accumulated deficit                                                                                               |                                      |        | (23,243 | )       |   |        | (2,631 | )     
|                                               | Cumulative foreign currency translation adjustment, net of
    income taxes                                       |                                      |        | 3,947   |         |   |        | 4,309  |       
|                                               |                                                                                                                   |                                      |        |         |         |  
|                                               |                                                                                                                   | TOTAL STOCKHOLDERS EQUITY (DEFICIT) |        |         | (16,182 | ) |        |        | 3,574  | 
|                                               |                                                                                                                   |                                      |        |         |         |  
|                                               |                                                                                                                   | $                                    | 50,954 |         |         | $ | 50,470 |       
|                                               |                                                                                                                   |                                      |        |         |         |  



F-50



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##### Table of Contents



PHIBRO ANIMAL HEALTH SA (Belgium)





STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)


|                                                                                                              |                                                                |                              |        |         |      |   |        |        |   |   |        |        |  
|------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------- | ---------------------------- | ------ | ------- | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                                                                                                              |                                                                | For the Years Ended June 30, |       
|                                                                                                              |                                                                |                              |       
|                                                                                                              |                                                                | 2005                         |        |         | 2004 |   |        | 2003   |  
|                                                                                                              |                                                                |                              |        |         |      |   |        |        |  
|                                                                                                              |                                                                | (In thousands)               |       
|NET SALES                                                                                                     |                                                                | $                            | 10,276 |         |      | $ | 5,742  |        |   | $ | 6,625  |       
|NET SALES  RELATED PARTIES                                                                                   |                                                                |                              | 30,298 |         |      |   | 28,970 |        |   |   | 26,994 |       
|                                                                                                              |                                                                |                              |        |         |      |   |        |        |  
|                                                                                                              | TOTAL SALES                                                    |                              |        | 40,574  |      |   |        | 34,712 |   |   |        | 33,619 |  
|COST OF GOODS SOLD (includes Belgium Plant Transaction costs of
    $22,191 for the year ended June 30, 2005) |                                                                |                              | 55,688 |         |      |   | 25,293 |        |   |   | 31,435 |       
|                                                                                                              |                                                                |                              |        |         |      |   |        |        |  
|                                                                                                              | GROSS PROFIT                                                   |                              |        | (15,114 | )    |   |        | 9,419  |   |   |        | 2,184  |  
|SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                                                  |                                                                |                              | 3,563  |         |      |   | 3,334  |        |   |   | 2,595  |       
|                                                                                                              |                                                                |                              |        |         |      |   |        |        |  
|                                                                                                              | OPERATING INCOME (LOSS)                                        |                              |        | (18,677 | )    |   |        | 6,085  |   |   |        | (411   | )
|OTHER:                                                                                                        |                                                                |                              |        |         |      |   |        |        |   |   |        |       
|                                                                                                              | Interest expense                                               |                              |        | 61      |      |   |        | 95     |   |   |        | 62     |  
|                                                                                                              | Interest expense  related parties                             |                              |        | 4,073   |      |   |        | 3,335  |   |   |        | 2,849  |  
|                                                                                                              | Other (income) expense, net                                    |                              |        | 62      |      |   |        | (265   | ) |   |        | 1,283  |  
|                                                                                                              |                                                                |                              |        |         |      |   |        |        |  
|                                                                                                              | INCOME (LOSS) BEFORE INCOME TAXES                              |                              |        | (22,873 | )    |   |        | 2,920  |   |   |        | (4,605 | )
|PROVISION (BENEFIT) FOR INCOME TAXES                                                                          |                                                                |                              | (2,261 | )       |      |   | 1,614  |        |   |   | (1,086 | )     
|                                                                                                              |                                                                |                              |        |         |      |   |        |        |  
|                                                                                                              | NET INCOME (LOSS)                                              |                              |        | (20,612 | )    |   |        | 1,306  |   |   |        | (3,519 | )
|OTHER COMPREHENSIVE INCOME:                                                                                   |                                                                |                              |        |         |      |   |        |        |   |   |        |       
|                                                                                                              | Change in currency translation adjustment, net of income taxes |                              |        | (362    | )    |   |        | 532    |   |   |        | 2,401  |  
|                                                                                                              |                                                                |                              |        |         |      |   |        |        |  
|                                                                                                              | COMPREHENSIVE INCOME (LOSS)                                    |                              | $      | (20,974 | )    |   | $      | 1,838  |   |   | $      | (1,118 | )
|                                                                                                              |                                                                |                              |        |         |      |   |        |        |  



F-51



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##### Table of Contents



PHIBRO ANIMAL HEALTH SA (Belgium)





STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(DEFICIT)


|                       |                                                              |                                                     |       |                  |              |   |         |             |   |   |       |       |   |   |         |         |  
|---------------------- | ------------------------------------------------------------ | --------------------------------------------------- | ----- | ---------------- | ------------ | - | ------- | ----------- | - | - | ----- | ----- | - | - | ------- | ------- | -
|                       |                                                              | For the Years Ended June 30, 2005 and 2004 and 2003 |      
|                       |                                                              |                                                     |      
|                       |                                                              |                                                     |       | Foreign Currency |              |   |        
|                       |                                                              | Paid-in                                             |       |                  | (Accumulated |   |         | Translation |   |   |      
|                       |                                                              | Capital                                             |       |                  | Deficit)     |   |         | Adjustment  |   |   | Total |      
|                       |                                                              |                                                     |       |                  |              |   |         |             |   |   |       |      
|                       |                                                              | (In thousands)                                      |      
|BALANCE, JUNE 30, 2002 |                                                              | $                                                   | 459   |                  |              | $ | (418    | )           |   | $ | 1,376 |       |   | $ | 1,417   |        
|                       | Contribution from parent                                     |                                                     |       | 727              |              |   |         |             |   |   |       |       |   |   |         | 727     |  
|                       | Net (loss)                                                   |                                                     |       |                  |              |   |         | (3,519      | ) |   |       |       |   |   |         | (3,519  | )
|                       | Foreign currency translation adjustment, net of income taxes |                                                     |       |                  |              |   |         |             |   |   |       | 2,401 |   |   |         | 2,401   |  
|                       |                                                              |                                                     |       |                  |              |   |         |             |   |   |       |      
|BALANCE, JUNE 30, 2003 |                                                              | $                                                   | 1,186 |                  |              | $ | (3,937  | )           |   | $ | 3,777 |       |   | $ | 1,026   |        
|                       |                                                              |                                                     |       |                  |              |   |         |             |   |   |       |      
|                       | Contribution from parent                                     |                                                     |       | 710              |              |   |         |             |   |   |       |       |   |   |         | 710     |  
|                       | Net income                                                   |                                                     |       |                  |              |   |         | 1,306       |   |   |       |       |   |   |         | 1,306   |  
|                       | Foreign currency translation adjustment, net of income taxes |                                                     |       |                  |              |   |         |             |   |   |       | 532   |   |   |         | 532     |  
|                       |                                                              |                                                     |       |                  |              |   |         |             |   |   |       |      
|BALANCE, JUNE 30, 2004 |                                                              | $                                                   | 1,896 |                  |              | $ | (2,631  | )           |   | $ | 4,309 |       |   | $ | 3,574   |        
|                       |                                                              |                                                     |       |                  |              |   |         |             |   |   |       |      
|                       | Contribution from parent                                     |                                                     |       | 1,218            |              |   |         |             |   |   |       |       |   |   |         | 1,218   |  
|                       | Net (loss)                                                   |                                                     |       |                  |              |   |         | (20,612     | ) |   |       |       |   |   |         | (20,612 | )
|                       | Foreign currency translation adjustment, net of income taxes |                                                     |       |                  |              |   |         |             |   |   |       | (362  | ) |   |         | (362    | )
|                       |                                                              |                                                     |       |                  |              |   |         |             |   |   |       |      
|BALANCE, JUNE 30, 2005 |                                                              | $                                                   | 3,114 |                  |              | $ | (23,243 | )           |   | $ | 3,947 |       |   | $ | (16,182 | )      
|                       |                                                              |                                                     |       |                  |              |   |         |             |   |   |       |      



F-52



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##### Table of Contents



PHIBRO ANIMAL HEALTH SA (Belgium)





STATEMENTS OF CASH FLOWS


|                                                 |                                                                                                     |                                                                                                                                                          |                                                      |         |        |        |     |        |       |        |     |        |       |        |  
|------------------------------------------------ | --------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ------- | ------ | ------ | --- | ------ | ----- | ------ | --- | ------ | ----- | ------ | -
|                                                 |                                                                                                     | For the Years Ended June 30,                                                                                                                             |                                                     
|                                                 |                                                                                                     |                                                                                                                                                          |                                                     
|                                                 |                                                                                                     | 2005                                                                                                                                                     |                                                      |         | 2004   |        |     | 2003   |      
|                                                 |                                                                                                     |                                                                                                                                                          |                                                      |         |        |        |     |        |      
|                                                 |                                                                                                     | (In thousands)                                                                                                                                           |                                                     
|OPERATING ACTIVITIES:                            |                                                                                                     |                                                                                                                                                          |                                                      |         |        |        |     |        |       |        |     |       
|                                                 | Net income (loss)                                                                                   |                                                                                                                                                          | $                                                    | (20,612 | )      |        | $   | 1,306  |       |        | $   | (3,519 | )    
|                                                 | Adjustments to reconcile net income (loss) to net cash provided
    (used) by operating activities: |                                                                                                                                                          |                                                      |         |        |        |     |        |       |        |     |        |      
|                                                 |                                                                                                     | Depreciation and amortization (includes accelerated depreciation
    from the Belgium Plant Transactions of $7,467 for the year ended
    June 30, 2005) |                                                      |         | 10,484 |        |     |        | 2,669 |        |     |        | 2,019 |       
|                                                 |                                                                                                     | Deferred taxes                                                                                                                                           |                                                      |         | (1,446 | )      |     |        | 112   |        |     |        | 142   |       
|                                                 |                                                                                                     | Allocated selling, general and administrative expenses from
    parent                                                                                   |                                                      |         | 1,218  |        |     |        | 658   |        |     |        | 727   |       
|                                                 |                                                                                                     | Effects of changes in foreign currency and other                                                                                                         |                                                      |         | 62     |        |     |        | (264  | )      |     |        | 1,268 |       
|                                                 |                                                                                                     | Changes in operating assets and liabilities:                                                                                                             |                                                      |         |        |        |     |        |       |        |     |        |       |       
|                                                 |                                                                                                     |                                                                                                                                                          | Accounts receivable                                  |         |        | (1,482 | )   |        |       | (945   | )   |        |       | (322   | )
|                                                 |                                                                                                     |                                                                                                                                                          | Inventories                                          |         |        | (7,084 | )   |        |       | (8,762 | )   |        |       | 2,270  |  
|                                                 |                                                                                                     |                                                                                                                                                          | Prepaid expenses and other current assets            |         |        | (786   | )   |        |       | 1,369  |     |        |       | (1,191 | )
|                                                 |                                                                                                     |                                                                                                                                                          | Related party receivables and payables               |         |        | 3,010  |     |        |       | 5,135  |     |        |       | 1,557  |  
|                                                 |                                                                                                     |                                                                                                                                                          | Accounts payable                                     |         |        | 1,137  |     |        |       | (2,395 | )   |        |       | 3,523  |  
|                                                 |                                                                                                     |                                                                                                                                                          | Accrued expenses and other liabilities               |         |        | (1,826 | )   |        |       | 2,790  |     |        |       | (8,244 | )
|                                                 |                                                                                                     |                                                                                                                                                          | Accrued costs of the Belgium Plant Transactions      |         |        | 13,069 |     |        |       |       |     |        |       |       |  
|                                                 |                                                                                                     |                                                                                                                                                          |                                                      |         |        |        |     |        |      
|                                                 |                                                                                                     |                                                                                                                                                          | NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES     |         |        | (4,256 | )   |        |       | 1,673  |     |        |       | (1,770 | )
|                                                 |                                                                                                     |                                                                                                                                                          |                                                      |         |        |        |     |        |      
|INVESTING ACTIVITIES:                            |                                                                                                     |                                                                                                                                                          |                                                      |         |        |        |     |        |       |        |     |       
|                                                 | Capital expenditures                                                                                |                                                                                                                                                          |                                                      | (1,001  | )      |        |     | (1,613 | )     |        |     | (2,149 | )    
|                                                 | Other investing                                                                                     |                                                                                                                                                          |                                                      | 296     |        |        |     |       |       |        |     |       |      
|                                                 |                                                                                                     |                                                                                                                                                          |                                                      |         |        |        |     |        |      
|                                                 |                                                                                                     |                                                                                                                                                          | NET CASH (USED) BY INVESTING ACTIVITIES              |         |        | (705   | )   |        |       | (1,613 | )   |        |       | (2,149 | )
|                                                 |                                                                                                     |                                                                                                                                                          |                                                      |         |        |        |     |        |      
|FINANCING ACTIVITIES:                            |                                                                                                     |                                                                                                                                                          |                                                      |         |        |        |     |        |       |        |     |       
|                                                 | Net increase in intercompany debt                                                                   |                                                                                                                                                          |                                                      | 5,008   |        |        |     | 8,181  |       |        |     | 3,432  |      
|                                                 | Payment of Pfizer obligations                                                                       |                                                                                                                                                          |                                                      |        |        |        |     | (8,225 | )     |        |     |       |      
|                                                 |                                                                                                     |                                                                                                                                                          |                                                      |         |        |        |     |        |      
|                                                 |                                                                                                     |                                                                                                                                                          | NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES     |         |        | 5,008  |     |        |       | (44    | )   |        |       | 3,432  |  
|                                                 |                                                                                                     |                                                                                                                                                          |                                                      |         |        |        |     |        |      
|EFFECT OF EXCHANGE RATE CHANGES ON CASH          |                                                                                                     |                                                                                                                                                          | (4                                                   | )       |        |        | 11  |        |       |        | 54  |       
|                                                 |                                                                                                     |                                                                                                                                                          |                                                      |         |        |        |     |        |      
|                                                 |                                                                                                     |                                                                                                                                                          | NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |         |        | 43     |     |        |       | 27     |     |        |       | (433   | )
|CASH AND CASH EQUIVALENTS at beginning of period |                                                                                                     |                                                                                                                                                          | 212                                                  |         |        |        | 185 |        |       |        | 618 |       
|                                                 |                                                                                                     |                                                                                                                                                          |                                                      |         |        |        |     |        |      
|CASH AND CASH EQUIVALENTS at end of period       |                                                                                                     | $                                                                                                                                                        | 255                                                  |         |        | $      | 212 |        |       | $      | 185 |       
|                                                 |                                                                                                     |                                                                                                                                                          |                                                      |         |        |        |     |        |      
|Supplemental Cash Flow Information:              |                                                                                                     |                                                                                                                                                          |                                                      |         |        |        |     |        |       |        |     |       
|                                                 | Interest paid                                                                                       |                                                                                                                                                          | $                                                    |        |        |        | $   | 55     |       |        | $   | 88     |      
|                                                 | Income taxes paid                                                                                   |                                                                                                                                                          |                                                      |        |        |        |     |       |       |        |     | 366    |      



F-53



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##### Table of Contents






PHIBRO ANIMAL HEALTH SA (Belgium)


NOTES TO FINANCIAL STATEMENTS


(In thousands)




|   |                        
|-- | -----------------------
|1. | Description of Business









|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies



| |                       
| | ----------------------
| | Basis of Presentation:





| |                         
| | ------------------------
| | Risks and Uncertainties:











| |                  
| | -----------------
| | Use of Estimates:



F-54



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##### Table of Contents



PHIBRO ANIMAL HEALTH SA (Belgium)


NOTES TO FINANCIAL STATEMENTS  (Continued)




| |                     
| | --------------------
| | Revenue Recognition:





| |      
| | -----
| | Cash:





| |                                                             
| | ------------------------------------------------------------
| | Accounts Receivable and Allowance for Doubtful
    Accounts:



|                               |  |                     |     |   |      |   |    |      |  |   |    | 
|------------------------------ |  | ------------------- | --- | - | ---- | - | -- | ---- |  | - | -- | 
|                               |  | For the Years Ended |    
|                               |  | June 30,            |    
|                               |  |                     |    
|                               |  | 2005                |     |   | 2004 |   |    | 2003 | 
|                               |  |                     |     |   |      |   |    |      | 
|Balance at beginning of period |  | $                   | 13  |   |      | $ | 22 |      |  | $ |   | 
|Provision for bad debts        |  |                     |    |   |      |   |   |      |  |   | 22 | 
|Bad debt write-offs            |  |                     | (13 | ) |      |   | (9 | )    |  |   |   | 
|                               |  |                     |     |   |      |   |    |      | 
|Balance at end of period       |  | $                   |    |   |      | $ | 13 |      |  | $ | 22 | 
|                               |  |                     |     |   |      |   |    |      | 



| |             
| | ------------
| | Inventories:



|                |  |                |        |  |      |   |        | 
|--------------- |  | -------------- | ------ |  | ---- | - | ------ | 
|                |  | As of June 30, |       
|                |  |                |       
|                |  | 2005           |        |  | 2004 |  
|                |  |                |        |  |      |  
|Raw materials   |  | $              | 907    |  |      | $ | 910    | 
|Work-in-process |  |                |       |  |      |   | 166    | 
|Finished goods  |  |                | 28,784 |  |      |   | 22,083 | 
|                |  |                |        |  |      |  
|Total inventory |  | $              | 29,691 |  |      | $ | 23,159 | 
|                |  |                |        |  |      |  

F-55



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##### Table of Contents



PHIBRO ANIMAL HEALTH SA (Belgium)


NOTES TO FINANCIAL STATEMENTS  (Continued)




| |                               
| | ------------------------------
| | Property, Plant and Equipment:









| |             
| | ------------
| | Intangibles:

1 2




| |                              
| | -----------------------------
| | Foreign Currency Translation:









| |                                     
| | ------------------------------------
| | Recoverability of Long-Lived Assets:



F-56



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##### Table of Contents



PHIBRO ANIMAL HEALTH SA (Belgium)


NOTES TO FINANCIAL STATEMENTS  (Continued)




| |              
| | -------------
| | Income Taxes:





| |                                       
| | --------------------------------------
| | Research and Development Expenditures:





| |                               
| | ------------------------------
| | New Accounting Pronouncements:









F-57



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##### Table of Contents



PHIBRO ANIMAL HEALTH SA (Belgium)


NOTES TO FINANCIAL STATEMENTS  (Continued)










|   |            
|-- | -----------
|3. | Refinancing



| |                                                                           
| | --------------------------------------------------------------------------
| | Issuance of 13% Senior Secured Notes and Payment of
    Pfizer Obligations





| |                                                     
| | ----------------------------------------------------
| | Issuance of Additional 13% Senior Secured
    Notes:



F-58



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##### Table of Contents



PHIBRO ANIMAL HEALTH SA (Belgium)


NOTES TO FINANCIAL STATEMENTS  (Continued)








|   |                           
|-- | --------------------------
|4. | Belgium Plant Transactions















F-59



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PHIBRO ANIMAL HEALTH SA (Belgium)


NOTES TO FINANCIAL STATEMENTS  (Continued)










|   |                              
|-- | -----------------------------
|5. | Property, Plant and Equipment



|                               |  |                |        |  |      |   |        | 
|------------------------------ |  | -------------- | ------ |  | ---- | - | ------ | 
|                               |  | As of June 30, |       
|                               |  |                |       
|                               |  | 2005           |        |  | 2004 |  
|                               |  |                |        |  |      |  
|Land                           |  | $              | 1,896  |  |      | $ | 1,912  | 
|Buildings and improvements     |  |                | 5,926  |  |      |   | 6,153  | 
|Machinery and equipment        |  |                | 17,482 |  |      |   | 16,425 | 
|                               |  |                |        |  |      |  
|                               |  |                | 25,304 |  |      |   | 24,490 | 
|Less: accumulated depreciation |  |                | 17,182 |  |      |   | 7,169  | 
|                               |  |                |        |  |      |  
|                               |  | $              | 8,122  |  |      | $ | 17,321 | 
|                               |  |                |        |  |      |  





|   |                           
|-- | --------------------------
|6. | Related Party Transactions



|                       |  |                              |        |  |      |   |        |      |  |   |        | 
|---------------------- |  | ---------------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                       |  | For the Years Ended June 30, |       
|                       |  |                              |       
|                       |  | 2005                         |        |  | 2004 |   |        | 2003 | 
|                       |  |                              |        |  |      |   |        |      | 
|Product sales          |  | $                            | 30,298 |  |      | $ | 28,970 |      |  | $ | 26,994 | 
|Product purchases      |  |                              | 8,183  |  |      |   | 3,553  |      |  |   | 5,344  | 
|Receivables at June 30 |  |                              | 5,560  |  |      |   | 4,527  |      |  |   | 8,553  | 
|Payables at June 30    |  |                              | 6,390  |  |      |   | 2,879  |      |  |   | 1,835  | 





F-60



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PHIBRO ANIMAL HEALTH SA (Belgium)


NOTES TO FINANCIAL STATEMENTS  (Continued)






|   |                                               
|-- | ----------------------------------------------
|7. | Accrued Expenses and Other Current Liabilities



|                           |  |                |        |  |      |   |       | 
|-------------------------- |  | -------------- | ------ |  | ---- | - | ----- | 
|                           |  | As of June 30, |       
|                           |  |                |       
|                           |  | 2005           |        |  | 2004 |  
|                           |  |                |        |  |      |  
|Belgium Plant Transactions |  | $              | 13,069 |  |      | $ |      | 
|Employee related expenses  |  |                | 2,511  |  |      |   | 2,507 | 
|Tax accruals               |  |                | 4,442  |  |      |   | 4,059 | 
|Other accrued liabilities  |  |                | 707    |  |      |   | 1,725 | 
|                           |  |                |        |  |      |  
|                           |  | $              | 20,729 |  |      | $ | 8,291 | 
|                           |  |                |        |  |      |  



|   |                
|-- | ---------------
|8. | Debt Guaranteed













|   |                       
|-- | ----------------------
|9. | Employee Benefit Plans



F-61



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##### Table of Contents



PHIBRO ANIMAL HEALTH SA (Belgium)


NOTES TO FINANCIAL STATEMENTS  (Continued)




|                                        |  |      |        |   |      |   |       |  
|--------------------------------------- |  | ---- | ------ | - | ---- | - | ----- | -
|                                        |  | 2005 |        |   | 2004 |  
|                                        |  |      |        |   |      |  
|Change in benefit obligation            |  |      |        |   |      |   |       |  
|Benefit obligation at beginning of year |  | $    | 7,323  |   |      | $ | 6,595 |  
|Service cost                            |  |      | 477    |   |      |   | 467   |  
|Interest cost                           |  |      | 423    |   |      |   | 374   |  
|Benefits paid                           |  |      | (14    | ) |      |   | (3    | )
|Employee contributions                  |  |      | 39     |   |      |   | 27    |  
|Actuarial (gain) or loss                |  |      | 670    |   |      |   | (475  | )
|Curtailment                             |  |      |       |   |      |   |      |  
|Special termination benefits            |  |      | 888    |   |      |   |      |  
|Change in discount rate                 |  |      | 1,690  |   |      |   |      |  
|Exchange rate impact                    |  |      | (232   | ) |      |   | 338   |  
|                                        |  |      |        |   |      |  
|Benefit obligation at end of year       |  | $    | 11,264 |   |      | $ | 7,323 |  
|                                        |  |      |        |   |      |  







|                                               |  |      |        |   |      |   |        |  
|---------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                               |  | 2005 |        |   | 2004 |  
|                                               |  |      |        |   |      |  
|Change in Plan Assets                          |  |      |        |   |      |   |        |  
|Fair value of plan assets at beginning of year |  | $    | 5,828  |   |      | $ | 4,566  |  
|Actual return on plan assets                   |  |      | 623    |   |      |   | 435    |  
|Employer contributions                         |  |      | 658    |   |      |   | 558    |  
|Employee contributions                         |  |      | 38     |   |      |   | 27     |  
|Other                                          |  |      | 353    |   |      |   |       |  
|Benefits paid                                  |  |      | (14    | ) |      |   | (3     | )
|Exchange rate impact                           |  |      | (78    | ) |      |   | 245    |  
|                                               |  |      |        |   |      |  
|Fair value of plan assets at end of year       |  | $    | 7,408  |   |      | $ | 5,828  |  
|                                               |  |      |        |   |      |  
|Funded status                                  |  |      |        |   |      |   |        |  
|Funded status of the plan                      |  | $    | (3,856 | ) |      | $ | (1,495 | )
|Unrecognized net actuarial (gain) or loss      |  |      | 2,002  |   |      |   | 368    |  
|Unrecognized prior service cost                |  |      |       |   |      |   |       |  
|Unrecognized transition obligation/(asset)     |  |      |       |   |      |   |       |  
|                                               |  |      |        |   |      |  
|(Accrued) pension cost                         |  | $    | (1,854 | ) |      | $ | (1,127 | )
|                                               |  |      |        |   |      |  



F-62



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##### Table of Contents



PHIBRO ANIMAL HEALTH SA (Belgium)


NOTES TO FINANCIAL STATEMENTS  (Continued)






|                                               |  |      |       |   |      |   |      |      |  |   |      |  
|---------------------------------------------- |  | ---- | ----- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                               |  | 2005 |       |   | 2004 |   |      | 2003 | 
|                                               |  |      |       |   |      |   |      |      | 
|Service cost  benefits earned during the year |  | $    | 477   |   |      | $ | 467  |      |  | $ | 310  |  
|Interest cost on benefit obligation            |  |      | 424   |   |      |   | 374  |      |  |   | 259  |  
|Expected return on plan assets                 |  |      | (362  | ) |      |   | (300 | )    |  |   | (203 | )
|Special Termination Benefits                   |  |      | 888   |   |      |   |     |      |  |   |     |  
|Amortization of net actuarial loss             |  |      |      |   |      |   | 22   |      |  |   |     |  
|                                               |  |      |       |   |      |   |      |      | 
|Net periodic pension expense  international   |  | $    | 1,427 |   |      | $ | 563  |      |  | $ | 366  |  
|                                               |  |      |       |   |      |   |      |      | 



|                                              |  |      |      |  |      |  |      |      |  |  |      | 
|--------------------------------------------- |  | ---- | ---- |  | ---- |  | ---- | ---- |  |  | ---- | 
|                                              |  | 2005 |      |  | 2004 |  |      | 2003 | 
|                                              |  |      |      |  |      |  |      |      | 
|Discount rate for service and interest        |  |      | 5.5% |  |      |  | 5.5% |      |  |  | 5.8% | 
|Expected rate of return on plan assets        |  |      | 6.0% |  |      |  | 6.0% |      |  |  | 6.0% | 
|Rate of compensation increase                 |  |      | 3.0% |  |      |  | 3.0% |      |  |  | 3.0% | 
|Discount rate for year-end benefit obligation |  |      | 4.5% |  |      |  | 5.5% |      |  |  | 5.5% | 





|          |  |   |    | 
|--------- |  | - | -- | 
|2006      |  | $ | 48 | 
|2007      |  |   | 10 | 
|2008      |  |   | 6  | 
|2009      |  |   | 5  | 
|2010      |  |   | 4  | 
|2011-2015 |  |   | 13 | 





|                  |  |      |     |  |      |  |     |      |  |  |     | 
|----------------- |  | ---- | --- |  | ---- |  | --- | ---- |  |  | --- | 
|                  |  | 2006 |     |  | 2005 |  |     | 2004 | 
|                  |  |      |     |  |      |  |     |      | 
|Debt Securities   |  |      | 57% |  |      |  | 57% |      |  |  | 62% | 
|Equity Securities |  |      | 24% |  |      |  | 23% |      |  |  | 21% | 
|Other             |  |      | 19% |  |      |  | 20% |      |  |  | 17% | 



F-63



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##### Table of Contents



PHIBRO ANIMAL HEALTH SA (Belgium)


NOTES TO FINANCIAL STATEMENTS  (Continued)




|    |             
|--- | ------------
|10. | Income Taxes

|                                     |  |                              |         |   |      |   |       |      |  |   |        |  
|------------------------------------ |  | ---------------------------- | ------- | - | ---- | - | ----- | ---- |  | - | ------ | -
|                                     |  | For the Years Ended June 30, |        
|                                     |  |                              |        
|                                     |  | 2005                         |         |   | 2004 |   |       | 2003 | 
|                                     |  |                              |         |   |      |   |       |      | 
|Income (loss) before income taxes    |  | $                            | (22,873 | ) |      | $ | 2,920 |      |  | $ | (4,605 | )
|                                     |  |                              |         |   |      |   |       |      | 
|Current tax provision (benefit)      |  | $                            | (815    | ) |      | $ | 1,502 |      |  | $ | (1,228 | )
|Deferred tax provision (benefit)     |  |                              | (1,446  | ) |      |   | 112   |      |  |   | 142    |  
|                                     |  |                              |         |   |      |   |       |      | 
|Provision (benefit) for income taxes |  | $                            | (2,261  | ) |      | $ | 1,614 |      |  | $ | (1,086 | )
|                                     |  |                              |         |   |      |   |       |      | 



|                               |  |                     |       |   |      |  |      |      |  |  |       |  
|------------------------------ |  | ------------------- | ----- | - | ---- |  | ---- | ---- |  |  | ----- | -
|                               |  | For the Years Ended |      
|                               |  | June 30,            |      
|                               |  |                     |      
|                               |  | 2005                |       |   | 2004 |  |      | 2003 | 
|                               |  |                     |       |   |      |  |      |      | 
|                               |  | %                   |       |   | %    |  |      | %    | 
|Statutory income tax rate      |  |                     | (34.0 | ) |      |  | 34.0 |      |  |  | (34.0 | )
|Expenses with no tax benefit   |  |                     | 1.8   |   |      |  | 16.9 |      |  |  | 5.4   |  
|Changes in valuation allowance |  |                     | 21.3  |   |      |  | (6.5 | )    |  |  | 4.1   |  
|Other                          |  |                     | 1.0   |   |      |  | 10.9 |      |  |  | 0.9   |  
|                               |  |                     |       |   |      |  |      |      | 
|Effective income tax rate      |  |                     | (9.9  | ) |      |  | 55.3 |      |  |  | (23.6 | )
|                               |  |                     |       |   |      |  |      |      | 



|                           |                                   |                |        |        |      |   |        |        |  
|-------------------------- | --------------------------------- | -------------- | ------ | ------ | ---- | - | ------ | ------ | -
|                           |                                   | As of June 30, |       
|                           |                                   |                |       
|                           |                                   | 2005           |        |        | 2004 |  
|                           |                                   |                |        |        |      |  
|Deferred tax assets:       |                                   |                |        |        |      |   |        |       
|                           | Depreciation                      |                | $      | 7      |      |   | $      | 7      |  
|                           | Inventory                         |                |        | 615    |      |   |        | 615    |  
|                           | Net operating loss carry forwards |                |        | 7,363  |      |   |        |       |  
|                           | Other                             |                |        | 575    |      |   |        | 97     |  
|                           |                                   |                |        |        |      |  
|                           |                                   |                | 8,560  |        |      |   | 719    |       
|                           | Valuation allowance               |                |        | (4,867 | )    |   |        |       |  
|                           |                                   |                |        |        |      |  
|                           |                                   |                | 3,693  |        |      |   | 719    |       
|                           |                                   |                |        |        |      |  
|Deferred tax liabilities:  |                                   |                |        |        |      |   |        |       
|                           | Depreciation                      |                |        | (2,058 | )    |   |        | (1,022 | )
|                           | Other                             |                |        | (1,635 | )    |   |        | (1,143 | )
|                           |                                   |                |        |        |      |  
|                           |                                   |                | (3,693 | )      |      |   | (2,165 | )     
|                           |                                   |                |        |        |      |  
|Net deferred tax liability |                                   | $              |       |        |      | $ | (1,446 | )     
|                           |                                   |                |        |        |      |  

F-64



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##### Table of Contents



PHIBRO ANIMAL HEALTH SA (Belgium)


NOTES TO FINANCIAL STATEMENTS  (Continued)




|                                          |  |                |      |   |      |   |        |  
|----------------------------------------- |  | -------------- | ---- | - | ---- | - | ------ | -
|                                          |  | As of June 30, |     
|                                          |  |                |     
|                                          |  | 2005           |      |   | 2004 |  
|                                          |  |                |      |   |      |  
|Prepaid expenses and other current assets |  | $              | 315  |   |      | $ | 315    |  
|Other liabilities                         |  |                | (315 | ) |      |   | (1,761 | )
|                                          |  |                |      |   |      |  
|Net deferred tax liability                |  | $              |     |   |      | $ | (1,446 | )
|                                          |  |                |      |   |      |  





|    |                      
|--- | ---------------------
|11. | Financial Instruments





F-65



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##### Table of Contents






SIGNATURES




|    |  |                                                                                       |  |                           |  |                                                                                                                                           
|--- |  | ------------------------------------------------------------------------------------- |  | ------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                       |  | PAHC HOLDINGS CORPORATION
|   
|By: |  | /s/ Jack C. BendheimJack
    C. BendheimChairman of the BoardDate: September 28, 2005 |  | By:                       |  | /s/ Gerald K. Carlson
    -------------------------------------------
    Gerald K. CarlsonChief Executive OfficerDate: September 28, 2005



|                                                                                                                                           |  |                    |  | 
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------ |  | 
|Signature and Title                                                                                                                        |  | Date              
|                                                                                                                                           |  |                   
|                                                                                                                                          
|/s/ Gerald K. CarlsonGerald
    K. CarlsonChief Executive Officer
    (Principal Executive Officer)                                        |  | September 28, 2005
|                                                                                                                                          
|/s/ Jack C. BendheimJack
    C. BendheimDirector, Chairman of the Board                                                                    |  | September 28, 2005
|                                                                                                                                          
|/s/ Richard G. JohnsonRichard
    G. JohnsonChief Financial Officer
    (Principal Financial Officer and
    Principal Accounting Officer) |  | September 28, 2005
|                                                                                                                                          
|/s/ Marvin S. SussmanMarvin
    S. SussmanDirector                                                                                         |  | September 28, 2005
|                                                                                                                                          
|/s/ James O. HerlandsJames
    O. HerlandsDirector                                                                                         |  | September 28, 2005

S-1



---



##### Table of Contents



EXHIBIT INDEX


|            |    |                        |  |  |  |                                                                                                                                                                                                                                                                                                                                          
|----------- | -- | ---------------------- |  |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    | Description of Exhibit
|            |    |                       
|            | 3  | .1                     |  |  |  | Certificate of Incorporation of the Registrant.(1)                                                                                                                                                                                                                                                                                       
|            | 3  | .2                     |  |  |  | By-laws of the Registrant.(1)                                                                                                                                                                                                                                                                                                            
|            | 4  | .1                     |  |  |  | Indenture, dated as of February 10, 2005, between the
    Registrant, as Issuer, and HSBC Bank USA, National Association,
    as Trustee and as Collateral Agent, relating to the
    15% Senior Secured Notes due 2010 of Registrant, and
    exhibits thereto, including Form of 15% Senior Secured Note
    due 2010 of Registrant.(1)
|            | 4  | .1.1                   |  |  |  | First Supplemental Indenture, dated as of May 17, 2005,
    between the Registrant and HSBC Bank USA, National Association,
    as Trustee.                                                                                                                                                                                              
|            | 10 | .1(a)                  |  |  |  | Stockholders Agreement, dated December 29, 1987, by and
    between Phibro Animal Health Corporation (formerly Philipp
    Brothers Chemicals, Inc.) (PAHC), Charles H.
    Bendheim, Jack C. Bendheim and Marvin S. Sussman.(1)                                                                                                       
|            | 10 | .1(b)                  |  |  |  | Subscription and Exchange Agreement, dated as of
    February 10, 2005, by and between PAHC, the Registrant,
    Jack C. Bendheim and Marvin S. Sussman, amending the
    Stockholders Agreement dated December 29, 1987.(1)                                                                                                             
|            | 10 | .2                     |  |  |  | Security Agreement, dated as of February 10, 2005, executed
    and delivered by the Registrant in favor of HSBC Bank USA,
    National Association as Collateral Agent for the Trustee and
    Holders.(1)                                                                                                                              
|            | 10 | .3                     |  |  |  | Pledge Agreement, dated as of February 10, 2005, by and
    between the Registrant and HSBC Bank USA, National Association
    as Collateral Agent for the Trustee and Noteholders.(1)                                                                                                                                                   
|            | 10 | .4                     |  |  |  | Agreement for the Sale and Purchase of the Entire Share Capital
    in Wychem Limited dated as of April 29, 2005 among Ferro
    Metal and Chemical Corporation Limited, Koffolk (1949) Limited
    and MRG Holdings Limited.(2)                                                                                                         
|            | 21 |                        |  |  |  | List of Subsidiaries.                                                                                                                                                                                                                                                                                                                    
|            | 31 | .1                     |  |  |  | Certification of Gerald K. Carlson, Chief Executive Officer
    required by Rule 15d-14(a) of the Act.                                                                                                                                                                                                                                   
|            | 31 | .2                     |  |  |  | Certification of Jack C. Bendheim, Chairman of the Board
    required by Rule 15d-14(a) of the Act.                                                                                                                                                                                                                                      
|            | 31 | .3                     |  |  |  | Certification of Richard G. Johnson, Chief Financial Officer
    required by Rule 15d-14(a) of the Act.                                                                                                                                                                                                                                  
|            | 32 |                        |  |  |  | Section 1350 Certifications of Registrant.                                                                                                                                                                                                                                                                                               






|    |                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------
|(1) | Filed as an Exhibit to the Registrants Registration
    Statement on Form S-4, No. 333-123614.                
|   
|(2) | Filed as an Exhibit to the Registrants Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2005.